I made this episode in 2022, had been sitting on it for about a year, until I finally had the courage to publish this for you. Whether you're in your car, on a walk, at the gym, or doing your chores, I have one promise to be genuine and help you with your finances. Enjoy listening to the very first episode of the Dubai Finance Podcast.

Now here's the show notes:

 

Time is money, now that’s an age old saying. It’s a phrase that encapsulates two key resources both of which are limited, time and money. Yet, you can use your time wisely to save money, you could also use your time strategically to invest money for growth.

Conversely, it is also true that you can use money to save on time. Sadly, no amount of money can increase or grow your time, we haven’t found any keys to immortality, at least not yet.

Ladies and gentlemen, my fellow listeners, from the golden sand dunes that capture the imagination, to the modern architectural marvels, it’s my privilege to be your host from Dubai. My name is Divesh, and I welcome you to episode 1 of the Dubai Finance Podcast.

Who I am, what is this podcast, why is it relevant to the listener

In today’s episode, I am here to tell you about a story, my story so far, and my motivation to start a Finance podcast. I started my journey as a young professional in the city of Bangalore in 2011, this was the year I had qualified as a CA. I had landed my first job with a Big Four audit firm, and I was pretty excited about the career that was ahead of me. It was my first time living independently, I never had to bother about rent before, or the costs of transportation, credit cards, electricity bills or anything.

Responsibilities were upon me, and me alone. To make matters complicated, I was about to get my partner in crime, my marriage was scheduled in less than 1 years’ time. Despite learning about Finance and Accounting for the 10 years before, managing my own income and expenses felt like a different ball game. I needed to make sure that I didn’t run out of money and had surplus available.

At this point, I had learnt a valuable lesson, that we need to count our expenses and have money set aside for contingencies, and life events. I had picked up a tool which is the monthly expense review. It was something I had learnt about, now put into practice with the help of an Excel Sheet.

As time flew by, I eventually got married, our family income was higher than what I did individually, but our living expenses were higher too. In any case, things were looking better financially. Up until we were with blessed with our first child, that’s when my wife had to take a break from employment post her pregnancy, this meant we had only a single income and our expenses had increased with the birth of our son. I am sure this is a familiar scenario, a lot of us have been through or are going through.

Luckily, I had my old tool the monthly expense review and budget to our rescue. This helped us stay disciplined, and plan our expenses at a challenging time. As Benjamin Franklin had famously said, a penny saved is a penny earned. It certainly does work in the modern world.

In a few years’ time, we had moved to Mumbai, and I had the idea to quit my job, and be self-employed. I had been moonlighting as a freelancer online apart from my regular job for a few months, and things began to look promising. So, I took the plunge and tried to take each day as a challenge, no longer having the perks of a monthly salary. The CEO of my ex-employer had shared a famous saying in the business world and it goes like this. Sales is Vanity, Profit is Sanity and Cash is King. The essence of this saying is the emphasis on having Positive Cash Flows. No matter what the business is, whether it’s a startup, a family run enterprise, a Multinational, the importance of generating cash flows cannot be ignored.

Personally, I began to realize the importance of cash flows as a business owner, not just staying profitable. I had to ensure I met expenses which needed to be paid timely, while at the same time, I had to ensure fledgling enterprise had to comply with local laws and regulations, that included taxes. This continued for a while, until I moved to Dubai, and landed a job with one of the leading Utilities in the region, the year was 2016.

Fast forward six years to today, I work as a Regional Finance Manager for a multinational company, and I am hungry to learn more about finance, specifically Personal Finance, as this will help me individually to reach my goals, and Business Finance, so that I can add real value to the organizations I work for. At the same time, this podcast is equally meant for you the listener, I would hope that you find the content on this podcast valuable enough, that you could apply things you’ve learnt into your lives and your businesses. I plan on achieving these goals by researching material and producing curated content relevant to Dubai and the Middle East as well as inviting guests who are experts in their fields and who can add a lot of value. So you can sit back, relax and I’ll have you covered.

