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Are freshers in UAE companies saving 10-15% of their monthly salaries?

Invest an amount to the extent that you may not require to withdraw in the near term

Question: My first job in Dubai pays me Dh8,000 per month. I plan to save and send my family some money as they need help to run the household in my home country. What should my savings plan be like? I am a frugal spender and pay Dh2,000 as rent.

Answer: From a savings perspective, you may choose to set aside at least 10 to 15 per cent of your monthly salary as savings and accumulate these savings over a period. This being your first job, you have a long way to go in your career and accumulation of savings gradually will result in a sizeable corpus, part of which you may invest to generate returns, depending upon your risk appetite and your understanding of investments and global markets.

Invest an amount to the extent that you may not require to withdraw in the near term. Given the early stages of employment, your time horizon for savings and investments is quite extended and you may be able to compound your returns, if you stay invested for a longer period. As a caution, always note that investment in markets is subject to market risks and you should review and understand the underlying conditions relating to these investments carefully before you choose a suitable investment product.

Question: My assets (house in Dubai and some cash in savings) are worth Dh10 million. I plan to retire early and perhaps start my own small restaurant business. I am 55 and want to use the cash for the business. Should I look for an investor in Dubai? I have no debt.

Answer: Considering your savings corpus, we concur with your thoughts to stay away from debt while you venture into the restaurant business. We propose that you start the business on your own with limited initial investment, run this business at least for a period of one year and then look for an investor. If your business is profitable, you may be able to fetch a premium on the investment when you offload part of your stake while you retain control and management over the business. You may also be able to persuade the investor for expansion, that may require additional investment and you may opt to reinvest part of your profits earned from the business for further expansion.

In case this business is not generating profits at the end of first year, you may wish to revisit your investment decision, after a thorough analysis of ground realities, that are contributing to these losses. With limited investment that you have introduced in the business, you may wish to give it a try for another year or opt to exit while taking a hair cut on the amount invested.

With the overall corpus including savings that is available at your disposal, your day-to-day living expenses and contingencies is already secured. However, riding the wave and spending out of your savings for a longer period may not be a sustainable option. Just a caution here — the house that you are staying is an asset that is for your own use. Hence, this house may not be considered as savings, unless you are planning to sell it. The sale price of the house may fluctuate over a period of time, depending upon supply and demand in the locality. You may or may not be able to realise projected profits on sale in future.

Question: My wife has a job that earns her Dh25,000 but she is keen to quit and take care of the kids. We have savings of some Dh3 million, including a house. We plan on downsizing for family and work-life balance. What is your advice?

Answer: Downsizing for family and work-life balance is a decision that the two of you will have to take jointly, considering your age bracket and future plans. This is purely your personal choice. On the other hand, investing time and effort in grooming and upbringing the kids at an early age is a desired investment for parents. At an early age, kids require more time and attention. The two of you as parents would reap the benefits of this investment in the long run.

Ideally, the house that you are living may not be considered as investment or savings, unless you are disposing off this house. An asset is generally supposed to generate returns for the investor. The selling price of the house may fluctuate over a period of time, depending on supply and demand in the locality. You may or may not be able to realise the projected profits on sale in future.

Hence, the two of you may wish to revisit your savings calculation, define your personal savings goals and the road map to achieve these goals.

— The writer is the CEO of ZTI Global.