Dubai: The high cost of living is always a personal finance issue for many people in many parts of the world. Households constantly worry about how they can keep a roof over their heads, put food on the table or send their children to school without getting broke.
Residents in the UAE are no exception.
Paul Butler, a father of three from the United Kingdom (UK), has been living in the Middle East for seven years now. But lately, he’s had to look at his lifestyle choices and consider cutting back on his family’s outgoings.
One of his biggest worries is that the education fees for his two elder sons have just increased and he now has to shell out Dh160,000 on school bills alone.
“This is a sizeable amount of money, what with the cost of living ever increasing. It meant we have had to cut back on most of the lifestyle choices we made when we came.”
Nerisa, a mother of three from the Philippines, said their financial outgoings have indeed increased every year and this time, she and her husband have to spend Dh120,000 annually to send their three kids to school.
“Everything seems to be on the rise, including the cost of groceries and housing rent. And on top of that, we have to pay a housemaid to help with the chores, and that’s another Dh30,000 yearly expense,” she said.
Financial experts at Guardian Wealth Management (GWM), who provide advice to 10,000 clients -- predominantly UAE-based expatriates from UK, United States, Australia, South Africa and Canada -- said there are many other people who share the same concerns.
“In [the first quarter] of 2018, we have noticed an increase in clients voicing concerns over the rising costs of their outgoings,” said Gemma Frankland, head of global partners at GWM.
“Education fees are a huge factor and, despite recent reports, education fees in the UAE are actually increasing rather than decreasing in line with the Education Cost Index (ECI), which is currently at 2.4 per cent.”
The UAE has been one of most preferred destinations for expatriates, mainly due to the high compensation packages that organisations offer to foreign workers.
According to HSBC’s Expat Explorer survey, people in Dubai earn more money than many of their peers in other labour markets, with expats who have moved to the city reporting that they earn $138,177 (Dh507,524) per year. That’s higher than the global average of $99,903. In terms of cost of living, however, Dubai and Abu Dhabi are ranked the 20th and 23rd costliest cities, respectively, according to Mercer, as of 2017.
While high living costs can seem concerning, financial experts said they don’t need to be, and it is important for consumers to take stock of their own finances, to ensure that they don’t end up going back home or retiring with an empty bank account.
“There is no reason why residents should not be able to offset the costs with savvy preparation,” experts at GWM said, adding that there are still a lot of things consumers can do to mitigate their financial situation.
To help them navigate high costs and ensure they are able to save enough money, financial experts have set out to provide the following tips:
Stop overspending on impulse buys
Being the shopping haven that it is, Dubai offers plenty of options and opportunities to spend money on, not to mention mega sales events that even the stingiest of consumers would be hard-pressed not to open their wallets.
If your goal is to minimize your spending, make sure you avoid giving in to impulse buys. Avoid the pressure, no matter how much your friends are showing off their shopping finds on social media.
“We're all susceptible to giving in to retail therapy or a desirable item occasionally. And it's easy to get drawn into a social competition with friends or family bragging about their latest purchases or luxury holidays on Facebook or Instagram, so be careful not to jump into impulse buying based on your newsfeed,” said Dr. Majdi Abd El Muhdi, head of corporate communications at ADCB.
“Also, make sure to filter your content to cut out or limit accounts that encourage consumption.”
And before you pull out your wallet, always ask whether the potential purchase is a need or a want. “And if there is a better way to spend this money and more importantly, whether you can really afford it,” El Muhdi added.
Budget better and cut back
Knowing where the money is going and ensuring that you don’t spend more than what you have is one of the keys to avoid getting broke. Being able to give up on non-essentials, such as drinking lattes or going out for a drink on Thursday nights, is even better.
“It’s painful, we know, to keep track of every single expense but even the trivial, seemingly small amounts need to be considered in the grand scheme of things,” said El Muhdi.
Consider how much you can save if, for instance, you give up your daily cup of coffee or latte. That adds up to more than Dh5,500 a year, noted Muhdi.
In order to keep track of every single expenditure and see which other areas you can cut back on, try using budget tools or templates that may be available online.
“Be honest and detailed as possible – the average person spends money three times a day. Keep your receipts and refer to your bank statements so you can reflect on how many of these expenses were wants rather than necessities,” Muhdi advised.
Clear bad debt
Debt is a part of life and difficult to avoid. As of October 2017, nearly half (46.7 per cent) of people in UAE have fallen into debt, while more than one in ten (12.8 per cent) are actively looking for a loan.
However, the one thing you don't want is having your bank or lender calling you non-stop because you have a mountain of credit card bills that you are struggling to pay back. Make sure you manage this type of debt wisely, as interest rates can be excessively high and make your unpaid balances skyrocket.
“There are two types of debt – good debt such as mortgages and bad debt such as credit cards. Make it a priority to clear bad debt as soon as possible to avoid paying high amounts of interest over a long period of time,” noted Butler.
“The money saved by paying debts can quickly be put towards savings funds that work for you.”
Put gratuities and bonuses straight into savings
Occasionally, you may be lucky enough to receive some extra payout aside from your monthly salary. If you leave a company, for instance, you are entitled to a gratuity pay, or if your employer is doing well, you may receive a bonus from time to time.
If you’re lucky enough to receive extra compensation, resist the urge to spend it. Instead, run to your bank and have it deposited into your savings account, or invest it somewhere else, if possible.
“Gratuities should essentially be seen as a pensions contribution in this area of the world so don’t be tempted to spend it at the end of your employment,” said Butler.
“Instead, put any cash bonuses straight into a savings scheme that you cannot reach and won’t be tempted to spend.”
Whatever you plan to spend on, be it a big-ticket item, a new pair of shoes to match a party outfit or your week's grocery needs, don’t just buy the first item you see. Take some time to compare prices.
“Take some time when you are choosing to buy goods and shop around for the lowest price. Don’t leave it until the last minute as you’ll likely impulse buy from the most convenient place at the highest price,” said Butler.
“Using comparison sites can help with research [on where to buy the most cost effective items]. Additionally, there are plenty of deal apps such as Groupon and The Entertainer, which can be a great way to save money on dining out and leisure activities.”
Prioritise your needs, not wants
Sometimes, it can be difficult to differentiate between wants and needs, so many people end up spending mindlessly. One way to avoid this is giving yourself a monthly budget for “extras” and monitor your spending, said Muhdi.
“When saving, it is important to have a goal in mind. You should consider setting up multiple savings accounts, for example, education, retirement, emergency, and direct funds directly into them as soon as you get paid – before it can reach your pocket.”
“Eventually, when you see those accounts grow, you will be motivated to increase your contributions towards your savings and also be able to enjoy your earnings in the present without worrying about the future.”