We need to spend less and save more

The rising cost of living is providing us with an opportunity to evaluate our spending habits

The rising cost of living is affecting many people in the UAE and providing an opportunity to evaluate spending habits. (Silvia Razgova/The National)
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The results of the 2014 Savings Index confirm what we already know: the rising cost of living is affecting the financial stability of many of those who live in the UAE. As The National reported yesterday, the study compiled by National Bonds Corporation found that residents are less able to save, with most people identifying rising rents and utility bills as major sources of pressure on the domestic budget.

This problem has other implications, with people not just failing to save but having to borrow to make ends meet. More than half of the 1,877 people who took part in the survey, said they had outstanding loans, with more residents saying they relied more on their credit cards in the past 12 months than before.

There are no reasons to believe that this will change in the short term. Inflation is rising – in Dubai at its quickest pace in five years – driven by the cost of housing across the UAE.

Adjusting to this new reality requires individual responsibility, with individuals and households needing to rethink their lifestyles and find ways to cut their spending so it matches their income.

Within the Emirati population, there is no strong culture of saving. This is understandable, given the generous social support network and welfare system that makes it easier for Emiratis to not have to worry so much about their future financial stability.

But there are reasons to argue this should also change. Spending less than one earns is always healthy. It fosters independence and offers the prospect of long-term financial health. It can also be good for the economy because the saved money will probably be used domestically rather than to buy imported consumer items like widescreen televisions, jewellery and designer bags, with the money going offshore to the countries of manufacture.

This new reality provides us all with an opportunity to evaluate our spending habits. Sometimes the things that we think we need are actually just the ones we want and can afford to live without.