The beginning of every successful financial journey happens from ground zero – a point where you have no money and no work. Then, you find work and start earning. You grow in your career and earn more. Financial planning is that crucial aspect of managing your finances as you earn more. Its goal is to reach a point where your money does all the work for you and you can retire in peace with financial independence. Financial planning in Dubai requires knowledge of the laws, culture, and other unique and special traits of this geographical region to build and secure your wealth and retirement.
The 10 Basics of Financial Planning in Dubai
The basics or foundation to financial planning is the same everywhere in the world. That is why it is called ‘the basics’! So, whether you consult a financial advisor in Dubai or a financial expert in any other place in the world, these are the key steps you will be advised to take.
- Setting Financial Goals: Goal setting is always the first step in goal getting. When it comes to planning your finances, you first need to identify your short-term (less than a year), medium term (1-5 years) and long term (5+ years) financial objectives. Your financial consultant in Dubai will help you concertize these for you and also help you prioritize these goals based on the urgency and importance.
- Creating a realistic budget: Having set the goals, the next key step is to ensure that you are ‘earning’ in the real sense. This means, your income should be greater than your expenses. As you progress in life, your lifestyle will change and expenses will increase. Planning your career and income streams become important. Your personal financial advisor will help in allocating income effectively and also advise you on strategies for reducing unnecessary expenses.
- Diversifying income sources: Never put all your eggs in one basket for if the basket falls, you lose everything. Never depend on only one source of income because, god forbid, something happens to that, you stand to lose everything. Apart from building financial investments with the help of your personal financial advisor in Dubai, you should invest in education and skills for career advancement also.
- Debt Management: Debt is a double-edged sword. Used well and intelligently, it is a great wealth creator. But if you are even slightly reckless, it will burn you and destroy wealth in no time. Understanding and managing various types of debt. Befriend debt through proper understanding and also develop a plan to pay it off in time, starting with high-interest debts.
- Emergency Funds: An emergency is called so because it comes without warning. To ensure that you are not caught unaware in case of mishaps, medical issues, death, job loss and other events you cannot foresee, you should have an emergency fund. Its size will depend on various factors and that again, is the domain expertise of your financial advisor in Dubai.
- Insurance coverage: Another important financial instrument to ensure preparedness for unforeseen events is insurance. It is important to evaluate the need for life, health, and property insurance, choosing the right insurance policies based on your individual circumstances.
- Investment Strategies: There is a plethora of options for investment ranging from stocks to bonds, real estate to gold and luxury goods to commodities. It is critical to determine your risk tolerance and accordingly allocate funds to different assets.
Dubai has several free zones that offer favorable conditions for business and investment. Each free zone may have its own regulations, and investors should be aware of the specific rules governing the zone in which they operate. That apart, UAE has taken steps to allow increased foreign ownership in certain sectors, moving away from the previous requirement of majority local ownership. Finally, non-UAE nationals can own property in designated areas. However, regulations regarding property ownership can vary, and it’s important to understand the specific rules governing real estate transactions. A good personal financial advisor in Dubai like Pro Financial Solutions would be perfect to guide you on these aspects.
- Tax Planning: The goal of tax planning is to minimize your tax liability by understanding tax-efficient investment options. While corporate entities are taxed, there is no personal income tax in Dubai. However, it’s crucial to be aware of the tax implications of international income and business investments. For instance, UAE implemented VAT in 2018 and most goods and services are subject to a 5% VAT. Businesses need to register for VAT if their annual supplies and imports exceed certain thresholds.
UAE has also been working on establishing double taxation treaties with various countries to prevent the same income from being taxed in both the UAE and the investor’s home country. Enquire from your financial consultant in Dubai to understand the terms of these treaties if you are an international investor.
- Retirement and Estate Planning: Retirement years can be fulfilling provided you do not have financial worries. While calculating your retirement needs you should factor in changes in requirements for health, inflation and probably lifespan. Apart from exploring retirement savings options like 401(k), IRAs, etc., you should also create a will and establish beneficiaries. Check with your financial consultant in Dubai on how to minimise estate taxes.
While inheritance laws in the UAE are governed by Sharia principles for Muslims, expatriates can choose to apply the inheritance laws of their home country through a will registered in the UAE. Such a will needs to comply with local regulations.
- Being aware and updated: One of the key reasons to employ a personal financial advisor in Dubai despite being savvy is to be on top of various economic factors and market trends. Accordingly, the financial plans need to be reviewed, adapted and adjusted.
Financial Planning in Dubai in a dynamic environment
It’s essential to note that rules and regulations can change, and the above information is a general overview. For the most up-to-date and accurate information, you should consult with a good financial advisor in Dubai, for instance, Pro Financial Solutions which is familiar with the current laws and regulations in UAE.
Do not hesitate to reach out to them or make enquiries from them. It is their promise to take you from ground zero to the zenith of the mount of finance!