COST OF LIVING SURGE LEAVES RESIDENTS IN DUBAI LOOKING AFTER THEIR DIRHAMS
▶ Price caps have kept costs down but budgeting still a balancing act, five people tell
While living in Dubai can be expensive, residents say good salaries and a wide choice of retail and dining options to suit all budgets help make it easier.
However, as global factors cause energy and food prices to rise, the cost of living has increased, with consumer prices in the US soaring to a four-decade high in June last year.
In Dubai, housing, utilities and fuel – which account for the biggest part of the Consumer Price Index at more than 40 per cent – rose 5.94 per cent yearly in June, the Dubai Statistics Centre said in July.
In the same month, average apartment rents reached the highest levels since February 2017, surging almost 22 per cent annually during July. Villa rents rose by 22.6 per cent as demand for property continued to rise. While the government has set price limits on essential items, requiring stores to maintain affordability, some residents are still looking for ways to cut costs.
Here, The National speaks to residents in Dubai from different occupations and backgrounds to understand how they work around the high living costs in the city and discover their strategies for managing their expenses.
Hamza Matahen Salary: Dh8,500
Hamza Matahen, 28, lived in Al Ain before moving to Dubai three months ago for a job as a business development manager. “Dubai offers a better level of employment. In Dubai, you feel like you’re in another world. You can’t compare it with any other place,” said Mr Matahen, who is originally from Jordan.
“There are a lot of big companies and the competition is very high, which drives you to be the best version of yourself.”
Mr Matahen lives with his sister, which reduces his rent cost. He has certain other methods he follows to live affordably in Dubai.
“Look for more than one option in everything,” he said. “For example, food-wise, you can look at the food applications available and see which application has discounts and this way you can save costs.
“There are a lot of restaurants in Dubai and a lot of varieties, so prices vary. You can eat lunch for Dh20, even Dh15, or you can eat lunch for Dh500. You can save a lot in food expenses.”
He earns Dh8,500 and his monthly expenses include: Dh2,500 on rent, Dh1,500 on food, Dh500 for utility bills, Dh1,000 on transport and savings and Dh2,000 for disposable income.
Jessica Abdel Nour Salary: None
Jessica Abdel Nour, 20, a student from the Netherlands, moved to Dubai on an exchange programme for a term.
“I’m very interested in moving here after my bachelor’s degree. I’m already building a community here which I very much like,” said Ms Abdel Nour, who is studying international business. She is staying in a university dorm, which has its advantages around security and services but is not cheap.
“I pay Dh3,000 ($816) for my dorm, so that is like, for us Europeans, €750,” she said. “That is kind of expensive. It depends on which country you’re from, but for Dutch people, it’s pretty expensive.
“But the advantage of living in a dorm and paying this amount is that you have security 24/7 and I also have breakfast and housekeeping service, so I get a lot of benefits.”
She manages to spend about Dh600 on food each month, and between Dh600 to Dh800 on transport, leaving her Dh1,500 as disposable income.
Veronika Ciniburkova Salary: Dh35,000
Veronika Ciniburkova, 38, from the Czech Republic moved to Dubai eight years ago, after working in the UK for 12 years. She works as a senior client executive at Christie’s International Real Estate.
Her goal was to find a better job, explore new opportunities and enjoy the warm weather of Dubai. “Dubai is definitely a place where everybody gets a chance,” said Ms Ciniburkova.
“I think it’s very easy to lose track of who you are here and spend money on things which are not necessarily a necessity.”
Ms Ciniburkova earns about Dh35,000 a month and her monthly expenses include Dh3,700 on rent, up to Dh2,500 on food, and Dh1,800 on utilities and transport. She is left each month with Dh20,000 of savings and up to Dh7,000 as disposable income.
“Many people, they come here and they want to save but they leave with nothing because they did not manage the right way of thinking or living,” she added. Ms Ciniburkova finds the cost of living in Dubai very similar to London.
“Although I believe rent here is a little bit lower than in the UK, when it comes to the cost of groceries, services, nail and hair salons, I believe it is very similar level,” she said.
Leon Mouafo Salary: Dh1,656
Leon Mouafo, 30, moved to Dubai from Cameroon five
years ago, seeking a better life. However, he finds the cost of living high, compared to his home country. “I can save little because I cannot live a normal life that I was living back home,” said Mr Mouafo, who works as a store associate at Carrefour. “So, yeah, I have to squeeze myself. For example, here in Dubai, I noticed the most difficult part is the house range. To arrange a house or an apartment to stay is very difficult and very expensive.”
