Category: Money Matters

Admit it. Working overseas can be tiring and overwhelming. Plus, you miss your family so bad and you want to be with them. Apparently, there are mouths to feed and bills to be paid. Plus, you want to make sure that your family, especially your kids or younger siblings, will have a secure future. This is why you are willing to take the sacrifices to ensure everyone’s welfare.

Still, you can’t be an OFW forever. At one point, you have to come home and build a life in the Philippines instead of depending on an employment overseas that may or may not happen. This is why it is important to start saving early and thinking of putting your money into something more sustainable, like a business.

The question now is are you ready for it? 

Well, you need to satisfy these qualifications first:

Minimum of Six Months-Worth of Emergency Fund

One of the funds you need to prepare for is an emergency fund. You will never know what would happen, so it is best to prepared. Plus, not all businesses will succeed especially during the first year, which is why it is imperative that you have a fund that will keep you covered in case you hit a roadblock.

If you’re not convinced, then here is another reason why you need to have an EF: you could use the funds for additional working capital instead of borrowing. At least you don’t have to worry about interest rate, right?

Two Words: Financial Stability

This is the first thing you need to look into before you start with your business. In fact, you should be financially stable wherein a fixed amount of money comes in every month.

What does financial stability means? It’s about being free from debt, regardless of the kind loan. This way, when you decide to borrow money for additional working capital, you only have ONE loan to worry about.

Being financially stable also means you already diversified investments that are currently earning. You can check out this post about investment options to help you get started.

If you insist on putting up your own business even with existing loans, then at least make sure that you qualify the first requirement, which is having an emergency fund.

You Know What to Pursue

There are tons of businesses you can do. You might also be inspired by the many rags-to-riches stories, which is why you want to take your cue from them.

Is that what you really want?

Before you go home, make sure you know what you want to accomplish. At this point, you should have a business idea with a defined strategy on how to make it happen, including suppliers, marketing techniques, a defined demographic, and where to sell your product or service. Quitting your work overseas without having a clear, defined business plan is a big risk. You need to be sure first before you kiss your job goodbye.

You Understand How the Business Works

The difference between being an entrepreneur and an OFW is that being a business owner is a 24/7 job. You don’t get mandated off days and you have to work day in and day out to make sure that your business thrives. This is why you need to be equipped with necessarily business knowledge to make sure that you will succeed in this endeavor.

Eventually, problems will come along. You need to be able to solve this instead of quitting and saying you’re done with business. If that is your point of view, then you are surely better off working overseas because that’s not what a successful businessman will do.

The key here is to start small first. Also, don’t give up everything yet just to make this entrepreneurial dream happen. Take it slow and eventually, your dream of having your own business will come true.

Let’s face it: being an OFW is hard. What makes your situation harder is the fact that you have to support your family and their (never-ending) needs, and make sure that their future is secure. This is why you are willing to take three to four jobs just to make ends meet.

You can still make it happen. It’s a matter of proper budgeting, making sure you stick to that budget, and some frugal hacks you need to know by heart.

1. Share a Space – This won’t be applicable if your employer provided accommodation. Otherwise, you need to find a space you can temporarily call your own. Apparently, renting can be expensive, so make sure you look for roommates, preferably trustworthy ones, that could help you split the bills. This includes utilities like water and electricity as well.

2. Keep a Penny Jar – Got loose change? Surely, you don’t want to bring coins everywhere you go, so put it in a penny jar. You might be surprised to find out how much money you’ll have, which you can use to buy goods.

3. Say NO to Extended Family – Yes, this is hard, but constantly giving in to your extended family’s money requests will bring you nowhere, at least financially speaking. While you appreciate the help they’ve given in taking care of your family, this doesn’t mean you’ll say yes to all their demands. Check out this post to find out how to say NO to your extended family.

4. Walk – Going from point A to point B doesn’t always mean riding the bus or train. If you can just walk or your destination is few kilometers away, then go ahead and walk. It’s a good way to relax and clear your head, plus it’s an excellent exercise too.

5. Cook, Not Eat Out – Yes, we understand that after a tiring day, you just want to eat without exerting too much effort. Buying food saves you time, which you can devote to sleep, but this would mean spending money too. The key here is to prepare your food during off days, cook in bulk, and then freeze. Thaw only when you’re ready to eat.

