As cost of living goes up, managing expenses on a Dh10,000 monthly salary can be a challenging endeavor. However, with astute budgeting and lifestyle adjustments, individuals can not only survive but also enjoy the perks of living in a vibrant country like the UAE.
The UAE has attracted a diverse population with its tax-free salaries and a plethora of job opportunities. However, the ‘living’ comes with a price tag, and for those earning a modest income, it's essential to adopt a budget-conscious lifestyle. “Budgeting is a vital condition of financial management, especially when you're working with a limited income,” said Rania Edward, Financial Director of a leading multinational firm in the UAE.
In order to budget accurately, prioritisation of expenses is a crucial initial step.
The two major categories would be needs and wants; adding to that, everyone can agree that needs are basic survival necessities, such as rent, groceries, utilities, and transportation, any other form of spending can be categorised as discretionary.
A simple yet common recommendation of budgeting is following the 50/30/20 rule, which was founded by Elizabeth Warren, a senior US Senator from Massachusetts and renowned expert in bankruptcy law.
Warren proposed that the best way to budget is to allocate 50 per cent of your income to your needs, 30 per cent of your income to your wants, and 20 per cent of your income to your savings.
Housing/Utilities: The biggest expense
Rent is typically the most significant monthly expense for UAE residents and can quickly devour a significant portion of your income.
Edward suggests that on a budget of Dh10,000, it is best not to allocate more than 30 per cent of your income to rent and not more than 10 per cent to utilities; “finding roommates to split the costs of rent and utilities, looking for more affordable neighborhoods” are all suggestions to securing lower rent rates.
Vijay Valecha, Chief Investment Officer of global financial markets company, Century Financial said that utilities, including electricity, water, and internet, can vary based on usage and provider.
Allocating around 10 per cent of your salary, which is Dh1,000, should cover these costs. It's advisable to track your consumption patterns to avoid any surprises in your bills
This limits options to studio or one-bedroom apartments in communities such as Deira, Bur Dubai, Discovery Gardens and International City, where rents are more affordable.
Transportation: Getting around
Having a car might not be cost friendly, with expenses such as rent/finance, petrol, and insurance.
Fortunately, Dubai's public transportation system, including the metro, buses, and taxis, is efficient and can be a cost-effective alternative to owning a car. A monthly Nol card, which can be used across various modes of transport, costs around Dh300, depending on the zones travelled.
Carpooling or ride sharing services with colleagues can also immensely reduce transportation costs.
Food: Smart grocery shopping and dining
When it comes to food expenses, shopping at local supermarkets and preparing meals at home can significantly cut costs. Budget supermarkets offer weekly promotions that can help save on groceries.
Dining out frequently can quickly drain finances, but the UAE also offers a variety of affordable eateries and food courts that cater to its diverse population. Setting a monthly limit for dining out and taking advantage of lunch specials or discount apps can help keep this luxury within reach.
Lifestyle and entertainment
The UAE boasts a wealth of entertainment options, from beaches and parks to malls and cinemas. Many of these amenities can be enjoyed for free or at a minimal cost. Public beaches, parks with nominal entry fees, and community events offer ample opportunities for leisure without breaking the bank.
“A great way to save money is to minimise on paying entry fees. Lots of places in Dubai offer free access to attractions or alternate views, for example, free public beaches provide stunning views and sunny vibes for nothing at all. There are lots of deals on websites and apps, which lists hundreds of 2-for-1 discounts at restaurants, spas and more,” added Edward
For the fitness fanatics, you can find very affordable gym memberships starting from Dh120 for a basic package.
Savings and emergency Funds
Saving for the future or any sudden unexpected event is as important as managing your expenses.
Rehab Lootah, Deputy Group CEO, National Bonds, advises to account for the future. “Building an emergency fund with 3 to 6 months of expenses is crucial. Aim to contribute a portion of your income each month until you reach this safety net,” said Lootah to Gulf News
“Don't forget about retirement! Look into employer-sponsored plans or personal savings accounts. National Bonds offers diverse saving options for instance the Second Salary savings plan is a customised savings solution designed to help individuals generate supplementary income. The plan is the first part of a long-term program aiming to provide the best retirement plans that allow you to grow your savings securely while adhering to your values. These plans offer competitive returns and flexible contribution options, making them a great fit for any budget,” she added.
Despite the many temptations to spend, it is crucial to prioritise savings. Financial advisors recommend setting aside at least 10 to 20 per cent of the monthly income and increasing the amount as your income grows.
Lootah proposes a very efficient way of saving money through automatic transfers, “Set up automatic transfers from your checking to a savings account makes it easier to save consistently without needing to remember to transfer the funds manually. This ensures consistent savings and helps you reach your goals faster. National Bonds plans offer a variety of features, including mobile app access for easy tracking and management of your savings with transparency.”
Health and insurance
All employees in the UAE are promised a health insurance package by their employer; however, some packages only cover basic medical care.
It is advisable to set aside a small portion of your income, approximately 10 per cent, in the case of any uncovered medical emergency.
Managing debt
When asked about tips and guides to manage debt, Sara Avera, cofounder of global company GCME, said to Gulf News
My tip is that you have to pay your future self first. By that, I mean you need to first focus on paying off any and all debt you might have and then start saving up to create an emergency fund in case anything bad happens. If you already paid off your debt and have a savings account, 20 per cent of your salary should go into that account. You could even start an investing account and put 10 per cent into investing and 10 per cent into savings
She also spoke about the psychological aspect that, in her opinion, leads people into debt. “My last tip is to stop comparing yourself to others situations and stop caring what other people might think or say. According to the Federal Reserve's Survey of Household Economics and Decision-Making, 48.5 per cent of people between the ages of 18 and 34 have a credit card debt. 52.5 per cent of people between the ages of 35 and 44 have a credit card debt. Fifty sevent per cent of people between the ages of 45 and 55 have a credit card debt. And the list of people who use credit cards and have credit card debt goes on. Most people have a lavish lifestyle because they’re spending money they don’t have on their credit cards, which will lead to so much debt,” she said.
Living on a Dh10,000 salary in the UAE requires discipline and a commitment to budgeting. By making informed choices about housing, transportation, food, and entertainment, it is possible to enjoy the city's offerings while maintaining financial stability.
For those new to the city or struggling to manage their finances, seeking advice from financial planners or joining community groups can GET valuable tips and support. With careful planning and a bit of creativity, life in on a modest salary can be both fulfilling and enjoyable.
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