At the heart of a successful financial strategy has always been the ability to build your personal economy while adapting to changes in the external environment. Although regularly saving and cutting back on living expenses may have been enough to meet your life’s goals in the past, the more complex environment we are in today means that you need to make numerous other considerations in order to ensure your continued financial stability.
With rising prices and uncertainty in the market, you need to be able to navigate these risks and take advantage of the growth opportunities available to ensure you are prepared to meet your financial milestones. Whether you are looking to develop and maintain your own financial plans, or seeking professional advice, the following four areas will be critical in securing your future:
1. Career: Planning your path
While the UAE has been growing at a strong pace for the past few years now and there are plenty of promising opportunities around, competition is stiff for the top jobs. While calculated career moves can be rewarding, you need to plan your next move carefully. Here are a few variables to consider:
— As a majority of people in the UAE are part of the transitory expat community, they should consider how long they plan to be in the country, as well as how they can use the benefits of higher-than-average global salaries and the lack of taxes to secure a career that best suits their long-term goals.
— Another advantage of working here are the high bonuses that people receive; while these are not guaranteed, they are also tax-free and should be seen as a unique opportunity to add to your financial security. Use these to make any pending payments on areas like mortgages, or proactively plan ahead by using these as an added windfall to your retirement fund or to support your children’s education.
— The UAE is increasingly becoming a haven for entrepreneurship in the region as the government has moved to simplify regulations and create an environment that encourages enterprising individuals. If you are interested in starting your own business and have a sustainable plan, the UAE is the place to do it, particularly as it is rated among the top 25 countries for “Doing Business” according to the World Bank.
2. Mortgage: Buying a home requires a strong financial foundation
Purchasing property in the UAE can be a daunting prospect given the escalating prices that we are seeing in the market today and general volatility over the longer term. Coupled with regular maintenance and ancillary costs, you can quickly find yourself going over-budget. While this can be a good investment, consider the following before making the jump:
• Take a close look at your current financial resources and future sources of income if you are looking to take out a mortgage to buy property. Recent regulations allow you can take a loan of up to 80 per cent of the property’s value if you are a UAE National and up to 75 per cent if you are an expat. Make sure you are in a financially-secure position to make payments for the loan term, and that this will not eat-away at your other financial commitments.
• Keep your credit history in mind as the launch of the Al Etihad Credit Bureau will mean your financial history will soon be available to banks across the UAE. This means that if you default on any loans, this information will be added to your personal financial records that will subsequently be used by all banks to determine your financial strength.
3. Education: The ABCs of paying for college
According to a recent HSBC study, more than four in five parents in the UAE believe that paying for a child’s education is the best investment you can make. Not surprisingly however, more than half of adults say that they find making financial decisions about their child’s education daunting. Below are some key considerations when planning:
• Plan around your earning potential: Many parents will be paying for their children’s college tuition in their late 40’s to early 50’s, which puts them past their peak earning potential. This makes saving early vital. With 67 per cent of parents wish they had begun saving and planning for their child’s tuition earlier — you should get started as soon as possible.
• Consider all avenues: Factoring in inflation and the increasing costs of education, particularly if you plan to send your child to study abroad, mean that all saving avenues should be explored to maximise your funds. Only 1% of parents in the UAE have specific education plans, while an alarming 99% state they rely primarily or partially on their current income.
Weigh all viable options, and speak to an advisor if necessary, but it is critical for people to take advantage of the long term savings plans that are specifically designed to help parents fund their child’s education. HSBC has developed solutions that allow the highly-transitory population in the UAE to take their education plan with them wherever they live in the future.
4. Retirement: Save while you’re young — it never gets old
People are living longer and saving less for retirement, yet the cost of living around the world continues to rise. According to a recent HSBC study, almost 89 per cent of people in the UAE said that they are unable to describe their current savings as “more than adequate” and more than half admitting that they fear financial hardship in the future. Here’s what you need to think about to bridge the gap between your dream retirement and financial reality:
• Start saving early: Shockingly, people in the country expect their retirement to last 15 years, while their savings for retirement to only last nine years, revealing a dire need to get started on securing your future as soon as possible. There will be events throughout your life, such as financing a car or buying a home, which will impact your ability to save. While it is natural to prioritise these needs, make sure that you are putting money aside regularly and making your funds work for you through financial investments.
• Identify what is important to you — whether it is spending time with friends and family, travel, or starting your own business — and discuss it with your spouse and with your financial advisor to make sure it is feasible.
If you are looking to tackle these issues on your own, ensure that you are proactive in your planning process and always keeping your long-term goals at the centre of your decisions.
However, if you feel that you do not have the financial knowledge required to take advantage of the opportunities available in the market, speak to a financial adviser to discuss your requirements and what solutions might best meet your capabilities. On most occasions, these services are complimentary and it never hurts to get professional advice in how you can secure your financial future.
Despite the challenging environment we see today, it is more important than ever before to take charge of your personal economy by navigating these four milestones. And remember, fail to plan then plan to fail!
The writer is HSBC’s Head of Retail Banking and Wealth Management for UAE
