Having trouble saving money in the UAE? Try zero sum budgeting and ‘spend’ every dirham

In zero sum budgeting, you must assign every dirham you earn to an expense, remembering that your savings and investments also fall under the 'expense' umbrella.

Help is at hand for your savings. Silvia Razgova / The National

We all want to save more but many of us struggle to save anything at all. According to National Bonds’ 2015 Savings Index, 84 per cent of UAE respondents admit to not saving enough for the future, and 63 per cent want to be able to save more. The intention is clear, so what’s the ideal solution?

Well, the team from Souqalmal.com, say whether your financial goals revolve around saving money for your retirement, for buying a house, getting rid of existing debt or all of these and more, budgeting CAN help you achieve them.

However, if your current budget hasn’t helped you achieve your financial goals, it’s time to shake things up a bit. This is where ‘zero-sum budgeting’ comes in.

Budgets don’t work for me. How is zero-sum budgeting any different?

A zero-sum budget is probably nothing like any budget you’ve tried before. It’s a unique concept that requires you to “spend” every dirham you make. But that isn’t a bad thing (in this case), and here’s why.

Every dirham you earn must be assigned a purpose. So, when that salary hits the account, you must plan how to allocate your salary to the various budget categories – household expenses, loan repayments, savings, investments and everything in between. And once you’re done allocating, all income minus all expenses should come down to zero.

So basically, you don’t leave any extra cash lying around without a purpose. Not only will this help you avoid needless spending, but will also keep you on track to achieving your short-term and long-term financial goals.

Putting the zero-sum budget into practice

In a zero-sum budget, you will have to allocate 100 per cent of your income towards your expense categories. And remember, everything must be treated as an expense, even your loan repayments, savings and investments. (See the simple example pictured below)

Customise the budget as you go

Trying zero-sum budgeting for the first time? Chances are you might not get that ‘zero’ remainder right away. Depending on how you allocate your salary to the various expense categories, you might be left with either an excess or deficit. Here’s what to do in both cases:

Case 1: I still have some money left over …

If that’s the case, you can either just add the leftover to your savings or use it to make a lump-sum debt repayment, depending on where your financial priorities lie. You can also choose to reallocate your salary in any other way as you see fit, but keep in mind that any extra income should ideally be put towards bigger financial commitments for budgeting to be worthwhile.

Case 2: I’m falling short of money …

In this case, there’s only one possible solution, which is to cut back. Take some cash away from the expense categories that aren’t an absolute necessity. Looking at the example presented below, you could reduce the allocation from your personal allowance or cut back on monthly telecom expenses. More radical measures could include moving into a cheaper rental accommodation.

Whether you’re new to the idea of budgeting, or have tried and failed with your usual monthly budget, this could be just the solution you’re looking for.