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Whether you’re desperate to ditch debt, running from the rat race, or just figuring out your finances, I can help you.
I’m a mum of two with a passion for personal finance. I help people grow the gap between income and expenses, freeing up money to pay down debt, save more and invest to build wealth.
I believe that aligning your finances to your values and long term goals combined with focused strategies to increase savings rate ultimately leads to a more contented and fulfilled life.
Check out my resources to help you pave your path to financial freedom!
Take the Leap to a brighter future
What is the Leap Strategy?
The LEAP strategy is a comprehensive, cyclical and efficient model, taking you from docile drifter to savvy saver! I have used this method to achieve financial goals I would previously have said would be impossible.
In just over 2 years, I progressed from a few hundred in the bank to a 6-figure investment portfolio and rental property in the UK, through continuous financial education, evaluating my current and past money picture, applying saving, budgeting, earning and investing strategies and developing the habits and systems to maintain the discipline required to stay the course.
Fixing your finances and building wealth are slow games requiring habits and systems to consistently grow the gap between income and expenses and invest the difference. Here I reveal my secrets to staying the course!
My journey
Years of Investing
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Amount Invested ($)
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Rental Properties
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Progress to Financial Independence!
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17 August, 2021Apply / Invest / Learn / PersistA couple of years into living and working in the UAE, I had met and married my husband and was pregnant with my first baby. The original plan to ‘work for 2 years, save enough money for a house deposit and move back to the UK’ was clearly evolving rapidly. I had a lot going on – I was newly married, studying for my master’s degree, working full time as a teacher and pregnant with my first baby. So, money, and saving for retirement especially, was not at the forefront of my mind.
However, I did have a niggling voice in the back of my mind telling me that I was missing out on paying into a pension by not working in the UK. The benefits of earning a tax-free salary come at a cost – you don’t get to pay into a pension. Around this time, I was discussing this very issue with a friend over coffee, and she explained that she put money into a savings plan, the equivalent of contributing to a pension in the UK. She just transferred in automatically every month for 25 years and boom, sipping cocktails on the beach, here we come.
I was introduced to her advisor and after a quick meeting, signed up relatively quickly. I didn’t bother asking too many questions – I had a baby on the way, and work, and life. I was busy. This was a financial advisor and they’re qualified so they know what they’re doing, right? WRONG! Looking back at my actions and priorities then, I could be talking about a different person.
I willingly handed my money over to someone without really doing research into the fees, the investments, none of it. I was told that the fees were 1% (lies!) and I thought, 1%, that’s hardly anything. WRONG AGAIN! A small investment of money and time in ‘Millionaire Expat’ would have informed me that the fees on my portfolio, upwards of 4-6%, would cost me hundreds of thousands of dollars; but alas, I was distracted. I was such an easy customer; the advisor must have been on cloud nine. She barely had to convince me into this money heist.
Fast-forward a couple of years and I did do a Google search, and read books, and listened to podcasts, and read blogs. And cried. But I didn’t dwell too long – I got out (incurring a huge penalty and losing most of the money I had contributed) and started investing intelligently. I’m now on the path to financial independence – investing regularly, making smart choices with my money and learning continuously.
One of the books that had a massive impact on my journey was ‘Millionaire Expat’ by Andrew Hallam. The book appealed to me as Andrew Hallam built his investment portfolio on a teacher’s salary. As a teacher myself, I know that, even in a tax-free country, a teacher’s salary is by no means Lamborghini territory; its barely even ‘new car’ worthy. Hallam proves that anyone can build an investment portfolio, even people on relatively small salaries. Wow. Hope for the little guy.
The world of investing and the stock market can be daunting and confusing for a ‘regular’ person, whose job has nothing to do with the finance industry. I just thought of investing as an extremely risky business, and the stock market as a place where people like me went to lose their money. It was only the bigwigs on Wall Street that earned money from the stock market, right? WRONG AGAIN! Andrew Hallam expertly explains this potentially confusing topic in easily digestible and relatable terms so that you and I, the ‘regular’ people, have a chance of understanding it.
The humorous analogies to Star Wars, fighting escalators, roast beef and many others are underpinned with facts gleaned from studies and research. As well as setting out a clear plan for different nationalities (there are sections in the book dedicated to British, American, Canadian, Asian, Irish, Australian, South African and South American expats as well as investors from New Zealand), Hallam answers all the burning questions you may have about this all-important topic in an informative yet entertaining way.
Here are 3 key lessons I took from the book:
Don’t time the market. When people get a taste of the stock market, especially if they earn returns on their money, their ego can take control and they may think they can outsmart the market to earn more. Quoting from experts like John Bogle and Warren Buffett and providing helpful visual charts showing investors’ returns in comparison to the stock market returns (3.98% to 10.16% from 1986-2016), Hallam sets about proving that nobody can successfully predict the future. A *boring* strategy of investing every single month (or as often as one can) no matter the circumstances or price, is your best shot at building a successful investment portfolio.
It’s important to invest in government bonds (loans to governments rather than to companies) as well as stocks. Now bonds can be less exciting than stocks. They don’t tend to earn huge rates of return and interest rates are fixed (usually around 3% so you barely beat inflation). The less bonds you have in your portfolio, in theory, the faster it will grow. But it will be exposed to higher volatility. Bonds are not likely to drop 50% if the stock market does, so if you have some in your portfolio, your investments aren’t going to drop by 50% either. In case you aren’t convinced, Hallam proves through factual data that a portfolio of purely stocks doesn’t necessarily beat a portfolio comprising stocks and bonds.
Decide on your long-term strategy and stick to it. Using practical examples and figures, Hallam explains why leaning in to ‘the next big thing’ is more likely to be a disaster than a dazzler. Stock pickers and people trading regularly were found to underperform the overall market by 4%-13%.
My signed copy of ‘Millionaire Expat’.
Buying this book might be one of the greatest things you can do for your future self and your family. Having met and listened to Andrew Hallam speak several times (as well as having him sign my book – pictured above), I can honestly say that this is a book review close to my heart. Investing less than a hundred dirhams in this book could (or should I say WILL if you take action) result in you saving hundreds of thousands and making hundreds of thousands of dollars (millions over your investing lifetime). Now that’s a return on investment that I can get onboard with!
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Millionaire Expat: How To Build Wealth Living Overseas
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12 December, 2021Apply / Learn / Save Money / Saving and BudgetingThe year was 2020, and as the world shut its doors on social gatherings, work came flooding in through my email, phone, and devices. In my multi-profession of teacher, tutor and proofreader, demand rose exponentially. As courses went online, people found it more difficult to access work requirements and turned to me to support them. Parents, desperate for children not to fall behind in the wake of a global pandemic, emailed and called for extra sessions. My income increased dramatically.
But here’s the catch. So did my expenses: hello, lifestyle inflation. In amongst all those long working hours and graft, I was dealing with my own anxieties and stresses, which led to throwing my grocery budget out the window entirely. My AC bill went up as we all worked and studied from home, and Amazon became my buddy, joining me in my quest to escape reality: how to function in a world, quaking in the shadow of a deadly virus, uncertain of when life would be ‘normal’ again, and if it ever would.
Don’t get me wrong, I was just about breaking even – due only to the fact that a lot of my expenses had been forcibly reduced – petrol, kid’s activities, travel, and family outings to name a few. However, my spending was spiraling and I wasn’t saving the kind of money I wanted to each month.
What would possess you to refrain from spending for a whole year?
As December 2020 and the new year approached, I decided to get a handle on things. Off work for the school holidays but not travelling anywhere, I knuckled down – I discovered minimalism and decluttered my house, selling a bunch of stuff I didn’t need, and took a long, hard look at my 2020 expenses. I was embarrassed of my grocery bill alone – some months it crept up past 7000aed! I realised I hadn’t taken a deep dive into cutting expenses since I discovered the FIRE (financial independence, retire early) movement in early 2019 as I’d been putting so many hours towards increasing my income by doing side hustles, so it was probably time I reassessed spending.
It was whilst browsing the internet researching cost-cutting ideas one evening when the kids had gone to bed that I came across a couple of ‘no spend year’ Facebook groups. I immediately joined and read through the posts and information. A challenge whereby people didn’t spend money for a whole year except on essentials. It’s so easy to write it off as completely unattainable and undesirable, but I was intrigued. These groups had 10s of thousands of members – this couldn’t be totally out of the realm of possibility. Frugality and minimalism had always interested me, but they were paths I was playing on, dipping my toe in to the waters to test if these concepts were aligned with my values.
Many people will be asking at this point, but why cut expenses? Why make yourself miserable when you could increase your income, making it possible to save, invest, and spend in the present, thus having the best of both worlds? This is great in theory, but myself and my husband are currently low-income earners (I am a teacher, and he is an equestrian instructor) with decade-long freezes on salaries, working part time side hustles to embellish our modest incomes.
Getting a promotion, starting a business, or applying for a better-paying job are all great and I 100% support those goals, but it might not happen overnight, and passive income streams (income that you don’t ‘actively’ earn, such as profit from sales, dividends, or rental income from property) take time and sometimes capital to establish and develop to the point of being passive. Sometimes it’s not as straightforward as just ‘earning more money’ in everyone’s situation.
Also, when people do earn more, they often succumb to lifestyle inflation, as I did in 2020, so being aware of expenses is important for every income level, in my opinion. Plus, with this strategy, you have full control and can implement it immediately. And there’s nothing stopping you from cutting expenses and raising income – it’s not an ‘either, or’ equation. I execute on both strategies simultaneously to maximise my savings rate.
Nevertheless, I had other reasons for wanting to endure this challenge. When people take on a marathon or an iron man challenge, they do so to test themselves, to put themselves through some level of suffering and discomfort purposefully. I wanted the same thing. I’d been following The Minimalists and listening to their podcast for some time and was interested in the idea that in our society, rampant consumerism causes misery rather than happiness and actually prevents us from being our true selves.
If we constantly try to keep up with other people’s or society’s expectations, we become the hamster on the wheel and end up dissatisfied and unfulfilled. One way to shed some of these expectations is by completing a no spend challenge. The burden to spend money to keep up with others will be lifted, albeit in an uncomfortable way, and your creativity and gratitude will be activated. Who knows, you might end up enjoying it?
I realised I wanted to do something big in 2021; I wanted a dramatic change. The series of small changes I’d been implementing had laid a foundation, but I wasn’t achieving the results I wanted. I had spent so long feeling trapped in the ‘rat race’ – not enough savings to move home or work part-time, but a frozen salary and rising living costs in the UAE meant that it was becoming more and more of a struggle to save each month. I felt a burning desire to rise up against my ‘entrapment’ and get on top of it – money, wealth and investments all create options, choices, and autonomy. But it might take short term sacrifice to get them. My grit and resolve kicked in. I felt ready.
For you, it might be a desire to finally shift your debt once and for all, or save 25% for a house deposit, or put your children through university. Whatever it is, it requires much more money in the bank than you currently have. So, you have two options: wish and dream or take massive action. And I’m not talking about robbing a bank or investing in the latest meme stock; both of which are ways to fast track yourself to being broke (and possibly in prison with the first option…). Or you could always take your 1 in 8 million chances of winning the lottery. Personally, I’d prefer a strategy that I have more control over and one that is going to put me out in front – give me an edge.
So, did it work?
Before I get into the planning, preparation and the ‘no spend year’ itself, I want to skip to the present. Sunday 12th December 2021 to be precise. For the purposes of cohesion, my reflection on lessons learned (the softer stuff and the hard, emotional stuff) will come later, so this section is dedicated to the primary reason one endures a no spend challenge: money. Here is a summary of what I achieved during my no spend year:
My core stock market investment portfolio doubled and rose above $100k
I bought a UK rental property, putting a 25% deposit down
I invested in cryptocurrency for the first time
I received a promotion to middle management at work
I started this blog and my LEAP business, which has just started generating sales
More than doubled my net worth (that’s over 100% growth!)
I’d say it worked. A resounding success. It was 100% worth it, not only for the financial rewards that delayed gratification, patience, consistent work, and sacrifice give you, but for all that I learned and all that I became (scroll down for the vulnerable reveal). Ready to dive in? Here comes the practical part – how to plan, prepare and execute your no spend challenge.
Planning and preparation
Ok, once I’d decided to do it – take the proverbial plunge and embark on a ‘no spend year’ – I wondered how on earth one goes about only spending on essentials. A million questions came to mind: what about my kids and husband? Does Netflix count? Can I buy gifts for people? What if my car breaks down? Since it can be confusing, I created a totally free guide and workbook with monthly trackers and FAQs, available here. I will summarise what helped me to prepare for the challenge as well as some tips here:
The first step is to journal/think about/discuss why you want to do this – what piques your interest? What do you want to get out of it? What are you willing and able to put into it? I suggest journaling with pen and paper and allowing yourself freedom to write whatever thoughts enter your head. It may also help to create a vision board and select images, words and quotes that you are drawn to. Another useful technique is to brainstorm on a whiteboard all the reasons for participating in this challenge. This part of the process will help you achieve clarity on your goals, purpose and vision.
The next step is to lay out your rules. You must decide what constitutes a ‘spend day’ and a ‘no spend day’. It’s YOUR challenge and you set the rules. Some people insist that ‘no spend’ is essentials only and nothing else, but I recommend that everyone’s rules be personalised to their circumstances. The idea is that the challenge is tough and gets you out of your comfort zone, but you have to design a program that you can actually stick to long term. Better to do it moderately and endure for a year than go extreme for a month, I say. I would have been more extreme if I didn’t have children, for example. I didn’t want them to be adversely affected by this, so I continued paying for activities that I thought would be beneficial for their development, such as swimming and ballet lessons. I also kept our travel sinking fund, and we visited my husband’s family in Tunisia over the summer. He would have been devastated if I demanded that the trip was cancelled due to my ‘no spend’ challenge. However, I cancelled Netflix, stopped hair and beauty appointments, didn’t buy clothes (and only replaced when they were damaged beyond repair) etc. You have a set of circumstances personal to you, and what’s important is that you consider all the things that you generally spend money on over the course of a year and evaluate each one, then ask – is it going to be in the ‘no spend’ or ‘spend’ category? You could also decide to do it for 20 days of the month or one week – whatever works for you is still progress.
Discuss your intentions with family and friends. It’s going to be difficult to keep it quiet, and it gives you the perfect opportunity to announce that you aren’t going to be ‘conforming’ anymore in a non-defensive way. I would advise you not to try to persuade them to join you though – people don’t tend to take too kindly to that. I looked at the way my family exchanged birthday and Christmas gifts and realised that it was more due to some obligatory expectation than genuine desire to give the gift. So, I explained that I was embarking on a no spend year and that I didn’t want to exchange gifts that lacked meaning. Instead, I offered that we save the money and use it to spend time together (which we would have done anyway) by going on a family outing or indulging in a meal out. They all agreed, but it’s up to you how you approach your friends and family and explain. Most people will be understanding, especially if you offer a compromise.
Track your progress. Once everyone knows and you’ve established your rules, you can get started! Download my free workbook with monthly trackers and keep it simple – one colour for a ‘no spend’ day and a different colour for a ‘spend’ day. Display the monthly tracker somewhere prominent and simply colour in each day depending on how you spent. This allows you to visually track your progress, and forces you to check on, track and be mindful of your spending. To hold yourself super accountable, post your progress on social media (follow my Instagram account @leapsavvysavers for regular updates on my journey) as there is little more motivating than public accountability. All positive outcomes in my book.
Reflect with gratitude, iterate and meet obstacles with action. Reflection is extremely important in this challenge, as is gratitude for everything you have and finding your ‘enough’. Each month (or week or day if it suits you better), reflect upon and journal how you felt, when you felt triggered to spend, and what you achieved. Don’t forget to celebrate your progress and achievements – don’t wait until the end of the year to do this! If it’s too challenging and you feel like giving up, scale it back next month. If you had a disaster and put a load of new clothes on your credit card, don’t give up. Setbacks are normal and part of the process. The best thing to do is figure out what triggered the setback and try to create a pause between the trigger and the action or remove the trigger. For example, have a set of questions in your wallet that you must ask yourself if you want to spend, such as: do I value this item more that the having the money that I am about to exchange for it? How many hours did I have to work to spend this money? Is this something that I will still value in a year? Do I really need this? If internet shopping is the problem, remove your card and login details from the site – you wouldn’t believe how much of a ‘pause’ you can salvage in the time it takes to get up and grab your credit card.
Setbacks and emotions, learning and lessons
It was a bit of an adventure to start – the challenge of the no spend year manifested in some excitement and adrenaline as I got started. Sometimes change, especially when we choose it and design it, feels good. I went about ruthlessly cutting as much as possible from the expenses side of my budget: hair appointments, beauty treatments, clothes – heck, even Netflix was cut. I reasoned that I was spending too much time binge-watching pointless shows on Netflix anyway. That ended up being a good decision as I used the time I had previously been spending watching TV either working on my side hustles or building Leap Savvy Savers. A change from spending time to investing time resulted in much more purpose and fulfillment, the beginnings of a business which I’m proud of, and definitely more money in the bank. I developed a system to cut my grocery bill in half, which you can read in detail here.
My son’s birthday is early February and I got savvy. I decided in early January to have a big declutter and sell as much as I could. The money from the sales equaled the money I spent on his birthday celebrations, essentially making it a zero-sum equation. No need to budget for it. He still got presents, a day out and a cake, but I didn’t use money from the budget to fund it. I got creative with entertaining my kids and invited people to play dates at our house, which usually resulted in an invite back, thus reducing costs on days out. I utilised my husband’s work benefit of free use of a swimming pool to enjoy hours relaxing and swimming with my family without spending money. Packing my own snacks and drinks made it the ultimate frugal day out.
However, it wasn’t all fun, free and frugal days out whilst piles of cash stacked up in my bank account. This is a word of warning about why I believe in a moderate, personalised approach. As the year went on, I found it increasingly more difficult to spend money. My frugality was becoming extreme. There was a turning point. Around June, my husband asked me why I was wearing clothes with holes. My leggings and jeans were so worn out that the seams had started coming apart, and they were really beyond repair. I would always try to cover it with dresses and longer tops, because something was blocking me from replacing the items. He gently encouraged me to replace the clothes.
So, I begrudgingly went to the mall and selected some items (the bare minimum), taking them to the cashier. Standing in the queue, I noticed my anxiety increasing. Palms sweaty, heartrate speeding up. I felt tears stabbing at my eyeballs and my constricting throat threatening a panic attack. In the moment, I didn’t really acknowledge what was happening. I only knew that I didn’t want to part with the money. At all. I didn’t want to spend anything. Was I a failure? Wasn’t I supposedly on a no spend challenge? Suddenly, it was my turn and the cashier smiled and said “yes, ma’am,” beckoning me forward. My brain screamed at me to get out, and I put the clothes down and practically bolted out of the shop. I could barely contain my tears as I raced towards my car and jumped in, slamming the door, and crying hysterically. Why couldn’t I spend money? What was wrong with me?
I realised that I had taken the challenge too far and was experiencing extreme frugality. Not meeting my basic needs just to save money. I was so desperately chasing my goals that I had forgotten how to fulfil my basic needs as a human. I then had to do the hard work of understanding my money blocks and why, instead of finding my ‘enough’, which was my reason for embarking on the challenge, I was being driven by my ‘not enough’. I felt that I wasn’t ‘good enough’, or ‘worthy enough’ unless I took the challenge to the extreme and achieved a certain number in my bank account. I was getting the exact opposite result to what I wanted. It took time and I’m still working on my ability to spend money without guilt and be OK with whatever point I’m at on the journey, but needless to say; I moved a lot of my expense categories over to the ‘no spend’ day rules, turned my validation inward rather than pinning my happiness and fulfillment on achieving some arbitrary goal, and built spending into the budget.
Finding your ‘level’ of no spend is essential to making this work for you. Frugality is good for the soul, the environment and your wallet, but not at the expense of yourself. This challenge is one of the best things I ever did and has changed my way of life. I had some major obstacles and setbacks, most of which I haven’t detailed here, but I developed resilience, discipline and most importantly, self-awareness. Know thyself is the first rule of having a fulfilling and purposeful life, and boy, will this challenge teach you about yourself.
You will face challenges: it might be extreme frugality like me, it might be overspending, or a combination of both – being really ‘good’ all month then blowing everything on the last day. It’s important, essential even, to go through these challenges and try to step outside of the emotions and find the deeper reasons and triggers (therapy is great for this and should be included as an essential expense). If in doubt, lean into deep gratitude for all that you already have and realise that you are enough, whatever the balance in your bank account or however extremely or moderately you approach the no spend year.
Good luck, friend. Connect with me for support, motivation and laughs along the way.
Need a bit of support on your financial journey?
If you would like to book a financial accountability coaching session to help you work through these steps or stay accountable to your goals, send me an email at [email protected] or drop me a line via the contact form and we can see if we are a good match.
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12 August, 2021Learn / PersistGetting a head start with money management can make a huge difference to a person’s entire life trajectory. A lot of parents fall into the trap of thinking that giving as much financial support as possible to their children is the key to putting them out front as they begin adulting.
But what is more valuable than being given money? Being taught how to manage money. Think of all the lottery winners that go broke – having more money is not always the solution. Teaching your children how to manage small amounts of money from a young age can help give them the best start in life.
So, what’s the best way to do that? We can’t just start talking to a 5-year-old about credit scores and the stock market, right? No, not advisable. But we can start guiding them in the right direction from a young age. Here are some ideas for you to implement as early as 4-5 years old.
1. Teach them that money is, at its core, an exchange of value.
Show them that money is earned from an early age; money is exchanged for value added to the marketplace. Even if you don’t want them to feel like a job is the only option later in life, most people (even those with passive income streams) started by earning or working for the money. The person who earns money from book sales must earn that money by writing the book, just as the person who works as a waitress must earn money waiting tables at a restaurant. The result is different as one becomes royalty income and one is earned income; however, the basic premise is that all people must work or create or provide to receive money.
You want one of the first lessons to be that money is an exchange at its core – you provide value or service and get paid money, then you pay money for value or service. You can teach this by example – give them money in exchange for ‘working’. Perhaps you can pay them for doing chores or if you don’t like that idea, reading books or writing a story. If you feel that everyone in the family should do chores by necessity and you don’t want the children to think that they are entitled to payment every time they sweep a floor, you can set up a roster of basic chores for members of the household, then offer to pay them for extra work. If they go above and beyond, they receive payment. However you decide to demonstrate this, plan it out before posing the idea to your children, so the boundaries are clear.
2. Separate money into 3 clear jars.
When they have earned or been gifted money, change notes into smaller denominations and ask them to split the money between 3 jars, labelled ‘spend’, ‘save’ and ‘give’. As much as possible give them the choice about how much will be added to each jar but guide and teach them what each means and make it clear that some money out of each ‘paycheck’ must go into each jar. Explain that the ‘spend’ jar is for satisfying immediate needs and wants, the ‘save’ jar is for future goals and buying larger things and the ‘give’ jar is to help or gift to others.
3. Show children the cost of things.
When you’re explaining the meanings of the different jars, ask them what they would like to spend the money on. Elicit a few things, preferably of different values, for example a packet of sweets, a toy car and a dollhouse.
