Millions of OFW families continue to suffer from financial stress despite the significant boost in the OFWs’ income. Many of these money problems can be traced to mismanagement of their finances. Here are some more money-mistakes that many OFWs make.
1. Sending all your savings to the family. This will not be a problem if your family back home knows how tomanage money responsibly. We’ve all heard of sob stories about a how the spouse in the Philippines wasted the money sent by the OFW and when the OFW returns there’s hardly anything to show for his hard work abroad. If your family cannot be trusted with large sums of money, it’s best that you don’t give them full access to your savings. You can retain control of your funds by opening an account under your name and putting some (or most) of your savings into this account. You can open this personal (or investment) account in the Philippines or in the country where you work. However, I recommend that you keep a Philippine account. Your family may find it difficult to get their hands on your foreign account in case something happens to you. Besides, you will be helping the country more if you keep your money in the Philippines.
2. Not planning for life after OFW work. Most OFWs will eventually return home for good, either by choice or forced to cut short their stint abroad due to unplanned or unexpected events like closure of the company or getting seriously ill. I recently got an email from an OFW who asked about how he can better prepare for retirement. He’s coming back permanently in a few years but will still have a job in the Philippines. He’s among the lucky ones who have jobs to fall back on after working as an OFW. Many other returning OFWs will be added to the country’s unemployment or underemployment statistics and with limited savings, it will just be a matter of time before these ex-OFWs start to suffer from financial problems.
It is crucial then that OFWs prepare for post-OFW life as soon as possible. Planning way ahead of time will make preparation a bit easier and will give you more options. Save as much as you can while still working abroad and invest your savings. If you can’t save enough to retire permanently, then you will have to keep on working (as an employee or your own boss) when you come back. Continue enhancing existing skills and learn new ones to improve your chances of landing a job when you return. Develop other sources of income back home (e.g. rental properties and small business) while you’re still in foreign soil so that you will have a steady source of funds when you return and stay for good.
3. Taking on too much debt. A large number of OFWs incur debt when they are first deployed. You just have to go near the POEA building in Ortigas to see that OFW loans is big business. Agents of lending companies are always there to distribute flyers with many of their target customers keenly examining the loans they are offering. I can understand OFWs borrowing money to cover expenses for deployment because placement fees today far exceed whatever savings they have. What is troubling is OFWs unnecessarily taking on additional debt because they are now earning more. “I-charge mo na lang sa credit card yung gusto mong kumikinang na sapatos at glow in the dark na make-up, tutal may pambayad na tayo nyan!” or “Sige, kunin mo yung voice-activiated TV na binibenta ng Bombay o umutang ka sa 5-6 para mabili mo yung gusto mong imitation na LV bag!” is something you might hear from an OFW. If you have to borrow money, do so because it is necessary and important. Do not borrow to support extravagant spending.
4. Accumulating unproductive assets. To a typical OFW, investing means buying tangible items that he can see, touch and feel. Ask him where he has invested his earnings and the usual answer will include any or all of the following: house and lot, appliances, furniture, computers, electronic gadgets, car, motorcycle and jewelry. While some of these are valuable assets, many are not productive, meaning they decrease in value over time and doesn’t bring more money into your pocket. In fact, some will make you spend more like fuel, maintenance and insurance for a vehicle. A money-smart OFW will acquire items that will likely increase in value over the years and/or increase his income. Accumulating items that continually decline in value is like slow-burning your money. Besides highly tangible assets like real estate and a car used for business, there are other valuable assets that are less tangible but are great investments nonetheless like investment-linked insurance policies, mutual funds, UITFs and stocks.
5. Falling for investment scams. Scammers take advantage of the OFWs’ burning desire to return home to their loved ones and not having to work away from them ever again. They make absurd promises of enormous earnings in a short period with minimal effort and position their investment as the best way towards getting rich. Sadly, many fall for these false promises. Do not allow criminals to steal your hard-earned money through dubious investment schemes. Before you put money in any investment, study it thoroughly and ask questions. Do not say yes to an investment immediately. Scammers usually persuade would-be victims to decide quickly so you won’t have time to uncover their deception and lies. Think long and hard before deciding. Consult others who are knowledgeable about investing and familiar with what’s being offered to you. If you have doubts about an investment then don’t put your money in it. It’s better for you to miss out on a legitimate investment with great returns because you had doubts than to lose your life’s savings on a scam because you disregarded your doubts and instead believed their lies. Always keep in mind that if an investment is too good to be true, it’s probably a scam!
6. Being overly generous with money. People who are earning well tend to be more generous. Ever heard of the returning OFW who throws a feast not just for the family but for the whole neighborhood? Or the one who lavishes his family, relatives and friends with gifts in kind or in cash? There’s nothing wrong with sharing your money as long as you do not over do it. Remember that there are more important uses for your money than making other people happy with cash. Be sensible when giving money. If you know that it’s just going to be spent on non-essential items then don’t give too much. Better yet give only when it is really needed. Also, be cautious in lending large amounts of money to people who intend to use it as capital for a business. Some relatives and friends of OFWs who do not have the knowledge, skills and right attitude to run a business suddenly feel like they are capable entrepreneurs knowing they can get money from the OFW. Do not lend money for capital unless you have the skill and competence to evaluate the would-be borrower’sbusiness plan and agree that it is feasible and profitable. The more money you have, the more relatives and friends will come to you asking for money. Learn to say “no!”
Alvin T. Tabañag is a personal money management coach and registered financial planner. He is a member of the US-based RegisteredFinancial Planners Institute, the Financial Planning Association (USA) and the Association of Registered Financial Planners of the Philippines. He is also a member of the Professional Speakers Association of the Philippines. He is the founder of Pinoy Smart Savers Learning Center, an internationally-recognized organization and “Best Provider” of employee financial education in the Philippines. Mr. Tabañag’s center is at the forefront of a campaign to promote a culture of saving and responsible money management among Filipinos.
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