How to Avoid Debt and Money Trap Problems

How to avoid debts and money trap problems

If you live in the UAE, or are planning to move to the UAE, you’re probably curious about debts and how the system works. The best advice would actually enable you to avoid getting into debt in UAE; moreover, avoid getting yourself into a possible money trap problem or activities which could lead to possible fraud. Debts and failure of payments could cause you to be in serious trouble not only in the UAE, but anywhere else in the world, which is why it would be wise to take precaution; it is better to be safe rather than sorry.

The entire reason you would be needing to borrow money from the bank is either because your expenses are not proportionate to your earnings, you want to start a business or want to buy a home. The bigger purchases such as a car or a home would be impossible to attain without a loan for someone with an average wage, but there are certain things that can be put off for buying later when you can afford them, rather than taking a loan to purchase them immediately.

Can YOU return all the money?

Although banks in the UAE have sufficient criteria in order to apply for loans, so that they are fully guaranteed that you will be able to pay them back, it is still important that you personally reflect. Ask questions like:

  • Is the item that I am taking the loan for, an absolute necessity for the present?
  • Does my financial status give me the guarantee that I will be able to pay back the loans?
  • Will I have to take another loan to compensate for the loan I am taking now?

The following are the things that you should avoid taking loans for:

  • Shopping
  • Birthdays
  • Tickets for special events
  • Topping up your mobile phone
  • Repairs
  • Compensation for other loans

The main goal would be to live within your means. Say no to impulses. If there is anything that makes you feel like ‘you HAVE to buy it,’ sleep it off. If you still want it the next day, you can consider buying it, but keep your mind open to saying no to things frequently. This will help you save up on a lot of cash that you may end up spending unnecessarily. Having a monthly budget would further allow you to monitory your money and spending. Undervaluing budgeting could contribute to a great loss in the future. Feeling overruled by extravagance is another thing that you might encounter if you live or strive to live in a place like Dubai. Spending a sum of money on things you don’t need is not the solution to your wants it will only feed to them more. It is important to distinguish between the things you have been wanting, in comparison to the things that you actually need.

As said by Khaleej Times, the most expensive form of debt is a credit card debt. The moment you make a bank account, you’re bound to get emails and calls for easy loans. Ignoring these will prevent you from getting into the cycle of loans in the first place. The wrongdoer here, is the steep interest or profit rate on credit cards. Don’t let that seemingly small number of 2.99 per cent to 3.25 per cent per month lead you astray. When converted to an annual rate or APR, interest rates on credit cards in the UAE can touch a whopping 40 per cent on average.

Today’s generation has quite the obsession with having a credit card for convenience. Monitoring your money is much easier when you’re paying in cash, so the next step would be to pay in cash as much as possible. Having the reassurance that you have saved something out of being cautious is merely astonishing.

One of the most effective ways of avoiding the situation of attaining a loan all together, is looking for a way to boost your income. A secondary source of income aside from your monthly wage job will serve you well in terms of cash flow. Investing in real estate is an interesting way of attaining secondary income because it is passive. Once the property is rented, you will be sure to have money in your wallet at the end or beginning of every month. The most engrossing part about it, is that – with crowdfunding platforms like Smart Crowd AE, there isn’t a need for a large amount of capital in order to get your investments in place.

Create a secondary source of income!

With Smart Crowd, you don’t acquire debt to invest in a piece of property. You can build a simple & affordable investments portfolio starting from USD5,000. 

The Truth About Wealth Inequality

The truth about wealth inequality

According to inequality.org, the richest 1% own 45% of the world’s wealth, and that the global wealth inequality has either been rising or staying extremely high nearly everywhere around the world. Wealth inequality is a concept that is crucial to understand to analyze the gap between the percentiles. The major question is, how can the gap be bridged?
Are you aware of what is wrong with this picture?
If not, you’re probably someone whose investment portfolio looks like the bottom 50% of the percentile. This chart expresses the way in which assets are distributed within each wealth percentile. It can be observed that the top 1% has a much more spread out proportion of assets and as the wealth percentile goes lower, real estate becomes the asset that is the most prevailing.
A large sum of your earning might be contributed to one big investment, which may be a home. When the market value drops, you’re essentially losing a lot of money, because your investment and risk are both highly concentrated in just one asset, with a low amount of diversification involved.
Diversification of income and assets is vital for the sustainability of your wealth, even if you belong in the 1% of the wealth percentile, because you could lose the money just as you’ve accumulated all of it if you are not careful with what you do with that money. The wealthy don’t do anything special with their earnings, other than living frugally for some part of their lives as they save money in order to invest in assets. They don’t just invest in assets, but diversely spread out their investment in order to stay low on risk. If one investment doesn’t work too well, they could just turn to another since they are still earning regardless of happens with one investment.
If all of your money is tied up in one investment as seen in the bottom 50% percentile, you’re essentially going to lose a lot of money if that investment is not fulfilling for you. This concentrates the risk in just one property, and can cause a great prospect of halt in the preservation of capital or returns for the future. It can also be noticed that their consumer durables are more in number because of how those individuals might impulsively buy appliances that they think that they need, when in fact it might have been a want in the spur of the moment. It is common that the top 1% of wealthy people say no to most things merely because they believe that it is a want rather than a need and put it off for a while unless it’s absolutely necessary to be purchased, which is why the percentage of consumer durables is so low for them.
Portfolio diversification can be done in a few different ways – it can either be across different asset classes or diversification within an asset class — investments being spread across within the same asset class. It isn’t a surprise that real estate has become the fastest growing and largest class in the world, considering that people from emerging countries actively seek homes and saving vehicles. The income generating capacity of the asset makes it an advantageous investment for people who are looking to save either for a more flexible retirement or for the future generations. Even when it comes to the returns in the present, real estate doesn’t disappoint as it provides a steady flow of income if your real estate investment portfolio is well diversified over a period of time.
With attention to wealth inequality, Smart Crowd is building a smart solution towards potentially bridging the gap between the top 1% and the rest of the 99%. Investing is something that is essential for growth. Just like how we invest in ourselves to educate ourselves formally, it is also important to invest to educate ourselves financially and attaining experiences which can bring uplift us in the distant future. The reduced risk factor that comes from purchasing a share of property and being able to spread out the risk by investing in small fractions of other properties can be of immense benefit as a whole. Investing in the largest asset class in the world is slowly but surely becoming more accessible, but it is up to you if you want to take the steps towards the direction of growth.