Now you can explain that they could probably afford to buy a packet of sweets now, but they can’t afford a dollhouse yet and that is why they must earn more money next week to be able to buy it. Ask them which things from their list of wants they desire most. If it’s the cheap option, then they can buy it now. But if it’s the more expensive option, such as the dollhouse, then more saving is necessary.
Look at the prices of some dollhouses on Amazon together then count their money. Discuss how much they would have to work to buy it. You are teaching them that things cost money and hours of life exchanged too. Guide them to split their money between the jars depending on their goals. For example, if they really want to buy an expensive item, then more money should go into the ‘save’ jar.
Holding the money in clear jars can provide a great visual to see their stash of money growing as they earn it. You could also stick a chart on the wall above and colour it in as they save towards their goal. You are gently encouraging them into a saver mindset rather than a spender mindset.
4. Introduce them to investing.
You might think you have to wait until they are older to educate them about the stock market, but this isn’t the case. As a way to entice them to save more, especially if you have a natural spender, give them 1 AED for every 5 AED that they save. Of course, you can alter the amounts to suit you.
The point is that they learn about investment returns, passive income, and delayed gratification. You don’t have to teach them those terms explicitly; just explain that if they resist the urge to spend all the money that comes their way, then there is a possibility they could earn more money just for their patience.
You are teaching them about earning interest on their money and a key method to build wealth from an early age! As they get a bit older, you can introduce a 4th jar, labelled ‘invest’ and explain the difference between saving and investing – that each has a purpose, and both are needed. You can distinguish between saving money – subject to inflation, but is necessary to cover emergencies and save for short term goals in cash, then investing – their wealth-building tool.
5. Help them choose how they will give with their money.
Remember that their money is split 3 ways – ‘save’, ‘spend’ and ‘give’. Offer them some options as to how they can help others with their money – perhaps donating to a charity or buying a teacher or friend a small gift.
It’s important that they go through the process of purchasing something for someone else and giving them the gift or actually handing the money to the charity representative. The person’s reaction is almost guaranteed to make your child feel on top of the world. Make a big deal of their feelings – write them down or draw them – you want them to remember how good it feels to help others.
6. Create a mini budget with your child.
Preparation for back-to-school is a perfect time to do this – during the summer they are more likely to have the headspace to really learn and internalize the messages. Sit down and sketch out a budget.
Start with an amount – say 500 AED – and list a range of items that need to be bought along with the prices. Do the sums together – do you have enough for each item? Make sure before you do this with your child that the total of all the school items is slightly more than the budgeted amount. Talk about the options available – we could reprioritise the list to see if there is anything we could take out, search around for cheaper alternatives, or increase the allocated amount for the budget.
Be sure to tell them that in real life it may not always be possible to increase the budget though, so it’s best to try to be creative with the allocated budget first, before just adding more to it. I have another post on saving for back-to-school here if you are interested in more tips to enjoy back-to-school spending without blowing the budget.
7. When your child is a little older, open a savings account together.
Now you can take the idea you have cultivated from the jars method and go along and deposit their money in the bank. Open an internet banking account and track the money together.
The goal is that you encourage them to get hooked on watching money grow before they have a chance to get addicted to spending money. You haven’t got long before consumerist advertisements toxic claws grip your children – it happens to everyone.
Depending on where you are in the world, it may be possible to open an investment account for them too and show them the differences between saving and investing. In the UAE, I invest for my children through Interactive Brokers. I just invest in a different ETF for them than for the adults. When they get a little older (perhaps pre-teen), I plan to show them exactly how their money has grown and what happens to it once they make a trade.
8. Coach them about credit.
As children reach their teens, demonstrate how compound interest can either work for you or against you. Educate your child about the risks (and potential rewards if used sensibly) of credit cards, loans and mortgages. Show them interest charged when you take out credit and a real example of how much something would cost if you bought it with a credit card and only paid off the minimum balance.
You can also offer them the alternative – a person who pays their card off in full each month has the potential to earn cashback and points from a credit card but warn them that these only work for you if you pay the card in full every single month.
On the other hand, you can show them that through investing, compound interest can multiply their money over time. But only if handled sensibly and rationally. Give them a few scenarios and ask them to work through what they would do. For example, John has been paid and wants to buy things and go out, but could invest his money – what should he do? You could compromise and say that John splits his money – some goes towards investing and some towards going out and enjoying the now. This way they can learn the balancing act that is managing money and making decisions about money.
9. Demonstrate gratitude and respect for what you already have.
Perhaps the best money lesson you can pass down is to try to curb the natural human desire for ‘more, more, more’ at an early age. Practise gratitude regularly and openly around your child.
Make it a habit to say every day and out loud how grateful you are for healthy food, a safe house to live in, central heating or air conditioning and a warm bath. These are likely things that your child will take for granted if you have all these staple necessities. Warn them explicitly about the dangers of consumerism, social media and comparison with ‘the Joneses’.
Show them through your own words and actions how much more contented and peaceful it is to live in gratitude for what you have.
10. Share your money story with them.
The final and most important idea is to be honest and open with them. As money is seen as a ‘taboo’ subject, many people grow up in homes whereby money is either not discussed or referred to in a negative way (e.g., ‘we can’t afford it’ or ‘money is the root of all evil’), and they carry this ignorance into their adult lives. The negative cycles are perpetuated.
You can break those cycles by simply being honest and open. Discuss the family finances with your children – your goals and budget. For example, if they really want to impulsively buy something when out shopping, such as a toy, but it isn’t in the budget, explain that if you buy small frivolous items now, perhaps you won’t be able to save for the trip to Disney that you have set as a goal (or whatever it might be).
Show them that you aren’t perfect and tell them your money mistakes. They will relate to you more if you come across as a normal person who makes mistakes than someone who constantly tries to lecture them. Trust me – it will increase their trust in you, not decrease it.
By educating your child in a practical way about money, you can set them up for a successful adult life in so many ways. No matter how we spin it, money underpins everything. Yes, it’s true that money can’t buy happiness, but lack of it or a money struggle can cause real stress and unhappiness.
Being financially literate enables your child to make informed choices. Perhaps they won’t have to be trapped in a toxic work environment or an abusive relationship in the future because you took the time now to show them how to manage their money effectively!
What further tips do you have for teaching children about money? Comment below – I love hearing from you.
Need A Bit Of Support with your finances?
If you would like to book a confidential financial accountability coaching session to help you work on your finances or stay accountable to your goals, send me an email at [email protected] or drop me a line via the contact form and we can see if we’re a good match.
Good luck on your financial journey – congratulations on taking the leap. [...]
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11 June, 2021Apply / LearnWhen I first looked at our household spending to analyse areas in which we could cut back and save money, I realised that we were haemorrhaging money on food. It’s easy to do – psychologically, we tell ourselves that this is ‘necessary’ spending. We made every mistake in the book: going shopping with no list, shopping multiple times a week, eating out too often, ordering takeaway because we were too tired to cook after a long day’s work, to name but a few. I figured out quickly that this was the line item that was going to save us the most money, and fast. So, here are 10 steps I developed and still use today to keep grocery spending under control.
1. Plan all your meals and cooking
I started by meal-planning for the following week. Select a day and time and schedule it every week. This will get you in a routine and help you to create a habit. Plan out every meal for the following week for the whole family and most importantly when you will cook. To really save money in this category, limit the number of meals to 2-3 per week and alternate with leftovers. This will mean that you won’t have to buy many ingredients, but you will have to eat the same thing a few times in a row. We don’t mind that in our house and I have trained our kids in this method from when they were toddlers, so they don’t know any different.
2. Shop your house
When you start planning your meals for the following week, begin by shopping your house. Do a quick inventory and check whether you have any items nearing the expiration date. If so, build your meals around those items. Are there any items that would go well together in certain recipes? For example, if you have minced beef and spaghetti, it would make sense to make a spaghetti bolognaise next week. At the same time, you can begin writing your shopping list for other items you may want to purchase as you check your house. I used to buy things all the time only to realise I already had the item lurking at the back of a cupboard. I keep a handy list on my fridge of items I tend to purchase every week, for example, milk, bread and eggs. I check whether these products need replenishing as I am performing my inventory and considering what meals to cook the next week.
3. Use toddler recipe books
One of my personal favourite hacks! I used simple toddler recipes when I was weaning my kids, and I still use them now for many of our meals. They tend to use simple ingredients and be healthy, easy-to-make and budget-friendly meals. The only thing is that they can be bland, so I just add herbs and spices to create more depth of flavour. If you don’t have toddler recipe books, google toddler recipes and there are a huge number of recipes to choose from on the internet.
4. Recipe hacks
I almost always double the recipe on anything I am going to cook. This saves money and time. I also tend to choose meals that I can easily cook in bulk and save the leftovers for the following days. For example, I would be much more likely to choose dinners like casserole, bolognaise, soups, lasagne and curries than meals like fajitas or steak and chips. That is because I can make a huge pot and save it, just cooking some rice, pasta or potatoes the next time I want to feed it to my family. The other recipe hack to try is to cook meals in the same week which use similar ingredients. For example, if I am cooking pesto pasta and I have to buy a jar of pesto but won’t use it all in one dinner, I will search for other recipes using pesto and cook them in the same week.
5. Shop the deals at different places
OK, so you have your meals planned out, have completed your inventory and have created a shopping list. I also include cleaning products and toiletries within the grocery budget, so they will go on the list if they need replacing. At this stage, it may be worth doing a quick check of deals at different supermarkets, although I wouldn’t spend too much time obsessing over this. If you’re not careful, you could spend hours analysing every deal to save just a few dirhams. The time spent researching and buying from different places may not be worth the money saved. You have to calculate that trade-off for yourself, but personally, I tend to spend a few minutes checking whether the big supermarkets have any significant sales or discounts.
Some people also prefer purchasing specific items at certain places; for example, in the UAE, many people like buying their meat and produce from Kibsons as they are reputed to have a superior quality range of these items. However, in general I find that you can save money and time in the long run by buying most of your items at one store. I am all for simplicity and not having to calculate how much one total is and add it to another etcetera. Keeping it straightforward means you are more likely to make this a habit. If you make it too complicated, you are less likely to stick to it week in, week out.
6. Online shopping
This one was a game changer for me. When I switched to online shopping, I saved so much money. I was wary at first, especially about purchasing things like fruit and vegetables, but here in the UAE at least, I have been pleasantly surprised at the quality of items delivered to me. I love that I can shop in my pjs in peace at home when the kids have gone to bed so I can actually focus on what I’m doing. I can easily price compare without having to match the labels on the shelves to the correct items, akin to completing a Rubik’s cube.
I set myself a hard limit for the total amount I will spend on groceries. I ensure that I stick to it by adding whatever is on my list to the shopping cart. Then, when I click on the checkout to pay, if the total is over my budgeted amount, I go through and remove products completely or cut the amount I am buying until I reach my maximum budgeted limit for groceries that week. This is not as difficult as it seems. For example, as you add the items to your cart, you may click on 5 packs of wipes as it is easier to purchase in bulk. But when you get to the checkout, you can reduce to 2 packs as that will see you through the next week as you realise the rest was excess, and thus stick to your budget. If you are over your budgeted amount when you get to the checkout, it also forces you to consider what is necessary for the following week and what you are buying just because you want it.
NB if your budget is too stretched each week and you are struggling to purchase even necessary items, you should consider extending your grocery allowance and looking to make cuts elsewhere in your budget.
7. Buy store brands in bulk
There is an argument for buying in bulk and an argument against buying in bulk, essentially represented by frugalists and minimalists. This blog post is not going to go into the argument for or against as both have merits, and we don’t have the scope here to give them both justice. Needless to say, if something you are purchasing in any case and will use in the future is on sale, then why not purchase in bulk? For example, if you are buying bin bags and you see a great deal for 50% off and you have the capacity to store them in your home, then it may be worth buying them in bulk. Additionally, items such as cleaning products, condiments, frozen fruit and vegetables, medicine, pasta & rice, household staples such as kitchen roll and milk and juice have virtually the same ingredients as their more-expensive branded counterparts. My advice if you are unsure whether to buy store-brand: trial it once. If it lacks quality compared with the branded product, then buy the branded item next time. You might be pleasantly surprised by the quality of home brands and the money you save.
8. Batch cook all your meals and snacks
Right, so you have planned your meals, diligently created your list and completed your online shop. The shopping has been delivered to you. Success! Not quite… A lot of people get so far and fall at this hurdle. Remember in point 1, I said plan out meals and cooking? You should do your meal planning at a certain time of the week, your grocery shopping at a specific time and allocate time to cook. This should be a time when you are not exhausted, busy or overwhelmed. A Wednesday evening at 6pm after a mammoth day of work when you have kids demanding things and the phone is ringing and the doorbell is buzzing is probably not the best time. I opt for a weekend morning – my husband takes the kids out to the park or for a playdate – and I put a Podcast or audiobook on and batch cook for the whole of the next week, or as much as I possibly can.
You have to look at your schedule and see what works for your family, but that works for us at the moment. Is it ideal? No, my ideal scenario would be working part time or freelance so that I can do my batch cooking in the week and free up the entire weekend for my family. But that is not possible right now, so we organise our schedule like this to work towards the ideal scenario. To me, it’s better than dealing with the guilt of throwing away expired food after calling a takeaway because I was too exhausted to cook.
My final hack is that as well as meals, you can batch-cook snacks. I usually cook two large dinners and one or two snacks, such as a batch of blueberry muffins or cereal bars. Saves a ton of money and you have healthy (ish) snacks on hand for hungry kids and lunchboxes. Seriously, do they ever stop eating?
9. Freeze food
This hack helps take the mental load off the primary caregiver who also has to work full-time as well as saving you money. I’ll cook a massive haul of food on a weekend morning, so how do we eat it all before it goes bad? We don’t. I separate it into different Tupperware containers. Whatever we don’t eat that day either goes into the fridge if it is to be eaten over the next couple of days or gets labelled with the name and date and frozen. The result is that you start to build an excess of frozen meals that you can pull out at any given time. If it’s a busy week at work or you aren’t feeling well, you don’t have to reach for a takeaway, you can pull a ready-made meal from the freezer. I use the oldest items first so store them near the front, and fresh food gets stored near the back. This way, you can alternate meals on different days too to alleviate boredom. The same applies to snacks for kids’ lunchboxes – I have built up a stash in the freezer, so I don’t always have to bake at the same rate every week.
10. What if I have to go to the supermarket?
I often visit the supermarket. Perhaps the online delivery service did not stock the item I wanted, or there was a mistake in delivery. I try to do online where possible, but this might happen. Some tips to avoid blowing your budget the minute you step into that golden fortress housing row upon row of shiny objects just waiting to be selected and placed in your trolley:
Lay out your list like the grocery shop that you will most likely shop at. For example, if the toiletries aisle is the first one you walk through when you enter, list toiletries first and so on. This will allow you to work efficiently through the supermarket and stick to your list.
Do not go when you are hungry, stressed or tired. You will buy more.
Look up and down in the aisles. Often, the most expensive items are displayed at eye level.
Schedule your trip right before an appointment so that you have a limited time to finish the shop. This will prevent you from browsing and impulse-spending.
I hope that list of hacks helps you. It seems like a lot, but when you establish a routine, it will all become second nature and I guarantee it will save you money. I managed to slash our grocery budget in half while feeding my family of 4 healthy, wholesome meals. They are simple recipes, but nobody has ever complained in my house! Plus, time has been freed up by scheduling the meal planning, grocery shopping and batch cooking pieces of the ‘feeding a family’ puzzle.
Need a bit of support through these steps?
If you would like to book a financial accountability coaching session to help you work through these steps or stay accountable to your goals, send me an email at [email protected] or drop me a line via the contact form and we can see if we are a good match.
Good luck on your financial journey – congratulations on taking the leap. [...]
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7 August, 2021Apply / Learn / PersistSometime in August, most parents start thinking about back-to-school preparation. Some look forward to school commencing with excitement after a long summer entertaining the offspring; others may feel slight (or major!) trepidation at the thought of the chaotic mornings, extracurricular clubs and homework starting up again. Whichever camp you fall into, some back-to-school shopping will most likely be involved.
Parents want the best for their children and companies know this, thus school items tend to be a tad on the expensive side (to put it mildly!). Keeping up with the Joneses is not limited to the large house and luxury car. School bags, shoes and even stationery can be subject to school gate comparison. This year the start of school may be particularly nerve-wracking due to it being the first time back full-time for many children since the start of the pandemic, leading to parents spending more to help their child to feel secure and prepared. I get it. I want my children to be prepared too. But there are ways to prepare your mini-me for heading back to the books without blowing the budget and still prepare them for the best start to the school year.
1. Take inventory of what you already have
During the summer, I take out all the previous year’s equipment and uniform and try it on. If something fits well enough and is in good enough condition to see out another school year, then it continues to serve its purpose. I also ‘shop my home’ for stationery items and decent water bottles lurking in the backs of cupboards. I can often find most stationery equipment that my children would need so can add it to the inventory list.
2. Write a Specific list
Decide before you go out shopping exactly how many of each item you will need. For example, how many sets of Physical Education uniform do you need? How often will your child have P.E.? How many times a week can you feasibly wash the uniform? It might be worth putting a note in your calendar to contact the school in June to check you are purchasing the appropriate things. I usually have 3 sets of main uniform pieces and 2 sets of P.E. kit, but this will depend on your situation. Make sure you remember to make a list of all equipment, such as socks, a hat (if you are in a hotter climate), specialised items such as a scientific calculator or protractor, a lunchbox and a swim kit.
3. Buy quality items (especially shoes and bag)!
I’m all about penny-pinching, but when it comes to school equipment, the wear and tear is going to test the stuff to the max. I will always splurge for quality footwear to support my growing child, and a sturdy bag, lunch box and water bottle. I don’t care so much about brands, more quality and durability.
I have a Bento lunchbox for my son and find it to be reliable, leakproof and keeps food fresh. It was a tad on the expensive side, but I’m sure will last several school years.
You may have a personal favourite brand of school shoes – mine is Skechers, but Clarks is well reputed to have high quality footwear. It is super important to get a proper fitted shoe to support child development, so I think heading out to the shops rather than online shopping is a must for footwear.
When purchasing a water bottle, I think about ease of use for younger children, and ease of cleaning. I often find that lids can be difficult to dismantle and clean and thus mould starts forming around the mouthpiece. I find CamelBak to be the best water bottle brand – reliable and spill proof. It’s definitely pricey but could last for several school years so be a saving in the long run.
A sturdy school bag is a must, especially now that a lot of schools are allowing children to bring their own device, meaning that they potentially have books, equipment, lunch and a laptop. Eeek. A comfortable bag is a must. L.Bean and State Kane are highly reputable brands for resilient and ergonomic school bags.
4. Shop around for the best prices
Schedule some time to browse for prices in your area well before school starts. Have a look at online and brick and mortar options as well as reviews. I recommend doing research on your own first to get the lay of the land, then, depending on the age of your child, you could get them to browse your ‘top 3’ and make them feel that they are making the decision.
5. Set a hard-limit budget!
Once you’ve got a firm list and have shopped around, you’ll have an idea of what things will cost. Tally it up and set a budget and stick to it! The amount you settle on should be your hard limit. It’s useful to keep a budget line item of school equipment in your variable expenses category so that you can refer back to it next year and line them up to make sure you’re not heading off into Joneses territory! I have a great budgeting tool in my Etsy store to help you keep track of all expenses with ease.
Depending on the age of your child, sharing your calculations and the budget with them could be a fantastic teachable moment. You could discuss the importance of planning out spending within a budget and living within one’s means, even when the desire to spend more to look a certain way or keep up with fashion may be strong. Use it for a lesson on the negative compound interest of credit cards versus the positive compound interest of investing if your child is engaged in the conversation, particularly if they want more expensive items. Share the example below if it helps to give the visual!
6. Pick the optimal day and time to go back-to-school shopping
Don’t go on a day that you have other appointments or meetings scheduled, and don’t go hungry or tired! This is an important shopping day and requires focus and self-control for you and your child! Some people prefer to spread out the shopping; for example, uniform one day, equipment another, while others prefer to get it all done in one session. You decide what’s best for your family. For me, I like to make it a memorable day for my child, so if we have agreed on the budget and list beforehand and my child demonstrates adequate restraint, we go for coffee/juice and cake after shopping. Shopping trips are such a rarity for my family that I do try to make it an occasion if I can!
7. Shop year round for back-to-school season.
Finally, keep an eye out during the whole year for items which might be on sale at other times, such as January sales or Black Friday. Things like clothes and shoes may have to be purchased close to the start of school due to sizing, but bags, water bottles, equipment and lunchboxes may be on sale at different times of the year.
I hope these tips have given you some ideas to start this school year off with a bang while sticking to your savings goals. If you have any further recommendations for back-to-school savings or brands that you swear by, comment below. Wishing everyone (parents, teachers and students alike) a peaceful and successful school year. Happy shopping 😊
Need A Bit Of Support with your finances?
If you would like to book a confidential financial accountability coaching session to help you work on your finances or stay accountable to your goals, send me an email at [email protected] or drop me a line via the contact form and we can see if we’re a good match.
Good luck on your financial journey – congratulations on taking the leap. [...]
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31 March, 2022Budget / Evaluate / Learn / Persist / Saving and BudgetingHave you ever looked at your bank balance towards the end of the month and asked where did all my money go? I know I have…too many times. You can’t remember anything substantial that you bought, and other than paying bills, you’re not sure where your hard-earned money went. Come to think of it, am I even keeping track of my bills? Do I know exactly how much I spent on groceries this month? Where do I even begin tracking expenses?
When you think that most of us spend 8-10 hours, 5 days a week earning this money, it seems crazy to think that we don’t take more care of it. But still, most of us don’t. It’s not spoken about – it’s not polite to ask other people how they keep track of their money and God forbid if we asked for help, admitting that we aren’t actually great at it.
You turn 18 and boom, you just know how to manage your money, right? Wrong! The average debt per household in the UAE is Dh25,720 and 48% of residents admitting that they struggle to make their debt repayments each month. So, where do we start in rectifying this?
1. Is tracking expenses worth it?
Tracking expenses gets a bad rep. I get it – on the one end of the scale, it’s boring, but on the other, it can induce feelings of shame, embarrassment, anxiety and frustration. But the unfortunate truth is this: keeping track of your money allows you to create a meaningful and realistic budget, face and change your spending habits and save and invest more money.
It’s going to be more difficult to not do it. Think about becoming healthy without tracking your weight or the inches off your waist – it’s not impossible, but it’s more difficult to figure out how far you’ve come without going through this process. And you know what’s worse? Looking at a meagre amount (or a negative amount) in your bank account and wondering where your money went.
On the contrary, tracking where your money goes is the foundation of all other wealth-building strategies and will make budgeting and saving flow easier – it is the 20% in the 80-20 equation (the theory that 20% of the work yields 80% of the results). The good thing is that you can create systems that suit you and the process of tracking expenses can be simple, straightforward, and effective.
2. How do I track my finances?
There are three main methods to track your spending in the long term. Whichever method you use, the first step is the same. To get started you are going to need your last 1-3 months of bank statements and receipts, preferably printed out, and a highlighter and pens. As you scan through your expenses, highlight ones that naturally ‘fall’ into the same category in a certain colour, for example groceries.
