It's time to recalibrate your budget, say financial experts Image Credit:

Dubai: As the coronavirus outbreak threatens to rob families of lives and livelihoods globally, the question of coping with shrunken or no incomes following salary cuts and job losses has become a pressing concern.

According to financial consultants, the key to dealing with the evolving scenario ranges from sticking to just essential needs by recalibrating budgets and taking proactive steps for loan, mortgage repayments to adopting a positive mindset and growing one’s potential employability, however far-fetched that may seem.

Taking stock of your essential needs is the first step to realigning your finances

As Ambareen Musa, Founder & CEO of the online platform, explained, “Being unemployed in the UAE comes with its own set of unique challenges. Single-income families, people who regularly remit money to their families back home, and those with outstanding debts can be undoubtedly the worst-affected. This laid-off workforce can also struggle to find a job in a market where most businesses are doing whatever they can to cut costs. Even the employees who’ve been forced to take a pay cut or those who’ve been given unpaid leave can find it increasingly difficult to manage expenses in a high cost-of-living environment.”

The harsh realities

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Ambareen Musa Image Credit: Supplied

In addition, she said people are especially worried about their debts, and the fact that they may face problems exiting the UAE without paying off all outstanding loans and credit cards. “It is common practice for banks in the UAE to freeze the account holder’s bank account and put a hold on all end-of-service benefits credited into the account by their employer. This will make it all the more challenging for people to survive if they do not have any savings to fall back on.”

Against such a backdrop, Musa cautioned against overuse of credit cards. “Credit cardholders may find themselves becoming excessively dependent on credit cards. Your credit card may seem like a quick and easy way to access cash, but the hefty interest charges, late payment penalties, over-limit charges and other penalties will leave you struggling financially long after the crisis is over.”

Much-needed respite

While there is no denying the harsh realities, not all is lost – if due care is taken.

Thankfully, borrowers can find some much-needed respite in the form of financial relief measures introduced by banks in the UAE. “For those who have been financially impacted by the crisis, the option of postponing debt repayments can allow them to focus on meeting their living expenses and immediate financial commitments first,” said Musa.

If a person has a bank loan:

Most banks in the country are now allowing financially affected borrowers to have their loan repayments deferred for up to three months. Banks are also waiving all interest and fees on this repayment holiday.

If a person has a mortgage:

A mortgage is usually the biggest financial commitment for most people, and one that takes up the largest chunk of their monthly income. The three-month penalty-free repayment holiday from banks applies to mortgage products too, but homeowners must have a financial action plan to deal with mortgage repayments once the three months are up.

For those who have a job and a stable income, mortgage refinance may turn out to be an opportunity to free up the cash tied up in home equity. The potentially lower interest rate would be a great bonus too.

Switching to survival mode

According to Musa, “Now is the time to cut all extra spending, stick to the bare necessities and switch to survival mode. Your priority should be to cover groceries, medicines and the essentials. If you have lost your job or received a major salary reduction, speak to your creditors, landlord, telecom operator and others about how they can help you cut your regular monthly expenses in terms of installments, rent and phone bills. And finally, remind yourself that this isn’t forever, and you will see better days soon. For those who have an emergency savings fund to fall back on, it is important that you do not deplete your savings completely. No one can really say how long the crisis and ensuing financial turmoil will last, so you need to cut back and stretch every dirham to make it last longer.”

Savings by default

Dubai-based Sandi Saksena has always been an advocate for downsizing. Long before coronavirus came about, the Indian social butterfly who once fell on hard times survived, even made unlikely gains, in the face of personal adversity.

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Sandi Saksena Image Credit: Supplied

The former housewife, who has turned into a financial adviser and empowerment officer over the years, says disruptive as the coronavirus outbreak has been, it has also presented itself with opportunities where people can actually save money.

As she points out, the stay-at-home regime has by default meant people can save on what was once considered a must-do, whether it was commuting, eating out, a movie date, shopping, a gym membership, a beauty salon, gifting, a celebration or a vacation.

“The business model has changed for everyone, whether you still have a job or not, whether you are an employee or employer, or whether you have to make do with a lower income. Don’t cling on to something that doesn’t work now. Take stock of your situation. You will be surprised that the savings accrued from the things you once freely spent on can now be stretched to meet your essentials,” she said.

Time to get real

Saksena said debt-ridden residents must waste no time and negotiate with their banks to defer repayments.

“They are not alone, the key is to get proactive and buy some time. I also tell people to use time, which they have aplenty on their hands now, to hone their skills and see what more they can do to become employable in the future. This is not far-fetched. I’ve been there, done that,” said Saksena, who dealt with a debilitating job loss in the family, by landing her first job only at the age of 44.

“This was after a series of rejections, but I was determined to get the family out of a debt trap and bounce back. You just have to step up and not feel victimised. It’s not the time to keep up appearances, but to just get real,” she added.