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Many expatriate residents in Dubai and Abu Dhabi originally come from a country which has automatic pension legislation. This means that before moving to the UAE, those who were in employment had a portion of their salary sent directly into a pension fund which couldn’t be touched until retirement. However, since their move to the UAE, the pension contributions have stopped. Fortunately, their salary has most likely increased, and they no longer have to pay tax. All sounds great, right? Well yes and no… This blog will explain why working in the UAE can be either a blessing or a curse for your longer-term financial security.
Why Living in Dubai can be a curse
You’re reading this blog so you’re probably already well aware of how expensive living in Dubai and Abu Dhabi can be. The malls, takeaways, flights, rent, constant birthday’s, brunch packages, Grand Prix’s, concerts and boat parties can get pretty expensive.
But this blog isn’t going to dwell on the long list of expensive things found in the UAE, because every city in the world can, if you let it, drain your bank account, but not every city in the world has such a big problem with saving money, like Dubai and Abu Dhabi does. So, what is it about being an expat in the UAE which makes it so hard to save?
You are here to spend, not save
As mentioned above, other nations have in-built savings legislation, and the main reason countries do that, is so when you stop working, you can financially look after yourself. But for the United Arab Emirates, you will never be a financial burden in retirement, because when you stop working, you won’t have a visa and you will have to leave. Therefore, your financial security in retirement is not the UAE’s problem. Moreover, it is not in the financial interest of the UAE to push you to save money, why? Because the more you spend in the UAE, the stronger the UAE’s economy will be. It’s an excellent economic model, but long-term it’s not in your financial best interest. So, whilst your high tax-free salary is great, it represents a major banana skin if you don’t manage it carefully.
Easily accessible credit is everywhere
Taking out a credit card or a loan is a fairly simple process in the UAE. In fact, it has become a major financial issue for many people who have found themselves burdened with an ever-growing level of debt. The age-old saying ‘don’t spend what you don’t have’ is particularly relevant to many of the UAE’s residents who take on more debt than they can payback.
The UAE is known for being flashy and consumerist, it can be very easy to get caught up in this trend and develop habits of spending beyond your means. Remember, if you buy things you don’t need, you will soon have to sell things you do. Taking out credit cards and loans should only ever be seen as a last resort, and should not be used as a sustainable long term financial solution.
People are not educated on how to manage their finances effectively
Like it or not money is one of the most important parts of life, but for some reason, we are not taught at school, university or work how to manage our finances. One of the main benefits of working in countries with pension legislation in place is that you are forced to build financial security without having to think about it. In the UAE however, you are not. Lack of financial education leads many people to make poor financial decisions and eventually leave the UAE in an unenviable position.
Fear not, the UAE can still be a blessing
Working in the UAE can be the best financial decision you ever make. You are in a tax-free country full of highly paid jobs.
Your financial success or failure in the UAE is almost entirely dependent on your decisions. You may well leave the UAE in a sorrow state and be years behind your non-expat peers financially if you fall into certain traps. But you also have the opportunity to build a significant wealth platform by applying a disciplined way of life and taking advantage of your high disposable income.
Our team of advisors can help you address all of the issues listed above by educating you about financial management and helping you map out your path to success. The choice is up to you.
Don't hesitate to learn all about our recipe for success in easy steps!