Take simple steps like setting realistic goals, tracking expenses, reducing debt and learning from mistakes.
We’d all like to have more money!
Individual financial empowerment involves a mix of several elements: enhanced earnings, more savings and breaking free from debt obligations (or at least reducing the cost of financing). Yes, it’s easier said than done. Here are seven simple tips on taking control of your personal budget:
1. Set realistic goals - Your goals should definitely encompass foreseeable expenses such as annual car insurance renewals, travel and school fees. It should also include longer term goals such as wealth accumulation and retirement. This is especially relevant for expats in the UAE who do not have any pension entitlements.
2. Track expenses - You can’t fix what you can’t measure. Most people will know their most chunky outflows like rent or school fees, but will very quickly get to ‘miscellaneous stuff’ - and that’s probably where you actually have the most room to optimise.
3. Build a game plan - Once you’ve set your goals and understand how you are spending your money, devise a plan that works for you. Will you save by eating out a little less or taking the metro instead of a cab? You don’t have to stop doing things you like.
4. Stay within your personal budget - “Don’t save what is left after spending; spend what is left after saving.” Warren Buffett’s simple quote sums this one up.
5. Reduce debt and seek funds wisely if you need to - Every dirham spent on servicing debt is a dirham that you could have saved. If you have expensive debt such as credit cards, consider consolidating them into a low-cost personal finance or aggregating them under a lower cost ‘balance transfer’ cards programme.
6. Invest to preserve and grow savings - What do you do with the savings that you have managed to carve out on a monthly basis? There is a myriad of options available to UAE residents ranging from local savings accounts to picking individual stocks anywhere in the world. Consult a specialist and choose an avenue that best suits your personal circumstances.
7. If you fall off the wagon, get right back on - It’s OK to falter once a while. The vital thing is that you get back on.
Source: Noor Bank