Wealth management remains a top priority among many residents in the UAE, but unfortunately, only a few are able to set aside a huge portion of their income to secure their retirement or fulfil their financial goals in life.
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According to a recent survey, more than 35% of people living in the UAE are able to save only 10% of their income, while less than 20% manage to leave 10% – 25% of their earnings untouched. Nearly 28% are not saving at all.
It is always smart to have a game plan going into the following year, especially around what you are trying to accomplish savings-wise. And seeing the uncertainty of the year 2020 with the pandemic hitting millions, it is more important now than ever. So, to head into the new year on a strong financial footing, you may want to get a few things in order now.
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Here are 6 steps that you can take now for a strong financial new year.
Create A Budget & Clean Up Your Finances
For better wealth management, it is always preferable to take stock of your expected income for the year. You must take into account the priority expenditure for the year like, EMIs, insurance, rent, children’s education costs, healthcare, utilities and so on. Also, keep a check on the discretionary expenditure like, vacations, eating out, lifestyle etc. The key is to make meaningful allocations towards priority items, find ways to reduce expenditure, and increase savings and investments in any manner possible for better wealth management. For instance, you may have online video streaming subscriptions along with a DTH connection. You can always pick one to save some money.
For a smooth budgeting process, you must set goals and allocate money towards the achievement of goals. Goal setting is the first step towards any investment, and the start of the financial year is a good time to set goals, be it taking a holiday abroad, buying a car, or saving for retirement.
Review Your Financial Goals
It is quite normal to get completely off track sometimes, because you may get caught up in other things, but it is always wiser to take a look at your financial and personal goals and ensure that they are aligned. Assessing your portfolio and tweaking it, if necessary, can be of a great advantage.
If you have a wealth management advisory, you can make an appointment to meet them before the end of the year to make sure you are heading in the right direction. If the investments are automated, it is a good idea to speak with someone just to get a fresh perspective.
It also may be the right time to put yourself out there for a salary increment or a job promotion. Listing all the things that support why you deserve it, and then getting feedback from someone in your organization that you trust can prove beneficial. Once you list everything down, you can ask yourself what it is you feel you deserve. This way, by the time it comes for your annual review, you will be prepared.
Mind Your Taxes
When the year comes to a close, ensure that you are doing everything you can to save on taxes. You can take a look at your investments. If you have sold or wish to sell some stocks that has done really well this year, you can think about other equities you may want to shed that are not doing that great.
This is known as tax-loss harvesting. By selling assets at a loss, it helps make up for some gains that you made. It also reduces the amount of taxes that you will have to pay. Additionally, you need to ensure that you use up the money stockpiled in the flexible spending accounts that allow payrolls to put aside cash on a pre-tax basis for medical costs. You usually have until the end of year to spend the money you saved.
Make A Savings Plan For Next Year
Just like tax-planning, investments and savings should not be left for the year-end. There should be monthly exercises. This can help you distribute your investment contributions over the year, and you would be able to avoid the strain of making lump sum investments near March.
For instance, you can invest in an ELSS mutual fund or PPF to save taxes or can also open an e-NPS account and increase your tax savings. In case, you already have an investment plan, you can step up your investments in line with your salary hike. You can also take stock of your emergency fund and top it up in a meaningful manner. This fund can have a minimum 3-6 months’ worth your current income in a fixed deposit, and should be touched only during emergencies.
If there is something you want to spend money on this year, like a vacation or real estate, you should plan for it now. It is smart to sit down and do the research and figure out what amount you need. Determining how much money you need to set aside per pay period to reach your goal can be very beneficial and will not put a burden on you. You can always consult investment management Dubai for a clearer view and better understanding on how you can make investment and saving plans for next year.
Invest in Gold
Gold is regarded as a great store of wealth. Gold is a commonly held asset in well diversified portfolios and it can be used to hedge against inflation. Wealth management advisors recommend setting aside 5% of the money for gold, to avoid getting your savings eaten away by inflation. Additionally, this precious metal is a safe haven and does well when equities do not perform, thus adding a good diversification to mutual funds and other traditional investments. Therefore, gold is a good investment for everyone.
Just because you have already parked your Dh4,000 in the other investment options, does not mean you can now sit down and wait for your money to grow. It is crucial to keep your investment growing and aim to save more and invest it. All these investments should be done regularly on a monthly basis or annual systematic investment plans (SIP).
- Top Up Your Coverage
Beginning of a new financial year means you must take stock of your existing insurance coverage. If you or any of your family members do not have health insurance, you must get a policy without wasting further time. If you are a dependent and do not have term insurance, you must get a policy and secure the long-term income needs of your dependents. If you already have insurance, you can examine the need to top up your coverage to bring it at par with your current income needs and lifestyle.
With these simple yet essential steps by wealth management advisory, you will begin the financial year on a stronger note and end it wealthier.
Asfar is an Independent Financial Advisor and Associate Partner with Continental Group based in Dubai, UAE with over 12 years of experience in the region. His clientele includes high networth individuals, corporations, C suite executives, business owners, and entrepreneurs in the region.
Although with proper planning and consistent effort, you can save, invest and distribute your own finances. It is always good to get some professional advice. If you need help in planning your finances in the short, medium, or long term, I can help you do so. You can write to me with your questions and comments to firstname.lastname@example.org