Dealing with debt is a subject that has become more prevalent over the last few years. According to a study by Strategic Analysis, in UAE the average consumer debt per household is AED 348,650. People who move to the country, generally receive a higher salary and, for the majority, no longer pay tax. They find a place to live and, if they have children, sort out schools and start to enjoy their new life.

Now there isn’t necessarily anything wrong with this, but there comes a point where you need to address your spending habits. Start to think if you’re really achieving the financial goals you moved here to accomplish. Too many people become accustomed to their new lifestyle and level of spending and never consider what they are actually doing.

The next thing they know, it’s two years down the line and they have little to no savings and quite possibly a chunk of debt. So, what can we actually do to help us manage our debt?

Start with making a budget

Work out where your money is actually going. Most of you will think you have a good idea but until you actually sit down and work it out, you never really do.

Having a set budget is one of the most effective and simple ways to manage your money. The best way to keep track is to use a spreadsheet. Take time to work out your fixed expenses per month: Rent, DEWA, School Fees, Etisalat/DU, Loans etc. Then budget for your non-fixed expenses such as clothing and entertainment.

[Related: The 50/20/30 budgeting rule – Does it work?]

By budgeting and stipulating around AED 1,000 per month on clothing and keeping track, you can tell if you’re overspending or underspending in any areas. You will be surprised how many people overspend on food and socializing without realizing it. By doing this, you can really get on the right track to achieving your financial goals with consistency and commitment.

Browse through over 60 Savings Accounts and 150 Deposit Accounts in the UAE, and apply for the one that meets your requirements.

Can’t pay off your debt? Tell your bank

So, what are your options if you can’t pay off your debt?

Firstly, you need to approach the banks and talk to them. Explain your situation and make sure you state that you’re willing to pay your debts but you’re no longer in a financial position to service them. The banks will request proof of income (salary certificate) and proof of your outgoings, i.e. DEWA bills and your tenancy agreement plus a rough budget of your other expenses.

They want to make sure how much you can actually afford to pay in regular installments. We urge you to not let this be too high, as you need to be able to honor these payments over time. If you have credit card debt, they should be able to bundle them together, put a fixed annual rate of interest of between 8-10% and schedule monthly repayments over a period of no more than five years. With credit cards, loans and overdrafts, the solution is very similar but may have a different name depending on the bank you’re dealing with.

Your bank may not offer these solutions to you at first; however, they are available. In some instances, you may be told you don’t qualify for them and again, this isn’t true as long as you can prove you can no longer service the debt. The downside to this is that if the bank determines you’re able to service the minimum payments then it may not let you enter into a repayment system. Try to talk to the bank’s debt specialist rather than the teller or customer services team as they can better position to answer any questions you may have.

David Noakes is currently the Head of Non-Medical at Lifecare International where he manages a department of specialists for Lifecare International whose services cover all aspects of insurance and financial services.