What Most People Don’t Realize About Credit Card Interest in the UAE*

When you sign up for a typical credit card in the UAE, you will likely see an advertised rate of 3.99%. That might not sound too bad… Until you realize:

• That’s a monthly rate.
• The interest is charged on your balance every single month — including on interest from previous months.
• Multiplied by 12, it adds up to 47.88% per year (if you pay off the interest each month)
• You can be paying up to 59.92% per year with compounding (that’s nearly 6x higher than what you can expect to earn by investing)

This is compound interest in action — the same force that can make your investments grow over time, but working against you when you carry a credit card balance.

Let’s Break Down the Cost of Carrying a Balance

Real-Life Example: The True Cost of Carrying a 1,000 AED Balance

Imagine you carry a 1,000 AED balance and don’t pay it off for a year.

• Month 1: You’re charged 39.90 AED in interest
• Month 2: Your new balance is 1,039.90 AED, and interest is charged again — now 41.49 AED
• Month 3: The balance grows again, and you pay even more in interest

After one year, you’ll have paid 599.92 AED in interest on that original 1,000 AED — without reducing the principal at all.

Now imagine your balance is 100,000 AED. You’d be paying 3,990 AED per month in interest alone. Even if you manage to pay that amount monthly, your principal wouldn’t budge while you’re out 47,880 AED a year for the privilege of carrying that balance.

Why Using a Credit Card in Emergencies Can Backfire

When you’re short on cash, using your credit card might seem like the simplest solution. But unless you can pay off the entire balance quickly, you risk racking up massive interest charges.

It’s better to:

• Use your emergency fund or other savings
• Cut discretionary expenses for a month or two
• Sell some of your investments (better than paying 59.9% interest!)

This is exactly why I recommend building and maintaining an emergency fund. It’s your buffer against life’s surprises — so you don’t have to turn to high-interest debt when you’re vulnerable.

Credit Cards vs. Compound Growth: The Good and the Bad

With long-term stock market investing, compound growth helps your wealth multiply — over the long term at around 10% per year. But with credit card debt at UAE rates, you’re looking at paying nearly 48% per year, and then the monthly compounding on top of that. It’s an battle you can’t win. You’ll never invest your way out of debt.

The compounding effect that grows your investments over decades will drain your finances fast when it’s applied to debt.

Let’s say you carry a 1,000 AED balance at 3.99% interest, compounded monthly:

• After 12 months, you’ll owe ~1,599 AED
• That’s 599 AED in interest — more than half the original balance
• And it keeps growing unless you actively pay it off

A simple graph (you can create one in Excel or Google Sheets) can show the difference between your original balance and the growing debt. The message is clear: credit card debt grows fast and hits hard.

What Should You Do if You Have Credit Card Debt?

7 Steps to Escape Credit Card Debt in the UAE

1. Stop adding to the balance — Track spending, pause non-essentials, and shift to cash or debit.
2. Make a plan — Focus your repayments on the highest interest debt first
3. Negotiate with the card issuer — Lenders are under obligation to ensure that your total debt repayments make up less than 50% of your income for new loans, and they can sometimes give you more favorable terms on existing debt
4. Explore balance transfers or consolidation loans — Be cautious, debt cannot solve the underlying issue of getting in debt in the first place, but reducing your interest payments can help
5. Consider stopping payments on debt outside the UAE — a strategy for countries where laws are more forgiving to debtors, in some cases lenders will not negotiate with you until you’ve missed several payments
6. Don’t stress about your credit score — while high credit scores can make some things easier, like getting a mortgage, carrying a credit card balance is a much bigger problem
7. Reach out for support — I can help you strategize without shame, taking into account your full financial picture. You don’t have to face this alone.

You can pay off credit card debt — even in the UAE — with a clear plan and support.

Frequently Asked Questions

What is the interest rate on credit cards in the UAE?

Most UAE credit cards advertise a monthly interest rate of around 3.5% to 3.99%, which equates to 42–48% annually without considering the effects of monthly compounding.*

How does compound interest affect credit card debt?

Compound interest means you’re charged interest on your interest each month. This causes debt to grow exponentially unless paid down aggressively.

Is it better to use savings or a credit card in an emergency?

If you have an emergency fund, always use that before turning to a credit card. Even selling investments may be better than carrying high-interest debt.

How can I pay off my credit card faster?

When it comes to high interest rate cards, always start with the highest interest rate first. Track your expenses monthly so you know where your money is going. Automate payments and track your progress.

What if I can only make the minimum payment?

Making only the minimum will keep you in debt for years and cost thousands in interest. If you’re carrying a credit card balance, paying it down needs to be your primary focus, divert funds from other goals until the cards are paid off.

Is credit card debt always bad?

Yes! Carrying a credit card balance is always a bad idea. Sometimes it’s the least worst option you have, but this is very rare. Credit cards are only useful if you can reliably pay the balance in full each month. Rewards programs are funded by the fees paid by people who carry balances. Rewards never make up for the interest you will pay if you don’t keep your card balance at 0 by the end of each month.

Are there alternatives to credit cards for emergencies?

Yes. Build an emergency fund of 1–6 months worth of expenses, or more. Never use a credit card for an expense you could otherwise use a loan to cover. Personal loans can also be dangerous to your financial health, but they’re much better than credit cards. Debt is a last resort for emergencies.

Final Thoughts

If you’re dealing with credit card debt in the UAE, know this: you’re not alone, and you’re not just “bad with money”. The system is designed to make it hard to escape once you’re in. That’s not your fault.

With the right plan and support, you can take back control of your finances and build something better.

Want a personalized debt payoff plan? Schedule a free 15-minute consultation now.

*For comparison, the standard annual interest rate for credit cards in the US is currently just under 25%, and in the UK it’s around 32% which are still terrible financial emergencies, but not quite as bad as the UAE.

What’s your goal? A debt-free education? Financial security? Before diving into how to save, let’s explore why—and how your own financial and emotional health play a role.

If you’re like me, you grew up without a lot of financial help, and you want your kids to have an easier time than you did. But good intentions need strategy. Here’s what to consider:

1. Prioritize Your Own Well-Being
2. Let Go of Control
3. Adolescence Lasts Longer Than You Think
4. Plan for Flexibility
5. Real Gifts Come Without Strings
6. Saving Smart for Your Child’s Education

If you pass out, you’re no use to your kid.

Put On Your Oxygen Mask First

This applies to your finances and emotional health. The greatest gift you can give your child is a stable, present parent.

Data backed truth: Helen Pearson’s Ted Talk discussing data from the British birth cohort studies identifies the two keys to a child’s success:

1. Don’t be born into poverty.
2. Have attentive parents.

If you’re reading this, you’ve probably already got the first one under your belt. So let’s work on the second.

Attentive parenting looks like:

• Talking to and listening to your kids
• Emotional warmth (even during meltdowns)
• Reading to them
• Maintaining routines (like a regular bedtime)

But how? If you’re stressed, regulating a toddler’s 50th “why?” or a teen’s angst feels impossible. That’s why your emotional health matters. Kids learn to regulate themselves by watching you. Kids can only learn emotional regulation by watching us model it. So that’s the work. If you never learned emotional regulation from your parents (like many of us), I recommend reading Self-Reg by Stuart Shankar as a starting place.

Financial implications:

Have an adequate emergency fund and a plan in place for your retirement before you start saving separately for your children.

Parenting is the Gradual Process of Letting Go

When these wondrous little humans first come to us, they are completely dependent on us for food, shelter, and safety. Although it seems like we have complete control over them as infants, this illusion is quickly shattered as our toddlers begin to assert their independence.

You see, they were separate beings from us all along. We never actually had control. We were always facilitators. The more we try to assert control over them the more they pull away from us.

