Keeping track of your expenses might seem basic. Whilst knowing how much money goes on rent every month is essential; that is not the only expenditure that needs tracking. With the expenditure sheet on hand, try to note down every single amount spent. From your AED/SAR12 Starbucks brewed coffee, to your taxi fare and laundry; keep track of all expense. And at the end of every month evaluate your sheet and figure out how you can cut back.For instance, that AED/SAR12 coffee, when consumed every day, amounts to AED/SAR 372 at the end of the month andAED/SAR 4,380 at the end of the year. This is on just coffee! Those who eat out regularly then need to track their expense on breakfast, lunch and dinner. Things like the cinema culture, shopping festivals, passion for cars and the need for a better apartment/ villa and the consequent cost associated to moving are all expenses that need to be thought out carefully.
Talking about cutting back expenditure is and will always be a hard conversation to have. But there has to be a balance between what you want and what you need when it comes down to finance.
The Magic words for saving are ‘Compound Interest’. The sooner you start saving the better return you get and not because of the amount you save up over the years.
For instance, when you (hypothetically) save $500 per month with a 7 percent growth rate from the age 21 to 30 and leave your fund as it is until your 70, you stand to get a return of $1.2 million. As opposed to, when you save the same amount from the age 30 to 70 with the same rate of growth; you stand to get a return of $1.1 million.
We live in an age where anything and everything is available to us with a single touch. Want to shop or dine in, there is an app for that. As a consumer this has made us largely lazy and accessing anything that has more than 3 – 5 steps involved is deemed largely inconvenient. So making your saving account harder to access compared to your current account can go a long way to make sure you save consistently.
Talk to your financial advisor to know what else you can do to turn your savings into a viable investment. For tips on choosing the best financial advisor, read our blog, “How to choose the best financial advice company or financial adviser in Dubai, Abu Dhabi or Saudi Arabia: 10 things you should look for...” Your financial advisor will then also further guide you on how to better your portfolio.
Never invest in on only one product. If you do, you will come across what we call ‘stock specific risk’, which is when your investment is associate only and directly to a specific stock/company/product. So do not put all your eggs in one basket, instead put them in a variation of baskets where it is possible to calculate and make reasonable assumptions and more importantly – not risk it all. Diversification does not eliminate all risk, but provides with a more stable investment. For more about the benefits of a diverse portfolio read our blog, “The Volkswagen debacle: Lesson for long term investors”. Additionally, as an expat try to make the most of the Double taxation agreement by investing in tax beneficiary jurisdictions.
It is always advisable to have a worst and best case scenario planned ahead with certain contingencies put in place. As an expat there are some landmark expenses that you need to prepare for like:
Financial planning is a very intricate process and we know it is not easy to trust somebody with your finance. We aim at working with your every step of the way to help you help yourself and encourage you to