We’re constantly forced to spend. Whether it’s rent, utility bills, food or petrol, these are expenditures you cannot get away from.
If you’re a parent, then you can add some school fees to that! And if you drive, add parking and Salik (road toll) too.
So, already, we don’t have much to save. The little that we do, we end up spending mindlessly at the many malls all around. Life is good. But is it, really?
We’re all wired to consume. In the UAE, this is magnified all the more when you walk around any of its fancy shopping destinations.
Ads give us reasons to upgrade. We're constantly hammered by eye-catching road and media visuals to want the latest, fanciest, biggest and priciest.
But stop for a moment. Think. Rationalise.
Once you’ve got a handle on that, we’re on our way to saving money.
And it's not impossible. Have you heard, for example, about this expat who survived on less than Dh10-a-day ($3) in Dubai — and living off paratha and potato curry for dinner each night and walking to and from work? Maybe you don't have to go to that extreme. But you get the idea...
Here are some money-saving tips we hope you’ll find helpful.
1. Start today
Whether you start big or small, it doesn’t really matter – as long as you start. If you can’t save 10 per cent of your income, begin with just 5 per cent and live off the remaining 95 per cent. Save consistently, even before you pay your monthly bills and debts. Find a way to gradually increase your savings rate to 6 per cent, 7 per cent, 10 per cent, if not more. Ideally, you should put aside 15 to 20 per cent of your savings in an investment fund. What’s important is that you start now, and get into the habit of saving and investing.
2. Pay yourself first
As soon as you are paid, split the money and put yourself on top of the queue. By paying yourself first, you get the satisfaction of saving something for a rainy day (or your retirement). If your salary gets deposited each month into your bank account, put some of that into a separate account which you won’t use for weekly groceries or personal expenses. You can do a split; say 50/50, 60/40, 70/30, 80/20 per cent for expenses/savings, whichever suits you best. What’s important is that you set a personal target of paying yourself first — and stick to it. What a typical budget pie shows, allocating a portion for savings.
3. Keep two bank accounts
Have one account for your expenses and have another one for your savings. It's a simple solution, and it’s rather helpful. Splitting the two allows you to keep tabs on your money better. This allows you not only to physically put your money in two places, but know the amount of money you have spent and saved up. Ideally, you should have more in your savings than in your expense account.
4. Make your money make you more money
If you put aside Dh370 (about $100) per month – the equivalent of a cup of cappuccino a day – throughout your working life and invest it in a fund that earns 8 per cent to 10 per cent per annum, you will be financially independent, with savings of Dh3.7 million ($1 million) by the time you retire, according to “Way to Wealth” author Brian Tracy. Even someone who earns a minimum wage can be a millionaire if he or she consistently saves over the course of his lifetime. Learn how mutual funds, exchange traded funds, trust funds, insurance, 401(k) or "forced savings" plan, and personal investments.
5. Keep track of your finances
Use a banking app on your phone (if it’s available) where you get a bigger view of your money, keep tabs of your balances, check your transaction history and transfer money in between accounts. Or you can go old school and write it in a book. What’s important is to keep track of how much is going in and going out. Keep track of how much goes where. This allows you to see if you’re overspending, so you can cut back on things and save money.
6. Save your change
Whether you use a box, a can or a piggy bank, saving loose change is an amazing way to earn extra money. Your 25 or 50 fils or Dh1 coin can seem insignificant, but if you round them up later, you could easily end up with a few hundreds before you know it and then you can buy something you’ve been wanting for yourself or add it to your investment kitty.
7. Don’t keep money in your wallet
This practice guards against your impulse to buy, especially from stores that still take cash-only payments. If you look into your wallet and know there’s money there, your instinct will tell you to spend it. So if you do find yourself without any cash when you walk into a store, it cuts your impulse to spend. You can’t spend what you don’t have.
8. Don’t convert currencies
Converting everything you buy or want to buy into your home currency is silly. We’re not earning in pounds or dollars, so we shouldn’t be thinking in those currencies. Besides different countries have different prices depending on various economic factors. It’s a mistake that many expats make.
9. Don’t buy a tank
With easy instalment plans and petrol being so cheap, walking into the 4x4 trap is not uncommon. But the amount you will end up paying in monthly instalments for a 4x4 compared to a regular car can work out to a difference of about Dh1,000. And let’s be honest, you just need a set of wheels to get you around from point A to B.
10. Avoid road tolls
While getting a Salik tag is not very expensive and gives you the option of using Shaikh Zayed Road when necessary, you can avoid using it all the time. Shaikh Mohammad bin Zayed Road and Al Khail Road are as convenient and mostly free-flowing.
11. Avoid overspending on food
Food is a necessity, but there’s no need to splurge. People tend to buy too much food, stocking their fridge with food that eventually goes straight in the bin. Saving money on food is as easy as preparing your lunch at home, instead of buying lunch at work.
