Finance
5 FINANCIAL PITFALLS EVERY EXPAT TEACHER SHOULD AVOID
We don’ t always want to admit it, but one of the main reasons people choose to move to the Middle East, is for financial gain. The opportunity to earn a higher tax-free salary, along with the social aspects the region has to offer, is hard to resist. As an asset manager, I have conversations daily with my clients to ensure they are maximizing the financial opportunities available. On paper, this seems relatively straight forward, however there are many errors people make which adversely impact their financial planning. In this article, I would like to share 5 financial pitfalls to avoid.
Credit Card Debt
As you will be aware, it seems a credit card is mandatory as part of a bank account application in the region. Unlike most jurisdictions in the world, it is extremely easy to gain credit from financial institutions. A credit card used in the correct manner can gain many financial rewards such as airmiles and cash back. However, when used inappropriately, they can lead to a slippery slope of accumulating debt. The question I always ask is,‘ If you cannot afford to buy it from your debit card then can you really afford it?’. Most of us will pay bills via a credit card and use one for every day expenditure, which is fine. My tip for this method is to use the auto clear facility that all banks offer. This ensures that when your salary hits your account your credit card balance is automatically cleared.
Pension contribution
Most of us have come from structured financial jurisdictions, where certain financial benefits are provided as common law. In most jurisdictions in the world, a company must offer a pension contribution facility for employees. In this region, this is not the case. It is up to us as individuals to ensure that we independently replicate these provisions to ensure that we are not exposing ourselves to a shortfall in retirement. If you have not started to do this as yet, start now.
Local interest rates
Most local banks do not offer interest, with the majority of instant access accounts offering 0 % interest rate. With global inflation averaging 3 % it is essential we earn at least this to preserve future buying power. For example, $ 100,000 receiving 0 % interest over 5 years will lose 15 % purchasing power to inflation,($ 15,000). Investigate offshore accounts.
International life insurance
Most of us who own property or have a family, will have life insurance to ensure that in the event of death, our loved ones are taken care of and debts can be cleared. It is essential to let your existing insurance provider know you are no longer living in your country of residence. If existing policies are not converted to an international version, there is a strong chance the policy will be null and void. If you have not done this it means you could still be contributing to a policy which is no longer valid. Check this out today!
Shariah compliant Will
Any assets purchased in the UAE are subject to local law. The UAE is a shariah compliant jurisdiction. It is very important that a Shariah compliant will is taken out to ensure that in the event of death, the asset can be subject to the laws of our home country. The cost of a Shariah complaint will is in the region of AED 3000, in my opinion a small price to pay to protect our assets. This includes such assets as property, vehicles and cash held in local bank accounts.
Aaron is a certified Senior Financial Planner with over nine( 9) years experience in the financial industry. He is based in Dubai where he utilises his expertise representing Arlo Associates. Contact Aaron via email at aaron. crotty @ arloassociates. com