This episode of the “Tamrah” podcast discusses sensitive and important financial topics, as the hosts share their experiences and views on financial awareness and how to better manage money, especially with an emphasis on securing a stable financial future after retirement. The guest, Salah Khashoggi, who has 15 years of experience in the banking sector, talks about the barriers preventing Saudis from saving and the excessive spending habits that account for up to 45% of their total income. He emphasizes the importance of developing financial awareness among individuals and sees that most people do not save for retirement plans, which causes them financial shock upon retiring.
During the discussion, issues related to investment are addressed, including the necessity of having a diversified investment portfolio that reduces risks and ensures stable returns. The challenges facing traditional banks amid the rise of modern fintech companies are highlighted, as well as the issues related to homeownership as an investment. It is stressed that individuals should save 20% of their income in a balanced investment portfolio to secure a comfortable living standard after retirement.
The episode encourages listeners to take practical steps to improve their financial situation and invites them to utilize available tools, making it an essential and beneficial episode for anyone wanting to achieve financial stability in their lives.
Financial Awareness and Its Importance in Individuals’ Lives
Financial awareness is a fundamental element that every individual should possess to achieve financial stability in their life. The concept of financial awareness involves individuals understanding how to manage their money, including how to save, invest, and manage expenses. Statistics indicate that many Saudis spend over 45% of their income on luxuries, leading to a significant shock upon retirement due to reduced income. This situation requires individuals to pay attention to the importance of saving and investing early to ensure a secure financial future.
Financial culture, or financial awareness, is a vital tool for sound financial planning. This awareness can encompass a range of concepts such as how to budget, how to save money, and how to invest in financial markets. Although many people believe they will not need to plan financially until later in life, the truth is that the earlier you start, the better your chances of achieving financial stability.
Investing may seem complicated or daunting at first for many people, but by learning and acquiring financial skills, an individual can begin to build a balanced investment portfolio that helps them achieve their financial goals. For instance, an individual can begin investing 20% of their monthly income in a diversified investment fund, giving them a chance to achieve good returns in the long term. Everyone should be aware of how to manage their money and plan for their financial future.
Challenges of Financial Planning in Saudi Society
Current generations in Saudi society face many challenges in financial planning. Despite the kingdom witnessing remarkable economic growth, there is a lack of financial awareness that could lead to serious problems in the future. One of the main issues is reliance on pension salaries and the lack of an effective savings plan. Many people believe that once they retire, they will have enough money to live comfortably, but statistics show that many retirees are surprised by the decrease in their income and are forced to draw from their savings or other assets to live.
The challenges are also reflected in the high consumer culture that promotes spending on luxuries rather than saving. This culture must be changed by raising awareness among individuals about the importance of saving and sustainable financial planning to build a stable financial future. Furthermore, the educational solutions offered by financial institutions and government companies should include practical strategies to encourage saving and sound financial planning from an early age.
It requires
the individual determines their expenses, it is important to track them closely and adjust any necessary areas to ensure that savings and investments are prioritized. Additionally, using budgeting tools or apps can help in monitoring expenses and ensuring that individuals stay within their set limits.
Moreover, individuals should regularly review their financial goals and adjust their budget accordingly. Setting short-term and long-term financial goals can provide motivation and a clear direction for savings and investment efforts.
In conclusion, adopting a mindset focused on saving and investing, along with effective financial management practices, is essential for achieving financial stability and long-term success in personal finance.
Building an emergency fund is recommended for transitioning to retirement portfolio financing, as this step ensures long-term financial stability. It is also essential to consider the risks associated with investments, as investing in stocks is generally considered less risky compared to real estate. For example, if a property (such as an apartment) is purchased for 500,000 SAR, the risks are related to the condition of the property itself, such as construction defects or a decrease in prices in the area. In contrast, stocks provide greater diversification in investments, which overall reduces the risks.
It is crucial for individuals to have financial awareness by tracking their expenses. Keeping a record of expenditures is an effective way to understand how money is being spent, which aids in making smarter financial decisions. For instance, individuals may discover that they are spending significant amounts on unnecessary subscriptions like Netflix or YouTube, affecting their overall budget. Raising awareness about the importance of these matters helps individuals achieve sustainable financial stability.
