Seven tips to stay afloat financially during a pandemic


Always be prepared and have a sufficient cash reserve
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We all know the headlines. Businesses are shutting down, people are losing jobs, we have no idea when things will get better and many are dipping into their emergency savings to survive.

So how do you stay afloat financially? This piece is mainly for the employed as there is little advice I can give to those who’ve lost jobs and haven’t been smart about personal finances.

Two salaries

Let’s face it, Dubai is still an expensive place to live. So two incomes are better than one, especially when one income stops abruptly as they can in these strange times for no fault of yours. In fact even if you are a high performer, there is no guarantee that your job is safe. So, what can you do? Work part time, for example, as a trainer or consultant. If you have a business idea, set up a free zone company. There are many options in the UAE and set up and annual costs can approximately be Dh20,000 and Dh15,000 respectively. All these should, of course, be in compliance with UAE laws like getting the necessary approvals from the current employer.

Rent vs Buy

Most people these days advise that you stay away from Dubai property. That is correct is you intend to speculate, or you don’t plan to stay for more than five years. But if you are planning a longer tenure, then buying doesn’t sound so bad after all. You have extraordinarily low interest rates on loans. House prices have fallen quite a bit. Add the two and your savings in rent (or rental income) could exceed the monthly mortgage payments. I say “could” because you must run the numbers; obviously the buy option gets more attractive the less you borrow, the less expensive the house and the more rent you save.

Multiple income streams

I used to think of this as a luxury that made no sense but now, I’ve seen the light. In the good days, set up a regular stream of passive income. It could be investment income (dividends, interest) or rental from properties. That way even if you lose your job you have enough to live by.

Bonds give you interest, and shares give you dividend. Invest based on your return requirement, risk appetite, liquidity needs etc. Investment grade bonds can give you 3 per cent and you can get a dividend yield of 2 per cent and we are talking of well managed companies with businesses relatively less affected by the pandemic with strong cash flow and low debt. But do your diligence as many companies may default on their bonds and are cutting or stopping dividend.

Expect the worst

This pandemic driven job recession can drag on for many more months and perhaps even longer. We don’t know. Businesses may take long to recover and rehire. Many positions may never be filled, thanks to shrinking demand, automation etc. Consumption may take long to pick up. There is no credible exit plan and we shouldn’t be naïve. Spend and save accordingly.

What that also means is always have sufficient cash reserves and if you don’t, start building now. How many months? It depends on how long you plan to be in the UAE, your existing reserves, your job prospects and so on, but anything less than six months may be foolhardy. You should also identify any assets that can be converted into cash in case of emergencies like shares, bonds, mutual funds or property.

Skip the FOMO

Yes, the financial markets are rising especially in the US and India and stocks are trading at near all-time highs. You risk catching the FOMO (Fear of Missing Out) syndrome. Tesla? Hertz? Zoom? Resist it. The stock and bond markets are hoping there is no second wave, that businesses reopen quickly and that a vaccine is around the corner. If any of these don’t materialize, a crash is probable.

Move or negotiate your rent and save

The two biggest costs in the UAE are usually rent and school fees. The good news is that rents in Dubai have softened. So take advantage and either negotiate with the landlord or if he proves to be stubborn, move into something smaller, cheaper and even maybe to a location that’s less attractive. Moving apartments could help you save a certain amount every month. The same is for school fees. Lots of schools are discounting now and you could get similar quality at a lower cost. Do your research before the new term begins.

Leverage the pandemic

You can’t fly out on holidays, shop for durables or eat out without taking significant risk and that may convince you to stay home. Which is a good thing financially. Because these three are well known in the UAE as the triumvirate that drains your savings and no amount of my asking you to “control” yourself would have worked! So, there you have it. Or in the wise words of the Boy Scouts, “be prepared”.

Binod Shankar has 25 years of experience as a banker, auditor, finance director, entrepreneur and financial trainer. He is a Chartered Accountant and a CFA Charter Holder.

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