Debt in the UAE is a complex issue especially due to the rising financial complexity of the country though having a plan on how to pay debt is a wise step towards financial liberty. Below are some guidelines that can lead to the formulation of a good plan based on the Principles of accounting to avoid the challenges of accounting in the UAE financial landscape that are;
Assess Your Financial Situation
The first thing you need to take when developing the structure of the debt repayment plan is always to have a clear view on your current financial status. Write all your loans, credit card, personal loans, auto loans and any other possible debt. This should involve providing information that is in relation to the amount of money that is owed in total, the interest rates, at least the minimum amount of money payable on a monthly basis.
Tip: In the UAE a prosaic has to be made to cater for any financial obligations in form of a cash advance through a post dated check with rent or any other financial balance that may be in the payroll. An evaluation of the situation requires an exact understanding of one’s debts and to whom they are owed.
Set the necessary financial objectives
It is very important to set achievable quantifiable objectives with regard to the repayment of your debts. Do you have a target on the period of time that you expect to be totally without any form of debt? Would you like to minimise interest repayments first of all? What many of these goals imply is that they are going to determine the structure of the repayment plan you are going to make.
Tip: Think about the needs that may appear or intensify in the further part of your life. For instance, if you are an expatriate that intends to reside in the UAE permanently, your strategy will not be the same as a person that intends to relocate in a couple of years.
Selecting the Method of Repayments
There are two popular strategies for paying off debt: These we have the Avalanche Method and the Snowball Method.
Avalanche Method: Another is to endeavour to pay off the debts that attract higher rates of interest. It helps in reducing the total interest charges paid over a long time though it may take a long time before the number of debts reduces.
Snowball Method: Concentration on paying the smallest balance of the credit card first. This approach is affirmative in that it gives quick wins and can create momentum as you watch debts reduce, but it entails more interest in the long run.
Make a planned budget.
A contingency plan or forecast is the cornerstone of your personal debt management strategy. Ideally, you should determine your monthly earnings and the amount that you need to spend on necessities for instance, rent, electricity bills, and food. Pay the rest of the money to your debts depending on the plan you have developed on how to do so.
Take into account the general cost of living in UAE which could be slightly on the higher side especially to residents in the urban areas of UAE for instance in Dubai or Abu Dhabi. Eliminate or reduce unnecessary expenses which can be considered as potential funds for paying off the debts if you are very much constrained by your financial means.
Automate payments
This to a large extent, saves you lots of time that would have been spent on making payments in the traditional way which can attract late fees and penalties. Bi monthly, pay at least the required minimum amount towards all credit cards and loans and any additional payments towards priority card /loan.
As a suggestion, in UAE it is possible to make direct access to the salary account with the loan instalment that would make it easier for the borrower to pay his instalments on time.
Monitor your progress
It is important that you often revisit the identified plan of how you should proceed with repaying the debts so that you are able to see how far you have gone. Shift to another plan if you notice the combined income has changed; for instance if you get a pay rise or if there are unforeseen bills to pay.
The financial structure for businesses in the UAE can be unstable resolving rents and charges. One should be rather fluid and prepared for the fact that one may need to manipulate his plan in order to stay on schedule.
