The majority in the UAE seems to have adopted healthy financial practices including timely payment of bills (75 per cent) as well as upfront payment or reduced payment periods (73 per cent), a report said.

They also have a plan for future financial challenges (57 per cent) and avoid using credit cards out of necessity (56 per cent), added the survey conducted by YouGov, an international data and analytics group.

When looking at overall monetary well-being, more than half of the surveyed respondents across the UAE were happy with their current financial situation, with around 1 in 3 claiming to always feel in control of their finances.

Although this creates quite a positive picture there are still underlined financial worries for a considerable portion of residents, with over a third of respondents (35 per cent) continually worrying about their finances and almost half (47 per cent) feeling troubled about losing their job or facing a large pay cut.

Planning and prioritisation

Speaking about best practices for financial planning, monitoring expenses (84 per cent), paying off credit card/ loan debts on time (83 per cent) and budgeting (82 per cent) are considered to be the most important steps for a healthy financial life.

When it comes to budgeting, 85 per cent consider themselves well-informed on financial preparation for the month. This knowledge seems to be being put into practice with 81 per cent claiming to be proficient in preparing budgets and 87 per cent monitoring expenses regularly.

Of those who exercise this level of planning, around 60 per cent prepare detailed budgets, with 80 per cent feeling they are able to stick to what they have calculated. For those who are not able to stick to a budget, the biggest reasons include, large unexpected expenses (49 per cent), inability to track expenses regularly (38 per cent), underestimating expenses when budgeting (33 per cent) and over-spending (31 per cent).

Saving prevails as another important step towards financial security, where we see people putting around 6 per cent of their earnings into retirement savings.

Comparatively, insurance (excluding mandatory ones) and investments emerged as the least important and least engaged in practices by respondents, with only close to half investing money (56 per cent) or buying insurance (51 per cent).

The dreaded word – Debt!

Debt is common among UAE residents, with more than 3 in 5 respondents currently having debt of some kind, most commonly from credit cards (33 per cent) and personal loans (28 per cent). The high percentage of personal debts could be a direct result of inadequate financial knowledge, with 29 per cent of respondents indicating they do not feel well informed about lending for credit cards or loans.

When looking at the habits of those with current outstanding debt, we see around 2 in 5 displaying what could be deemed as risky behaviour. The most damaging would potentially be those using credit cards to pay for things they can’t currently afford (43 per cent), not saving any money due to debt (40 per cent) and inability to make debt repayments on time (36 per cent).

Most alarming was that close to 1 in 3 were unaware of their total debt and further to that 39 per cent do not see their total debt reducing despite making regular payments.

Kerry McLaren, head- YouGov Omnibus, said, “Although most UAE residents seem to be managing their personal finance fairly well, debt seems to be a significant issue for them. In this cashless age, credit cards seem to be a blessing to push through the unexpected/unplanned drain of purchases. However, if not managed well, credit cards can become a burden instead of convenience.”

“A third of UAE’s debt is from credit cards. What is more alarming being that more than a third of debt-ridden people are oblivious to the interest rates on debts and even more worrying, a slightly lower percentage is unaware of their level of debt overall. This is an indicator of low financial literacy and awareness. Although people need to take more time to understand the factors that come with borrowing, it also sits with the responsibility of banks who could do more to ensure their customers are financially literate,” McLaren concluded. – TradeArabia News Service