Young professionals face fresh  challenges as they enter the job   market and start the exciting journey towards  developing their careers,   adapting to the real world and learning to be  independent. A big part   of this journey to becoming responsible adults is  financial   independence.

As a young professional, you have to  deal with all bills, payments and   expenses; that task is not an easy feat.  Trial and error is the basis   for learning how to budget your finances, but this  could be costly.   Here are some tips to help you so that you can avoid some  common   mistakes.

First thing’s first: saving is  essential for any young professional. You have to learn how to set aside a certain  amount of money from your monthly salary in order to be able to afford items  you need. Learning how to be an efficient saver will help whether you intend to  buy a car, plan a summer getaway, continue your education or even start your  own business.

One of the popular saving instruments  is a savings account. Unlike a current account, this tool allows you to receive  annual interest on your money. Bonds can also be used as a saving instrument. Bonds  basically allow you to lend a fixed amount of money for a predetermined amount  of time to a bank or other institution. Terms for bonds differ, but all bonds  entail the repayment of the full amount of the capital placed after completing  the specified time (usually referred to as maturity rate) with additional interest  rates according to fixed intervals. You can choose to invest in bonds at both  national and international banks.

Your car is one of the most important purchases you will be making. With so many options, price ranges and brands out there, it is important that you take the time to research the market properly and find the car that best suits you both in terms of your preferences and affordability.

First, you need to determine your price range. Make sure that your car is within the limits that you will be able to afford in addition to the other expenses you have such as rent and bills. Research the market really well, and take your time before buying your car.  Visit the different car dealerships and compare prices. Remember that the asking price of the car does not include other costs such as insurance and licensing.

After enquiring about the features and facilities of the car, it is also a good idea to ask about the resale value of the vehicle to be better aware of its worth. Other issues to keep in mind include maintenance and repair costs and how much you will need to pay for spare parts.

You might decide to take a car loan in order to finance your vehicle, which is a good option if it is managed, researched, and budgeted correctly. Make sure you study the market well and are aware of the different rates and options banks offer.

Guidelines when applying for a car loan:

• Do not apply for the first loan you find. Rather than depending on the recommendations of your friends or relatives, or applying for a loan at your own bank, make sure you do your research. Look at aspects like interest rates, monthly installments, and hidden fees.
• Some banks offer service charges for loans such as processing fees. Ask to pay for those separately so as not to include them within the principal amount which is interest applicable.
• Try to opt for loans that offer the option of an early settlement. The faster you pay off the loan, the less interest you will accumulate.

Car Loan Comparison Table

Your car insurance is another crucial aspect of your purchase, as you cannot register your car in the UAE without it.  Often, when budgeting for a car, some people forget to include insurance fees as part of the cost of the vehicle. However, although it involves a steady payment, quality car insurance can save you a lot of money in case of an accident. Therefore, it is important to be selective when deciding which insurance company you want to deal with.

Insurance tips:

• Do not settle for the first offer. Try to negotiate with the insurance company for the best rates possible.
• Make sure you understand the policy really well and know what it covers.
• Different car values have different insurance rates, which is an issue worth considering when purchasing your car.
• Be aware of the different options available for insurance coverage.

Continuing your education is the best  kind of investment you can make because you are investing in yourself.  Obtaining higher degrees also contributes to advancing your career and provides  the opportunity of being offered higher salary ranges. When considering  studying for a degree, search for available scholarship funds. The government  offers many scholarships for UAE nationals who want to continue their studies  in the country or abroad. Many organizations and companies also sponsor  individuals who wish to continue their education as well. You might also want  to check if the university offers a payment plan that will allow you to pay  over a period of time rather than coming up with the full amount at the start  of the program.

When planning for a trip locally or abroad, there are many things you can do to save yourself some extra cash. For instance, rather than booking your flight through an agent, you can book it online and receive cheaper rates. Also, when booking a ticket for a vacation, make sure you do so well ahead of time. The longer you wait, the more costly your trip may become as last minute bookings cost much higher.

You might want to start your own business sometime in the future. This will require planning and saving so that you can have some of your own equity in the business. You need to research what type of business you would like to have, taking market needs into consideration. Innovation is always a plus when thinking of new business concepts. Ask around and try to find out what types of services or items people need or are missing from the market. And even if it is not a new product or service, think of ways in which you can differentiate your business from the competition.

There are many aspects you need to consider before you start your new business. Most importantly, you need to decide how you are going to finance your business. Research and collect information on the different services that are available to help you get started – funding, training marketing etc. are available from different agencies and institutions. You have to consider how much of your own money you will put into the business and whether you will involve any partners in your venture. You can also apply for business loans to aid you in financing your project.

If you decide to apply for a business loan, make sure you decide how much you need before applying. Furthermore, research the different lenders available to you, and it would also help if you can have legal advice on the loan stipulations.

