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How UAE millennials work towards their common goal of financial independence. Picture used for illustrative purposes only. Image Credit:

Dubai: Many UAE millennials strive to achieve financial freedom by the time they turn 45. But is it possible, and if yes, how do they go about it? Let’s find out from some Dubai-based millennials themselves, and see what tips they have to offer.

The current generation gives importance to early retirement than their predecessors, who generally have worked with one company for their entire career until they reached their retirement age of above 65 years.

On the other hand, millennials want to be financially independent to make monetary decisions without worrying. They aim to retire young to pursue their dream lifestyle.

Dubai-based banking and financial professional Fahad Merchant, 37, said: “We, millennials, who like to think outside the box, are adventurous, risk-takers and goal seekers."

Fahad Merchant

"From an early age, we are prepared with a mindset to consider retiring young from work and be able to invest in a business," Merchant said.

"We have an entrepreneurship mindset, and by the age of 45 to 50 years, we wish to jump on the wagon of being a venture capitalist and business owners.”

Rule #1: Set aside a portion each month just to invest

Merchant regularly saves a portion of his monthly salary and has invested in mutual funds, life insurance with a retirement plan to secure his and his family's future. “I am actively investing in shares, mutual funds and bonds plus investing annually in a life insurance savings plan,” he said.

“Life insurance offers an investment plan that pays out on completion of the term. It will provide me with liquidity on retirement and secure my family after me.”

Merchant began investing in mutual funds in India at the start of his career in 2007. “The market has tremendously seen an increase from 15,000 points and reached 40,000 points recently. I am a medium risk-taker, invest only in secured bonds and low-risk funds. I believe going in for medium risk products gives you stability over your capital.”

Rule #2: Use pandemic savings to buy a property in your home country

The pandemic situation has helped Merchant set aside extra savings this year because the travel restrictions helped him increase savings. It helped him invest his surplus money towards buying a small property in India.

“Having invested in a property now would help me secure a roof post-retirement, which is the biggest need for an expat working in the UAE that wants to settle down in their home country after retirement.”

Rule #3: Invest over multiple asset classes in order to retire in 15-20 years

Long time Dubai resident, Akhil Chimnani, 30, aims to achieve financial independence in the next 15 to 20 years when he turns 45 to 50. He runs a family-owned real estate brokerage business in Dubai and saves to achieve his money goals since his career started.

Akhil Chimnani

“Investments spread over multiple asset classes like in stocks 50 per cent, debt/deposits 15 per cent, real estate 25 per cent, and cash 10 per cent, is an ideal way to secure future,” he said.

“I don't want to retire after attaining my financial freedom but the shift from my regular work to passion projects, community service, and become more innovative with my profession.”

Rule #4: Put most savings in stocks, fixed deposits and real estate

Chimnani has put most of his savings in stocks, fixed deposits and real estate. “My strategy is to save enough to make a regular investment in shares and be able to grow my portfolio by 8 – 10 per cent each year. When investing in stocks, I prefer to start with companies that I am a consumer of, like Netflix, Uber or Apple.”

He has learned the strategy to pick the company for investment, considering how the world will change in the next 10 years.

“That is, would we still be going to universities or moving to online learning? Will, we always be driving a car, or will we have self-driven vehicles? Will we still consume meat or move to plant-based meat? It's important to pick a story you believe in and invest in the idea,” he said.

Rule #5: Get market-linked whole life insurance, critical health insurance early on

Chimnani had pointed out that a well-planned investment strategy should also include having market-linked whole life insurance and critical health insurance once you reach 30.

“Setting aside funds for health and life insurance is crucial, as good health allows people to live a good lifestyle. Similarly, a small investment for a long time (18 years) for children's education is equally vital to enjoying a worry-free future.”

Experts share tips to help millennials attain goals

Saif Al Alkeem, head of Priority Banking, Wealth Management and Liabilities at Abu Dhabi Islamic Bank (ADIB), witnessed a significant divide between generations' retirement goals. He pointed out that the millennials' behaviour is largely shaped by the global economic crisis experiences and the increasingly competitive and challenging corporate work culture.

Saif Al Alkeem

“There is a growing emphasis on their personal needs above all else, including those of the organisation. Unlike previous generations, they are much more prone to changing jobs and chasing higher pay, better benefits and greater flexibility.”