Some spending won’t naturally fall into a category; for example, renewing your annual subscription to your internet security software or purchasing printer ink. I would start off with more categories and gradually narrow it down; for example, your printer ink might align best with stationery or office equipment. Your categories will be highly personal – some people like very specific categories to closely monitor their spending, whereas others prefer general sweeping categories to keep a bird’s eye view.
3. What expenses should I track and budget for?
Generally speaking, expenses might fall under the following category titles:
Rent or mortgage
Utility bills
Phone/internet
Insurance
Tax
Groceries
Household items/ products/ décor
Dining out
Entertainment
Medical
Gifts
Fuel/transport
Children (clothing, activities, toys etc.)
Clothing/ toiletries/ grooming
Subscriptions
Pets
Travel/holidays
Charity
Of course, you may have more or fewer categories than this, depending on your spending patterns and habits. Once you have worked out your categories (which can and will change over time so don’t worry if they aren’t perfect), you need to calculate the totals for each category – this budget tracker has a built-in, readymade expenses calculator. This will help you to create a realistic budget that you can actually stick to. When you have reached this stage, choose one of the methods below to track your money.
4. What is the best way to track my spending?
4a. Tracking monthly expenses using excel
Using Excel is my preferred method, so I will explain why this strategy is Excel-lent first! I love Excel (or Google sheets) because once you have your spreadsheet set up, the formulas do all the calculations, so you just have to plug in the numbers to the expense tracker template. In this quick demo video, I show exactly how you track expenses on my monthly budget spreadsheet.
Essentially, you assign sub-categories to each of the following umbrella category headings: fixed expenses (don’t generally change month-to-month), variable expenses (varying expenses like eating at restaurants or buying clothing), debt repayments, savings (your cash savings goals such as new car or holiday) and sinking funds (if you don’t know these yet, don’t worry, leave them blank for now, but in a nutshell, they are large expenses that you can spread out and budget for over a year).
https://leapsavvysavers.com/wp-content/uploads/2022/03/Tracking-expenses-Excel-demo.mp4
When you create a line item in your monthly budget spreadsheet (e.g., rent), it will automatically populate in a drop-down menu on the expenses calculator sheet. Simply type in your expenses on the expenses calculator sheet from your bank statement or receipts and assign them to a category.
When you click back to your monthly budget spreadsheet, you will see your totals automatically populating in your ‘actual’ columns beside your budgeted amounts for easy comparison. For a detailed step-by-step guide as to how to do this and the spreadsheet pre-made for you, my course has video tutorials for every step and the following images are taken from the course guide.
You will easily be able to see the totals for each category and overall totals on your monthly budget tab. Voila! You now know exactly where your money goes each month. If you would like readymade formulas to be able to see your annual spending for each category at a glance, the workbook available with my budgeting course has it all set up and ready to go for you!
4b. Tracking expenses using an app
Another easy and effective way to track your spending and your bills is by using an app. There are various apps available – paid apps like YNAB allow you to link bank accounts, eliminating the step in which you input your expenses into Excel.
Others are free, such as Fudget and Wally, and readily available in the UAE. Wally has been growing rapidly since 2021 when it began allowing its users to link UAE bank accounts and is possibly the best app to track your expenses if you’re living in the UAE. Once you link your bank accounts, you can create budget categories and track your expenses within the app.
However, despite how convenient using an app may be, and how lock tight their security is, I personally still have reservations about linking all my bank accounts to an app and giving the app that much personal information.
That’s why I created my own system using Excel, which mimics all the app features, except one: with my system, you have to track your expenses manually, or at least, type them in to the spreadsheet. But I think this is a good thing. The act of doing this allows me to take a second to interact with that spending and while I am tracking my expense, weigh up how much value I assign to that interaction – how much joy or regret does it bring me to track that money?
4c. Tracking money using pen and paper
Some people prefer using pen and paper to keep a record of their money, and if that’s you, why not? It may take a little more time, but if it suits you, then you should stick to it. To use a budget notebook, I would simply write out the date, the expense, the category and the amount, and ensure that I total it. This template is a useful place to start tracking your expenses.
5. How often should I track my expenses?
This is a another highly personal question. When I started, I would track daily. It helped me gain clarity and control at first, when I felt that my spending was out of control and impulsive. I now track my expenses on a monthly basis at a minimum, so as to reconcile with my budget allocations and create a new budget for the next month. I also track my expenses if I’m having a bad day or feeling overwhelmed as managing my money helps bring a sense of control and peace to my life – I can practise conscious gratitude for the money flowing to and from me.
However, you decide to track your expenses, one thing is clear: the system must be easy for you to follow and sustain over the long term. This is not a quick fix; this is a lifestyle change and the road to building wealth for you and your family for multiple generations. [...]
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27 January, 2022Budget / Persist / Saving and BudgetingHow are your new year’s resolutions going? Studies show that up to 80% of people give up their promises to themselves by February. If that’s you, don’t despair! The good news is that you can make a change any time; it just takes a decision, some planning, and sometimes a bit of guidance.
Here is a list of 10 easily actionable goals that you can implement to transform your finances at any time of the year! My biggest tip is start small – just choose one thing to do today and do it. If it’s opening a savings account specifically for your emergency fund or calculating your sinking funds, or ordering one personal finance book, every action makes a difference. Try one of these and let me know how it goes at @leapsavvysavers.
Tip #1 – Calculate your net worth
A snapshot of your financial health, your net worth is a good indicator of your overall financial house health, taken from a bird’s eye view. Tracking it over time can reveal general trends and is a useful evaluation tool when you’re planning financial goals or your budget.
Simply add up all you ‘own’ (cash, property, investments, pensions, some include cars and jewellery as well) and minus all you ‘owe’ (credit card debt, personal loan, mortgage, money owed to people etc.). This number is your net worth. It’s worth tracking it on a semi-regular basis (I do it every quarter, some do it bi-annually or even monthly if it helps you). It’s not the most important or reliable metric as it’s often subject to market fluctuations; however, it does give a snapshot of your financial picture and you can track it over time to assess whether, overall, you’re on an upward trend.
Tip #2 – Create a realistic budget
Even if you don’t have debt or you are a high income-earner, a budget is your friend. Take the time to track your expenses and use this to create categories. Once you’ve tracked backwards, plan forwards and assign each dirham (or dollar or pound depending on where you earn) a duty to spend more intentionally and become the boss of your money. Don’t forget to reconcile at the end of the month – match your actual spending to your budgeted – in order to plan ahead to the next month. For an easy to use annual budget template with all formulas already plugged in, click here.
Tip #3 – Plan for the win
Use your calendar to plot out spending for the year. Plug in birthdays, events, religious celebrations, subscription renewals, annual medical check-ups, insurance renewals, ID and paperwork updates – literally anything that you KNOW will cost you money. Then put it in your budget. Decide whether it is going to be cash flowed (come from your monthly budget) or paid for by a sinking fund (larger predicted expenses over a 12-month period, which you can save for incrementally).
Should you decide you want to pay for it from your sinking funds, add up the total of these items or events, divide by 12 and start saving that amount into a separate savings account. For example, you might decide that you want to spend a relatively small amount for your friend’s birthday gift, so you will work it into your monthly budget and pay for it from your salary. However, you may want your child’s birthday this year to include a party, outing, presents and cake, in which case it will be too large to pay for in one month’s budget, along with your groceries and bills etc. Then it becomes a sinking fund and you spread the cost over several months.
Tip #4 – Build your emergency fund
What about the unexpected? I hear you asking the question as I write about sinking funds. The best laid plans, huh? No matter how meticulously we colour-code our calendars and plan out our perfect zero-based budgets, we just can’t plan for everything. That’s where an emergency fund dons its cape and saves us from crushing credit card debt. Typically, financial advice recommends having 3-6 months’ worth of expenses tucked away in a separate savings account for, well, rainy days – unexpected events such as a sudden job loss or your car breaks down.
I think this number is extremely personal – some people want the comfort of lots of cash on hand while others feel comfortable investing the vast majority of their money and keep a fairly small amount of cash. It really depends on your risk tolerance and personal circumstances – how many people do you have that are dependent on your income for example? Whatever you decide, its best to have some cash buffer available. Download my FREE emergency fund tracker here to save your way to being able to weather any financial storm.
Tip #5 – Knowledge = confidence
Financial confidence is born out of knowledge. You don’t need to know everything about options trading or NFTs, but foundational financial literacy is fundamental to building successful systems and structures, and most importantly, staying the course in the face of a multitude of temptations and latest trends etc. You could make it a goal to read one finance book a month or listen to one podcast episode a week. When you start consuming the literature, you can apply the strategies that suit you and check validity – if multiple authors and podcast presenters agree on a certain concept, it is likely to be an established wealth-building method. I update my book recommendations page regularly with interesting books in the areas of investing, money mindset and personal development.
I also always set aside part of my sinking fund for my education – whether that be a course, a training programme or books – the best investment is in yourself as it is the one that you can guarantee a return on investment IF you take action to implement the tips, strategies and knowledge you learn. With that in mind, if you want a very reasonably priced course that walks you through every aspect of money management, from budgeting, to savings rate, to sinking funds, to emergency funds, then I have just the one! Alternatively, if you feel that an investing course is more your cup of tea, this is a brilliant one – I have taken it and personally recommend.
Tip #6 – Start with the end in mind
Have you ever thought about how and why you set goals? Setting goals is a much-debated topic – some people love them, others hate them. I think they can be useful, IF they are rooted in your values, what you truly want. You have to put the reflective inner work in to figure out what that is, start with a big picture vision, then work backwards and ask yourself: what can I realistically achieve this year to move in the direction of my big picture vision? Personally, I think goals should sit in the just-out-of-reach region, not easily achieved but not completely out of the realm of possibility either.
Break down annual goals into monthly, weekly, and daily goals to muster the consistency needed to achieve a big vision, such as retirement or becoming a millionaire. You can work out your estimated FI (financial independence) number relatively easily using the rule of 25 – multiply your annual expenses by 25 (for example, if you spend approximately $40k a year, you will need $1 million invested to become financially independent). For most people, that figure is huge and can feel overwhelming, but if you break it down and aim for the first $12k, that’s $1k a month and so on.
Tip #7 –Solve your future problems
A great tip I learned last year was to plan for challenges ahead of time. For example, you might set a goal to save $1000 a month and in January when things are quiet, you may easily achieve your goal. But have you considered when temptation strikes, whatever that might be for you? It might be birthdays, Christmas, Eid, payday, online shopping, nights out, when you feel stressed, when you feel happy, when you feel homesick – most of us have spending triggers. Once you identify yours, you’ll be better placed to prepare your actions for when the temptation inevitably bubbles up.
For example, if I feel the impulse to shop on Amazon, I will drink 1 litre of water and do 20-star jumps. Then, if I still want to browse, I will put items in my cart and leave them there for 7 days. If I still want the item, I then give myself permission to purchase. The ‘pause’ created by your new routine will be enough disruption to the habit to give you time to logically review your choices and not give in to the impulse in 9 out of 10 situations. Build these behaviours and routines for each distraction to your goals, and keep your goals visually accessible, for example on your desktop screensaver or stuck on your fridge.
Tip #8 – Increase your income
When you’re looking at your income and expenses and assessing how you can grow your savings rate, you really have two choices: reduce expenses or increase income. For many people, increasing income is the more attractive option. There is a limit to how much you can save, but earning potential is limitless. You have loads of options – start a side hustle, work towards a promotion, spruce up your CV to apply for new jobs, learn a high-income and in-demand skill… Be creative and think outside the box – I think a good place to start is by filling in an Ikigai diagram, considering what you love, what you can be paid for, what the world needs and where your skills lie. Within that brainstorming, you may discover the perfect side hustle – I did with Leap Savvy Savers!
However, many people don’t want to do a side hustle and it’s not for everyone – there are usually longer hours involved as you set it up and it may impact your free time. Therefore, working towards a promotion might be for you – could you schedule a meeting with your line manager to plan a strategy for working towards a promotion or starting a training course? Or could you spruce up your CV and apply for higher paying roles. Honestly, the possibilities are endless and the potential to earn income is limitless, so make it a goal this year to plan a strategy to raise your income.
Tip #9 – Supercharge your savings
You might love your modestly-paying job or have other commitments, or just simply not fancy extra training or longer hours. In that case, you can supercharge your savings instead. You might think that you can’t save anymore and that you already live modestly, but I am here to challenge that limiting belief! You have a few options if you want to cut back on your spending:
Try a no spend challenge – I did this and it’s not as bad as it first seems – I did it and not only survived but thrived! In a nutshell, you set yourself a challenge to cut back as much non-essential spending as you can, then track your progress. You might set yourself a goal of 20 days or no buying non-essentials for a whole month. There’s nothing stopping you from adding these line items back into your budget, and the bonus: you don’t know what you really, truly value until you go without. Only then will you know what you really want to add back into your monthly spending.
Start tracking your savings rate. It’s pretty easy – just add up all your income and minus all your expenses. Once you do this, you have a savings rate, then just convert that number into a percentage; for example, if you earn $1000 and spend $500, your savings rate is 1000-500=500/1000=0.5×100 = 50%. Just tracking this number can motivate you to improve it – challenge yourself to improve it by 1-5% next month by taking on a savings challenge.
Cut your expenses methodically. If you don’t fancy a no-spend challenge, then you could work through your expenses category-by-category. I would start with fixed expenses (expenses that generally don’t change month-to-month such as rent, phone bill or subscriptions) – see if you can call your service providers to negotiate a lower rate or cut some out altogether. Then, move on to variable expenses (any expenses that fluctuate each month, such as clothing or days out). Evaluate each expense for how much value it brought you (you could rate on a scale of 1-10) and that will help you decide which are best to keep and which you can bin! For example, if you love going out to eat every Friday, then keep doing that. On the other hand, if you are paying for clothes and shoes each month that you don’t even get a chance to wear, it might be best to decrease that category in your budget.
Tip #10 – Practise daily gratitude
My final tip is probably the most important! I can’t tell you how long I underestimated gratitude, writing it off as ‘woo, woo’ and not something productive that would help me feel accomplished. That was my old way of thinking. Gratitude and reflection are the key ingredients in figuring out what accomplishment even means for you, instead of simply following society’s/family’s/spouse’s expectations of you. Gratitude helped me save money by taming my desire for more (more achievement, more stuff, more everything) and instead, being content with what already is.
Developing a simple habit of writing 3 things you are grateful for every night before bed can help you save money and replace the feeling of being restricted by your budget with the freedom that comes (or will come if you stay the course!) from being disciplined and living within your means. I try to vary the things I feel grateful for each day – everything from the big things – like being interviewed on the radio with Helen Farmer – to a fresh cup of coffee, or my personal favourite – when my 3 year old daughter tells me how pretty I am! There are a multitude of other ways that practising gratitude will benefit your life that I haven’t mentioned here, but trust me, this one will cost you nothing and the return on the investment of 10-20 minutes a day is life changing.
Any one of these things can help you sort your money out and make a leap in the right direction. But if you still need a bit of support or a push in the right direction, I have freebies, budget planners, a course and coaching packages available. Good luck and happy leaping! [...]
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9 October, 2021Apply / Invest / LearnYou decide to live abroad for a few years – a new experience, travel opportunities, luxury lifestyle, tax free salary, why not? Home will still be waiting when you rejoin ‘normal’ life after your stint away. Then 4, 5, 6 years later… you’re still there! My colleague coined the UAE ‘convenience quicksand’ – how quickly the months turn into years, then before you know it, you’ve been an expat for decades! You may enjoy your life as an expat or you might hate it, but one thing that will most likely be niggling at you is the matter of money. It dawns on you that you haven’t been paying into a pension like your peers back home, and you may feel behind in retirement planning. High costs of living – increases in bills and school fees and groceries – coupled with frozen salaries and benefit-cutting may leave you wondering where to even start.
But don’t worry, help is at hand and there is hope for expats! I have put together a quick guide of 3 ‘p’s to expat investing so you can get started on the path to financial independence as an expat. For a step-by-step course on this, I highly recommend Steve Cronin’s Expat Saving and Investing Course. Jam-packed with information on everything from paying off debt to opening a brokerage account, to definitions of investing jargon, to making your first trade, to money mindset, this is the go-to course for achieving financial freedom as an expat. I attended Steve’s workshop in April 2019 and haven’t looked back; it was the most life-changing and impactful course I have ever taken.
1. Plan
The first stage is planning and saving. Before you invest, you must gain knowledge on investing strategies, figure out your own goals and evaluate your current situation. This part is crucial and often overlooked by expats who dive right into the market with no plan or strategy and end up losing money. This is what people refer to when they say that investing is risky: it’s not, investing without a plan is risky. Some steps to take before you jump into the stock market:
Pull together the balances of all your debts, cash accounts and assets to calculate your current net worth.
Track your current spending and savings rate so you know how much money you have available to invest. Here is a fantastic tool to track income, expenses, savings and savings rate.
Build your emergency fund – most finance experts recommend holding at least 3-6 months’ worth of expenses in cash, in a savings account or government bond yielding as much interest as possible without actually being invested. This helps protects you from going into debt or selling investments if you experience a financial crisis. I have a FREE visual emergency fund tracker to help you save up for any financial storms that might come your way.
Work out your goals – where and when would you like to retire? Do you have other financial goals such as buying a home or children’s education?
Adjust your lifestyle accordingly by cutting back expenses or increasing income through a job change or starting a side hustle.
Understand investing strategy – does stock market or property suit you better? Learn the pros and cons of both strategies. What is your risk tolerance? This will depend on your own personality and current circumstances and your age and time to retirement.
Will you go robo-advisor or DIY? This depends on how much money you have to invest and your long-term goals.
2. Perform
The next stage is to perform, and I don’t mean the performance of your investments here, I am talking about how you perform! When you are acutely aware of your current situation and your future goals, and you have decided on your strategy and risk tolerance, the next stage is to begin the investing process. Here are some steps to follow for investing in the stock market as an expat (property is another beast and requires a different article to explain the steps):
Decide on a brokerage – Interactive Brokers and Saxo Bank are popular choices for the DIY approach and Stashaway is ideal for those who seek a robo-advisor. Make sure you select a reputable broker with SIPC coverage (protects your money in the case of your broker going bust). Interactive Brokers is one of the cheapest and easiest options for expats. Opening an account will require proof of identity and address, then once your documents have been verified, you are ready to fund your account. I recommend that in settings, you select tiered pricing to get the best rates for your trades.
Transfer money to your account. Expats use a variety of options, such as Transferwise and Wall Street Exchange, but the best option I have found is Lulu Exchange, who offer a 3.6735 exchange rate with USD and 157.5 aed fees total. At this point, try to keep transfer costs as low as possible by looking at exchange rate and fees. It usually makes sense to transfer larger amounts less frequently to avoid high costs, so it may be worth saving up until you have at least $5000 before transferring to Interactive Brokers.
Pick an Exchange Traded Fund (ETF). An ETF is a basket of stocks that tracks an index (like the S&P 500 or the FTSE 100). Expats tend to invest in globally diversified funds (choices will vary depending on your nationality and where you want to retire – Andrew Hallam goes into detail on different portfolios for varying nationalities), which are domiciled in Ireland and trade on the London Stock Exchange (for tax efficiency). You have to choose a fund manager, such as Vanguard or iShares, then a low-cost ETF, such as VWRA (Vanguard all world accumulating fund).
You’re now ready to invest! During trading hours (check the time difference), you need to click ‘buy’ and ‘limit price’ and ‘good till cancel’ to ensure your transaction will go through smoothly. Congratulations! You can now go about your day knowing that you have bought yourself a slither of the future.
3. Protect
Great work! By this point, you will have a good handle on your personal finances, and you are now investing for your future. But the work isn’t done yet. There are a few measures you can put in place to ensure you protect your hard-earned assets and investments.
Purchase life insurance to cover your loved ones in the event of your death. Term life insurance with critical illness will suffice for 99% of people. If you have dependents who rely on your income, life insurance is a necessity, and purchase as soon as possible as the older you get, the more expensive the premiums become. I use Aviva through Friends Provident and have heard good reviews. Search life insurance on the SimplyFI Facebook group for more information.
Create a Will. It’s best to have a Will drafted in any country which you have assets (stocks, property or business) and name a beneficiary for your brokerage account, as well as in your home country. I am in no way an expert on Wills, and you are best contacting a lawyer about the best ways to prepare for your impending mortality.
Assemble a ‘death folder’ – ensure all your account information and important documents are stored somewhere where your partner or beneficiary can access it. If one person deals with most of the finances in the family, make sure the other person knows the investments, accounts and budget information. It would be beneficial for the whole family if you work together on financial goals to become more aligned in your values.
Revisit your plan and strategy regularly. It helps to sit down and reconcile your spending with your budget each month, as well as creating a new budget. Every 6-12 months, it’s worth evaluating your overall strategy and plan, especially as an expat. Expats tend to move, shift and change more often than people living in their home countries, requiring more reconfiguring of strategy.
As an expat, there is already enough to deal with living in another country, so having a clear plan for your finances and maximizing tax-free salaries and advantageous employee packages can be one less thing off your mind, allowing you to enjoy the lifestyle until you return to the ‘rat race’!
This guide can be a great starting point, but if some of the steps still need clarifying, you’re definitely not alone. I attended a workshop in April 2019 that changed my financial trajectory. Steve Cronin’s Expat Saving and Investing Workshop gives a step-by-step guide to the above points, aimed at everyone from a complete beginner to a seasoned investor. Click here to learn more about his online course, complete with several Q&A sessions and access to an Exclusive Facebook Group.
This will change your life. Getting your financial house in order is a massive relief. Good luck and let me know how you found the workshop. [...]
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25 September, 2021Apply / Invest / LearnDo you want to invest but feel overwhelmed by all the options and information? Perhaps you don’t know where to start? Not sure how to contribute to your retirement as an expat? Being an expat can come with many benefits, such as a tax-free salary, beach lifestyle and beautiful weather. However, nothing comes without a price and beware the cost of working in a GCC country: no pension contributions!
Often when we work in the UK or other European countries, we are legally obligated to contribute to a pension and employers often match these contributions. However, in the UAE, typical pensions are replaced by gratuity bonuses, paid out at the end of your service to the company. That means that YOU have to take control of your retirement accounts. No easy feat for many people, with all the temptations to spend your money now, live the YOLO lifestyle and put your ‘real life’ in your home country on hold for a while.
So, now you know that you have to take control of your day-to-day finances and your long-term retirement pot, how do you do that? After you have established a realistic budget and saved a 3–6-month emergency fund, the next step is to invest your money. But where? How? There are so many scams out there and it is often hard to know who you can trust. I know this all too well as I fell for one and invested in an expensive ‘savings plan’, sold to me on the premise that it was the ‘UAE equivalent’ of a UK pension scheme.
Is it impossible to find a decent platform to invest? No, there is hope. As an expat, you have two options for reliable and low-cost investing: the DIY approach or a robo-advisor. I am going to outline the pros and cons of both here and know that either option is a solid way into investing and building your retirement pot, but definitely do your due diligence and research into the options available to you, considering your personal circumstances and tax liabilities.
