Every year, thousands of Filipinos flock to different parts of the world to render services in accordance to their skill sets. They endure the thousands of miles of distance away from their loved ones in hopes of providing better lives for them. There are approximately 10 million Filipino workers working in 170 countries in the world. This staggering number is around 10% of our total population.
Working abroad had become so common in the country that is has interweaved itself in our social and political fabrics. The World Bank ranks Philippines as fourth in the world, just behind India, China, and Mexico, when it comes to remittances. In 2010, remittances from OFWs reached its peak at $20 billion accounting to more than a tenth of the annual Gross Domestic Product (GDP) of the country.
But you might ask, “Where does these billions of dollars sent back to families being spent on?” Mostly are for education, payment to mortgages, investments, or sometimes just irresponsibly spent by relatives who thinks money is just being picked up on the streets abroad. Unfortunately, a study by the Social Enterprise Development Partnerships Inc. showed that one in 10 OFWs are financially struggling and eight out of 10 return home without any savings. This is because of wrong ways of handling and investing their money.
So, if you are an OFW and want to have financial success, here are 8 of the common investment mistakes you need to stop doing now and ways on how to avoid them.
1.) Remitting to much
Over remitting usually happens to OFWs since their families are greatly and solely dependent on them. Most of them are breadwinners with relatives back home that have no stable jobs or source of income.
As mentioned above, remittances from abroad is helping our economy in a great way. But what most OFWs don’t realize is that they are sending too much money back home sometimes. They try their best to minimize their spending in order to send home a huge portion of their salary with little to nothing left for savings. This is one of the most common reasons on why many OFWs go home broke.
How to avoid it?
Set a monthly budget for your personal expenses, remittance, and savings. Stick to it and try to allocate your salary evenly. Make sure that you have enough money to survive before the next paycheck comes. If necessary you could open a separate account for your savings alone to avoid it being used for other expenses. It is important to think of the future knowing that you cannot be an OFW forever and have a stable source of income. It would also help a lot if you encourage your family to invest the money you send wisely and not spend it on unnecessary things.
2.) Not having an emergency fund
In addition to setting aside money for your savings, having an emergency fund is also a must. As much as we don’t want them to happen, it is still better be prepared in case an emergency happens back home or abroad such as hospitalization, getting laid off work, and other unanticipated events.
Not having an emergency fund is another reason why OFWs come home empty handed – either they borrowed a large amount of money from others to send back home or they used up their savings to pay up for these emergencies or only have enough money to finance their airfare back to the country.
How to avoid it?
Allot an emergency fund separate from your savings, a fraction of your monthly salary could make a big difference. It doesn’t have to as big as your savings, as it will eventually add up and not every so often an emergency occur. But don’t feel obligated to pay up for your mother’s cousin’s daughter hospital bill, you want to save up this fund for your immediate relatives.
3.) Having a “pasikat” attitude
This might be the most common attitude developed by Filipinos who happened to have the chance of working abroad. Every time an OFW comes home, it is expected that it will be a celebration. And most often than not, it is the OFW who shoulders all the bill. They are also expected to have pasalubong for everyone, not only for their relatives but even for their neighbors.
OFWs also have the mentality that they need to look good whenever they come home, splurging their money on expensive clothes, jewelries, and even gadgets that they don’t even need or know how to use. It’s not bad to treat yourself sometimes, you deserve it, just make sure they are within your means.
How to avoid it?
There is nothing bad about celebrating your return home, you have worked hard for months and it is a well-deserved break, but make sure to limit your spending. Don’t feel obliged to pay for every bill when you go out with relatives, little as they may seem but before you know it the bills have stacked up and the amount have skyrocketed. Don’t waste your hard earned money on unnecessary items just to show off. You don’t need to impress other people to the point that you’re already spending your savings or taking loans.
4.) Investing mistakes
There are a lot of investment options for OFWs contrary to what many believe that real estates like agricultural and commercial lands or house and lot are their only choices. Investment opportunities such as trust funds, mutual funds, business ventures, bonds, stock market, and others can be considered. Even just a small sari-sari store or a food franchise can be good investments especially when managed well. These investments will assure that you will still have a stable source of income even if you have retired and went back home for good.
