Top 5 money management tips for OFWs
Life as an overseas Filipino worker (OFW) is no walk in the park. In fact, you sacrifice time and energy away from home to give your loved ones the best life. So, when the time comes to reap the rewards of your labour, make sure everything was worth it by following our top 5 money management tips:
- Plan with your family
- Follow a budget
- Have separate remittance and savings accounts
- Pay your credit card bills and manage debt
- Monitor exchange rates when sending money to the Philippines
Let’s discuss these 5 money management tips and learn how each of these can help you to manage finances.
Plan with your family
Whilst your family may rely on you sending money to the Philippines, you must be honest about the challenges you face while working abroad, including:
- Being far from your support group
- Experiencing culture shock
- Missing important moments with your family
One day, you all want to be happy and healthy together, so think about how the family can team up to achieve this dream and when it will come true.
First, agree on your financial priorities, such as:
- Paying school tuition
- Ensuring everyone has the healthcare they need
- Making needed renovations in the family home
- Having enough to eat
- Paying for utilities
Next, what are your goals as a family? These could be anything, including the below:
- Ensuring that everyone finishes college
- Having enough funds for the family’s regular medical check-ups
- Buying a new home in a safe environment
- Opening a small business
Once you agree on your goals as a family, everyone must remember that to achieve these dreams, everyone must work together to save money and properly manage finances.
Follow a budget
Now that you’ve identified your family’s financial priorities, you can better compute how much you’ll need to live within your means, without depriving yourselves.
A popular budgeting technique is the 50-30-20 rule. It helps you manage finances in the following percentages:
- 50% for necessary expenses, such as utilities, food, medicine and transportation
- 30% for leisure and hobbies – The things that make you happy even if they aren’t necessary for survival
- 20% for savings
This financial arrangement can change depending on your needs. For example, you can allocate more funds to necessary expenses and reduce your budget for leisure activities. In other instances, the 20% you saved can also go to paying debts or to investing in yourself, such as taking professional development classes or getting insurance.
Whichever way you choose to spread out your money, always remember your financial goals.
Have separate remittance and savings accounts
After budgeting, you’ll need to manage your finances.
Instead of putting all of your money in one place, assign a bank account for your expenses and have a separate account for your savings. To know how much to put in to each account, you can use this trusty formula endorsed by the Philippine Central Bank:
INCOME – SAVINGS = EXPENSES
Based on your family meeting, you already know how much you want to save each month, so you can take the exact amount from your expenses account and move it to a savings account.
As your savings grow, you can keep track of your remaining funds by monitoring your designated expenses account to ensure that everyone sticks to the family’s financial priorities.
Now that you’re planning to separate expenses from savings, you’re probably wondering what kind of bank accounts you should use to manage your finances? Based on your needs, you can choose any of these deposit accounts:
- Savings account – These bank accounts have higher annual interest rates compared to checking accounts, so you can slowly grow your funds here. With a savings account, you can still withdraw your money when needed, especially during unexpected moments, like emergency home repairs, company lay-offs, and illnesses in the family.
- Checking account – These bank accounts allow you to write checks, so you can spend bigger amounts of money per transaction. You can use these to safely manage your regular expenses without having to walk around with large amounts of cash in your purse or wallet.
- Time deposit account – Though you can’t touch your savings while it’s in a time deposit account, you will eventually take out more money than what you put in thanks to this account’s high-interest rates. Time deposit accounts have lock-in periods that range from 30 days to seven years and have a minimum deposit requirement, so do your research to find a bank that offers the best terms for you. Once you do open a time deposit account, your chosen bank will issue a Certificate of Time Deposit or CTD as proof that you’ve locked in some savings with them.
Once you’ve decided where you’ll manage your finances, you will need to find the right bank for you. So, when choosing where to save money, make sure to pick reputable banks like our partners below:
Pay your credit card bills and manage debt
This is another reminder to live within your means.
While tapping a credit card is a quick way to get what you want, it can also lead to more debt than you can manage. Therefore, when using your credit card, make sure you can pay the resulting bill plus interest.
There are also the tricky situations of borrowing, lending, and giving money. When delving into debt, consider these money management tips:
- Borrow only what you can pay back – While loaning money can be a quick fix when you’re stuck in a bind, you’ll get more problems in return if you don’t have a way to pay the money back. Lastly, don’t borrow money for someone else.
- Limit your generosity – Whilst it’s alright for you as an OFW to share your blessings, don’t stretch yourself thin by lending money to all who ask. Before sharing think, can this person pay you back? Will lending this person money help them become independent or will they grow more dependent on you?
- Go easy on utang na loob (debt of gratitude) – While we can be grateful to the people who helped us get to where we are now, we can’t keep repaying them forever. Therefore, agree on an amount you can give your loved one that will not only make them feel valued but will also help you feel you’ve repaid them for their kindness.
Monitor exchange rates when sending money to the Philippines
The cost of sending money to the Philippines as well as varying exchange rates among money changers should factor into your expenses.
To remit your money, you can try any of the following:
- Going to your local bank or credit union
- Visiting currency exchange kiosks
- Using a foreign automated teller machine (ATM) with your credit or debit card
- Working with online money transfer services
Once you’ve chosen a provider, you will:
- Request to exchange your money to Philippine Pesos.
- Wait for the money changer to look up the current exchange rates
- Get the equivalent amount of Philippine Pesos based on how much you gave and the money changer’s exchange rate.
How much you get back will depend on picking the money changer that offers the best rates.
So, to make sure you save and get your money’s worth when you remit, you should:
- Choose the service that offers competitive exchange rates – You can check our comparison table on our homepage to compare.
- Check how much foreign transaction fees would cost – Usually, this is 3% per transaction when you use your credit card. However, Kabayan Remit only charges £4.99 for transactions worth up to £5,000.
- Compare how much online services charge when you use their platforms – There will always be service fees when transferring money online, but with Kabayan Remit your first remittance is fee-free.
- Limit how much you use exchange kiosks – They usually have lower exchange rates but higher transaction fees.
Choosing the best money transfer service
You’ve been working hard overseas, so when you want to manage finances, follow the 5 money management tips above and also choose a safe money transfer app that helps you secure and grow your hard-earned money.
You aren’t just limited to sending money either, With our partner merchants, you can even grow financially by investing in government contributions, insurance, and real estate.
When it comes to money management, all you need is the right partner to set you on the path to financial freedom. Kabayan Remit can help you there: Just follow our 5 money management tips and you’re on your way.