Spend wise, save more: A short guide to better financial planning
No one wants to be wasteful with money, but with our busy schedules it’s often challenging to pause and reflect on those little changes we can make to save or protect our hard-earned cash. The introduction of value added tax in the UAE this year and the rising cost of inflation especially have drawn attention to the impact on consumer spending habits.
Whilst these potential pressures on people’s expenditure can seem concerning, they don’t need to be. However, it is important for everyone to take stock of their own financial planning to ensure long-term security and, if this is something you have been putting off, then we’ve got some easy tips to get you started.
Budget better
Before you start dreaming about your savings stacking up, you’ve got to identify where your money is going. It’s painful, we know, to keep track of every single expense but even the trivial, seemingly small amounts need to be considered in the grand scheme of things. For instance, your daily caffeine fix at just Dh20 a day, still adds up to more than Dh5,500 in a year, so it must be counted.
One of the easiest ways to create a simple budget is to download a template that suits you, like an app that can serve as a practical guide containing information, tips and tools.
Be as honest and detailed as possible; the average person spends money three times a day. Keep your receipts and refer to your bank statements so you can reflect on how many of these expenses were wants rather than necessities. Try not to get overwhelmed. Believe it or not, a recent survey found that 42 per cent of UAE residents don’t know how to create a budget.
Set ‘Smart’ goals
The best way to set goals is to think ‘Smart’. Starting to save early and regularly over time will build the base to achieve your financial goals. Each letter in ‘Smart’ stands for a feature of good goals. Therefore, goals need to be specific, measurable, achievable, realistic and time-bound.
Whether it’s that new car you’re dreaming of buying, a college fund for your kids, owning a home, funding a retirement plan or going on that ultimate getaway, draw up your list and then prioritise if your ‘Smart’ goal is a need or a want. Naturally, needs rank first.
Once you know what you need and want, and have prioritised your goals, make sure to pay yourself first by saving a fixed amount from income before spending anything. This helps you put aside a set amount towards your savings goals each month.
Plan for the future
42% of UAE residents don’t know how to create a budget
Saving is a great tool, but dormant money can always be put to better use so look for opportunities to invest in products and tools that can help you further achieve your goals.
Numerous types of investments such as stocks, bonds, term deposits, managed funds, real estate and others can be considered but make sure to do your homework and get expert advice on which solution works best for you.
Life rarely goes according to plan and unexpected changes in health, job status, dependents or unplanned repairs can disrupt even the most sensible of monthly budgets and long-term goals. So, make sure to look at insurance solutions like emergency fund savings, critical illness and life insurance, consumer credit products and other types of insurance to safeguard your savings.
Say no to pressure
Finally, be mindful of temptation. We’re all susceptible to giving in to retail therapy or a desirable item occasionally. And it’s easy to get drawn into a social competition with friends or family bragging about their latest purchases or luxury holidays on Facebook or Instagram, so be careful not to jump into impulse buying based on your newsfeed.
Also make sure to filter your content to cut out or limit accounts that encourage consumption. And before you pull out your wallet, always ask whether the potential purchase is a need or a want, whether it’s a ‘Smart’ goal and if there is a better way to spend this money and more importantly, whether you can really afford it.