The sooner we accept this and focus on collaborating with our tiny humans, building a secure and resilient relationship, the stronger and more positive our lasting impact on them will be. This doesn’t mean no rules or boundaries, but rather that we accept them as separate and equal beings who deserve the same respect we would give an elderly relative who might also need their chin wiped, or to be told no.

Financial implications:

• Your child will make choices you wouldn’t.
• Collaborate, don’t control. Secure relationships mean they’ll choose to seek your advice

If we continually assert control they won’t share their struggles, financial or otherwise, they’ll hide them from us.

Adolescence Isn’t Over at 18

If it seems like your college student is acting like a child, then you’re on to something. The adult brain doesn’t finish developing until the mid to late twenties. So next time you see a 23 year old making a bad decision, blame their brain.

Even 22 year olds show heightened sensitivity to peer pressure

In fact, during the teens and twenties, people’s brains go through extensive synaptic pruning and myelination, two physical processes that make the brain more efficient. The way these processes affect behavior can been observed in the above graph, where it’s clear that after 24 years of age there is a significant decrease in risky behaviors around peers.

Emotional regulation and executive function are also affected by brain development, and both play an outsized role in what everyday people call “self control” and “discipline.” The mean age for myelination to be complete in our “social” brain is 32 years old! That doesn’t mean teenagers can’t think clearly and make difficult decisions, it means that emotional regulation and peer pressure affect them more. So give the kids a break, especially the 20 somethings.

What this means:

• Adjust expectations for young adults
• Flexibility in financial planning is essential

So while we need to respect young people as separate from us, and avoid attempts to control them, we also need to recognize that they’re operating in an adult world without fully functioning emotional regulation due to the time it takes for their brains to fully develop.

The Future is Unknowable; Plan for Flexibility

Often when a first child is born, parents and other family have so many expectations for what that will look like over the long run. But there are no guarantees. You may end up having more children than you planned, or fewer. Your kids may go on to academic excellence, opt for vocational school, start their own business, or join the circus. We can’t know what the outcome will be, so planning for flexibility is key.

While you are in the UAE there are generally no tax considerations to worry about, so you don’t need to separate your child’s education funds from the family portfolio unless you want to. Even if you do want to segregate your assets for your children, you can do so on “paper”, through buying similar but different assets, or by creating sub accounts within your brokerage.

If you are tax resident of a country that taxes capital gains and dividends (this includes all American expats), you might consider a tax advantaged account for your children. However, you will lose flexibility with these types of plans, so it might not be worth it. You end up allocating money to a specific child (and that can end up being unfair if you’re unable to do the same for subsequent children) and then that money has rules about how it can be used in the future.

Financial tips:

• In the UAE: No need to segregate education funds unless you want to.
• For U.S. taxpayers: Tax-advantaged accounts (like 529 plans) reduce flexibility. Weigh trade-offs.

Cut the Strings or It’s Not a Gift

If you want to give a gift to your child, that’s great. Keep in mind that it needs to become theirs. Otherwise it’s not a gift at all, but rather a disguised form of control. If this makes you uncomfortable, it would be worth reflecting on why.

Often our discomfort around our children’s behavior and choices comes from how we were expected to behave as a child. Most of us didn’t have emotionally mature, respectful parents who understood child development. That’s a high bar. So when we find ourselves bumping into discomfort, it’s a sign that there’s some unresolved emotion lingering from our past. No judgement, this is something we all face in one way or another. It’s how we deal with it (or not) that makes the difference to our kids.

Discomfort? Dig deeper: Is this about my child? or my unresolved past?

Saving for Child’s Education: Practical Tips

Given all of this, I still want to help my kid have a leg up in life by paying for their school fees through university. I graduated with tens of thousands of dollars in student loan debt, and I would prefer if I can spare my child from that.

So how do you go about planning for university fees?

1. Estimate the annual cost of university fees + room and board today
2. Divide that number by your current monthly savings
3. If the number you get is less than 12, then you probably don’t need to start saving for university until a year or so before you child sets off. If the number is more than 12, you will need to plan further ahead.

Let’s say you want to cover the entire cost of tuition, room, and board for your children at a mid-range public university in the US. The US is one of the more expensive places to attend university, so it’s possible you’ll need less than this for your child.

You can expect university to cost about 40,000 USD a year (an average of US universities including room and board in today’s dollars) and if you can save that in about 24 months, then you’ll want to start saving about 5 years before your kid goes off to school.

Meaning, that until your kid is 13, you’ll be putting your annual savings of 20,000 USD per year into your family ETF portfolio, but 5 years before you expect them to start university, you will divert new savings into a high yield savings account, money market fund, or maybe even an i-bond ladder.

The idea here being that you front-load your equity investments for the long term, and you wait until just before you need it to start building up cash for the university fees. It also gives you flexibility to use that cash in whatever way makes sense for your family.

Taking the scenario above, but adding an additional child starting school 2 years later means you would need to start saving cash 11 years before your oldest heads off to school.

If you have multiple children and/or a lower savings potential the math gets tougher.

So what is a parent to do?

Here are a few options to consider that might make university more affordable for your family:

• Choosing a less expensive school/country.
• Establishing residency or nationality in a place that will offer lower tuition to locals.
• Work study, where your child works part time during the school year, or during summers to cover part of their costs.
• Lowering room and board costs by going to school where you have family nearby, or by your child living with roommates and cooking for themself. Sometimes living off campus is cheaper than staying in the dorms.
• Delaying university, maybe while your child builds up work experience and additional savings.
• Scholarships, if your child is eligible, come in many forms and can cover part or all of the costs of university.
• Starting off at a less expensive school, like a community college, but then transferring to a more expensive (and more well known) school for the final 2 years of university. As long as your credits are transferrable (check in advance) you get half of your education at a discount, but a full diploma from a reputable school just the same.

My college yearbook photo from 2003

When I attended university in the US more than 20 years ago, I had an academic scholarship from the school for half of tuition room and board, along with a need-based grant, and a few other state-based academic scholarships. Even though I worked throughout university I still ended up with substantial student loan debt because I chose a more expensive private university and my parents were unable to help me financially. Had I chosen to go to a public university instead I likely would not have needed any loans. However, when I went back to graduate school, I funded it entirely on loans.

I bring this up to say that student loans are still an option if university is unaffordable otherwise. Although it puts a significant financial stress on students in the early years of the their careers (I know because I experienced it!). It’s often a better option than not completing a degree.

I don’t regret going to the school I chose, even though it was expensive. I believe it was the right choice for me at that time. I learned so much being in a smaller more intimate educational setting where I was able to have a meaningful relationship with many of my professors.

However, one regret I do have is not pursuing a semester abroad. At the time I thought it would be prohibitively expensive, but since I never even looked at the numbers, I didn’t realize until later that the lower cost of tuition in France would have meant it cost less to study there, even including flights and accommodation, than continuing at my American school.

The take away: Always run the numbers. Often our assumptions are wrong.

If you want help running your specific numbers, schedule a free call to discuss how I can help you do that.

I’ve been buying only VT (VWRA equivalent for Americans) for the past 7 years, before that I used a robo-advisor similar to Sarwa and I still have a small percentage in bonds from that time. By December, my portfolio had gotten to about 1.5% bonds and 98.5% stock.

I have been an advocate for 100% equity, so why the change? Well. My life has changed. I’m no longer actively investing as my income is significantly lower (by choice). I am now approaching the drawdown phase, though I won’t need to start living on my investments for some time yet.

Now that my assets are sufficient, I no longer need substantial growth, but I do want downside protection. The difference between 9% growth and 10% growth isn’t such a big deal for me now. I am much more concerned now with capital preservation than I was a few years ago.

