The Debt Panel: 'I took out a loan for my mother's medical treatment'

I have been struggling financially for the past year after going into debt to pay for my elderly mother’s medical expenses back home.

I am the sole breadwinner in our family and took out a Dh25,000 ($6,807) personal loan to pay for emergency treatment when my mother became ill last year.

She has since recovered but I am finding it difficult to pay the monthly loan instalment on top of all my other financial responsibilities.

I earn Dh10,000 per month and most of my salary goes towards rent, utilities, school fees and other daily expenses.

I also have to send money home every month as I support my family there. By the time I pay for all this and the loan instalment, there is nothing left over to save.

I am becoming increasingly worried that I’m living paycheque to paycheque and have no savings. If something goes wrong – or my mother faces another medical emergency – I am afraid that I won’t be able to afford to help her.

Can you advise me on how I can improve my finances in the short term and start saving for the future? MK, Sharjah

Debt Panellist 1: R Deepakchandran, group head of retail products at Emirates NBD

Saving for a rainy day is crucial because it provides a financial safety net during unforeseen circumstances, ensuring stability and peace of mind when faced with emergencies or unexpected expenses.

Managing finances in your current situation can be challenging, especially when a significant portion of your salary goes towards rent, utilities, loan payments and sending money home.

However, there are several effective strategies you can adopt to save and secure your financial future.

Firstly, consider asking your loan provider about your existing loan and whether restructuring it could help you to plan your finances better.

This could lead to more manageable repayment terms, allowing you to save more effectively.

In addition, create a detailed budget to identify areas where expenses can be reduced, such as cooking at home and using affordable transportation.

Small changes can add up and leave you with more money to save.

Secondly, invest wisely. Explore low-risk investment options like mutual funds or government bonds to grow your savings steadily.

Lastly, focus on upskilling to increase your earning potential, opening doors to higher-paying job opportunities and career advancement.

Remember, building a robust financial safety net requires discipline and consistency.

Start with small, achievable savings goals, and gradually increase them as you become more comfortable managing your finances.

Stay committed to your savings plan and resist the temptation to dip into your rainy day fund for non-essential expenses.

By implementing these strategies, you'll be better prepared to handle unexpected financial challenges and achieve your long-term financial objectives.

Debt panellist 2: Jaya Ratnani, managing partner at Freed Financial Services

Debt is never a pleasant situation for any of us. The more one digs into the strings of debt, it means an immense strain on a person's physical and mental health.

However, you must understand that life is never a dead end as there are immense financial solutions for any problem that you confront.

Here are some steps you can take in the short term to improve your financial situation and potentially increase your savings:

You can make a budget that will help you to understand where your money is going and identify areas where you may be able to cut back on spending.

I also recommend setting up an in-person meeting with a senior officer at the bank and explaining your situation to them.

There may be solutions that a bank can offer, such as lower interest rates or extending the tenure of the loan. This will help to lower your monthly outflow of payments and support small monthly savings goals.

Consider cutting back on unnecessary expenses, including subscriptions, luxuries like eating out and any purchases that are not essential.

Watch: The debt cycle

Look for ways to earn extra income; this could be through a part-time job, freelancing or selling items that you no longer need.

Set up automatic transfers from your payroll account to a savings account every month, so you don’t have to worry about remembering to save.

Creating an emergency fund is an essential element of financial security and can help you to avoid taking on more debt in the event of an unexpected expense.

Aim to save at least three to six months’ worth of living expenses.

You can also seek professional advice and consider consulting with a financial adviser who can help you to develop a long-term financial plan, review your budget and offer guidance on how to achieve your financial goals.

Remember, it’s not an easy road to financial stability but with discipline and determination, you can get there.

I wish you all the best in your efforts to improve your finances and build a secure future for yourself and your family.

Debt panellist 3: Alison Soltani, founder of Leap Savvy Savers

It sounds as though you are already doing a good job juggling a lot of expenses with your salary. It is smart that you are prioritising paying back the loan and managing to keep up with the instalments.

When you are living paycheque to paycheque, you have two options – reduce expenses or increase income.

The first thing to do in your circumstances is to carefully track your spending to assess exactly where your money is going each month.

Use a spreadsheet or paper and pen and note down precise expenditures. Then, assess whether each expense is necessary and whether you can reduce or cut it out temporarily.

Expenses like rent, school fees and utilities are essential but you may be able to reduce them.

Many credit cards and banks offer zero per cent instalment plans for school fees, for example. Alternatively, you could look at moving to a more affordable area or closer to work to reduce travel costs.

The other expense you mention is sending money back home to support your family.

It might be worth talking to your wider family to see if anyone can assist you with this payment and you can reduce it temporarily while you recover to a more financially secure position.

This may be a difficult conversation to have but your current precarious situation means that you risk falling further into debt and being unable to support your family at all.

Another option is to increase your income by either training or applying for a promotion at work or taking on extra jobs when you are not working.

This may be more challenging when considering your circumstances and commitments but, depending on your skill set and career, can be a profitable endeavour.

Even a couple of evenings a week can help you to start building a savings pot and enable you to feel more secure.

Once you have freed up some disposable income, even just a small amount, you can start building a savings pot.

Transfer an amount each month to a different savings account and try increasing it by 1 per cent a month.

An emergency fund of three to six months’ worth of expenses is ideal to support you in the case of an unforeseeable financial issue, such as a health crisis or job loss.

However, you may be comfortable with a larger fund if you have a lot of people depending on your income.

Ensure you also spread your larger costs, such as school fees, over the year and save for them gradually to ease the pressure on your budget.

Start small and consistently contribute until you can build some financial security. Then, you will be in a stronger position to support your family, both in the UAE and at home.

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