I have recently discovered that my family is Dh350,000 ($95,302) in debt. My husband has been hiding our financial situation from me, as his business suffered a huge loss.
We are both in our late 40s and have a teenage daughter. I have also discovered that we have no investments, savings or pension to fall back on.
Although we both collectively earn about Dh45,000 a month, most of it goes to servicing debt and other household expenses.
I am now terrified thinking about our financial future. Can you suggest how we can recoup the family’s finances? PB, Dubai
Debt panellist 1: R Sivaram, executive vice president and head of retail banking products at Emirates NBD
It is unfortunate that you are facing this difficulty, and I empathise with your situation.
Although you have a considerable amount of debt, you both also have a reasonable source of income.
Given this, I suggest you discuss your current financial situation with your bank and agree on a restructuring plan, including consolidating all your debt into a long-term loan.
The bank will most likely help you with several options in terms of settlement or restructuring of your liabilities.
I am assuming that the debt your husband has accumulated has been borrowed from a bank.
Request for a revised payment plan over a longer term that will help you to continue paying off the outstanding amount with lower monthly instalments.
As a priority, you need to get back to a more stable financial plan, keeping in mind your income.
While it might be difficult to face your family, do discuss this with them and take their suggestions on options you may have to draw on funds from your home country.
For example, if you have assets in your home country, you may consider selling them to provide you with some immediate relief in your current financial distress.
Your priority should be to retain your income in the UAE to ensure your financial situation is under control again.
Debt panellist 2: Jaya Ratnani, managing partner at Freed Financial Services
People often venture into a business with the hope of having more financial stability, but sometimes even the best of plans can go awry.
Managing a business must be extremely challenging and stressful. It is admirable that you have been able to manage it with some delays and provide for your family in these tough times.
Based on your current state of affairs, the best possible solution is to contact the bank and request a debt consolidation plan.
Debt consolidation plans are offered by most well-known banks in the UAE. This will help you to manage all outstanding liabilities together in one consolidated monthly payment.
By doing this, you can avoid the high annual interest rates applicable to your liability and instead obtain a revised monthly instalment figure that allows you to pay off your outstanding debt in a structured manner that balances your earnings with your liabilities.
It is advisable to prepare an in-depth analysis of your current financial situation, taking in account all your expenditures and other liabilities.
Watch: Understand your finances
You can also propose to the bank a manageable monthly instalment that you think will help you pay off the debt without overstretching your finances.
The bank will assess your current situation and will devise a plan in line with your repayment ability. This will enable you to pay off the debt and make it easier to keep track of how much you owe to a single entity.
To begin with, you must immediately focus on spending only on the basic essentials and making a realistic budget based on your income and expenses.
You can try to allocate funds for essential expenses such as rent, debt payments, food, utilities and transport.
From the remaining amount, aim to build an emergency fund that will make it easier to tackle unforeseen emergencies.
Debt panellist 3: Alison Soltani, founder of Leap Savvy Savers
I am sorry to hear about your situation, but it is not too late to get back on track.
I think the first thing you need to do is get aligned with your husband.
Financial infidelity is not an easy challenge for a relationship to overcome and you may have to have some difficult and frank conversations.
Investing in couples therapy might be helpful to ensure you can work through your issues.
In terms of finances, make a plan to pay off the debt.
Use a debt calculator to input your total amount and interest rate. Experiment with the numbers to see how long it will take you to pay off the debt if your instalment, for example, is Dh5,000 or Dh30,000 a month.
founder of Leap Savvy Savers
You will need to reduce your monthly spending while you pay off the debt.
List out all of your monthly expenses. Sort your spending into categories if it makes it easier to analyse, such as groceries, utilities, restaurants and subscriptions.
Start by cutting items you are not using, for example, a gym membership that you no longer use. Separate your expenses into “needs” and “wants” and begin by reducing the “wants”.
Try a savings or no-spend challenge to keep you motivated and track your progress towards your debt freedom.
It is important to also ensure that you have your own savings and emergency fund separate from your husband.
After you have decided on the amount you will pay towards your debt each month, also set aside some for your personal savings.
Most experts recommend saving three to six months of expenses for your emergency fund, but while you are getting started paying off the debt, it is advisable to have at least a month’s expenses in a bank account.
This will support you in the case of a financial crisis during your debt payoff plan and beyond; to ensure that you don’t have to take on more debt.
Once you have your monthly budget and debt-free plan in place, it is wise to start investing for your future.
You could start with small amounts during the debt pay-off period, then gradually increase your contributions as your debt burden eases.
Research different investing methods, such as the stock market and property, to see which strategy suits you.
For busy working parents, a passive investing strategy is easy and simple to begin building your portfolio.
Investing in globally diversified exchange-traded funds is a cost-effective way to build wealth over the long term.
Ensure you make a plan for savings and retirement, do your research into brokers and funds suitable for you, as well as your risk tolerance, and consult an accountant to check the tax implications of your preferred investment strategy.
The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to pf@thenational.ae