As a teacher, I needed the growth of a mostly equity portfolio during accumulation. I wouldn’t have gotten to FI so quickly if I had started with a 50/50 portfolio. Being a bit of a finance nerd, I was (and still am) very comfortable with volatility. Yet, I want more bonds in my portfolio now.

Why the change of heart? Because investing isn’t about winning, it’s about not losing.

Bonds aren’t in my portfolio to grow. They’re in there for the possible but not probable chance that there will be a long period in the near future where stocks underperform bonds. If stocks are underperforming while you’re accumulating, as long as you stay the course you’re good. Stocks on discount! But if stocks underperform while you’re in the drawdown you’re at risk of running out of money before you die.

The bonds are essentially insurance to decrease the risk of going broke in retirement.

This article by The White Coat Investor explains much of my reasoning for investing in almost 100% equities, and also for increasing (slightly) my bond allocation now that I’m nearing the drawdown phase.

While I only increased my bond allocation to about 3% in December (by reinvesting my end of year dividends). I am planning to get my bond allocation up to around 10% over time. I also feel good about buying bonds while they’re cheap, knowing that those are there for downside protection in the off chance that stocks go very low for years on end.

But what about you? What should you do? If you’re a new investor, I suggest starting off with at least 20% in bonds for the first two years. This is because when you first start, you don’t yet have years of growth in your portfolio. Your entire portfolio value is money you saved up from your earnings. It’s very difficult to watch that value fluctuate when it’s your hard earned cash. Once you’ve been in the market for a while, you will likely have a few years of growth and a much better understanding of your actual risk tolerance. At that point feel free to increase your stock allocation as you see fit.

However, when you get closer to drawdown, you’ll also want to reassess your risk tolerance as I have. This is lifecycle financial planning. Changing your asset allocation based on your life circumstances is a key part of staying the course over the long run.

If you want some help navigating what’s best in your particular circumstances, why not schedule a free call with me to discuss?

Ever heard of Capital Gains Harvesting? Jenny hadn’t either.

Jenny hasn’t paid any U.S. taxes for 15 years. Since moving overseas, her earned income from teaching has been below the Foreign Earned Income Exclusion ($126,500 in 2024). As a result, she owes no taxes…and has left thousands of dollars in future tax savings unclaimed.

Each year, the IRS provides a Standard Deduction based on one’s filing status. The standard deduction is a specific dollar amount that reduces the amount of income on which you are taxed. For example, Jenny’s filing status is Single. In 2024, she is eligible for a standard deduction of $14,600.

Why should Jenny consider the standard deduction, given she does not have a tax liability due to using the Foreign Earned Income Exclusion? Jenny could sell $14,600 of appreciated gains in her brokerage account. This would normally have cost her $2,190 in taxes. Instead, using her unused (you read that correctly) standard deduction would cost her nothing. Multiply these savings by the 15 years she has been overseas, and the math adds up quickly. If Jenny had children under 17, she could add an additional $13,333 of harvesting for each child.

This is counterintuitive thinking for most of us. We wouldn’t normally try to create tax liabilities, but expats should. If you want to take advantage of these opportunities, you must do so during the current tax year (in this case, between now and December 31st).

The Standard Deduction amounts for 2024 are as follows:

-Single: $14,600

-Married Filing Jointly: $29,200

-Married Filing Separately: $14,600

-Head of Household: $21,900

Primer on harvesting gains

When I purchase an asset like an Index fund, stock, bond, or mutual fund, the price I pay for this is my BASIS.

If I purchased $10,000 of an index fund, my basis would be $10,000. If the next day I decided to sell this and there was no gain in my basis ($10,000), I would owe NO taxes as there was no gain; however, if I hold on to the investment for 1,2,5,10,15 years, there will be growth (termed Capital Gains). When I sell the investment, I will have to pay taxes on the gains of this investment, not the basis. For example, that index fund I purchased for $10,000 has now grown (appreciated) to $15,000. If I were to sell this, I would owe taxes on the $5,000 of growth (gains). The tax on this amount would be $750.

I could use a portion of my unused standard deduction ($5,000) to offset taxes owed, resulting in no taxes. I can now take this $15,000, purchase the same index fund (or purchase something else, take the money out, pay for college for my son, or use this for retirement), and re-set the basis. My “new” basis is $15,000. In the eyes of the IRS it appears I paid $15,000 for that index fund. In the future, I will only be taxed on the gains (growth) of the $15,000, not the original amount ($15,000) I invested.

*Note: we are not selling anything for a loss. We are looking for gains and creating taxable events, then using various deductions (like the stand deduction) and credits to offset the taxes owed

If you are an American married to a non-American and you have a dependent child, then you are eligible to file as “Head of Household” on your taxes each year, increasing your standard deduction and therefore your potential tax savings. A huge thank you to Jeff Devens for sharing this information about capital gains harvesting to reduce US expat taxes.

1. Where am I going?American tourists can travel easily with visa on arrival in many countries around the world. Don’t be fooled, as soon as you want to live or work in a new country you’re going to run into hurdles. The first one being your visa. In some places it’s relatively easy to get a long stay visitor’s visa, but this won’t allow you to work. If you want to be able to work you either need to secure a job before you move (so the employer sponsors your visa) or you will have to secure another form of visa for yourself, like an entrepreneur visa. The rules for visas vary greatly from country to country, even within the EU. You’re not going to get anywhere searching for advice on “moving to Europe” You need country specific advice. So choose a place before you start your search.
2. How will I handle taxes?The US is one of only five countries in the world that tax their citizens when they’re living abroad (Hungary, Eritrea, Myanmar, and Tajikistan are the others). Because of this, you will have to file a US tax return every year, whether or not you’re also paying tax in your new country of residence.
   You may not end up owing tax due to the FEIE (Foreign Earned Income Exclusion), which allows you to exempt a little over $100k in earnings each year, but you’ll still have to file. You may also qualify for the Foreign Housing Exclusion. There are also numerous tax treaties the US has with other countries, so knowing where you’re going is really important. You can’t know what tax credits and rules will apply to you if you don’t know what kind of income you will have and where you will be living. As with most things internationally, it mostly depends on where you’re living.
3. What about banking? Many US institutions make it very difficult for expats to work with them, often requiring a US phone number for 2 factor authentication or customer support. If you can keep your US bank account open while you’re abroad it will be helpful, but be prepared to have some headaches. It’s usually better to simplify your financial accounts before you move. If you have multiple accounts, figure out the friendliest one to keep open. Some institutions will close your account if you move abroad so best to do some searches for other expat’s experiences with your specific bank.
   You will almost certainly need to open a bank account in your new country of residence. Because the US has extremely stringent reporting requirements, some banks won’t want you as a customer, apprently this is often an issue in France. When you do open an account, you will have to fill out additional paperwork because you’re American and if your account ever has the equivalent of $10,000 or more in it, you will have to fill out an FBAR form online every year that your balance exceeds this amount.