For this episode, I’ve broken it down into two segments that I wish to cover on an ongoing basis in this podcast. In the first segment, I will talk about Personal Finance in Dubai, and then move on to Business Finance in the second

Finance in Dubai Personal Finance   Savings and Investments – Dubai, India, US

Dubai is a unique city in many ways, there’s no personal income tax as of today, which is a huge attraction for people to move in, higher salaries than many regions in the world, but expenses can be high too. Despite the challenges faced, there are ways in which we can effectively manage our finances. Given its location, and lower barriers to transmitting foreign exchange there are ample opportunities to access global markets even as individuals. This gives a level of freedom, but it can also be quite daunting, when you’re unsure about what needs to be done.

The aim for every household should be to cover contingencies due to either loss of job or downturn of business. While there are varied views on what should be the minimum amount saved up for contingency, it’s advisable to have at least 6 months’ worth of monthly expenses stashed as a contingency fund. This fund should preferably be in a Saving’s Account. While interest rates in the region low, the plan for a contingency fund is that you never want to have to use it, but if and when there’s a need, you have at least 6 months covered for. I’d even recommend 12 months if you can, but 6 months is a bare minimum.

To give you a teaser, this is a topic we will cover in episode two.

Often times people don’t opt for a Saving’s Account in the UAE, due to the low rates of interest, and requirement for a minimum balance.

Personally, I like earning a little interest than no interest. There are however, banks that offer up to 2% interest or profit rates, in case of Islamic Banking, which is definitely better than your funds remaining stagnant in a current account or as cash in hand. Another possible avenue for savings would be National Bonds, they tend to offer comparable or slightly higher rates of return than Premium Savings banks accounts, paid through profits or earnings.

While contingency funds are meant to cover unforeseen circumstances in the short term, when it comes to fulfilling life goals, long term investments are the best answer. So, what’s the difference between investing and saving? Saving means, you set aside money that you intentionally don’t spend so that you can use the money saved up at a later date. In the case of savings, you look at interest rates for comparison with different banks, as well as their financial standing to decide on where to shore up your cash. Investing on the other hand is building an asset portfolio, that pays in passive earnings, like dividend, rents and realized profits from increase in value of the investment.

Investments that are held long term take the advantage of compounding, they sometimes have a lock in period such as mutual funds, corporate bonds, and can be illiquid such as real estate, or even liquid like stocks and ETFs. With the proliferation of the internet, we also have newer concepts through Cryptocurrencies, however, it’s still a bit like the wild wild west, and it’s still in my view in its early days. The technology has its pros and cons, but it can’t be ignored, I am sure we will have episodes dedicated to it in the future. There’re also physically valuable assets like metals such as Gold that have been used as a traditional reserve of wealth for centuries and generally being a depleting natural resource, the intrinsic value of gold should increase on demand and supply principles. Needless to say, I’ll have you covered, we will go over each of these avenues at length in this podcast multiple times over and assess what works well over a period of time.

When based in Dubai, if you’re like me, an expat, we are also in a position to invest as non-resident citizens of our home countries, again be it in real estate or in the stock market. We can also access mature markets like the US. Moreover, if your home country is a growing economy, chances are that you will also gain by way of home country currency depreciation versus the USD. As an example, in 2016, 1 USD was hovering around 67 Rupees, while at the end of December 2022, it was a shade under 83 rupees, which is an increase by 24% and Annualized Increase of 3.4%. So if someone did nothing but kept a 1000 dollars with them in 2016, and sold it in December last year, they would have earned 16,077 Rupees on an initial amount of 1000 dollars which was close to 67000. This return would be even higher, had it been put to work through an investment in the US markets, such as the S&P 500 which has an annualized return rate of 7%. But, that’s a topic for another episode.

