Preserve your cash by curbing frivolous spending, experts advise

Residents that are looking to save money during times of economic uncertainty should adopt and follow a bare-bones budget, experts in the UAE advised.

Speaking to Khaleej Times, Ambareen Musa, founder and CEO of Souqalmal.com, revealed that residents who are facing redundancies, salary cuts, and unpaid leave allotment, have already started tapping into their savings or even liquidating investments to gather the funds to tide over these financially challenging times.

"Those who already had an emergency fund worth at least three to six months of expenses, are obviously in a better position to weather this storm," she said.

It remains crucial that financially impacted people cut their expenses as much as possible and preserve their cash, she said. "This isn't just important for people who have already lost their primary source of income or those who have had their incomes reduced. Even people, who haven't been directly impacted yet, are anxious and uncertain about their financial wellbeing in the near future."

Musa noted that there have been several examples of UAE residents cutting back on frivolous spending and expensive subscriptions. Many are choosing a supermarket's own-brand products instead of the more pricey name brands. Even small efforts such as baking their own bread or brewing their own coffee, can help people save a bit more.

Steve Cronin, founder of DeadSimpleSaving.com, which helps UAE residents learn how to plan, save and invest their money by themselves, noted that some people have been grateful for the lockdown as it has stopped them from spending money going out and forced them to realise what is important. People with job losses and pay cuts, he said, have had to immediately get creative about slashing expenses, with many renegotiating their rent, clubbing together to get school fee reductions, and banning luxury purchases by the family.

"The best way to save money is to do it with intention - by knowing exactly what you are saving for," he said. "Ideally you need a cash buffer of at least six months' total expenses, so you can survive losing your job without stress and find another one you like."

This cash buffer, he stressed, is the priority above all else. "Forget buying a car, property, and investing in stocks. If you have credit card debt, then you have to be able to pay it off before it balloons. So saving cash and reducing expense debt give you the motivation, which makes saving a lot easier. Then you have to assess your large expenses such as rent, education, and gym membership, to see what you can slash."

Saving 10-20 per cent on rent, he said, will have much more impact than cutting out avocados from weekly shopping. "Do check how all the small items, especially food deliveries, add up and set a budget for each expense category to make sure your spending is under control," he advised.

Contact banks for options on payment

Highlighting how banks in the UAE have played a key role in aiding residents during this trying period, Musa noted that one of the biggest relief measures that they introduced is the three-month payment holiday for borrowers whose income has been impacted by the crisis. However, she also pointed out that for many borrowers this three-month payment holiday may already be about to end. Many other credit cardholders would not even have qualified for the same payment break to begin with.

Banks may consider individual borrower's requests for further debt relief and renegotiation of loan/credit card terms on a case to case basis. So borrowers must reach out to their banks to see what options are available to them.

"There may also be people who are forced to relocate back to their home countries after being made redundant by their employers. Such borrowers may now see banks demand immediate and full settlement of their loans before they exit the country. It is best to negotiate with the bank to try and find the most affordable debt settlement option, be it a reduced lump sum settlement or a restructured repayment plan," Musa said.