5 ways to get your finances back in shape

Picture for illustrative purposes only. ARCHIVE

The UAE is facing an increasing number of residents with crippling finances due to a lack of financial literacy, overspending, and a prevalent culture of expensive lifestyle purchases. It is imperative for residents to equip themselves with the knowledge and skills needed to make sound financial decisions. Financial literacy is key to not only ensure the protection of funds, but also has a direct effect on mental health. Take time to identify and record your goals. The rise and fall of the financial markets can often be overwhelming. Start with determining your financial goals. This will help you plan the next steps and diversify your investments. Debt management. Credit card debts often lead to spiralling expenses and even more so with interest rates on the increase. If you use credit cards to make payments, keep a strict check on how much you owe on your cards and set a limit that you can be disciplined with. Map out a budget. The ideal allocation of budgets is based on a 50/30/20 rule – with 50 per cent spent on necessities, 30 per cent on needs, and the remaining 20 per cent on savings/debt payments. However, it is important to be flexible and work on a monthly budget spend rather than yearly. Revisit your asset allocation. The digitisation of investment has allowed first-time and seasoned investors to explore a wide variety of assets they can deploy savings into such as equities, bonds, commodities, exchange-traded funds, and mutual funds. Save for retirement. Plan and take steps to ensure that you have adequate standard of living after retirement through savings and investments. Invest as early as you can, which means for as long as you can reap the rewards of long-term compound returns, in spite of short-term market volatility.