There are deeper emotions hiding in Overseas Filipino Workers (OFW) as they never talk about their difficulties, unpleasant supervisors, or hostile coworkers. They are liberal with life lessons and guidance without acknowledging that they are being heard for the first time in a long time. They speak Filipino with the excitement of someone who has had to speak other languages, understanding that some emotions cannot be expressed outside of one’s home tongue. Their sacrifices are honored as they are praised as “contemporary heroes” of our country. Recognizing their efforts is insufficient to express our thanks, which is why this essay is intended to assist OFW on what to do with their hard-earned money when going back from abroad.
According to data from the Bangko Sentral ng Pilipinas (BSP), cash remittances – money transfers made through banks — were $2.755 billion in June, up 4.4% from $2.638 billion in the same month last year. Remittance inflows totalled $15.347 billion in the first half of 2018, up 2.9% from $14.918 billion in the same time previous year. Meanwhile, personal remittances – the total of cash and in-kind transfers received through informal channels — increased by 4.4% to $3.064 billion in June 2022, up from $2.936 billion in June 2022. Personal remittances have reached $17.086 billion this year, up 2.8% from $16.616 billion in the first half of last year. As the peso continues to fall in value, most OFWs will profit for the time being, but the advantages will be offset by rising commodity prices in the long term. So, here is some money spending tips for OFWs.
- Open a Savings Account
To combat the widespread impacts of inflation, the BSP raised interest rates to encourage individuals to deposit their money in banks that may earn high interest rates, therefore reducing purchasing power and, as a result, cutting down prices. Furthermore, according to experts, the Philippine central bank may boost policy rates by a total of 50 basis points during its November and December meetings. So, it will be inevitable for your money to grow in the bank instead of spending it unwisely.
Consequently, a money saving tip is to save in digital banks. These innovative banks had took the limelight of conservative investing for the younger generation as it provides higher interest rates. Digital banks loosely defined as a bank with few or no physical branches, lower overhead costs, and a more digital approach to customer service are making headway against traditional banks, with some digital banks advertising savings account interest rates of 4% per annum or higher — with some rates ten times higher than what you might earn at a traditional bank. Few other businesses are now witnessing pricing disparities as large as those between traditional and digital banks. Unlike mortgages, whose rates have fallen below 3%, savings account deposits are held with the bank that establishes the account. Banks do not often sell deposits that they do not require. As a result, the interest rates on their savings accounts and loans are adjusted.
- Invest in Foreign Currency Deposit Units
A Foreign Currency Depository Unit or FCDU, is a unit of a local bank or a local branch of a foreign bank that has been allowed by the Bangko Sentral ng Pilipinas (BSP) to conduct foreign currency-denominated transactions in accordance with the terms of Republic Act 6426, as amended. International banks, such as HSBC and Citibank, also allow you to withdraw and deposit funds from your multi-currency/foreign currency accounts online or in person. However, your account must be in one of the most often traded currencies, such as pounds, yen, or dollars. Overall, these accounts may be quite useful if you generate money in a currency other than US dollars and want quick cash on hand while still allowing your clients to pay you in their local currency. Furthermore, having a foreign currency account may be an effective method to mitigate the risks connected with currency swings while also lowering some of the costs associated with overseas transfers. Also, OFWs are considered as Non-resident citizens which makes them tax-exempt from the final withholding tax of interest income.
In addition, Government Agencies such as the Department of Trade and Industry (DTI) continues to conduct a series of online seminar to advocate for OFWs to invest their money for the long term goal and retirement here in the Philippines. The online seminar also included information about the Personal Equity & Retirement Account (PERA), a voluntary retirement savings program available to Filipinos through any of three accredited PERA Administrators: ATR Asset Management (ATRAM) Trust Corporation, Banco De Oro (BDO) Trust and Investments Group, and Bank of the Philippine Islands (BPI) Asset Management and Trust Corporation. PERA offers a 5% yearly tax credit on total contributions, tax-free gains from PERA investments, and tax-free distributions (i.e., PERA investments are not subject to estate tax). The maximum yearly contribution is $100,000, however OFs may invest up to $200,000 in various investment products each year.
- Monitor Exhange Rates
“OFWs will believe they are being paid more when, in reality, they are not; their worth just decreases as the peso declines.” As a result, for the same amount of remittances in dollars, they may send more in pesos. However, in comparison to host-country earnings, the pay of these OFWs will be low, if not nothing.”
