Many of my clients ask me how they can save money while living in a city like Dubai. They feel that the cost of living is high and expenses stack up easily. Before they notice, they have spent a lot of money and often can’t precisely put their finger on what they are spending their money on. This can be frustrating and one might wonder if it is possible at all to save money in Dubai. I first want to share my observations related to why people are spending more than they intend to.
The main reason why people feel compelled to spending a lot of money in Dubai is the culture. Dubai is a materialistic society, just like the US. Consumer spending is created by aggressive advertising to consumers on the internet, big billboards next to the roads, public transport and television. Everywhere you go you can see a message asking you to pay money to get a product or a service. When people are surrounded by messages about spending and other people who spend a lot, it normalizes the idea that you need to buy stuff all the time, even stuff you never wanted to buy.
Easy money comes, easy money goes. When you have the opportunity to earn easily and don’t pay taxes, you don’t value your money as much as you would in other countries. A lot of expats are offered attractive salary packages tax free. This leads to an increase in household disposable income. Only well-disciplined people know how to exercise self-control. Others will simply succumb to the temptation of spending more once their disposable income goes up.
I have heard many expats mention that they spend their weekends and free time shopping. Most of these individuals do not have this hobby in their own countries, but mall hopping seems to become a favorite activity of Dubai residents. Due to several factors like the limited number of outdoor options, summer temperatures and the abundance of super-sized malls which are equipped with every possible product you can imagine, shopping is a natural choice for many.
This is also one of the popular options for families with children. The only downside is that this is the easiest way to indulge in impulse buying, where you buy things you aren’t really interested in and the satisfaction associated with it is short lived.
How can you start saving money in Dubai?
Stay out of debt. Many banks, credit card companies and other companies offer easy access to loans. Interest can be up to 60% a year. For example you borrow $10,000 with 60% interest you pay $6,000 on interest alone a year and your debt is still the same.
Paying rent or paying interest as a home owner. Rent has come down significantly, especially in certain areas. Take a look around and compare different offers with your current rent and see if you can make a saving. When you identify a new property try to do one of the following things or all:
– Ask for a lower rent
– Ask for multiple checks instead of 1 or 2
– Ask for the start date of the contract to be later, but try to get the keys earlier (grace period).
– Ask for a lower security deposit
– Ask for home appliances; washer, dryer, fridge etc.
For home owners you can save on the following:
– Re-negotiate your interest rate
– Change your mortgage life insurance if you are paying too much.
Transportation. After housing, transportation is the next major expense for residents in Dubai. Cars don’t have the same life expectancy as in other regions of the world e.g. Europe. The heat, sand and salt have significant damaging effects on cars. Therefore it is very important that when you buy a car you understand what the re-sale value will be, so that you know how much you lose due to usage. Some luxury car brands sell their cars brand new for AED 300k+ and after 10 years the value is less than 30K. That is a deprecation of 90%.
Buy a fuel efficient, long lasting and reliable car instead of the one that is most impressive based on superficial characteristics. If you cannot afford a new car, consider a car whose spares parts and service will not cost a fortune. Routine maintenance can avoid sudden spikes in cost.
Restaurants, malls and groceries. Avoid malls and only go there if you want to buy something specific. Malls are designed to trap you and make you spend, no matter when you go to a mall there is always a sale and impulse buying is forced on you. If you have to visit the mall, be equipped with a list of items and preferably also the store where you need to go. Binge buying is common when you are in a mall. Online shopping and calling stores in advance to check for availability can also help keep expenses in check.
Restaurants are not a replacement for your kitchen. If you want to save money, you must try to eat at home. It is very common in Dubai culture to eat out or have food home delivered every day, since a significant part of Dubai expats are single and/or male. Not only can home cooked food be more fulfilling, it can also positively impact your health.
Flight tickets. Plan your holidays ahead of time and book your flights well in advance. This will save you a significant amount of money on your flight ticket. Do the same with your hotels or other expenses related to your holiday.
Budget. Living on a budget means that you project your cost for the month based on your run rate and at the end of the month you check the actual cost. Based on the results you can see if you have reached your goals or if you have been wasteful. This allows you to focus on the areas where your money is flowing too easily and reducing that gap will help you for the future. It is advisable to avoid using cash as much as possible as it is difficult to track what you spend on. Card transactions can be easily monitored electronically through your online banking system.
It is also important to have a long term outlook and goal annually or biannually where you consider where you want to end up financially within a period of time and assess your current situation as a benchmark.
Your attitude towards saving money is perhaps the most important thing. When you take saving money seriously, you will start putting effort in it. Ignoring a problem has never been a solution. When your attitude is to focus on saving money, many other solutions will come in your path which will enable you to save more. Once you see that your cash is increasing every month, you know that your methods are leading to results.
Written bySimon Angelo Avila Snelder
Simon, based in Dubai, is an investment advisor and presently working as a financial consultant with Capstone Insurance. Simon has worked, lived and studied in Brazil, Chili, Netherlands, Caribbean and UAE, blogs about the world of finance and advises the expats to make the right move.