How a Consultant in the UAE Does Money

Photo credit: Francisco Anzola, CC BY 2.0.

Brian (not his real name) is a 31-year-old organizational development professional.

So, Brian, how much are you making?

My take-home pay is $130K before taxes, but my work also pays for my housing. I’m currently in the United Arab Emirates, so taxes are estimated at $10K a year due to working overseas in a tax-free country. The U.S. lets me exempt the first $100K, but I have to pay taxes on everything over that.

My wife makes $52K tax free, and I make $32K a year from a rental property, but that just barely covers the mortgage.

Where’s your rental property located?

In your neck of the woods, I think—West Seattle.

How does landlording from overseas work?

So far it has been easy. I was lucky to find great tenants that wanted a two-year lease, plus my dad lives nearby and acts as my unofficial property manager. I’m a little worried if the tenants don’t renew; I’m considering selling because of how hot the market is.

It is VERY hot right now.

So we know that most of your rental income goes towards your mortgage. What about the rest of your income? What are your major expenses?

Well, since housing is covered it’s mostly food. My wife and I aren’t always the best at cooking, and food is a little pricier here, so we budget $24K a year for groceries/restaurants. We are usually under each month, except when we travel.

Otherwise, we have a small car payment of $280 a month and I am helping my dad out with his car payment which is $350 a month.

I did have student loans, but just paid them off this week. That payment was $380/month.

Congratulations! How much did you pay off in total?

I had $55K when I finished grad school, but paid off the last $33K over the past six months.

That’s impressive.

I had refinanced them on a variable rate, which was good until the past year, when the rates started going up. So we prioritized paying them off over putting money into our investment accounts.

That makes sense. How much of your income had you been putting towards investments previously?

Until about a year ago, I was just doing my work 401(k) at 6 percent, since that is what they matched. My wife was doing the same. Then I just kept my savings account at about $25K at all times for emergencies.

Since starting the job in UAE, we don’t have 401(k)s, so we maxed out our traditional and Roth IRAs this year.

Now that loans are paid off, we have $5K/month for investments budgeted.

Again, very impressive.

Besides the other odds and ends, the rest goes to travel or savings. With little taxes and housing taken care of, our money has gone a lot further than we thought. It has been odd for us to adjust to. We’re used to living in urban cities where housing is a large part of our budget.

So… part of your ability to pay off loans and set aside money for investments comes from your higher-than-average earnings. And, as you just noted, your low taxes and free housing. Was this all part of your plan? Or was it something that you didn’t anticipate happening?

When we decided to take the job, we only did it because my income would be more than our previous combined income based on taxes and housing, so it was definitely a financial decision. We weren’t sure if my wife would find a job right away, but she did—I’m not surprised, she is amazing.

The decision wasn’t all about money; it was also for the travel (30 days vacation) and the international work experience. But it was more money than we were used to. We thought it would take a couple years to pay off my loans, save, and travel.

Has it changed your long-term financial goals? Since you just finished paying off one of your short-term goals?

It has made me think differently, like could we both retire early or maybe when we return to the states we could worry less about pay when it comes to our jobs—be more picky about other factors.

I think we need to talk about our goals, though. I feel like we’re only saving to save, but lack purpose—which makes working hard and saving feel less meaningful.

It’s not enough to have the money set aside—you want it to be going towards something. Either now or in the longer-term future.

Right. We’re both goal-oriented, so it helps us feel more focused and gives a little purpose to the savings—as much as money can give purpose and meaning.

When I think about wanting to spend my savings on something, I worry that I might need or want that money for something else later. Does that factor in at all? Like… ten years from now, what if you have a great idea for how you could use that money you set aside?

Yeah, I grew up pretty poor and have always struggled with not spending my extra money when I have it. That’s why I rarely had more than my set amount for emergency savings in my account. I am slowly getting past that mindset, and I like the idea that I’ll have liquid investments for future purposes or opportunities instead of spending the extra.

How did you learn about how to invest, where to invest, etc.? I know a lot of Billfolders struggle with this question, once they have more than enough money in their bank accounts to consider investing. 

I used to just do target date funds with my 401(k) because they seemed easy. I was lucky that my first two jobs used Fidelity and then Vanguard, so they were low-cost.

I think I benefited from being around a lot of financially savvy and experienced people at my job, such as the partners at my consulting firm. From there I spent a lot of time doing my own internet research—Bogleheads and Mr. Money Mustache have been pretty influential on me. I think there has also been some great popular press about the importance of index funds at low cost, avoiding actively managed mutual funds, etc.

FOR SURE.

So all of that has helped me a lot. Now I view my 401(k), personal investments, and savings as one big portfolio and then divide it up between asset types (bonds, equities, etc.).

I’m not an investment professional, and I like the idea of people knowing you don’t have to do finance to make money. I think the financial press has done a great job of recently educating people and making them better investors, likely to the detriment of mutual fund managers and investment advisers.

Hahaha! I’ve heard that rumor going around. Especially after the whole “passively managed funds do better than actively managed ones” thing.

Though if you asked the investment managers at my work, they would say all the passive money is creating new opportunities for active managers. Maybe things will swing back the other way in a few years. We will have to wait and see.

Last question, then: what advice do you have for Billfold readers?

Start with tracking your expenses with something like Mint or Personal Capital. Make sure you tag expenses properly. This is how I started to understand what I spent money on.

From there, set a general budget with some larger categories to help guide future spending.

Otherwise, set goals, both financial and personal. And remember, money is only one of the tools that helps bring happiness. Spend as much time on it as you do on the others.

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