Our Dubai Budget and Savings Rate

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To get started in FI, the first step is to track your spending. My habit has generally been to track spending in 3-month increments and then look at the average over those 3 months. The reason to do this is that if you only look at your spending during one month, you’ll miss the outliers that may show up in another month. For example, you might have no travel in one month, and in the next month, have a family vacation planned.  Averaging over a series of months helps paint a more accurate picture of your actual spending. 
When we were in the UAE, I used Goodbudget because I could not find any apps that could easily connect to my online bank and credit card in the UAE.  While Goodbudget requires you to enter each expense manually, it was convenient as I got a text message every time there was a credit or bank card transaction. This meant I could immediately open the app and enter the expense.   Even if you’re not using an app, you can always just download your bank and credit card statements and categorize your spending into Excel or Google Sheets.

The key categories you need to track are fixed, variable and discretionary spending. 

  1. Fixed  expenses are the easiest to track because they are consistent over time. Fixed expenses include rent or mortgage payments, real estate taxes, insurance, phone plans, loan payments, daycare/ school tuition costs, and car payments or other transportation costs.

    Under fixed expenses you should also track your monthly savings for retirement or emergencies.  What this means is that to accelerate your FI savings, plan to save a certain percentage or amount every month. As well, move your savings into a dedicated account on the day you get paid. Many people only save what’s left over at the end of the month.

  1. Variable expenses are still necessary costs, but the amounts fluctuate month to month. As an example, your heating bill will be higher in the winter than the summer. Variable expenses include utilities, groceries, gas, and car maintenance. 
  1. Discretionary expenses include entertainment, restaurants, subscriptions, beauty, gifts, shopping, and travel. 

Once you have your spending tracked, see if there are opportunities to trim your spending. The three biggest areas where you can introduce savings are housing, transportation and discretionary spending. 

  • Housing: We lived in Abu Dhabi for the first 3 years we were in the UAE, and the housing costs are higher than in Dubai. During Covid I was working remotely, and we really wanted to live in a villa instead of an apartment. We decided to move to Dubai and this saved us $12K Canadian per year. 
  • Transportation: When we were shopping for cars, we nearly bought a Porsche and then a Lexus.  We decided to buy a Ford Focus instead and paid it off in two years. 
  • Discretionary Spending: Food delivery services are hugely popular and affordable in the UAE. With food costs already very high, delivery services are actually comparable to buying groceries. I noticed this because I was tracking our groceries, delivery, and restaurant expenses. What I noticed is that dining out was costing us a fortune, mostly because we would consume alcohol and need to use Ubers and a pet sitting service. As a result, Steve and I agreed to limit going out to twice per month. We could maintain the delivery service because it was nearly the same price as preparing food ourselves. 

Our average, this was our Dubai monthly spending breakdown for 2 adults with no kids in 2022: 

Fixed: Savings 40%
Fixed: Rent15% 
Variable: Groceries, gas, utilities, pets    Groceries: 11%Utilities: 4%Pets: 2%Gas: 2% 
Discretionary: Beauty, Restaurants, food delivery, shopping, gifts, travel, house cleaning Restaurants/Delivery: 6%All other: 19%

In the UAE, salaries are paid monthly and include both a base salary at 60% and a housing benefit of 40%.  Also there is no tax which means you keep 100% of your salary. 

There are a couple of notable points with our spending pattern: 

  1. Savings:  

I consider our savings as the most important part of our budget which is why I’ve placed it at the top. As you can see we have an average savings rate of 40%. While I’m the main breadwinner, Steve’s earnings also contribute to this. 2019 was by far our highest savings year, in large part because Steve had a well paying contract.  

I should note that our savings rate includes my annual bonuses. What this means is that while our average savings rate is 40% per month, this has been maintained by saving 100% of Steve’s earnings as well as my annual bonuses. If we had just blown that money, our average monthly savings rate would have been lower. 

Our 40% monthly savings is transferred to Canada on payday. I don’t wait until the end of the month to send what’s left over. This is an important characteristic of FI budgeting. As well, it’s important to note that a 40% savings rate is somewhat low by FI standards. 

Most early retirees get there by saving 50% or more of their salaries. 

The big win for us was that the salaries are higher in the UAE, to a large degree because there’s no tax. A disadvantage for us is that we’re relatively old in the FI community, so even though we save a large amount per month, we won’t have compound interest working her magic over the longer term. 

If for example, we had come to the UAE in our late 20s or early 30s, AND we had saved the same amount, we’d have long retired by now. On the other hand, my salary would have been much lower in my 20s and I would have very likely got sucked into the spending frenzy that is so common here. 

Despite the high salaries and no tax, you’d be surprised how many people leave with nothing. 

  1. Fixed costs: 

I’ve only included our rent because that’s the only fixed cost we have. As mentioned above we saved an additional $1,000 CAD per month by moving from Abu Dhabi to Dubai. This only made sense because I was working from home. Otherwise that additional $1,000 per month would have been negated by gas and car maintenance costs to drive to the office. 

I’ve also excluded our car payment as we paid our car off within two years. Our Ford Focus payment was an additional 7% of our budget, while a used luxury car would have set us back 13% per month.  

Fixed costs for families would also need to include school fees. In the UAE, expat kids cannot attend public schools as these are reserved for Emirati children. Expat packages commonly included tuition fees, but other than teaching jobs, fewer and fewer employers offer this benefit. As a result, this is a huge consideration before taking a package in the UAE. Per child, you would be looking at an additional 13% monthly out of your budget for tuition alone. With 2 kids, that would erode a total of 26% of your budget. This is not including uniforms, after school activities / sports, entertainment and travel costs for a family versus two adults. As well, nearly every family in the UAE has a nanny and that will set you back another 7%. Therefore, in our situation, having two kids would literally have meant we would break even and have no savings. 

  1. Variable Costs:  

Groceries in the UAE are extremely expensive. According to Money Sense, in 2022, a family of two Canadian adults spent about $7,465 per year on groceries, which is $622 CAD per month.  

Comparatively, Steve and I spend $1,800 per month on groceries alone! This is why delivery service made sense for us. Dollar for dollar it’s the same price or even cheaper when you factor in food waste etc.  

Our ‘other category’ is a bit of a catch all and includes shopping, gifts, Uber, cleaning, beauty, and travel.  At 19% it’s a hefty category which could probably have used some trimming. However, it also accounts for the months where we have travel costs. Since we don’t have kids, we can afford more luxurious vacations. As well, travel is a big priority for us, and since we’re already hitting our monthly savings target, it’s not something we are willing to skimp on. 

As you can see, if you are to be mindful of your money, you need to know where you are spending. Tracking your spending is the only way to accomplish this.  Money is a tool you can use to your advantage or you can wind up being enslaved to money or an employer because of debt or overspending. 

Tracking your spending is your first step to financial freedom and developing mindful money habits. 

What tracking or budgeting tools are you using? 

Reach out, if you need more help to get started.

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