According to a recent survey conducted by a financial technology platform in the UAE, over half of residents, specifically 50.46%, have spent more than they earned in the past year. The findings are part of Yabi's Financial Health Report 2024, which highlights concerns around financial security and long-term financial planning.
Financial Security at Risk
The report reveals that while many residents manage to meet their immediate financial obligations, only 33.53% feel confident about having sufficient funds for retirement. The survey also uncovered that 41% of respondents have little optimism about achieving their long-term financial goals, indicating widespread uncertainty surrounding financial stability.
The importance of saving and investing is clear, with the report showing that although 63% of respondents pay their bills on time, only half could sustain their expenses for two weeks or less without an income. This underscores the vulnerability of many residents when it comes to financial security and the need for better financial education and budgeting skills.
Why Are People Spending More?
Financial advisor and millennial money expert Raji Kaippallil explained several reasons for the high spending trends among UAE residents. "Firstly, in a city like Dubai, there’s always something to splurge on — from brunches to clubs and attractions," Kaippallil said. "Secondly, the pressure to keep up appearances leads many to purchase luxury items like designer bags and cars they can’t afford. And lastly, the ease of credit cards and buy-now-pay-later schemes makes it simple for people to overspend, even when they can't pay upfront."
Despite this, Kaippallil acknowledged that the rising cost of living has encouraged residents to rethink their spending habits. While many now recognize the importance of saving, she highlighted that numerous individuals still lack a clear understanding of where their income is going each month.
Tips for Better Budgeting
Kaippallil shared advice on how to budget more effectively, advising residents to aim to save at least 20% of their monthly salary. "This savings should go towards building an emergency fund, which can cover three to six months of fixed expenses and be a lifesaver during financial difficulties," she explained.
Prioritizing Needs Over Wants
Content creator Kaunain Fatima, a 28-year-old UAE resident, shared that 30% of her salary goes towards rent and groceries, while 20% is allocated for travel and content creation investments. "I try to save at least 25% of my income every month, although this varies," she said. "I focus on prioritizing needs over wants, but I do make room for personal indulgences."
On the other hand, South African expat Zahirah Marty, a freelance travel content producer, admitted that saving hasn't been a strong point for her. "Being a freelancer, there are some quieter months, so I try to stretch my finances between payments. However, I always make sure to meet my expenses on time to avoid high interest rates on late payments."
The 50/30/20 Rule for Budgeting
Kaippallil shared the "50/30/20 rule of budgeting" to help residents plan their finances more effectively, particularly during unpredictable months:
- 50% of your income should go toward fixed expenses or needs, such as rent, utilities, and education.
- 30% should be allocated to discretionary spending, including eating out, shopping, and self-care.
- 20% should be saved or invested, in alignment with your long-term financial goals.
