In the UAE, which is home to more than 200 nationalities, there are an increasing number of expats looking for support with financial planning.
Sarah Lord, Managing Director of Killik Chartered Financial Planners, has put together a new guide aimed at helping globe-trotting expats wherever they are in the world.
It includes a step-by-step advice on managing financial ambitions, simple budgeting tips, understanding personal net worth, managing expensive debt, designing an investment strategy and how to make the most of trust funds.
In the first of a three-part series on financial health, GN Focus – Personal Finance shared four steps of Lord’s plan, which aims to help expats living in the UAE manage their money effectively.
In part one, we looked at how expats should work out their net worth, start budgeting, create an emergency fund and clear expensive debt.
Financial fitness for UAE expats
• Read part one of the financial fitness plan
• Read part three of the financial fitness plan
Here, in the second series, we share the next few steps of Lord’s plan:
5. Set up your financial lifetime goals
Your mission (which I hope you will choose to accept) is to identify your major life goals so that you can determine when you will need to pay for them and how you will ensure you have the funds to do so. These goals are personal to you. For someone in their 30s or 40s, some typical key milestones might include:
• Buying a first home
• Nursery and school start dates for children
• Car upgrades/replacements
• Property extensions/improvements
• Major holidays and trips
• Retirement (even if this seems some way off)
The next step is to project future income and costs to decide whether you can afford to fund these goals. A decent cash-flow model is essential here. The result may be a pleasant surprise (perhaps an opportunity to stop working sooner than they expect) or the opposite.
Step 5 might sound a little daunting, so do consider seeking professional advice from a qualified, regulated adviser.
6. Design your investing strategy
Step five will have made you consider your financial priorities, so you should now have a feel for when the larger cash outflows are likely to hit you and how much money is involved. The next step is to set yourself up with an investment strategy that will deliver the right amounts at the right time. As a friend once quipped, there are only five ways most people ever make money;
a. Work for it (salary from an employer or income from a business)
b. Marry it (but, as the saying goes, “if you marry for money, you’ll end up working for it”)
c. Inherit it (with little certainty about either the amount or the timing)
d. Win it (a high-risk strategy)
e. Earn it (from successful investing and harnessing the power of compounding)
Options [a] and [e] are clearly where we should be focusing our efforts.
So where to start? Here are a few guidelines:
Timing
A key question when it comes to investing is “when do I need the money back”?
• Quickly – within five years: This sort of “short call” money needs to be somewhere safe and relatively low risk. Cash, or perhaps short-dated securities, are good options
• Over the medium term – five to 10 years: The bulk of your portfolio should be kept in relatively low-risk securities but with say a seven to 10-year horizon you may also choose to invest in shares
• Longer term: Lifetime savings should be put to work in the stock market to earn a decent return.
Risk appetite
Some of us are risk-takers while others are risk-averse. An adviser can help you to set up a strategy that takes account of both your risk appetite and the need to achieve your lifetime goals.
When you are young (and given that girls born today are expected to live to 100 on average, if you are reading this in your 30s or 40s you are still young) you should be aiming for decent returns and accepting some short-term volatility by investing substantially in equities.
Your strategy doesn’t need to be complicated – you may start off with a simple monthly investment plan.
Knowledge, aptitude and time
Investing takes time and effort, not something everyone is prepared, or able, to commit to. So you may want to bring in someone to help you set targets, allocate your funds appropriately and advise you as your circumstances change.
Stay tuned for the final series which will be published online next Monday
