Creating your nest egg Improved retirement saving starts with better budgeting

Most readers of this magazine are business people, thus, numbers, ratios percentages, projections valuations and balance sheets are pretty much your daily diet. After all you are either running a business on your own, or somebody else’s business. You are committed to your employer or your business. You are focused, organized and responsible, so where does that leave you? In what little box do you put yourself? 

 

You like to be known as the captain who runs a tight ship, right? You want proof, studies/surveys, validation well here’s a dose of reality.

 

Pryce Warner International Group – The Future of Retirement: by HSBC has revealed with stark clarity how unprepared expats in the UAE are for retirement.

 

The survey featured 15,000 individuals in 15 markets, of which over 1000 were based in the UAE. The UAE was revealed to be the joint highest globally in putting off saving for retirement. The explanation given for this was that retirement is “too far away to worry about”.

 

 

Ø  89% of expats were unable to describe their current savings plans as ‘more than adequate’

 

Ø  50% said they feared financial hardship in their retirement years.

 

Ø  46% said they were struggling to save enough for retirement due to the exorbitant cost of living in the UAE.

 

 

Ø  93% of people also stated that they did not plan their savings with a financial advisor, which perhaps explains the relaxed attitude and inadequate savings they currently have.

 

The problem in this part of the world is the mobility of the workforce and the transient nature means that people come here to save money and then move on or back to their home country. In many cases, that’s not happening, as they come here, spend a lot of money and go back. At that point, they have often been living outside their home country and have not been contributing to national insurance. As a result, they aren’t eligible for their home country schemes.

 

 Furthermore, a research from Friends Provident International (FPI) Investor Attitudes survey and a recent study by Standard Life reveal:

 

Ø  Most of UAE investors would prefer to spend an unexpected windfall on property or gold rather than save it towards a pension.

Ø   

If receiving a windfall of Dhs 300,000 ($81,682) tomorrow:

Ø  17% would use the money as a deposit for a property.

Ø  15 % would invest in a balanced portfolio of stocks and shares.

Ø  11 % would buy gold and jewelry as an investment.

Ø  6% claimed they would invest the money in a pension or retirement plan, though the number rose to 10 per cent among 45 to 64 year olds.

Ø  10% of non-resident Indians (NRIs) in the UAE invest in any retirement plans.

Ø  75 % are expected to be cared for by their children after retirement

 

 

Study after study of Expatriate behaviors - saving, spending and investment across the UAE, Singapore and Hong Kong reveals that around 97% of UAE based western expatriates spend some of their disposable income on luxurious lifestyle choices.

 

UAE-based western expatriates were found to be “less prudent” than those in Singapore and Hong Kong when it comes to financial planning.

 

The expenditure on luxurious lifestyle options was much less among the western expats in Singapore (51 per cent) and Hong Kong (47 per cent).

 

 The belief about sufficient retirement planning amongst UAE respondents is quite interesting as this group was found to have the least inclination for savings. There appear to be a mismatch between aspirations and realities or income and expenditure.

 

It’s never too early to start saving for retirement. The earlier people start to save for their retirement, the less costly it will be in the long run.

 

A first step to improve saving starts with better budgeting: 

 

Why put budgeting first? To quote an old business expression, “You can’t manage what you don’t measure.” I hear this very often ‘I cannot afford to save’. Without a budget to follow, how do you know what you can afford? Developing a monthly budget and following it should be as one of your top financial priorities. 

 

Better budgeting can play an important role toward achieving a secure retirement.

 

 

What financial planners say and what prospects hear

 

 CONSUMER “GETS IT”

Financial Security

“Feeling confident you can provide for yourself”

Nest Egg

“Future, security”

Those Who Matter Most

“Family, children”

CONSUMER DISCONNECT

Accelerated Benefit

“The  Rolls Royce plan”

Annuitize

Many consumers could not even guess “No idea, and I own an annuity”

Cash Value

“Value of an item, product or service in cash”

Death Benefit

“I don’t think death benefits anyone”

Premium

“The best”

 

 About Sandra Saksena:

Sandra Saksena is an Empowerment Officer at Nexus Insurance Brokers. She devotes her time and energies to her job in personal financial planning. She leads the first all-female team of financial counsellors at Nexus Insurance Brokers with whom she has maintained a professional relationship since 1996. Sandra also heads the division Family Matters at Echelon Advisors and Management Consultants her family firm. Her focus is on financial advice and planning for women and small and medium business owners among others. She is a long time member and serves on various committees of the Million Dollar Round Table USA.

 

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