Risks Associated with Debt and Its Use
Debt is a controversial topic in the financial world, and it is advised to handle it with caution. It is important to understand that wealthy individuals often use debt as a tool for investment rather than consumption. For example, a wealthy person might take out a loan to purchase a property that can generate additional income. Meanwhile, in the middle class, individuals often borrow for consumer purposes, such as weddings or buying luxury cars, without considering the potential returns.
It is important to distinguish between different types of expenses. It is advised to categorize expenditures into essentials, luxuries, and investments. For instance, if there is an option between purchasing a simple car or a luxury car, an individual should consider the benefits they will gain from the vehicle. If the basic car is necessary for commuting to work, it may make sense to invest more in an efficient car. However, if the purchase is merely for luxury, they should take their time and think about the financial consequences of this decision.
Furthermore, tracking debts is a fundamental part of effective financial management. Individuals should know how much debt they are carrying, how to repay it, and what the associated interests are. Lack of awareness of these matters can lead to a severe financial crisis that may have long-term effects on an individual’s financial situation. Individuals should have a clear plan for dealing with their debts, including when to make decisions regarding borrowing or repayment.
Investing in Real Estate vs. Stocks
When it comes to investing, real estate is a complex subject that requires careful study. Although real estate can be a good source of income, it carries certain risks that may not exist in other financial markets like stocks. For example, a real estate investor may face issues related to property maintenance, declining rental prices, or even the inability to find tenants. All these factors can negatively impact the return on investment.
In comparison, stocks offer greater diversification. For example, an investor can spread their investments across several companies, reducing the risk of losing their investment if one company fails. Additionally, stocks often provide liquidity, meaning they can be sold easily whenever desired, unlike real estate, which may take a long time to sell. Stocks are generally more flexible, making them a preferred choice for many investors.
However, this does not mean that investing in real estate lacks advantages. Sometimes, real estate can provide higher returns on investment in the long run, especially if the property is located in a rapidly growing area. Additionally, real estate can offer protection against inflation, as rental prices tend to increase with the rising cost of living. Therefore, investors should carefully weigh these factors when making investment decisions.
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Demographics and Their Impact on Real Estate Investment
Demographic changes are considered one of the main factors influencing the real estate market. We have witnessed a significant decline in population growth rates in many countries, including Saudi Arabia. For example, after World War II, the population growth rate was around 2.5%, but today it has decreased to 1.6%. This decline in population growth has major impacts on demand for real estate, leading to a reduced need for new housing.
Prices are also affected by migration rates and movement between cities. Some cities may experience an increase in demand for real estate due to migration, while in other cities, demand may decrease. These dynamics lead to significant price variations, making it essential for investors to thoroughly understand the local market before making purchasing decisions. For instance, if there is a significant influx of people to a particular area due to new job opportunities, property prices in that area are likely to rise.
Furthermore, investors must consider other economic and social factors that affect the real estate market. For example, government policies related to housing can impact property prices. If the government provides incentives for buying homes, this may increase demand and consequently raise prices. Therefore, investors should have a comprehensive understanding of the economic and social context when making investment decisions. Ultimately, real estate investment strategies can be significantly affected by demographic changes, requiring investors to be aware of these trends.
The Importance of Financial and Technical Education
Financial and technical education is one of the fundamental pillars for achieving financial awareness and the ability to deal with contemporary financial challenges. While many receive a good academic education in other fields, financial education is often overlooked. Individuals should learn the basics of money management, such as how to prepare a budget, saving methods, and investing. The lack of this knowledge can lead to poor financial decisions, such as falling into debt or missing out on available investment opportunities.
Moreover, with rapid technological advancement, learning technical skills has become essential as well. Knowledge in programming or data analysis has become crucial in the modern job market. For example, learning a programming language like Python can open new horizons in fields such as data analysis, artificial intelligence, and software development. These skills are not only beneficial in an individual’s career but also in managing their investments and better understanding economic trends.
Therefore, it is important to include financial and technical education in the curriculum from an early age. Schools and universities should take the initiative to teach students how to manage their finances, as well as develop technical skills that enable them to adapt to the rapid changes in the job market. By promoting financial and technical literacy, communities can contribute to creating a generation capable of making sound financial decisions and achieving financial success.
Episode summarized using artificial intelligence ezycontent
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