From his Dh1,656 salary each month, he spends Dh800 on shared rental accommodation, up to Dh400 on food and is left with Dh150 to spend on himself. Utility bills and transport are covered by his employer.
“When I came to Dubai in 2018, to buy food – mostly basic needs – they were cheaper than now.”
Mr Mouafo said he lives on a budget so he can send about Dh500 back home to his wife and two children each month.
Seara Khan Salary: Variable
Seara Khan, 25, from Bangladesh moved to Dubai about two years ago and works as a social media executive for the Squatwolf gym wear brand. “Everybody here is very business-oriented and working as a social media executive, it allows me to communicate with a lot of people as well.
So, it’s like you meet connections everywhere you go,” said Ms Khan. “It also makes you like the independent life. It teaches you a lot about budgeting, how you should control yourself, considering how expensive everything is outside.”
Ms Khan’s expenses include Dh3,000 on rent, Dh1,700 on food and utilities, and Dh560 on transport. Tight budgeting and no savings plan leave her with Dh6,000 in disposable income each month. Living in
Dubai, she has noticed some living costs getting higher and advises newcomers to keep track of their spending.
“To be smart about the whole decision to move here, make an expense sheet on your Excel for your personal expenses for the month,” she said.
“For the first month, spend as much as you would regularly and calculate the first month’s cost, and then decide where you could do the cuts, and there a lot of budget-friendly grocery stores around the areas. This will make you realise how much you are actually spending.”
While the government has set price limits on essential items, some residents are still looking for ways to cut costs
Anew year is always an opportune time to make new financial resolutions and get back on track to meet your money goals. Some of the most common financial goals include saving more money and making a plan to pay off credit card debt, personal finance experts say.
The end of the year is a great time to start thinking about the financial habits you want to take into 2024, says Joseph El Am, general manager at digital wealth manager StashAway Mena.
“Even if it’s just implementing one or two resolutions, having the right financial mindset can get you off to a good financial start to 2024,” he says.
“You’ll gain better financial control and reduce financial stress, contributing to your overall mental and financial well-being.”
The top three financial resolutions for Americans in 2024 are to save more money, pay down debt and spend less, according to an October survey by financial services company Fidelity Investments. About 66 per cent of respondents said they are considering a financial resolution for the new year.
Before deciding on the saving strategy that you would like to follow, it is worth looking at your current spending habits, says Raji Kaippallil, a UK-based money expert and founder of educational platform Finance with Raji.
“Begin by gathering statements from the past three months, covering all your credit and debit card transactions,” she recommends.
“Organise these expenses into various categories like rent, utilities, dining out, shopping and more.
“Once you understand your current spending habits and set your budget, the next step is to look at the saving strategy you would like to follow.”
Create an emergency fund
An emergency fund is a pot of money that can be availed of at short notice to cover unexpected expenses, such as home or car repairs, says Chris Keeling, a chartered financial planner at The Fry Group.
The fund should cover a minimum of three to six months of living expenses and be in a separate bank account from your day-to-day spending account, he says.
As an emergency fund is a readily available pot, savers will often have to forego interest or investment growth in return for instant access, Mr Keeling adds.
Ben Bolger, a financial planner in Abu Dhabi who is also the co-founder of Squirrel Education, a digital learning platform, says this fund provides a financial cushion for unexpected expenses, reducing the need to rely on credit cards, loans or your dedicated savings during emergencies.
Set up a budget
For those unsure about structuring their budget, the 50/30/20 budgeting system is a good framework to follow, suggests Ms Kaippallil. Allocate 50 per cent of your income to needs, covering essentials such as housing, utilities, groceries and education. Dedicate 30 per cent to wants, encompassing self-care and leisure activities.
The remaining 20 per cent should be earmarked for savings and investing.
“It’s a balanced way to handle finances, allowing for enjoyment while still prioritising financial security and debt reduction,” Mr El Am says.
Alternatively, Mr Keeling says there are many budgeting apps available that help to make it easier to view where you can cut down on spending.
These apps help you set a budget and track your spending against it. Ms Kaippallil says some of them also connect with your bank accounts, thereby erasing the need to manually input the data.
However, if you are not keen on sharing your financial information with an application, the alternative is to use spreadsheets, she says.
