Consumers cut back on debt and spending

After the shock of the global economic crisis, attitudes towards personal spending, savings, investing and debt are changing across the UAE.

A survey commissioned by The National in conjunction with YouGovSiraj shows that consumers have become more conscious of their spending habits and debt, with many people delaying major purchases.

Tarek al Samad used to drive to Dubai about once a week on shopping excursions, with most of the goodies he bought charged to credit cards. Although the accountant, 29, from Abu Dhabi has never run up huge debts, he has changed his ways nonetheless.

"I've stopped using my credit card entirely. I used to use it so much," he says. Not only that but he has noticed even this year's Ramadan is different in style. "We're living like sardines in our houses. The years before, we'd spend Ramadan mostly at restaurants and doing social activities." Across the UAE, residents have adopted similar belt-tightening measures in response to the global economic downturn. The results of a survey commissioned by The National in conjunction with YouGovSiraj show consumers have become more conscious of their spending habits and debts.

"For a while, as we first went into the crisis, there was a feeling that blind optimism would get us through," says Tim Searle, the chief executive of Globaleye, a Dubai financial advisory company. "That was clearly not the case. We are having a tough time at the moment." But the survey suggests people are addressing potential problems by paying off their existing debts. Contrary to some reports contending that the average UAE resident is loaded down with six-figure debts, only 10 per cent of those surveyed say they have more than Dh50,000 (US$13,612) in credit card bills. Almost 20 per cent say they do not have any debt.

Among other types of debt, the most common is car loans, which 35 per cent say they have, while only 13 per cent owe money on a mortgage. Twenty-seven per cent have a bank loan. In addition, most people say they are holding off on major purchases, with 70 per cent saying they have not spent more than Dh50,000 on a single purchase in the past 12 months. Of those who have bought a big ticket item, the most common purchase is a car (15 per cent) while 11 per cent have bought expensive gold and jewellery.

Particularly for expatriates, the crisis was "like a slap in the face", says Mr Searle, who has lived in Dubai for more than a decade. "You know, forget the Dh50,000 watch. You came to this part of the world in order to make yourself financially stable." Many residents have adjusted their priorities given the new reality. Fawzie Nahle, 24, was working for a property company last year before he was laid off. He now has a job in banking, with a salary of more than Dh100,000 a year but nonetheless is in the midst of a self-imposed austerity plan.

"Since that experience [being laid off], I keep my budget under tight control. I used to travel at least four times per year - now I travel once, for 15 days only," he says. The majority of those surveyed, 58 per cent, similarly say they have taken fewer trips in the previous year. Only 9 per cent say they have had more holidays than in previous years. What worries some analysts is that despite being more sensible about spending and debt, UAE residents are not managing to build up considerable savings. Among those surveyed, 27 per cent report having no money immediately available in the bank, while another 19 per cent say they could access less than Dh10,000. Only 6 per cent say they could get their hands on more than Dh80,000 (22 per cent would "rather not say" how much savings they have.)

The rule of thumb from most financial planners is for consumers to keep at least three months' salary on hand as an emergency fund. The idea is that the reserve fund protects people from financial problems in the event of a job loss, medical emergency or some other unforeseen circumstance that requires considerable funding. Loredana Alexa, 30, a project manager for an international construction firm, was living in Qatar before moving to Abu Dhabi earlier this year. She earns a good salary, more than Dh400,000 a year, but is nonetheless stashing money away.

"I've learned to save more and plan for bad days," she says. [e-mail] [e-mail]