Dubai: Every New Year, a lot of people resolve to get wealthier or improve their personal finances.  Many vow to cut back on spending, settle their debts, pay more attention to their budgets and save more.

But these things are easier said than done, especially in the UAE, where personal borrowings are piling up. Consumer loans in the UAE alone have been growing, amounting to Dh417 million in the last quarter of 2015, up by Dh27 million from the first quarter of the year. Data released by Strategic Analysis also put down the debt burden in the UAE to Dh348,000 per household, which will make total indebtedness amount to $114 billion.

With these grim figures in mind, it would be difficult to achieve personal finance goals. And one must have a clear strategy and enough determination to follow through.

Gulf News has asked the experts to provide some useful advice around the area of investing, financial planning, budgeting, saving or spending to help improve the financial situation of residents in the UAE.

Save first

Saving money is a top priority for those who want to build their wealth, especially among residents from Europe or the US. According to a National Bonds survey, Western expatriates (48 per cent) are the most committed to save money on a regular basis, followed by Asians (44 per cent) and UAE and Arab nationals at 28 per cent and 27 per cent, respectively.

But how do you save money? A new research by Gocompare.com reveals that the majority of British nationals (88 per cent) have resolved to do something in 2017 to grow their wealth. Popular money-saving measures include using vouchers and apps that provide discounts, and taking advantage of loyalty and cash back schemes.

Other frugal habits also include shopping around for a better deal on a range of goods and services, from insurance policies to groceries.

But cutting down on household expenses can be very challenging, especially in a place like UAE, where consumers are constantly tempted to open their wallets.

The best thing to do to avoid the temptation is to put cash aside first in a savings account. This way, access to disposable income is very limited. “Therefore, even if an individual does exceed his or her budget for the month, saving or retirement fund will continue to grow,” said Mark Leigh, chief operating officer at XTrade.

Pay your credit card dues in full

If you must use your plastic money, make sure you don’t max it out and you are very diligent in paying back your dues in full, to avoid incurring hundreds or thousands of dirham in interest and late payment fees. Interest rates on credit cards in the UAE are said to be higher than in other markets like the UK or most of Europe, Japan and the United States.

“It’s a real rate of almost 30 per cent annually,” a far cry from the 14.6 per cent charged in the US and 18.8 per cent in the UK, according to one financial planner.

Matt Sanders, credit card expert at Gocompare, however, said that using credit cards is not at all bad. In fact, consumers can use plastic money to their advantage. “For many of us, the New Year is a perfect time to reassess our lives, including our financial goals. One simple and achievable resolution is to review the plastic in your wallet. Used carefully, credit cards can give you extra flexibility with your spending and help you manage your finances better.”

“To avoid any interest, outstanding balances must be paid off on or before the final day of interest-free period. “ Those who are unable to clear their card balance right away are advised to anticipate how much interest they are likely to pay and how long they can expect to carry the debt on the card.

“Once interest starts accruing on a regular basis, it can become every costly indeed. The key thing is to recognise a persistent and stubborn debt, that isn’t magically just going to go away, and deal with it. “

Consumers can also move the outstanding balances to an interest-free balance transfer card, to help lower borrowing costs and pay it off much quickly.

Budget wisely

Work out how much money you require every month to pay utility bills, including your housing rent, water and electricity consumption, mobile phone, internet and other financial responsibilities.

“Living in Dubai, individuals can predict their monthly budget for the year in terms of their fixed costs, such as rent, Dewa, telephone, car payments, etc. They can set aside a budget for shopping, eating out and car payments. They can also include a miscellaneous budget for any unforeseen situations that may arise during the course of the month,” noted Leigh.

To ensure they succeed, consumers must be financially disciplined to prolong the   desire to make additional purchases towards the end of the month, as a reward for staying within budget. If you must spend, take advantage of discounts for dining, shopping and other activities that are offered in multiple mobile applications.

“Usually, these apps promote the buy-one-get-one-free offers. By choosing to go out with a friend or family member taking advantage of these offers and splitting the bill equally amongst both parties, the individual can save up to 75 percent of the total bill,” said Leigh.

Invest in a will, life insurance

As an expatriate working in the UAE, it is important to think about what might happen if the unthinkable does occur. By having a will in place, you’ll have peace of mind knowing that, when faced with death, your assets are distributed according to your wishes and your family has access to money.

Without it, authorities will handle your estate according to Sharia law and your bank accounts will be frozen. Life insurance also ensures that your dependents will continue to receive money to cover living costs and any mortgage or debt is paid for.

“Human nature encourages us to be optimistic, however, unfortunate situations can occur at any time and when we least expect it, leaving our loved ones piled under a significant amount of debt and emotional grief,” said Leigh.

“Taking proactive measures to safeguard their financial interests and future should be a top priority of any breadwinner,” Leigh added.

Invest cautiously

There are many strategies for investing money, but whatever approach you decide to take, it is important to take into account the global economic environment. Investors have been expecting the Federal Reserve to make further interest rate adjustments next year and boost infrastructure spending, while the possibility of political and economic uncertainty in Europe is not remote.

The Brexit move in the UK, for one, is expected to create a “bit more  ambiguity across the European and global markets”, while the Chinese asset bubble look increasingly overheated.

“Having considered the market sentiment, a diversified US mid-cap portfolio is the area investors should be engaged in, focusing on US sales, largely through Exchange Traded Funds (ETFs - a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold),” said Leigh.

"As it relates to foreign exchange, shorting the euro would seem as the most plausible option. Having broken through the $1.05, we would expect parity as the next support level."

For those who prefer to invest in gold, it may not be a bad idea, as well.  “It is advisable to invest in it as historically speaking, gold preserves wealth. This precious metal has always served as a hedge against declining currencies, rising inflation rates as well as economic uncertainty. However, for an investor to be a successful trader, a diversified portfolio is always recommended.”

Online trading is another area you could venture into. If approached correctly, this has the potential to provide supplemental income and enough financial support when you decide to stop working. But you need to orient yourself first and learn how it works.

"Like any other business or activity, you need education, practice and experience to excel and succeed. Online trading is no different. It involves comprehending the macroeconomic and microeconmic environments to make educated predictions on  how certain markets would move, enabling individuals to make decisions that will positively affect their companies, savings and investment portfolio," said Leigh.

Start saving for retirement

Individuals must save for retirement at an early age, ideally in University. A study showed that three out of five expatriates  in the UAE have no retirement savings yet. 

According to Leigh, this is alarming because people without retirement savings will struggle to find a source of income to support their lifestyle and will have to give up a number of luxuries they have earned throughout their lives.

“The save-first mentality combined with investing in stocks, bonds and currencies is a good way to prepare for retirement. Technology is a double-edged sword that can either cause us to spend or provide us with strategic insights on macro and micro economic developments equipping us with knowledge to make key investment decisions that can positively affect an individual’s financial health,” Leigh said.

“However in order to succeed, people must be disciplined and willing to invest in the long-term.”