DUBAI 10 December 2017: Leading investment company National Bonds has launched a nationwide campaign to encourage residents in the UAE to confront challenges to saving head-on in a bid to turn the UAE into a nation of savers.
The UAE has a reputation for being a country of big spenders, but the firm wants to reverse this trend. By calling on members of the public to open up about their financial excuses, using the hashtag #SavingsExcuse, National Bonds aims to raise awareness about the challenges to saving and provide trusted advice on how to save.
So what better place to start than here. If you have a burning question for our resident doctor send it to: news@emiratesnews247.com.
Q: I am a working father with two school-age children and I am worried about the incoming VAT and the impact it will have on the cost of living in the UAE?
A: You are right to be thinking about the impact VAT will have on you and your family in 2018. As a first step, it is important to understand VAT and its impact on the consumer.
VAT is a tax on consumption applied to a number of goods and services at a rate of 5 per cent. Electronics, smart phones, cars, jewelry, watches, dining out and entertainment will all be subject to VAT from 1 January 2018. While education (school fees) is not taxed, associated costs such as school uniforms and private school textbooks will be. An excise tax, a tax on unhealthy products including sugar, will also be introduced at the beginning of the year.
It is important to note the UAE will remain tax-free in many ways, for example, income tax (a tax on your income will not be introduced). Since housing and education will remain tax-free, VAT should not make a big dent on savings, as some would expect.
While the tax will affect other areas of spending, with careful preparation, you can still save more in 2018. The fact that you are trying to plan is an essential first step!
Monitor your outgoings
As your outgoings increase, in this case due to VAT, it is important you keep track of your expenses. It may be a great opportunity to evaluate your spending habits and see where you can spend less. Differentiate between your needs and your wants
Pay yourself first
This means pay your bills before you do anything else. Once that is out of the way, put aside the percent of your salary that you plan to save each month (ideally 10-15%) and the rest is yours!
Spend responsibly
It is always a good idea to cut back on unnecessary spending, but in the light of the VAT, it is more important than ever.
Make sure you spend on what matters, even if it means skipping a meal out with friends and cooking at home instead.
Keep abreast of developments
As more information becomes known, keeping updated on VAT is the way to go. Keep up with local news and government websites to see what is or isn’t included in the tax, and factor that into your budget. This is an opportunity to reevaluate your spending habits, and you might be less tempted to dine out if it’s affected by VAT, so you can end up saving more than before.
I understand that as a professional and parent, it can be difficult to keep track of everything that’s going on. A financial planner can help you identify your financial goals and help you achieve them, whether that means saving or investing. For more information and advice on how to get started, contact a Financial Planner at: SavingsDoctor@nationalbonds.ae.
Happy Saving!
Note: The author, Meriem Zahouani, is a Certified Financial Planner at National Bonds