6. Bring Your Own Baon – You’re lucky if your employer provides free meal, usually free lunch. If not, then don’t use it as an excuse to eat out. Plan your meals ahead, go to the market to buy ingredients, and cook meals in bulk. Set aside a portion for your lunch and dinner to save you time.

7. Plan Shopping – Don’t get too excited on sales. As much as you want to fill that balikbayan box with goodies for your family, putting that pressure on will make you spend more. Know when is the sale season, make a list of the things you will buy, and stick to a budget.

8. Never Make Purchases when Hungry – Believe it or not, you will end up buying more than what you actually need. Plus, your decision-making is impaired, which means you might be spending more – a scenario that you must avoid.

9. Use Cash – This will make it easier for you to track how much money you spent and left. You can easily make adjustments in your spending because you can physically see how much money have. More importantly, at least you don’t have to worry about bills come end of the month.

10. Invest – One of the common mistakes committed by OFWs is saving and saving, and not investing. Saving is good, but your money will only grow this much. If you want to make your hard-earned money work for you, then you need to look into other options such as investment. There are many investment options available that will help you grow your money. You can check this post for further details.

Remember, if there’s a will, then there’s a way. Stop making excuses on why you are not able to save. At the end of the day, it’s about discipline and commitment. You can do it.

Tax – the life-blood of the nation. Without tax, government won’t be able to build roads and infrastructures, and provide services to its people, at least in the ideal world. It is something you cannot escape from the time you were born until you die. When you get into franchising, you need to pay taxes as well. Because of the passage of Tax Reform for Acceleration and Inclusion or TRAIN Law, there are certain conditions included that could either increase or decrease the taxes you have to pay.

“How much?” you might ask.

Let’s look into the taxes you need to pay as a franchisee under the Tax Reform Law. 

Franchises are still subject to the usual business and income tax just like any other business. Nonetheless, check below for specific amount of taxes to be imposed:

• Service Revenue – 3 percent percentage tax if below P3 million with quarterly filing. On the other hand, if you decide to franchise a service business or register as a professional, then you may opt for the 8 percent flat rate based on gross sales or revenue in lieu of both percentage and income tax. Otherwise, anything above P3 million is subject to 12 percent value added tax filed monthly.
• Sale of Goods – same computation with service revenue
• Royalty – 20 percent final tax, regardless of the amount of royalty set by franchisor. This is filed monthly.
• Profit (Taxable Income) – 20 to 35 percent income tax if profit is above P250,000. In case you are registered as a corporation, income tax rate is 30 percent without P250,000 exemption.
• Rent – 3 percent withholding tax.
• Salary – 20 to 35 percent income tax if above P250,000.
• Professional Fees – 5 percent withholding tax if below P3 million. Anything above P3 million is subject to 10 percent withholding tax.

There is also a difference between taxes filed by a corporation and sole proprietor. If you register as a corporation, then your income is subject to 30 percent corporate income tax. This may be reduced to 20 or 25 percent upon the passage of TRAIN 2.

If you are a sole proprietor, your income will be subject to personal income tax of up to 35 percent.

Can I get away with the 20 percent tax on royalty? 

Believe it or not, yes. The rule is that IF the royalties are not considered as passive income rather for the active pursuit and performance of the company’s primary purpose, then there is no need to pay the 20 percent tax for royalty.

Keep in mind that passive income means you are earning something without exerting effort. A perfect example of this is rental. Clearly, running a business is not passive income because you need to do something to perform the business’ main purpose.

But 20 percent tax on royalty is LOWER than the 30 percent corporate income tax. 

That’s true. Still, keep in mind that the 20 percent tax is based on gross revenue as opposed to 30 percent corporate income tax, which will be imposed only on the taxable income. You also have to remember that corporate income tax is subject to optional standard deductions or itemized deductions, which means you could pay lower amount even if the rate imposed is higher.

Still, don’t worry. Taxes will always be part of your expenses as a business owner. Don’t be discouraged in getting into franchising or starting your business just because of the taxes you have to pay. Strategic tax planning plays a crucial role in ensuring that you pay whatever is due – and correctly – and at the same time, make the most out of your profits.

