Question: I have been an OFW for five years now, but still with no savings at all. Although I have been reading articles on financial literacy, I find it really very hard to execute them well. One day, my eyes were opened and I realized that I had to do something. I read your article and even archived your old writings, but I know I need to write you more for personal help.
During my first year as an OFW, we didn’t save well as my first goal was to bring my family (husband and daughter) here. Luckily and with God’s grace, it happened in two years’ time. My husband found work and my daughter is now in school. We sent money to our family (my in-laws and my widow mother), medyo enough pa naman kahit paano. Then last year, banks opened doors for us to take a loan, which we thought was great because it was easy to apply and the amortization was within our budget. Like most OFWs, our dream was to have our own house so we borrowed the equivalent of PhP1,000,000.00. We sent the money for the house to my father-in-law who managed the construction. We have spent almost PhP700,000.00 now but it is still unfinished (no ceiling and tiles yet, but you can already live in it). The rest of the money went to relatives for utang and help. All went well, but last January, our company announced that it would discontinue our housing allowance due to company cost-cutting measures. In short, we had to pay for our housing here which is very costly. We were caught off guard as we didn’t have enough budget for this. But life had to go on until naubos ang ipon at walang emergency fund kaya nagkautang pa. Luckily, I was able to find a better job, which I think will be enough to pay for our utang until the end of this year.
To make the story short, ayoko nang maulit sa amin ang ganong sitwasyon. Could you please help me on how to manage our finances well? I also want to invest and set aside money for our future. I don’t want to be an OFW forever.
Thanks a lot and God speed. – M via email
Answer: I am very happy to know that one of my articles opened your eyes and moved you to really do something about your financial future right now. Feedback like yours makes me feel that all the hours I spend writing my columns are worth it.
Since I believe that money problems are not solely about money I will discuss with you matters that go beyond financial issues. But first I’d like to make you aware of your blessings, your aces. It’s always good to start a project knowing what you have in your “battle chest” as this will give you the confidence to forge ahead.
1. You are lucky to be living with your family right now. This is your number one ace. It takes away the burden and guilt of absentee-parenting for you. You can raise your daughter in a complete family set-up. Your marriage is not in danger of the usual growing apart that happens among spouses who have to live away from each other to earn a living. So please take good care of your marriage and your child. Your family is your biggest source of strength.
2. You seem to be a good employee as you were able to get a better job soon after your former employer discontinued its housing allowance. Value your job and always give your best in fulfilling your duties. When an employer sees your devotion and potential, he will give you a higher position, which in turn, will allow you to hone your skills even further. This can only happen if you treat your employment not just as a source of income, which is usually shown by just giving the minimum requirement for the job. Fortunately, a lot of our OFWs are known to have malasakit (concern/solicitude) for their jobs, which make them successful. I hope you and your husband always remember this.
3. Your early experience of being tight on budget gave you a very important lesson. They say experience is the best teacher and somehow your experience gave you the resolve that you want a better life. I tell you, everybody knows that one has to save and invest for his future but how come only a small fraction does it? It’s because of the human being’s inability to picture oneself suffering in the future due to lack of preparation. So treat your past experience as a blessing in disguise and a concrete reminder for you to have the strength to avoid the temptations of unnecessary spending.
4. The internet is your ally. OFWs these days are luckier in the sense that they can communicate with their family and friends back home at a more efficient and cheaper way. Not only that, you can keep yourself up-to-date with what’s happening in your home country wherever you are in the world. It also allows you to do your research on how best to prepare when you finally come back home.
5. Your drive and resolve to do something about your future. This is your engine to work your way to a bright future.
With all your blessings in mind, you can now do the following:
1. Sit down with your husband to set your goals and dreams. This will be your compass in your journey. As I always say, you have to really know your core values, what you stand for, before you can effectively set your goals.
2. Put values and timetable on your goals and dreams. From your letter I assume completing your house and going back to the Philippines are among your dreams. You can now put an estimated cost on these and your other dreams. Don’t forget to set the timetable so that you will not be overwhelmed in trying to fulfill everything at the same time.
