Readers respond: paying their dues

Dubai:  Last week we showed readers five ways to fight debt and also urged them to tell us how they got out of the red. The response was overwhelming. Hundreds of letters poured in. But three case studies stood out. We are reproducing them here so that debt-stricken people could learn from them and keep their heads above water...

K.A., Dubai: From Despair to hope

I came to Dubai nine years ago with a dream but that dream started to fade in a few years' time and in 2007 I found myself in the debt trap with a personal loan and credit card debts amounting to a total of Dh125,000.

I used to spend more than I earned and tended to use one credit card to settle the bills on another…

My personal and professional life lay in tatters, not to mention my peace of mind.

It was then that I decided that enough was enough. One Friday, my wife and I sat down and looked into our spending habits.

We realised that we were spending almost Dh3,000 a month on things which were not really required - entertainment, eating at fancy restaurants, buying clothes just because they were on sale, buying the latest mobiles etc..

We quickly put a simple budget plan to work and found out that apart from the Dh3,000 which was going to waste, we could save another Dh1,000 by cutting a few more corners. The first step was to stop using credit cards. We cut back on expenses, started eating at home, and did away with all unnecessary expenses.

We began evaluating our credit cards - the total outstanding and the interest we were going to pay if we were only to pay the minimum on each card. We looked at the cards with the highest amount of interest and outstanding and began clearing one card at a time while continuing to make the minimum payment on the others.

While we were busy clearing credit card debts, we also focused on repaying the personal loan.

Two difficult years

It took us two difficult years to come good. We had to cut corners, lose out on friends... make drastic changes to our lifestyle. But there were positive spin-offs. We were now eating healthier, spending more time with our family, reading and listening to music… in short rediscovering our core values.

I am proud to say that today things are back to normal, and the dream is alive again.

I don't use credit cards any more - I only pay in cash and if I don't have cash, I do not buy.

My personal loans are settled, and I now save a substantial amount each month. I have taken out life insurance policies for my family and the property back home in India, for which I had taken the personal loan, is giving me decent returns. Importantly, I can now sleep well.

Today I am no longer an impulsive buyer. I take time to evaluate before I buy anything which is more than Dh300.

Another secret I have discovered is that if you go on an empty stomach to the supermarket for grocery shopping, you tend to buy unnecessary things to eat, but if you have had a meal you will buy only what you require which, in turn, will save you money.

I have been so encouraged by my life-changing experience that I have begun sharing my simple budget plans with my friends and helping people who are in the debt trap. I am willing to help anyone who needs my help. Please feel free to contact me if required and I will help you. Call me on 055-650 4528 or e-mail me at finishricher@gmail.com

Dee, dubai: Budget to break free

I am a Filipina gainfully employed in a British company here in Dubai for the past 5 years. Some may not agree with my description of "gainfully employed" given that my salary is just Dh6,000 a month. But as I've learned the hard way, it's all about living within one's means.

In 2007, I had four credit cards nearly maxed out, in addition to a personal loan of Dh50,000 which I had taken to pay for my rent.

As most are aware, the real estate agents take annual rent via two to four cheques. Unfortunately, the man who I presumed was my landlord turned out to be just a tenant who was sub-letting the apartment to me. However, in the second year, he vanished after encashing my rent cheque of Dh30,000. To cut a long story short, I had to pay the real estate office (the legal one) another Dh30,000 to keep myself from living out in the street. I needed the money fast, and my friends loaned me Dh10,000, while the rest was managed through cash advance off my credit cards. So there I was buried in debt without even having enjoyed a penny.

I decided to buckle up and face the problem head-on.

Assets and liabilities

My first task was to list my assets and liabilities, or debts and investments in layman's terms.

I made a note of how much I owed and to whom and the minimum monthly instalments I needed to make.

It is best to write down your debts and assets in a notebook. On one page list out the liabilities under four columns - lender, amount, minimum monthly instalment and interest rate.

On another sheet of paper write down all assets and investments. Find out how long it will take you to liquidate/encash each investment, such as deposit certificates, real estate property, jewellery etc. For this page, you will need another four columns: asset, value (a conservative estimate would be prudent at this time), estimated time needed to encash it and the debt this asset will be able to clear.

In my case, at the bottom half of the same page, I listed down a bare-bones realistic get-out-of-debt budget on my monthly salary.

But before I did any of that, I moved to a cheaper flat. I also stopped driving lessons that were making a hole in my finances, while trips to the mall were on an as-needed basis.

I also managed to find part-time jobs.

Informing the family

The second phase involved informing the family, whether here or back home. This is crucial because not everyone in the family will understand why you need to send or give them less money.

Don't expect many of them to be sympathetic, or to easily accept the fact that the money you've be sending them will be considerably less.It's also always good to have other members of the family helping out your parents or siblings while you try to stay out of jail. In my case, my brother who has lived here even extended me an interest-free loan, payable monthly.

Liquidating assets

The third phase involves liquidating some or all of your assets. I encashed my deposit certificates, sold off some of my jewellery, paid off all my credit cards except for the last one. My plan is to finish paying off my credit card bills and then set aside Dh1,000 each month to fast-track repayment of my remaining debts.

I., Dubai: Going through an ordeal

I got married in 2004 and we had a baby girl. Life was beautiful.

We decided to buy property in Dubai and took a Dh700,000 loan. In 2007 my husband branched out into his own business with a friend and took a Dh1.8 million loan from him to invest in property at Silicon Oasis. My husband gave a guarantee cheque to his friend against the loan. It seemed like our dream was coming true.

But the economic crisis brought our dreams crashing down. Property prices tumbled and many projects were put on hold. It was then that my husband's friend asked him to return the entire invested amount of Dh1.8 million. Now there was no way we could return the money because we did not have it.

It had already been invested but since the project was frozen, all we could do was wait. The friend then took the guarantee cheque to the police and filed a case against my husband, who was sentenced to two years in jail. This was, however, reduced to one year after an appeal.

Till date the project is incomplete and I am still waiting for my husband to return from jail.

Since he is in jail he cannot provide for the family and I can only manage to cover basic expenses with my salary of Dh4,000 that I earn as a teacher. My daughter is ready for school, but I have no idea how I will be able to arrange for her grade 1 fees.

Worse, banks are calling us every day to pay up credit card debts and the loan, while threatening to open more cases.

When I go to visit my husband in jail, some people say: "You are the wife of a criminal".

I wonder how I will be able to pass through this ordeal.