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How UAE residents can spring clean their finances

By Shuchita Kapur

Expert advice on reducing debt and making a savings plan work for you
Spring cleaning your finances is as important as cleaning your homes. It could be in the form of better financial planning, boosting your retirement contributions or savings for children's higher education.

According to Saleem Khokhar, Head of Equities at National Bank of Abu Dhabi Asset Management, "UAE residents should pay greater attention to financial planning than many others as being expatriates they have different needs with regards to savings plans and pension contributions. Such investments need to be portable and easy to liquidate should the need arise whilst still offering returns that are consistent with clients' expectations."

Khokhar believes investment portfolios should be designed to suit an individual, her/his circumstances and the stage of life at which she/he is in.

Giving tips to the younger generation, he advises: "A number of options are available for those who are serious about spring cleaning their finances and saving for the future.

"The initial step is to assess your time horizon if you are young and far from retirement. In such a case, an aggressive or dynamic portfolio is best suited to your needs.

"These portfolios typically invest in equities across the global but focus on growth rather than income producing equities. Resultantly, it should be a portfolio that is volatile but produces higher returns over a long period of time."

For those who have completed many years in their career, should have a more conservative approach. "A conservative portfolio that typically invests in short term fixed income instruments and money markets to generate stable but lower returns will suit you if you are approaching retirement.

"This is where you should be positioned. Balanced funds sit between the two and offer a combination of equities and fixed income," he added.

Besides prudent future financial planning, getting rid of current debt is vital to cleaning up finances. This is something that requires a strong will power as we become bigger consumers with each passing year.

R Raghu, Senior Vice-President-Research at Kuwait Financial Centre (Markaz) believes reducing debt, which will ultimately clean up your finances in not an easy task.

"Eliminating or reducing debt is like reducing weight! Most desirable but most of the times impossible," he recently told this website.

Giving some simple tip to the readers, he added: "[Firstly], augment your income through additional means (you can teach in the evenings or write for magazines).

"[Secondly], try and negotiate with banks for restructuring your debt (reducing the interest or extending the term). Most of the institutional borrowers did exactly this during the last three years.

"[Third], reduce operational expenses to free up cash for quicker repayment.

"[Lastly], remember how hard it is to eliminate the debt the next time you borrow!" he said.

© Emirates 24|7 2012

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