How to take control of your finances

1. Your health is your wealth
“What this means in financial terms is that, first and foremost, you should be covered by both health and life insurance. There are two types of insurance everyone should have whether you are married or single and whether you have children or not. These are life insurance and critical-illness insurance. A very good friend of mine became seriously ill in her 20s and the one thing she didn’t need to worry about was money. Thankfully, at that dire time in her life, she had critical-illness cover in place. What was even better is that when she recovered back to fabulous health, she wasn’t bankrupted by the process. It’s also worth knowing that since 2008, insurance coverage with many employers has changed and now covers less. So if you have corporate health insurance, check what it covers.”

2. Automate your savings
“Organising your finances will let you reap major benefits in wealth creation. Find a bank that is convenient – it’s best to find one that’s open on Saturdays – and offers an easy savings plan. With e-saver accounts, you can cover all of your fixed quarterly costs with a slightly better interest rate – this automatic saving may even equal some extra money for a holiday or rainy-day fund. To work out your monthly e-saver contribution, simply list your quarterly expenses, such as holidays, rent and clothes, and divide this total by 12. This leaves you with your monthly e-saver contribution. Most banks will offer savings as well as deposit accounts. They are essentially a way of budgeting your money to improve your cash flow, while also benefiting your overall wealth creation. Think of it as cultivating good habits around money rather than charging these items to credit.”

3. Do your credit check
“Credit cards cost money if they are misused and misunderstood. Take ten minutes out of your hectic schedule to call your bank and get to grips with your interest rates on late payments. I find that when we fully understand the consequences of our actions, we do in fact change our behaviour. Nearly all people who are in debt are guilty of not being fully aware of the terms and conditions of their credit cards and loans. No matter how busy we are in our daily lives, we should all be aware of these. This tip is imperative to spending and saving smartly.”

4.Smart style
“Smart style is all about being efficient with your clothing budget. To do this, identify your signature look, the type of clothes that look great on you and the clothes that fit with your lifestyle. Work out what works for evening wear, daywear, around-the-house casual and smart casual. Once you have listed these headings, identify five outfits under each title and organise your wardrobe accordingly. You’ll find that you needn’t shop for what’s in this season, but rather what’s missing in your wardrobe. It might be a new belt, a new pair of flats, or perhaps it’s as simple as a few new black tops. I live by this rule – and so do many of my friends – and they all agree that you save money while looking and feeling great.”
 
5.Work out your budget
“It’s amazing how simply having a budget in place can have a positive effect on all areas of your life. It’s about being financially mindful... I like to think of mindfulness as knowing where you’re at. Knowing what’s going out and what’s coming in each month will enable you to live life to the full. If you are a budgeting beginner, try iWallet, a free iPhone app that helps to track your monthly expenses. The results may shock you. If you’re not an iPhone user, keep track of your spending in a small dairy kept in your handbag. If you do this, you’ll soon realise the benefits of an e-saver account (see tip two), as saving first is the real way to ensure you don’t spend all your cash. You can find a wealth of knowledge on how to save on my blog, womenmoneyandstyle.com, under the ‘Money’ tab.”

6. Make compound interest work for you
“As Albert Einstein said, ‘Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.’ Compound interest is when the interest that is added to the principal amount of wealth also earns interest itself. This addition of interest to the principal is called compounding. For example, if a bank account starts off with Dh1,000 in it and has an interest rate of 20 per cent, which is compounded every year, at the end of the first year it would have Dh1,200 in it. At the end of the second year, the balance would be Dh1,440. For the shopper, the harsh truth of this is that it also works against you if your credit card is not paid off. Imagine you are thinking about buying a dress for Dh2,000. If you knew that it would end up costing you Dh10,000 by the time you had paid it off, would you still buy
it? Probably not.”

7. Understand dollar cost averaging
“You may remember this term from year 12 economics. The meaning may have flown right over your head then, but trust me, it will make perfect sense now. Dollar cost averaging (DCA) is an investment strategy that can be used with any currency. It is as simple as a regular investment, or savings strategy, which takes the form of investing regular amounts into a particular investment or portfolio – for example, Dh100 per month for ten months. If you are doing this, you are enjoying dollar cost averaging. How does it work? Well, when you invest in regular monthly installments, you are purchasing more shares when prices are low and less shares are purchased when prices are high. As the markets go up and down, you benefit from the market changes – providing you embrace this strategy over the long term. The great thing about dollar cost averaging is that it takes away the worry of working out when it’s the best time to invest because, over time, regular saving may help average out any market volatility. Remember, it’s never about market timing, but always about time in the market.”

8. Teach your kids the mechanics of money
“Lessons about money should start before high school. How early? Well, consider starting the topic as early as five years old, or as soon as children realise that money buys things. By five, most children can understand money in basic terms. Start by explaining savings goals, which have three elements – what you want to buy, when you want to buy it and how much it will cost at that time. Also tell them that a bank is a place that helps us safely store, organise and manage our money. Show them cheques and explain how we use them to pay for items when we don’t have cash on us – how they are like a note asking our bank to send our money to someone to pay for our purchases. Also, they can know that bills are invoices for services rendered, such as for water, electricity and phone usage.”

9. Transfer your money with a better rate
“As expats living in the UAE, we’re spoilt with massive savings on tax. But when it comes to transferring money overseas, bank charges and poor exchange rates mean we can often end paying more than we bargained for. When you’re transferring money overseas, do you know how much you’re paying? .

10. In debt? Do something about it
“Debt is a serious financial issue that affects far too many people today. A new study conducted by International Swiss Debt Management (ISDM) consultancy shows that 85 per cent of UAE residents are debt-stricken. In the UAE, when people find themselves struggling to repay what becomes a seemingly endless cycle of debt, the only option is prison – there’s no declaring bankruptcy here! So if you’re in debt, don’t bury your head in the sand – it will only get worse.” For more from ISDM, visit isdmconsultancy.com.