Economic risk influences individual and organisational financial conditions in terms of stability. Like other nations of the world, the UAE has undergone economic shocks occasioned by periods of low oil prices, stagnant economies, and other factors compounded by COVID 19 in the recent past. These crises have also brought the issue of how to balance and manage debts and the best strategies needed in such periods to light. Here are the best lessons that have been learnt.
- Build an Emergency Fund
It was one of the most important things that one learns from the recent economic instability for one to save for the rainy days. Emergency money makes a difference through the creation of an emergency fund which gives obtainable adequate cash balance that can be used to liquidate expenses in event that there is low wages or high emergency ancillary costs. In an ideal world, you should be able to save between half a year and a year’s worth of your income in an emergency fund. Contribution to this fund can be made from time to time so that no large amount of money is needed to be borrowed thus reducing the levels of indebtedness.
- Prioritise Debt Repayment
It is always good to pay off the debts most especially when contracted to face the difficult economic challenges such as default of loans and credit cards. First, you should aim at debts that can easily accrue, like credit card balances, thus require high-interest rates to pay. Thus, they should be paid first, so that the general load would be lessened, and other important costs can be met. Debt consolidation could be done using the debt avalanche or the snowball effect to eliminate the debts one by one.
- Re-evaluate Your Budget
That is why, in conditions of economic instability, it is necessary to reconsider, adjust, and stabilise one’s economic vision. Keeping track of the changes in the income and expenditure and then revising the budgets to reflect these changes is very useful when it comes to solving for debt. Identify sectors where it is possible to save money so that the funds towards the expenses can be directed towards the debt and a save fund. Being forward-thinking with funding helps you to look forward to the changes in finances favourably without having to incur high tabs.
- Communicate with Creditors
When one is in need of cash or is struggling to make payments then it is important to try and discuss issues with the creditor. Most of the financial institutions in the UAE have crisis resolution measures which include provision of help such as loans repayment holidays, option of lower interest rate or balance restructuring among others. Contacting your creditors at early stages will assist one arrive at some solutions that would not allow the debts accumulate and badly affect the credit rating.
- Diversify Income Streams
Times of economic instability underline the dangerous eccentricity of depending on a single type of income. Exploring new business opportunities and looking for new clients may be also timely and effectively used to increase additional revenues. It could also mean seeking better paying projects, applying for a personal investment that would generate income or seeking promotions that would allow the candidate to be qualified for other positions. Having more than one stream through which income is earned can be useful in case one is laid off, or their income is cut, it becomes easier to manage debts.
- Seek Professional Financial Advice
It is especially helpful to turn to an expert in a time of turbulence To agreement with financial advisors. Sometimes it’s good to ask advisors about possible debt consolidation, refinancing, and other good strategies that may be obscure. A professional guidance is very useful because it makes sure that your debt management plan is right for you and the current environment.
- Stay Informed and Adapt
These are unpredictable and this is why it is important to follow the current events, market trends, governmental actions and financial news. It is, therefore, good to sync your debt management to reflect current economic status in the effort to cope with the unknown. Whether you are claiming government bailouts or a change in investment policies so as to cut expenses, it will be useful if you are an informed borrower since this makes it possible to manage debts more efficiently.
Conclusion
Sustaining apparent debts during an economic crisis is never easy, though it does not have to be impossible. Emergency funds, debt management, reassessing budgets, and getting help from financial experts play a great role. Therefore, the methods of prevention and dealing with the flow of debts and other economic vices seen in the UAE can be achieved by following essential lessons educed from past economic crises.
