An expat in UAE: 8 common financial facts you need to know

28-06-2016 11:11 AM

Ammon News - AMMONNEWS -
Hidden behind the ubiquitous tax-free status lurk many hidden pitfalls for the uninformed expat

The UAE is a very popular destination for expats who are attracted by the lavish lifestyle and the large salaries. There are, however, certain financial facts that should be carefully considered.
Exercising Prudence:" temp_href="" >Credit Card v the e-Dirham
If you find it difficult to keep control of your purse strings, pre-loaded e-Dirham prepaid cards might be a better bet than traditional bank credit cards when making purchases. As the card is pre-loaded with your own money and ensures that you spend only within the limits you have set.
Tax-free Status
One of the UAE’s biggest attractions is the prospect of a tax-free income. On a salary of $100,000 a British expat would save the $30,000 in taxes that would be payable to the British government at home. Although this suggests a huge potential for savings, the exorbitant lifestyle costs in the Emirates can eat up most of this.
Shop till you Drop
The consumerism for which the UAE is renowned results in some expats throwing financial discipline to the wind. Going to the mall becomes a favorite pastime and the ease with which credit can be obtained has driven many a man (or woman) crazy, sometimes resulting in disastrous levels of debt.
No Such Thing as a Free Lunch: Conventional v Islamic Banking Systems
For a non-Muslim Islamic banking may take a little getting used to, although the idea that interest (riba) is forbidden might seem very appealing. You are in for a big disappointment, as there really is no such thing as a not-for-profit banking system! Rather than giving you a car loan, an Islamic bank will purchase the car for you and sell it back to you at an inflated price, to be paid in installments over an agreed period of time (murabaha). It pays to compare conditions and rates between the two systems.

Educating the Offspring
A schooling allowance was traditionally a perk that Western expats used to take for granted. If you now have to pay for your child’s education out of your own pocket, this alone will put a huge dent in the family finances, since school fees at a top British school can reaching almost Dh 100.000.
Health insurance
Residents of the UAE have little reason to think about healthcare as many have top class" temp_href="" >health insurance coverage through their companies but after retirement there will be no company to cover health insurance premiums. The sedentary lifestyle of the UAE has been linked to several chronic medical conditions. With the cost of healthcare sky-rocketing, you need to make sure you have the money put aside to cover any sort of eventuality.
Budgeting Ahead
Longer lifespans mean starting saving earlier or putting aside a larger amount monthly to secure a comfortable standard of living for your golden years. Many UAE residents are seduced into living life to the limits in the here and now, thinking that the future will take care of itself! End-of-service benefit schemes might help fund your retirement but should not be relied upon.
Investing for the Future
Your early financial goals should include building up your future pension but as you approach retirement you should be aiming towards protecting your pension pot.

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