THE Bangko Sentral ng Pilipinas’ second-quarter Consumer Expectations Survey for 2011 showed that the number of overseas Filipino worker (OFW) households that set aside money for savings has grown to 44 percent, a very substantial increase from the 7.2 percent recorded in 2007. However, since there are an estimated 8.7 million to 11 million overseas Filipinos, we are still looking at millions of OFWs who don’t save at all. This is very unfortunate because most OFWs have the capacity to accumulate adequate savings that can help them secure their families’ financial future. It’s really sad that many OFWs are still unable to significantly raise their families’ standard of living even after years of working abroad.
I believe one of the main reasons a lot of OFW families continue to suffer from financial distress is improper money management. Although in some cases an OFW’s financial troubles may have been due to circumstances beyond his control (e.g., foreign employers not paying them, victimized by illegal recruiters, etc.), I’m convinced that most money problems confronting OFWs are due to financial missteps they’ve committed time and again.
Here are some common money-mistakes that OFWs (and millions of other Pinoys in the country) make and what they can do about it:
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.
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 HD TV 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 to your goal or farther from it.
Not saving consistently and 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 percent 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.
Failing to invest money wisely. While 44 percent of OFW families save, only a tiny fraction—5.7 percent—use 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 preneed 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.
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 nonessential 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.
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Alvin T. Tabañag is a registered financial planner and a member of the RFP Philippines. He is the author of best selling book 12 Steps to Build Wealth on Any Income. Comments and questions about the article and other queries ma ybe e-mailed to alvintabz@yahoo.com. To know more about the RFP program, visit www.rfp.ph or e-mail info@rfp.ph.
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