OFW Money Management: How to Get Out of Debt and Save
OFW Money Management Updated on May 2023
More than 10 million Filipinos work abroad. And millions more aspire to become OFWs.
There are 10 million people living away from their families to give them better financial support.
Earning double or triple the salary they could earn here in the Philippines, they brave life in other countries amidst homesickness in the hope of a better future.
Why is it that most OFWs get buried in debt and go home broke?
Some OFWs have a luxurious lifestyle and even borrow money to buy expensive items. Most OFWs just can’t say “no” to their relatives when asked to pay for birthdays, “binyag,” fiesta, and extravagant “pasalubongs.”
OFWs are even willing to live like beggars just to send as much money as they can. Of course, they will never admit this as they do not want their families to get worried.
They have grown old without any savings. Then their children will, in turn, become OFWs, too, to pay off debts and help the family survive.
This article will guide you on how to free yourself from debts and successfully save up for your future.
Here are 10 money management tips to help you get out of debt and save for the future.
Get Committed
You need to accept the fact that you are dealing with debts. There is a problem that you have to face. Of course, since you are supporting your family, you need to ask for their participation as well.
Make your family understand that there will be changes once you start paying off your debts and saving up. This does not mean that you will stop sending money. It only means that you will only send for needs and not wants.
Ask for their budget nicely because some people get defensive when asked about how they use their remittances or allotments.
Also, tell them that this is also for their future. Being an OFW is not forever. Once you go home, you need to make sure that you are still financially stable. It is sad to go home with still debts to pay.
Once you have made a conscious choice to take action, you need to be committed. Focus on your goal.
Go home to your family debt free and with financial freedom.
Be financially literate
Filipinos are not keen when talking about money. Maybe they think it is too complicated. However, you need to take up the challenge and be financially literate to move up the financial ladder.
Nobody wants to be “isang kahig, isang tuka” forever. By knowing how to handle your money, you will know how to successfully save.
How would you know your financial literacy level?
President of the Social Enterprise Development Partnerships, Inc., Vince Rapisura, has listed five questions to ask yourself:
Do you have a Financial Plan?
While we all have dreams, your goals have to be Specific, Time-bound and have a specific amount of money for them to be achieved.
Do you have savings?
“May ipon ka ba?” It is best to save up for emergency funds. You will never know what will happen in the future. If an emergency arises, it is best to use your savings so you will not be financially shocked. Your emergency savings has to be worth your 6 months’ income.
Do you have insurance?
Insurance has different types, but they will all help you during tough financial times.
Do you use your loans properly?
Loans may help you reach your financial goals, but you must handle loans properly. You need to pay it on time to avoid penalties. Loans can be used for investments and emergencies.
Do you have a passive income?
Passive income is your money working for you, such as investments in the stock market.
If you have got at least two (2) “Yes” answers to these five questions, then you have low financial literacy and status. Three to four (3 – 4) “Yes” answers means you are on Average, and five (5) means you have high financial literacy score.
Financial literacy will take some time, but it can surely help you effectively manage your money.
If you really need a loan, get it from a legitimate money lender.
Loans are actually useful if used in the right way.
Suppose you got a loan to handle it well by paying the installments diligently. There are a lot of benefits you can get with a loan.
If you borrow from a legitimate money lender, it can help you build up your credit history. A good credit history will help you get a higher amount of loans in the future. Also, registered money lenders surely take care of your sensitive information.
Know how much your debt is and which strategy to use.
Use the Snowball Strategy.
List all your debts from the least amount up to the highest amount. Take note of the due dates, installment amounts, minimum required payment and the interest rates.
Pay off the smallest debt first then cross it out. After knocking out the first debt, use the extra money to pay off the next one. By literally seeing your debts getting fewer, you can feel that debt free life is actually possible.
This debt reduction method can boost your enthusiasm to pay off even debt until the last cent.
Negotiate with creditors
As said above, get a loan only from registered moneylenders. This is because illegal money lenders are loan sharks who will suck you of your money.
Legitimate money lenders are willing to negotiate with their borrowers. Never ignore their calls or emails. They just want to get their money back in a secure way.
The sad thing about Filipino culture is when a borrower can’t pay the debt. They go into hiding. They do not know that this does not solve the problem and that it can just multiply the amount of the loans.
Creditors will be willing to give you other payment options if only you talk with them properly. After all, they have helped you in the first place, it is only right to pay them back.
Stick with the budget.
Since you are the one earning for the family, you need to convince your family to stick with the budget which you have created. When you get your salary, set aside 5% for insurance, 15% for savings, 20% for investments, and 60% for expenses.
Learn to say “no” when relatives ask money for none emergency situations. However, we all know that this is not easy.
There are too many wrecked relationships and hurt pride because an OFW rejected a financial request. As must as possible, make your relatives understand that living as an OFW is not living in paradise. You work hard, sacrifice too much, and rest too little to earn money.
Control spending habits. You may be earning a lot now, but this does not mean that you spend most of it for your expenses.
Buy an Insurance
There are various types of insurance. It is best to start with health, accidental death, permanent disability and life insurance.
Insurance is your protection. It is like a shock absorber. When something happens, your financial stability will not get a direct blow. Plus, it gives you peace of mind.
Start investing
You need to save money, pay off debts and provide for the needs of your family. Clearly, you will need another source of income. Try to invest.
Shake off the thought that investments are only for the rich. We can all invest through banks, the stock market, or even small businesses.
Take note that before you invest, you must be sure that:
- you are investing in legal businesses,
- you understand what you are investing in, and
- you vary your investments.
Do not put all your eggs in one basket, so to speak.
Avoid get-rich-instantly schemes
There is no such thing as legal easy money. OFWs are easy prey for these schemes. They will make you believe that you can easily get cash if you invest in them a certain amount.
Be vigilant. Take the time to research on these groups and ask around. It is also best to join OFW social media groups. They most likely share news about scams. They also share money management tips from other OFWs’ experiences.
Money Management Secret
Managing your cash flow is not easy. It takes discipline and focuses on being debt free and financially free finally.
Money management might take months to years, but it will be worth it when you get back home and finally experience a retirement without financial worries.
