Wealthy expats in the UAE: 5 money secrets you should know

Ask people why they’ve moved to the UAE.

They might gush about the beaches.

They might tell you about the region’s fine restaurants.

Then there’s the weather, the nightlife, and the relative safety.

According to an HSBC poll, financial opportunities work like a magnet too. There’s no income tax or capital gains tax. That makes it a charged environment for building wealth…or at least financial independence.

Unfortunately, there’s a common trap. Take the example of someone in senior management. Perhaps it’s your boss. The company pays him a truckload of money. 

He and his wife drive Maseratis. They take ski trips every year, sometimes to Canadian glaciers in July. They host parties at their glitzy home. 

You might think they’re rich. 

But they could be living a smoke and mirror show. 

I recently spoke to Dino Ibric. He’s the Deputy CEO and Director of Swissquote MEA, in Dubai. He says plenty of expats in Dubai don’t invest. Among those that do, most invest too little. “When people open accounts, we ask them to list their incomes and assets,” he says. “The lifestyle in Dubai can suck people in. So many high-income people here have low levels of wealth.”

Thomas Stanley studied wealthy people for more than 45 years. He wrote the bestselling books, Stop Acting Rich and The Millionaire Mind. He co-authored The Millionaire Next Door, with William Danko, and The Next Millionaire Next Door with his daughter, Sarah Stanley Fallaw. 

How much wealth should you have?

Dr. Stanley had a formula. In a country that charges income taxes and capital gains taxes, he said a person’s wealth should at least be equal to their age, multiplied by their total household pre-tax income, divided by ten. “Total household income” includes annual income from salaries, property revenue, dividends and any other income. 

For example, imagine a 50-year-old who lives in London. She has a total household pre-tax income of £300,000 per year. Based on Thomas Stanley’s formula, her net worth should be at least £1.5 million (50 x £300,000 / 10 = £1.5 million).

But because she pays income taxes, her net income is far lower than £300,000 per year. That’s why, if you’re living in Dubai, I made an adjustment to Thomas Stanley’s formula. I added an additional 30 percent to the minimum expected wealth number.

By this reckoning, the same 50-year-old in Dubai should have a net worth of at least £1.95 million ($2.49 million USD).

Try this calculation with your income and your age.

Here it is again:

Multiply your age by your total household income (including salaries, dividends, property income and other income).

Divide that number by 10.

Then multiply that by 1.3 (this last calculation adds 30% to Stanley and Danko’s formula). 

Do you have the minimum expected wealth?

Plenty fall short.

Sam Instone, Managing Director at AES International says, “Expats in Dubai are typically world-class pros at hedonically adapting to their circumstances. They scramble their priorities and focus on today rather than tomorrow. But there are some simple fixes to these behaviours.” 

These “simple fixes” require that we follow the habits of the wealthy…while ignoring the people who just pretend to have money.

Here’s what research says about their habits, priorities, and backgrounds. 

1. Most millionaires don’t drive expensive cars or wear flashy watches

Ramsey Solutions surveyed more than 10,000 wealthy Americans in their National Study of Millionaires. One of the questions asked whether displaying high status was important to them. The vast majority said no. They said their primary focus was achieving financial independence. In contrast, plenty of people with high incomes but low levels of wealth prioritise status.

This mirrors Thomas Stanley’s research on what types of cars most millionaires drive. They prefer to buy Fords, Hondas, Toyotas or Mazdas, instead of Porsches, Audis, BMWs, Jaguars and Mercedes Benz cars.

That doesn’t mean there aren’t some rich people who drive flashy cars. But the vast majority of people driving such cars have high incomes and low levels of wealth.

Millionaires also prefer Timex to Rolex. 

2. Roughly 75% of millionaires have never carried a credit card balance 

You might see this and say, “Well that makes sense. They’re rich, and they were likely born rich. Why would a rich person have credit card debt?” 

But 80 percent of wealthy people, according to the Ramsey Solutions research, came from families with average or below average household incomes. In other words, they weren’t born rich.

They established healthy habits early. They pay their entire credit card balances off every month. Roughly 75 percent of millionaires have never paid a penny in interest to a credit card company.

3. Most millionaires did not receive financial assistance from their parents 

If you haven’t received an inheritance, you might feel like a dachshund in a greyhound race. But Ramsey Solutions found that 79 percent of millionaires have not received an inheritance. Of those who have, only 3 percent inherited more than $1 million. 

In other words, you’ll build bigger muscles if you do your own pushups. 

This is worth remembering if you want your children to also become financially strong.

Wealth expert, Sarah Stanley Fallaw says even helping children with down payments on their first homes is generally a bad idea.

She says, “In general, the more dollars adult children receive, the fewer they accumulate, while those who are given fewer dollars accumulate more.”

4. Most millionaires did not get lucky with a single successful stock 

It’s easy to think of people building fortunes after buying Apple, Google or Nvidia shares. But that can tempt us to gamble. Roughly 75 percent of millionaires say their success is a result of diversified, regular, consistent investing.

According to Ramsey Solutions, most millionaires don’t waste time trying to time the market or gamble on a single stock.

5. Only 15% of millionaires work in senior leadership positions 

A friend of mine worked in a senior management role. He rode a scooter to work in Singapore. His colleagues, however, gave him a tough time. “You can’t ride a scooter when lower-ranked employees are driving BMWs, the said. 

“Yes, I can" he replied.

People in leadership positions often think they have to live large. 

It’s much the same with doctors. That’s one reason why Thomas Stanley and William Danko found that doctors, on average, have low levels of wealth, relative to their salaries. They normalise spending habits that aren’t consistent with building wealth.

So, whether you’re a doctor, lawyer, or senior leader in your company, don’t try to match the spending habits of your contemporaries. Many commit financial malpractice on themselves. 

It’s not what you make, it’s what you do with what you make 

Ramsey Solutions also found that most of its surveyed millionaires earned less than an average of $100,000 a year over their professional working lives. That’s an average. Their salaries likely started lower and worked their way up.

But out of more than 10,000 people surveyed, none of them ever earned more than $1 million a year. 

Frugality and financial planning are keys to success.

So while the UAE offers a great lifestyle and wealth building potential, do what you can to avoid ‘expatitis’. Unlike colitis, appendicitis, and arthritis, the early stages are rather pleasant. But over time, ignoring the principles of the wealthy could end up haunting even the best-paid expats.