DIY approach
The do-it-yourself investing approach is where you take control of your retirement, from the amount you contribute to your risk tolerance to the funds you invest in. This is the lowest-cost form of investing as it is the most ‘passive’, that is you have the fewest amount of other people involved in the management of your money and funds. There are a few brokers to choose from if you are not a US or Canadian citizen (if you are, Charles Schwab may be a better option or buying directly from the Toronto Stock Exchange): Interactive Brokers, Saxo Bank and Swissquote are all popular options with expats.
I invest with Interactive Brokers and as far as I’m aware, all the aforementioned brokers are quite similar to each other in terms of the service they offer. Do your due diligence and research though before deciding what’s best for you. When choosing a broker, I would certainly check fees and pricing structure as well as SIPC protection (insurance in place to ensure that your funds are protected should the broker go bust). Once you have opened an account, verified your address and identity, you are ready to start investing.
Pros of using a DIY approach
+ Full control of your funds and account.
+ Low cost – your fees could be 0.3% of your total, which is very low compared to actively managed funds, which tend to charge 1%+
+ There are lots of books, podcasts, blog posts and courses available to help you choose a broker, set up an account, transfer your money, choose a fund and make a trade. You are definitely not going through this alone!
+ Once you have set up your account and chosen your strategy, very little time will be required to continue making trades and investing your hard-earned cash!
+ A wide range of ETFs available in different currencies.
Drawbacks of using a DIY approach
~ Does require time to learn about the stock market and set up your account
~ The DIY approach will require discipline to invest regularly and also to not panic sell. That is where communities like Leap Savvy Savers can help to support you
~ With all the information and options available, you may be subject to analysis-paralysis and set up your account but not actually invest at all or be tempted by all the other options available (forex or options trading for example). There is nothing wrong with those trading methods per se, but you do need to make sure you are fully informed about what you are doing rather than being subject to ‘shiny object’ syndrome. They also are higher risk trading strategies, so your capital could be at higher risk, therefore you may want to consider how much of your retirement funds you are willing to risk.
~ You are responsible for calculating your risk profile and rebalancing your account, which may require a higher level of self-awareness and discipline. Simply put, rebalancing your account means that if you have an allocation of 80% stocks and 20% bonds for example, but your stocks outperform your bonds, your portfolio becomes more of a 90% stocks and 10% bonds split. You then have to allocate more to the bonds to even up the allocation again to match your risk profile. It is not necessarily a difficult process, but does require knowing your risk tolerance well and having the discipline to rebalance.
get started with interactive brokers & grab some free stocks!
Investing with a robo-advisor
A robo-advisor is an automated algorithm-driven platform that takes your information and invests for you. It is essentially a bridge between a DIY method and an actively managed account, where someone would select funds for you and rebalance for you. When someone manages your money for you, the fees are higher as you have to pay for their time. The genius of a robo-advisor is you get the benefits of an advisor without the high fees.
Essentially, you set up an account and answer a series of questions, and the algorithm uses the information to assess your risk tolerance and choose your funds, as well as rebalance your allocation. In the UAE, Stashaway is a DFSA (Dubai Financial Services Authority) regulated, easy-to-use platform. Once you’ve opened an account, verified your identity and answered a series of questions, you are ready to invest!
Pros of using a robo-advisor
+ Low fees – with Stashaway, fees are 0.8% on the first $25k and then they reduce as your portfolio gets higher. And they offer the first 6 months of investing totally free – what’s not to like about that?!
+ Free education available. The videos and articles are easy to read and digest and you can educate yourself while you invest, rather than educating yourself before investing and losing time in the market
+ Your diversified funds are selected for you based on your risk profile, so you don’t have to spend your weekends researching price ratios and domiciles etc. for yourself.
+ The platform rebalances for you so you can rest easy knowing that your portfolio will consistently match your risk profile.
+ You have the option to transfer AED directly to the Stashaway account and they will transfer it to USD for 0.08% on the spot rate, saving you on hefty transfer fees. You can also fund the account yourself using a bank transfer if you prefer, but you may incur transfer fees.
+ Unlimited, free withdrawals
Drawbacks of using a robo-advisor
~ Slightly more expensive than DIY option
~ At the moment, they only offer US-domiciled ETFs traded in USD. However, the USD is pegged to the dirham, so it makes sense to invest in dollars (I do). Also, as they grow and develop, they are likely to start offering a wider range of products.
learn more about Stashaway & get access to free investing!
Overall, both of these methods allow you to build wealth and the most important thing is that you get started investing now to build wealth for the future! Time in the market is the single biggest indicator for long-term wealth so make a decision and go with it. With traditional savings accounts giving a 0.05% interest rate (if you’re lucky), it’s riskier to not invest than to invest. All financial transactions carry risk, and I believe that these two methods are among the lowest for risk out there when you are investing your hard-earned cash to fund your retirement or your child’s education.
However, I am not a certified financial advisor, and you should always do your own research and due diligence. I hope this article has given you food for thought, but all information is based on my own research, experience and opinions so I cannot take accountability or responsibility for your decisions. Best of luck and do comment below – which investing platform do you prefer and why?
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6 May, 2022Apply / Budget / Ditch Debt / Expat Money / Learn / Persist / Save Money / Saving and BudgetingStruggling to manage money? Want to know where all your money went? You will hear the same advice almost every time: create a budget. But which budgeting method is best? And how do you create a budget that you will actually stick to and will help you make the most of your money?
There’s a reason it’s called ‘personal finance’ – there isn’t one way to manage your money. Only around 2 in 5 individuals create and follow a budget, but all successful businesses have a budget, because they know it is the most effective way to manage money.
Chances are you’ve tried to budget in the past but either not stuck to it or not updated it and gradually fizzled out. If that sounds like you, try a few different methods until you find the one that you can maintain for the long-term. It has to suit your unique circumstances; be simple enough that you can keep going whatever is going on in your life but complex enough that it encompasses all your various spending habits and income streams.
I have 3 golden budgeting rules despite the method:
Track your income and expenses
Live within your means
Budget according to your values
Here are 5 simple budgeting methods to try. Each has their strengths and drawbacks and no one method is more or less effective than another – it’s which one suits your circumstances best.
1. Zero-based budgeting
My favourite method – give every dirham a duty. The zero-based budgeting method works by assigning every dollar/dirham/pound you earn a ‘job’ to do before the money hits your account. This works best for people with regular income streams, such as a fixed monthly salary. It’s also very effective for people who are paying down debt or have savings goals that they are prioritizing. I have used this method for over 3 years now to maintain a 50% minimum savings rate.
https://leapsavvysavers.com/wp-content/uploads/2022/03/Tracking-expenses-Excel-demo.mp4
This spreadsheet template automatically calculates the totals for you to ensure you aren’t under or over budget. You simply input your expected income at the top of the spreadsheet. Then, once you have assigned money for your fixed bills, debt repayments and savings, you can allocate money for variable expenses, such as dining out, until you reach 0, hence zero-based budgeting. Before your income even hits your account, you know how much you have to spend in each category.
This works well in conjunction with the envelope method (see below) as once you have assigned amounts to categories, you simply stuff your cash envelopes with the correct amounts and go about your life. If you’re not into cash and prefer to spend on a credit card (whilst ensuring it is paid in full before any charges are incurred), simply use my spreadsheet to track your actual spending next to your budgeted allocations. Towards the end of the month, reconcile your budget by calculating how much you spent in comparison with your budgeted amounts in order to plan for the following month.
2. Cash Envelope method
This method is great for people who naturally overspend and lack the discipline to use a credit card responsibly. If you’ve been in and out of credit card debt and often make impulse purchases that you wind up regretting, cash envelopes could be for you. Recognising this tendency in yourself and seeking a method to support your money management is commendable.
The method is fairly simple – once you have decided how much you will spend on each category for the week or month, depending on how often you are paid, stuff your cash envelopes with the amount you want to spend. Go out and about without your cards with the attitude that once the money is spent, it’s spent. This can help you develop the discipline required to use a different budgeting method. It’s not as effective if you are someone who’s already quite frugal and can benefit from the points and rewards associated with credit cards (when used responsibly and paid in full).
3. The 50/30/20 budget method
Many finance experts call this method the 50/30/20 method, but I prefer the Percentage Plan. Another simple money management technique in which you allocate a percentage of your income to fixed expenses such as rent, utilities and groceries (50%), variable expenses such as dining out and entertainment (30%) and savings and investments (20%). This could be effective if you don’t have a complex financial picture and want to spend very little time on your money.
Instead of prescribing percentages though, I think it would be more beneficial to assess your personal situation to see what percentage of your income is realistic for you to put towards fixed expenses, variable expenses and savings. For example, someone who is on a modest salary and living in a high cost of living area may have to spend a larger portion of their income on necessary living expenses. However, if you want to ensure you are allocating a certain amount to retirement (such as 20%), this method might work for you. The key is figuring out what lifestyle you want to live and your goals and making the percentages work for you, rather than trying to fit your life around some arbitrary figures that someone on the internet prescribed.
Once you get paid, simply transfer the percentages to different accounts and spend from there. One way this would be effective is to ascertain at the start what you currently spend on different categories and evaluate whether you’re happy with it. If you are spending more than 50% of your income on housing, you may want to consider applying for a promotion or moving to a lower cost of living area, if you feel ‘trapped’ by this expense. On the other hand, if you are really happy in the area you are living in, spending a large portion of your income on rent or mortgage might be worth it for you. It all depends on your situation.
4. The Pay-yourself-first budget
This method works well for people who wish to aggressively save for financial independence or pay down debt rapidly. With this budgeting strategy, you simply decide how much you want to save and use the rest of your income to live on.
For example, if you have worked out that you want to invest $2500 per month, then that is the first thing you do when you get paid and you are forced to live on the rest and make it work.
This could be effective if you don’t have dependents or a lot of bills or liabilities but could cause issues if you can’t pay your bills. I’m all for increasing your savings rate, but I advocate for making sure all your bills are paid on time to avoid fees and high interest debt.
5. The automatic budget
This is also called the ‘no budget’ method and can work for people who feel extremely restricted by traditional budgeting methods. It can also work for naturally frugal people who have a tendency to restrict their own spending at the expense of their own happiness or fulfilling their own basic needs.
If you use the automatic budget, you automate as many of your expenses and bills that you can and then don’t allocate set amounts for variable categories but simply track what you spend. It works like a backwards budget where as long as your bills are paid, you go with the flow and track what you have spent. You might make mental notes about which areas you spent a little too much or too little in as you track, but other than that, you freely spend. I would not adopt this method unless you are naturally frugal and are not at risk of spending more than you earn.
For a person using this method, I would recommend having money set aside in an emergency fund and for any sinking funds (large, planned expenses) that you have coming up in the next 6-12 months, so these don’t catch you out.
This method might be useful for someone who has already achieved financial independence or ‘coast FI’ (a state whereby you have enough invested that when you reach the age you wish to stop working you will have enough money to passively live off for your retirement) who doesn’t have to focus too heavily on saving and investing.
Whichever budgeting method suits your circumstances, make sure it serves you to live the life you want and spend money on what brings you joy and cut the rest. If you have debt that you’re struggling to pay off or you can’t seem to stick to a budget, check out my online course or pop me an email to set up a coaching session. I can provide you with a roadmap to fix your finances and a clear step-by-step guide to managing your money. [...]
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25 September, 2022Apply / Expat Money / Financial Independence / Invest / LearnOne of the most frequently asked questions of expats is ‘what’s the best way to transfer money internationally?’ Expats earning in different currencies than their home currency may have to send money home to support family or meet financial obligations in their home country. In addition, people earning in currencies such as the UAE Dirham (AED) and wanting to fund investments in brokerages that don’t accept AED often want to know the best way to exchange money.
The first thing to consider is what constitutes ‘best’ for you. For some, it’s the lowest cost money transfer, for others convenience is top of their list and for different people safety and reliability of the exchange house. Or it may be a combination of these factors. Quite often, as with most things in life, the cheapest methods are not the most efficient or reliable.
how do i find the best exchange rate?
There are some general costs to consider no matter which method of currency exchange you choose. Keep them in mind as you do your research and ensure before you decide on your exchange method, you have factored in all of the potential costs end to end.
1. International Transfer Fees
You may be charged a fixed fee for exchange, or a percentage of the amount transferred. Either way, some sort of charge is likely to be levied for the exchange by the bank or financial institution doing the currency conversion.
2. Exchange Rate
This one often tricks people. If you see an extremely low (or even free) fee for exchange, check out the exchange rate. Exchange rates vary depending on the supply and demand in the market. Some currencies are ‘pegged’ or fixed, for example the UAE Dirham is pegged to the USA dollar, meaning that they move together.
A ‘spot rate’ or ‘mid-market rate’ is the current asset value, or truest exchange rate possible. However, most banks or financial institutions add a spread to this true rate to increase the charges to you. That way, they can decrease their ‘fees’ but still make money from the exchange; it just won’t be as obvious.
For example, every $1 USD is worth 3.67AED. If every $1 cost you 3.8AED, you could buy less dollars with your dirhams. To simplify this for the purposes of this example:
If you were to buy $10,000 at 3.67AED, you would part with 36,700AED. If you were to exchange at 3.8AED, you would pay 38,000AED. This fractional increase in the spread has just cost you 1300AED. So, when people talk about getting the best possible exchange rate, this is what they mean. The closer it is to the ‘mid-market rate’, the better deal you are getting.
3. Intermediary bank fees
When doing an international transfer, an intermediary bank is often needed. To transfer money, banks must have an account with each other. If the bank you are transferring to doesn’t have an established relationship with your bank, an intermediary will be used and will charge a fee. This is usually around $15-30.
4. Recipient bank Charges
If you transfer to another person via a wire transfer, the bank will often ask you who will bear the fees – the sender or the recipient. This is because the destination bank charges a fee to receive the funds. it’s *usually* cheaper to accept all charges from the sender and you will be able to see how much the total cost will be before you go ahead with the transfer.
Most Efficient way to Transfer Money internationally
It’s best to work out all these potential costs on each method of transfer, then weigh up the best option for you. For example, some financial institutions may give you a better exchange rate but charge a higher fee. You can then decide which is the best overall for your circumstances.
Many expats begin investing into some sort of retirement funds when they move to the Middle East. Often the brokerages do not support their earned currency. You may feel confused or overwhelmed by the thought of investing due to the process of transferring and exchanging money. We often hear ‘keep fees below 1%’ but if you are subject to bank wire transfer fees, you may be paying 4% or more just on transfer, and that’s before you have factored in any sort of charges or commission for actually purchasing your stocks or bonds. So, should we just save in cash while we live overseas and not bother investing? Absolutely not!
There are ways to keep your costs down – some more efficient than others. Here are some common methods that expats use to exchange money. A disclaimer and word of warning though: the fees and terms and conditions of each of these methods is continuously changing and being updated. Therefore, I recommend you do your own research as while I aim to keep my blog up to date, I don’t update every change as soon as they happen. If you get to reading this and the terms and conditions or fees have changed, let me know and I will update the information. Otherwise, take this as a general guide or starting point for your own research.
Secondly, I have not personally used all of the methods discussed below. Some of the information is from my own experience, but much of it is from my research, talking to clients and reaching out to the companies listed. Therefore, if you have a contradictory experience of fees or service etc., please do share below to help the community have a well-rounded and up to date knowledge base to draw from.
1. Bank transfer
This is likely to be the most efficient and reliable as well as most expensive method of transfer. Most banks support international transfers through their internet banking systems – you just have to fill out a form and your money will land in your brokerage the next working day. There aren’t normally any issues as the brokerage can see that the money is coming from your personal bank account in your name.
Due to anti money laundering policies, brokerages often must see that the money is being transferred in your name, otherwise they will return it to you. This is due to financial institutions’ requirement to see the origin of funds. However, you tend to pay for this efficiency and convenience with higher fees and a poor exchange rate. This method can be useful for your first transfer to ‘test the waters’ and try out investing. It’s more important that you get started – you can always optimise as you gain more experience.
2. Revolut
I have heard mixed reviews of Revolut and haven’t personally used them myself, although it is on my to-do list to create an account and give it a go. Some people struggle with opening an account and it is not available to everyone. For UK citizens, if you have a UK address and phone number (which I believe can be changed after the initial setup) you can set up a Revolut UK account. For citizens of the European Economic Area plus Australia, Canada, Singapore, Switzerland, and the United States, you can also open an account in their Lithuania faction.
Once you have an account opened, you can transfer from a limited number of banks in the UAE, including HSBC, ENBD or ADCB (in the branch). If you don’t have an account with one of these banks, you can open a savings account for the purposes of Revolut transfers. Then transfer AED to AED and exchange in Revolut before sending on to Interactive Brokers (or your broker of choice) in your desired currency. Sometimes you may be charged approximately 30AED to transfer out of your UAE bank and Interactive Brokers may hold the money for a few days before you can trade.
Ensure you notify Interactive Brokers that you will be sending money from Revolut by clicking ‘Manage your Account’ then ‘Transfer Funds’ before clicking on ‘Bank Wire’. You also need to specify that you are transferring to another person in Revolut to avoid any money laundering issues.
To transfer from Revolut to Interactive Brokers or another account, you can transfer £1000 for free and after that you will be charged 0.5% unless you pay for a Premium account. At the time of writing, the cost of a Premium account is £6.99 a month or £72 a year. If you wish to make regular payments, it may be worth paying this membership cost to avoid the exchange fees.
3. Wise (formerly Transferwise) and CurrencyFair
Wise, despite previously being a popular option, has become more expensive since they took away the wire transfer for UAE residents and now only give the option of using a debit or credit card, which is more expensive. Therefore, this may not be a viable option anymore.
CurrencyFair on the other hand does have competitive rates. They charge a 0.45% markup on mid-market rates for FOREX and a flat fee of just €3 (or currency equivalent). However, as CurrencyFair is based in Ireland, some people have had issues transferring money from the UAE and, despite it being an AED-to-AED transfer, found themselves with an international transfer fee. It also can be a lengthy process and takes up to 10 days to complete. On the whole, this is a low-cost transfer option, but again not available to all nationalities (the full list is here).
4. Wall Street Exchange and Lulu Exchange
Both of these exchange houses have identical costs, but with Lulu Exchange, you don’t have to visit a branch every time you complete a transfer as you do with Wall Street Exchange. These two have great FX rates, particularly for exchanging to USD. For fluctuating currencies, the spread can range from 0.1%-1%. If you wish to exchange AED for USD, Lulu and Wall Street offer 3.6735 and a fixed fee of 157.5AED.
The service is fast, efficient and reliable too – usually the money lands in its destination within 24 hours. There are no intermediary charges or other hidden fees and only one transaction required by you – transfer the money locally to Lulu or Wall Street and they will remit to Interactive Brokers (or wherever you like) on your behalf.
5. Interactive Brokers
Once your money is in Interactive Brokers, you will get the best rate of currency conversion for no charge and can transfer out for free. However, you do still have to get money into Interactive Brokers using one of the above methods as they don’t accept dirhams (click here for a full list of currencies that Interactive Brokers deals with).
The best exchange rate
There is no perfect or ideal way to make international transfers for every single person. The market is ever-changing and competitive and what works for one person might not work for you. Some people want the lowest cost option and are willing to put in multiple steps manually to avoid fees. Others want convenience and efficiency.
Personally, I find Lulu Exchange suits me the best. I send my contact at Lulu Exchange a WhatsApp message when I am ready to transfer. He acknowledges my message and sends me a receipt. I set up my bank wire notification on Interactive Brokers then transfer the money to Lulu Exchange – FAB to FAB. They then remit the money to Interactive Brokers in the next 24 hours and the receipt breaks down the exact charges and exchange rate.
I like the fact that it is reasonably priced and convenient. I also wait until I have at least $6000 to transfer so that the fees represent a lower percentage of my transfer. If you would like the name and number of my contact in Lulu Exchange, get in touch and I will share the information with you
Options for international money transfer
It is also worth noting that the methods I have outlined are not exhaustive – there are many exchange houses, banks and methods available in the UAE and Middle East. I would recommend that you use a reputable financial institution, regulated by the Central Bank.
Exchange houses can find themselves caught up in controversy and money laundering scams and can be shut down rather swiftly. Smaller, unregulated institutions are much more likely to find themselves in this situation, but larger exchange houses can fall victim too. A few years ago, a large exchange house halted business abruptly and if you happened to be midway through a transfer, it took a long time for funds to be returned. If in doubt, visit the SimplyFI Facebook group for a wealth of information and experience on this topic.
Finally, remember that your money is better in the market so don’t let the process of transferring it hold you up. Try different methods until you find the one that suits you. For the methods listed above, they all have customer services that you can contact and if something goes wrong along the way, your money will be returned to you. Alternatively, you can invest with a robo-advisor such as Stashaway to avoid the international exchange fees. You may still have to transfer money for other reasons, but possibly not as often as if you use an international brokerage to purchase your investments.
What’s your experience with international money transfer? Comment below with your preferred method and why.
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26 November, 2021Apply / Budget / Ditch Debt / Evaluate / Learn / Saving and BudgetingResearch shows that over a quarter of people go into debt over the December holidays. Approximately 20% of people will likely carry a credit card balance into the new year. Do you often start out with good intentions then before you know it, your budget has spiralled out of control? For some, checking their balance might not even be an option before new year, lest they may spontaneously combust from the lack of funds to cover the parties, gifts, decorations, travel, etc. etc.! It’s one thing to keep a spreadsheet or list with gifts and amounts, but does that account for all the ‘extras’ at this time of year – staff parties, extra food and drinks, more socialising etc.?
That’s on top of ‘normal’ life – if one of your tyres blows out or the washing machine breaks, you’re screwed. This anxiety, even if you keep it at bay with the endless festive distractions, will bubble under the surface and make you feel out of control, even as you sign up for another Secret Santa and help yourself to another canopé at the work do. So, will we all just ruin our saving and budgeting efforts for the sake of one month? NO! There is a way to enjoy the festivities, spend without regret and not break your budget… how, you ask? Download the FREE 30-day holiday savings challenge and read about how to implement the quick and easy ideas below to save yourself up to $1000 this holiday season.
Seasons Savings!
Most people have the problem of overspending at this time of year, so let’s start with saving tips.
Firstly, download the FREE 30-day savings challenge which gives loads of quick and easy-to-implement strategies to help you stay under budget this holiday. Colour them or tick them as you complete them to keep yourself accountable and even better, post on social media (tag @leapsavvysavers) as nothing beats public accountability!
Make a list of people you want to buy gifts for and check it twice (!) – are they all necessary? Could you chat with friends and family about gifting time or having a spending limit for gifts? Possibly arrange a day out with each other, which surely would be so much more memorable to all involved than yet another toiletries set or pair of socks! You might find that people are relieved to cross you off their list…
For those people you do want to purchase gifts for, make sure you give plenty of time to buy and shop around for the best deal. Check apps such as Groupon and Smiles to make sure you’re not overspending on the items.
Have a gift rule for children – stick to 4 gifts for example – one to read, one to wear, one they need and one for flair! Shop around for gently used children’s stuff – it is new for them on Christmas morning, even if it isn’t newly purchased.
Prepare beforehand by cutting back on spending categories in September, October, November and even the first few weeks of December. You could try a meat-free month or cooking from your pantry for a week. For more detail on how to save big on your grocery budget, see this blog post, and for practical tips on how to cut back on your food budget, download the FREE 5 step savings challenge.
