Making financial discipline work for you

The UAE’s tax-free salaries and luxurious lifestyle can make financial discipline a challenge, an expert said.

“Easy access to credit, coupled with spending opportunities, can blur the lines between wants and needs,” Mithil Ajmera, co-founder and chief operating officer of Sav, told Khaleej Times in an interview.

While the CPI is expected to grow at 1.9 per cent in 2024, the consumer spending is expected to grow by five per cent. The Ministry of Finance has put in significant efforts with the savings awareness initiatives to help residents manage their money better.

“We have heard horror stories of residents who have consumed beyond their means and been trapped in a debt cycle. A large portion of credit card holders in the UAE are overleveraged and are unable to pay their credit card bills in full so they pay ~3.6 per cent interest monthly. Loans and interest on it hinder financial freedom and reduce preparedness for long term goals like retirement or buying a new house,” Ajmera said.

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Impulse spending can be a significant hurdle. What strategies can be used to help UAE residents build impulse control and stick to their financial goals?

The UAE’s vibrant consumer culture, with spending increasing 13 per cent in 2023, can easily lead to impulsive purchases. However, there are smart ways to manage your finances. Creating a detailed budget is essential for financial discipline. You can use technology to create budgets and automate rules to decide when funds will be allocated accordingly (offered by Sav). Additionally, understand financial jargon, stay current on financial laws, and thoroughly research investments before committing funds – below are a few more ways to help with impulse control.

1. Know your income: How much disposable income do you have after paying bills?

2. Understand your expenses: Where is the money going?

3. Pay yourself first: Savings after bills then leisure spending

4. The five-minute rule: Wait for five minutes before tapping the card

5. Ask questions: Am I getting the products at the best prices?

6. Timing: The UAE typically has three to four sales every year where brands offer up to 80 per cent off – ask yourself, “Can I time and plan the purchases during sales?”

The best financial management begins with careful budgeting. Therefore, establishing a plan that categorises expenses, short, mid and long-term goals would be a good start. Tracking expenses will help you in the future and is a more efficient way to save.

Saving for the future is crucial. What are some of the unique considerations for young people in the UAE when it comes to financial planning?

Financial literacy is a superpower, especially for young people in the UAE. Understanding how to budget, save, and invest wisely puts you on a path toward financial freedom. The UAE understands the importance, leading the charge with “first division” financial literacy programs. The sooner you begin saving and investing, the more you’ll benefit from the magic of compound interest. This aligns perfectly with the UAE Ministry of Finance’s plan for economic growth and financial empowerment for everyone.

Here are a few tips from the Ministry of Finance:

a. 50/30/20 rule of spending

b. Automating savings

c. Saving spare change every time you spend through the card

d. Make someone else accountable for your financial success

e. Understanding that credit is not bad, however can hurt if not managed properly

f. Attribute money towards your goals

g. Best to subscribe for savings schemes so that you get rewards at the end of it

Also, emergency funds are an essential part of financial planning. Think of an emergency fund as your safety net. It will protect you when life throws you a curveball, ideally you should be saving 3-6 months of living expenses.

At the same time, be mindful of debt – it can be a sneaky trap. Before taking out loans or racking up credit card bills, be sure you have a solid repayment plan. Also, explore investments beyond basic savings accounts! Stocks, mutual funds, or even real estate can potentially grow your money over time, aligning with the UAE’s emphasis on balancing taxes and managing public debt within its strategic plan.

Leverage technology to optimise your financial wellbeing. Sav’s data-driven savings features, including Smart Rules, round-up savings, and the “Save Now, Buy Later” options, empower users to achieve financial objectives with precision. Doing that, encourages prioritising long-term financial stability through comprehensive planning, and tailored personal savings solutions.

Data privacy is a concern for many. How does Sav ensure the security of users’ financial information and promote responsible data management?

Sav understands that trust is paramount when it comes to handling sensitive user data. Here’s how Sav prioritises the security of your financial information and responsible data practices:

• Security measures: Sav employs military-grade security protocols to safeguard your data at every stage. This includes robust encryption during both storage and transmission, ensuring your financial details are protected from unauthorised access.

• Transparency and control: Sav believes in providing users with clarity and control over their data. Our privacy policy is presented in a clear way and outlines exactly how your data is collected, stored, and used. You can manage your data preferences directly within the Sav app.

• Limited Data Collection: Sav operates on a “need-to-know” principle, collecting only the essential information required to provide the services. We do not sell your data to third parties.

• Compliance and Regulation: Sav is based in DIFC and adheres to strict data protection and security guidelines. We maintain compliance with data protection standards, ensuring your information is managed responsibly.

• Partnerships: Sav carefully selects partners who share their commitment to security. The Sav Card, for example, is issued by Mashreq Bank and powered by Visa, both of which have robust systems in place to protect user data.

Sav’s commitment to security is ongoing. We consistently monitor and update security measures to stay ahead of evolving threats.

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