Friday, May 24, 2024

OFW Financial Literacy: 7 Visible Signs Overseas Pinoys Fail

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Overseas Filipino workers are well-known to be resilient people, enduring life’s challenges, sacrificing personal time and pleasure for the sake of others.

But when it comes to financial literacy — a crucial element that can make or break an OFWs’ career abroad — not everyone has a good grasp. In fact, many of them could not sustain their daily life within their means due to a lack of vision and discipline. As a result, some of them end up racking up more debt after going abroad than before leaving the Philippines.

Here are some signs an OFW has low or poor financial literacy.

He or she cannot easily distinguish between a want or a need.

The OFW thinks every commodity is a need. For every item, he or she has an excuse to justify a purchase. A new car will help pick up or send a child to school. A new gadget helps ease homesickness. A new pair of shoes help him or her look professional and boost personal confidence. So when making a purchase, there is no feeling of guilt when his or her expenses exceed his or her monthly income.

If an OFW is surrounded by friends or co-workers with poor financial literacy, he or she then will likely inherit this bad habit and will have difficulty in overcoming money problems.

He or she does not know when to use or not to use a credit card.

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Not every OFW owns a card. But to some of those who do, usage of credit cards is more for convenience. True, using a credit card feels like you keep cash in your pocket, a convenient way to skip going to the ATM. But the very same feeling of not spending (cash) also fuels interest in spending for more. Spending credit cards should be done only when it presents a clear advantage over cash payment besides convenience. For example, if a dining promotion encourages patrons to use credit cards to get an extra 10% off on menu items or if using a credit card entitles a discount in a gasoline station.

Using a credit card has advantages — it establishes your credit portfolio and shows how diligent, if not disciplined, you are when it comes to settling the bills.  This helps build your credibility as a responsible debtor should an OFW seek to borrow larger sums of money from a lending institution in the future. That is why we don’t discourage its use. Otherwise, we would have discouraged patronizing the dining promotion above. But misuse of credit cards puts the holder in a trap that might be difficult to overcome without drastic lifestyle change.

Having said this, whether the use of a credit card exceeds the initial plan, tracking credit card transactions and settling the bill every time it arrives must be the first priority. Otherwise, a big chunk of monthly income will end up paying bank fees or the minimum required amount, failing to pay off the entire credit card bill.

He or she does not set a fiscal budget every month.

Most OFWs live on a fixed income. The good news with fixed income is that workers know how much to expect during payday. The problem with this, though, is that not many OFWs make documentation on how the income fits in the budget. Many will just make a mental note on where to spend or how to spend the money. As a result, oftentimes expenses exceed income and OFWs will end up borrowing from loan companies or skip sending money to family.

Many OFWs need financial literacy
Filipino migrant workers send money back home in a remittance center, on Wednesday, June 11, 2008, in Hong Kong, China. Remittances from Filipinos working abroad rose 9.4 percent from a year earlier to a record $1.4 billion, the central bank said in Manila. The amount grew 15.5 percent in February. The value of remittances, equivalent to about a 10th of the $117 billion Southeast Asian economies, is shrinking in local currency terms as the peso trades near an eight-year high against the dollar. Photographer: Jerome Favre/Bloomberg News
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A financially literate OFW is conscious of spending money without becoming stingy. He or she budgets how much to spend for savings, remittance money, recreation (movie, eating out, hobbies, concert tickets), and others (transportation, church tithes, clothing).

He or she failed to invest for retirement.

As able-bodied members of the workforce, OFWs are in the prime years of their life trying to prepare for their eventual retirement years. Unfortunately, bound by inherited debt, family needs, and so on, some OFWs fail to earmark money for retirement or investment in health insurance. They concede that their salary is not high enough to cover expenses. Let us all realize that it is important to develop the habit of saving more than just achieving a higher paying salary, though it won’t hurt to get promoted and earn higher.

An OFW who has low financial literacy may not see the benefits of investing in retirement funds such as making monthly contributions to SSS or paying quarterly premiums to interest-yielding insurance policies and sees paying premiums as an extra burden that they cannot handle.

They do not have emergency funds.

OFWs sometimes don’t have extra money — hopefully about six times their monthly expenses — as funds for the rainy day, during which there is a medical emergency or sudden loss of means of livelihood. As a result, they run towards creditors hoping to loan money to address that emergency. The problem with such an approach is that money is not used to invest, but as an expense, and it carries interest rates. Failure to pay such loans just because an OFW does not have an emergency fund could trigger a vicious cycle: borrow more money to pay for an outstanding debt.

They cannot say no to money requests.

As if alluding to their role as workers who are used to receiving orders from bosses and comply, many OFWs also fail to learn how to say no.  It can be from a family asking for more remittance money, a friend sending out solicitation forms for her child’s graduation, or a hometown friend seeking funds to finance an application for a job abroad.

Related: Emotions stumbling block in OFWs financial success

Saying no does not mean you don’t like them pursuing their dreams. It’s more about checking your own capability to help out. You could have helped but because you also sent money to finish the construction of your new pigpen or sari-sari store, so you say no, not this time.

Sometimes it’s also for their welfare. If you think it’s not a good idea to invest in a friend’s planned business venture, saying no could save him from losing the business to bankruptcy.

Sometimes it’s to set expectations. If you say you cannot spend money because you already did remit your regular monthly allotment, your family could at least attempt to stretch whatever budget they receive. Catering to their needs all the time can spoil them.

They compare what they have with others.

There are times when OFWs are overcome with insecurity.

“How come he only worked fewer years than I did, he already managed to buy a house and lot?”
“Buti ka pa, nakapagpatayo na ng negosyo sa Pilipinas. Ako andito pa rin walang asenso”

The moment OFWs start comparing their lives, their careers, and success with others creates more pressure to achieve goals, which are now patterned after the perceived success of others. Instead of reviewing their own goals and examine where did it go wrong and fix it, some OFWs have become fixated with how other people managed their lives.

If you have any of these signs, it’s okay to acknowledge you have low financial literacy. There are several programs by private companies such as the Social Enterprise Development Partnerships Inc and the Philippine government such as the Commission on Filipinos Overseas on offer for overseas Filipino workers.

Sign up for financial literacy classes and seminars to become more aware of how to make the most of your fixed monthly income, more than just earning extra income.

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