I know you went abroad to find a greener pasture for you and your family. You went out of the comfort of our home country and braved the uncertainties of life abroad. You went there with the hope of finally elevating your family’s life out of poverty and become financially stable and free.
Unfortunately, many still ask: Why am I still financially broken even after working for so many years abroad?
Anyone would respond to this question almost the same way: BAD MONEY HABIT.
Or maybe, you were simply not earning enough. Maybe your family’s needs were far too great your income couldn’t cope with it.
There are many ways of looking at it, unfortunately, for most, it’s plain and simple: BAD MONEY HABIT.
In this article, we will talk about some of the worst money habits most of us develop. And then I offer a brief solution.
1. You do not know how to handle money.
According to a survey by Standard & Poor, only 25% of Filipino adults are financially literate.
So, that means, 75% are financially illiterate.
What does that even mean anyways?
Well, for starters, financial literacy pertains to the basics of handling money wisely and intelligently. Sounds easy, if you ask me.
Unfortunately, it isn’t, in real life.
Of course, other than the ‘piggy bank’ strategy, most Filipinos never learned anything about personal finance in school like the importance of saving, thrift values, and basic investing.
So, can you do anything about it? Are you sure you are financially literate? Well, if you are still cash-strapped after working for so many years abroad, well, you probably are illiterate. No offense meant. But you you can something about that.
HOW TO FIX THIS:
Read and learn everything there is to learn about managing your personal finance. Most importantly, ACTIVELY APPLY what you learn EVERY SINGLE DAY.
Remember that learning how to do stuff, but not doing the stuff you learn is basically USELESS.
Invest in a good finance book that will teach you how to manage your finances. You can also read the tips and advice of some Filipino financial gurus which are often for free. By being financially literate, you also become informed on how to identify and avoid quick-rich-money-scams or questionable investments.
2. You love debts (perhaps a little too much).
For starters, most Filipinos are left with no other choice but to go abroad and work because of too much debt incurred back home to begin with. Before they even started getting their first paycheck, they are already have a lot of debts.
The first few or several paychecks will, of course, be consumed to pay off the debts incurred back home.
In some more undesirable cases, the idea that a family member has already gone to work abroad prompts some families to splurge even before receiving money from their family member working abroad. What do I mean by this?
There are cases when OFWs (and their families) feel that they have the power to purchase the things they have wanted for so long. They start borrowing money just to buy stuff that bring instant gratification like furniture, appliances, computers and electronic gadgets with the premise that their soon-to-be-OFW will be earning a lot money and will be able to pay it at some point.
That is the deadly side effect of having a steady job and a good paying one at that: You think you will have a job forever and that money will steadily flow.
This is called “income permanence perception” in economic. And this belief sometimes lead people to make poor financial choices.
They think it’s okay to loan big amounts of money thinking that “we can pay it off, I’ve got a job”. And then they’d do it again, and again, and again, until a labor crackdown happens and ends up without a job, and just debts.
AVOID THE DEBT TRAP BY ALL MEANS.
Borrow money only and only when it is necessary and important! Again, ONLY WHEN IT IS NECESSARY AND EXTREMELY IMPORTANT.
Don’t borrow money to buy luxuries (things you don’t need). Moreover, do not borrow money just to pay off another debt! This is the most common financial mistake known to us. If you do this, you will fall in the cycle of debt!
Follow and practice this mantra with your family: If you don’t have any money, you should not buy anything.
OR, you should not buy or spend on things when you don’t have the money.
3. You love everything fancy and glittering (and you don’t have any purchase plan).
Woo dollars. You are earning dollars. You have a lot of purchasing power back at home. Here’s the thing about earning dollars and increase purchasing power: SPENDING SEEMS SO MUCH EASIER, SO MUCH EASIER, INDEED!
With that, more and more of our “kababayans” get overwhelmed easily and start recklessly spending. They begin to have this impulsive urge to display their earnings whether in the form shiny gadgets like smartphones and computers, new cars, house and lot.
They lavishly give cash or send balikbayan boxes to their family/relatives filled with imported chocolates, canned goods, apparel, and other items bought by overseas workers during their stay there.
When they come home to the Philippines, some OFWs become one-day millionaires!
They tend to go overboard and blow their budget on a lot of unnecessary things: nightly parties, weekend getaways, shopping galore, gambling, and so much more.
I bet we all know balikbayans like these! Right?
This is another sign of financial illiteracy. You see, real rich people don’t like spending. Have you noticed? They want to get things they need at the least possible price (damn, even salaries they want ‘em down low).
So, you should exercise restraint!
Buy only the things you need.
Learn to spend money to make more money.
In other words, take motivation in the fact that when you invest your money, it will grow; when you use it to splurge, you are, in effect, decreasing your wealth.
Don’t spend more because you earn more.
Instead, SAVE MORE, when you earn more. Or better yet, INVEST.