3. Talk to your family about money. A lot of family money problems arise because of the members’ inability to have a healthy conversation about money. Involve your daughter in your financial goals using age-appropriate concepts. Talk to your extended family about financial expectations. For the people back home you are providing for, has there been a clear discussion as to the extent of your help? The problem with a lot of Filipino families is the wrong belief that all their financial woes will be solved when a member starts working abroad. This unduly burdens the OFW who is working hard abroad, away from family and friends, sad, uncertain, and yet has to show the face of a successful OFW who can afford to give each bilin, favor, and come home for vacation with balikbayan boxes full of pasalubongs for everyone. We should stop this crazy idea that our OFW relatives are ATM machines or gold mines, of which the entire extended family or families from both sides (sometimes even barangays) have a right to! I’m telling you, your obligation right now is, strictly speaking, just to your nuclear family (that’s your daughter, your husband and yourself). Talk to your parents, other relatives and friends back home and in trying to help others, always remember to apply the principle “Give a man a fish and you will feed him for a day. Teach a man to fish and you feed him for a lifetime.” The problem with our culture is that we had that mixed up, such that OFWs are expected to give their family members a fish for a lifetime. Stop it! If you don’t, you enable their dependence and mendicancy. It’s a bit more difficult if your parents are now old and dependent on you. No self-respecting Filipino anak can turn his back on his parents at this time. However, try to design something that’s best for you and your parents. If they’re still strong and can manage to earn a living either by employment or small business, then maybe you can work something along those lines. Just be very clear with them that your financial help is only up to them, and does not extend to other siblings, relatives and friends. Parents have the tendency to equalize financial resources among their children that sometimes they channel funds intended for them to their other children, again subconsciously encouraging these children to remain dependent.
4. Make your Balance Sheet and Monthly Cashflow Statements. You might have read in my previous articles the importance of having a Balance Sheet (so you know what you own and what you owe, update this on a quarterly basis) and your monthly cashflow statement (so you know where your money actually goes on a monthly basis). By religiously preparing these statements you are always conscious if you are fulfilling your financial goals or not. (I suggest you go back to my previous articles on financial statements.)
5. Pay yourself first. I know you’ve heard this so many times but let me emphasize this because in your letter you mentioned ”medyo enough pa naman kahit paano” and that’s why you sent money back home. However, you also mentioned that there was no emergency fund. So I guess, without feeling selfish, you should first have your emergency fund and protection fund in place before anything else. You should also be contributing to your retirement fund regularly by now. After you’ve set your monthly budget with your husband, you two should regularly set aside for yourselves (your and your daughter’s future) before any expense or padala happens. Treat this as a necessary expense for your future – meaning it cannot be foregone nor delayed. Imagine not paying your electricity bill for one month. What happens? Your service is cut off, right? For each delay in paying yourself first, you are cutting off an aspect of your dream future life. Recall all the stress you went through recently when you ran out of money and imagine that compounded with more problems that goes with old age.
6. Where to invest. Put your emergency funds in short-term money market placements or time deposits. This should be worth six month of your expenses. You and your husband should also be insured so that when something happens to you, your daughter will still have financial support. Buy term insurance. If your daughter is enjoying good free education, then you will just have to provide for college. If you still have more than five years before she enters college, then you may invest in equity funds. The same goes for your retirement fund, your coming back to the Philippines fund, and other dream funds. If timetable is more than five years, you are better off in equity funds. Note, I said you’re better off in funds instead of you picking the stocks yourselves. You are busy with your respective jobs so let the fund managers do it for you.
7. Automate it. Look for investment instruments that can give you the service of automatically deducting from your payroll account so that you will not forget or be tempted to postpone or forego your regular saving and investing.
8. Pay your debt. There was a mention of debt in your letter. Be a good borrower and pay on time. Your creditworthiness is also one of the things that you have to take care of. The higher your credit score, the lower your cost of borrowing. Likewise, collect on the debts that you extended to your relatives.
9. Earn something from your house. Your P700,000.00 investment in your house may constitute a huge percentage of your assets in your Balance Sheet. I think by now it’s also a significant portion of your liabilities. Try to earn something from it. You said one could already live in it despite its unfinished state. Can you have it rented? Try not to spend any more money on it as you still have more important funds to complete, but do not leave it idle and useless for the meantime. It’s already an asset and you should be able to earn from it.
10. Coming back to the Philippines. The timetable for this will depend on your saving and investing, your daughter’s schooling and the dreams you set out at the start. When do you envision yourselves coming back home? What do you see yourself doing in the Philippines? It would be nice to come back home comfortable but still with some challenging activities. A word of caution on starting a business in the Philippines: Being an absentee-business person doesn’t work. What can you do right now to come up with other options? Maybe you can hone your skills well in your current jobs, do something on the side that uses your hobbies and passion, which are exciting to you. Who knows, this might be your second career that you will do here in the Philippines. Is there any specialization you can learn there that you can bring home and earn from? Given that you don’t want to be an OFW forever, now is the time to be aware of what opportunities are around you that will help you transition back to your life in the Philippines.
Good luck M. I wish you a happy life as an OFW and I look forward to welcoming you back home financially free, equipped with a lot of knowledge and experience to share with your country someday.