UAE: Half of residents spend more than they earn, survey reveals

A little more than half or 50.46 per cent of UAE residents spent more than they earned in the past year, according to a survey conducted by a financial technology platform in the country.

Yabi's Financial Health Report 2024 says “this excessive spending is juxtaposed against a backdrop where only a minority, or about 33.53 per cent, feel assured of having sufficient funds for retirement. This underscores a lack of financial security and preparedness that could affect many in their later years.”

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The report also brought to light that a substantial 41 per cent “hold little to no optimism about achieving their long-term financial goals, underscoring the pervasive uncertainty surrounding financial planning and stability for the future.”

The point of the survey is to understand the importance of saving and investing. The report further revealed that although more than 63 per cent of respondents managed to pay their bills on time, only half of the surveyed individuals could sustain their expenses for two weeks or less without an income. This fact highlights a stark vulnerability in financial security and underscores the urgent requirement for better financial education and budget management skills among the population.

Why people spend more?

Speaking to Khaleej Times, financial advisor and millennial money expert Raji Kaippallil said: “There are three big reasons why residents tend to spend more than what they earn. Firstly, in a city like Dubai, there's always something to splurge on - brunches, clubs, attractions, and more."

"Secondly, there's a lot of pressure to keep up appearances, so people end up buying things like luxury cars and designer bags they can't really afford. Lastly, credit cards and buy-now-pay-later options make it super easy to buy things on credit, even when people can't pay for them upfront.”

She added that the rising cost of living has pushed residents to rethink their spending habits and focus on living within their means. While many people now understand the importance of saving and investing, sadly, there are still plenty who have no clear idea where their income is going each month.

“You should aim to save at least 20 per cent of your monthly salary. This can go toward building an emergency fund, which can be a lifesaver if you face financial difficulties in the future. Ideally, your emergency fund should cover three to six months of your fixed expenses,” Kaippallil said.

Prioritise needs over wants

UAE resident and 28-year-old content creator Kaunain Fatima shared that around 30 per cent of her salary goes towards rent and groceries, while 20 per cent is set aside for travel and content creation investments.

“On average, I spend around Dh10,000 to Dh12,000 a month. A big chunk of that goes towards professional expenses like travel, content creation, and social media tools. However, there are times when I feel the crunch - especially if there are delays in payments from collaborations,” shared Fatima.

“I aim to save at least 25 per cent every month, but it can vary. I also make room for personal indulgences - but I prioritise needs over wants.”

On the other hand, South African expat and travel content producer Zahirah Marty admits that she hasn't been a great saver, and this is an area she is working on.

“Being a freelancer, there are some quieter months, so I aim to stretch things a bit more between payments but usually I do meet expenses on time. Interest rates in this country are quite high on late overdrawn payment so I aim to not get into that where I can,” Marty said.

50/30/20 rule of budgeting

Living in a fast-paced city like Dubai, staying organised financially is crucial, especially on months when cash flow can be unpredictable. Calling it the '50/30/20 rule of budgeting', Kaippallil shares three tips to help plan your finances better:

• Allocate 50 per cent of your monthly income to fixed expenses or needs, such as rent or mortgage payments, utility bills, fuel, and education.
• Dedicate 30 per cent to wants, which can include eating out, shopping, self-care, and other discretionary spending.
• Save or invest the remaining 20 per cent, aligning this with your financial goals and future plans.

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