One of the most common questions people first learning about financial independence ask is: "When do I know I have enough money to retire?"
This is a great question for several reasons:
1. Having a goal to aim at is critical. Without the destination in mind, you won't really care if you're making progress, but if you know what you're aiming at, you can see if your steps are paying off. You'll also have more motivation if you know there is a light at the end of the tunnel.
2. Many are unaware that there is actually an answer to this question. This is because greed and marketing - and Instagram - have us chasing a never-ending amount of increasingly expensive things and experiences. If you just think of money as a way to buy stuff, and there's an infinite amount of things to buy, you might need infinite money to retire "in style".
To really know when you have enough money to quit your job and sip fruity drinks in photogenic locations forever, there are two things to consider. The first comes from knowing yourself, particularly, how much you spend in a year, or want to spend in a year of retirement. To find that figure, you need to track your spending.
Modern technology makes this incredibly easy with apps on your phone like "Spending Tracker" (it's free on iOS and Android and can be set to AED). It takes about 10 seconds after you make a purchase to log it into the app and select which category, such as rent, clothes, mobile phone etc. that the purchase belongs to. Almost every financial expert I've ever listened to recommends this as the first step towards taking charge of your economic life, and for good reason. Without this information, you can't really know how much you spend or what you spend it on. And you can't figure out how much you need per year to live on after you stop working.
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Read more:
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Can you really afford to buy a car in the UAE?
Choose assets that buy you wealth not poverty
Financial advisers and employers must step up to help expatriates fill the retirement gap
The five-step guide to low-cost offshore investing for UAE residents
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There are many debates as to how much of your current annual expenditure you will need to make after retirement. Some experts say 70 per cent of what you spend now, as you'll have more time to do things that save you money like cook at home. Others think you will need more than you currently spend, because you'll have to find ways to entertain yourself to avoid boredom. Only you can really answer that question, but for me, a good estimate is just to say how much you spend currently and leave it at that - it's just easier.
Now that you know the amount you spend per year, multiply that by 25. This number is the amount you need in investible assets like stocks, bonds, or preferably low-cost index funds. "Wait!" you're probably saying right now. "Why 25? Why not 20 or 40?" And the answer, as is so often the case, is maths: 25 is the inverse of 0.04, therefore multiplying your expenditure by 25 is the same as dividing it by 0.04 to get the amount you need for retirement.
In 1998, three finance professors at Trinity University in Texas, US, published a study that showed if you withdraw 4 per cent of your assets per year, you have a 98 per cent chance of your money outliving you over the course of a 30-year retirement. This changes a little depending on the percentage of stocks versus the percentage of bonds you have, but if you have a good asset allocation of around 80 per cent stocks/20 per cent bonds to around 60 per cent stocks/40 per cent bonds, odds are, you are good to go.
This means, if you think you will need $40,000 per year in your golden years, you must have a portfolio of $1 million to retire, if you had no other pensions or sources of income. Those with a pension of $20,000 per year would only need $500,000 in their portfolio to provide them with the other $20,000.
If you already have a portfolio of $1m and feel you can live off $40,000, congratulations. You can quit right now and live a relaxing life away from office politics, alarm clocks, and rush hour commutes. You've made it!
Dubai school teacher Zach Holz documents his journey towards financial independence on his personal finance blog The Happiest Teach
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
$1,000 award for 1,000 days on madrasa portal
Daily cash awards of $1,000 dollars will sweeten the Madrasa e-learning project by tempting more pupils to an education portal to deepen their understanding of math and sciences.
School children are required to watch an educational video each day and answer a question related to it. They then enter into a raffle draw for the $1,000 prize.
“We are targeting everyone who wants to learn. This will be $1,000 for 1,000 days so there will be a winner every day for 1,000 days,” said Sara Al Nuaimi, project manager of the Madrasa e-learning platform that was launched on Tuesday by the Vice President and Ruler of Dubai, to reach Arab pupils from kindergarten to grade 12 with educational videos.
“The objective of the Madrasa is to become the number one reference for all Arab students in the world. The 5,000 videos we have online is just the beginning, we have big ambitions. Today in the Arab world there are 50 million students. We want to reach everyone who is willing to learn.”
Cry Macho
Director: Clint Eastwood
Stars: Clint Eastwood, Dwight Yoakam
Rating:**
Fines for littering
In Dubai:
Dh200 for littering or spitting in the Dubai Metro
Dh500 for throwing cigarette butts or chewing gum on the floor, or littering from a vehicle.
Dh1,000 for littering on a beach, spitting in public places, throwing a cigarette butt from a vehicle
In Sharjah and other emirates
Dh500 for littering - including cigarette butts and chewing gum - in public places and beaches in Sharjah
Dh2,000 for littering in Sharjah deserts
Dh500 for littering from a vehicle in Ras Al Khaimah
Dh1,000 for littering from a car in Abu Dhabi
Dh1,000 to Dh100,000 for dumping waste in residential or public areas in Al Ain
Dh10,000 for littering at Ajman's beaches
Favourite things
Luxury: Enjoys window shopping for high-end bags and jewellery
Discount: She works in luxury retail, but is careful about spending, waits for sales, festivals and only buys on discount
University: The only person in her family to go to college, Jiang secured a bachelor’s degree in business management in China
Masters: Studying part-time for a master’s degree in international business marketing in Dubai
Vacation: Heads back home to see family in China
Community work: Member of the Chinese Business Women’s Association of the UAE to encourage other women entrepreneurs
Company%20Profile
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MATCH RESULT
Liverpool 4 Brighton and Hove Albion 0
Liverpool: Salah (26'), Lovren (40'), Solanke (53'), Robertson (85')
Results
1. New Zealand Daniel Meech – Fine (name of horse), Richard Gardner – Calisto, Bruce Goodin - Backatorps Danny V, Samantha McIntosh – Check In. Team total First round: 200.22; Second round: 201.75 – Penalties 12 (jump-off 40.16 seconds) Prize €64,000
2. Ireland Cameron Hanley – Aiyetoro, David Simpson – Keoki, Paul Kennedy – Cartown Danger Mouse, Shane Breen – Laith. Team total 200.25/202.84 – P 12 (jump-off 51.79 – P17) Prize €40,000
3. Italy Luca Maria Moneta – Connery, Luca Coata – Crandessa, Simone Coata – Dardonge, Natale Chiaudani – Almero. Team total 130.82/198.-4 – P20. Prize €32,000
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
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The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
War
Director: Siddharth Anand
Cast: Hrithik Roshan, Tiger Shroff, Ashutosh Rana, Vaani Kapoor
Rating: Two out of five stars
Tree of Hell
Starring: Raed Zeno, Hadi Awada, Dr Mohammad Abdalla
Director: Raed Zeno
Rating: 4/5
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