4. You don’t save. Or, you don’t know how to save.
Despite earning more, many OFWs have a strong tendency to spend more rather than to save more.
Some of them say: “I’ve worked hard for my money so I feel justified in splurging and treating myself to better things.”
This is pretty common. When a person starts bringing home more money, they start spending more by buying a new gadget, a expensive bag, a nicer car, and so on. They call this “lifestyle inflation”, which simply means that the more you earn, the more you wish to spend.
Learn how to budget. Keep a record of all incoming and outgoing money. The first question you should ask yourself is “How much should I save?” NOT “How much should I spend?” Good lord!
You will not work forever. Let that sink in. YOU WILL STOP WORKING SOME TIME (for whatever reason, but that is FOR SURE). Are you going to be an OFW forever? NO.
Therefore, you should learn to save and invest for the future. Commit to save a part of your income through your bank. Open a separate savings account just for your savings fund. You can enroll your accounts into an auto-debit arrangement to help force you into saving regularly.
5. You are too “galante”.
Most OFWs send most of their salary back home. They spend whatever little money is left.
It is also typical among Filipinos to consider the breadwinners of the family as the go-to person for emergency or non-emergency cash. This is also the case with OFWs. The bad thing about this is that sometimes, the OFW ends up drained. We’ve all seen stories of OFWs
Send you money back home. Fine. But put all the necessary controls and make sure your family back home knows how to manage money responsibly.
Teach your spouse or your family proper money habits. It’s also good to have a funds for special requests – like an emergency fund, special occasions fund or a lending fund.
For example, when an emergency arises, such as a medical emergency you can reach into your emergency fund.
Another brilliant idea is to set up a lending fund so that when a family or a friend asks to borrow money, you can use your lending fund.
The idea behind this is that you are setting aside money that you can afford to lose.
Don’t feel guilty when you set a limit to what you can offer as help.
AND, don’t be boastful about what you earn back in the states. Let’s face it, we all know someone who’s too proud of what they earn and they love to show it around through purchases and giveaways.
6. You keep making poor investment choices.
Fine. You are a little financially literate. You know that investing is good for your wealth. Unfortunately, you are not diligent enough to do your homework.
Most of your investment ventures do not work to your advantage. Or, worse, you have a wrong idea of investment. For a typical OFW, investing means buying items that will include any or all of the following: a house and lot, appliances, furniture, computers, electronic gadgets, car, motorcycle and jewelry.
While some of these are valuable, many are unproductive assets – meaning they decrease in value over time and they do not provide additional income. In fact, some of these unproductive assets will make you spend more.
For example, when you purchase a car, expect to spend on fuel, maintenance and insurance. Buying unproductive items like these is clearly a waste of your money.
SO, INVEST IN PRODUCTIVE ASSETS. These are items that appreciate in value over time. Besides highly tangible assets like real estate and a car used for business, invest in assets like mutual funds, investment-linked insurance policies, UITFs and stocks and get your money working for you.
7. Or, you don’t invest at all. Or, you don’t even know how to invest to begin with.
Many OFWs hesitate when talking about investment. They’d rather put their money in savings in banks, which is a really bad idea. The bank is the worst place to put money, except for emergency needs. The reason: inflation. Your PhP 1000 will buy less a year from now. So the only best alternative for you is to grow your money by investing it.
Start investing, no matter how small. Depending on your investment goals, risk tolerance, and time frame, you can start with pooled funds like mutual funds and UITFs. They are simple (and cheaper) to start with and fairly easy to understand. Later on, when you get a better cash flow, you can get into more complex investments like real estate, which is a great option for Filipinos looking for a passive income. Starting a business can also be feasible provided that you understand the business you’re getting into and know and trust competent people who will run the business in your absence.
Working overseas gives you an amazing opportunity to meet your goals and realize the dreams that you have for yourself and your family. While it is great, it is nevertheless not forever. That’s why it’s important to plan for the future.
You won’t be an overseas Filipino worker forever; even if you want to, you will not be an OFW forever. That’s not how it works.
So, it is important that you start building your financial foundation early, while you still have a good source of income. Get rid of those unwanted money habits and prepare for a brighter future.
Time.com. (2017). 23 Reasons Why You’ll Always Be Broke. [online] Available at: http://time.com/money/4320973/why-you-are-poor/ [Accessed 29 Mar. 2017].
Expatriatus. (2013). Returning Home after Living Abroad? Not as Easy as Expected! | Expatriatus. [online] Available at: http://blog.iese.edu/expatriatus/2013/04/05/returning-home-after-living-abroad-not-as-easy-as-expected/ [Accessed 29 Mar. 2017].
Bondoc, J. (2017). OFW experience: At what cost to family?. [online] philstar.com. Available at: http://www.philstar.com/opinion/2014/10/06/1376935/ofw-experience-what-cost-family [Accessed 29 Mar. 2017].