Bank loans, credit cards, tuition fees and the yearly rent. Life nowadays is often punctuated by bills, bank statements and post-dated cheques. Gulf News held a live readers debate on financial management problems faced by many in the UAE, and how the global economic situations are affecting the lives of residents. With the rents dropping, fuel prices rising and jobs staying fairly constant, Gulf News readers debated what stops them from staying on top of their finances. Also, did the global financial crisis leave people wiser about debt management? And how much pressure does one’s family and society put on their savings. Here are the excerpts. To participate in similar live debates, write to us at readers@gulfnews.com
Reduced rents have made managing family finances easier
Suad Halwachi
The issue is two-fold because the home owners have taken loans to buy a house and they don’t have a substantial earnings. And now with the rents being low, it doesn’t cover the mortgage. So, that puts the homeowners in problems. I bought a flat, and the rent I got last year was 20 per cent of the value of the flat and now it is 8 per cent. So, if I had taken the flat on a loan, the rent would not have covered my mortgage.
Mohammad Tahboub
I bought an apartment two years ago, and it was only seven or eight months ago that I was able to get out of it. Simply because they didn’t build a single thing, it was not registered with either the Land Department or the Real Estate Regulatory Authority. That in a way helped me to start procedures to filing a lawsuit against the owner. That as a result has given me a brand new look on the global and regional economy. I had plans to migrate to Canada or another country, but I started to get very worried because I had other financial commitments, too, so that affected me a lot, especially towards the end of 2009. But that helped me a lot, I am much more organised than I was with my finances two years’ ago.
K.V. Shams Al Deen
In the UAE, specifically, real estate is a new segment of business. Real estate price always influences the domestic market situation. When the rent declines, there are families living on this rent, so for them the income is diminishing. Whereas for the majority of the expatriates, it is benefiting. I run an investment brokerage company, and we realised that we are now getting more investment, because people are thinking more about savings and investments.
Elie Charles-Youssef
For homeowners who were having a steady income coming in, they will now have less income, so it is a challenge for them. However, people who pay rents, the financial burden lessens but how they manage the money is up to them – if they put away the extra money they have at the end of the month, it is great. But if they spend it, then it is up to them. Personally, it has given me more flexibility to do what I want to with the extra cash.
Steve Gregory
Tenants are the majority of the people in Dubai and not everybody is rich and well-paid. As the rents came down, families are paying the same money but if they could afford Dh30,000 before, they are now living in their own apartment for that money. If they could afford Dh50,000 before they now live in a two-bedroom apartment. They deserve it. We all live to the maximum that we can with the money that we have.
Anjali Joshi
I have been a homeowner as well as a tenant. What actually happened is that now pretty much medium-income to low-income families have moved to better areas. I personally don’t think people are saving as much. My rent fell by Dh30,000 and we could have moved, but we decided to stay put, which I think most people didn’t. They think that now since I am saving Dh3,000 a month, I may be able to afford a new car.
The global recession has taught people how to manage debt properly
Suad Halwachi
The problems were more because of the banks — they gave the credit cards, they gave the loans. They know your credit history, so why do they give you so much money? Two of my employees travelled out of the country without paying their dues, and they owed the bank more than Dh150,000 in car loans, credit card loans and personal loans when their collective salary was Dh15,000.
Anjali Joshi
In the US, you have a credit bureau, which is a fundamental thing. I think that is missing here. There should be a bankruptcy option, which can help people - one where banks can come and probably negotiate with people. Be honest, say I don’t have the money, this is how much I can pay you and work with that.
K V Shams Al Deen
In fact, we cannot say that people are ‘taking loans’, we should say that people are ‘getting loans’, they get calls from banks offering loans. Once they have accepted a loan, they may send it to their family back home. They don’t realise that they will not be able to pay it back.
Mohammad Tahboub
Just this month the Central Bank issued a directive to put a price cap on the charges banks can levy on customers. But it depends on the individual more than the bank. During the boom days, I had friends who loved to brag about how they ‘maxed out’ their credit cards, when everyone had 7-10 credit cards. I would blame the individual if they are not able to understand what a credit card is.
Managing household budget has now become a family exercise
Steve Gregory
From my experience working with families in the UAE, when the families are living here, they work together. Rarely do you find that the husband doesn’t talk to the wife and vice versa.
K. V. Shams Al Deen
My family is living in the UAE since 1977 and if you look at financial discipline, before we decide to buy something we first discuss it. So we never regret after buying something. It is very easy. Now I ask people to have a family budget. I would ask people how much you want to save, if they say Dh2,000, I would ask them to keep it away the moment they get their salary, and consider it as the first expenditure on your own future.
Suad Halwachi
I have three children, two of whom are now working with me. My dad was very strict with us. So I did not buy a set of toys until I had the money to buy it. So, my children are the same. They won’t get anything for free. They don’t have any credit cards either.
Anjali Joshi
I agree. I have a son and it is not like he can go to a mall and sees a toy and can start crying for it. There are chores in the house you need to do, if you do well you get rewarded with something small. But if you instil these little things in your child at a young age, the older they get, they tend to be more grounded.
Family expectations push people towards debts
Elie Charles-Yousuf
I was lucky to be brought up in a family where I was very disciplined in terms of the pocket money I was given as a child. So I think educating children is very important. It always comes back to the individual. But, of course, I see my younger cousins now with phones that are fancier than mine, and they are just eight or nine years old. It is just the social culture and the social pressures, which I am sure is very difficult for parents. Personally, I am in the media industry so I am swamped with outings and a certain culture, but I have never been tempted to overspend.
Mohammad Tahboub
I am actually preparing myself for the future. I have always adopted a more mature approach when it came to my finances. I am actually calculating and thinking what approach to take when it comes to taking care of my own home expenses. I would just like to make a point – I agree that society is superficial and a lot of people tend to be affected by peer pressure. People come here and make a lot more than they made and completely lost track of being responsible and spending maturely.
K. V. Shams Al Deen
This is what I teach most people. Open up an account for your children from an early age, make them save money and take them to the bank and deposit it. This is what we can develop in children, and it will last for their entire life.
Conclusion
Readers did not reach a consensus on whether reduced rents were making financial management easier for families. While homeowners are now earning less from rents, most tenants are spending the same to get more benefits according to the readers.
Budgeting needs to be a family exercise, with members realising the importance of spending within their means. Family expectations and social pressures need to be managed to ensure one does not spend more than they can pay for. Banks need to tighten regulations to ensure they do not lend more money to people than they can repay.
Haider Al Zuhairi, Manager of a private investment company
I manage my own finances, I have private businesses. All credit cards are settled in full directly and when I am purchasing assets I don’t resort to taking loans. I invest the money that I have. You need to reconsider where you are investing and do your homework on the commercial laws.”
Asma Abdul Rahman, Freelance trainer
I have learned not to have a credit card and I have learned not to spend money that I don’t own. Once you don’t have loans, if anything hits you hard you don’t feel it as badly as most would. Try your best to have a loan-free life, or try to minimise the risk even if you do have a loan.”