4. What will happen to my Roth IRA, 401k, HSA etc? These are all US tax wrappers around investing or savings accounts. In general they don’t apply to expats with some exceptions. Most the the finance advice you will hear from the US becomes irrelevant because to a large degree it’s about taking advantage of these tax wrappers, which you will most likely not have access to. Additionally, you may or may not qualify for similar tax advantaged accounts in your new country of residency.
5. Can I continue investing?Most US brokerages will not allow you to continue to invest with them if they find out you’re living abroad. IBKR is the most expat friendly, and Charles Schwab is the second most expat friendly. Many others have been known to close accounts if they find out you’re not a US resident. However, even with IBKR and Schwab, if you’re living in the EU or the UK you will not be able to continue investing while living there due to conflicting regulations around retail investing between the US and the EU (the UK retained these rules after Brexit). In this case your existing investments are fine, but you can’t reinvest dividends or add to your portfolio without significant hurdles.
   Generally it’s a bad idea to invest with a brokerage outside of the US as an American. This is due to punishing tax laws for certain types of investments. In some ways this is good, because there are so many investment traps and scams targeting expats. But it limits you, particularly if you’re trying to invest from the UK or Europe. It’s best to stick with either IBKR or Schwab, or hope that your other US broker doesn’t realize you’ve relocated.
6. Will I still be eligible for Social Security?You cannot contribute to social security with foreign earned income, so it’s a good idea to check and see if you already have enough credits for social security before you leave. Some people knock social security, but it’s a defined benefit, which is gold in the retirement planning world. So even if it’s just a couple hundred dollars, it will make a big difference when you’re 80 and can’t do five side hustles any more. However, if you are self employed as an expat, you will be REQUIRED to pay self employment tax, which includes social security. So there is an option for people like me who moved abroad 2 credits shy of being fully vested.
7. What should I do about Health Insurance?The good news is that healthcare is cheaper than the US everywhere else in the world, an often times the care is as good or even better than the in the US. When you first move you will need a temporary travel insurance plan while your’e in transition, but after that you’ll be dealing with the local health coverage system. Again, you can’t know much about this until you pick a location.
8. What happens if I die?No one likes to think about this, but when you’re moving internationally it’s important to note that inheritance law differs greatly from one country to another. If you don’t have a locally valid will and you die while resident abroad, the local law where you died will take precidence. In many jurisdictions spouses do not automatically inherit when one partner dies. In some places joint bank accounts get frozen if one of the parties dies. It’s important to know what you’re getting into, especially if you have dependents. You may consider having an international will registered, but even these are not valid everywhere. If you have no dependents this may not be as high on your priority list, but it’s still worthwhile being aware of what your family will be dealing with if you don’t make it quite as long as you had planned.
9. Who can help me with all of this?Finding tax planners, lawyers, and financial advisors who work with expats is difficult, because you really need someone who understand the laws and regulations of every country in which you have assets. So it’s not just about the country where you live, it’s also your nationality and any other place you own property. I can help you with financial planning and investing, but at some point you may need to hire a cross border specialist for specific tax planning and filing requirements, filing a will or estate planning, or even a visa specialist. The good news is that I can help you know when you need to hire someone else and when you’re safe to do it on your own. Schedule a free call to see how I can support you.

Sometimes moving abroad can supercharge your timeline to financial independence, it did for me. When left the US and moved to the UAE in 2009, I had over 30k in debt. Now I’m retired from teaching, financially independent, and working for myself on my own terms. I can help you navigate a path towards the life you want too.

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1. Guardianship: If you have minor children, then this is the most important part of your will.
2. Inheritance: What we normally think of: gives you control over who inherits your assets.
3. Executor: The person who will handle your accounts, clear out your apartment, and ensure your written wishes are carried out.

1. Guardianship

This is the most pressing issue for us. Deciding who will take care of our daughter should we both die while she is still young.

When she was a baby this seemed straightforward: Of course she would live with my sister.

Now she’s 5, has a social network of her own and very strong opinions and preferences. My ideas about what is in her best interest have evolved. My sister lives in the US, has no children, and only sees my daughter about once a year. They don’t know each other very well. This no longer seems like the best decision for my daughter.

Living as an expat makes this ever more complicated as our close friends are transient like us. My two closest friends have left the UAE in the past few years. This is part of what makes writing a will hard. Putting something into writing about the care of our child in a world that is constantly changing. How can we get this right?

In reality, we can’t. There is no best solution here. Sometimes we just have to make a choice. In this case, making a choice is far better for our child than not making one. So here I am pondering my own demise and what my child’s life will look like.

I’m going to go take a few deep breaths and make a cup of tea.

Temporary and permanent guardianship

The will template provided by the Abu Dhabi courts includes space for naming a permanent guardian and a temporary guardian, along with an alternate for each. The temporary guardian takes custody of your child/ren if the permanent guardian is not present and able to take immediate custody.

Even if you don’t have a will in place, the UAE is not in the practice of taking children, if the child is not already under the care of a trusted adult at the time of their parents passing, the police will contact the child’s school, and/or the parents’ employer to find a female known to the child to place the child with until family can arrive in the UAE.

For our family, we already have close friends here in Abu Dhabi in mind that I know my child would feel comfortable staying with temporarily. It’s a relief knowing that we can nominate two temporary guardians knowing that our friends travel, and they might not always be here. These friends are already aware that they’re listed as emergency contacts for our child at school.

Our chosen permanent guardian is an auntie who knows our child well, has lived here in UAE before, although she is currently living elsewhere. She is someone I trust and who I know will both have the capacity and willingness to care for my daughter and meet her needs. She has known she is our daughter’s godmother and guardian for a long time now, even though we haven’t yet registered an official will.

Do This Now:

If you have one or more children you can do these steps today.

• Decide who will be their temporary (here in UAE) guardians and who will be their permanent guardians.
• Discuss this with the guardians, list the local guardians as emergency contacts at your child’s school or nursery.
• List them as emergency contacts with your place of employment. This is useful as in case of death, the police will reach out to your visa sponsor. Even without a will, this ensures that your child/ren will be taken care of by someone they know should something happen to you. It’s also helpful to write this in a shared google doc or email, so there is a written record of your guardianship wishes, even without a will.

If the decision is already made and communicated with your potential guardians, then writing the legal will is that much easier.

2. Inheritance

Without a will, inheritance is determined by the laws in the place where your assets are. If you have assets in the UAE (bank accounts, property, household goods etc) these will be distributed according to the local laws. The UAE’s laws on inheritance for expatriates were recently revised to be fairly closely aligned to what I would choose myself.

According to Article 11 (2) of Law No. 14 of 2021, if a non-UAE resident dies without a Will then there is a set method for asset distribution. The surviving spouse shall receive half of the inheritance and the other half shall be distributed equally between the children of the deceased (no difference between males and females). If the deceased has no children, then the remaining inheritance shall be shared equally between the deceased’s parents. If one of the parents is deceased, the remaining parent shall retain their half share and the other half shall be shared equally between the deceased’s siblings. If both of the deceased’s parents have passed away, the remaining inheritance shall be shared equally between the siblings (no difference between males and females).

The advantage to having a will is that the process of transferring your assets will go more quickly (probate can take years!) and you will be able to choose how those assets are distributed. For me, this is straightforward, everything to my husband, and if he’s not here, everything to my daughter.

The will template from Abu Dhabi Family Courts includes space for one primary beneficiary, and up to two secondary beneficiaries in case the primary is deceased. This will template applies to UAE assets only. This works for us, so will make writing our will very straightforward. If you need more beneficiaries, you will likely need to hire a lawyer to help draft your will, which will cost more.

If you have assets in other countries you may need to write a will for each of those countries as well, depending on the laws in place there, or an international will. Since my assets are only in the UAE and US, and my US investments have my spouse and child listed as beneficiaries, I don’t see the need for a US will. Honestly, as long as my daughter is taken care of, I don’t really care what happens to any of my belongings after I’m gone. Other people may feel differently.

Do This Now:

It is important to note that when a person resident in the UAE dies the first thing that will happen is that financial accounts in the UAE will be frozen, even if they are joint accounts. In the US, UK, Europe, and Canada most joint accounts include “automatic rights of survivorship” which means the the assets in that account go directly to the surviving account holder without going through probate, but that is not the case in the UAE. For this reason, it’s advisable for all adults to have a least a month’s worth of expenses, in cash, in an account solely in their own name regardless of whether or not they also have a will in place. This also protects you in case of legal action against one spouse, where assets can sometimes be frozen during the legal proceedings.