There are many spreadsheets available, depending on your needs, that can be purchased at a low cost on e-commerce platforms such as Etsy.
Pay yourself first
Treat your savings or investment contributions as a non-negotiable expense, ensuring that you allocate a portion of your income to yourself before paying for any other discretionary or non-essential items, Mr Bolger says.
As soon as your salary comes in, you make that payment to your savings account the same way you would pay any other bill, he suggests. “Saving money can be challenging when you’re uncertain about your spending. To overcome this, allocate each dirham before you receive your salary,” he says.
“A spreadsheet can be a useful tool for this. Plan for expenses like rent, bills, car payments, discretionary spending and, most importantly, set a monthly savings goal.
“Aim to allocate your funds so that your account balance reaches close to zero. This way, you’ll spend with intention and have a clear understanding of where your money is going.”
Automate your savings
To make it easier to save regularly, automate your savings by using standing instructions or direct debits, Mr Keeling says.
This will ensure you do not forget to save money each month, he says.
Set the transfer date to just after you receive an income. Once your savings have been transferred to your savings accounts, you know what is left is yours to spend, he adds.
For instance, Mr El Am says you might set up an automatic transfer of Dh500 from your current account to an investment account every month.
“Over time, you can increase the transfer amount as your salary grows or your expenses decrease. This method leverages the out-of-sight, outof-mind principle, ensuring that a portion of your income is saved without the need for active decision-making each month,” he says.
Set up additional accounts
Consider maintaining at least two additional accounts alongside your primary income account, according to Ms Kaippallil.
Set up a recurring payment from your primary account to a secondary account to pay your bills and create another recurring payment to a third account to save for your future goals, she suggests.
“To curb spending from this account, consider opening one without a debit card, making access more challenging. This will leave you with the remaining amount in your main account, which is essentially for spending,” she says.
“By segregating funds, your main account now reflects only the remaining balance, which could trick your brain to think of it as your discretionary spending rather than your total income.”
Set financial goals
Setting saving and investment goals will motivate you to save regularly. It is crucial to set achievable goals when it comes to savings and investments, says Mohit Mehra, vice president of operations at digital payment app Totl.
Keep simple targets for yourself that can be broken down through the year. For example, “I want to save Dh5,000 by May 2024” and you can keep building on that, he suggests.
Mr Keeling says these could also be annual goals, or for specific purchases, such as a new car, a property purchase or even saving for your retirement.
Ensure these goals are realistic and do not put too much pressure on yourself to achieve unrealistic targets, he warns.
Mr El Am says “for short-term goals, you could save your cash in a low-risk, high-interest savings or cash management account”. “But for long-term goals like saving for retirement in 20 years, investing your money in a diversified investment portfolio allows your capital to benefit from an appropriately higher level of risk and return over a longer period.”
High-interest savings account
Using a high-interest savings account can boost your savings growth significantly, says Mr El Am.
For example, suppose you have Dh5,000 in a traditional savings account with an interest rate of 0.5 per cent annually. Over a year, you would earn about Dh25 in interest, he says.
But if you transfer this amount to a high-interest savings account or a money-market fund offering 4.5 per cent annually, your interest earnings would jump to Dh225 a year, he adds.
Remember to shop around
Ensure you shop around and compare prices for the savings accounts that best suit your requirements, Mr Keeling says.
“Banks will have different offers when it comes to savings options, and it pays to research the market for the best option for you,” he says.
Mr Bolger says by actively seeking discounts, promotions and loyalty programmes, we can save money on both our everyday and occasional expenses. The more we reduce our spending by shopping around, the more we will have available for savings, he adds.
Cashback and rewards
Cashback and rewards apps offer incentives for everyday purchases such as groceries, restaurants and movies where customers gain store credit, cashback, freebies and more, says Mr Mehra from Totl.
Look for apps that offer the highest value back, especially at places you regularly visit, he says. “E-vouchers are another great way to maximise savings. Buying e-vouchers in bulk can be advantageous, primarily when bought for brands you frequently spend on,” he says.
Envelope budgeting
Envelope budgeting has been around for a long time.
The strategy involves physically separating your income into designated envelopes, each representing a specific expense category, Ms Kaippallil says.
“The physical separation of cash into different envelopes is one of the reasons why many find it easier to adhere to,” she says.
“Unconsciously, you now know the budget for each of your expenses and have a clear visual representation of the money remaining.”
The end of the year is a great time to start thinking about the financial habits you want to take into the next year