When going back from abroad, what to do before you go to a currency exchanger is to make sure to monitor the exchange rates as it could have a significant difference from the time you exchange it to its increased value the next day. The effects of a weaker peso are not obvious. According to experts, demand for Philippine exports may grow now that the US dollar is worth more Philippine pesos. Overseas Filipino Workers (OFWs), particularly those paid in dollars, will notice that their pay is now worth more in Philippine pesos. This might enhance gross national revenue, which is disproportionately reliant on remittances from abroad. According to ING Groep NV, Bank of the Philippine Islands, and eMBM Services, the peso might fall to P60 to P62 per dollar as early as this year. According to Bloomberg, the peso will fall more than 13% in 2022, making it one of Asia’s worst performers.
On the other hand, domestic realities restrict these potential benefits. The Philippines is still mostly an importer, and the epidemic has hampered its ability to satisfy increased export demand. Furthermore, rising food and transportation expenses negated the rise in overseas remittances received by OFW households. Headline inflation averaged 5.5% in the second quarter of 2022, above the country’s target range of 2 to 4%.
- Avoid Unnecessary Loans and Expenses
When a Balikbayan comes to visit, all they want to do is spend time with their relatives. While they pretend (even for a few days) that everything is back to normal, they will not pass up an opportunity to be the provider, the source of everyone’s pleasure, and to show their family that their hardships have been worthwhile.
Over 10 million Filipinos labor in other countries. Millions more desire to work as OFWs. There are 10 million people who live apart from their family in order to receive greater financial assistance. Earning twice or treble what they might make in the Philippines, they risk their lives in other nations, despite homesickness, in the hope of a brighter future.Why do most OFWs become buried in debt and return home broke? Some OFWs live a lavish lifestyle, sometimes borrowing money to purchase luxury products. When asked to pay for birthdays, “binyag,” fiestas, and expensive “pasalubongs,” most OFWs just cannot say “no.”
Loans may be beneficial if utilized correctly.If you have a loan, be sure you pay the installments on time. A loan might provide you with several advantages. If you genuinely want to get out of debt, that is OK as long as you educate yourself on financial matters. List all of your debts, starting with the smallest and working your way up. Take note of the due dates, installment amounts, necessary minimum payment, and interest rates. First, pay off the lowest debt, then check it off your list. After you’ve paid off the first obligation, utilize the additional cash to pay off the next. You might sense that a debt-free existence is achievable by practically watching your bills diminish. This debt-reduction approach can energize you mentally to pay off any debt to the last dime.
- Get Your Whole Family to be Involved
You may be a modern hero for the Philippines but your no Superman when it comes to financial problems. One of the money saving tip for OFW is to you keep your family updated with what you plan in the long term as they can help you towards achieving your goals with the right communication. Give them a planned budget and let them pay for their own costs with their own money in case they spend more than the budget. This will help younger ones understand the significance of financial planning and budgeting. It will be simpler for them to step into the shoes of the house’s ‘financial manager’ in his/her absence. Ensure that any critical financial information is shared with all members of your household. This will help to minimize confusion and worry in the event of any unanticipated events in the future. Also, be transparent and honest about the family’s financial background. Allow your experiences, whether positive or negative, to serve as a teaching tool for them.
It takes discipline and work from all family members to guarantee that the family’s financial goals are met. Besides there are now a lot of platforms to use for communications between long distance family members. You must hold a meeting with your spouse and children to establish a monthly budget and analyze spending. Only if all members of the family work together to cut needless spending and strive toward a single goal will the family’s financial goals be realized. It is advised for you to talk and devise a plan of action as a group, which will boost the possibilities of your desires coming true over a single individual doing all the brainstorming. All of these hopes and goals may never come true unless members work together.
Finally, tips above are some of the “what to do” when going back from abroad. OFWs and migratory Filipinos have grown to play a key role in the Philippine economy. Their remittances from other areas of the world have had a huge influence, which continues to rise as more Filipino workers go overseas for employment. The first thing any OFW and migrant Filipino should understand is that there is no quick way to financial independence. Everything, even economic independence, takes time. What you wish to appreciate for a prolonged period must be matured and ready to enjoy within a certain period.
Financial planning encourages people to be fiscally responsible. It provides discipline in keeping track of financial goals in the short, medium, and long term. Short-term objectives are monthly living expenditures that must be paid for the individual’s fundamental necessities, including the establishment of an emergency fund. Medium-term objectives are those that you wish to attain in the next five years, such as buying a house or a car, but long-term goals take longer to fulfill.
In Bria Homes, we make sure to be involved with our investors especially OFW long-term plans in providing them the retirement they deserve.