Monthly Expenses Tracking: Are you aware of where every dirham of your income ends up each month in the UAE?
Let's Talk Money:
Figuring out where your hard-earned cash goes each month can be a puzzle. Whether you're a new grad or a busy parent, the question remains the same: what's eating away at my bank balance?
The secret? Keeping tabs on your spending and setting a budget. But before you panic, let's debunk a common myth – budgeting isn't about living a tightfisted life. It's all about gaining better control and understanding of your money.
Know Your Numbers
To master your finances, start by understanding your income and expenses. List down all sources of income: your day job, freelance gigs, passive income or side hustles.
Next, record your spending for at least a month. Dig up the receipts for rent, groceries, utilities, transport, takeouts and subscriptions.
Don't underestimate the help tech can offer. There are plenty of apps to make this task a breeze – Spendy, Wally, Buddy, and Yabi. Sure, they may sound funny, but they can help you save time (and hopefully money). In fact, homegrown app Yabi uses AI to not just track spending, but also provide actionable advice on budgeting.
Banks in the UAE also have tools to help you budget for free. Emirates NBD's Liv digital bank, for instance, has a budget planner to help adjust your spending patterns.
Preparing your budget can be an eye-opener. You might be shocked to find how much you spend on food deliveries like Careem, Deliveroo, or Uber Eats. And you might discover unnecessary online subscriptions draining your wallet. But with knowledge comes power – once you know, you can take action!
Rakhil Fernando, CEO of Yabi, believes, "We need to reach users early, before they develop bad money habits. Preventing common pitfalls like lack of savings or overspending is important." In a city like Dubai, with its glitzy image, many workers find themselves dining out frequently, visiting clubs and bars, as well as buying designer labels and the latest tech gadgets.
Categorize Your Expenses
Finance experts recommend splitting your expenses into three main categories. Essentials – like rent, utilities, groceries, transport, and school fees, should take up around 50% of your income. High-cost cities like Dubai or Abu Dhabi might require more, but the idea is to prioritize these expenses first.
Next is lifestyle spending – dining out, shopping, entertainment. This category should take up about 30%. It's challenging living in a city like this with constant nightlife, fancy restaurants, and fast food delivery apps.
Lastly, your financial goals – like saving for holidays, a car, or your kid's education. Or, paying off debts instead. Your savings and investments should account for about 20% of your income.
Set SMART Goals
Goals give your budget a purpose. Aim for short-term goals – saving 5,000 AED for a staycation, clearing a credit card, or building a 3-month emergency fund. Then look at long-term goals – like a house deposit or a new car.
SMART stands for Specific, Measurable, Achievable, Relevant, and Time-bound. So instead of aimlessly saying, "I want to save more," you'll jot down, "I'll save AED 500 a month to build an AED 6,000 emergency fund by next summer."
Be Realistic
Most budgets fail because they're too restrictive. It's hard to cut back on your favorite meals or nights out suddenly. Instead, set limits on specific spending like dining out, Ubers, or taxi rides. This is where budgeting apps come in handy. ADCB Hayyak and Mashreq Neo are two banks offering budgeting features that let you set limits and receive alerts when you're near them.
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Budgeting isn't a one-time task. It's a regular activity, ideally done at the end of each month. It doesn't have to be a chore – you can make it fun! Save more than expected at the end of the month? Treat yourself! gaming it – set targets for you and your partner to beat and compete with each other. Mistakes happen – just remember to quickly get back on track.
Making Budgeting Work in the UAE
Living in the UAE brings unique financial advantages and pressures. You enjoy tax-free income, but also face high living costs, social expectations, and the urge to spend big. Salaries can be generous, but it's easy to fall into the lifestyle inflation trap – the more you earn, the more you spend. Avoid becoming one of them.
Pro Tip:
- Want to get a handle on your finances? Pick a budgeting app, list your income and expenses, and categorize your spending. Set achievable, tangible financial goals and remain disciplined. Remember, budgeting is all about gaining a better understanding of your money – it's not about giving up the things you love!
- To find out where your money is going each month, keep track of your spending and set a budget, which is not about living frugally but gaining control over your finances.
- List down all sources of income, including your day job, freelance gigs, passive income, or side hustles, then record your spending for at least a month, covering rent, groceries, utilities, transport, takeouts, subscriptions, and more.
- Utilize technological tools like Spendy, Wally, Buddy, Yabi, and others to streamline the budgeting process and potentially save money in the process.
- Finance experts recommend categorizing expenses into essentials (50% of income), lifestyle spending (30%), and financial goals (20%).
- Goals should be specific, measurable, achievable, relevant, and time-bound, and can include short-term goals such as saving for a staycation or building an emergency fund.
- Be realistic when setting budget limits for specific spending, and consider using budgeting apps like ADCB Hayyak and Meshreq Neo to help manage your spending effectively.
- Monitor and review your budget regularly to track progress, quickly rectify any mistakes, and make it an enjoyable part of your lifestyle in the UAE.