3. Executor

The executor is the person who does all the work of handling your life when you’re not here. They close bank accounts, cancel utilities, sort out debts, sell property if necessary, and clear out your personal items. The executor will be the decision maker during the settling of your estate, and will hold your assets in trust if your beneficiary is a minor. It is a time consuming and emotionally heavy task that requires a great deal of trust.

It’s a good idea to set this person up with all of your necessary information in an easy to access place. This could be a digital document with a list of your financial accounts, utilities, and subscriptions as well as any other personal details that are important to you (ie, give this painting to aunt Miriam).

Your executor can be the same as the beneficiary of your will, so long as they are an adult and able to do the work. No matter what, it should be someone you trust to handle your affairs when you’re no longer here.

The will template from AD Family courts give space for up to three executors, with the second and third as alternates in case the first cannot fulfill the responsibility.

It’s useful to note that the will template also includes a “letter of wishes” provision. Directing your executor to follow the wishes of any written intentions, no matter how informal, provided they are dated after the will.

So, please communicate, clearly and in writing, your wishes to your executor. It’s easy to update these wishes as time goes by without having to re-write your will. Their task will be much easier to handle in the midst of their grief if they know what you had in mind already.

Do This Now:

Decide who will be your executor and communicate your wishes to them clearly in writing. In the absence of a will, informal writings can be helpful for your loved ones navigating how to settle your estate. We have an informal “will” as a google document that we’ve written and shared with our child’s potential guardian. Most importantly, my spouse and I have a clear idea of what the other would want should one of us pass. Not having a legal will makes the process of settling an estate much more complicated and time consuming, but having something is better than nothing.

Summary

Writing a will is daunting. The hardest part is the thinking and planning, and you can do that right now. There are certain things you can put into place even before you make a legal will to make things easier should you die in the interim, such as naming guardians for your children, having a bank account in each spouse’s name, and communicating your wishes in writing to your beneficiaries/executor, even informally. Once you have made these decisions, using the Abu Dhabi Family courts template should be fairly straightforward. You will need to include Arabic translations of the names of people listed in the will, but this is fairly easy to do yourself if you have soft copies of their EID, or know someone who can type in Arabic.

Registering the Will

1. Decide who will be listed in your will (executors, guardians, beneficiaries), discuss it with those people, and gather digital copies of their EID and/or passports
2. Fill out the template in English and Arabic
3. Register the will on the Abu Dhabi Civil Family Courts website and pay the 950 AED fee

Let me know in the comments if you were able to file your own, or if you ran into any trouble along the way.

Sources:

This meet-up got me thinking of the utility of community in our lives. There are so many different ways we benefit from relationships.

Happiness and Health

The Harvard study, a longitudinal study of 268 Harvard sophomores that began in 1938 and is still going today shows us that the key to happiness is relationships. “Close relationships, more than money or fame, are what keep people happy throughout their lives, the study revealed. Those ties protect people from life’s discontents, help to delay mental and physical decline, and are better predictors of long and happy lives than social class, IQ, or even genes.”

Humans are fundamentally social creatures. It’s well established that chronic loneliness kills. We need other people for our physical, emotional, and intellectual health. Having strong relationships is highly protective of physical health throughout life. But it’s not just our happiness and our bodies that need community, it’s our minds too.

Learning and Growth

As a teacher and self professed life-long-learner, I’m particularly interested in how relationships affect learning. From earliest infancy throughout life, learning takes place within the context of relationships. If you have ever talked with a student who doesn’t get along with their teacher, whether you were that student, their classmate, their parent, or even their teacher, you’ll be aware that significantly less learning takes place when there is not a positive relationship between teacher and student. Learning cannot take place without a sense of safety and security. We cannot feel safe without positive relationships with those around us. We learn through relationships.

Without community, we cannot grow.

Healing Trauma

As a middle school pastoral leader, one of my jobs was to bring kids back into our community when they were exhibiting anti-social behaviors. The best way to prevent anti-social behavior is to cultivate connection within a warm and inclusive community. Kids who feel connected get on well with others. Kids who feel disconnected fight back against the community they don’t feel they belong to. You see this dynamic play out all across the world. While disconnection creates trauma, positive connections have the power to help us heal.

Community as an Expat

If you’re an expat like me. You’re likely separated from your extended family by many timezones. You are probably unsure of exactly how long you will stay in your current location, and equally unsure how long any given friend you make will continue to live near you. The uncertainty of being an expat can make building community even more fragile.

I have lived in Abu Dhabi for 15 years now. I have worked in 7 different jobs, and lived in 9 different apartments across the emirate. I have made many close friendships and seen many people I love move away.

Early on in my tenure as an expat, I asked John Henzell how he handled the loss of so many friendships. It kind of felt to me like it wasn’t worth it to make new friends if they would just leave me. He shrugged his shoulders and said, well, it makes room for new friends. John is an expert in building community. He continually creates opportunities to connect with new people around common interests. For us it was hiking and trivia nights.

Wabi-Sabi

Over time I’ve come to realize that friendships are dynamic, they ebb and flow and come and go. It’s not a failure of a relationship just because it’s temporary. In fact, all relationships are temporary on some level, because life is a temporary state. How much more precious is a flower bud because it is transient, than the permanent state of a fake plastic flower?

It is the temporary and changing nature of relationships that make them so beautiful and valuable. If we could fix them permanently, we would stop growing and living ourselves.

Keeping in Touch

As you get older, even if you’re not an expat, you inevitably experience the impermanence of relationships. From shifting friend groups in your teens, to leaving your hometown for university or work, and then perhaps shifting your focus to raising children and building your friendships around playdates. Everyone experiences various relationships growing and waning in their lives. As time passes you necessarily realize that you can’t keep in touch with everyone who you have called friend. That’s okay. Although it is important to keep some people close, you don’t need many close relationships. Time will sort out the ones that stick, and sometimes old relationships will come around to be new again.

How to Build Community

While we know that close personal relationships are good for us, the good news is that weak ties are also highly beneficial. Not every relationship needs to be long lived and close. Having many small, more superficial relationships is also good for our wellbeing. We need both types of relationships.

The following is a list of ideas of how you can start to build more connections within your community right now.

Say Hello

Just saying hello can lead to a boost in your happiness over time. You will begin to recognize your neighbors, the barista at your favorite cafe, the receptionist in your building, the cashier at the baqala. Having these very loose and often nameless ties can really boost your happiness, with almost no effort.

Learn Names

When there are people you regularly interact with, just learning their names can make a big difference in your happiness and theirs. My daughter recently started KG1 at the school were I worked 2 years ago. When I pick her up the security guards say hello to me by name because they remember me from 2 years ago. This makes me feel seen and safe. They know my daughter by name because I took the time to learn their names when I worked there. These little gestures of mutual respect create a stronger and safer community over time.

Invite People

It doesn’t have to be a big thing.

“Do you want to site with us?”

“Hey neighbor, would you like to take a walk with me in the morning?”

“I’m going to the playground with my kid, do you want to come?”

“I’m grabbing a coffee, care to join?”

Not everyone will accept, but just asking builds trust. Just asking builds your capacity to handle the possibility of (very small) rejections. Like everything in life, it gets easier to connect with people the more you try.

Accept Invitations

Last week I received an invitation to a neighbor’s 5th birthday. His mom had met my child playing with her nanny. This personal invite from the mother made me get over my shyness and show up. I am so glad that I did. I think I had a better time than my child getting to know the family and sharing stories of life in Abu Dhabi. I hope that we will be able to connect more in the future, but it’s also okay if it never happens again. It was already worth it.

Talk about your Interests

Do you like board games? Hiking? Ultimate frisbee? Camping? Talking about personal finance? The way you find other people who will do these things with you is to talk about it, with everyone. Eventually someone will say, “oh yeah, I love ___!” This is how you make connections with people who have the same interests. Sometimes people will connect you with their other friends who like the same things as you. It’s networking, but for hobbies.

