A large number of Overseas Filipino Workers (OFWs) struggle from chronic debt, despite making substantial amounts of money while working in a foreign country. Why? Debt is becoming a real monster for many.
There’s no doubt debt can drain your energy and zest for life. Due to emergencies, some OFWs are obliged to use their passports as collateral for borrowing money, even from a loan shark. With high interest rates, it can cause an incredible amount of pressure, anxiety and sleepless nights. This may lead to conflicts or arguments within a workplace or personal relationships. Thus, it can eventually ruin not just your career, but reputation as well.
Are there simple and practical ways in regard to escaping debt problems so you can save and go back to the Philippines having financial freedom? Yes. Let me share with you some practical tips to improve your personal finance.
1. Assess the problem and commit to get out of debt
It is important to first acknowledge the problem before you find a solution. Make an honest assessment to see your overall financial situation. You need to face reality and make a commitment to get rid of debt. If you expect to get out of debt without defining the real culprit, the problem won’t be resolved.
2. Decide a time frame to achieve your financial goal
Once you figure out the total debt in your record and have a bigger picture, write a deadline for when you’ll be financially free. Setting a time frame is necessary in achieving your financial freedom.
It is like a compass that would guide you in your financial journey, ensuring you will be motivated to stay on course. If it takes a few months or even years to settle your debt, don’t be discouraged. In some cases, OFWs in Thailand have opted to join the established cooperative which is a great alternative to have buffer funds for emergencies.
3. Negotiate with your creditors
It’s stressful to receive phone calls and notices from loan companies reminding you of unpaid credit card balances or other related loans. If you borrowed money from a friend or fellow OFWs, you may also receive inevitable text messages almost every day.
However, approach the creditor and learn to negotiate politely. You can discuss penalties for paying late, lowering down the interest rate, allowing you to skip one or more payments with no penalty, and requesting loan to be extended or restructured.
Just be honest as you explain the current financial condition and be responsible enough to follow the written agreement to protect your reputation as a borrower.
4. Control your spending habits
We always hear the phrase “live within your means” over and over. But if you find yourself in excessive debt, to live below your means is more reasonable and practical. Control your spending by eliminating unnecessary expenses. A small purchase on your credit card seems like nothing, yet it can accumulate huge amounts of debt when it becomes a habit. Benjamin Franklin once said, “Beware of little expenses. A small leak will sink a great ship.”
Learn to re-define wants versus needs and live with it. If you’re spending more than what you’re actually earning, it’s time to cut back on luxurious that you can live without such as movies, extra clothing and dinner out. As an OFW, it’s essential to be frugal and control your spending habits to avoid debt.
5. Learn to live a simpler life
Life is about choices. It’s worth to re-examine your lifestyle if you really want to get out of debt. If your pleasure is always purchasing branded or expensive items at the mall, think of replacing this habit where you will not be tempted to spend much money.
Learn to explore new habits and pleasures which don’t require much spending money. Picnicking at the park, biking, watching movies at home, and roller skating with kids are a few activities that can give simple joys.
6. Increase your income stream
Find out how you can make extra money aside from your regular employment. One way to increase your income stream is to use your talent and skills. This could include activities such as writing, tutoring, making crafts, or even web design. Convert skills into extra sources of income. For instance, a part time job would help you to earn extra money which is helpful, especially when your budget is tight.
You may also set up a garage sale to sell stuff or other unused item at home. Finding ways to increase your income will expedite the process of repaying debt.
Don’t be discouraged if you’re facing financial difficulty right now as God brings hope even in an extreme financial situation. The most important thing is that you’re ready to make changes in your financial life, such as building an emergency fund or managing your financial resources wisely.
For the Lord your God will bless you as he has promised, and you will lend to many nations but will borrow from none. You will rule over many nations but none will rule over you. –Deuteronomy 15:6, NIV
JUN AMPARO is the author of OMG! OFW’s Money is Gone: Practical Tips on How to Be Wise with Your Hard-earned Money which was featured at GMA News Online. Being an OFW for over a decade, he’s aware about the common financial challenges of many Overseas Filipino Workers.
Jun is investing in mutual funds and stock market for over three- years and conducts financial literacy seminar.