What is the point of living in Dubai if you are not saving?

UAE is a tax free country and many expats are very grateful for that. The country cannot afford for that reason to pay expats a pension if they haven’t saved enough. The same accounts for most countries in the world if you are a citizen, but if you are not a resident and therefore not paying tax, the benefits will also disappear. Which means that if you come back home expecting that your government will give you a pension (or a decent pension) you need to think again.

A couple of days back I read a letter that was sent to 7days from a western expat who was living in Dubai for 5 years. He stated that his salary was AED 30,000 per month ($8170). In this letter he was complaining that he was not capable to save money in Dubai due to the high living cost.

I know that certain Asian/South Asian expats in UAE earn this amount in one year and still are capable to save money and support their family back home. How come this expat is not saving money?
Let’s try to break it down. Let’s assume he has 2 children and a wife. This person did not mention he had a family, but we will assume he has.

The expat likely has the following yearly cost:

- Housing AED 120,000 (2 bedroom in a good location in Dubai)
- Utilities + internet + television AED 25,000
- 2 Cars AED 60,000 (loans + fuel)
- School fee AED 60,000
- Groceries AED 30,000
- Vacation AED 30,000
- Other spending AED 35,000

In this case the expat is not saving any money.

The expat life that he could have if he makes better choices:

- Housing AED 90,000 (there are plenty of 2 bedrooms in Dubai for this price in multiple area’s)
- Utilities + internet + television AED 22,000 (take an apartment with chiller included)
- 1 Car AED 30,000 (loans + fuel) (one car is enough for a household)
- School fee AED 60,000
- Groceries AED 25,000 (buy smarter in bulk units in LULU or other places)
- Vacation AED 25,000 (Go to places like Europe, India, Turkey their currency is low compared to AED/USD and buy your tickets ahead of time)
- Other spending AED 20,000 (watch your spending and work on a budget)

In this case the expat is saving AED 88,000 yearly

The expat can save cash 50% on the bank as a buffer for emergencies, which will be in 10 years AED 440,000 ($120,000) The remaining 50% can be put in a saving plan with 5%-8% growth, which will be in 10 years AED 555,000 – AED 648,000 ($152,000 – 177,500)

Note that in this example the expat was already 5 years in the UAE which means that in 2010 the housing price were different than now (much lower), and that they started to go up in 2013. If he started this plan 5 years back he only needed 5 more years to complete it. Living in Dubai for 10 years will bring this expat 0 savings right now, however if he will follows my advice or will do research himself he would save in 10 years AED 1,000,000 ($270,000).

Dubai lifestyle can distract people and make them do things they would normally not do. To complain that this is completely due to the high living cost in Dubai and not self-reflecting on your own choices means you are not facing reality.

People make decisions and those decisions affect their finances. Once expats realize this and start tracking down their cost they must understand if they are building up their savings or they are not. In case they are not saving money, they must start making a plan how to improve their financial situation. This will lead on the long term to a more sustainable lifestyle for the expat.

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