The summer months can be a costly time for many, especially now that our travel options have expanded as countries reopen during the Covid-19 pandemic.
From vacations to staycations, days and nights out, expenses can build up quickly, particularly if you have a family.
After a “summer splurge”, it is important to review your situation and look at how you are going to realign your finances. Here are my tips on how to approach this situation and get your finances back on track to achieve your savings goals.
Assess your current financial position
Before the rush of September begins, set aside time to review your expenditure over the past few months and examine them against your current financial situation by determining your net worth, which is your total assets versus your liabilities, or debts.
Let's assume that you budgeted Dh5,000 for your summer vacation, but ended up spending Dh6,000. That’s 20 per cent more than you anticipated and now means that you need to assess how this extra Dh1,000 can affect your financial goals. For how long will it stall your savings plan? If you have an investment plan, do you need to review how much you can put in monthly? It is important to be realistic and start to rework your budget to get back to your original investment plan.
Review your monthly budget
Once you have an idea of your financial situation, revisit your budget and decide how you are going to move forward to manage it. Factor in ways you can save more money. Examples include spending less on food deliveries, limiting weekend activities and using public transport instead of taxis.
Looking at the basic breakdown of budgeting and saving, it is said that the 50:30:20 rule is the optimum way to manage your income and generate savings. In layman’s terms, you should spend 50 per cent of your monthly income on necessities such as food, rent, transport and other essentials, 30 per cent on things you want and 20 per cent on savings or paying off debt. Depending on your financial situation after your summer splurge, the 30 per cent of wants should be decreased and used to contribute to savings until you are content that you’ve recovered from the overspend.
If you are eager to travel again soon, also factor this into your plan. There is no harm planning early when it comes to finances and savings.
Don’t forget your savings priorities
It’s imperative that you keep your finance goals front of mind and what you need to do to achieve them. If you have any kind of high interest debt, such as a credit card, make sure you prioritise the allocation towards that. It is also important that you build a safety net of six to nine months' worth of expenses, which will come in handy during uncertain periods.
Managing personal finances is now easier than ever before thanks to smart solutions and digital wealth management services, which can help get your savings working harder for you, so you can achieve your financial goals.
Automate your savings
Ensure you set up a standing instruction from your bank account directly into your savings plan or investment fund, so you don’t need to think about it. This should ideally be 20 per cent of your salary. If you can’t manage to save 20 per cent of your salary, aim to save at least 10 per cent to 15 per cent.
Track your spending
Always make sure to keep a watchful eye on your spending. Some people still do this manually, but these days there are several personal finance management solutions, such as Wally or Pocket Expense, to help you easily keep track of your daily spending. These tools can be integrated with your bank account to provide a seamless experience.
Use discount apps
Consider subscribing to rewards apps or even certain credit cards that can provide cashback benefits as well as leisure, food and beverage discounts; but make sure to use them mindfully and moderately. In the past year, the UAE has seen a huge influx of rewards apps, all offering opportunities to suit most lifestyles. Before signing up, do your research. Some might have fees attached, but always make sure the fees and benefits work for you and your plans.
Ramzi Khleif is the general manager of StashAway for the MENA region