Blessed Budgeting!
Creating an additional budget for this season is imperative for your financial success as there will be so many ‘extras’ not usually covered in your budget. I have just the budget template for you; the formulas are all ready-made and customisable categories created – just plug in your budget and record your expenditure to ensure you stay on target.
Start by writing down your values and goals for the holiday season – what is important for you to do and achieve this year? Is it spending time with people? Hosting a memorable Christmas day at your house? Making sure you treat your best friends? If you write down what exactly you want to get out of the day, the budgeting will be easier and smoother.
Next, review your finances, cash flow, savings and income and decide on a hard limit – what is the number you absolutely can’t surpass? Everyone will be different here – it may be that you also want to invest as you don’t want to break your regular investing routine, or perhaps you want to avoid carrying a credit card balance… you have to make the call, with your spouse or family if applicable.
Once you’ve got your hard limit, plug it into the top of the holiday spreadsheet. Then create categories – write them in order of importance to you; for example, if lavish gifts are your thing, list them first, or alternatively, if you want the finest food, start with your food categories.
Now it’s time to allocate money to each category. If you’re using my spreadsheet, you’ll see the total populating under your hard limit and the percentage plus dollar/dirham amount you have left and how close you are to your hard limit.
Finally, start spending and enjoying yourself! There are two methods for tracking – the first is to use a credit card for your expenses (if you aren’t tempted to go over budget and can use a credit card responsibly and pay it off in full at the end of the month) and record them on my budget spreadsheet as you go to ensure you don’t go overbudget. This is an easy exercise and can be done with a glass of wine and Christmas special quite easily. The second is to withdraw the cash and stuff envelopes with your budgeted amounts. Don’t take your credit cards anywhere and boom! You can’t go overbudget!
My present to you: planning and preparation tips!
Like with most things in life, some careful and considered planning and preparation can help avoid major catastrophes and curb a lot of impulsive behaviours that might lead to getting a little too merry with your credit card! If you’re reading this close to Christmas, don’t despair… any sort of planning helps, even if it is last-minute!
Firstly, go to your internet bank and open a savings account if you haven’t already. Look at your total hard spend, add 5%, and divide that number by 12. Set up an automatic transfer into this account for that amount every payday. You have now bought yourself a stress-free holiday season for next year by setting up a sinking fund (financially at least, I can’t prevent your in-laws from visiting!).
Take a calendar and start planning in activities and events. Aim to include as many free and frugal activities as you can – for example, could you visit people or have them visit you for drinks rather than go out? It works out cheaper and you’ll probably enjoy it more anyway!
Plan some frugal self-care activities. We all know the holidays can be stressful – all that forced festive fun and visiting can actually be exhausting. To avoid spending when you feel stress, plan ahead for a night in alone to have a bubble bath and do a pedicure or go for a long walk on your own or with your other half, just to decompress. It doesn’t have to be go, go, go all the time – it is called ‘holidays’ after all.
Declutter and sell before you buy. Take some time (preferably around Black Friday and Cyber Monday when you may be tempted to make unnecessary purchases) to go through what you already have and make room for the new year. It’s nice to do this before you put up the Christmas decorations if you celebrate, as you will be decorating a fresh, decluttered environment rather than piling clutter upon clutter.
Set a splurge date! It shouldn’t be all restrictive; decide on something you really want to spend on and plan to indulge lavishly and guilt-free. Just make sure you work it into the budget, it’s something you truly value and brings you joy, and it doesn’t compromise your ‘hard limit’ and you’re set to spend! It could be an item of clothing, a meal out, anything that YOU love.
Enjoy extra earning!
You may think of the ‘holidays’ as a time to wind down and relax, but this isn’t the case for a lot of people. Many people (my husband included) don’t get time off for Christmas and some people don’t love all the festive cheer. I get it. I wasn’t really into it until I had children, and now I do it for their benefit primarily. If you have some time on your hands, you could consider starting a temporary side hustle to earn some extra cash to fund your festivities, or even better, your index funds! Here are some to consider:
Pet or house sitting. Many people (especially in the UAE) go away over Christmas and need someone to look after their houses, pets and plants. This could be the perfect opportunity to make money and enjoy the company of a furry companion. Make your intentions clear on Facebook and spread the word around friends, neighbours, and colleagues – I reckon you’ll be in high demand and quids in!
Give people lifts to the airport and/or events. With many people travelling, if you offer slightly less than taxis, you will get loads of work. Spend a couple of evenings as a chauffeur and earn yourself a free night out!
Run Christmas-themed activities for children or adults. People love Christmas events, especially reasonably priced ones. You could offer a kids’ arts and crafts morning during the holidays or an adults’ wreath-making morning. Whatever interests you – just plan out your event, purchase some materials, organise a location (could be your house/garden), spread the word and you’re set! If you charge each person 70aed and you cater for 25 people, you’ve made 1750aed (before overheads) for a couple of hours of work. Once you have your event planned, you could repeat it several times for increased revenue.
Tutor for exam subjects. A lot of parents pause tutoring over the holidays, but many GCSE, A-level and University students will continue studying. If you could offer tutoring or proofing essays, this could be a healthy earner for the holidays! Even offering to babysit children for working parents can be useful to so many during school holidays.
Create holiday-themed crafts or gifts. People LOVE personalised, handmade gifts and crafts at this time of year. A lot of people are forgoing large corporations for small businesses for their choice of holiday décor and gifts. If you have a penchant for creative pursuits, put it to good use – Christmas tree decorations sell well, as well as UAE-themed trinkets for people to take back to gift in their home country.
Enjoy the frugal festivities!
Finally, after all that hard work, take the time to enjoy the holiday season. The best way to do that is to do more of what you value and less of what the media tells you to do! It sounds cliché, but the true value of Christmas is spending time with loved ones, and it doesn’t have to cost a fortune. Don’t feel pressured to carry debt into next year if it doesn’t sit right with you. Write a gratitude journal in December and look back at it next year when you begin the planning process again – you will quickly see what truly brought you joy during this season.
Happy holidays friend.
Need a bit of support through these steps?
If you would like to book a financial accountability coaching session to help you work through these steps or stay accountable to your goals, send me an email at [email protected] or drop me a line via the contact form and we can see if we are a good match.
Good luck on your financial journey – congratulations on taking the leap. [...]
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13 May, 2021Apply / Evaluate / Learn / PersistPeople often migrate to Gulf countries with ambitious saving goals. Perhaps they want to pay off their debt or save for a house deposit to purchase a property back in their home country.
However, the lure of boozy brunches, luxury yacht parties and sparkly malls can be extremely enticing. Pair that with homesickness and culture shock and you have the ingredients for UAE lifestyle inflation. Maybe you had big financial dreams when you moved to the Middle East, but you also want to develop friendships, and that often involves drinks after long days at the office? So, you go ahead and swipe that Visa again as you get another round in.
Or perhaps you moved your family here so that you or your spouse could stay at home to care for children and now you are feeling the squeeze? Between school fees, which are only paid for by 16% of expat companies (The Gulf News) and a high cost of living (the UAE ranks higher than Chicago, London, Paris, and Sydney for cost of living according to the Mercer survey), families can soon fall behind in credit card payments and find themselves trapped in the ‘convenience quicksand’ of the UAE’s readily available extravagance.
If you find yourself in this situation, you’re certainly not alone. Although you may feel isolated. People at home may roll their eyes at your ‘tax-free lifestyle’. After all, the stereotypes of grandeur and opulence are rife, and people may assume that you are able to maintain that lifestyle and save bucket loads of cash. Enter reality. Frozen salaries. Decreasing benefits. Very few financial support systems. But alas, do not despair. I have some steps that will help you sort out your finances and get you back on track to achieve your financial goals.
1. Review your goals and return to your values
The first thing to do is to review and set goals. The way I always start this process is to visualise my ideal life – what would my week look like? Who do I interact with? Where am I? What sorts of things am I doing? Get specific – what car are you driving? What job do you do if any? This will help you set goals that are meaningful for you. I would advise doing this a few times as the first time (or 10) may be a confused muddle of society’s expectations of you, your parents’ wishes and those desires your spouse has mentioned. The goal is to get to you – what do you really want? Try journaling about it to accompany the visualisation process.
Discuss these ideas with your spouse and children (if applicable), then set some goals that will start you on the path to your ideal life. It might help to make a vision board – it doesn’t have to be an arty process of cutting and pasting pictures from magazines but can be as simple as compiling some images on to a document and saving it to your desktop so you can access it easily. Your values will start to crystalise and you will (hopefully) get some clarity on where you want to go.
2. Cultivate a positive money mindset
Getting to this point of the journey might be tough. Often people see a large gap between where they are now and where they want to be. This can bring up feelings of guilt, shame, and regret. Instead of ignoring them and using your usual escape strategies (binge-watch Netflix anyone? Amazon spending spree?), allow yourself the space to face them. It might take some work; it might be challenging.
In fact, this can be the most difficult part of the journey and why so many fall back into bad habits and lack the discipline to achieve their goals. If you do this correctly, it should be at least a push outside of your comfort zone. You may have to face up to unpleasant childhood financial truths and uncover hidden unconscious money biases.
You can work through all this though – by reading books and listening to podcasts that lift you and teach you. By daily gratitude journaling and a discovery of what is ‘enough’ for you. You can exit the ‘constant desire for more train’ and pause at the station, take a wander, smell the metaphorical flowers. Gradually, you will feel an easing of the perpetual rat race more, more, more cycle.
This may all sound ‘woo woo’, and you might be wondering why I am writing about gratitude and mindset on a finance blog. It is because cracking money is 90% mindset and 10% numbers. Calculations and numbers are the easy bit. But if you skip this part, I will wager a bet that you will slip back into old habits (and I’m not usually a betting person!)
3. Track your numbers
OK, you feel in a better mental and emotional place and have worked through your relationship with money. Although this is a cyclical process and the development of money mindset is perpetual, you are now ready to move on to step three – the numbers. There are a few key numbers that you will want to calculate in the saving process.
First, what are you heading towards? Most people want to stop working in their jobs at some point, and they contribute into some kind of pension account in their home country. But as an expat, pensions don’t generally exist, and you may have to do some calculations yourself. In step one, we visualised your ideal life. Whether that picture included working or not, it’s useful to know what you need to be saving towards retirement as an expat. Once you have that goal clarified, you can look at splitting savings between long term and short-term savings goals.
Use the x25 rule to calculate your financial independence number. This is where you take your annual expenses (or the annual expenses of your ideal life) and multiply by 25. The number you get is what you need to have saved and invested to not rely on active income (working for money). Let me give you an example:
$40,000 (annual expenses) x 25 = $1,000,000 (financial independence number)
In the above example, the person would need $1 million invested to cross the threshold into financial independence (the point at which passive income from your investments pays for your expenses).
Next, we need to work out how much you must save to reach that goal. Go to a compound interest calculator such as http://www.moneychimp.com/calculator/compound_interest_calculator.htm and play around with the monthly contributions, returns (although a reasonable return is likely 7% in the stock market), and years. Assuming that the person in the example above already has $50k, if they contribute $1k a month for 24 years at 7% return, they will likely finish with over $1 million.
Of course, this is a very simplified version, and there are many factors affecting this number, such as pensions, property investments, inheritance, health issues etc. You may also have multiple short-term savings goals, such as holidays or a car. For short-term savings goals, you can apply this calculation: For example, you want to save $60k for a house deposit in 5 years, so -$60,000/60 (months) = $1000 per month. More detail on this in another post.
Now, once you have a rough idea of how long until financial independence and how much you must save, we need to look at your current financial picture to assess whether you can meet the monthly savings requirements to reach your goal.
Write out and total your expenses for the past 3 months or so (I say 3 months as that gives you a good whole picture of your spending habits). Compare this to your income and you can now calculate your saving rate. Again, I will demonstrate with a simplified example below:
$5000 (monthly income) – $2500 (monthly expenses) = $2500
$2500/$5000*100 = 50%
The person in the example above has a 50% savings rate and $2500 available to invest. Make sure you account for annual or bi-annual expenses and you have an emergency fund of at least 3-6 months of easily available cash. Back to your compound interest calculator to play with some numbers to work out the time it will take you to reach your savings goal.
Again, this is an over-simplified example for demonstrative purposes and people will have a wide range of circumstances, e.g., debt, children’s education funds, change in income etc. all for future blog posts. Each person will have a different overall picture, but by this point you should be getting some clarity about how you are doing in terms of your current spending behaviour versus your savings goal. What if there is some friction there? Or what if you want to optimise this process? On to step four for the next stage of the process!
4. Grow the gap, but get the balance right
By the time you reach this step, you are self-aware, you know your numbers, your goals and consistently work on your money mindset. But let’s say there is discord in your calculations – you are only managing to save a very small percentage of your income or you are still paying off debt. You may again face an emotional and mental block here – how are you ever going to reach those savings goals? This is where you give your money purpose and see it start working for you. Begin to feel empowered.
There are essentially two ways you can increase your savings rate – the first one is by cutting expenses and the second one is by increasing income. We will cover both briefly.
To cut expenses, first, look at fixed expenses, like your phone bill, rent/mortgage payment and insurance. Call the companies and try to negotiate a lower cost. Shop around different providers. Consider moving or renting a room out if your housing payment is too large.
Next, look at variable expenses. Are there any easy wins? For example, if you eat out three times a week, can you cut it down to once and cook at home? There are many specific ways to cut down expenses in the UAE, but that is for another post.
So, what about increasing income? You can try to search for a higher paying job, work towards a promotion or start a side hustle. There are many profitable side hustles – consider your skills and how you can add value to people. Can you tutor? Sell a skill to add value to people in the UAE? There are so many side hustles you can do, especially as post-pandemic, many jobs are now virtual and do not require physical presence.
The key with this step is getting the balance right for you in terms of how aggressively you want to pursue savings goals as opposed to spending to enjoy the now. Only you will be able to ascertain that balance and it is not always easy juggling FOMO and YOLO with your long-term savings goals. I advise returning to your values again to figure out what you really want – what will bring you fulfilment both now and, in the future – then do that.
5. Tweak, optimise and stay the course
Phew, what a ride it’s been! By this point, you will have gone through a monumental shift in perception and behaviour, but I can guarantee you that it will serve you now and in the future. Just steps one and two alone will supercharge your savings. These steps will work whether you are an expat or not; however, I think they are particularly pertinent for expats as we constantly and consciously walk the tightrope between now and the future.
The UAE is a revolving door – very few stay forever, so the questions always linger: where are you heading? What is your plan? We juggle the high-quality lifestyle we can sustain in the UAE with the pull of home – of family, of comforts, of nostalgia. No one can provide these answers but you, but I hope that my steps can help you get started down whichever path is right for your circumstances. At this point, you are ready to start investing to supercharge your journey to financial independence. More detail in a future post.
Need a bit of support through these steps?
If you would like to book a financial accountability coaching session to help you work through these steps or stay accountable to your goals, send me an email at [email protected] or drop me a line via the contact form and we can see if we are a good match.
Good luck on your financial journey – congratulations on taking the leap. [...]
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14 February, 2022Apply / Budget / Expat Money / Money MindsetAdding a partner to budgeting adds a layer of complexity in itself – now you have another person’s money beliefs, needs, goals and habits to consider when you go about managing your money. As money is still such a taboo subject for so many people, discussing it can be awkward and challenging for many couples, but avoiding it will have worse consequences.
This is especially true for multicultural couples (each person has a different nationality, culture, heritage or language) where past money beliefs and stories can be vastly different, and the way each partner approaches all things money can vary from slightly contrasting to dichotomous. It’s worth discussing money at length before even considering engagement. But whether you are a couple of dates in or a decade into marriage, the following tips can help you align your budget for a financially fruitful partnership.
1. What are your cultural expectations of money?
There’s a reason this tip is first for multicultural couples. Cultural expectations can vary massively around money – some cultures are required to take care of aging parents, others to provide for children long into adulthood, some to pay for weddings of children, others to donate regularly to the community or religious institution. Some expect one partner to provide financially while the other has full responsibility for the household, and others have a more even split when it comes to generating income and looking after the home and children.
It is imperative to discuss cultural expectations and where you and your partner stand in relation to these assumptions. If one or both of you are not willing to adhere to cultural customs, will that require a conversation with family? It may well mean that other people may be involved, even if it is just informing them of your intentions as a couple.
However, it might become evident that one or both of you wish to follow cultural conventions. If that’s the case, your finances and lives will certainly be affected, and you must either accept, compromise or decide you don’t wish to pursue the relationship. That is extremely personal and for each couple to discuss and decide themselves.
The same can be said for money stories – different cultures may be educated in different ways – for example, some may be frugal and thrifty, saving money and investing in land and property. Others may lavish generously on their friends or be expected to provide for the wider family, and therefore not save for themselves. Different people may not be educated by their families and expected to deal with all financial matters as individuals or within their own marriages.
Here is what I suggest: talk openly about each person’s money stories and cultural expectations then create your own version as a couple and family. Discussing it openly might be hard as one or both of you might bring to consciousness deeply embedded and rooted beliefs and expectations that you weren’t even fully aware of. However, this is not a situation where ignorance is bliss. The money stories will surface and manifest eventually and rather you discuss it calmly before your partner sets up a standing order to pay their parents half your income every month.
Once you are both knowledgeable about where the other one stands, come to an agreement about how cultural expectations and stories will play out in your marriage. This could cover costs related to celebrations (Christmas, Eid etc.), children, wider family, everyday living costs, essentially everything that you spend money on! It is likely to span many conversations and meetings, so I would start with basic cultural expectations: celebrations, children, wider family and any other large financial expectation.
2. Get on the same goals page
It’s important for all life partners to talk about long term goals, and essential for multicultural couples, as these might be inherently different based on cultural money assumptions. Something like where you want to retire could be a long-drawn out series of conversations, especially if you meet as expats and neither of you lives in your ‘home’ country.
You could start by talking about your ideal life looks like – what you are doing, where you are, who you are with. See how aligned both of your visions are and work towards a harmonious picture – something you forge together and work towards as a team (it may involve compromise on both of your parts).
Once you’ve decided on the life you both want to lead together, work out how much it costs, and from there you can lay some concrete plans. If your vision and long-term goals are aligned, it’s less likely that you’ll experience conflict in the short term.
Consider different circumstances and eventualities that may confront you, such as aging parents, job loss, health issues, unexpected inheritance, and how you would deal with them. You don’t need a step by step, to the dollar plan, but a general strategy can help keep major conflicts at bay as you face various life challenges. Of course, people change, and life goals may alter, so it’s important to talk about them regularly, how you both feel, what, if anything, needs adjusting.
3. Global Debts and assets
When you first combine finances, it is essential to pool all assets globally – it might be that one or both of you have property or investments in your respective countries or just that you acquired before you met. It would be wise to have an open discussion about those assets (or debts) – who are they intended for and what is the purpose of them? Will they be considered joint or separate? Are they intended to be passed to children or to fund retirement or something else entirely?
If one of you has a large amount of debt and the other has assets, this will need to be openly discussed to avoid resentment. You must decide on a debt payoff strategy – will the individual who accrued the debt be solely responsible for paying it? Or will you tackle it together? Be aware that in some countries, when you are married, you are responsible for the other person’s debt in the eyes of the law.
Before you choose a spouse, it would be useful to know your own non-negotiable limits as an individual. Consider whether, if you have spent time, money and energy building an investment portfolio, you would be willing to spend the rest of your life with someone who spends without limits. Your story could be very different – if you want to enjoy the now and spend most of your money, decide whether an extremely frugal, thrifty partner will suit you best. If you know your own wants, needs and limits well, discussions you have with others will become much easier.
Even if you are married and reading this and haven’t gone through this process, you can still have an open discussion about it, and try to come to a middle ground or compromise if your non-negotiables are different. The only other option is to part ways, and if you don’t want that, both of you may have to adjust your expectations.
4. Have regular money meetings
This tip works for any and all couples! The more you acknowledge the important role money plays in all aspects of your life and agree to regular, open, and frank money talks, the easier it will become and the closer you may find yourself becoming. To make it fun, you could schedule your money meeting at your favourite restaurant or spa. It is best to have it when you will be undisturbed and neither person is distracted by work or phones or other obligations, so that you can fully focus on the conversation.
For a more enjoyable conversation, quickly review the numbers, and spend most of your time discussing your values and dreams and how you are going to make it happen. Let’s say you both dream of going on safari in Africa, if you talk about this and generate ideas and motivations to jointly work towards this, the conversation will be much more productive, enjoyable and feel like a team effort.
The worst possible thing to do is meet up and shame each other for money habits or purchases that the other one doesn’t agree with. It is imperative to allow each other space to voice opinions and thoughts without being judged but work towards a place when it is possible to call each other out on blind spots (hint: this takes a lot of time and maturity, and I wouldn’t expect this straight away!). After all, money is emotional energy much more so than numbers!
If you feel that you just can’t keep these conversations civil, it might be worth having a mediator in the form of a certified professional planner, financial coach or even a therapist – any objective third party (so a family member or friend might not be the best option). This might be especially useful if you are new to discussing money; for some people, it is a topic that is best swept under the carpet and never discussed and can bring up childhood trauma. Try to keep this in mind as you venture these topics with your partner – you don’t know what is behind their impulse spending or extreme frugality. The more empathetic and understanding you can be, the more likely that they will share their thoughts and feelings with you.
5. Set rules and routines
Having rules or guidelines can help tremendously in financial decision making. For example, you may decide that for any purchase more than $200, you have to consult the other person, discuss, and decide together. This way, you aren’t recording and telling them about every coffee you purchase, but for items that may alter the monthly budget more dramatically, you are giving them the respect of weighing in on the decision. You could also consciously and explicitly agree to remain open and honest and voice and concerns or resentments you may be harbouring. Whatever you decide, it should suit your lifestyle and relationship.
Routines also really help – if the same things are happening month after month, there is less room for conflict. This is where establishing a budget and sinking funds helps. Decide what large expenses are likely to come up in the next 12 months, such as education fees or car service, and set up a savings account for these sinking funds. Each of you could transfer a set amount every month into the account to pay for these expenses stress-free.
You could also have the same person each month responsible for paying certain bills, for example, if one person buys the groceries, the other pays the internet and water bill. It’s up to you to establish the routines, but if you do set it up fairly and openly from the start, bills won’t be forgotten as ‘I thought you were paying that’ or other unexpected scenarios.
It might be worth writing a money plan down that you both agree on (and you could even sign). You could lay out both partner’s needs, wants and non-negotiables, describe how you will manage the household budget and investments or debt payoff, as well as what action to take in the event of an unforeseen emergency or a windfall.
This will be a great document to have if, for example, one of you is at home taking the lion’s share of the housework and childcare and the other person is working, and the working partner receives a bonus. If each partner disagrees on what to do with the money, you can fall back on your money agreement to help guide you. Otherwise, who’s to say that one person wouldn’t want to buy a motorbike and the other person wouldn’t want to invest it all in VWRA! Financial decisions are not only challenging when it comes to debt and hardship, but also for income increases, bonuses and windfalls. Either way, you have to see yourselves as partners in a team effort, no matter which partner’s bank account the money actually lands in (or leaves!).