Investing in Real Estate is not for the 1% anymore!

With Smart Crowd, you can build a simple & affordable crowdfunding real estate investments portfolio starting from USD5,000

What’s the big deal with cashflow? Cashflow is king

What's the big deal with cashflow? cashflow is king!

An average person finds it quite challenging to answer the question, “What is the big deal with cash flow?” This is solely because they haven’t had the chance to attain any financial education for a significant amount of time in their lives. For people who have secured financial literacy, the answer might be simple. In the whole of the Middle East, there are only 24-34% of financially literate individuals, which makes it essential for us to reach out and enable more people to grasp the opportunity to learn.

Cash flow, in simple terms, is the total amount of money that goes in and out of an account.

As you may already know, a big part of investing money to earn a sum in return requires a specific mindset. (Read more about it) Along with that mindset, there is also the intention. This is where the difference between capital gains and cash flow chime in. If you are someone who invests their money and observes the market value going up and down, then you are investing for capital gain – it could be classified as a gamble. If you are someone who invests their money and plans to have a long term holding time despite the market value, then you are investing for cash flow – this is because you would be earning regardless of market fluctuations.

There is an undersense that to “invest” is to buy something that you presume, will grow in value in the future. The whole purpose behind this is to “sell later” and that as soon as the market value of the asset is growing, they can immediately sell it for a reasonable amount. This doesn’t keep cash flow steady as it won’t be money going in and out of your account at a continual level; rather, it would be money earned at once from selling the asset. Taking real estate as an example; most people buy homes to live to later sell them at a better value and then purchase an upgraded home when the market goes down again. Within this intention, there is no presence of cash flow but rather, capital gain. Robert Kiyosaki – author of the renowned business guide “Rich Dad, Poor Dad” refers to this as the rat race, because you, as the investor, are chasing value. It is usually seen that people such as this, quickly upgrade their lifestyle as soon as they have earned that capital. Only 7% of people save up on essential ventures such as future health care – and this will leave most people with nothing by the time they reach the age where they are dependent. Sticking to the same lifestyle even when you have attained capital is an important trick to double up on the amount that you save.

“Everybody-even your friend who works at McDonald's--has some sort of paycheck. It may be two hundred dollars or it may be two hundred thousand dollars, but almost everyone has a source of income. The question is: what do they DO with that income?”
- Monroe Mann

A wise investor would be the one to buy a home and rent it out at a good value since they are aware of how much it cost for them actually to attain the property as their own. They would receive rent every month despite the market value being on a constant seesaw. Since their investments would most likely be diversified, there is a less concentration of risk – meaning that it is spread out. The chances of reviving from the losses as a result of the drop in market value, won’t be as huge. There will be a visible seam of new cash flowing into their account, and they can then withdraw this cash to save up or further invest in other assets. Earning money from what you purchase rather than what you do is something that most people haven’t been able to master yet. The large population that hasn’t had access to financial education should be aware that creating a secondary passive income is essential if you want to see yourself doing well in the long run. A wise investor will invest and hold.

Smart Crowd promotes the “wise investor intention” accordingly, and provides a platform where you can initiate the intelligent decision to invest in rental property to generate and monitor your income in terms of cash flow. Your intention to provoke cash flow can provide you with peace of mind since you will be able to grow with what you earn, avoid overspending and have a solid idea of your overall financial performance, possibly leading you to implement a more flexible lifestyle. It is undoubtedly your choice, your money, your intention and your income security. It starts and ends with you.

Real Estate Investments For Everyone!

With Smart Crowd, you can build a simple & affordable crowdfunding real estate investments portfolio starting from USD5,000