Proven methods for saving money in the UAE

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Money management is essential for budgeting and developing your wealth. Although saving money and financial planning are personal choices, having appropriate finances for financial crises is a good idea. That’s not all you may also have specific goals, such as a vacation overseas, a child’s education and marriage. All of these plans necessitate financial planning as an important part of your daily routines.

While money-saving strategies differ from person to person, it is critical to understand your financial needs, plans, and accessible possibilities before embarking on a saving strategy. Fortunately, banks and financial institutions in the UAE offer a variety of savings choices to meet your needs. The following article discusses the greatest strategies to save money in the UAE.

What Are the Best Ways to Saving Money in the UAE?

While saving money in the UAE is important for emergencies, it also prepares you to manage major investments in the UAE that may come in the future. While there are numerous ways to save money in the UAE, you can choose the most appropriate saving strategy based on your needs and financial planning. The following are some tried-and-true strategies to save money in the UAE.

Begin a Savings Plan

Your stay in the UAE might be costly if you do not manage your finances properly. If you’re planning on making large purchases, you’ll need to have enough money saved up. If you have a savings account with a bank or financial institution, you can accumulate a significant sum over the term and use it for any upcoming costs. Banks in the UAE provide interest rates ranging from 0.5 percent to 3 percent. Furthermore, you can choose a deposit scheme such as a fixed deposit or recurring deposit that gives better interest rates than savings accounts.

However, when choosing a bank account, you should also consider the amount of return you will eventually earn, as banks charge account starting, minimum deposit, and account closing costs. Experts recommend that you have at least 6 months’ worth of expenses in your bank account to deal with any potential financial difficulties.

Plan a Monthly Budget

A monthly budget plan is a wise money-saving strategy because it provides insight into your entire savings and expenses. After determining how much you actually save, you can make informed decisions about investing or saving. When creating your monthly budget, start with the necessities, such as housing rent, bills, transportation, and groceries. This calculation assists you in separating your fixed expenses from the rest of your income, giving you an idea of how much you may spend on other expenses. A good place to start is to remember the 50/30/20 rule, which states that you should ideally handle such basic expenses within 50% of your salary.

Continuing with the rest of the guideline, you can next estimate non-essential spending such as dining out, shopping, and hobbies. These costs should not surpass 30 percent of your monthly profits.

Finally, the remaining 20% of your income should be ideal savings that you can choose to store or invest. Finally, such monthly budget planning allows you to identify additional opportunities to invest or develop your funds.

Buy Groceries and Household Items in Bulk

If you buy groceries and other home supplies in bulk, you can save a large amount of money each month. It not only saves you money on transportation, but it also relieves you of the burden of having to visit grocery stores and marketplaces every week.

Cooking at home is the most cost-effective alternative no matter where you reside. If you intend to prepare your own food, you will need to have a pantry. According to sources, a single meal at a restaurant in the UAE can cost up to AED 120, whereas the same cuisine can cost up to AED 80 if bought online. Even though, preparing such meal at home costs only AED 50. As is obvious, cooking for yourself can help you save a significant amount of money each month.

Buying groceries and home items in bulk from supermarkets such as Lulu, Carrefour, Grand Hyper, and others is a convenient method to save money. Alternatively, online food shopping, which is becoming more popular, saves money as well.

Consider Establishing an Emergency Fund

Financial emergencies can appear anytime, and you need to prepare for such events in advance. As the cost of living in the UAE is on the expensive side, most financial emergencies can cost you a fortune. Events like job losses, urgent medical care, emergency repairs, etc., can exert a negative impact on your finances and saving plans.

However, dodging such financial crises is easy if you can manage an emergency fund in the UAE.

Individuals without emergency funds tend to take loans at high-interest rates, further decreasing their chances of efficient savings. On the other hand, if you follow the general practice of possessing emergency savings of up to 6 months of your living expenses, you will be able to tackle unfortunate financial situations conveniently.  You can maintain emergency funds in a savings account, money market account, or any liquid account for quick fund withdrawal.

Debt Consolidation (If Any)

Debts might trap you in a loop of high-interest repayments. If you have active debts, you must pay them off on regular basis and close them as soon as feasible. Similarly, if you don’t practice sensible spending, it’s easy to go into credit card debt. Non-payments can add to your monthly due and trap you in enormous debts, with credit card APRs reaching as high as 40%.  In the same case, it is advised that you close your debts responsibly. You should not forego emergency reserves or savings in order to pay off your obligations. Similarly, while there are numerous debt-reduction strategies, the debt snowballing approach is particularly effective in handling high amounts of debt. However, if you have a number of lesser loans, you should consider merging them because it lowers the loan APR (Annual Percentage Rate) and lengthens the payback period. You might also take out a personal loan to combine your credit card obligations, as the former has lower interest rates than credit card interest rates.

Consider Your Apartment and Living Expenses

Living and housing expenses consume a sizable portion of your monthly income. Renting an apartment or a property in the UAE might be prohibitively expensive. As a result, persons who live in rented homes should think about the amount of rent they pay. According to experts, you should not spend more than 30% of your monthly salary on home rent.

If you are spending more than you should, you might try negotiating your rent or moving to a more affordable location. The same argument can be applied to a variety of other major expenses. To begin, start with the largest spend and work your way down while bargaining to save more on your monthly expenses.

Create an Investment Portfolio That Is Diversified

Stock trading and investment platforms frequently impose exorbitant fees to open, manage, and close your investment account. Before opening an account with a stockbroking business, you should conduct considerable research. Similarly, a diverse portfolio would assist you prevent the danger of losing your money. If you invest a substantial sum in a single type of stock or equity, your chances of losing money increase if that stock underperforms. Finally, the ways to save money in the UAE are determined by how well you invest your money.

However, if you invest your money in smaller amounts across a variety of stocks, your chances of losing money are much reduced. You should also try to grasp the balance of your investments between stocks and bonds, as this balance may be the greatest approach to save money in the UAE while increasing your profits.

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