6. Where in the world?
For expat couples, you have the added complexity of different countries to mix it up (as if dealing with money and people isn’t complicated enough!). You made a big decision to leave your home country to work and live abroad, and you must establish both people’s expectations and goals for the future in terms of place.
Of course, it may change depending on the circumstances, and you might decide that if one or both of you received an awesome job offer, you would be willing to move to another country. What do your finances look like in that case? Could you come up with a list of expectations you have? It isn’t just about a great package – will the lifestyle suit both of you? Should you consider the cost of living before making a move? It might be that these decisions are easy, but it might take time to hash out the details – weigh up the costs of moving, the cost of living in relation to the package and benefits and how much you both want the move.
A big question for expats and especially multicultural couples is when it comes down to purchasing property. You have to decide whether you purchase in one or both of your home countries or the country you are living in, somewhere else entirely, or not at all. You could discuss where you are planning on ‘ending up’ to govern the decision, plus which has the best housing market, returns etc.
Ultimately, it is a very personal decision and one well worth contemplating before you get too serious. You might not be in the position to purchase currently, but could it be an option in the future? If so, how much do you want to set aside per month to buy the property? Ideally, you both should be in agreement and on board with property and places!
The same is true although not so much when investing in the stock market. Some people prefer a home bias, others would rather have a globally diversified portfolio. Consider the location of your brokerage and accounts in relation to where you currently live and where you want to live. You may have to factor in tax burdens related to your nationalities (for advice on tax, please make an appointment to see a specialist). For example, people with Irish citizenship may be liable to pay more tax if they purchase ETFs domiciled in Ireland.
All of this section is more ideas for consideration and discussion than solutions, as each couple’s situation will be so unique that it is impossible to tell you exactly what to do, but definitely weigh up where you want to live, where (if anywhere) you want to purchase property and how you want to go about investing in the stock market.
7. Wealth protection and planning
The final tip is regarding protecting your wealth. Many people don’t feel it necessary to discuss these issues as they plan to live ‘temporarily’ as expats so don’t expect anything to happen to them while they are living abroad. However, it is important to protect the assets you build together, especially if you have children or others you wish to pass it to. If the pandemic has taught us anything, it is that we can’t predict the future and while we should hope for the best, we should plan for the worst.
This is an area in which professional guidance and support is crucial, but nonetheless, I will stress the importance of addressing it. You may need wills in different countries to account for various assets. I know for my UK will, I have outlined our situation and named all our assets in different countries plus the intended beneficiaries. Even though the will does not have jurisdiction in other countries, it gives guidance to my executors as to the location and nature of any assets.
My top tip on this would be to keep your finances as simple as possible from the start – the less complexity you have to deal with, the less stress you have to deal with, and other people have to clear up when you’re gone.
Guardianship of children is also a key area to set up – who will take care of your children should the worst come to pass for you and your partner? Make them aware and set up guardianship in your place of residence and country which the children will reside upon your death, should it be different to the place you currently live.
I hope these tips have helped provide you with a structure for dealing with your finances as a multicultural expat couple. For any couple, these tips will help, but being an expat and married to someone with a different cultural background can add layered complexity to the situation.
The most important takeaways from this are to know yourself, your wants, desires and limits, and get to know your partner’s money stories, expectations, wants and desires and limits too. If you develop the ability to talk openly and honestly with each other, compromise while setting your own boundaries and plan together, you’re on the path to a harmonious partnership.
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23 July, 2022Financial Independence / Invest / Money Mindset / PersistFinancial independence, or the concept of saving enough money that you never have to work again often decades before most people can retire, has gained popularity over the last decade. But it’s far from an easy goal to achieve so is it really worth it?
When most people hear the word ‘retirement’, images of grey hair, grandkids and leisurely days taking naps and short walks around assisted living facilities spring to mind. Many people think of the traditional retirement age, currently 67 in the UK.
At this government-defined age, people qualify to claim the state pension, which they have usually been contributing to for 30-40 years. They may also draw down on a private pension from their employer to cover their living expenses, which they have also been contributing to for multiple decades.
The FIRE (financial independence retire early) movement seeks to disrupt this traditional concept. While it may not be mainstream, since the pioneering book, ‘Your Money or Your Life’ written by Vicki Robin and Joe Dominguez in 1992, it has been slowly building momentum. FIRE encourages people to look at money and retirement through a different lens.
Radically reducing expenses and increasing income while investing the difference can enable people to build a big enough nest egg that they can live off small withdrawals for the rest of their life, and thanks to compound interest, not run out of money.
How is Financial Independence possible?
Achieving FIRE has largely been made possible by the 4% rule. First attributed to Bill Bengen in the 1990s, the 4% rule essentially stipulates that if you have 25-30x your annual living expenses invested in a low-cost index fund in the stock market, you can withdraw 4% a year and not run out of money for at least 30 years (or more as 4% is relatively conservative). For example, if you can live comfortably on $40,000 per year, you would need $1million invested. This is because the average return in the stock market is 7-10%, so if you withdraw 4% you are still leaving room for growth and accounting for inflation. Calculate your retirement number with is Financial Independence calculator.
Of course, this is not the only way to reach FIRE – the basic premise is that as soon as you make enough to cover your living costs passively, you can effectively ‘retire’ or stop actively working. This is typically done through property investing, stock market investments or business income (recurring income through product sales or royalties etc.).
In order to reach their ‘FIRE number’, many FIRE hopefuls live frugally and engage in ‘hustle culture’ – long hours of work in the short term because the desire for long-term freedom outweighs the temporary pain of maintaining a high savings rate (income minus expenses, aka the ‘gap’ of dispensable cash available to invest each month).
The concept of FIRE has received a fair bit of negative press due to accusations that Fire-ees are lazy or waste decades of their life in ‘retirement’ without contributing to society. Due to this, some members of the FIRE movement have adopted the shortened acronym of FI – Financial Independence. Not everyone wants to sip cocktails on the beach once they reach FI.
Some people in pursuit of FI wish to fulfil passions or volunteer – spend their life free of the traditional ‘rat race’ clamour for a salary and perhaps offer their time without the expectation of a hefty paycheque. Perhaps some wish to work but want freedom to choose without being dictated by salary and benefits and package and so on.
Not that there is anything wrong with wanting to slow down and enjoy your short time on this planet – again, the idea of constantly contributing, achieving and working yourself to death is a concept constructed by modern society. So, in conclusion, people in pursuit of Financial Independence have a whole range of motivations and circumstances; the basic premise remaining the same – getting to a point in which your passive income covers your spending so that you are not required to actively work for money.
How I found the financial independence movement
It was during maternity leave with my second child that I discovered the FIRE movement. After having my two children, I began to take money and savings more seriously. I wondered how (and if) we were ever going to be able to retire. How were we going to provide fulfilling lives for them now while also saving for their future? How did other people do it? I didn’t have a plan and it caused a fair bit of anxiety.
Unfortunately, for me, like many others, money is a taboo subject among the people I communicate with in ‘real life’. Talking about money is just not done, so I didn’t feel like talking to someone around me was an option. It was and still is bizarre to me that people are more willing to talk about their toilet habits than their bank accounts.
I feel quite strongly that this concept is hammered into us to by the ‘patriarchy’ to keep us ‘peasants’ down. If people don’t discuss what they get paid, they can be exploited; if people don’t discuss saving and budgeting tips, they will remain in a consumer debt cycle, and so on.
Large corporations will remain rich by exploiting the working (and middle) class for their own gains; allowing them to believe that by purchasing an expensive car, designer items or a large house with debt, happiness will be found. While we are busy working ourselves to the ground to pay for all this ‘stuff’ to keep up with the standards society sets for us, we are too burnt out and exhausted to stop and question this perpetual spiral of misery. I felt that misery all too keenly.
Thus, discussing these money worries with people around me was out of the question. I decided to do some research. It took siphoning through the usual blogs and YouTube videos on ‘how to buy a Ferrari and a beachfront home in a year by joining a pyramid scheme’ before I stumbled upon the Choose FI podcast. A lightbulb clicked on in my head as I rapidly consumed the content. Here were people sharing stories of living frugally, with purpose, sharing struggles and solutions publicly.
I finally, at long last, felt like I had discovered likeminded people. All of a sudden, here were people pursuing money, not to buy expensive clothes and cars, but to buy time. Freedom. The most important and only non-renewable resource available to us.
The next weeks and months passed in a blur of learning as the internet algorithms worked their magic and I discovered Paula Pant, Andrew Hallam, Mr. Money Moustache and countless other bloggers, authors and podcasters. I read ‘Rich Dad Poor Dad’ by Robert Kiyosaki. Although some of his ideas and teachings are dubious, this book was the one that changed my whole perspective on life and money.
Nothing has been the same since and I still use his framework to make decisions more than 3 years after reading. Buy assets first and use assets to fund liabilities. This simple but startling truth stopped me in my tracks. It was so obvious, so simple, and hiding in plain sight. Most people buy liabilities and not assets, which is why they don’t build wealth. I had been doing this for my entire adult life. I was 33 when I read the book, and a whole library of other personal finance books.
Needless to say, discovering the FIRE movement was life changing for me. Within weeks I had overhauled our budget, increased our savings rate and started investing. I was plunged into the world of finance, a world I had once thought was only accessible to balding white men in suits who possessed much more intelligence, superiority and insider knowledge than little old me. That’s what they want you to think. As soon as I discovered that managing and investing money was completely accessible to me and building wealth within my capability, the snowball gained momentum, leading to this website, blog and resources to help hitch others up onto the snowboard.
However, it wasn’t all smooth sailing. All of this was both the best and worst thing to happen to me at that point in my life. As with most extremes that we experience in life, they are paradoxical. The greatest strength is often the greatest weakness. The best things can come at a high cost, and it is our lifelong job to decide what is worth paying the price for and what isn’t.
Was financial independence worth pursuing?
Finding FIRE came at a difficult time for me. I suffered with post-natal depression after the birth of my second child, and having not experienced it with my first, I wasn’t expecting it. It isn’t something I would wish on my worst enemy. At the time (and I would never recommend this), I didn’t seek help as I was worried about what people would think of me. Instead, I reached deep into my muddied brain to pull myself out of it by reading, specifically around the topic of self-development and self-improvement.
I fell into the world of FIRE, and I had a renewed sense of purpose. And hope. And hope is a powerful motivator and healer. Stories about how average people achieved extraordinary goals and were willing to lay out their strategies and blueprints for others were extremely inspiring to me. Pursuing FI can provide you hope, a plan and a strategy to escape a toxic situation or strive for a better life on your terms. If you dream of leaving your corporate job to work part time in a café, following the concepts of Financial Independence can help you achieve your goal, making it a tangible reality rather than a pipeline dream.
The birth of the low-cost index fund coupled with the development of accessible and affordable brokerages was the start of a revolution of sorts for the ‘little man’. The awesome John Bogle sure left a legacy. Founder of Vanguard and pioneer of the index fund, a passive investing ‘basket of equities’ which tracks the market and is available to anyone, regardless of investing or economic knowledge, monumentally changed the investing landscape.
Never has it been easier for an average person to manage their own portfolio and start building wealth with as little as $100. When I realised that this wasn’t a dream reserved solely for bankers or lawyers with huge salaries, I took control of my financial future. This is an empowering feeling, and although people with higher salaries have more capital to build wealth faster, the mechanism to do it is accessible to all.
So, if it is really that easy, why isn’t everyone doing it, I hear you asking. I don’t know everyone’s circumstances, but I would hazard a guess that the force of the Joneses is strong and still holds the majority in its spell. The FIRE movement touts the exact opposite of what society tells us to do – get in debt, get a job, overspend, indulge in material consumerism etc. etc. And as that is the way that most people live, to tread a different path can be difficult. Societal pressure is real and can come from family and friends too.
In order to change, research shows that a community and support system is much more likely to help you stay motivated. We are herd animals after all. Although I didn’t have members of the FIRE movement as neighbours, having online communities served as a lifeline for me. I felt a connection and camaraderie with people, and when they spoke, their words felt like security, acceptance and assurance that the path I was travelling was the right path.
I honestly hadn’t ever felt like that before. I had just felt like an eccentric outsider, hiding my true self to fit in. All of a sudden, I didn’t care what people thought. My confidence grew as my community did. I didn’t care about driving an old car, dressing my children in hand-me-down clothes or living frugally. Now I was proud of my identity and that is an easier way to live than hiding behind a façade to fit in. Finding the FIRE movement represented so much more than discovering budgeting and investing. It was about shedding society’s expectations and reclaiming my own identity.
Finally, a huge benefit of pursuing FIRE is rejecting consumerism and becoming more conscious about living sustainably and frugally. This naturally coincides with a deeper care and connection for the environment. I felt more aligned with my values as I bought less stuff and embraced minimalism. I started listening to The Minimalists and their conversations resonated deeply with me.
I’m not saying my way is the best and everyone should be a minimalist but finding people who align with your deepest values is extremely freeing. As I walk further down the path towards FI, I have discovered that it isn’t really about money. That’s just the surface. It’s about building a life you love by aligning it to your true values.
The dark side of Financial Independence
You might be thinking at this point that I’m trying to brainwash you into joining the FIRE movement – it’s perfect, it solved all my problems, amazing, blah, blah, blah. Nope. That isn’t the case. Everything comes with a cost. Discovering the FIRE movement led to some very real downsides for me. They might not relate to your situation, but I wanted to share them nonetheless, because the dark side of Financial Independence isn’t shared enough.
There is truth to the old adage ‘ignorance is bliss’. A word of warning if this is your first foray into FIRE, dip a toe in sure, but once you’ve had a taste, it’s hard to go back. Not because it’s a cult as the media often touts. But because to join you have to become aware of some hard truths about yourself and society. I’ve touched on a few above, such as how we have been cloaked and manipulated to think and act a certain way.
But you also must delve into your own finances, run your retirement numbers and explore your murky relationship with money. That’s the cost of membership. And most FIRE members would see that as a good thing. Self-awareness, financial awareness. Great. I too think it is a positive thing.
But once you know the numbers, you can’t ‘unknow’ the numbers. Most people live in a bubble, seeing the future in some sort of optimistic and blurry bubble. I did too. What FIRE will do is cast a light, or more, burn away the mist, on that future. While having cold hard facts is useful as you can plot out a plan and strategy, if the goal posts are just a speck in the far distance, for example if you carry debt or have very little wealth currently, it can feel overwhelming. Even to reach that sort of wealth by traditional retirement age can feel like some distant dream.
But you have an awareness – if I don’t achieve these numbers, I can’t stop working! This can lead to a sacrifice of the present for an unguaranteed future. For some people, knowing the numbers and facts and working towards a goal can be an effective motivator and foster hope for the future.
But there are people who become obsessed with the numbers, overwork and sacrifice health and relationships for money. This is the dark side of the FIRE movement. It can lead to burnout and stress as people struggle to switch off and relax because there’s still more work to be done to achieve their ‘FI number’, which for most, is a long game and requires a steady pace and level head.
Despite all of its positives, the FIRE movement can exacerbate feelings of isolation and inadequacy. I talked about the online communities, which are fantastic, and I appreciate all the comments, discussions and people who take time out of their lives to support others on their financial journeys. But if you feel isolated from the people in your ‘real’ life, your feelings of loneliness can intensify. For me, finding people in my area who could relate to me was imperative to staying the course.
It’s human nature to compare yourselves to others. It’s how the ‘keeping up with the Joneses’ concept is so powerful; whether we like it or not, we compare ourselves to those around us. For me, it was liberating to stop comparing myself to my neighbours and peers, but I replaced them with people from the FIRE Movement. Dangerous territory, as so many FIRE members have significant wealth. Although they might not look ‘rich’ to their neighbours, many share their financials online and the money milestones people achieve are extraordinary. However, it is possible to transform this toxic comparison into a positive for yourself. Take that jealousy and turn it into admiration; use it as inspiration and motivation to work towards your goal.
These are some of the downsides of the FIRE movement that I have experienced along the way. It’s not that the FIRE movement is toxic or encourages me to think or do any of the things described in this article, but I find that it can exacerbate your own weaknesses and insecurities if you don’t put the necessary precautions in place.
How can I pursue financial independence in a healthy way?
If you succumb to some of the negative traits listed above, you could sacrifice decades of your life and achieve FI but have to spend your money and time recovering from your journey. That is the opposite of the intended outcome, which is to live a richer, more fulfilled life. I’ve heard stories of people missing out on their kids’ lives due to grinding it out at the office and regretting too late that they can never get that time back. Or becoming so obsessed with FI that their greed becomes overwhelming, and they wind up gambling their money in a high-risk investment and lose all their hard work.
So, how can you stay the course on this monumental journey and keep your head?
Create your own, personal plan and write it down. Know your limitations and boundaries and stick to them. Remind yourself that everyone is different – some people will reach FI in 5 years, some in 30 years. The most important thing is that it is your journey, and you must enjoy it, or it defeats the purpose. Even if you find the FIRE movement in your 50s and miss the ‘retire early’ part of FIRE, implementing better money habits is a good thing for everyone. If you don’t earn a high salary, rather than accepting defeat, seek out ways you can live frugally without sacrificing your happiness or increase your income.
If you find yourself in toxic comparison territory – perhaps you are late night scrolling in a Financial Independence Facebook group and you see someone celebrating millionaire status, whereas you are still battling $5,000 of credit card debt – accept the negative feelings, sit in them for a while, then reflect. Ask yourself why you are reacting like that. Is it because this person has achieved something that you desire? Try to shift the negative to positive and see what you can learn from their journey. Check the comments and write down any advice they give that you can take on board for your own journey.
Always return to gratitude. When it all feels overwhelming and impossible, track how far you have come. It’s so important to set up a way to measure progress from the start, whether with an Excel document or colourful chart, journal or app. Celebrate your own milestones of success along the way. Remember that everyone’s circumstances are different, and everyone has their own struggles regardless of net worth. You might have something that they desire. Reflect on your life and write 3 things you are grateful for as soon as the negativity starts to surface.
Try to find (or create) a face-to-face community to complement your online support. Social media, toxic as it can be, can be a vital lifeline and source of great wisdom if you use it smartly. But nothing beats in-person interaction and connection. If there aren’t people in your life who currently share your mindset, start a group in your area online and see who joins. Organise a meet up and you never know, you could meet lifelong friends. You don’t have to dump your current circle, especially if you have things in common with them and enjoy each other’s company but expanding it will serve you.
In Andrew Hallam’s latest book, ‘Balance’, he defines success as four pillars – money, relationships, health and purpose – if one or more of these pillars are significantly neglected, the individual will not feel fulfilled or successful. Even if you achieve FIRE quickly, if you sacrifice your family or your health to get there, chances are it won’t feel like the success you desire. Every day, or week, or month – whatever works for you – it’s helpful to sit down and reflect on how you are working towards success in all areas. If one is lagging, plan ways you can chip away at it in the next week. It might be simple changes such as ‘I will leave the office by 5pm every day this week to read with my children before bed’ or ‘instead of finishing my work report this Saturday which can wait until next week, we will go for a family bike ride’.
For me, discovering the FIRE movement has fundamentally changed my life, no doubt about it. But it has been a paradoxical experience. When the veil was removed and my eyes were opened, all my insecurities and issues were exposed. But along with the blast of truth comes a realisation.
What people pursuing FIRE want most is freedom. Choice. Options. But once you realise that you already have that – there are many, many ways to achieve FI and many versions of FI (Coast FI, Fat FIRE, Barista FIRE etc.) – you come to the awareness that, as Jean Paul-Sartre wrote, ‘man is condemned to be free.’ I have never felt more strongly connected to the philosophy of Sartre than when I am aligned with the FIRE movement.
We all have the choice every minute of every day – love the journey or resent the journey. Admiration or jealousy. Choose to go to bed and get a good night’s sleep to continue chipping away at the dream tomorrow or push yourself further towards burnout? Live in perpetual regret of past decisions or forge forward towards a more optimistic future? You get to choose. You don’t have to wait until you reach FIRE.
Good luck on your journey. Remember that FIRE is less about reaching a certain ‘number’ or quitting your job and more about building a life that you truly value rather than one dictated to you by society. Take the raw self-awareness that becoming a member of the FIRE movement costs and open yourself to it, because on the other side is the life you truly desire.
Need a bit of support through these steps?
If you would like to book a financial accountability coaching session to help you work through these steps or stay accountable to your goals, send me an email at [email protected] or drop me a line via the contact form and we can see if we are a good match.
Good luck on your financial journey – congratulations on taking the leap. [...]
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23 October, 2021Apply / Budget / Learn / Persist / Save MoneyFor most parents, the day their child arrives is one of, if not the most memorable day of their lives. This date will forever be etched into their lives and never forgotten. Every year on this day, different cultures have certain traditions to celebrate another year of life. For a lot of people, they celebrate every year as they go through adulthood too, but financially, birthdays can be especially hard on parents’ wallets. Many people prepare for the day by purchasing gifts, organising a party or day out, and planning a cake and decorations. If you have more than one child, the costs can add up quickly. On the other side of the coin, you feel the desire to give your child a great day – their face when they see the wrapped presents and decorations does give you joy. It’s not an expense that most parents would want to cut completely.
So, what can be done? Is it possible to do birthdays on a budget? It’s definitely possible – read on for my top tips to celebrate another year of life without breaking the budget. When money is tight, you have to think outside the box. These tips can be applied to any birthday celebrations, although I’ve aimed it directly at children.
1. Have a present rule
Have a present ‘rule’ for example the rule of 3 or rule of 5. Buying presents can get out of control and sometimes results in a sea of wrapping paper flooding your living room, your kids’ eyes flickering with greed as they throw aside one present to tear open the wrap on another. Is this a pride of lions on a hunt or your precious child enjoying the gifts you worked long and hard to buy and wrap? Eliminate this by employing a gift-giving ‘rule’. The rule of 3 might entail 1 present for playing, 1 to wear and 1 to educate. If you want your child to open more than 3, a rule of 5 might work: 1 to read, 1 to play with, 1 to wear, 1 to eat, 1 to educate. If these rules are understood by everyone, there won’t be any complaining on the day or long lists of present wishes in the build-up. It also helps to teach your child restraint as they reach an age to understand. If they can only choose one toy to play with, this requires thought and restraint, a very important life skill.
2. Reduce, reuse, recycle
Consider the impact on the environment of buying and wrapping the presents you gift, as well as decorations, party bags etc. Here are a few ways you can reduce your carbon footprint when it comes to your child’s birthday:
Save any toys or clothes that get donated to you through the year, especially useful for expats. As so many people come and go, people often give me clothes, toys and equipment through the year and instead of giving them to my child straightaway, I hide them away and gift them on birthdays. It might not be new, but it’s new to them, and just as exciting to unwrap.
Reuse decorations and gift wrap. Every year, the same banners are stuck on the walls in our house. I don’t need a special theme every single year, especially when they are young. If you buy general decorations and maybe if your child has a favourite TV show or character, just buy one item in that branding might suffice. Reusable wrapping paper is a fantastic idea and I also use Carrefour’s brown paper bags to wrap presents and decorate with some ribbon or a bow.
You could consider cutting out cards – what is the likelihood that someone will keep it? It will be either thrown in the bin or stuffed in a drawer. Think about why you are giving the card – is it truly what you want or are you just robotically following a tradition? If you really value cards, then carry on, as long as it is a conscious decision that brings you and the receiver joy and happiness.
