Our Dubai Budget and Savings Rate
(It’s less than many FIRE followers, but we still hit our FI number early)
Tracking your spending is the first step towards mastering money. In our case, it has been an invaluable tool in achieving work optional status or financial independence.
My habit has generally been to track spending in 3-month increments and then look at the average across spending categories. The reason to do this is that if you only look at one month, you’ll miss the outliers or extras that can contribute significantly to your budget.
For example, a family trip in May that cost $2,000 might not be reflected in your spending pattern if you only look at June.
When we lived in the UAE, I used Goodbudget because I could not find any apps that worked with the local banks. I used Mint when I was in Canada, and now that we live in Mexico, where cash is king, I use Google Sheets.
What to track.
The key categories you need to track are fixed, variable and discretionary spending.
- Fixed expenses are the easiest to track because they are consistent over time. Fixed expenses include rent or mortgage payments, real estate taxes, insurance, phone plans, loan payments, day-care/ school tuition costs, and car payments or other transportation costs.
Under fixed expenses you should also track your monthly savings for retirement or emergencies. What this means is that to accelerate your FI savings, plan to save a certain percentage or amount every month. As well, move your savings into a dedicated account on the day you get paid. Many people only save what’s left over at the end of the month.
- Variable expenses are still necessary costs, but the amounts fluctuate month to month. As an example, your heating bill will be higher in the winter than the summer. Variable expenses include utilities, groceries, gas, and car maintenance.
- Discretionary expenses include entertainment, restaurants, subscriptions, beauty, gifts, shopping, and travel.
Cut the fat.
Once you have your spending tracked, see if there are opportunities to trim your spending. The three biggest areas where you can introduce savings are housing, transportation and discretionary spending.
- Housing: We lived in Abu Dhabi for the first 3 years we were in the UAE, and the housing costs are higher than in Dubai. During Covid I was working remotely, and we really wanted to live in a villa instead of an apartment. We decided to move to Dubai, and this saved us $9K USD per year.
- Transportation: When we were shopping for cars, we nearly bought a Porsche and then a Lexus. We decided to buy a Ford Focus instead and paid it off in two years.
- Discretionary Spending: Food delivery services are hugely popular and affordable in the UAE. With food costs already very high, delivery services are actually comparable to buying groceries. However, restaurants were costing us a fortune because of the added costs of Ubers, alcohol, and pet sitting.
Our Dubai savings rate
Here is our average Dubai monthly spending breakdown for 2 adults with no kids in the fall of 2022:
In the UAE, salaries are paid monthly and include both a base salary at 60% and a housing benefit of 40%. Also, there is no tax which means you keep 100% of your salary.
There are a couple of notable points with our spending pattern:
- Savings
I consider our savings as the most important part of our budget which is why I’ve placed it at the top. As you can see, we have an average savings rate of 40% which included my annual bonuses and Steve’s contract earnings.
On pay day, I do two things religiously. I pay off our credit card balance in full, and I send the 40% to our investment account.
It’s important to note that a 40% savings rate is somewhat low by FI standards.
Most early retirees get there by saving 50% or more of their salaries.
The big win for us was that the salaries are higher in the UAE, to a large degree because there’s no tax. A disadvantage for us is that we’re relatively old in the FI community, so even though we save a large amount per month, we won’t have compound interest working her magic over the longer term.
If for example, we had come to the UAE in our late 20s or early 30s, AND we had saved the same amount, we’d have long retired by now. On the other hand, my salary would have been much lower in my 20s and I would have very likely got sucked into the spending frenzy that is so common here.
Despite the high salaries and no tax, you’d be surprised how many people leave the UAE with nothing or in debt.
2. Fixed costs:
I’ve only included our rent because that’s the only fixed cost we have. As mentioned above, we saved an additional $750 USD per month by moving from Abu Dhabi to Dubai. This only made sense because I was working from home. Otherwise, the extra savings would have been negated by gas and car maintenance costs to drive to the office.
I’ve also excluded our car payment as we paid our car off within two years. Our Ford Focus payment was an additional 7% of our budget, while a used luxury car would have set us back 13% per month. You can read more about why we chose a Ford over a Lexus and a Porche here.
Fixed costs for families would need to include school fees. In the UAE, expat kids cannot attend public schools as these are reserved for Emirati children. Expat packages used to include tuition fees, but fewer and fewer employers offer this benefit. As a result, this is a huge consideration before accepting a package in the UAE. Per child, and using my salary as a baseline, you would be looking at an additional 13% monthly out of your budget for tuition alone. With 2 kids, that would erode a total of 26% of your budget. This is not including uniforms, after school activities / sports, entertainment and travel costs for a family versus two adults. As well, nearly every family in the UAE has a nanny and that will set you back another 7%. Therefore, in our situation, having two kids would literally have meant we would break even and have no savings.
3. Variable Costs:
Groceries in the UAE are extremely expensive. According to Money Sense, in 2022, a family of two Canadian adults spent about $5,548 USD per year on groceries, which is around $462 per month.
Comparatively, Steve and I spent $1,300 USD per month on groceries alone. This is why delivery service made sense for us. Dollar for dollar it’s the same price or even cheaper when you factor in food waste.
Our ‘other category’ is a bit of a catch-all and includes shopping, gifts, Uber, cleaning, beauty, and travel. At 19% it’s a hefty category which could probably have used some trimming.
Money is a tool you can use to your advantage. The alternative is being enslaved by your money. This is especially true with debt and overspending.
Tracking your spending is your first step to financial freedom and developing mindful money habits.
To help you get started, here is another sample budget breakdown for Playa del Carmen.
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