Living in Dubai has many perks. From experiencing life in its splendor to being a part of the global cultural hot-pot and working hard, Dubai is a city that will never let you leave. Financially speaking, Dubai offers a nearly tax-free life, leaving you with more disposable income than in your home country where taxes can take up a sizeable portion of your salary. Having said this, Dubai also has a wide range of avenues to spend which makes financial planning an absolute necessity. In today’s article, we will look at the different types of financial planning that you must consider.
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What is Financial Planning?
In simple words, financial planning is a process which helps you make good decisions about your money. It helps you in achieving your financial goals. It is important to remember that financial planning does not merely cover your retirement or property buying plans but the entire range of your financial life. When you think about financial planning, don’t look at any aspect involving money in isolation but fit everything into the more significant financial plan of your life.
Types of Financial Planning
Being an expat living in Dubai, comprehensive financial planning includes a few important aspects:
Cash Flow Planning
Cash Flow is simply the money that comes in and goes out of your life at any point in time. To create an efficient budget, having a plan for your cash flow is essential. It acts as a guide which helps you make saving and spending decisions in an informed manner.
Typically, a cash flow plan takes the income, expenses, assets, etc. into consideration and predict the possible cash flow in the future. This helps you foresee the possible expenses in the future and plan yourself accordingly. A well-thought-over cash flow plan helps you demarcate money which you can use all through your life by managing your costs, increasing your savings and planning investments. It also highlights any shortfalls before they can affect you.
This is a problematic aspect to think about, but if you are a sole person managing the financial responsibilities of your loved ones, then planning for the eventuality where you can no longer provide for them is critical. You work hard to earn, save, invest, and grow your wealth. However, ensuring the protection of your loved ones using insurance products requires your attention too.
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At times, you might want to ensure that you provide an insurance cover to your family even before you start investing. Whatever be the case, insurance planning helps you approach this methodically.
Investment planning forms a significant part of financial planning. All through your life you have different financial goals like marriage, children’s education, buying a home, retirement, etc. All these goals need the fuel of well-planned finances. It is essential to keep the following aspects in mind to create a good investment plan:
- Clear definition of financial goals
- The amount of money that you want to invest (either every month or every year)
- The total time horizon of investment. Do you want to invest for 5 years or 15 years?
- Your risk preference. Usually, higher risks to the invested capital are associated with higher chances of earning good returns. How much risk are you willing to take?
Choosing the right investment instruments will help in achieving your goals keeping the above-mentioned points in mind.
While retirement planning can be seen as a part of investment planning, we decided to address it separately since it is a long process and requires years of consistent investments. We all want to retire with dignity and not have to be dependent on our families (at least financially). Therefore, it is imperative that you spend time planning your nest egg.
If you start at a relatively younger age, create a plan and stick to it, by the time you retire, you will have a good corpus which can help you spend your golden years doing things that you like to do.
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When you are living and working in a different country, one of the most important financial decisions that you have to make is where you keep your savings. Do you keep it in a bank in the country that you are currently residing? Alternatively, should you open an account with a bank in your country of origin?
Many experts suggest that as an expat, you should follow the A-B-C Rule. According to this rule, if you come from a country ‘A’ and live and work in another country ‘B’, then you should bank in country ‘C’. Why? Because, it keeps your money out of your origin country’s tax net, safeguards your savings against the potential threats (political or economic) in the country that you currently reside in, and saves you from the trouble of shifting your accounts if you move to another country.
Financial planning is essential to ensure a financially independent future and to achieve your financial goals. While you can create a financial plan by yourself, it is always better to talk to an investment adviser who can help you build one by considering all these aspects. Remember, you work hard to earn your money and save it. Therefore, to make the most out of it, you must create a financial plan which helps you achieve your goals and offers a better-quality life to you and your family.