The good news is there are seminars available that you can attend to so you can better understand how Philippine tax system works. There are also groups and dedicated tax professionals who are willing to answer your questions about tax, so make sure to reach out to them.

According to the Bangko Sentral ng Pilipinas, as of July 9, 2018, the US Dollar to Philippine Peso exchange rate is at P53.41. Unfortunately, the weakening peso doesn’t look well for the economy, which is currently at its weakest in 12 years.

For OFW families like yours, now is the best time to send money and have it exchanged because your family will get more than usual. Weaker peso means higher value of money, which also means more spending power for your loved ones back home (as long as money is used for needs and necessities).

The question now is this: where can you get your dollars exchanged?

Here are your options:

Money Changer

Not many people are believers of money changers. Surprisingly enough, these entities offer higher, if not the best exchange rates compared to banks in order to attract customers.

If you want your family to make the most out of your remittances, then they might want to take that trip in Mabini Street in Ermita, Manila. The place is lined up with tons of money changers, whose rates are up to 20 percent higher than what is offered by banks.

Some of the best money changers you can find in this area are:

• Czarina Foreign Exchange, which does not charge commission and accepts all major currencies aside from US dollar.
• Tivoli Money Changer, also known for its better and competitive rates.
• Edzen Money Changer, which is also known to have the highest exchange rate in Mabini area.

The downside of going to money changers is that you have to bring with you the cash already before you can employ their services. Otherwise, they won’t transact with you without any assurance that you are already in possession of the money that needs to be exchanged. If you want a one-stop shop, then the next options would be ideal for you.

Remittance Centers 

This is another favorite among OFW families. Remittance centers are ideal because they can get their money and have it exchanged in peso. Many remittance centers also offer other services like bills payment, which means your family can already pay utility expenses without going elsewhere.

Still, don’t expect high exchange rates compared to what money changers can offer. Remittance centers are also limited to US dollar and British pound among others, with some branch carrying US dollar only. Nonetheless, if your family wants convenience, then remittance centers like Cebuana Lhuillier, Palawan Pawnshop, and Western Union will do. Getting money is easy as well because all they need to do is to present ID to validate the identity of the recipient.

Foreign Exchange Counters in Malls

Speaking of convenience, malls also have foreign exchange counters, usually near the supermarket or department store where your family can exchange the money you sent. Rates are competitive and reasonable as well, although again, don’t expect the kind of rate money changers can give you.

Nonetheless, doing forex transactions in the mall is also convenient because you can do other things after exchanging money. Keep in mind that forex counters in malls like SM and Robinson’s only accept dollar (or other currency, depending on the location) to peso exchange and not the other way around.

Banks 

Banks are the safest facilities where you can send money and your family can get and exchange it. On the other hand, banks need to abide by certain rules, which means they are strict when it comes to foreign currency exchange transactions.

Banks like BDO, BPI, and Metrobank will allow forex transactions IF you will transact with the branch where you opened your account. They will also require presentation of certain documents like government-issued ID before the transaction pushes through. Don’t even get started with the long line your family has to endure just to get the money you sent.

Among these facilities, which do you think is the ideal and most convenient for you?

A sufficient savings account, a car that you own, a house you can finally call your home, and a small business to help sustain daily finances. These are some of the many goals you want to achieve, which is why you decided to pack your bags and look for opportunities overseas. Aside from these goals, surely, you want to give your kids the best education.

Apparently, sending money for tuition fee is not enough. You need to look long-term and prepare for the future because let’s face it, you can’t work overseas for the rest of your life.

This is why while you still can, you need to start saving up for your children’s education – and here’s how you can do it:

1) Establish your child’s education goals. 

This is the first step you need to establish when preparing for your kid’s educational fund. Establishing goals will make it easier for you to decide how much money you will set aside for this fund and how much you need to save. In line with this, you need to consider the following factors as you establish educational goals:

• Your child’s school, preferably something you can sustain even without your overseas stint.
• Amount of tuition fee in the preferred school

Find out how much the tuition fee costs and multiply it with the number of years your child will go to school. Make sure to include inflation since tuition fee increased by at least 10 percent every year.

2) Decide how much you want to set aside for Education Fund. 