12. Don’t waste food
If you have ended up buying too much food, don’t throw it away. Improvise. Do what all the Nan’s in the world do… make a pickle. It’ll save you an expense on a day when you’re planning to have some friends over. You don’t have to rush out to Spinneys to buy some over-priced snacks. Slap some of that pickle on crackers and you’re sorted.
13. Buy quality
Saving doesn’t mean not buying anything at all. When you do buy, go for quality over quantity. When you have a family, buy a quality couch that would stand the onslaughts of growing children. Invest in a nice bed, because you’ll spend a third of your life on it. Buy quality because it actually helps you save money in the long term. It’s the same when buying a car; buy cheap and you’ll end up spending more on repairs and replacements.
14. Achieve targets, reward yourself
Even an occasional dinner at a nice place to mark a milestone in your savings plan can be helpful. When you do meet your target, buy yourself something you’ve wanted for a while. Having something that really motivates you helps you stay focused on your goal.
15. Do not borrow money
Avoid spending money that isn’t yours. Avoid borrowing money from your parents, siblings or friends, although it’s sometimes inevitable. Owing money is not worth buying that thing you want. As far as possible, stay away from credit card debt, as they charge up to 36 per cent a year. If you need to borrow at all, then apply for a personal loan, which in general charges much less than a credit card. Borrowing causes stress, and stress is something you need to avoid.
16. Shop around
Before buying something you need, shop around for a better price, especially for food, clothes, shoes, cars, and insurance. Just because the supermarket nearest your home is the most convenient, it doesn’t mean it sells the cheapest goods. Shopping can be extremely therapeutic and enjoyable, so instead of looking at it like a task, make a day of it.
17. Pin it up
Developing a lifelong habit of saving and investing is not easy. It requires will-power and determination. Write down your goal and pin it up so you’re constantly reminded of it. Once this practice locks in and becomes automatic, financial success is virtually guaranteed.
18. Cut down spending on special occasions
Buying presents is great, but don’t overdo it. Gifts that are well thought out are more appreciated than mindless ones picked on a trip to the mall. Keep your spending down on special occasions – birthdays, anniversaries and holidays such as Christmas. It’s always the thought that counts.
19. Avoid Credit cards
Credit cards can either be your worst enemy or your best friend. But more often than not, they’re our worst enemy. They give us a false sense of security and allow us to spend money we don’t actually have so it’s best to avoid them. Credit cards also have the highest interest rates out of any borrowing mechanism from a bank. Live within your means and spend only what you have.
20. Pay your credit cards first
If you do have a credit card the least you can do is to pay them off first and ensure you have zero balance each month. Paying the minimum is a trap as the outstanding balance remains the same. You’re essentially only paying off the interest to the bank if you do that. If you maintain a zero balance, you avoid coughing up to 3 per cent ‘finance charges’ per month, ‘credit shield’ and all other pointless charges. Doing so would allow you to save thousands, each year.
21. Build an emergency fund
An emergency fund is helpful in case of unexpected misfortune – job loss, accident, death in the family. The rule of thumb here is to have an equivalent of three months of your salary kept aside as an emergency fund and within easy reach.
22. Don’t buy things on impulse
If you fancy something, wait for 24 hours before buying it. Chances are you will realise you don’t actually want it. If you love window shopping, ignore shopping malls for a while – or altogether -- because window shopping often turns into actual shopping. Don’t allow yourself to be tempted.
23. Save on utilities
Turn off appliances when they are not in use, switch to energy-saving lights and turn off the air conditioning when you leave the house. Even by placing a water-filled plastic bottle inside an average-size toilet flush tank to displace extra water will result in hundreds of litres of water being saved each month. Don’t let the water run when brushing your teeth, use a glass instead. Avoid taking extended showers or baths. Know when the peak-hour rates apply and avoid using home appliances during that period. Avoid disconnection and reconnection fees by paying your bills on time. All these add up.
24. Be realistic, even when you get a pay rise
Don’t let a pay rise give you an excuse to upgrade or spike your expenses. Don’t ditch your small sedan for a Porsche just because a neighbour drives one. Don’t move into a nicer, bigger villa just because a friend lives in one. You can’t keep up with the Kardashians and come on, let’s be honest, you really wouldn’t want to.
25. Keep an eye out for discounts
Take advantage of loyalty programmes that allow you to save points. Make use of discount coupons to buy necessities. These days, most shops have loyalty cards so sign up with hypermarket loyalty programmes that convert your points into cash.
26. Never bounce a cheque
Bouncing a cheque in the UAE is a crime. If you use a cheque to pay rent or school fees, make sure they don’t bounce. Otherwise it will cost you dearly in charges, or even land you in legal trouble.
