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Spending too much? How to take back control of your finances in the New Year

December 6, 2017

If you’re expecting to spend too much over the festive season, you aren’t alone.

Late November to January are the prime months for excessive shopping. Not least festive food and gifts for other people, but also increasingly purchases for ourselves – homeware, electronic goods and gadgets, designer clothing and other luxury goods as “rewards” at the end of a hard working year.

In this kind of environment people can easily find themselves pressured into spending more than they can afford.

But now for the good news: there are ways to recoup the extra money you’ll be spending, and with just a few small changes to spending behaviours, attitudes and habits, it’s possible to get your finances back on track.

Let’s take a look at some ways to avoid overspending, and to help build a healthier outlook for your finances in the year ahead. 

How common is festive overspending in the UAE?

The UAE is recognised globally as a shopping hotspot. In 2016, UAE consumer spending reached its highest ever levels – over AED 750bn – and a study by YouGov found that more than half of UAE residents shop at malls or stores at least three times per month.

In 2016, UAE consumer spending reached its highest ever levels – over AED 750bn – and a study by YouGov found that more than half of UAE residents shop at malls or stores at least three times per month.

As with many other places in the world, consumer spending skyrockets during the festive season, fuelled by events like the Dubai Shopping Festival and the wave of retail sales between mid-December and end of January. Even Black Friday – the US shopping craze which follows Thanksgiving Day in late November – is starting to spill over into the UAE, with online shoppers looking for mega-deals.

Not surprisingly, with shopping temptations like this available in stores and online, many people fall out of sync with their normal shopping habits at this time of year. Comparison site Souqalmal.com found that during last year’s Dubai Shopping Festival nearly half of UAE residents exceeded their monthly budget by at least AED 1,000.

How can I bounce back from overspending?

Perhaps you’re one of the shoppers who have succumbed to the tempting deals and will be starting the new year already in the red. Here are some ways you can help undo the damage.

1. Ditch the paid services: Cut down or cut out any regular paid services you don’t use, for example cable TV or memberships to clubs or gyms. Especially if you’re not at home all year round, it will be much more cost-effective to pay on a one-off basis rather than monthly or annually. An expensive monthly gym membership, for example, can be replaced with day or class passes that you use only when you need them.

2. Cut back on non-essential spending: Whether it’s eating out at restaurants, visiting the theatre with friends, or taking part in expensive social activities, you might be surprised how much of your income is spent on non-essential activities. By making small changes – for example cooking at home one day during the weekend – or exploring free local events and activities, you can make huge savings from one week to the next, and direct this extra income towards another financial goal.

3. Out of sight, out of mind: If you’re susceptible to impulse spending, why not take steps to “hide” your money from yourself? It can be as simple as leaving your credit card at home for the day and only taking cash with you. Or, if you want to go a step further, why not put a portion of your income into a savings account, or stocks or investments that you can’t access for one year or more? Not only will it remove temptation, but it can act as a financial buffer for the future, and you’ll be earning interest on money that you would have otherwise spent.

4. Create a budget: This is one of the easiest and most effective methods to stop yourself overspending. You don’t need any complicated software or materials – work it out using an Excel spreadsheet or a pen and paper, or download one of the many budgeting apps now available on your phone. Separate your monthly bills, and work out your monthly outgoings for different categories – for example housing, transport, food and drink. Remember to take into account future spending, and plan ahead for likely changes in things like rent, school fees and insurance payments. Once you’ve compared your essential core spending against your income, you can calculate the amount of money you have available to spend each week.

5. Automate: Make life easier for yourself by automating your cash flow as much as possible. Set up an automatic transfer to pay off your credit card, and create automatic payments for monthly bills – this will make it much easier to see the true value of your income at any given time and avoid any nasty surprises. This autopilot method works well when it comes to savings, too. Set up a direct debit so that as soon as you receive your salary each month, a certain amount is sent directly to a savings account. Increase this figure as much as you can to cover past outgoings. And if you’re lucky enough to get a raise or bonus, add it straight to your savings account. You already know you don’t need it to sustain your current lifestyle.

Set up an automatic transfer to pay off your credit card, and create automatic payments for monthly bills – this will make it much easier to see the true value of your income at any given time and avoid any nasty surprises.

6. Downgrade your mobile phone: Mobile phone bills are well known for making a huge dent in your monthly funds. But it doesn’t need to be that way. Review your mobile phone tariff and see if there’s a way to transfer to a cheaper plan, drop any features you don’t need, or even consider changing providers altogether. It might take time and effort, but it’ll make a huge difference to your finances in the long run.

7. Check your interest rates: Look into the interest rates on any loans or credit cards you’re paying, and negotiate with your bank to see if they can be reduced. Avoid store cards, where initial offers give way to extremely high interest rates. And, if at all possible, avoid making purchases on your credit card. If you’ve set a clear and realistic budget, you shouldn’t need to use it.

8. Check you’re not overpaying for insurance: Your insurance may come with a whole list of benefits, but are you actually using them all? Make sure you’re only insured for what you need, and aren’t paying for unnecessary add-ons. You may also find your insurance cover is duplicated across providers. For example you might already have holiday insurance or breakdown cover through your bank account. Take some time to find out exactly what cover you have, and streamline your provider accounts if necessary.

9. Limit your travel: Cut down on non-essential travel, and remember to factor in that cost when accepting social invitations. If you are making a trip, look for ways to limit the expense. Be flexible with transport providers and dates to find a good deal. Try Airbnb instead of pricy hotels, pack light to avoid baggage fees, and take your own meals. It might also be worth using a travel credit card to get offers and earn points.

10. Avoid retailer ploys: Retail outlets are employing increasingly sophisticated tactics to entice you into parting with your money, especially during the holiday season. Stay one step ahead by avoiding loyalty cards, misleading pricing and holiday sales, no matter how good they seem at the time. If you’re in two minds about a purchase, walk away and give yourself time to think it through.

11. Kick the habit: Habits like smoking and drinking present another huge drain on monthly budgets. If you needed an incentive to give up or cut down, now’s your chance. Even a small change will boost the health of your body and your wallet.

How can I make sure I stick to my budget?

The key thing is to set yourself clear, achievable goals. Many people set new year’s resolutions to spend less money, but don’t stick to them just because they’re too vague or unrealistic. Make your path clear and easy to navigate by creating a timeline, with small, achievable goals along the way. It’s important to stay motivated too – so each time you reach a milestone, give yourself a small reward.

Many people set new year’s resolutions to spend less money, but don’t stick to them just because they’re too vague or unrealistic.

It’s also advisable to surround yourself with a good team. No matter how much you know about your money, advice from an expert such as a wealth manager will prove invaluable in the long run. Whether you need help to solve immediate financial problems, or just enhance your longer-term outlook, a wealth manager will reassure and empower you in your decision making, and help equip you with the tools you need to manage your money better. 

All in all, it doesn’t take much to save your finances in the new year. Reeling in your expenses during the holiday season does need a bit more time and effort, but if you stick to your budget, fight back against retail tactics, and employ the help of an expert, you’ll bounce back in no time. And all the knowledge you gain will keep you in a good position for festive seasons for many years to come.

About the author: Chris Kendrick, Head of Private Clients

Chris Kendrick is a financial services professional with 17 years of experience across multiple disciplines including private banking, offshore financial planning, SME banking and retail banking. He has worked for some of the world’s leading financial institutions in the UK and UAE, including Standard Chartered Bank, HSBC, and NatWest. Starting with Lifecare International as the Head of Private Clients, he is currently the UAE Commercial Director. Chris is certified by the Chartered Institute for Securities & Investment.