Building a Friend-Family

If you don’t have many close connections with people around you, you can build them. In Hawaii there is the concept of Ohana, which is similar to the Maori concept of Whanau (pronounced fanow). Both of these encompass the community you live around and depend on. While traditionally these would have been family groups, they also include adopted family. What I call my friend-family. As expats we have the opportunity to surround ourselves with people we choose to cultivate relationships with. It takes an investment of time, but it’s worth it.

Parenting and the Friend-Family

Raising one or more children as an expat can be particularly isolating. It is so important to build close connections with other families who are going through similar stages as you. You need support as parents, and your kids need to have multiple trusted adults in their lives. Building out a group of other parents you can depend on for playdates and friendships is essential. But it’s also important to be flexible in allowing newer relationships in, as inevitably, some of your friend-family will leave.

Leveraging Community for Financial Freedom

Science has well established that community is good for your health, longevity, and happiness. We’ve looked into some ways to build both weak and strong ties within your community. But what does community have to do with personal finance?

Learning Support

First of all, people learn best in community. So as you are beginning your FI journey, having a group of people to bounce ideas off of, and ask questions is powerful. We learn from each other’s experiences. Whether this is an online community like the SimplyFI facebook group, or talking with friends in real life (maybe at our next meet-up?), our community provides support and collective knowledge.

Positive Peer Pressure

In December 2020, I was at a Christmas party when some of my friends mentioned that they had just taken the Sinopharm vaccine that had only just become available earlier that month. As a science teacher, I am very pro-vaccine and had been awaiting the release of the first Covid Vaccines. Yet, I hadn’t booked an appointment nearly a month after it had become available. Hearing our friends experience of taking the vaccine earlier that week was the push I needed to book my own appointment. Even though I wanted to get the shot, I needed a little positive peer pressure to actually make it happen.

When we’re doing something new like investing for the first time, having people around you who have done it before and can talk with you about it makes taking the initiative easier.

Reinforcing Values

This past week at our meet-up, a couple well on their way to FI/RE mentioned how hard it was for them in their friend group at times because they are significantly more frugal than their friends. While they do enjoy going out, they just don’t want to participate in expensive dinners as often as their friends. This imbalance creates some tension that I well know from my own similar experiences with friends who didn’t understand my frugality.

There is nothing wrong with enjoying expensive dinners and holidays. Just as there is nothing wrong with preferring dinners at home and camping trips. They’re simply different lifestyle preferences based on different values. If you are surrounded by people who have very different values than you, you will often find yourself conflicted. Do you go along with the group? Or stick to what’s important to you? As ever, it’s important to find a balance that works for you, so that you can enjoy your friendships while also staying aligned with your values.

It’s hard to go against the flow of your friend group, so having other people in your life that are also on the FI/RE journey can give you a sense of solidarity. No, you’re not being antisocial, you just have different goals for your time and money than what many others do. It’s okay to be different, and it’s easier when you can relate to others with more similar values.

Invest in Your Community

Start small. Choose one easy way of building community to work on and get started. Say hi, reach out to ask questions, invite someone to do something. Say yes. Small changes implemented daily compound into huge differences over time. Before you know it you’ll be happier, healthier, and feel a greater sense of security as your network of weak and strong ties increases.

How do you plan to start investing in your community? You will find that the dividends pay richly for years to come.

How do you choose your asset allocation? Financial advisors have traditionally constructed portfolios based primarily on an investor’s risk tolerance (along with stated goals and time horizons). Traditional advisors, as well as roboadvisors, use your appetite for risk to choose your allocation of stock to bonds.

Stocks = Risk?

Sarwa, a roboadvisor based in the UAE, asks potential investors to choose from risk levels 1-6 to determine the asset allocation of their traditional investment portfolios.

If you chose the Risk Level 2/6 (Conservative) portfolio with Sarwa, you would end up with an asset allocation of 50% stocks and 50% bonds. Their 5/6 Moderate Growth portfolio holds 84% stocks and 16% bonds.

Betterment, an American roboadvisor, has a similar way of equating stocks with risk.

This is a screenshot from my old account that had an asset allocation of 90% stocks. Betterment considers this allocation “Very aggressive.”

If you read the full text, you will see that this is qualified by stating that by “aggressive”, they mean “potentially higher returns in the long term, but exposes you to higher potential losses in the short term.”

So the risk they’re talking about must be short term losses.

Loss is scary.

If you’re anything like I was at the start of my investing journey, any thought of loss puts you off. I had zero risk appetite when I first started investing because I didn’t want to lose my money.

For most people, losing capital is the biggest fear they have when starting to invest.

So Stocks = Risk of Loss, Right?

This is where I think the simple equation that more stocks = more risk is wrong.

There is almost no risk of losing your money if you’re buying and holding a whole market index tracking ETF for the long term.

I will say that again, you will not lose money in the stock market if you are buying and holding a whole market tracking index fund over the long term. This is true for all 20+ year periods and also true for the vast majority of 10 year periods across the history of the US stock market.*

How Risky is the Stock Market?

The following chart illustrates the rolling annualized real returns** of the US stock market over long time periods beginning as far back as the 1790s. As you can see, there is no 20, 30, or 50 year period that results in a loss.

In fact, when looking at the S&P 500 from 1923 to the present the worst 30 year return was a total gain of 850%.

But wait! Didn’t it take 26 years for the US stock market to regain its value after the crash of 1929? That’s true in nominal terms. In real terms it took only about 5 years.

Let me explain:

Inflation

If you calculate inflation adjusted dollars, it only took about 16 years to regain the spending power of a portfolio after the 1929 crash. The Great Depression was a deflationary period: goods cost less than earlier on. Normally we think of inflation as always weakening our dollars (as has been the trend for the last 50 years), but sometimes the buying power of a dollar actually increases like it did in the Great Depression.

Dividends

If you reinvest your dividends, then the timeline to recovery after a crash is even shorter, and your total return even greater because each share you buy using your dividends during the crash is on discount. Total return is calculated by the growth in share price + the dividends earned. During the Great Depression dividend yields actually increased!

Total Real Returns

An investor who put a lump sum into a whole market index fund (had it been available) at the peak of the 1929 boom would have only needed about 5 years to regain the real value of the lump sum investment after the crash if they had:

1. Stayed invested even when it was scary
2. Continually reinvested their dividends (which increases the total return)
3. Looked at the inflation-adjusted value (the buying power) of their portfolio, AKA the real value, instead of the nominal value

Volatility ≠ Loss

When you invest in the whole stock market, what you are facing is risk of volatility, not a risk of loss. Volatility means that the price changes drastically and unpredictably. The market goes up and down a lot, sometimes quite substantially even over the course of one day. However, the overall trend is always up over longer periods of time.

It is important to remember that you’re investing for the long term, and that shields you from the risk of loss over the short term.

Apply it to Your Timeline

If you are saving to create financial independence for your family, your investment horizon is long. Most people start investing 10-30 years before retirement. But even if you’re starting relatively late in the game, you won’t sell all of your shares once your reach retirement. You will only need to sell around 4% of your shares per year if you’re following the 4% rule of thumb. The remainder of your principal remains invested continually. Most often, your portfolio will continue to grow, even while you’re in retirement.

Even if you want to retire in 10 years, you’re still investing for a much longer timeframe. And as we’ve seen illustrated above, there’s virtually no risk of losing your principal when investing for 20 or more years.

So why do financial professionals still consider stocks to be risky?

Because traditional investment advice equates volatility with risk. But what most regular retail investors think of as risk is actually loss. There’s a mismatch in assumptions. Risk of loss is not the same thing as risk of volatility. Risk comes in many forms.