To learn more about the different agencies that support entrepreneurs and to get inspiration from other young Emirati entrepreneurs, visit the AKOUN website: http://www.adced.ae/akoun/

Quick Business Finance tips:

• To keep track of your status, you need to develop a balance sheet to include the current state of your business, liabilities and equity. Your balance sheet needs to be constantly updated.
• You also need to develop a system to monitor your expenses vs. profits for fixed periods of times, or what is known as return on investment.
• Plan ahead. Develop yearly schemes for how you foresee your money being used or spent each quarter.

Careful planning is an integral part of managing your income as you start to make your own money. You need to balance the amount you make with the amount you spend in order to avoid debt and other unfavourable situations.

An effective way of making a budget for your monthly expenses is by listing all the essential costs that you have every month such as the amount you want to save, phone bills, electric bills, rent, car payments, etc. You then need to calculate how much you will have leftover for your other expenses.

It is also advisable that you save a certain amount every month from your income, in order to be able to afford things that you cannot immediately purchase. Furthermore, it is crucial to have some money set aside in case of unexpected emergencies.

Budgeting Tips:

• Make a list of all your daily expenses including your daily cup of coffee, meals and other purchases. It may seem like the cost of these items are insignificant but getting into this habit will prevent you from losing track of your expenses.
• Make a budgeting sheet. Whether you prefer using a plain paper and pen to jot down all your expenses or other methods such as certain templates you find on this website, organizing your finance is a must. Take the time every month to organize your expenses, loans and debts.
• To avoid falling into debt, make sure that whatever items you opt to purchase, you have a steady source of income to cover the cost. Taking loans or credit without carefully considering how to repay them is a crucial error and can lead to serious consequences.
• Differentiate between “good debt” and “bad debt”. You incur good debt to make a purchase that is likely to increase in value (e.g. house) and contribute to improving your overall financial situation. Bad debt is using loans for purchases you don’t need or can’t afford and at a high interest rate.
• When paying back your credit card debt, make sure you pay the entire amount, not the minimum charge, or the money you owe will just keep piling up with higher interest rates.
• Try to minimize the number of credit cards you have as too many will probably get you into a debt situation.

 

Young Professionals Expenses

Young Professionals Budget

The golden rule is that you should  not spend more than you earn. At the beginning of your career, you need to be  able to learn how to prioritize and manage your expenditures according to the  monthly income you receive. But as you progress in your career and make more  money, you will be able to indulge in more extravagant items. There are so  many areas in your daily life where wise spending tips will provide you with significant  savings over a period of time. 

Be a smart shopper

• Before you head out for a shopping trip, make sure you  determine what you need
• Learn to prioritize your shopping list; buying items  you need the most first.
• Try to stick to your  pre-planned budget when shopping.

Banks offer many services and  products to customers. It is crucial to become familiar with all these  features, conditions and penalties. Deciding what type of account you would  like to open and which bank you would like to deal with depends on a number of  variables. You need to find the bank that is right for you.

Accounts

• Current account: It is an account where you deposit  your money with intent to withdraw later. Usually, a current account is where  your salary gets transferred. In addition to the services offered in a basic  account, a current account allows you to write cheques as well.
• Savings account: It is similar to a current account,  in that you can withdraw the money at any time via a card. However, saving  accounts are usually created to place money with the intention of saving it  over a period of time. Usually, you can ask your bank to transfer a set amount  monthly from your salary to your savings account, where you will receive an  annual interest, allowing your savings to grow.
• Shariah-compliant account: A current or savings  account that is run according to Islamic law.

Credit cards

A credit card is different from a  debit card. Credit cards allow you to borrow money, which you do not possess,  from the bank up to a certain limit. If you pay off the outstanding balance on  your credit card before the due date, you will not be required to pay any  interest.  As a rule of thumb, the longer  you take, the more you will pay. Once you reach your limit, you can no longer  use your card until you repay some of your debt.

There are different categories of  cards you can acquire, which differ in benefits, credit range and interest  rates. The first category is standard cards, which most people own. Prestige  cards such as silver, gold and platinum cards, usually offer a higher credit  limit and lower interest.

Features of credit cards differ from  one bank to another. There is no uniform set of rules for these cards and you  need to ensure that you fully understand the features you can enjoy before applying  for the category you want.

Online  shopping credit cards are used solely for one purpose, and thereby allow you to  keep personal information retaining to your main bank account safe.  Furthermore, many banks offer temporary credit online shopping cards that  provide high level of security to protect you from hackers.

Credit card tips:

• Keep a track of your monthly credit card statement
• Try to pay your entire outstanding amount to not  accumulate interest.
• Try to purchase items you know you are able to pay  for. Otherwise, refrain from doing so.