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Structuring Your Expense Pot as an Expat in the UAE
James Swash
A few weeks ago I wrote in my first blog about how to structure yourself financially as an expat in the UAE and spoke of the '3 pots' guide (see below graphic) - the three pots being your expenses pot, emergency funds pot and long term investment pot. As I 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 favors male relatives, meaning that if you are an 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 I will talk in more depth about the "Expenses Pot" specifically.
The Expenses Pot
Keep only a Minimum - 1.5 months expenses.
As described in the graphic above and explored in my last Blog post, I recommend to keep 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. I 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 me 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 I 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 I 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 I would recommend ADCB (Abu Dhabi Commercial Bank) or FAB (First Bank of Abu Dhabi). These are the 2 largest providers in the country, and have the most ATM's available and the most support service.
I personally use ADCB and have been very happy with their service and have heard similarly positive reports from my clients. Please note, opening a local UAE account with an international carrier such HSBC or Standard Chartered does not solve any of the issues I 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 all funds over and above the 1.5 months expenses should be moved offshore as a matter of priority.
I personally bank with Standard Bank Offshore in the Isle of Man. The minimum account balance is the lowest I could find at only gbp4,000, which is much less than most other providers. They offer 24/7 phone and internet service and offer multi-currency accounts across GBP, Euro, USD and Australian Dollar. Please be aware if you have an ADCB Jersey Offshore Bank Account or are considering one, that ADCB reserve the right to still freeze this account subject to a UAE court order despite it being offshore.
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.
Blog #3 - The Emergency Pot.....
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