In a year that has thrown a pandemic, natural disasters and economic calamity at us, stability can feel elusive. No matter how well laid your plans, some new crisis might be lurking around the corner, waiting to upend your life.
While it’s never been clearer just how much is out of our control, you can still take steps to improve your financial stability. And it’s not just about cash flow.
Financial stability is both a state of money and a state of mind, says Ed Coambs, a US-based certified financial planner and certified financial therapist.
On the money side, stability is straightforward. “You have a budget, you know where your money is going and you know how much you should be saving to meet your bigger goals,” Mr Coambs says.
“What’s a little harder is more the state of mind,” he adds.
This financial peace of mind is subjective and looks different from one person to the next.
Do some self-reflection to pin down what stability means for you. Maybe you don’t want to feel anxious when you check your bank balance, or you hope to save enough for retirement so you won’t have to worry about the future. Whatever your focus, feeling stable means you won’t have to constantly worry about money.
If you find yourself overwhelmed because the pandemic has destabilised your finances, follow the advice of Tara Tussing Unverzagt, a certified financial planner and financial therapist. She advises people to think through the worst that could happen rather than avoiding the topic out of fear.
“This often helps people open up a way to reframe the situation from, ‘There’s no way out of this’, to ‘I have some choices – this isn’t my preferred path, but I can move forward with this’,” Ms Tussing Unverzagt says.
Once you’ve defined what personal financial stability means to you, you can build a sense of control through proactive money management.
You can probably rattle off half a dozen serious issues to worry about right now. But how many of them can you do anything about?
Rather than hand-wringing and doom-scrolling through social media when you feel anxious, focus on actions you can take. Namely, work to improve your financial basics.
A rule of thumb is three to six months of nondiscretionary expenses, and I like to include maximum out-of-pocket health care expenses in that
Get a grasp on spending: Pin down a budget, if you haven’t already. The 50:30:20 budget is an easy tool for this. Half of your take-home pay goes to necessities, like housing, groceries and utilities. Then, 30 per cent of your budget takes care of wants, such as takeout from your favourite restaurant or home decor to spice up your pandemic shelter. Lastly, 20 per cent of your income goes to debt payments and savings.
If you find that your debt payments or housing costs eat up more than the allotted percentage, you could increase financial peace of mind by getting them back in line. That might mean concentrating on paying down debt or looking for less expensive housing. Tackling one or two big expenses does more for your budget than cancelling a handful of streaming services.
Look into refinancing debt: With interest rates at record lows, see if you can refinance your debt, like your student loans or mortgage, to get a lower interest rate. In general, paying less in interest will make your debt more affordable and free up cash in your budget. Note that you’ll generally need a steady income and a healthy credit score to qualify for the best rates.
Build your emergency fund: Increasing your savings helps you cover an unexpected expense, like your car breaking down.
“People should focus on creating a safety net, which is the emergency fund,” says Jovan Johnson, a certified financial planner. Start with a goal of $500 to $1,000, which is enough to insulate you from common emergencies, then keep building over the long haul.
“A rule of thumb is three to six months of non-discretionary expenses, and I like to include maximum out-of-pocket health care expenses in that,” Mr Johnson says.
Stick with steady retirement savings: The stock market will go up and down, then back up again. It’s best to be a steady investor. Make regular contributions every month or every pay period to smooth out fluctuations in the cost of investments.
“By doing systematic rebalancing, historically that’s been proven to minimise risk in times of distress and can add to your long-term returns,” Daniel Granucci, a certified financial planner says.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
ETFs explained
Exhchange traded funds are bought and sold like shares, but operate as index-tracking funds, passively following their chosen indices, such as the S&P 500, FTSE 100 and the FTSE All World, plus a vast range of smaller exchanges and commodities, such as gold, silver, copper sugar, coffee and oil.
ETFs have zero upfront fees and annual charges as low as 0.07 per cent a year, which means you get to keep more of your returns, as actively managed funds can charge as much as 1.5 per cent a year.
There are thousands to choose from, with the five biggest providers BlackRock’s iShares range, Vanguard, State Street Global Advisors SPDR ETFs, Deutsche Bank AWM X-trackers and Invesco PowerShares.
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
