As the saying goes, ‘just as you’re about to make ends meet, someone moves the ends’. We all know that a peaceful life comes with a nice place to live, enough money to pay the bills and fewer concerns about finances. However, with the cost of living in the UAE on the rise and the majority of households shelling out huge chunks towards a cocktail of household expenses, the task of daily budgeting can be a tough nut to crack, with many of us at a loss as to where to start.
“When I moved to the UAE my plan was to make a tax-free income and save money to buy a house back home,” says Amelia Loughty*, a recruitment manager from the UK. “However, three years on and I’m no closer to that goal than when I arrived. Every month I seem to have burned through my salary and I have no idea where it all goes.”
Amelia is not alone. In her book, Nice Girls Don’t Get Rich: 75 Avoidable Mistakes Women Make with Money, Lois P Frankel lists a lack of awareness as a top reason women are being held back financially. But why is it that so many of us find what should be a case of simple arithmetic so tough to master? Jessica Cook, private client adviser at AES International, Global Wealth Management, believes it all comes down to underestimation. “Many individuals underestimate their spending, and will omit costs from their budget such as Christmas, summer holidays, trips to the dentist, car servicing – the list goes on. Without including every single spend, your budget simply won’t add up.”
Wealth and wellness coach and author of Heal Your Life Through Financial Freedom, Rasheda Khatun, agrees. “A lot of people never actually write down what they are spending. They have it in their heads, but it’s often a different picture on paper.”
It’s not all doom and gloom though; because once you’ve established an accurate budget you’re in a position to start moving forward with new targets. We asked the experts for their top tips on how to get you to where you need to be.
Top Tips From The Money Coaches
Financial adviser Jessica Cook shares her top tips on getting your money in order
When it comes to budgeting you need to include everything from the odd coffee to school uniforms and vet bills. It all adds up and all needs to be included so that you can budget effectively.
Pay with cash
It’s sometimes difficult to keep track of what you are spending when you use credit cards. Try an experiment whereby you only use cash. Take out what you think you will need at the beginning of the month and see if you can stick to the amount you have allocated yourself.
Have a specific goal in mind
This could be to save for retirement, for a property, or to achieve freedom from debt. Having a long-term goal will make it easier if you have to make some sacrifices along the way.
The app to download: Pocket Expense
Users can track their accounts, set budget targets and will receive alerts when bill payments are due.
The website to view
I recommend my own website,www.financial-advice-dubai.com, as my blog gives expats some useful tips about expat finance and budgeting.
Wealth expert Rasheda Khatun tells us how to budget and save
Pay yourself First
It’s something Warren Buffet recommends and it means that you should be saving before you spend. Don’t just save what is left over.
Pay off your credit card every month
You can go to the bank and sign an automated full repayment option. This way the full balance of your card will be automatically paid off and nothing rolls over.
Build an emergency fund of about three months’ salary
This will help you take care of all those unforeseen circumstances that really mess with your month’s budget and make you fall behind on savings.
The app to download: iWallet
This app takes care of your money management. Just feed in your expenses and income to analyse it.
The website to view
Www.finishrich.com, this is the website of financial guru David Back. He has some great tips on how to get your finances in order.
Inga Stevens, 33, is a communications manager from Finland
“I’m saving for a house so I put as much of my income as I can away for that. I also have an ‘emergency fund’ of around three months’ salary in the bank, which is there for vet bills, rent and car insurance. However, the problem I have right now is that by the end of the month I find myself completely skint, which often means I have to dip back into my emergency fund to cover general expenses. For a long time I’ve also been planning to put money into a private pension, but because my account is down to zero by payday, I’m not in a position to do that. I’d like to know how to structure my budget so I have enough money left over to create a solid savings plan, which incorporates a pension, my house and an emergency fund.”
“Inga keeps track of her spending on an excel sheet and divides her money between three accounts, so she is already on the right track. However, there is some confusion about what each account is for. Her emergency fund incorporates things like rent and car insurance, but these aren’t ‘emergencies’. I advise Inga to look at her emergency fund as more of a rolling bills account. I also recommend that she set up a fourth account for genuine emergencies, such as if she was made redundant. Ideally, this account should have a balance of around three to six months’ salary.
“One of Inga’s other concerns was that her account is down to zero every month. It’s fine for that to happen, as long as every dirham is being accounted for. She can do this by collecting all her receipts over a one-month period and then adding up what she is spending on various things. If she has a figure in mind of what she has for groceries or socialising, then she is less likely to overspend.”
“I’ve always wondered why people need so many bank accounts but talking to Rasheda made me realise how important it is. She also helped to alter my mindset about how I spend. At the moment about 30 per cent of my salary goes on socialising. However, Rasheda explained it’s not about saying ‘no’ to brunch, which can seem negative, it’s about saying ‘yes’ to getting my house or putting money into my pension, which is positive. It’s changed the way I think.”
