Staying in debt is something that happens without your notice. While people get out of debt many times but then again get stuck in that vicious circle which becomes unmanageable. Covid-19 pandemic has changed the attitude of people towards spending money and created more financial safety. As it is reported, the saving account of UAE residents has shown a drastic increase to a total of Dh199 billion from Dh189 billion. Savings also plays an important role in our lives when needed in an emergency and helps us to stay out of debt. If you are in debt, follow these strategies to plan your budget in a way to keep you out of debt.
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Upskill yourself
In today’s time, when economy is recovering from the pandemic affect many sectors are expecting redundancies so you should think of learning new skills that are in demand. Whereas side hustles are a good way to start earning an extra income beside working within your existing firm. Without a skill you would be clue less about all those opportunities that can help you make some extra cash. Therefore, to make your plans into action you are supposed to have a new skill on your bucket list which will upgrade your CV.
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Build an emergency fund
Saving an emergency fund is very important in order to avoid all those urgent situations. Companies do not provide job security so you can lose the job at any point of your career. The best practice is to add a little fixed amount in to the savings account at the end of every month or every week. Even squirreling away AED 500 a month will be beneficial in long-term and will definitely grow the savings. You never know when a rainy day is coming up. This will cover the expenses of a medical emergency or an unexpected deficit.
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Focus more on needs than wants
To maintain better finances, you seriously need to have a look upon your lifestyle and distinguish between the basic needs and wants. Investing on branded clothes, eating out at fancy restaurants, buying magazine and gym subscriptions, renting a luxury house are all those unnecessary wants that should be quickly shaved away in case of debts. Just spend on the needs that are essential for survival like food, education, shelter and medicines. These are needed at every part of life.
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Review your shopping habits
We all know generally going out for shopping to buy one thing, ends up with many other useless items. In order to ensure savings, you need to stick to the budget plan and plan the shopping according to that. Moreover, avoid keeping credit card with you to the malls and prefer using coupons offering weakly deals. You should take advantage of all those reward programs available at the stores.
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Avoid using credit card for cash advances
Credit card sounds like an easy option to buy things which attracts many users to make everyday purchase with the card. Except if you have an idea about how they work, then this won’t be that attractive. Credit cards have a high interest rate ranging from 2.5% to 3.5% per month. This is going to make it more difficult for you to pay off the debt as another considerable amount of interest is being added making your outstanding balance heap every month. Think before using it every time.
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Cash in on your assets
Whether you have a long-term investment in stocks, crypto, mutual funds or property this is the time to take them out. Your first priority should be paying off debts instead of saving for investments. Considering the returns from each investment, you should sell the one generating 2% compared to the other giving you 10% return yearly. This won’t be wise to keep the assets if you have credit card debt that keeps on multiplying day by day so sell them instantly to get out of the stressful situation.
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Final Thoughts
The hardest part is to follow the budget plan and avoid over expenditure. You will need to make some sacrifices and cut off many extra expenses. These steps will certainly help you pay off the debt without keeping track of every dirham. Do not consider yourself alone as according to a survey 46% of UAE population is currently in debt.
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