How Should An Australian Expat in the UAE Manage Their Expenses

How Should An Australian Expat in the UAE Manage Their Expenses

How Should An Australian Expat in the UAE Manage Their Expenses?

 

How Should an Australian expat in the UAE manage their Expenses – A few weeks ago we wrote about how to structure yourself financially as an Australian expat in the UAE and spoke of the ‘3 pots’ guide – the three pots being your expenses pot, emergency funds pot and long term investment pot.

As we described in that blog, if you pass away here in the UAE, there is no right of survivor-ship meaning UAE based assets are not passed to the surviving spouse. Instead, the assets of a deceased person will be distributed as per sharia law which heavily favours male relatives, meaning that if you are an Australian expat male and you pass away, most of your assets will NOT go to your surviving spouse.

Additionally, local bank accounts here may be frozen if you are called to a court order or change employers (sometimes even without a loan being in place).

As a follow up then, today we will talk in more depth about the “Expenses Pot” specifically.

The Expenses Pot

Keep only a Minimum – 1.5 months expenses

As we described in our previous Blog post, we recommend keeping the bare minimum amount of funds here in your UAE current account to pay for day to day living expenses depending on how often you are paid.

If you are paid monthly then you should keep enough to cover that months expenses plus a little extra just in case your expenses are high that month. A month and a half’s expenses should be just right.

For instance if your monthly expenses are aed20,000 then keep a maximum of aed30,000 in this account. This ensures you have enough funds readily available to cover your expenses for that month before your next pay cheque arrives, albeit that the bulk of your funds are moved offshore for safekeeping.

Calculating your Expenses

Now to calculate a month and a half’s expenses you first of course must prepare a budget. We recommend you use the below budget calculator from ASIC – https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/budget-planner

Local vs Offshore?

Some people have asked us whether it would simply be worthwhile to use an Offshore bank account to house the ‘Expenses pot’ and simply have their UAE employer pay directly to this in light of all the issues we highlighted with UAE held bank funds. If you are worried about these issues then certainly moving absolutely everything offshore does solve these issues but at what cost?

Ordinarily an Offshore Account will carry higher charges and few offshore banking providers offer accounts in AED meaning currency conversion charges would be applicable. As such we would use a local account but just keep the bare minimum of 1.5 months expenses as mentioned.

Which Local Bank?

In terms of local banks headquartered in Abu Dhabi, ADCB (Abu Dhabi Commercial Bank) or FAB (First Bank of Abu Dhabi) are 2 of the largest providers and have the most ATM’s available and the most support service. The largest bank headquartered in Dubai is the Emirates NBD.

Please note, opening a local UAE account with an international bank like HSBC or Standard Chartered does not solve any of the issues that we previously mentioned as these banks are still local banks merely carrying a brand name- licensees if you will.

In whose name?

We recommend you use separate accounts for you and your partner and/or children if old enough. Joint accounts increases the risk of the account being frozen from either death or a court order, meaning all funds in the account will be frozen.

Similarly if both you and your spouse are working you should have your Visa’s held separately with your respective employers rather than having one party on a spouses’ visa.

Move the Rest Offshore

As described above any assets held in the UAE, including bank deposits, are distributed as per sharia law upon death with no right of survivorship, meaning if you are a male and you die, your UAE held assets will NOT be paid to your wife.

As such it isn’t a bad idea to move all funds over and above the 1.5 months expenses offshore. There are a number of offshore banks that offer 24/7 phone and internet service and offer multi-currency accounts across GBP, Euro, USD and the Australian Dollar.

Alternatively you may use your Australian bank account as your emergency pot, however if you do send money back to Australia, ensure you have a justifiable reason as to why you are doing so. e.g setting up an investment account, sending money back for a mortgage repayment etc.

Issues typically arise when you send regular surplus funds back to Australia and leave these amounts sitting in a bank account. This behavior may present an opportunity for the regulators to question your behaviors (one of the tests for non-residency) and in turn your residency status.

 

General advice warning. The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.

Brett Evans is the Managing Director and a Financial Planner with Atlas Wealth Management which is the first financial services firm in Australia to specialise in providing financial advice to Australian expatriates. With over 20 years of experience in the finance and investments industry, Brett has worked for blue chip companies which include the Australian Stock Exchange (ASX), HSBC, Suncorp and Citi Smith Barney.

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