Experts Say Consistent Saving, Even in Small Amounts, Can Build an Emergency Fund and Reduce Dependence on Debt.
For UAE residents earning less than Dh10,000 a month, balancing rent, transport, groceries and other everyday expenses while trying to save can be difficult.
Financial planning on a limited income starts with prioritising essential costs, keeping lifestyle spending under control as earnings increase and developing a consistent savings habit — even if only a small amount can be set aside each month.
To understand how residents can better manage their finances, cut unnecessary expenses and gradually build savings, financial expert Vijay Valecha, Chief Investment Officer at Century Financial, shared some practical budgeting strategies.
How much of your salary should go towards rent?
Housing should be one of the first expenses considered when preparing a monthly budget, according to Valecha.
As a general guideline, he recommends limiting rent to around 30% of monthly income. However, the amount a person can realistically allocate towards housing will depend on where they live, their household circumstances and other financial commitments.
A general guide for housing costs
As a broad budgeting guideline, Valecha suggests residents consider the following:
- Rent: Try to limit it to around 30% of your monthly salary.
- Utilities: Set aside an additional 5% to 10% of monthly income.
- If housing costs are too high: Consider shared accommodation, moving farther from major city centres or negotiating more manageable rental payment terms.
For example, someone earning Dh7,000 a month would have a monthly rent budget of around Dh2,100 if they followed the 30% guideline.
For residents earning slightly below Dh10,000 a month, Valecha said studio apartments in areas such as International City in Dubai or Khalifa City in Abu Dhabi could cost approximately Dh30,000 to Dh34,000 annually.
“Rent shouldn’t exceed 30 per cent of your monthly income,” he said.
How can you reduce transport and grocery costs?
Housing, transport and food combined can account for around 60% of monthly income, particularly for people living in more expensive areas of Dubai and Abu Dhabi, according to Valecha.
Transport and food are therefore two important categories where residents may be able to adjust their spending and free up additional money for savings.
Transport
Valecha recommends allocating around 8% to 12% of monthly income towards transport.
Using Dubai’s Metro and bus network with a monthly Nol pass can help keep commuting expenses below Dh200, depending on the routes and zones used.
By comparison, owning a car could cost Dh700 to Dh1,000 or more each month once expenses such as fuel, parking, insurance and loan repayments are taken into account.
Groceries and dining
Valecha recommends keeping food expenses at around 20% of monthly income.
Cooking at home more frequently instead of regularly ordering food or eating at restaurants can help reduce costs. Residents can also consider buying groceries in bulk where practical and planning meals in advance to minimise unnecessary purchases and food waste.
Dining out can be treated as an occasional expense rather than part of everyday spending.
For someone earning Dh7,000 a month, allocating 20% towards food would provide a monthly budget of Dh1,400.
“Food is probably the most underestimated budget category,” Valecha said.
How much should you save every month?
Financial experts recommend treating savings as a fixed part of the monthly budget rather than waiting until the end of the month to save whatever remains.
Valecha suggests transferring at least 15% of monthly income into a separate savings account as soon as the salary is credited. However, he acknowledged that high housing, transport and other essential expenses can make this target difficult for some residents.
Savings targets if you earn under Dh10,000
For those with limited disposable income, savings goals can be adjusted according to individual circumstances:
- 5% to 10%: A practical starting point when essential expenses leave limited room for saving.
- 15%: Valecha’s suggested initial savings target where financially manageable.
- Up to 20%: A longer-term goal as income increases or expenses become more manageable.
For someone earning Dh7,000 a month, saving 5% would mean setting aside Dh350, while a 10% savings rate would amount to Dh700 each month.
Valecha said the first savings priority should be building an emergency fund capable of covering between three and six months of essential expenses.
Should you use credit cards or buy-now-pay-later services?
Valecha advises residents to be careful when using personal loans, credit cards or buy-now-pay-later services to fund everyday spending.
Interest charges, fees and repayment obligations can turn a single purchase into a longer-term financial commitment, potentially reducing the amount available for future savings.
Before taking on additional debt or a new payment plan, residents should make sure they can comfortably meet the repayments after paying for essential expenses such as rent, utilities, groceries and transport.
They should also review interest rates, fees and repayment conditions carefully and avoid borrowing simply to maintain a lifestyle that exceeds their available income.
Valecha also cautioned residents against sending a large share of their income overseas before establishing adequate savings in the UAE, as doing so could leave them without an accessible financial buffer if an unexpected expense arises.
What could a monthly budget look like on a Dh7,000 salary?
A practical approach is to set a spending limit for each major category and then adjust those amounts according to actual living costs and individual financial commitments.
For example, a resident earning Dh7,000 could initially allocate around 30% to rent, up to 20% to food, 8% to 12% to transport and at least 5% to 15% to savings, while budgeting separately for utilities and other essential expenses.
The takeaway
Managing a monthly income of less than Dh10,000 does not require following a single perfect budgeting formula.
A practical starting point is to keep housing costs within manageable limits, control spending on transport and food, regularly review recurring expenses and transfer a realistic amount into savings as soon as the monthly salary arrives.
Even setting aside a relatively small amount consistently can gradually build an emergency fund and reduce the need to rely on credit cards, loans or other forms of borrowing when unexpected costs arise.
