Like many other overseas Filipino workers (OFWs), you chose to work abroad so you could earn more money. However, securing a higher income is just the first step to financial stability. You need to manage your money well, so you enjoy a high quality of life even after you return home.

Use this guide to avoid common OFW financial problems and secure your future.

Common OFW financial problems

Living and working abroad creates unique challenges that affect how you manage expenses and save for the future.

• Family pressure. Relatives may have unrealistic expectations about how much you can afford to send every month. Since you’re far away, it’s harder to monitor how the money is spent.
• High cost of living. You may be working in a country with a high cost of living. If your employer doesn’t provide room and board, your personal expenses will reduce how much you can remit and save.
• Fluctuating currency rates. Changes in the peso-dollar exchange rate can influence your purchasing power and ability to budget and make long-term financial plans. You also need to pay for remittance or bank transfer fees.
• Job security and benefits. As a contractual worker, you have limited job security and health and retirement benefits.
• Poor financial literacy. You may have problems sticking to a budget or paying off debt. You want to save and invest, but don’t know where to start or how to compare different options.You can overcome these OFW financial problems or manage how they impact your finances. Here are some simple, concrete steps you can take today.

Avoid “lifestyle inflation”

Lifestyle inflation is when your spending increases with your income. You or your family members start living extravagantly because you want to “enjoy your wealth” or feel pressured to keep up with your peers.

This is one of the most common OFW financial problems. As the income pours in, you make expensive purchases and unsustainable lifestyle changes. You may spend more than you can really afford. You may also forget to plan for important long-term expenses like education and retirement.

Here are some signs that you’ve succumbed to lifestyle inflation:

• You have accumulated credit card debt
• You spend to keep up an image
• Former luxuries (like eating at expensive restaurants) have become a habit
• You lose track of your expenses, and often ask yourself: “Where did my money go?”
• You have little or no savings

Your financial choices shape your present and future. There’s no harm in enjoying a better quality of life, if you’re able to balance it with savings and long-term financial planning.

Set SMART financial goals

You chose to work abroad to fulfill your dreams, like sending your children to college or buying a home.

These dreams motivate you and help you rise above difficulties and setbacks. However, dreams are vague and don’t set a clear path for achievement. For example, you want to give your child a good education, but you don’t know how much that will cost or how your savings can beat inflation.

Dreams come true when you turn them into specific, actionable goals. To do this, write down one of your dreams and then apply the SMART method.

SMART stands for specific, measurable, achievable, and time-bound. Let’s use the example of saving for your child’s college education:

• Specific: Establish a dedicated college fund that can cover tuition, books, and other associated expenses.
• Measurable: Save ₱1,000,000 by the time my child is ready to enroll in college in 10 years.
• Achievable: Compute how much I can contribute each month to the college fund. Explore different educational plans that can help me achieve this goal.
• Relevant: Adjust my goal according to my other financial obligations and personal factors like the length of my contract.
• Time-bound: Monitor and reassess the college fund annually to see if I am on track.

You can apply the SMART method to plan for any goal or major expense, from saving for a plane ticket so you can visit home this Christmas to building your retirement fund.

Stick to a budget

Budgets protect you from lifestyle inflation. You track spending and save for future goals. The key is to create a realistic budget and set up a system that can help you stick to it.

List all sources of income

This includes your regular salary and additional earnings from your side jobs or home-based business.

Set your spending limits

Create different spending categories (rent, utilities, food, entertainment, etc.) and your maximum budget for each.

Consider adopting the 80-20 rule or allocating 80% of your income to expenses and 20% to savings.

However, accidents may happen when you’re not home to take care of your family. BPI AIA has a protection plan that covers medical costs for your family back home. Check out Pamilya Protect to explore an affordable protection plan for your family.

Prepare for large, seasonal expenses

Create a special budget for these seasonal expenses during the holidays or the start of the school year.

