Abu Dhabi, UAETuesday 20 October 2020

The Debt Panel: Dubai couple sandwiched between supporting their children and parents have zero savings after 10 years in the UAE

The Filipino couple earn Dh8,000 between them and owe Dh150,000 on three credit cards and a loan.
Clockwise from top left: Ambareen Musa, founder and CEO of Souqalmal.com; The National columnist Keren Bobker; Philip King, head of retail banking at ADIB; and Rasheda Khatun from Financial Life Planner, provide insights on why people are getting into excessive debt, how this situation can be resolved and where they can turn for help. Ravindranath K, Satish Kumar, Marwan Alhammadi and Mona Al Marzooqi / The National
Clockwise from top left: Ambareen Musa, founder and CEO of Souqalmal.com; The National columnist Keren Bobker; Philip King, head of retail banking at ADIB; and Rasheda Khatun from Financial Life Planner, provide insights on why people are getting into excessive debt, how this situation can be resolved and where they can turn for help. Ravindranath K, Satish Kumar, Marwan Alhammadi and Mona Al Marzooqi / The National

My husband and I are trying to get rid of our debts. It’s 10 years since we first came to Dubai and we have no savings at all. This is because for the past few years we have been helping our families in the Philippines with their finances. But now we are drowning in debt and we have our own family – two children aged seven and two – that depend on us too. I have three credit cards and two loans and together we owe Dh150,000. My husband works as a waiter for a hotel chain in Dubai and earns Dh2,500 per month, while I work as a sales assistant for a motorsports company and earn Dh5,500. We live in Al Quoz in Dubai. We are still able to pay the minimum payments on our debts, but we are spending too. It’s a cycle – we pay off debt and then we spend and build up more debt. I was helping my parents pay for my brother and sister’s college fee. Thank god they graduated last year. On my husband’s side, six times we have helped his family members come to Dubai to find a job. But only one secured work, the rest went back. In 2015, my husband resigned to settle our kids back home and the debt started to get bigger and bigger as there was only my income. Then he came back in 2016 to help me and we have been struggling ever since. The interest is killing us. ​​We still send Dh2,000 home every month as well as an extra Dh2,000, which covers my daughter’s tuition fee for the year. Can you help us? JC, Dubai

Debt panellist 1: Ambareen Musa, chief executive of the comparison website Souqalmal.com

Earning a combined monthly income of Dh8,000 and owing Dh150,000 in debt, it is unlikely that you and your spouse will be able to qualify for a conventional debt consolidation loan. So the next option is to explore other ways to pay off your debts one-by-one.

First of all, you must cut your remittances back home. Restrict yourself to remitting the bare minimum until you’ve settled all your debts in Dubai. Probably a close relative in the Philippines could help you out financially with an interest-free loan, which can be used to pay for your kids’ tuition fees and other living expenses.

Strict budgeting on a monthly basis could also help free up some extra cash. But make sure that whatever you save through this should only be used to pay off your debts, starting with the three outstanding credit card payments. Since you haven’t specified how much you owe on all the cards, it is advisable that you first settle the card that has the highest interest rate or the one that has the smallest outstanding balance. It is also worth speaking to the individual credit card providers about converting the card balances into fixed-term loans. At least, this will stop the accumulation of interest every month.

After that, you can move on to pre-paying the two loans, but make sure you do not skip paying the monthly instalments in the meanwhile. Remember that missing your regular loan EMIs or minimum credit card payments will not only cause late payment fees and penalties to pile up, it will also adversely affect your credit score, warrant a call from the debt collectors and, even worse, the banks could file a police complaint against you.

Debt panellist 2: Rasheda Khatun Khan, a wealth and wellness planner

Keeping a tight reign on expenses verses income can be somewhat challenging. The cost of living has been increasing with no real increases to salaries to match. In fact many have taken pay cuts just to keep their jobs. But the fact remains the same, if you spend more than you earn, you will get into debt. And the longer this continues the larger the debt.

Drowning in debt cannot come as a surprise, it’s the result of over spending. So, the real question is, how do we keep our costs less than our income?

Some options include reducing your rent by downsizing, moving locations or to a house share; reducing your school fees by considering home schooling; considering your necessities over your wants when you are grocery shopping; choosing car sharing or public transport over buying a car and sending family home to reduce your overall living expenses.

Many expats have extended family obligations too, usually back in their home countries. But if we are not in a position to cover our immediate expenses, how do we fulfil the expenses of others? We need to ask ourselves if this is a must. Knowing it will only put you deeper into the well of debt, at what point do we say “no” or “we can’t right now”? The sacrifice made is your own financial well-being. Remember, financial distress is the number one cause of ill health and marital break-ups.

We are seeing more and more people getting into serious amounts of debt because of additional family expenses back home. But if you don’t have the money, taking credit is not the answer.

Always have a repayment plan before taking on debt. If you don’t have one, then you should not be taking out the loan. Find a way to communicate to your family to explain why you cannot support them right now. You can only commit to what you can afford.

In summary, you need to re-evaluate your expenses; limit the amount of money you send home to the bare minimum, at least until you can get back on your feet; look for a higher paid job or increased hours for more income and look for a debt consolidation loan for the three credit cards.

Prepare your statement of accounts before going to the bank so you know exactly what you can afford to repay on a monthly basis.

It’s time to say no to anything that is not necessary right now.

The Debt Panel brings together four financial experts: Philip King, the head of retail banking in the UAE at Abu Dhabi Islamic Bank; Ambareen Musa, the founder and chief executive of the comparison website Souqalmal.com; Rasheda Khatun Khan, a wealth and wellness planner and founder of Design Your Life; and Keren Bobker, The National’s On Your Side columnist and an independent financial adviser with Holborn Assets in Dubai. Together they answer queries in a weekly online column to help readers better tackle their debts. If you have a question for the panel, write to pf@thenational.ae.

pf@thenational.ae

Follow us on Twitter @TheNationalPF

Updated: June 13, 2017 04:00 AM

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