Rachel Ballantyne, 38, is a full-time mother of two from the UK
“My husband and I currently don’t have a household budget and we don’t monitor our outgoings. We’re not big spenders, so we tend to assume that we don’t need a budget. However, by the end of the month we don’t have any excess to put into our savings. I know we need to start monitoring our spending so that we have more clarity on exactly where the money goes, but it’s difficult to know where to start.”
“Rachel tends to see money as the elephant in the room but at the end of the day, if you don’t talk about getting a bigger house, or your children’s education, these things won’t happen.To help her change her attitude about money I suggested she do some life mapping, which is an exercise where you look at different time periods in your life, such as your late forties, early fifties and sixties. You then write down how you would like your life to be at those times. Once you have put it out there it becomes so much easier for you to plan for it financially and it’s no longer just a figure, but an event to plan for, which is much less scary."
“Currently Rachel doesn’t have a budget, so I recommend that for the next two months she monitor the family spending by putting everything on the credit card and analysing it at the end of each month. This should then give her an accurate idea of where the money is going. She will then be in a position to open up separate accounts and begin allocating funds accordingly.”
“The meeting with Rasheda was as much a philosophical session as it was instructional. She was talking about money as a tool to be used, rather than an end in itself. She gave me some advice about planning my short-, medium- and long-term goals, which was a new experience, as I didn’t even have a budget for that week, let alone 10 years’ time. Her recommendation was that over the next two months we keep track of our spending. That way we will be more aware of how much we have to put into savings, and we won’t have a false idea of the amount we have to play with each month.”
Irene De Wit, 29, is a learning and development manager and mother of one from South Africa
“My daughter’s financial future, be it university tuition, a gap year or her first apartment, is something that I would like to budget for. However, at the moment this is eluding me as I’m a spontaneous person and I find daily and weekly budgeting quite challenging. I would really like some tips and techniques on how to be a more effective budgeter and planner.“
“Irene is in a healthy position in that she has savings and is debt free. However, after doing a detailed budget we discovered that there was quite a large percentage of her annual income that is unaccounted for. Looking closely, it’s clear that the little things, such as the manicures and lunches out, are eating up quite a bit of cash.”
“While it’s fine to spend on those things, Irene needs to account for them in her budget so that she has a clear idea of her financial situation, rather than spending blindly and believing she has less to put into savings than she in fact does. One way to do this is to keep a detailed account of her spending over a month period. Seeing where the money is going will give her more control over where she chooses to shave off expenses.”
“Like most parents, her main priority is that she can provide for her daughter and that includes short-term things like paying for sports clubs and out-of-school activities. These things are expensive, and will only become more expensive as her daughter gets older. Being a bit stricter now will allow her to be a bit better off in future so that she has money to pay for those things.”
“Dubai is a very cash-rich place and if you have money in your wallet, you’ll spend it. Jessica made me aware that I have become a victim of this, as I tend to spend on things without accounting for them. Of course, when it’s the odd Starbucks coffee or trip to the nail spa, you don’t think it’s an issue, but when you look at it on paper, it’s scary how quickly it adds up.”
“For November I have been tasked with keeping all my receipts and writing down my daily spending in a notebook. Jessica also suggested setting myself some rules. For example, rather than buying a Starbucks every time I want one, I’m going to limit myself to three a week. That way I can keep a closer eye on my daily and weekly spending, and with any luck I’ll be in a position to save a bit more money for my daughter’s future.”
Sarah Bentley, 39, is a marketing director and mum of two from the UK
“My dad always taught me, ‘take care of the pennies and the pounds take care of themselves.’ I believe that’s true, but as a busy working mum it’s a difficult thing to put into action. I find it hard to budget properly, whether it’s for groceries, clothes or new furniture. In terms of long- and short-term savings, we have money tied up in property and savings in the bank, but I’m sure if I could get my daily spending under control we would have more disposable income to put away for our future.”
“Sarah is quite up to speed financially, however, like many people, she is back to front when it comes to her savings. Currently, anything left over at the end of the month goes into a short-term savings account. Instead, she needs to establish how much she is going to put into her savings at the beginning of the month and then commit to living off the rest.”
“To do this, we looked at her monthly expenditure and I was pleased to see that while there were things that she underestimated, such as groceries and interior items, she was on track with her calculations. The next step is to look at reducing her household budget.”
“This should free up some income and she can allocate some funds to her retirement plan, which so far hasn’t been addressed. Sarah is 39 and plans to retire at 55. That’s approximately 192 more pay months, which means she needs to begin saving an additional percentage of her income as soon as possible.”
“Jessica made me realise I need to get my household budget in order and recommended that I schedule in a monthly shop at a budget hypermarket for toiletries, cupboard goods and cleaning products.”
“She also suggested that I take out the cash I need at the beginning of the month and divide it up into separate envelopes – one for groceries, one for petrol and one for entertainment. The goal is to stick with it and spend only what I have allocated to each envelope.”
“One of the biggest eye openers about the meeting was that Jessica pointed out that at the moment I am not making any provision for my retirement. I had an ‘OMG’ moment when she worked out that I have just 192 pay months left until I plan to retire. Now that I am taking control of my budget, I plan to allocate funds towards that.”