Staying out of debt is not easy, especially for those with family obligations in the UAE and their home countries. According to recent reports, residents of the UAE are over-leveraging themselves and accumulating huge debts that they cannot pay back (see box).
However, with its flashy lifestyles and high standards, life in the UAE can be extremely hard on the pocket. Here are some ways to keep a rein on expenses.
Create a family budget: In cultures where extended families live under one roof, it is not enough to plan your own expenses. Controlling collective finances can be hard, especially when there may be only one or two major earners. A family budget worksheet, templates for which are available for free on the internet, is an important step in keeping your family solvent. This helps track all the big items, such as rent and car loans, and also the small ones, such as a night out. If you have multiple earning members shouldering financial responsibilities it is advisable to track them by making two parallel budget worksheets. This may take a little work initially, but is a guaranteed method of understanding how your money is spent. Discussing budgets also puts the parties concerned in the same picture and pressurises everyone to stay within the limit.
Pay yourself first: However much in debt you are, it is essential to maintain and grow a savings fund. We all need savings for both unforeseen emergencies and planned purchases. Be it Dh200 or Dh2,000, the amount will be a reserve available for unforeseen expenses that quite often come up when you can least afford it. With job security uncertain, it is best to have a reserve fund in place.
Cut back everywhere: Expenses can easily shoot out of control and exceed one’s income. Regularly spending more than you make will keep you in debt — and increase it as the interest rises. Determine which categories, such as dining out or clothing purchases, can be cut back on. Be ruthless — the alternatives to going without can be far worse.
Shop wisely: Sites such as Groupon, Cobone and Nailthedeal have coupons and discounts for everything from meals to furniture. Big brands also offer cheaper rates — or more benefits — if you shop online. Competition for your money is fierce and consumers can get away with paying less than full price with a little research. Sometimes, it is a good idea to use generic substitutes. Carrefour, for example, sells many own-brand quality products at a cheaper rate than the better-known products.
Consolidate your debts: Once you understand the financial picture, it’s time to start paying the outstanding balances. If you can only make the minimum payment on your credit card or are sometimes unable to pay even this much, it is a good idea to ring the bank and ask about a lower-interest rate loan — one that is often available on your credit card itself, but which can be had at rates of 1.1 per cent per month compared to the 2.99 per cent card rate. These are also payable in fixed instalments, making the pay back process easier. Pick a tenor you are comfortable with and only borrow what you need. Do not lose sight of the basic tenet — the more you borrow, the more you have to pay back.
