How to take charge of your finances when debts start to pile up

Careful planning, discipline and the right tools can help improve financial security and wellbeing

The convenience of deferred payments can encourage people to prioritise immediate gratification. Getty Images

The global cost of living crisis is placing immense pressure on households worldwide, making debt management increasingly difficult.

In the GCC, economic forecasts are more optimistic due to the region's diversification efforts and focus on sustainability, positioning it to weather the global slowdown. The UAE, in particular, remains resilient, supported by sectors such as tourism, property and logistics, and is maintaining a careful balance between economic growth and inflation control.

Despite this, global economic uncertainties and stagnant wages are leaving many households with less disposable income to manage their debts. As a result, more people are relying on credit to cover expenses, with credit growth in the UAE expected to rise to 9.5 per cent by the end of 2024 from 8.4 per cent at the end of 2023, according to BMI Fitch Solutions.

An often-overlooked factor contributing to this is the over-incentivisation of credit options and buy-now-pay-later schemes. These services encourage individuals to purchase even essential items on credit, often leading them to spend beyond their means, despite having funds available in their bank accounts.

The convenience of deferred payments can create a false sense of financial security, pushing individuals to prioritise immediate gratification over prudent financial management.

This, coupled with low financial literacy, has created a challenging economic environment where many residents struggle to balance their budgets and plan for the future.

How debt impacts financial security and wellness

Debt does not just affect bank balances, it impacts our overall sense of financial security. As debt piles up, people often find themselves forced to make tough decisions: cutting back on essential spending, delaying retirement savings, or even taking on more loans just to make ends meet.

The stress from financial instability can also take a serious toll on mental health, leading to anxiety, depression and strained relationships. Those burdened by high levels of debt often feel isolated and overwhelmed, which affects not only their well-being but also their productivity at work. As such, addressing household debt becomes not only an economic necessity, but also a social priority.

Where to start regaining financial freedom

For anyone struggling with debt, the road to financial freedom starts with two key steps: awareness and action. First, it is essential to understand where your money is going, how much you are borrowing, and what you are spending it on. Armed with this knowledge, you can then take steps to cut unnecessary expenses, prioritise tackling high-interest debt and find financial tools to help you stay on track.

Financial institutions play a crucial role here, offering personalised debt repayment solutions. Services such as debt consolidation, low-interest refinancing, and tailored advice empower people to regain control of their finances.

Meanwhile, technology is revolutionising how we manage money, making it easier to budget, track expenses in real time, and stay informed about our financial health. In the UAE, an array of innovative FinTech solutions provide valuable resources to help residents organise their money.

Realising a strong financial future

Debt does not have to be an overwhelming burden. With careful planning, discipline and the right financial tools, UAE residents can effectively manage their debt and secure a more stable financial future.

Now more than ever, it is essential to take control of your finances and make thoughtful decisions that prioritise long-term financial stability over short-term satisfaction.

Mithil Ajmera is chief operating officer at SAV