How to get your finances back in shape

How to get your finances back in shape

As we approach the end of H1 2023, there is an increased discussion about a global rise in employment layoffs, market volatility, and compromised financial security. Despite the range of resources now available to us, the statistics around financial literacy worldwide are grim with only 35 per cent of men and 30 per cent of women being considered financially literate.

The Arab Youth Survey results in 2022 revealed that Arabs aged between 18 and 24 have chosen the UAE as the top destination to live in, beating the US, Canada, France, and Germany due to job opportunities, education quality, and preservation of cultural traditions. However, it is also worth noting that the UAE is also facing an increasing amount of residents with crippling finances due to a lack of financial literacy, overspending, and a prevalent culture of expensive lifestyle purchases such as luxury apparel, technology, entertainment, and costly eating habits.

Damian Hitchen, CEO of Saxo Bank MENA, believes financial fitness is essential for everyone, regardless of age or gender. “Financial literacy is key to not only ensure the protection of funds, but also has a direct effect on mental health. The UAE is home to a multicultural mix of nationalities and age groups, and it is imperative for residents to equip themselves with the knowledge and skills needed to make sound financial decisions.”

  1. Take time to identify and record your goals: The rise and fall of the financial markets can often be overwhelming. Start with determining your financial goals. This will help you plan the next steps and diversify your investments.
  2. Map out a budget: The ideal allocation of budgets is based on a 50/30/20 rule – with 50 per cent spent on necessities, 30 per cent on needs, and the remaining 20 per cent on savings/debt payments. However, it is important to be flexible and work on a monthly budget spend rather than yearly.
  3. Revisit your asset allocation: The digitisation of investment has allowed first-time and seasoned investors to explore a wide variety of assets they can deploy savings into such as equities, bonds, commodities, exchange-traded funds, and mutual funds. By using a multi-asset approach, investors can diversify their investments against concentration risk and take more participation in the markets.  
  4. Debt management: Credit card debts often lead to spiralling expenses and even more so with interest rates on the increase. If you use credit cards to make payments, keep a strict check on how much you owe on your cards and try to set yourself an upper limit that you can be disciplined with.
  5. Save for your retirement: Global consultancy Mercer states that nearly 45 per cent of employees in the UAE have no plans to ensure an adequate standard of living after retirement. Additionally, research shows that by not actively investing in the stock markets for your retirement can result in a negative loss of 12 per cent compared to those who do participate in global markets. Also investing as early as you, which means for as long as you can reap the rewards of long-term compound returns, in spite of short-term market volatility.

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