Now that you know how much you need for your child’s education, it’s time to devise a strategy on how to save for this amount.

There are many ways on how you can save for your child’s Education Fund:

• Set aside a specific portion of your monthly income for tuition fee.
• Look for additional ways to earn money and save the money earned for this specific fund.
• Save the bonuses you received from work and deposit it in the Education Fund.
• Involve your child in saving such as keeping the money received from godparents. You will also be teaching your child to be financially responsible at an early age.

The bottom line is be creative to help you earn extra income. Every centavo counts when it comes to saving for your child’s education.

3) Invest your money to make it grow. 

Savings will not be enough to cover the expenses for your child’s education. At this point, you need to look for ways that will help you grow your money as tuition fee and other school-related expenses increase. In that case, you need to carefully consider investment.

Here are some of your investment options:

• Education plan, preferably something that includes dividend earnings and with flexible payout options.
• Mutual Fund
• Unit Investment Trust Fund (UITF)
• Stocks

READ: Investment Options for OFWs 

4) Start saving NOW. 

All of these won’t be helpful if you won’t start doing it now. The earlier you start to build your child’s Education Fund, the better and higher you can save for his/her future. Don’t wait for your contract to end before you realize how important education is. Start now and you will be able to provide a better and more stable future for your child.

In line with this, don’t forget to track how much money you are saving. Tracking your progress will make it easier for you to adjust spending and investment options to ensure that your child will get the education s/he deserves.

Nobody wants to be in debt. Surely, no one wants to borrow money and not be able to pay it, especially now that you are earning in dollars. Unfortunately, financial difficulties happen and there are expenses you won’t be able to pay on time, which prompts you to borrow money.

You might ask, “What if I am unable to pay?” 

In that case, late or non-payment of financial obligations could affect your credit score, thereby reducing your chances of getting approved when you apply for a loan. The same goes if you have little credit history, which means you haven’t tried applying for a loan or credit card.

Is there a way to fix this? The answer is yes. Here’s what you can do to fix your bad or no credit history:

1) Start building your credit history. 

This is applicable if you don’t have financial obligations under your name.

Take note that credit history is among the most important factors lenders like Balikbayad look into. If there is none, then don’t worry. Now is the best time to build your credit history, starting with getting a credit card.

Credit card companies are more lenient in giving credit card to consumers. This is because this plastic card serves as your entry in the Consumer Lending market. Despite the convenience, make sure you are a responsible credit card holder by paying your bill on time and in full every time you use it for your pasalubong purchases.

If you happen to have bad credit, paying off your credit card debts could reduce your chances of being put in a bad light. In other words, don’t underestimate your credit card.

2) Don’t apply for another credit card. 

If you have existing financial obligations, getting a new credit is a big no-no. You will be tempted to use the card to pay for your purchases even if you cannot pay for the bill in full. Lenders also take this as a red flag because borrowers with too much credit cards in his name often indicates that you are financially troubled.

Resist every temptation to apply for a new credit card and avoid using cards newly issued to you, which leads you to this next tip.

3) Pay off existing loans and bills. 

Online cash loan, personal loan, salary loan, auto loan, car loan, credit card debt, and even utility bills – all of this have an effect on your credit history. Any late or non-payment could affect your overall credit score, which means getting a loan approval can be difficult as well.

Here’s what you can do:

• List all existing debts and financial obligations. Indicate the amount, interest rate, and due date for each expense.
• Identify which loans have either higher interest rate or earliest due date. Prioritize these loans when making a payment.
• Look for ways where you can earn extra. You can try selling items you no longer need or getting a side job.
• Make little sacrifices. If possible, walk on your way to work, avoid buying material things for your family back home, skip the weekly drinks with colleagues. You need to save money so you can pay off your loans.

Every payment made goes a long way. Lenders would like to see borrowers who have existing debts yet are making efforts to slowly pay off their loans.

4) Try negotiating with lenders. 

This may not work since it depends on your previous credit standing. If you were able to pay on time before, then explain the roadblocks you experienced, which led to delay in payment. Your lender would be willing to help you on this based on the type of borrower you were.

You can also suggest debt consolidation so you will only worry about just one loan. Try negotiating for lower but reasonable interest rate to make loan repayment easier for you.

