Splashing out over the festive season is all very well, but if you are spending six months of the year paying for your holiday cheer it is time to put things in perspective.
Over-spending, high rent and mortgage costs and living beyond your means are all ways of building up debt, and before you know it you could be spiralling towards an unhappy 2008.
Two of the most common resolutions made in the new year are to be thinner and have a fatter wallet. But shedding extra pounds and beefing up your bank account can be difficult to achieve.
So, with a new year just around the corner there is no better time to start tightening the purse strings. Whether you’re buying a house, saving for your children’s future education or just want to have more disposable income, now is the ideal opportunity to rethink your finances.
“The recent credit crunch in the US has been felt around the world and people here are also feeling the reverberations. The start of the year is a good time to make financial resolutions and stick to them,” says independent financial advisor Martin Kinsey.
There are a myriad ways to save, from specialist accounts, to off-shore banking, to stocks, shares and bonds. But with the weak dollar affecting everything from food, to rent and money transfers, saving even a small amount each month will help pay for those little extras, according to Richard Boyd, a financial consultant for Global Eye.
“There are many simple ways to save money, including paying your credit card off on time as there’s always a fee for late payment. You could also take your own sandwiches to work, or if you want to go out for dinner buy the Entertainer and use the two-for-one vouchers in there.
“Shopping around for car insurance is a great way to save as a garage might quote you a higher premium. Likewise with personal loans, ensure you get a few other quotes as your regular bank may not offer the best deal. Many people get carried away with the lavish UAE lifestyle, but there are lots of sales here; waiting until then to buy your clothes could save cash,” says Boyd.
Making financial resolutions is one thing but trimming back spending for 12 months is another. Every year hundreds of New Year resolution surveys are conducted, and most results show even though the majority of people cite “saving money” as a priority, they also reveal most wannabe savers have broken that pledge as early as the end of January. “People often tend to think about their finances as part of their good intentions for the new year. That is a great idea, but what I really want to see is everyone sticking to their guns,” says Kinsey.
Kinsey suggests the first step to being financially better off is to know what you want and in what time frame. “Set out a clear goal of what you are saving for. Ask yourself if it’s something long or short term. Is it for your children’s education, a pension, a house deposit? The answer to these questions will help a financial advisor give the best advice,” he says. “An off-shore account is ideal for something over 10 years, whereas a high-interest savings account is better for up to five years. You also need to think about buying property, which is a good way to invest for the future.”
However, the financial expert advises savers to be realistic, too.
“There’s no point saying you will save Dh10,000 a month if you can’t afford to live on what is left over. You will do best if you frame your goals positively rather than negatively and break your goals into pieces that seem doable,” he explains.
Boyd suggests dividing accounts up so that you can track your savings. “You should always have a rainy day fund in case your car needs servicing or your washing machine breaks. If the money is in your current account, it’s very easy to make a trip to the nearest ATM and take it out, so moving it will help you save,” he says.
Personal debt is slowly on the increase in the UAE and psychologist Sailaja Menon says she has seen a rise in the number of clients with mounting financial problems. “The rise in living costs and the amount of credit on offer has led more and more residents to live beyond their means. This results in them becoming depressed and that’s when they end up with me,” she says.
Menon says it is very easy to brush money troubles under the carpet, thinking they will go away. “If you do have any concerns about your finances the best thing to do is tackle them straight on, and there’s no better time to do this than at the start of the new year,” she says.
Top tips to help you save in 2008
- Never borrow more than you can afford to pay back
- Don’t loan money to people that you can’t afford to lose
- - First cut unnecessary expenses before you decide to cut money
from your savings goals
- - If you no longer have a regular expense, such as when you pay off
your car, set aside that money into savings. You’ll be paying
yourself instead of somebody else
- - Try using a piggy bank. It might sound childish, but you’ll be
amazed how much you can save in coins alone
- - Set some money aside for emergencies. Decide on a number of
months’ worth of salary as a cushion, and ensure to replace it
anytime you must use it
- - Shop around for deals. If you want a car loan or to borrow money
for your rent, check out all the available options on the market
- - Turn your air-conditioning off when you are not in the house – your
electricity bill will shrink dramatically
- - Don’t splash out on luxuries for the sake of it. Private gym
membership is a waste of money if you never use it
- - Do some jobs yourself. Washing your car yourself once a week
will save you up to Dh1,000 a year