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Money Mistakes of OFWs and most people too

I was browsing the net when I came across these two explicit articles by Alvin T. Tabañag of , and I wanted to share if you haven't read it yet. It's titled “Common money mistake of OFWs” and a continuation article “More Money Mistakes By OFWs” It might give something to those of you who are reading it about a thing or two to think about and you might recognize some that has a link to yourself (if you haven't yet realize it or you are just looking through blind eyes) so as not to drag yourself down in a financial rut. If you are already bogged down with financial worries, it's better to start late solving than giving up and making more mistakes.

Common Mistakes of OFWs
1. Reckless spending. My kumpare who worked in the Middle East for several years had this to say about OFWs and their money: “karamihan sa OFW nagugulat sa perang nahahawakan nila kumpara sa kinikita sa Pinas.” The sudden and enormous jump in income also brings a feeling of empowerment. The OFW now feels he has the power to purchase the things that he and his family have wanted for so long. And so he begins to buy stuff that brings instant gratification like furniture, appliances, computers and electronic gadgets. The family begins to engage in more leisure activities like eating out and going on vacation because they can now afford it. There is nothing wrong with this as long as you keep it under control.

Unrestrained spending, especially on things that you don’t really need, can lead to financial ruin. Do not spend as if money will not stop flowing. Overseas work is supposed to be temporary. Sooner or later OFWs will return home and the big income they’ve been accustomed to will stop coming in. What happens then if you’ve spent most your money on unnecessary things? Just because you’re earning big doesn’t mean you have to become a big spender and start living a luxurious lifestyle. Exercise discipline in spending your money. Do not let your expenses catch up with your income, otherwise the money you’ve worked so hard for will go nowhere. Even if you can afford it, do not spend too much on items you can live without because these will not help you secure your future.

2. Lack of long-term financial goals. Many OFWs and their families spend recklessly because they don’t have any long-term goals. What’s important to them is to enjoy life to the max now. Their attitude is to live for today and forget about the future. Well, the future will not take care of itself. You should give equal, if not, more importance to your family’s future and start preparing for it now! Set and prioritize goals that really matter. Having a 100-inch LCD HDTV in your bedroom is not a very smart goal. Before you buy your kids expensive gadgets ask yourself first if you have already secured their college education. Among the important financial goals that you can make besides securing your children’s education are accumulating savings for your retirement, setting aside money for your own house and putting up capital for your own business. Whenever you intend to spend money think about your goals and ask yourself if the expense will bring you closer your goal or farther from it.

3. Not saving consistently & not saving enough. The first thing that comes to mind when people start earning a bigger income is how they will spend the money. The first thing that you should be excited about is how much more you can save now with a higher income. When you receive your salary your top priority is to set aside a substantial amount for your savings and live off on what remains. Make it a habit to save regularly. Saving should not be an “on and off” activity. Set aside every month at least 20 percent of your income. Save more if you can. Many OFWs have the capacity to save 30 to 50 percent (perhaps even more) of their income. Try to save as much as you can while you are still earning well because it will not last forever. But do not overdo it to the point that your stinginess will already affect your family’s comfort and well-being. Lahat ng sobra ay hindi maganda kahit sa pag-iipon.

4. Failing to invest money wisely. While 44 percent of OFW families save, only a tiny fraction - 5.7 percent - uses their funds for investments. You should realize that it’s not enough to save. You should invest your money to make it grow bigger and faster which will allow you to reach your financial goals earlier. In fact, you may very well miss your financial targets if you do not invest and grow your money. If you keep your funds in a regular savings account that pays a teeny-weeny interest rate, you will actually lose some purchasing power because your money is not growing as fast as the increase in prices of goods and services. At the very least your money should keep pace with inflation. Your investment options include long-term time deposit accounts (which is not really an investment vehicle but a deposit product but nonetheless a good and safe way to grow your money), treasury bills and bonds, government securities, mutual funds and unit investment trust funds, insurance and pre-need products and real estate. Putting up your own business is also a great way to invest your hard-earned money. Just make sure that you know exactly what you are getting into.

5. Not teaching family members about responsible money management. OFWs have to endure prolonged loneliness just to earn more in the hope of improving the quality of life of their loved ones. They work very hard, scrimp and live frugally so that they can remit a bigger amount to their families. Unfortunately, some folks back home squander the money that’s sent to them, spending it whenever they feel like it. (Sometimes it is the OFW’s fault because he spoils the spouse and kids.) If your family is wasting a lot of money on non-essential items, you have to put your foot down. Demand that they use responsibly the money you worked hard for. Explain to them that there are things far more important than indulging in stuff that provides instant but short-lived satisfaction. Ask your household to create a reasonable budget for their expenses and have them stick to it. Monitor closely how they spend the money until they learn how to manage it well. I often tell OFWs who bring my book with them abroad to also leave a copy for their family so they will also learn about responsible money management. Every member of the family should do their part if it aspires for a brighter and more secure financial future.

More Money-mistakes by OFWs
1. Sending all your savings to the family. This will not be a problem if your family back home knows how to manage 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. 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 overdo 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’s business 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!”

Food to the mind:
“Progress is impossible without change, and those who cannot change their minds cannot change anything.”- George Bernard Shaw


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