5) Make sure that your family is working with you. 

All of these efforts won’t be possible if your family back home is not backing you up. It is imperative that you explain the financial situation with your family and collectively, look for ways on how you can pay off your loans and improve your credit score. Encourage your family to save and make little sacrifices as well to improve your financial condition.

Being a parent is not easy. You need to prepare your kids for the future and make sure they are equipped with necessary knowledge and learnings in order for them to survive. Even if you are miles away because you have to work overseas, this is not an excuse to pass on important lessons to your kids, which they will carry on later in life. In fact, that is part of your responsibility as a parent.

When it comes to important lessons, this includes teaching them about money. Here are some basic financial lessons you should teach your kids:

Money Lesson No. 1: Money is earned and worked hard for. 

Living as an OFW could make earning money easier for you compared to working in the Philippines. Still, this doesn’t mean you should spend your money every time your family asks for it.

One of the important lessons you need to teach your kids is that money is earned and worked hard for. It is something you don’t get out of thin air or grow out of trees, rather a reward for the sacrifices you made while living and working abroad.

There are several ways to teach them the importance of money. When you go home for vacation, try holding a garage sale and sell items you don’t need but are still in good condition. If your child is good at something, say baking goodies, encourage your child to bake and then sell it to friends or neighbors. This will make your child feel how it feels to earn money.

Money Lesson No. 2: There is a difference between needs and wants.

First things first. Needs are necessary expenses that you cannot get away from like water, food, and shelter. Yes, you can look for cheaper alternatives but it is something necessary for survival. On the other hand, wants are expenses that you don’t really need and can be delayed. For instance, a new gadget, staycations, shopping for new clothes and shoes, and eating out in restaurants.

Therefore, teach your kids to prioritize needs over wants – a money lesson they need to learn as early as possible. Practice the concept of “delayed gratification” where the want will be used as a reward for, say good grades or good behavior. Teaching them the difference between the two concepts will help your child make better decisions in money as they grow up.

Money Lesson No. 3: Save up. 

This is important. Many Filipino families don’t have enough savings that will help them last for a month – and it’s not a good sign. In fact, your family shouldn’t be one of them.

To make that happen, you need to instill the importance of savings to your kids even before you leave for your job overseas. Make sure that you set as a good example by showing your kids that you are also doing your part to save. Give every member of the family his/her own Money Bank wherein the money saved will be pooled in the Family Fund. This teaches your kids on how to responsible with money – a trait they can carry with them as they get older.

Money Lesson No. 4: Think of ways to grow money. 

Saving is good, but don’t stop there. Saving money in the bank is a good start, but if you want financial freedom, then you should teach your kids about investing as well.

There are many ways to invest money even with little amount. Explore your options and learn about them as a family so you can decide what’s best. This should be a team effort and everyone must be involved.

Fact: work overseas is not a lifetime career. At some point in your life, you have to go back to the Philippines and settle here. This is why you should make the most (and save the most!) out of your stay because you will never know when it’s time to go back.

Let’s say your contract expired and you’re finally back home. What is your next step? Should you apply for work overseas again or settle in the Philippines? Will you finally open your dream business you and your family have been planning for years? What about the money?

For all returning OFWs, this one is for you: money tips to remember to make sure you’ll have enough until you get another job:

Tip No. 1: Know how much you have. 

In fact, this is the first thing you need to do when you get home. Make a list of all your assets you acquired over the years. This includes savings (both in and out of the bank), investments (stocks, mutual funds, treasury bills, etc), and other assets like car or property. Place the corresponding amount so you know how much you have.

Ideally, you should have at least six months-worth of income to help you get by while you are still looking for another overseas stint. You can check out this post about crazy but effective ideas to save more money.

Tip No. 2: Make a list of how much you owe. 

Consequently, list every financial obligation that you have, regardless of how big or small the amount it. This should include existing personal, auto, home, business, and even online cash loans. Don’t forget to include the outstanding balance, interest rate or amount paid every month, and due date for each loans. This will give you a clearer picture of how much you owe as opposed to how much you have.

Tip No. 3: Develop a financial plan. 