27. Get adequate insurance
Make sure you and your loved ones get adequate insurance cover. If a medical condition or accident takes you away from work and you end up with a huge medical bill, insurance is a boon. When shopping for insurance, remember that the cheapest isn’t necessarily the best. Read the fine print. Some costs are necessary for your peace of mind if misfortune strikes. More on this, below.
28. Get a basic TV package
With the amount of TV package options you have in this city, it’s easy to get lost and end up with a package that is well beyond your budget. People in Dubai work a lot. Most people don’t have much time to watch telly so it’s a waste to have 500 channels when you mostly watch 5 on a regular basis. Most basic packages have all you need.
29. Keep your phone bill down
Landline rates are usually cheaper than mobile phone calls, so use your home phone instead. To save on international calls, use your smart phone’s messenger service to get in touch with friends and family abroad. Limit your phone calls. Sign up for discounted rates offered by local phone operators for international calls. Fridays are always a good day to call home in the UAE as they’re discounted.
30. Get Wi-Fi instead of a socket connection
Even though a Wi-Fi connection is more expensive than the regular socket connection, in the long run it will save you more money on your phone bill as you will be using the Wi-Fi to connect to the web rather than using your phone data.
31. Consider downgrading
If your rent is a quarter of your salary, you’re living beyond your budget and must try downgrading. It may be less comfortable, but if you want financial freedom and long-term peace of mind, it is definitely worth considering this option. If the cost of living goes beyond reach, there's nothing to be embarassed about downgrading your lifestyle. You're just being honest and true to yourself.
32. Use public transport
More people are using public transport in Dubai now. Use the excellent Dubai Metro and try the improving public bus transport network. And walk more; it’s good for your health and your pocket. Only take a cab when it’s absolutely necessary. If you have a guzzler that also requires high maintenance, it’s time to ditch it.
33. Exercise: Health is wealth
This should have been on top of this list, instead of landing at No. 33. The long and short of this: exercise! Your ability to make money depends on your capacity to flex your muscles, which follow signals from your brain. So physical and mental health are equally important. Find ways to unload stuff from your brain. Heavy, useless thinking is pretty useless. Also, medicine can be expensive. Research home brands of products and shop around at different pharmacies for lower costs. And don't postpone seeing a doctor, or getting regular health checks. Get what you need – your health comes first.
34. Wash your own clothes
Avoid using laundry services. It might seem cheaper when compared to your home country but it’s not, really, and it all adds up. Set your washing machine at the minimum water usage. When dry cleaning your clothes, stick to the outfits your washing machine could ruin. A growing practice in Dubai is to wash your clothes at home and call the neighbourhood pressing service.
35. Be frugal
Question every expense. Be very careful with every fils, dirham, penny, paisa, centavo, dime or nickel, especially if you’re at the beginning of your working life. The longer you hold on a buying decision, the better your decision will be and the price you will get at that time.
36. Don’t be a victim of Parkinson’s Law
In finance, Parkinson’s Law is: "As the supply of a resource increases, so does the demand for that same resource." In other words, the more money you earn, the more money you spend; you go to fancier restaurants, live in a fancier place, buy pricier items, drive a bigger car, and give larger tips. In the worst case, your expenses even rise higher than your income. If you get a raise, view it as a greater opportunity to save, not spend.
BONUS 1: Get term insurance
Do you know what happens tomorrow, or even the next hour? Getting an insurance cover is the basic building block of good financial housekeeping. It's a must-have for parents.
Why? For every dollar or dirham you pay for a term insurance plan, you get 100x — if not more — in case a personal disaster hits. Term cover offers guaranteed protection in terms of sum assured for a fixed premium for a fixed period of time (usually one year).
In case you, as the policyholder, die during the term, the sum assured gets paid to your loved ones. Mathematically, it 's a no-brainer. The most cost-effective way of buying life insurance is therefore through a pure term insurance plan.
BONUS 2: Manage expectations well
It's the most unfortunate thing: expats who had no clue about financial discipline going home broke — and infirm — after many years of toil.
Or worse, serving jail time over financial troubles. So here's the point: Just because you're an expat worker, it doesn't mean your relatives' expectations must be met all the time.
That every expectation to celebrate with lavish parties at home must be met. That you're obliged to bail relatives or a cousin-of-a-cousin-of-a-friend kind of relation out of every financial bind.
The key is to manage your needs and their needs well.
Set savings and expense targets. Be willing to take the pain. Stick to them. The degree of your success or failure in meeting goals lies in your resolve to stick your neck out to hit those targets. You may fail at some point, but keep trying.
Like relentlessly pushing yourself to follow an excercise regimen in order to reap its proven health benefits, no one can help build your financial muscles better than you.
The good news is that while we're alive, it's never too late to start — today.