Think about alternative gifts – could you gift an experience or trip or membership to your child rather than another ‘thing’. They might end up valuing it more. For example, if your child enjoys horse-riding, you could gift them 10 riding lessons to take through the year.
Could you make the cake yourself? Think about the size – yes, a three tier professionally-decorated cake looks great for a photo, but do you need it? Your child could still blow out candles on a smaller, home-baked or supermarket-bought cake?
3. The most expensive option may not always be the best option.
This is especially true when your children are young. For example, for my daughter’s third birthday, I wanted to do a family day out that involved some sort of swimming and waterpark. I considered whether to make the trip to Yas Waterworld in Abu Dhabi, which would have been 3-4 hours of travelling in the car, expensive ticket entry and most likely a packed venue.
Instead, we made the short drive to the Mercure hotel on Jabel Hafeet, which has 3 waterslides and a play area as well as the main swimming pool. The cost of entry for 4 of us was the price of one ticket into Yas Waterworld, and we enjoyed a more relaxed day with less crowds and less travelling. We all thoroughly enjoyed the day, and it didn’t break the bank or the budget.
It might not always work out like this but think carefully about the reason you might be choosing the most expensive or luxurious option. The same might be true of party venues – scope out several before deciding – just because something costs more, it might not be intrinsically better. Are you paying for a brand or is it genuinely good quality?
4. Sell before you buy.
I always declutter before a birthday. Plan in advance and declutter before you even begin planning presents so that you don’t end up purchasing something that you already have stuffed in the back of a cupboard. The act of decluttering can remind you of just how much stuff you already have to maintain, clean, organise and store, and could get you to think twice before swiping your credit card on Amazon for all the latest gifts and gadgets.
It creates space for the new things, particularly if you’re having a party where guests will more than likely bring gifts. It gives you ideas about what your children actually need. For example, your child may have outgrown their puzzles or the play doh might be drying up. If so, replacing these items might be useful gift ideas.
If you’re really frugal, you could try a zero-based gift budget. During my no spend year, I decluttered before my kids’ birthdays. The money I made selling items, I used to buy my child’s gifts. It was great for my minimalism journey, the environment and my wallet. And my children were none the wiser.
5. Be grateful and aligned with your family’s goals.
Children’s birthdays are rife with the ‘keeping up with the Joneses’ mentality. As a parent, you love your child and want to celebrate their birthday; you want to see their face light up at the exciting gift or party and wonder at the amazing cake you present them, their eyes twinkling as they blow out the candles. I am not here to tell you not to do any of that. Just strike a balance between your long-term goals and priorities and a birthday celebration which you could be paying off for the next 2 months but is forgotten within a week. I celebrate my children’s birthdays, but I create a budget and stick to it and try to think outside the box – here’s how:
Create a budget and plan out the birthday at least a couple of months in advance. That gives you time to save, allocate the money, declutter and shop around for the best prices. Items for your budget might include cake, presents, decorations and day out or party. Decide on an overall budget for the whole occasion, then assign money to each category, depending on its importance. For example, if the party or activity is most important to your family, allocate the most money to it, and continue like that until you reach the least important item. It might look something like this:
Birthday Fund: 1500 aed
Day out: 600 aed
Party: 400 aed
Gifts: 200 aed
Cake: 150 aed
Decorations: 80 aed
Contingencies: 70 aed
Keep some money in case you go over budget on one of your categories – it’s always better to overestimate than underestimate the costs. Ideally, for the long-term, once you have the total amount you spend on birthdays for all of your children, divide by 12 and save as a sinking fund each month. If you feel the sinking feeling that because you’re setting a budget for your little angel, it somehow negates your love for them, ground yourself in gratitude.
Be grateful for what you do provide – a consistent, safe and happy family home all year round. Money you don’t spend on one-time-use plastic plates and decorations now can be invested and spent on helping them with university fees or a deposit for their first home or buying a car. Which do you truly think they will value more? Only you can decide that, but I know for me, a balanced budget between now and the future is the most logical and loving decision. [...]
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12 June, 2022Expat Money / Invest / Learn / Money Mindset / PersistYou probably left your home country to work as an expat for a higher salary, better employment package and quality of life and to experience a new culture. However, mental health concerns such as loneliness and homesickness quickly led to behaviour that increases the likelihood of financial stress. You spend more, and you aren’t sure how to invest and save for the future while living abroad anyway. There are so many scams you decided to put that off until you return home.
But niggling worries at the back of your mind – I should be saving more, and I should really be contributing to a pension – can lead to financial stress, depression, and anxiety, meaning that expats can be more prone to money-related mental health issues.
The link between money and mental health
The link between money and mental health is a hot topic, and for good reason. According to the Money and Mental Health Institute, almost half of people with consumer debt also struggle with mental health issues. It leads to a negative cycle – mental health issues make it more difficult to earn, manage and save money and the resulting stress causes deepening depression.
People with common mental health problems may experience barriers to money management that simply ‘creating a budget’ might not fix, such as poor memory or impulsivity issues. On the other hand, severe and chronic money worries can cause depression and anxiety, which leaks into all areas of an individual’s life.
Why are expats more likely to experience financial stress?
For expats, added factors such as loneliness, isolation and homesickness can amplify these problems. And it is a problem not discussed enough. It seems that leading an ‘exciting’ expat lifestyle in a foreign country is assumed to provide immunity for all these issues. But on the contrary, the lack of a support network and financial knowledge in that country can exacerbate financial stress and mental health concerns.
The statistics support my theory that many expats are not financially savvy. Global consultancy firm Mercer report that 45% of expat employees in the UAE either have not planned for a sufficient retirement or plan to work post-traditional retirement age to compensate for their lack of savings. A whopping 99% expressed the need for better savings and investment options as expats.
It’s one thing to earn a tax-free salary; it’s quite another to know what to do with that money. Corroborating this, leading financial news provider Zawya found that half of UAE expats are saving less than 5% of their income. When we marry these statistics with the William Russell findings that twice as many expats reported feeling trapped or depressed when compared to people working in their home countries and twice as many expats experienced high levels of anxiety, a tentative link may be forged.
Seeking help for mental health concerns can be more challenging than in one’s home country too – treatment may not be covered by insurance and could be costly and difficult to seek out.
Here are three financial red flags which could contribute to mental health concerns for expats. This is by no means an exhaustive list, and any time you feel low for a more than a few days or anxious to the point that it begins affecting your daily life, you should seek out medical treatment. This is simply for the purposes of raising awareness and offering tips for expats but does not replace professional medical advice in any way.
1. Impulsive purchases or overspending
When expats leave their home countries, they may have expectations that the lifestyle in the foreign country will solve all their problems. When the reality falls short of the expectations, the result can be increased depression or anxiety. There can be a pressure to ‘enjoy the lifestyle’ in the expat country and forge friendships, meaning an increase in spending.
A constant feeling of being on holiday mixed with easily available credit can often mean expats find themselves in quickly escalating credit card debt. Increased feelings of isolation, loneliness and homesickness can result in impulsive spending as a way of dealing with or escaping from those feelings. This contradictorily heightens the feeling of being trapped as you have to stay until the debt is paid off.
Perpetuating feelings of fear, negativity and anxiety is the challenge you may face in seeking support if you find yourself in spiralling debt. There is not much by way of financial assistance once you’re in a difficult financial situation in the UAE. It is slowly changing, and the Government is planning on bringing in financial aid policies for expats, but at the time of writing, it will be some time before those sorts of options are available.
2. Living in a doctor’s waiting room
This red flag is the polar opposite to the experience of the individual in scenario one. Not all expats have the same experience, and a range of issues could lead to a variety of mental health concerns.
Some expats feel a great deal of pressure to save for the future and make the most of their tax-free salaries while they are away from their home countries. If this is you, you may have started forfeiting the present day to save for the future. If you do this too much, you develop a feeling that you are living in a doctor’s waiting room, just constantly preparing for your ‘real life at home’ to start up again.
Sacrificing too much joy in the now for the future can lead to high levels of anxiety and resentment towards people ‘living their best lives’. Situations out of your control such as the rising cost of living and the global pandemic may also throw a spanner in your plans, resulting in even more anxiety.
3. Running out on retirement
You moved abroad, you got settled in your job and you decided to sort your financial house out. You don’t know how pensions and investments work in your expat country, so you met with a financial advisor – someone with the expertise that you lack. They set you up with a savings plan – this is in lieu of pensions in your home country, and you invest a fixed amount each month and in 25 years you be able to retire. All you had to do was assign a few papers. Sorted. Or not.
What many people realise too late is that these savings plans charge so much in fees that the first 18 months of payments often go solely to fees. They charge up to 4-5% in fees per year, which might not seem like a lot, but over decades can be 100s of thousands of dollars. If you pay 4% in fees, and the stock market returns 8%, you are losing out on 50% of your profits, as shown by the orange ‘active managers’ line in the chart below. Not to mention the 1.5% credit card fee and 0.75% mirror fund charge to invest in a fake fund! This on top of a surrender fee if you wish to exit early (which the vast majority of people do) is enough to put people off investing for life.
If you have signed up to one of these long-term savings plans, there is hope. Check out Steve Cronin at Dead Simple Saving for more support. However, it can take a toll on your mental health to be scammed by these confident, slick advisors. You could lose confidence in your money management skills, feel depressed about the money lost to the scheme and fear investing again.
This could lead to feelings of depression, anxiety, stress, worry about the future and being duped again as well as the perception that you are now ‘behind’ on retirement planning. This is not true – you absolutely can recover and get back on track, but it doesn’t negate the feelings that bad investments can bring, which are completely valid.
What can I do if I have money-related stress or mental health concerns?
First and foremost, seek professional medical advice if your mental health has started to impact your daily actions. If you are experiencing changes in sleep, weight gain or loss, or feelings of hopelessness or despair, visit a doctor and explain your situation.
If you’re feeling run-down, resentful or burnt out over money issues, it’s perfectly normal, and there are things you can do to improve your situation. No matter whether you’re 5 years into a failing savings plan or have managed to accrue Dh30,000 of credit card debt, just making a plan to start moving in the right direction and getting on track can do wonders for your mental health. Start by creating a realistic budget and setting financial goals.
Try to connect with other people. Make friends and talk to other expats (whilst spending within your budget!) with the same interests and hobbies as you. It might be cathartic to realise that you aren’t alone and other people are experiencing similar feelings (you don’t need to spill your life story but sharing feelings of homesickness might help you connect).
Build mental health into your budget. I have a ready-made budget template for you to use which monitors your income and expenses and uses colourful charts to track your progress towards your goals. Use it to plug in mental health activities to your monthly spending, whether that is therapy, a gym membership, or a spa day.
Finally, educate yourself on saving, budgeting and investing as an expat. Equip yourself with knowledge so that you can build financial security and wealth while living abroad. It might not solve all your mental health concerns, but it can help alleviate some money stress and financial worries. Finding your balance between living in the now and preparing for the future is the key to getting the expat life right. [...]
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19 August, 2022Evaluate / Financial Independence / Invest / Learn / Money Mindset / Save Money / Saving and BudgetingWhat does ‘savings rate’ mean?
Savings rate is a fairly straightforward metric to calculate and track. It is essentially just your total income minus your total expenditure in any given pay cycle, month, year, or other timeframe of your choice. This is, in my opinion, the best indicator of your financial health. Your savings rate reveals how much disposable income remains once you have done all your spending. This can be used to predict and make strides towards retirement; but what’s a good savings rate to retire early?
How do I calculate my savings rate?
To calculate your monthly savings rate, simply take your income and minus your expenses. For example:
Income = Dh15,000 – Expenses = Dh10,000 = Dh5,000/Dh15,000*100 = 33%
The person in this example has 33% of their paycheque left over once they have paid their bills. You can work it out as an individual, couple or household. To add more people, just total all your income and your expenses and complete the calculation.
In terms of what to include in the expenses side of the equation, you should decide which items you consider ‘savings’ and which you define as ‘expenses’ before you do the calculation. For example, I include my contributions to my sinking funds on the expenses side and money put towards savings goals into the ‘savings’ side.
Even though technically I’m saving into my sinking funds, that money is already earmarked to serve a spending purpose in the near future, such as flights, visa costs, school fees or medical bills. Thus, I allocate my sinking funds contributions to expenses. I don’t include the spending I do out of the sinking funds in the equation as they are spread over the year.
If I included those large expenses plus the sinking funds contributions, it is a double up of expenses and inaccurate. For example, if I spend Dh20,000 on a flight in July, I don’t include that expense in my monthly savings rate calculation. Instead, I enter the Dh1700 I save towards flights every month. Of course, this only works if you regularly save towards your sinking funds. If you don’t, you will need to include all expenses, big and small. I give detailed and visual examples of exactly how to do this in my Leap Budgeting Basics course – the simple money system that sticks.
Do I use my gross or net income?
There are a few ways to calculate your savings rate. The first method is to take your gross income and minus the deductions, such as tax or health insurance, as expenses. If your employer contributes to a pension on your behalf, you can input this onto the savings side of the equation.
The second way is to base your calculation on your net income and expenses, as outlined in the example above. Don’t factor in your tax and pension etc. and simply track the money you have control over spending.
I go into detail and give examples of working out your savings rate using different factors in my Leap Budgeting Basics course. However you choose to calculate your savings rate, as long as you’re consistent with what you factor into the formula, you will have an accurate measure of disposable income over time.
https://leapsavvysavers.com/wp-content/uploads/2022/03/Tracking-expenses-Excel-demo.mp4
Can I have a negative savings rate?
If you have a negative savings rate, it means that you are living beyond your means. This is how you get into debt. For example:
Income = Dh15,000 – Expenses = Dh17,000 = Dh-2000/Dh15,000*100 = -13%
The person in this example is spending Dh2,000 more than their Dh15,000 income. That means that they are overspending by 13% of their total income. Even what may appear to be a ‘negligible overspend’ is a substantial wedge of your income if you work it out as a percentage. If you’re spending more than you’re bringing in, you either have to draw on savings or debt to cover the excess. This requires an urgent assessment of your expenses to see what you can cut or reduce to ensure that your savings rate is a positive number.
What is a ‘good’ savings rate to retire early?
A ‘good’ savings rate will depend on several factors: your income, the cost of living in your area, your lifestyle, the number and nature of dependents who rely on your income. Write down your income and your expenses for the last few months and check your current savings rate. Then you can evaluate how much you want to increase or decrease the number.
Most financial planners will advise you to save at least 10% of your income towards retirement. Really, it’s up to you – how much disposable income do you want to have? Ideally, you should have at least some level of buffer to protect your finances in case of unexpected expenses, emergencies, or rises in costs. Living paycheque to paycheque is a sure-fire way to sleepless nights and stress.
My personal goal is 50% of my income averaged over the year, with an aspiration of 60%. Bringing up two children in a high-cost-of-living area, this is challenging enough that it keeps me on top of my finances, but still allows for a standard of living that we as a family enjoy. Finding your ideal savings rate will be personal to your circumstances, but I recommend that your goal be a little challenging without compromising your quality of life.
Can I retire early?
Mr. Money Moustache wrote an iconic blog post on the link between savings rate and retirement. He included a diagram (below) which clearly indicates how long you have until retirement depending on your savings rate. Assuming that you invest the saved amount each month in a robust investment vehicle, such as globally diversified index funds or property, this is a useful benchmark for how long you have to work before you become financially independent. It makes sense for two reasons:
The higher your savings rate, the larger your contributions to your retirement/investment accounts so the faster compound interest will work its magic for you.
The lower your living costs, the less of a retirement ‘pot’ you need to draw from to cover your living expenses
How can I improve my savings rate?
To improve your savings rate, you have two levers to pull: reduce expenses or increase income. Reducing expenses can include the following actions:
Tracking your expenses
Doing a values-based analysis of your spending
Creating a realistic and attainable budget
Doing a no spend challenge
Participating in a saving challenge
Alternatively, you can increase your income by training for a promotion, applying for different jobs or starting a side hustle.
What’s the best metric in personal finance?
You can track a range of numbers in personal finance – net worth, investment returns, return on investment, dividends, income, expenses and so on. So, why is savings rate so special? It is different to most of these other measures in that it is the metric that is MOST IN YOUR CONTROL.
Nothing in this world is completely within your control. But you’re going to be disappointed fast if you track returns on your investments or net worth. These numbers can swing wildly depending on market and economic conditions and you’ll be more susceptible to emotional selling when the market is down.
You’ll feel much more satisfied tracking your own actions. You’re the one who is accountable to your savings rate. Of course, factors such as inflation play into your savings rate. That’s where you can make adjustments though – if you really want to maintain your savings rate, you will find a way of creating an additional stream of income or cutting an unnecessary expense.
You could track your income or your expenses independently; however, one doesn’t mean much without the other. If a person is making $500k a year, you might think, wow, they’re doing really well. But if they’re spending $600k a year, they’re situation is unsustainable and probably pretty stressful.
Your savings rate tells you so many things about your financial health and is easy to track – it doesn’t take me longer than one hour a month using my spreadsheet to calculate this significant number, crucial to all savvy savers’ journeys. When asking yourself ‘what’s a good savings rate to retire early?’ make sure you are also asking yourself if you are creating a life you can love now as well. [...]
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17 December, 2022Apply / Evaluate / Expat Money / Financial Independence / InvestA common dilemma many people face: to invest in property or stocks? You are in the fortunate position of having an emergency fund saved and some excess cash. What to do with it? On the one hand, you have people who swear by real estate. The stock market is just fancy gambling, they say. Bricks and mortar are what you need. Something tangible; you can see your investment. Another train of thought offers a completely contrasting point of view: who wants the bother of property when you can invest your cash in stocks? You can make a trade in about 10 minutes while sat at your computer. And so, you find yourself in a conundrum. This article presents a comparison – to invest in property or stocks: 10 things to consider.
Property vs Stocks: 10 things to consider as an expat
This is even more complex as an expat: do you invest in property in your expat country or your home country? Or somewhere completely different? You may not be able to contribute to a pension account in your home country and there might be challenges investing in the stock market from abroad. Which currency to invest in? Where should your funds be domiciled? What happens when you move back home? What are the tax implications? These are valid questions, and there may well be simple answers, depending on your nationality and country of citizenship. But it doesn’t stop it from being daunting before you start.
To invest in property or stocks: 10 things to consider using the UK property market as an example throughout this article: upfront capital investment, capital appreciation, fees and costs, passive income potential, leverage, emotional risk, time investment, risk of loss and returns. Exact figures and information will differ depending on your nationality and expat country. This is not financial advice, and it is necessary to do your own research before investing.
It’s also worth noting that both investing in property and stocks are complex areas in themselves. Within property investment, there are long-term rentals, short-term rentals, flips, student housing and so on. In terms of the stock market, there are single stocks, ETF/index funds, bond funds, options, forex trading, shorting stocks etcetera. The purpose of this article is to give a broad comparison against the 10 factors. Of course, there will be nuances depending on the method you use. However, it’s a good place to start your research.
1. To invest in property or stocks: Upfront capital investment
Property: very high/ Stock market: low
The major issue with property is the down payment required. Depending on the country you are investing in, you will need anything from 5-30% of the property’s value to purchase. That means you will most likely be saving in cash for a period of time before investing (even years), leaving your cash exposed to devaluation by inflation. On top of the deposit, you will need to pay hefty fees to the solicitors, and possibly searches, valuation, repairs, maintenance, taxes, stamp duty, insurance, document postage, broker, and arrangement fees. And that is everything goes well!
Property sales regularly fall through at various points in the often-lengthy purchasing process, which can leave you having paid out money with no refund. As an example, to purchase a property for £150k, I saved £38k deposit plus I paid an extra £10k in fees. To buy the house set me back almost £50k (Dh225k). In the to invest in property or stocks: 10 things to consider debate, upfront capital investment puts many people off property.
On the other hand, purchasing stocks requires almost no upfront investment. You can open an account with a broker such as Interactive Brokers for free and just pay the money transfer costs (Dh100-150). You can then purchase ETF funds such as VRWA for as little as $5 with an ongoing charge of approximately 0.25.
2. Property versus stocks: Capital Appreciation
Property: yes, but varies widely/ Stock market: Yes, but fluctuates regularly
A big reason people buy houses is because they tend to increase in value over time. According to Rightmove, the average increase for a UK property over the last decade is 53% at the time of writing in 2022. It is trickier to find historical appreciation rates for the UAE property market and it tends to fluctuate widely; property can increase by 300% one year then decrease by 11% another. On the whole though, real estate in the UAE has increased massively in value over the past decade. Of course, whichever country’s statistics you are looking at, it is going to vary again depending on the region and type of property, so these figures are very broad and generalised.
The stock market fluctuates widely as well, depending on which country’s market you are analysing, economic conditions and public sentiment. If you invest in a single company, it depends on that company’s earnings. In terms of the entire stock market, I calculated that an initial investment 10 years ago in a global, diversified ETF fund would have increased by 40%. Again, this is generalised and fluid. It is slightly less appreciation that property, but there are less fees involved, which will be explored in the ‘returns’ section.
3. investing in real estate or equities: Fees and Costs
Property: high/ Stock market: potentially very low
With property, the initial fees and costs are high. As detailed above, as well as a 5-30% down payment, you will likely need money to pay for the solicitors, and possibly searches, valuation, repairs, maintenance, taxes, stamp duty, insurance, document postage, broker, and arrangement fees. This is just the upfront costs though. When you own property in a different country, it is likely (and advisable) to use a property manager, who may take up to 10% of your rental income as their fee. In return, they will manage the tenants, respond to issues, and check on the property for you. You are also liable for maintenance and improvements to the property and insurance, which can be costly for homeowners.
For stock market investors, the ongoing fees and costs can be incredibly low if you invest wisely. As explained above, you can open an account with a broker such as Interactive Brokers for free and just pay the money transfer costs (Dh100-150). You can then purchase ETF funds such as VRWA for as little as $5 with an ongoing charge of approximately 0.25. However, if you choose actively managed funds, or even worse, a savings plan, you can be duped into paying a large percentage of your returns in seemingly ‘low’ fees. For example, if a fund manager or advisor charges you 1.5-4%, you might think ‘that’s not very much’. But over the long term, it can reduce your gains by up to 78%. The key with the stock market is to keep fees low.
If your situation is particularly complex or you would feel better speaking to a financial advisor, ensure they are a fee-only advisor and interview them to check that their services align with your values. Or even better, check out Steve Cronin’s website and this awesome expat financial independence workshop. This is the perfect workshop to ensure that you can become a DIY investor and keep your fees ultra-low.
4. Top of the 10 factors for some: Passive Income
Property: Income, yes, passive, no/ Stock market: yes, eventually
With property, if you have a property manager and an accountant to file your taxes, technically it can become a passive source of income. Certainly, it’s going to be less work than working a full-time job. However, the property manager is going to contact you to confirm maintenance work etc. and there generally are issues that regularly crop up. Unless you’re a cash buyer, you have also got to consider the mortgage: re-mortgaging every 2-5 years, plus if it is interest-only, do you have a plan to pay the mortgage off? You could also have troublesome tenants, a market crash or negative equity to deal with. Nevertheless, once the mortgage is paid, you could have a reliable source of rental income, which generally keeps pace with inflation.