Now that you know how much your assets and liabilities are, it will be easier for you to devise a plan on how to handle your finances. At this point, establish a way on how to pay off your existing financial obligations and making sure that you won’t accumulate more.

You should be able to look into your budget as well since you are no longer earning in dollars. Adjust your family’s weekly and monthly budget to accommodate expenses without exhausting every centavo in your bank account, which leads you to this next tip.

Tip No. 4: Look for ways to earn something extra. 

Getting another job abroad is not easy even if you already have experience. Unless you are specifically requested by your previous employer,  you have to wait for an opportunity and rely heavily on luck as well to get a job overseas.

In the meantime, look for other ways to earn extra money. This could help sustain your everyday expenses without hurting your bank account.

Tip No. 5: Avoid parties and treating friends. 

Many returning OFWs are victims of “Libre naman dyan” culture. You were away for years and the fact that you earned in dollars make you look “bigtime” in the eyes of other people. It wouldn’t hurt if you say yes to an invitation and become the designated financier in the group.

Well, it would if this happens more than once.

As much as you miss your relatives and friends, treating them could hurt your pocket. Keep in mind that you don’t have a job – yet – so save as much as you can. Don’t give in to temptations easily.

Tip No. 6: Don’t jump into business immediately. 

Admit it. You wanted to open up your own business so you don’t have to go back overseas. Apparently, it’s not as easy as it seems. Some businesses, no matter how promising it would be, fail for variety of reasons. If you are not ready to risk the money you worked hard for, then don’t start your own venture – for now.

Examine the market first and see if there is an impending need for your product or service. You should be able to prepare yourself not just financially but also mentally and physically as you enter into this new venture. Once you are ready, keep in mind that Balikbayad is here to help. Send your loan application now for pre-approval and we will get back to you as soon as we can.

One of the most common misconceptions surrounding OFWs is that you are rich. You earn in dollars and with the existing peso-dollar conversion (P52.00 ++), money is easier for you. Because of this, many relatives and some friends decide to turn to you and ask for help – financial help. No thanks to the so-called utang na loob, it’s hard to say no to them even if the money is intended for you family.

This is the challenge: should you send money to friends or relatives when they asked for help? 

The answer is it depends. It should never be your habit to let anyone borrow from you anytime they need it. Nonetheless, here’s what you can do if a friend or relative sought for your help and borrowed money:

First, be a good listener and listen to their money issues. 

You can’t just say no instantly. You need to genuinely listen to their problem first that led to money issues. You need to know where they plan to use the money IF you will let them borrow. Listening to their concerns will help you gauge whether that person is worth lending.

Then, tell them you’ll check your finances. 

Money is something you work hard for. This is why you should never let anyone borrow from you when they need it.

If a friend asks for help, tell him/her that you’ll think about it. Explain your situation since you have a family to feed as well. Let them know that you have other responsibilities and a strict budget to follow. At this point, do not promise anything yet until you are sure that you have extra funds you can lend.

Decide whether to lend money or not. 

That friend or relative is waiting for you. A day or two of making them wait for your decision is fine, but if you are certain that you cannot lend them money, then you need to tell that person right away.

If you decide to lend money to a relative or friend – 

Ensure that the money will be used for the said purpose. Consequently, make sure to set payment terms because you and your family need money as well. Agree on a particular date on when s/he should pay and how the money will be paid. Nonetheless, you have to be ready for the consequences.

There is a possibility that this person might “forget” about the money borrowed; hence repayment won’t take place. Don’t be embarrassed to remind that relative or friend to pay because that is the money you worked hard for, especially if it’s already the agreed date of payment.

If you said no – 

Be ready for grudges. You’ll be hearing statements like, “Noong ikaw ang may kailangan …” or “Tulungan mo naman kami kasi binabantayan namin pamilya mo,” so be ready for it. Some would even insult you for not allowing them to borrow money from you, so make sure you are prepared for that.

Nonetheless, it is important to be honest on why you cannot let them borrow money. Explain your current situation and the current standing of your family when it comes to expenses.

Still, don’t feel bad. True friends are those who understand your situation. If they ended up putting you down just because you can’t lend them, then it is best to kick them out of your life. You don’t need that and just focus on what else you can do to improve your family’s financial situation.