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