We all strive for a financially independent future. A future where we have saved and invested enough to be able to live on the returns from our investments and do things that we always wanted to do. A future where most of our financial goals have been achieved, debts repaid, and healthcare, taken care of. This future is achievable only if we can manage to save and invest enough money during our younger days. UAE has a large number of expatriates living and working here for a better future. Most people have a higher disposable income than they did back in their home countries. But, the cost of living in the UAE is expensive. If you follow financial discipline, you can save money and convert it into a formidable sum. However, if you lose track, UAE offers countless options to spend too!
Today, we will offer some tips that can help you save money from a limited salary in the UAE.
1. Budget to Save
Nobody likes budgeting. The word usually implies cutting down on expenses that give pleasure. However, a personal budget is the first and important step in saving money. It offers a bird’s eye view of your financial health and opens up avenues that can help you save. Here is how you can create a simple but effective budget:
- Open Google Sheets or Excel and create three sheets – Income, Expenses & Debts
- In the income sheet, list down all avenues of income. It includes your salary and other interest or dividend incomes that you might have
- In the expenses sheet, list down all your monthly expenses in the decreasing order of priority. So, the topmost entry should be the most important expense (like house rent) and the last entry should be the expense that you can stop immediately (like a monthly foot massage)
- In the debts sheet, list down all the debts that need to be repaid. This includes loans (personal, home, car, etc.), credit cards, and loans from family or friends (if any)
Allocating funds: Once you have created the sheets, calculate if your income is sufficient to cover your expenses. If yes, then how much funds do you have left to repay your debts? Remember, unless you clear your debts, savings will not make sense since the debts will continue accruing interest. Next, turn to the expenses sheet and look at the expenses you can get rid of. Every cost you strike down from the list is money saved.
Create a budget for the amount of money you would want to spend on necessities and luxuries and stick to that budget. You can divide your costs into NEEDS and WANTS where needs are absolutely essential costs like rent, utility bills, transport, etc. and wants are avoidable costs like dining out, vacations, shopping, etc. Create a budget that allows you to cover all your needs and a reasonable number of wants. Don’t do the mistake of trying to strike off all WANTS as that will leave you unhappy and dissatisfied with the quality of life. Reduce the wants but don’t abolish them.
You can follow some budgeting rules like the popular 50-30-20 rule or the 30-days savings rule to help you with the process. Once your debts are paid, the same funds can be redirected towards savings.
2. Save before you Spend
One of the biggest mistakes that most people do is that they try to curb their expenses and save the money that is left at the end of the month. This is not an efficient way to save. You need to reverse the process. When you receive your salary, set aside a pre-determined sum (10-20% of your salary) for savings. Now, budget your costs within the remaining funds and ensure that you get through the month without having to use the money set aside. This will require discipline and focus. However, over time, you will succeed and before you know, you will have a sizeable amount in savings.
3. Always have an Emergency Fund
Life is unpredictable. While we are busy working hard to earn money and harder to save it, illnesses, accidents, etc. are emergencies that cannot be avoided. All these emergencies come with a cost. You shouldn’t dip into your savings to manage these costs. Hence, it is important to set aside a small amount every month for such emergencies. Call it the emergency fund. It is very important to have this fund to avoid breaking your bank every time an emergency arises.
4. Look for ways to increase your Income
Anyone who has lived in the UAE understands that the cost of living is high. Regardless of the savings techniques, you will be able to save only if your income covers the average cost of living and leaves you with some room to save. Therefore, to start saving you also need to look for ways to increase your income. This can mean looking for a better-paying job, getting a part-time job during your free time, getting online work like content writing, designing, etc. Remember, every effort you put now will reward you in the years to come. And increasing your income will give you more firepower to create a better future.
5. Track your Expenses
Saving money is a journey – a long and arduous process that requires a commitment to your budget every single day. As you go out into the world, you come face to face with many spending opportunities. It can be an impulse purchase or a gadget that you always wanted or a great discount on flight tickets back home. However, the only way you can save is if you stick with your budget.
We are not discouraging you from spending, but you should avoid unplanned expenses at all costs (except emergencies). Before you buy something that is not on your list, create a budget for it. So, if you want to buy that gadget that you always wanted, then cut back of movies or dinners planned for the month. Work within your allotted budget and don’t fall prey to impulses.
Every day, after coming back home, list down all the expenses incurred. Check if you are within your budget or have exceeded it somewhere. This will allow you to take corrective measures and ensure that you save money by the end of the month.
Remember, saving money requires a lot of dedication and persistence. It will not be an easy journey as every time you stop yourself from spending on something you want, you will have to fight your desires. Keep the bigger picture in mind. Visualize yourself living a fuller life 15 years down the line. Think about things that you would want to do once you have saved enough and don’t have to worry about your future anymore. Stick to your savings plan and make this year the year that turned your finances around. Good Luck!