The 5 essentials of personal finance management

Master these five rules to successfully manage your personal finances and pave the path to a stress-free financial future:

Save Consistently

There is never a bad time to begin a savings plan. It is the first step to achieving your financial goals. Carefully examine your income to understand if you are living within your means. Create a budget based on your immediate needs and wants, taking into where you see yourself in five or ten years from now. Look at the ways you can cut down on unnecessary expenses that may be draining your finances, increase your income, if possible so you can boost savings, and at all cost, avoid debt that you will be unable to pay off.

Borrow wisely

While a loan is never a good idea if you are using it to finance a lifestyle beyond your means, there are times when borrowing may be necessary to make a large essential purchase. Purchasing a car or a house may require a bank loan but you should ensure you have saved adequate funds for the down payment and are making decisions based on what you can afford. If you are fortunate enough to access a zero or low-interest car or personal loan from your workplace against your salary, a loan will actually help you manage liquidity better, as long as you have a concrete repayment plan in place.

Remain Protected

Insurance acts as a safety net for certain unforeseen expenses that you cannot plan and budget for. There are different types of insurance depending on your needs and lifestyle. While it is mandatory for UAE employers to provide medical insurance, check your policy to ensure your family is adequately protected, and if you are protected in your home country when you retire. Critical illness cover can help offset the massive bills that may result from hospitalisation and specialised medical care. If you own, a home, you may want to consider home contents insurance.

Invest Smartly

Investing will help you beat inflation and accelerate your personal finances. Investing should be a part of your personal finance toolkit, along with saving and budgeting. Educate yourself on the different asset classes available to understand where and how to invest, keeping in mind your risk appetite. Enlist the help of an experienced personal finance advisor to guide your investment strategy and help you meet medium and long-term goals.

Look ahead

Personal finance management involves not just looking after the here and now but looking ahead to secure your financial future. Determine your financial goals and make a robust savings and investment plan so you can look forward to a stress-free retirement. Life can be unexpected and preparing for the worst can help you stay on course as you navigate unforeseen challenges. Make a will so your family and loved ones are well taken care of.