For expats, GCC countries often provide excellent job prospects and the chance to improve their earning potential. But on the flip side, it’s important to not get carried away, and remember to save for a rainy day and for eventual retirement. Extra expenditure on education, healthcare and unexpected emergencies can throw budgets out of balance – so it’s best to always have a cushion. Here are Xpress Money‘s top tips to save effectively for retirement.
Understand your goals
The first step is to have goals. How much money are you going to need on retirement? That depends entirely on where you plan to settle down. It’s always a good idea to understand what your retirement income should be, and work backwards.
Be disciplined
Many people spend their salary and business revenues as they come in, to meet commitments. They only save if anything is left over at the end of the month. A far more effective way to save is to put a percentage of your salary into your savings plan at the start of the month, and then manage your expenses with what’s left over.
Keep an eye out for favourable exchange rates
If you don’t have it, you can’t spend it. Many successful saves prefer to send lump sums back home so that the funds are securely saved away. Keep an eye out for when the dollar (and UAE Dirham) is the strongest against your home currency, and transfer savings back home when each dirham will go further.
Diversify your assets
While putting money in a savings account is often the default option for many, a more balanced portfolio can deliver better returns. Riskier assets have higher returns associated with them, while safer ones minimise the chance of losses. Some assets are good at generating regular income, while others appreciate over time to deliver capital gains. When correctly positioned, diversified savings plans help you meet your retirement goals without being subjected to excessive risk.
Start early
This might seem obvious, but far too many people leave retirement planning till the last moment – which leads to stress, and a big change in quality of life as you divert a large chunk of income to savings. The earlier you start, the more time you have to build up a substantial amount of savings and assets without compromising your quality of life.
Watch out for debt
Finally, be very careful about how much debt you take on. Debt has higher interest rates than savings accounts, which means you’ll lose money paying the servicing charges and interest. Some forms of debt – such as credit cards – can be extremely punishing if not handled correctly. The best way to save money is to first control debt, so that the money that would otherwise go into interest payments and instalments can instead be diverted into savings.
Budget better
Most of us don’t tabulate where we’re spending our hard-earned money. If you’re having trouble saving for the future, it’s a good idea to start monitoring and tabulating your expenses. How much are you spending on your gourmet coffee every morning? Is it really necessary to eat out three times a week? By understanding how you spend your money, you’ll be in a far better position to save it.