There is no such thing as a risk-free asset.

Bonds = Safe?

Bonds are also subject to volatility, just a bit less over the short term than stocks. This is why investment advisors usually try to balance the “risk” of stocks with the “stability” of bonds. However, even bonds come with volatility. Interestingly, bonds are less volatile than stocks over shorter periods, but more volatile than stocks over longer periods. Over longer time periods, like the time frames individual investors would buy and hold for retirement, long term bonds are actually riskier than stocks. You can see below that even at 50 year periods there are some scenarios where you would lose some of your capital were you invested entirely in bonds.

Cash = Safe?

Even cash comes with risk. First of all there is the risk of losing value to inflation. There is also currency risk if you live or travel internationally. And of course, your cash is only as safe as the place you keep it. Physical cash can be lost, stolen, or damaged and banks have both fraud risk and default risk (thankfully this risk is low due to central bank protections in many countries).

Gold = Safe?

Like cash, gold is only as safe as where you keep it. Gold is also subject to volatility among other forms of risk. Gold has similar volatility to stocks without the growth potential.

Property = Safe?

While the home you live in should not be considered an investment, rental properties can make good returns. However, there is risk with property, much more than the volatility risk with stocks largely due to the lack of diversification and maintenance costs. Whereas the risk with index investing is that the share price drops in the short term, properties can be damaged, lose value, and rents can drop. Each individual property usually represents a large portion of an investor’s portfolio tied up in a single asset. Properties are subject to taxation, community fees and significant costs associated with selling (if you can find a buyer). The loss of liquidity alone is a huge risk.

“Every investment is a risk asset. Each represents a basket of different risks, and the contents of the basket differ across asset types.”

-Edward F. McQuarrie Stocks for the Long Run? Sometimes Yes. Sometimes No. p21

Vanguard has excellent risk explainer banners under its investment product profiles. I found the following under BND and BNDX, which are intermediate-term bond index ETFs.

Risks associated with conservative to moderate funds

Vanguard funds classified as conservative to moderate are subject to low-to-moderate fluctuations in share prices. In general, such funds are appropriate for investors with medium-term investment horizons (4 to 10 years), for those seeking an investment that emphasizes income rather than growth, and for investors who have a low tolerance for the risk of short-term price fluctuations.

Price fluctuations sounds a lot more realistic and less scary than short term losses as mentioned by the roboadvisors.

Under whole market stock index funds like VT this is the banner:

Risks associated with moderate to aggressive funds

Vanguard funds classified as moderate to aggressive are broadly diversified but are subject to wide fluctuations in share price because they hold virtually all of their assets in common stocks. In general, such funds are appropriate for investors who have a long-term investment horizon (ten years or longer), who are seeking growth in capital as a primary objective, and who are prepared to endure the sharp and sometimes prolonged declines in share prices that occur from time to time in the stock market. This price volatility is the trade-off for the potentially high returns that common stocks can provide. The level of current income produced by funds in this category ranges from moderate to very low.

A clear explanation of the risk of volatility with stocks. Vanguard is very clear-headed when explaining the risk of volatility to investors.

Volatility is still Risk

Even if you invest in a low cost, whole market tracking index fund, there is still a risk that you’ll get scared and sell during a downturn. There’s still a risk that you’ll stop reinvesting your dividends when the market crashes. There’s still a risk that you’ll stop investing according to your plan while you’re still earning. (You do have an investment plan? right? If not, schedule a free call with me to get started making one). You cannot know exactly when you will hit your FI number because volatility means that there is a wide variance in returns from year to year. There is also the very real risk that the market will have a series of down years right at the beginning of your retirement (this is called sequence of returns risk). Watching the value of your portfolio take a nose dive is scary, even if you don’t act on your fears.

So What Asset Allocation Should I Choose?

If you’re relying on the 4% rule to plan for your retirement (as I do), then you need to have a minimum of 50% stocks in your total portfolio in order for it to last through a drawdown period of more than 20 years. If you’re still in the accumulation stage, where you’re regularly investing your savings, then you would most likely benefit from having much more than 50% of your total portfolio in stocks. Stocks have a higher risk-adjusted potential for growth than any other asset class.

Most people**** invest in stocks and bonds, the bonds are there to balance out the volatility of the stocks over shorter time periods. Common asset allocations are 60/40 and 80/20 (stocks/bonds). Warren Buffet famously invested his wife’s retirement portfolio with an allocation of 90/10.

I personally invested only in a single whole world market tracking ETF for most of my accumulation journey (about 7 years). I didn’t choose to heavily invest in bonds for most of my investing journey because I know that stocks hold greater growth potential. As a former teacher, I relied heavily on the growth of my investments over time to get to to my FI number. That said, I didn’t start out with 100% stocks, and never actually got there. I started with a much more conservative 60/40 allocation and ramped up to buying only VT after about 2 years, once I understood volatility and felt comfortable with it. I had about 98% stocks when we hit FI in 2024 and then I started to reinvest my dividends into a bond fund thereafter.

We are not yet living off of our portfolio, even though we’re FI. While we’re still living on earned income I am building up my bond allocation to act as insurance against sequence of returns risk. I’m aiming for 10-12% in bonds in the next year or so.

Regardless of which asset allocation you decide is right for your own volatility tolerance at any given stage of your investing journey, it’s important to stay the course over the long term, and then, you really can’t lose.

*I have referenced the US stock market in this post because it represents 60% of the total world market and we have records going back to 1793. Data from world stock markets as a whole show slightly more modest growth, but with the added benefit of downside protection when the US market underperforms, hello 2025!

**real returns are inflation adjusted and assume that dividends are reinvested.

***If you are looking for Shariah compliant investing, you can replace the bond portion of your portfolio with a Sukuk fund, Gold, Cash, real estate or a combination of those.

Further reading

Stocks for the Long Run? Sometimes Yes. Sometimes No. Edward F. McQuarrie

In-depth discussion of McQuarrie’s data sources https://www.bogleheads.org/forum/viewtopic.php?f=10&t=353607

Reinvesting dividends speeds recovery https://www.fool.com/investing/dividends-income/2005/09/30/the-greatest-investing-quotsecretquot.aspx

5 years to recover from lump sum in 1929 if you reinvest dividends https://en.swissquote.lu/international-investing/smart-investing/investors-what-if-coronavirus-created-another-1929

4.5 years to recovery from 1929 “The longest was the recovery from the December 1974 low; it took more than eight years for the market to return to its previous peak, which was reached in late 1972.” http://web.archive.org/web/20220512022356/https://www.nytimes.com/2009/04/26/your-money/stocks-and-bonds/26stra.html?module=Search&mabReward=relbias%3Ar%2C%7B%222%22%3A%22RI%3A13%22%7D&_r=1

At first glance, it may seem something nefarious was going on. However, investigators quickly realized the wins were all legit. Jerry and Marge were making full use of a feature of the lotto to win constantly and consistently.

That feature was called a “Rolldown“, and the lottery announced when it was coming. If no one wins the jackpot, the money would roll down to lower tiered prize winners, boosting dramatically their fixed payout.

After reading the published odds, Jerry was able to calculate a winning strategy within 3 minutes using basic arithmetic. When a “rolldown” occurs, every ticket had an expected positive return! All he and Marge had to do was buy as many tickets as possible and the money started rolling in. After a while close friends and family joined in the fun.

When the lotto game in Michigan closed down, they started playing in Massachusetts, which also had a similar payout system. Things ended in 2011 when the Boston Globe received a tipoff about unusual ticket sales in places and other syndicates also came up with similar strategies, but not before they had won over $26M in prizes.

This is a fantastic story and we all wish it could be us!

Psst!

Come here!

Come closer!