Citing research and data from the bank, he said that the younger generation spends less and make far less unnecessary purchases than their predecessors. “They are considered financially prudent and savvier consumers and are less provoked to spend money on material goods.”

“While long-term finances are a top cause of stress, more than half of millennials, and nearly half of Gen Zs, are saving money and could cope if they unexpectedly received a large bill,” he said.

Al Alkeem pointed out that the movement among millennials seen globally and here in the UAE is to plan their financial life to gain more financial independence and retire early.

“They are into savings programs and investment where there is a tendency to save a large amount of their income, allowing them to retire far earlier than traditional budgets and retirement plans would allow.”

Rule #6: Be conservative with any investment advice and make your own estimates

Al Alkeem added that planning for retirement should start by thinking about your retirement goals and how long you have to meet them. The rule of saving for retirement is to start as early in your working life as you can and invest them in different places or asset classes, allowing it to grow, he said.

Professional help from an investment advisor can help you decide on where you should invest based on your goals and the rate at which you want it to grow.

Being too conservative about your retirement goal can be harmful as it does not take into account unanticipated emergencies

- Saif Al Alkeem

Al Alkeem said that although your advisor may give you an idea of how much you can expect when you retire, it's wise to be conservative with these and do your estimates. “Adjust how much you are saving if you think you may be falling short.”

He also stated that the earliest contributions you make are most valuable for planning early retirement because you have the longest time to grow but be prepared to make financial sacrifices. “The problem arises when usually, retirement is placed on the back burner in favour of other priorities, such as setting up a home and starting a family.

“Also, being too conservative about your retirement goal can be harmful as it does not take into account unanticipated emergencies, such as potential health problems and emergency expenses.”

He recommended participating in an investment plan designed to provide a lump sum of money at retirements like in Sukuks (Sharia-compliant bond-like investments used in Islamic finance) or stocks. “The value of these investments can grow depending on market performance. However, never rely on just one pot of savings for your retirement.”

Rule #7: While monitoring monthly spends, always save before you start spending

Dilip B M, Financial Advisor, Elixir Commercial Brokers said that 'Save Before You Spend' is a rule you should keep in mind before starting any saving plan.

Dilip B M

“Keep a tab on monthly spends and avoid impulsive buying.” Don't live beyond your means, as getting cash loans is easily accessible in the UAE, but if not paid on time, you may incur high interest and get into a debt trap that could jeopardise your long-term financial goals, he explained.

“So, if you have identified the total amount you need for retirement, you may start a Systematic Investment Plan (SIP) to accumulate and grow your investments over a long period and invest in Exchange-Traded Funds (ETFs) and Mutual Funds.”

What is an SIP, ETF and Mutual Fund?
A Systematic Investment Plan (SIP) is an investment vehicle offered by many mutual funds to investors, allowing them to invest small amounts periodically instead of lump sums. The frequency of investment is usually weekly, monthly or quarterly.

A Mutual Fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets.

An Exchange-Traded Fund (ETF) is a type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges. ETFs are similar in many ways to Mutual Funds, except that ETFs are bought and sold throughout the day on stock exchanges while Mutual Funds are bought and sold based on their price at day's end.

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Rule #8: Stay invested for the long term, but adapt a flexible investment approach

Paul Cox, HSBC’s regional head of Wealth Development (MENA and Turkey) said that millennials' financial freedom is linked to personal freedom of choice and flexibility. “It is a shift in overall thinking that might allow spending more time on expanding their horizons outside of work.”

Paul Cox

“Have a clear plan based on measurable long-term goals. It will help you budget how much you save every month and support you to resist the temptation to make short-term decisions during periods of market volatility.”

He explained that a balanced multi-asset portfolio would provide some protection against volatility in one asset class. For example, while stocks and shares may temporarily fall in value, a shift to safer assets can make bonds rise in value, he said.

“People try to 'buy low and sell high' within the short term, which in reality is often an unsuccessful strategy. Achieving financial freedom is a big goal, which merits time and patience, be consistent and regularly invest so that you can average out your investment cost over a longer period.”

Lastly, he said to include a safety net of accessible cash that you might need for other, unplanned purposes. Many people dip into savings and disrupt their long-term plan for want of short term cash, so budget for this to hit your long-term goals effectively, he added.