Many of us make New Year resolutions, but how many of those are about our finances? And how many of them do we really keep?
2020 and 2021 have been tough years for large numbers of people and we can’t be sure of what else is in store, but knowing you have taken all the right financial steps will put you in a good position to weather any future storm.
Invariably, we could all do a little better and some focus rarely goes amiss. With that in mind here’s a list of 10 steps you can take to get yourself financially fitter in 2022.
1. Have an emergency fund. This is my number one priority for everyone. If you haven’t done this, you need to have cash equivalent to at least three months’ outgoings and preferably more, especially if you have children. Start this today.
Even if you start small, it is still a start. If you need discipline, set up a standing order to move money to a saving account after you get paid so can’t spend it. Put coins and small notes in a jar each day and it soon becomes a habit and the amounts will build up.
The importance to this was sadly brought home to many people who suddenly lost their income due to COVID19 in 2020 and immediately found themselves in difficulty.
You never know when the rainy day will come so best to be prepared and there is a great deal of comfort in knowing that you have a financial buffer.
2. Sort out your paperwork. Put all relevant financial papers in one place. That includes bank statements, information on accounts, life assurance and savings policies, copies of wills. A safe is ideal but a large box or folder will do.
Many documents are not required in hard copy so you can cut down on the paper by keeping soft copies.
Do back up properly though and send copies of important items to a secure email account that you can access from anywhere.
3. Keep a budget. This is especially important if money is tight as until you know what is coming in and at least as importantly, going out, each month you won’t be in a position to improve your situation.
Too many people wonder where their hard-earned income went each month, so for a few months you need to keep a log of every Dirham that you receive and every one that you pay out, no matter how small the amount. If you feel you are frittering cash away, note what you are spending it on. At the end of the month tally each column and you will see not only what is left over, but also where you can make savings.
This matters even if you have a good income and no debt as many people I speak to are not quite sure where all the money goes each month and it will help you manage and allocate your income a little better.
4. Set yourself a monthly spending limit. Once you have paid your rent or mortgage, your utility bills, loans and essential bills, give yourself a set amount to spend each week or month. Your pocket money if you like. If it helps, pay yourself an allowance in cash and leave cards at home as that way you will be far more aware of where the money is going.
One school of thought says that after allocating essential expenditure, you should allocate money for savings and investment and then only spend what is left.
5. Address those credit card bills. Paying the high rates of interest on a credit card balance is a waste of money. Paying the minimum amount each month will not reduce the balance so you must pay more than that amount each month to make any inroads on your debt.
If you are building up debt on a card you need to stop using it for daily expenses. That only leads to problems. Remove temptation and put the card away. Leave it at home, out of sight.
For useful information on dealing with debts take a look at this article: 10 tips for dealing with debt in the UAE
Credit cards can be a useful tool but they only really work for you if you repay the balance in full every month.
6. Make sure you have the facts in case the worst happens. Dealing with death as an expat in the UAE is hard, so it is important to have the facts and have the right things in place.
It is important to have suitable wills, to have set bank accounts up properly, and much more.
Read the facts in this article: How to plan for the worst when living in the UAE
I can assist with arranging wills at competitive prices and make the process easier.
7. Get insured. People don’t think twice about insuring their cars but what about the person who is paying the bills? What are they worth if no longer around, or seriously ill and unable to earn?
If you have dependents or a mortgage, you need to make sure you have enough life assurance to protect your family. It is the kind thing to do and it isn’t expensive to arrange simple life cover.
Is Your Family Protected If You Die? Six Common Errors
8. Plan for your future & manage your investments. The earlier you start the better and compound interest/growth can make a big difference. There are a variety of options to suit different budgets and circumstances but make sure you get professional and unbiased advice.
Your existing investment may also need reviewing in light of all that has happened over the past year. We are in ‘interesting’ times in terms of global stock markets and professional and experienced investment management makes a difference to your returns and risk levels over time.
Following regulatory changes in the UAE, I have investment plans that are super flexible. You could save on charges by making changes whether to personal investments or to pensions as well as benefitting from a great range of fund options and expert management.
See here for more information: The future of investing is… flexible
9. Beware of scammers. There are large numbers of scams doing the rounds so be careful, be cynical and ask questions of any direct contacts. Scammers are getting smarter. Don’t ever give passwords or PINs over the phone.
The UAE central Bank will never send a SMS or WhatApp message, especially from a mobile number. You won’t ever win a big prize if you haven’t entered a competition.
10. Set yourself goals It is important that you set yourself goals as without them you cannot measure your success. Write them down and check them every month or so.
If the priority is to pay off your credit cards, set a monthly payment goal and a deadline to have a zero balance.
If you need to build up cash savings, decide how much you will try and save each month and have a target that you can review every six months.
A proper financial review to check that you are on track, to review any existing policies, and to discuss how you can achieve your goals can be highly beneficial.
Real financial planning, not just selling policies, is about helping you with financial organisation, finding out what you need to do, how to protect your family, and ensures you will have a comfortable later life.
Read more: What a real financial adviser can do for you
- Shop around. Prices vary especially between supermarkets
- Go food shopping with a list and make meal plans
- Avoid impulse spending by waiting 24 hours before making major purchases
- Check standing orders and direct debts to ensure you aren’t wasting money on unwanted subscriptions
- Stick to speed limits to avoid unwanted spending on fines
- Don’t forget that you can have home country tax liabilities as an expat so take expert advice
Make 2022 the year when you really make a difference to your financial situation and seriously plan for your future. Keeping your financial resolutions doesn’t have to be painful, especially with some friendly but expert help.
Happy New Year!
To arrange a discussion on any aspect of your personal financial planning, please email me at firstname.lastname@example.org. Expert, qualified, professional advice on a range of issues including general financial planning, life and critical illness cover, investments and UK pensions, UK property investment, wills and inheritance tax planning, UK tax, offshore banking, currency transfers.
I write articles such as this one as part of the holistic personal financial planning service and that I provide to expats, and the general consumer, financial and legal information that I provide in The National newspaper, and on the Facebook group British Expats Dubai.
Please take a look at the other useful articles on this website.