Divide the total cost by 12 to find out how much you need to save per month. This is separate from your regular savings fund, which is meant for emergencies and long-term needs.

Set up a system

Choose a way to track your expenses: Excel sheets, apps or even a notebook. At the end of each week, check to see if you are still within your monthly budget. This gives you time to adjust your expenses.

Get the whole family involved

Money management is a team effort. Share your budget with the family and explain why it is important to stick to it to achieve important financial goals.

Then, plan how you can control expenses for specific categories. For example, assign someone to make a meal plan that includes budget-friendly dishes. It’s easier for everyone to stick to a budget if they have clear responsibilities and concrete steps.

Save before you spend

Most people will prioritize expenses and then save whatever is left over. It should be the other way around. The moment you get your salary, transmit your savings to a separate bank account and then use the rest for expenses.

Prioritizing your savings can help prevent many OFW financial problems. You’re prepared for any urgent, unexpected expense and accumulate money for important long-term goals.

Set up different types of bank accounts

Keep separate bank accounts for daily expenses and remittances and savings. Once you have built sizeable savings, transfer some of it to a time deposit that can yield higher interest.

You can also open Philippine bank accounts for your family’s emergency expenses or for local loans and credit card payments.

Talk to your BPI customer representative to find out more about the different types of accounts you can use for your OFW savings.

Shop around for the best foreign exchange rates

Exchange rates fluctuate unexpectedly. Before sending money to the Philippines, compare different money transfer services to get the best rates. Always check the service charges and other transfer fees.

Use credit cards wisely

Credit cards are convenient, but they aren’t “instant cash”. Don’t use them for impulse purchases and charge only what you can afford. As much as possible, pay your credit card bill in full to avoid interest and other charges.

Do you have credit card debt? Use these tips to get your OFW finances back on track:

• Stop using your card. Use a debit card or an e-wallet for cashless transactions. If necessary, leave your credit card at home to prevent temptation.
• Prioritize paying off debt. Focus on high-interest cards first, allocating extra payments to clear those balances.
• Rework your budget. Identify areas where you can cut back, so you can redirect your funds to paying off debt.
• Consider debt consolidation. If you have several credit cards with outstanding balances and high interest rates, you can combine the debt by taking out a personal loan to pay everything off or transferring all the debt to one credit card. Consolidating debt simplifies payments since you only think about one bill and due date. You may also be able to get lower interest.

Start investing

Investing makes your money work for you.You buy assets that can generate income in the future, such as stocks and bonds, mutual funds, variable life insurance and real estate.

Always research before you invest your money. Ask about the investment risks and returns. Gather information and supporting documents so you have a clearer idea of the value and cost. For example, if you are purchasing a condominium, you’ll want to consider the reputation of the developer, location and administrative fees.

It’s also important to check the background and credentials of the company or person who is offering the investment. Some companies like BPI-AIA have already established a reputation and history. For independent brokers, check their license or affiliation.

Under Philippine law, stockbrokers, insurance agents and real estate brokers need a license to sell any investment product. Real estate agents don’t need a license but must be supervised or accredited by a broker. Check their license at the Philippine Regulation Commission’s website and click Verification of License.

[H2] Start retirement planning

A retirement plan usually includes a combination of savings, investments and insurance. You secure a source of income and funds and prepare for any health emergencies.

But how much do you need to retire comfortably? You need to consider the cost of housing, food, healthcare and other things that are personally important to you. For example, you may want to travel or set up a legacy for your children.

BPI AIA can help you plan for your retirement. The Bancassurance representatives can show you different options and recommend a plan based on your age, current financial situation and your retirement goals.

Explore your financial options

It’s never too late to prevent or solve OFW financial problems. You can rein in expenses with a budget, build your savings and reduce your debt. You can also use financial instruments to grow your wealth and protect yourself from financial emergencies.

BPI AIA offers many kinds of savings and insurance plans for OFWs. Contact us to explore your options and get personalized advice from a Bancassurance representative.