Planning retirement

It pays to manage money. In an era where social media platforms like Tiktok or Streaming platforms like Netflix and the like target our pleasure centers providing instant gratification, it really pays in the long term through delayed gratification. I’ve got nothing against these platforms, in fact if they show promising growth stories, as many of them do, I would be inclined to analyse their financials, do my research and possible invest in them, if they’re publicly listed companies.

Coming back to planning retirement, this is only possible if we are wise with our money. As we continue with the daily grind, it’s easy to overlook the need to plan for a future, when income may be scarce, and possibly no longer through a job or a vocation or a business. This is where, making prudent choices when we do have the time, focusing on delayed gratification and developing financial discipline makes a world of a difference. If we start the habit of investing in our 20s instead of 40s, the gains can be stunningly different, that’s the magic of compounding. Time can be an ally or an enemy, it all depends on how we use it to our advantage. While planning a retirement, ideally there should be a stream of passive income through rent or interest or dividends to meet some, if not all our future needs, else we would be depleting our reserves leading to an uncertain and unfriendly outcome.

To achieve this a mix of interest-bearing assets like bonds, dividend paying stocks / ETFs and real estate that generates rental income are few traditional and time-tested ways that work. We will dive into each of these asset classes in later episodes but today we are laying the foundation, which is to build up a habit to pay yourself in the future while managing your current expenses and having a healthy risk appetite.

Children’s education, managing household budget

 

Apart from Retirement, if you have kids, you know that education can be expensive. Moreso in the case of higher education. Thus, planning children’s education expenses in the future is an important topic. Luckily, like retirement planning, the principles remain the same. Although, since this is an important topic, financial institutions like banks, insurance companies alike cater to this specific need through tailor made products. It makes sense to study these in addition to what we can achieve by other direct investments like stocks, ETFs and Real Estate.

Buying a house

Next, buying a house is a dream for most people. Buying one in Dubai today, is a wonderful possibility today, given the recent changes in visa regulations, making the market attractive to international buyers and Residents alike. There are a few things to consider here. These range from finding the best deals for mortgage in the market, weighing your options like buying property in your home country versus in the UAE or in Dubai in particular, understanding your objective with the real estate investment, that is whether you plan it for your own end use or purely to generate rental income. Needless to say, you don’t need to worry about tax implications in the UAE, as there are no income taxes, but you will need to do your legwork when it comes to your home country.

One thing for sure is, buying a house, is like laying down an anchor in some ways, that is, being an illiquid asset, you will need to have some sort of a presence either in person or through an agency to take care of the property all year-round. Today, we have alternative avenues to gain some of the benefits of owning a house without having to take out a loan. I am talking about fractional ownership, or investing through Real Estate Investment Trusts (abbreviated as REITs) there are several startups in Dubai for example, that are doing this, and my hope is to have conversations with people closer to this market on our show in the near future.

 

Business Finance

 

Now that we’ve covered areas that we will look to explore, dive deep for personal finance, it’s time to pay attention to the business side of things. Let’s move onto Segment two.

Raising Capital

 

As a business owner, one of the challenges you may face either early on or at a time of business expansion is raising capital, should you go the equity route or look for borrowing money? What about going public or staying private? What are the things one needs to consider while taking a bank loan, is it just the rate of interest, should it be fixed or floating? What are the pros and cons. These are some of the things that come to mind. There are solutions for any challenges in this matter, but there certainly is no one size fits all solution. The one thing common is finding the right balance between exercising control and having debt, while ensuring you have the lowest cost of capital. Now you may already be familiar with these financial terms, if not, don’t sweat, as I’ve said before, we’ll have this covered.