Want to know a secret? I have a game that makes me an insane amount of money and I’m willing to share the secret with my readers. It’s similar to the state lottery success of Jerry and Marge.

The Secret to Winning

It’s the stock market! Investing in the stock market won’t make you a winner every year. However, your expected return for money invested* is about 10% annually in the long run! And if you invest enough money for long enough, the compounded returns could run in the millions, far bigger than winning most lottos!

In fact, the stock market is way better for several reasons:

1. Legal – you can play it in nearly every country without fear of the police. Some countries even allow people under 18 to play it and parents can even play it on behalf of the children.
2. Scalability – Tell all your friends and family this secret so they benefit as well. The fact that they play and win has no impact on your winnings so share the love around!
3. Expected positive return – Lotto games have a negative expected return (the house always wins) with the chance of an individual ticket winning top prize is ~0%. Conversely, you are expected to win consistently, constantly, and effortlessly like Jerry and Marge, at an expected profit rate of ~10% compounded annually!
4. No limit – The stock market game is so big that no matter how little or how much money you put in, your winnings are linear and in proportion to the amount invested. As it stands, the equity part of the stock market stands at ~$94T (end of 2020) while the bond portion is a whopping $119T.
5. Availability – The stock market game is available on all continents (except Antarctica) and most countries. Investments can be made during business hours on over 20 major exchanges (and 100+ minor exchanges) around the world. There’s no chance of this game getting shut down in the foreseeable future so the gravy train will continue indefinitely, unlike what happened to Jerry and Marge.

Get Started Winning Now

So, unless you are really lucky (or smart) to find a lotto game with positive expected returns, my hot tip is to invest in a broad index of the global stock market for a ~100% success rate (compared to ~0% on a normal lotto ticket) to build long term wealth.

Through the compounding of growth over time, the returns on your investments are likely to be greater than most jackpots you could hope to win. There’s no longer the need to gamble – simply buy a broad index tracking ETF with your “lotto money” for a guaranteed jackpot at retirement and ride off into the sunset like Jerry and Marge.

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*Buying and holding a single low-cost whole-market-tracking index fund is what we’re talking about here. Picking and choosing individual stocks or indexes of particular countries or sectors will not lead to the same results due to a lack of diversification. Timing the market by actively trading is also a losing game.

Further reading:

Movie:

Jerry & Marge Go Large (2022)

Thanks to the pandemic, I found out.

Spoiler alert: it wasn’t what I’d expected.

But let’s back up for a bit. Thanks to a combination of diligence and a healthy dose of luck, I managed to reach financial independence in 2016, at the age of 54. I began by taking a year off, hiking the Sinai and Appalachian Trails amid various other travels with a plan to transition into a life that was less self indulgent and more philanthropic.

By the time 2020 dawned, I was living in Timor Leste, an impoverished newly-independent southeast Asian country, working as a volunteer communications mentor at the pensions ministry (the floridly titled Ministériu Solidariedade Sosiál no Inkluzaun, which translates as the Ministry of Social Solidarity and Inclusion).

That came to an abrupt and chaotic end in March, when the spread of Covid-19 prompted a decision by the Australian Government to send home me and hundreds of other volunteers working in 38 countries. Then “Book a flight in the next two to three weeks” suddenly turned into “You have to leave NOW!”

A day later, I was in hotel quarantine in Australia.

And two weeks after that, I was released into the strange new pandemic world, with my range at first being 5km from my home in Brisbane then 50km then 150km and finally the entire state. It was clear I wasn’t going back to Timor Leste any time soon so I bought an old 4×4 and began traveling around Queensland.

It struck me that this was the life I’d dreamed of as a twenty-something, when I’d work for a few years and then travel for as long as I could with the savings I’d accumulated, ending up in a new country on the other side of the world where I’d restart the process. I really enjoyed my work as a journalist but I also always wondered what it would be like to have enough money to just travel forever.

And now I could.

At first it was great, like the start of any other extended trip. Except better in some ways because all the sites that were usually thronged with international tourists were deserted. At amazing places like Whitehaven Beach in the Whitsundays, instead of having to book campsites months in advance I could just rock up on the day.

I headed up to Cape York, the northernmost tip of Australia and an adventure in itself to reach, then into the Outback, where the fences stopped and farms were the size of small countries.

All the state borders had been shut to inhibit the transmission of Covid 19 but early on, the border to the Northern Territory opened up and then, four months into my trip, Western Australia decided unexpectedly to let outsiders in. Soon after I entered WA, the border closed abruptly again and didn’t open again for another year.

Western Australia is big. Like really big. If it was its own country, it would be the tenth biggest in the world, smaller than Kazakhstan and knocking Algeria out of the top 10. And while it might seem to be mostly empty desert – on average the 2.7 million residents each have just under a square kilometer each to roam around in – the raw and elemental landscapes of the Kimberley and Pilbara regions were simply amazing and became my favorite part of Australia.

Six months into my trip I’d travelled about 30,000km and reached the south west corner of WA, where I realized my appetite for heading onwards had gradually been replaced by the worst possible mindset for any traveller: not really caring what was ahead.

My twenty-something idea of the perfect life was hitting reality. I’d thought a lot about exactly what was driving this – let’s just say solo outback travel provides plenty of opportunity for extended cogitation – and came up with what I was missing. (This only applies to me; your mileage may vary.) It could be distilled into three words:

Purpose.

Structure.

Community.

Wandering around looking at new stuff, it turns out, wears a bit smooth after a while and I found I needed a greater sense of purpose to get out of bed in the morning. And although I shouldn’t need external events to calibrate my day, the reality was that I did. And after months of meeting new people and having exactly the same asinine conversations – “Where are you guys from? Which way are you heading? Have you been to X?” – I really wanted to be around people who I’d known for more than 10 minutes.

So I parked my 4×4 and started hiking, which I knew from previous long-distance ventures provided purpose, structure and community. Making quantifiable progress towards a tangible goal alongside others with a shared aspiration has a powerful bonding effect.

First there was the 130km Cape to Cape walk, followed by the 1,003km Bibbulmun Track.

That took three months, at the end of which the desire to resume touring in my 4×4 still hadn’t returned, so I ended up taking a job as an activity guide at an eco resort outside Broome in the Kimberley.

Taking guests fishing, sea kayaking, hiking and quaffing champagne while watching sunsets over the Indian ocean for the next three months finally rekindled my interest in normal travel.

I headed back to Queensland via 4×4 tracks through central Australia and began the process that eventually brought me back to Timor Leste on a new volunteering gig, working with a small Timorese-led NGO focussing on childhood malnutrition.

My sixty-something self’s idea of an ideal life bore little relation to the version envisaged by my twenty-something self, being less self indulgent and instead being influenced by all the unearned benefits in life I’d taken advantage of to reach financial independence. Particularly after working in the UAE, I felt an elemental need to use my advantages of education, experience and economics to help even the ledger a little with those who didn’t share the fortunate circumstances of my birth.

And once back in Dili, I began to realize that my life here had that sense of purpose I’d missed on my pandemic-prompted tour of Australia, as well as the structure of working in an organisation trying to avert the blight of malnutrition. And there was a strong community of people here so that I almost always recognize a familiar face on any social outing.

I hadn’t explicitly articulated what it was that made my life here work. Until I got to live the life my twenty-something self dreamed about.

Purpose. Structure. Community.

—

A note from Blair:

John is an old friend and was the first person I knew in real life who retired early. He reached financial independence and left Abu Dhabi around the same time that I began my FIRE journey. He has always been an inspiration in life: he started and ran the Abu Dhabi Alpine Club and helped many lost souls find adventure and connect with each other while he was here in the UAE. Last year he stopped by Abu Dhabi in between his travels and told me a shorter version of this story. I am grateful that he found the time to write it up as a blog post so I could share it with you.

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