On the other hand, many OFWs wants to venture into investments like these but they have no knowledge about it – they don’t know how or where to start and are too afraid that instead of growing their money it will go the other way around.
How to avoid it?
OFWs should prioritize financial education, this doesn’t require any schooling but a quick read on financial management blogs will make a huge difference. Once you have the knowledge, you will be able to invest your hard earned money in the right ventures. You should take this opportunity to invest wisely on long term endeavors now that you are still receiving better salary.
5.) Falling for investment scams
Many OFWs have this get-rich-quick attitude which basically makes them an easy target for scammers and investment fraud. These scammers promises them high returns for their money in a short span of time even without doing anything. Investment frauds like this are very common to OFWs because they have the money and the passion to start an investment but lacks the knowledge of discerning which a good one is.
How to avoid it?
The same as above, financial literacy is the best thing against these scams and frauds. Be cautious and don’t be tempted by promises that seems too good to be true. Remember that a good investment takes time but worth it in the end.
6.) Living beyond your means
Yes it’s true that your salary abroad is five times or higher than what you could earn back in the Philippines, but this does not mean that you can spend on things you have always wanted every time your paycheck comes. Living paycheck after paycheck have become the trend for OFWs and their families back home. From sneakers, to clothes, and the newest gadgets, their wants and likes seem unending. Some are even taking loans from other OFWs just to be able to buy these things, sometimes staking their salary for the next month.
How to avoid it?
Before you spend your hard earned money on that bag or shoes you have been eyeing for months, make sure that you can truly afford it. Not because you are earning much more, you can also increase your spending. Track down your family’s spending back home also, make sure that the money you are sending are being spent for their needs and not only spent on wants.
Make sure that your salary can cover your expenses and your savings together with the emergency fund. If there is some more left, then there is nothing wrong in rewarding yourself or your children once in a while with the things you want.
7.) Spending on liabilities instead of assets
An asset is anything that can give you money, while a liability is anything that takes away money from your pocket. An asset gains value overtime and has the potential to bring in money in the future. A liability on the other hand depreciates in value but can also bring in money if utilized well.
Many OFWs fail to define these two and see the fine line between them. Often, they purchase something thinking that it is an asset well in fact it is a liability. A classic example for this is a car, people buys a car thinking it is a good investment, but it turns out to be draining money from their pockets as fast as it burns off its fuel. An asset on the other hand can be a real estate such as land or a condo unit. Properties like these gain value over time and can be used as rental space to give you a passive income.
How to avoid it?
Having a simple and clear definition of an asset and liability is very important when planning a purchase. It is also important to consider different factors especially if buying a real estate property such as the location, reputation of the developer, and the source of your payment before closing a deal.
8.) Lack of long-term plan and financial goals
Not having long term goals increases your chances of just overspending your salary on unnecessary things. You should have goals in your mind and plans how you can achieve them.
These goals and plans must be sustainable and future proof to make sure that you are not wasting any effort, time and especially money. These will serve as your motivation why you endure working hard and away from your loved ones.
How to avoid it?
Put in mind that you cannot be an OFW forever, so it is very important to think of the future and plan ahead of time. Set goals that are realistic and will put you in the right direction. You should have your short term goals alongside with your long term goals. Short term goals such as paying up your debts back home or starting a small business can be achieved in months or in a year or two. Long term goals such as financing your children’s studies up to college or owning a house and lot or car will take longer time to achieve. Remember that your family greatly depend on you so it is very important to have an effective plan for the future.
Working away from your loved ones is a tremendous sacrifice. Nothing equates to the feeling of physically being there to witness important events in your children’s or sibling’s life. But as much as you want to be beside them every step of the way, their needs are rising as they grow. Financial issues are the main reason on why many are still choosing to work abroad despite these difficulties.
Working abroad gives you the financial freedom and lessen the worry of being able to provide your family a good future and a better life. Just make sure to avoid all these 8 investment mistakes, pair it with rational and wise financial decisions, and you’ll be able to make the most of your hard earned cash. Be guided with these tips, and before you know it, you have already attained all your goals and have a stable present and future financial outlook allowing you to retire early and spend more time back to your family.