Trade Finance

 

Let’s bring our attention now to Trade Finance. You have your capital resolved, there are regular customers, orders are being executed by your team, and things are going well, except for one fact. Collections are an issue, customers are reluctant to pay on time, there are newer customers, you are not familiar with, and have an understanding of their financial standing or risk for going bankrupt. In turn you face a cash crunch, turnover maybe good, as are profits, but somehow, you don’t see the money yet. Markets like waves, have their ups and downs, one of these down drafts takes out your customer, who turns bankrupt, now you’re in a fix. Luckily there are a lot ways to manage such risks, there are innovative solutions or products provided by Banks, Insurance companies and NBFCs alike to cover these risks. To name a few, there are Letters of Credit or LCs, Bank Guarantees, Working Capital loans and Trade Credit Insurance. These required detailed discussions of their own, but that’s for another day.

Compliance – Tax laws, Bankruptcy

Since 2018, we have had the start of taxation through VAT in the UAE. It has helped the Govt generate non-oil revenue, and has required businesses to maintain compliance through filing returns, paying Output VAT and claiming Input VAT. Since then, there have been several other laws enacted, such as the Economic Substance Regulations, Anti Money Laundering law. The most recent but significant change though is Corporate Tax implementation. Once laws are enacted, changes occur, and the need to stay up to date increases, here’s where we need to use services of professionals. In this podcast, we will invite such professionals and go over important regulatory changes, understand their nuances and help you and your business to stay one step ahead of the curve.

Insurance

Another topic I’d like to cover for you is insurance. Uncertainties in business are everywhere, and where there’s risk, there’s insurance. If your business is involved in transporting material between countries, there’s a requirement to have insurance cover for such transit of the goods, subject to incoterms and transfer of title. If you own goods and stock them in a warehouse, the goods need to be insured against fire loss or other natural causes. Next, there are certain insurance requirements that maybe mandated by the law, or to remain benchmarked in the market such as health insurance for employees. We will explore what are the necessary things that need to be considered while entering into an insurance policy and what are the potential risks that need to be covered.

Accounting for small businesses

Moving on, Accounting as you know, is the language of business; it is a systematic method to record economic transactions while maintaining principles that are generally accepted. Maintaining accurate books of accounts is vital and, in many instances, it is mandatory to do so. Life and business can be complicated, and as such maintaining accurate books of accounts can be a tedious and expensive undertaking. Today however, there are a plethora of cloud-based solutions and ERPs that help simplify the process, and with a bit of understanding the basics, it’s possible to manage accounting relatively easily or even have it outsourced. QuickBooks, Xero and Tally are a few names that come to mind, when it comes to accounting software that’s both affordable, customizable and easy to use. Yet, these are solutions for small to medium sized enterprises. For larger companies, there are ERPs such as SAP and Oracle that are commonly used in the industry. Having proper books of accounts is validated through an Audit. Having a set of audited financial statements helps a business stay transparent and relevant to borrowers as well as potential buyers. If you’re in a position or you’re looking to buy a business, one of the things you will need to do, is Financial Due Diligence, which requires valuing a business. An audited set of books of accounts is the main starting point.

Business Setup, Restructuring

Okay, on to our final topic. Here’s a common scenario, you’re in the shower, you meditate and poof, an idea pops into your head, you make a mental note of it, as the idea is a good one, a viable business plan is needed though. So, you get to work, you make that business plan, a financial forecast, you seem set, except, you don’t know yet how to setup a company in the UAE. Should it be based in the mainland, how to do this along with a job as a side hustle, but done legally? What about setup costs, visas and other unforeseen requirements? Or, you could already be an established company, but you’re looking at ways to manage your taxes effectively. There are a lot of intricacies in Business Setup and Restructuring that needs to be considered. Again, I’ve got you covered in this department too like all the other discussions.

Conclusion

If you’ve made this far, you are totally awesome, and I thank you for being awesome. What we’ve covered today gives you a gist of the laundry list that I have in mind for this podcast and that is quite exciting. Starting with next episode, we will deep dive into these topics one at a time. Once again, thanks for listening and I will catch you in the next episode. Until then, have a great rest of your day, evening or night, and keep crunching those numbers. Bye.