Top tips on how to live the financial dream of an expat

Many expatriates in the Emirates tend to live extravagant lifestyles and ignore their financial futures. Rich-Joseph Facun / The National

Many people who make the move to live and work in the UAE can be tempted by a more expensive lifestyle. Whether it's five-star dining or 18 sun-blessed holes on a championship golf course, the average expat spends a higher percentage of their income on luxury goods than their peers at home. But Neil Stewart, a senior financial planner at Acuma Wealth Management, asks: are you taking full advantage of what is the best opportunity you will ever have to save for your future?

1 The warning signs

The average person initially envisages a time horizon of staying in the UAE for a year or two. Once the reality of a life in the sun and tax-free earnings sets in, people often find it difficult to leave. One more year becomes two more, then three and so on. This is often when the warning signs start to appear. Many people tell me that their initial plan was to work during the healthiest years of their lives, with the opportunity to earn a tax-free wage far greater than they would earn at home, thus allowing them to allocate a percentage of this extra income towards their future financial independence. In reality, however, they often admit this is not the blueprint they follow.

2 The first steps

To make the most of the tax-free environment in the UAE and to manage your finances, you should focus on three key areas. Firstly, debt should always be considered a high priority when looking to create a robust financial plan. Secondly, do you have a sustainable level of emergency funds in place? Focusing on between three to six months of earned income is often a good rule of thumb here. Do you have medical and other essential insurances in place? A very important consideration here is the implication of Sharia law on expats. If the worst were to happen to you in terms of a brush with the law or even death, your assets in the UAE are often frozen and the process to release these assets is very time consuming, hugely complicated and often a very expensive process. Make sure you have set up a Sharia law-compliant will to run alongside your emergency fund and other assets.

3 Work out a budget

Once these considerations have been addressed, you then need to consider your monthly outgoings and liabilities. You can either formulate a simple spreadsheet or, ideally, keep all of your receipts over a calendar month. Sit down at the end of the month, calculate exactly how much you have spent in the past month and appraise this as honestly as possible. It should be an interesting and eye-opening use of your time.

4 Talk to an expert

The next step is to sit down with a qualified and experienced financial planner who can work with you to create a disciplined and achievable financial plan. There are numerous areas where value can be added, but by taking baby steps over reasonable time periods, this doesn't have to be a scary process. If these objectives are met from day one, the whole scenario becomes an education for the client and no longer a weight on their shoulders.

5 Be honest

A common query is what percentage of your income should you be saving. This has to be specific to the individual and their situation. When would you like to retire or start a phased retirement? What does your future look like in terms of enjoying an extravagant lifestyle or being happy to live a relatively basic life? Where would you like to live in the future? Are you planning on starting a family or do you have children already? One consideration after appraising the variables above is to ask yourself: "I would be paying tax back at home - could half of this, most of this or even all of this be allocated to my future financial plan?"

6 Be disciplined

A disciplined and achievable time frame coupled with a sustainable level of funding is paramount. The best advice always needs to consider flexibility, too - after all, it's a sad reality that all of our worlds can be turned upside down in an instant, whether this is in terms of health setbacks or a changing of the guard in the workplace.

7 The extras

Numerous other factors need to be considered when living and working in the UAE - the additional costs for children's schooling is a good example. Many companies financially assist their employees in full or in part, but school fees aren't cheap here. The lack of mandatory health insurance in Dubai, for instance, can also be a crippling financial blow to people if they have not taken the right advice to account for the eventuality of an injury.