Using the 4% rule, you can calculate how big your stock market investment portfolio needs to be before you can start withdrawing from it to support your lifestyle (4% is the amount you can withdraw for 30+ years and never run out of money, assuming an 8-10% rate of return). To flip it and work out your total amount, use the x25 rule. This is where you take your annual expenses (or the annual expenses of your ideal life) and multiply by 25. The number you get is what you need to have saved and invested to not rely on active income (working for money), as you can safely withdraw 4% a year to cover your expenses. Let me give you an example:
$40,000 (annual expenses) x 25 = $1,000,000 (financial independence number)
Clearly, getting to $1million for most people is going to take some time and effort. Once you’re there though, in theory, you only really have taxes to consider before you can sell and withdraw from your retirement pot as easily as you make a transfer between banks. With the stock market, the challenge lies more in the mental games of patience and staying the course on the journey. If you can hold your nerve through stock market highs and lows, a (relatively) passive income stream awaits you on the other side.
5. Leverage in property and stock market investing
Property: yes, absolutely! / Stock market: Not advisable
A real benefit of property is the mortgage market. Leveraging other people’s money to purchase a more valuable asset for yourself is made accessible by mortgages with low-interest rates. The premise is that despite paying only 5-25% of the value of the asset, you can acquire a much more expensive and appreciating asset. The tenants (in theory) should pay the mortgage plus interest and at the end you own the asset outright and can either sell or continue collecting rent as cash flow. Of course, this is simplified, but leverage is one of the biggest benefits of investing in property.
On the other hand, leveraging other people’s money to buy stocks (margin trading, or taking a loan from the broker to trade) is risky and not advisable. Not only are you at risk of losing your money, but you can also lose more money than you originally invested if the stock price drops, or the broker issues a margin call (an immediate demand to repay money). Unlike a mortgage, the borrowing is exposed to greater levels of volatility in the market. Therefore, unless you are willing to take the risk of margin trading, you are limited to invest your own funds and income.
6. what are the emotional risks of investing in property vs stocks?
Property: Medium/ Stock Market: High
So far in this comparison, it seems that the stock market is the obvious choice. But when it comes to emotions, the stock market is a much bigger risk. Emotions are tied up in property for sure; a mistake many investors make is investing in a property they would like to live in over what works best for the numbers. However, it takes so long to buy and sell real estate (3-6 months in the UK) that you will have chance to consider your options, and if there is a market crash, it’s near impossible to panic sell.
On the other hand, stocks are quick and easy to buy and sell, meaning that if you panic during a downturn, it won’t take you longer than 10 minutes to destroy your hard work. The hardest thing about the stock market is the mental discipline to stay the course despite market conditions. It’s impossible to separate emotions and investing, but if we can learn habits and discipline and develop a supportive community, we’ve got a fighting chance.
7. Time Investment for different investment vehicles
Property: medium to high/ Stock Market: low
To make the purchase, property takes more time than the stock market. After you have invested some time learning about the stock market (you can learn as much as you need to do to DIY invest in one weekend), you can spend less than an hour on your investments each month. That’s if you invest in a passive ETF/index fund; if you trade individual stocks or delve into more complex methods such as options or forex trading, your time investment will be considerably higher.
With property, the purchase will likely take much longer. If you’re a cash buyer and there’s no chain (the sale depends on another sale), it may be a smoother process. In all likelihood, once you have put in an offer, the process will take 3-6 months if all is well. Between searches, solicitor interactions, valuations, gathering documents and so on, your time investment will be significant.
This is also true once you have made your purchase. Even though you may hire a property manager to sort out issues that crop up with your tenants, the final decision on repairs, maintenance, improvements, tenants etc. will be yours. When you invest in an ETF (exchange traded fund), the most time you will have to spend on your portfolio a year is to re-balance and possibly to consider your strategy when you move to a different country.
8. Liquidity and Flexibility of property vs stocks
Property: no/ Stock Market: yes
Property has virtually no liquidity and flexibility as it’s time-intensive to sell and liquidate your asset. You may receive monthly cash flow, but if you need the capital gains returned to you quickly, property may not be the investment vehicle for you. On the other hand, stocks are renowned for their liquidity and flexibility. You can sell your stocks and receive the money in less than a week usually. Wherever you live in the world, you can access your account. If your property is located in a certain country, you have to be there to visit.
However, it may not always be a benefit to be able to liquidate your assets quickly and easily. It increases the chances of making mistakes and impulsive buying and selling of stocks or funds you may later regret. Having an emergency fund in cash which you can easily liquidate may ease the need or desire to sell your investments. You could also hold some money in a flexible asset and keep some tied up in property to diversify and balance your portfolio.
9. Risk of Loss: real estate vs the stock market
Property: yes, it’s possible / Stock Market: yes, it’s possible
With any investment, your capital is at risk. Keeping your money in a savings account at the bank is putting it at risk to devaluation by inflation. For example, the UK property market crashed in the 1950s, the 1970s, the 1990s and of course, 2008. The global stock market crashed in 2000, 2008 and 2020 (and many more times before that!).
The worst thing you can do is panic and sell all your investments at a ‘loss’. When it comes to investing, having a contingency plan can protect you from impulsive decisions no matter your investment vehicle of choice. Deciding what you will do to manage and reduce your overall risk can help, things like:
Build an emergency fund
Diversify your investments
Decide what you will do in the case of a market downturn
Develop a range of highly paid skills to create cash flow
Educate yourself
Assess your risk tolerance and rebalance your portfolio in line with it
Dollar cost averaging (automating your contributions so you invest regardless of market conditions)
10. Last but not least of the 10 factors: Returns
Property: yes / Stock Market: yes
Both property and equities are viable and reputable investment vehicles. The average return of the S&P 500 over the last 30 years is 7.31% (adjusted for inflation). Net rental yields on UK properties fall between 5% and 8%, so after factoring in fees, returns are similar to the stock market. However, returns vary massively by region, country, property type and strategy. A person investing in a studio flat in inner London for short term rental will expect a different return to a family home in Birmingham. The same is true for the stock market; the funds or stocks you invest in and the fees you pay will determine your exact return. For both investment methods, long-term holding of assets generally warrants the best returns.
Beating the market is extremely difficult and is mostly down to luck. It’s much more favourable for you to make a personal plan as an investor following careful consideration of your personal goals. Rather than face the stomach-churning, out-of-control feelings of trying to time the market and speculate based on economic conditions, sticking to a plan suitable for you will guarantee a much higher rate of success.
Need A Bit Of Support with your finances?
If you would like to book a confidential financial accountability coaching session to help you work on your finances or stay accountable to your goals, book a free 15 minute discovery session below, or send me an email at [email protected] or drop me a line via the contact form and we can see if we’re a good match.
Good luck on your financial journey – congratulations on taking the leap. [...]
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19 July, 2021Apply / LearnAh, holidays. A time to relax, unwind, eat good food, spend time with the family and return home refreshed and ready to take on life again. Casual check of bank account and….whaaaat? We spent HOW MUCH? Unfortunately, that chilled holiday mood is quickly replaced by panic and anxiety, followed by the realisation that you will have to spend the next few months paying off that couple of weeks escape. Suddenly, real life returns, and regret sets in about that extra cocktail and the fancy restaurant because, why not? ‘We’re on holiday after all!’ The gentle lapping of the waves at your toes as the hours tick by feels like some distant memory. Sorry to be a party pooper but money matters while on holiday, just as calories still count (I wish they didn’t, believe me!).
Just because you do due diligence before you go by getting good flight deals etc., doesn’t mean the budgeting stops there. There are ways to enjoy your holiday and not blow your budget. Go on a well-deserved vacation while still saving and investing for your future. During the booking process, the answers to the questions where and when really do matter. Travelling outside of school holidays if you don’t have children will save you a lot of money on flights and hotels that you can then use for spending during your vacation. Also consider travelling to a place where your home currency will go further. For example, you will get a lot more bang for your buck in Thailand than the UK. However, wherever and whenever you are travelling, there are ways of enjoying your holiday and sticking to your budget.
Here are my top 7 tips.
1. Research the best way to convert currency before you go on holiday
Generally speaking, it’s advisable to exchange money before you travel, especially if you’re travelling somewhere unknown to you where the language is different. Currency conversion desks in airports tend to overcharge so only use these as a last resort. Try banks or large currency exchange houses such as Al Ansari or Lulu Exchange. Check for fees and exchange rate to ensure you’re getting the best deal.
It’s also worth checking what your bank charges for foreign transactions on your credit card as well as ATM fees in your destination. You may find that you’re rewarded with extra credit card points for using your card abroad, but the fees might outweigh those rewards. While you’re checking this with your bank, make sure you let them know the dates you’ll be travelling too. That way, they won’t block your account for suspicious activity if you use your card on holiday.
2. Pre-plan activities
This can help you establish how much money you need to exchange and take with you. Look at the area you are staying – what attractions are in the vicinity? What do restaurants generally charge? Can you look at a few menus online to figure out general costs? What sorts of activities are you planning to do? If you’re sightseeing, what are the entrance fees for museums and other places you will visit? It’s great to be spontaneous while on holiday, but no planning whatsoever might equate to a money mishap. Perhaps map out ¾ of your days and leave the rest to ‘whatever you feel like doing at the time’. Honestly, your wallet will thank you.
3. Use cash envelopes
This is the ultimate holiday hack and probably the one that will save you the most money. If you exchange cash before you go as outlined in tip 1, then plan your activities as explained in tip 2, then you should be able to stuff cash envelopes before you go for different categories. Categories could include eating out, sight-seeing, beach, pool days, room service, kids’ entertainment etc.
Although this might seem restrictive, it’s actually freeing and allows you to fully enjoy your holiday, knowing that you have budgeted for it. When you put that extra meal on your card with a starter and dessert because ‘we’re on holiday after all and YOLO’, do you ever get a niggly thought in the back of your mind? Can we afford this? How much have I actually spent at these restaurants? I’m dreading looking at the statement when I get home…paying from a cash envelope will alleviate these anxious feelings.
Obviously having a lot of cash is not always safe in all countries, so you may do some cash envelopes and some credit card purchases. Or ask your hotel whether they have a room safe or place to keep valuables before you go so you know whether it’s safe to take a large amount of cash. When you’re out and about, only carry enough cash to pay for that outing.
4. Consider self-catering accommodation
Consider self-catering accommodation or a hotel that includes a kitchenette. This is a must for me now that I have 2 children to feed as eating out as a family of 4 can quickly add up. This doesn’t have to mean that you never eat out, but the times that you do will be more special, and you could enjoy a high-end restaurant guilt-free if the rest of the time you’re cooking at home.
Other ways you can save money on accommodation and food are by staying in Airbnb or researching whether there are house-sitting opportunities in the area, especially if you are travelling during a school holiday. People might have pets or just want someone to stay in their property for security reasons, and you could end up staying in a beautiful house for free (except utility bills). An added bonus is access to laundry facilities, so you don’t have to pay extra for the service.
Obviously, you should weigh this with the benefits of staying in a hotel, for example quick and easy pool and beach access. In summary, there are options to have a luxurious but frugal family holiday if you do a bit of research.
5. Eat local
The price difference between local eateries and tourist restaurants can be eye-watering. Eating local ensures you have a more authentic experience of the place you’re visiting too. I backpacked across South Africa, Zambia, Zimbabwe, Botswana, Australia, New Zealand, Peru, Brazil, Bolivia and Argentina when I was 23 and some of my best memories are getting to know locals, and my largest saving was eating at local cafes instead of luxury tourist restaurants. This freed up money for experiences, such as sky diving, white water rafting down the Zambezi River and diving with great white sharks (yep, back before I had kids I did indulge in a spot of adventure!). As long as the place is clean, go ahead and give it a try (keep some Imodium handy just in case though!). This sort of activity helps children broaden their life experiences too.
6. Supermarket snacks are your friends!
Stock up on snacks and drinks and pack a cooler bag for days at the beach or by the pool (if the hotel will allow it). A lot of my tips mention eating, but the biggest areas that people overspend while on holiday are food, accommodation and attractions/entertainment. Tourist areas know this and overcharge for snacks and drinks, aware that children often get hangry! You would be surprised at the amount you save by going to a local supermarket and buying juice, fruit, packs of raisins and nuts and cereal bars. This is especially useful if you’re doing a lot of walking with children, such as around a museum, zoo or theme park.
7. Try the public transport
This is where planning helps save you money. If you give yourself plenty of time to get to your attraction or day out, you could try the bus or train system in the country (obviously if it’s safe to do so). Again, the experience will be more authentic and will save you a lot of money in comparison to hailing a taxi. Waving down a taxi means waving goodbye to your holiday budget!
If you will be travelling about quite a bit, consider renting a car or even staying in a campervan. You have to decide what type of holiday you want and then research the options available to you. But taking taxis all the time will eat into your budget and what would you prefer – the comfort of an air-conditioned taxi or going jet-skiing (insert any memorable holiday activity here)?
In summary, researching 3 major areas (accommodation, food and entertainment) before you leave as well as planning how you will pay and how you will travel can save you a small fortune while savouring your precious holiday time. You can still enjoy time at the beach or sight-seeing but making a few small changes can keep your budget on track. Make sure you start a sinking fund for your holiday spending beforehand and give yourself plenty of time to save to take the stress off your monthly budget.
P.S. One last thing before you rush off to pack your bags – souvenirs and gifts… Think carefully before buying that trinket from the market stall – will it end up collecting dust on a shelf? Or worse, be thrown away? Often, it’s not the souvenirs that we appreciate long after the vacation has vanished – it’s the memories and the photographs. You can still give money to the market stall owner if you would like, but bringing a bunch of souvenirs home is overrated.
The same goes for buying gifts for people back home – do they really want a tacky trinket from a place they never visited? Or a fridge magnet cluttering their kitchen? If you really want to buy gifts for people back home, consider buying them something they can use or wear. Possibly a scarf that they can wear in your home country or some food or toiletries. For example, I like to bring people camel soap from the UAE as it’s something a bit different and exotic, but they can use it and it won’t sit around on a shelf or at the back of a cupboard.
All that’s left to say is Bon Voyage! It is possible to have a budget break, enjoy it to the maximum AND invest for your future! Happy holidays
Need A Bit Of Support with your finances?
If you would like to book a confidential financial accountability coaching session to help you work through these steps or stay accountable to your goals, send me an email at [email protected] or drop me a line via the contact form and we can see if we’re a good match.
Good luck on your financial journey – congratulations on taking the leap. [...]
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30 January, 2022Apply / Expat Money / Invest / LearnInvesting can seem convoluted and risky before you get started. There is so much information – what are stocks, equities and bonds? Which ‘stocks’ should I invest in? What platform should I use? What do all these little squiggly lines mean? What is the S&P 500? The Dow Jones and the London Stock Exchange? Should I be investing in Bitcoin? And on and on.
I could write a page of questions that left me blank, and the answers, I thought, would be much too complex for my brain to comprehend. I always thought investing was for people with more knowledge than me; people who wore suits and worked on Wall Street.
In addition, when you work as an expat in the Middle East, there isn’t a ‘pension’ or ‘retirement’ system as there is in many Western countries. Instead, they usually offer end of service gratuity – typically companies pay out a month per year of work as a lump sum, or some similar contractual deal. A recipe for potential disaster.
This mix of a negative mindset and a lack of financial literacy landed me an investment in a very bad product – loaded with fees, very expensive. I had no idea – all I knew was that a financial advisor, someone with much more knowledge than me, was looking after my money, investing it in the stock market and essentially, building my pension for me.
Luckily, a few years later, I ‘woke up’ and exited my savings plan, discovered that the stock market is actually not all that scary and you don’t have to be an old white guy in a suit to understand it or invest in it. That being said, you do need some knowledge of how the stock market works, the various indices and funds available, brokerage platforms and fee structures.
But not everyone is all that interested in reading about exchange traded funds and deciding on the correct asset allocation. That’s where Stashaway comes in – confidently and safely invest in the stock market without your returns being eaten away by fees.
What is Stashaway?
Stashaway is a DIFC (Dubai International Finance Centre) and DFSA (Dubai Financial Services Authority) regulated robo-advisor, which means that you put your details in and choose your risk tolerance, then they use sophisticated algorithms to automatically invest and rebalance the money.
Thus, the fees are lower than a financial advisor, whose time you are paying for to manually select the funds and invest your money. However, you will likely find it slightly more expensive than full do-it-yourself, where you pick, invest, and rebalance your portfolio.
Founded in Singapore in 2016, Stashaway now has $1 billion USD in assets under management and people of 174 nationalities living in 145 countries choosing to invest with them. They pride themselves on offering a simple method of growing money with a transparent fee structure – sounds good to me!
How do I create an account?
Creating an account is easy and free – just enter and verify your email and enter a couple of other details. It takes literally minutes to set up an account. Then, you send them a copy of your ID and proof of address (can be a rental contract or bank statement or utility bill). This takes a couple of days to get verified and then you’re ready to invest. I found it to be a straightforward process.
Assessing your risk tolerance
Once you’ve created an account, the next step is to assess your risk tolerance. In ‘General Investing’, you choose whether this is a ‘core’ portfolio (lower risk) or ‘higher risk’ portfolio to begin. Then Stashaway will ask you how much you’re willing to risk, giving you a scale of how likely your portfolio will drop in a year, depending on your risk tolerance.
For example, if you select ‘more conservative’ in core portfolio, there is a 1% chance that your portfolio will lose more than 7.1% in a year, whereas selecting ‘more aggressive’ gives you a 1% chance that your portfolio will lose more than 22% in a year. I like this feature as it prepares investors for the downturns ahead of time, and the ‘losses’ (although they aren’t real losses unless you sell) are what worry a lot of people.
Different types of portfolios
I love this feature of Stashaway! You can choose between ‘General Investing’, ‘Goal-Based Investing’ and ‘Simple’ portfolios. The ‘General Investing’ option is what I discussed in the previous section – you have either a core portfolio or higher risk portfolio option, you select the risk, and you can then see a sample below of the sectors in which your money will be invested, for example, government bonds, commodities and equities. There is an option to click on each one to read a definition as well as name your portfolio.
Another portfolio type that Stashaway offers is ‘Goal-Based Investing’. There are typical goals people might have such as retirement, wedding, new vehicle etc. For each goal, there are specific questions to guide you on how much you need to save per month. Alternatively, if you want to save for a goal and bypass the specific questions, you can click on ‘I already know how much I need’ and just enter your total amount and the time you have to achieve it. Stashaway will then calculate what you need to save per month to achieve it.
Finally, with ‘Stashaway Simple’, you can save money with an average 1.2% return per year with no minimum or maximum balance and no management fee. It’s not going to beat inflation, but you can treat this like a savings account for short term goals or your sinking funds/ emergency fund if you wish, as it bears very little risk. It invests your money in a Sharia compliant money market fund, so it beats most savings accounts in banks, but has little risk.
Transferring money
One of the best features of Stashaway is that the stress and hassle of transfer fees are eliminated. The funds are invested in US dollars, but you can transfer AED from your bank to their local bank so just pay the cost of a local transfer (maybe 1-2 dirhams). The FX rate charged is 0.08% on the spot rate. You can view your investments and transactions in $US and AED.
I transferred 2000aed in January 2022 and after the conversion, received $544.07. To compare with xe.com, 2000aed is converted into $544.58. This is an excellent transfer rate and allows you to invest smaller amounts more regularly (every paycheck if you wish) and of course you have the option of transferring directly in USD to avoid the fees.
With DIY platforms such as Interactive Brokers, you can also transfer small amounts if you wish, but you will likely pay higher transfer fees with the use of an intermediary bank. Hence why people usually wait until they have $5000 or more before making international transfers to reduce the fees.
Investing the funds
Once you’ve transferred the money, Stashaway will invest it for you in a couple of working days. You can then click on overview, assets, projections and about portfolio to learn about exactly what has been invested in and how each sector is performing. Stashaway’s robots will automatically rebalance for you if the markets skew your portfolio to too much or too little risk exposure.
You can click on each asset class and fund to read about it at length if you wish. Your portfolio, although domiciled in the US, is globally diversified and you will be invested across a number of sectors and fund types. Any dividends you get paid are automatically reinvested for you and will appear on your ‘transactions’ tab.
Fees vs service
So, the question on most people’s minds will be: how much does all this cost me? It is free of charge to set up and close your account, plus to make withdrawals and transfer money between your portfolios.
The annual fee of the general and goal-based portfolios is between 0.2-0.8%, and the bigger your portfolio, the lower your fee (all the more incentive to get more money invested!). For example, the first $25,000 is charged at 0.8% and portfolios over $1 million are charged at 0.2%.
There is also the 0.08% conversion rate if you transfer money in AED, but of course you have the option of transferring directly in USD to avoid that cost. For the Stashaway Simple account, there is a 0.38% fee, which is embedded in the 1.2% projected return. Plus, if you sign up using my link you will get your first 6 months of investing for free!
The service is excellent – the FAQs and blogs are informative and straightforward, designed for the everyday person who isn’t an investing expert and every time I’ve contacted them with a question, they are quick to respond and extremely helpful.
Overall, for the service you get, this is an excellent service in my opinion. I even got a little reassuring message which popped up when I logged into my account when the markets had gone through a downturn.
How do I know my money is safe?
Another question people often ask is: what if Stashaway go bust? Will I lose all my money? My retirement – oh my days, I couldn’t even imagine! I want to preface this section by reminding you that nothing is ever 100% guaranteed – your high street bank could go bust and even if you keep your money under your mattress, it could be damaged and will definitely be being slowly devoured by inflation!
Having said that, Stashaway have put measures in place to protect your money in the most stringent way possible. In terms of the website, they have high levels of security in place and 2 factor authentication required, as well as notifying you of any transactions on your account.
Your money is kept separate from Stashaway’s money – they keep their investors’ money in a trust or custodian account that they can’t touch. For General Investing and Goal-based portfolios, your deposits first go to a Citibank UAE trust account. Then, your purchased securities go to a custodian account through Saxo Capital Markets. For StashAway Simple™, State Street Custodial Services (Jersey) Limited holds your funds.
Additionally, Stashaway is regulated by the Dubai Financial Services Authority, which monitors its business and ensures that Stashway complies with laws and policies. It protects the customer from fraud, dishonesty or misconduct from any financial services provider – click here to read more.
If you have been wanting to start saving for retirement, but not sure where to start, Stashaway could be just the ticket. The platform is super easy to navigate, you can invest at your risk tolerance with low fees and withdraw your money at any time. Plus, what’s even better is that they’ve recently introduced ESG (environmental, social and governance) and environmental portfolios to their app so you can invest in ethically sustainable companies that you want to see grow.
Good luck on your investing journey and congratulations for taking the leap.
Do post any further questions below and I am going to keep adding to this blog post as the year goes on to keep you updated about my Stashaway experience – don’t forget to follow on Instagram for all the updates.
However, I am not a certified financial advisor, and you should always do your own research and due diligence. I hope this article has given you food for thought, but all information is based on my own research, experience and opinions so I cannot take accountability or responsibility for your decisions.
This page may contain affiliate links, which means that if you click a link and make a purchase, I might make a small commission at no extra charge to you. Click here to read the full disclosure and privacy policy. [...]
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