Managing our personal finances is important to be able to improve or maintain our financial situation.
People have different relationships with money - there are some who want as much money as they could possibly have and devote their time and energy to achieve it while others prefer to live simply with the right amount of resources. Perhaps, most of us fall somewhere in between - being able to live a comfortable life without sacrificing balance or quality.
Quite a different case for OFWs who take the risk of working in a foreign land to earn money and send back remittances to support their family and provide a better future for them. For most of them, finding a balance between supporting their family back home and saving for their future is challenging.
By learning the basics of money management, we can avoid the risk of financial constraints. Meanwhile, if you are an OFW, understanding this can help you protect and grow your money while working abroad. Setting your financial goals will help you stay focused and avoid overstaying abroad.
What is money management?
According to Investopedia, money management refers to the process of budgeting, saving, investing, spending, or otherwise overseeing the capital usage of an individual or group.
It includes how you manage your money considering various life events and risks and how you cater to both your short- and long-term goals. Understanding money management will help you distinguish between financial decisions that will be beneficial and those that will be detrimental to your future.
Why is money management essential?
Being able to manage your money will help you meet your short- and long-term needs, without going beyond your income limits. Here are some of the reasons why money management is essential.
1. Helps you meet your money needs
Money issues and concerns go beyond what most of us think about. If we think about our finances from a much broader perspective, we will be able to think beyond just working and making money.
We should have a plan that establishes how much our income is, what our expenses are, what our plans are for the future, and what our financial goals are. This way, you will be able to see the value and think beyond just working to earn money.
2. Teaches you to manage your income
No matter how big you are earning every month, if you don’t plan for your income, you will end up overspending or spending your money on unnecessary things.
Understanding money management will help you evaluate how you will make use of your money. It teaches you how to spend on what is necessary and save or invest the rest.
3. Enables you to learn about budgeting, spending, and saving
Even if you are earning a 6-digit salary every month, you can still be living in debt if you don’t plan for your income and manage your expenses.
Managing your money and being able to stick to your budget helps you avoid overspending temptations that you otherwise would have ignored.
4. Keeps you off debts
Have you experienced being overly in debt? It is important to be able to manage one’s debts in a way that guarantees no harm is done to your future financial stability.
Being debt-free will help you grow your wealth quickly and one way to do this is to avoid overspending and learn how to spend within your means.
A good example would be those people who tend to change their lifestyle when they have an increased income. What usually happens is that the change in lifestyle becomes in a higher proportion than the increase they are getting, which leads to getting into more debts. Another common mistake that most of us are guilty of is overusing our credit cards, which only adds more to our debts.
If you know how to manage your money, you can be able to avoid this.
5. Grow your assets
Understanding money management will help you identify the real value of a specific asset, and the know-how to cancel or settle liabilities. In this way, you will be able to grow your assets, because you are sure that they will not turn out to be a financial burden in the future.
6. Raise your standards of living
Another reason why money management is important is that it helps you increase your living standards. The more you plan for your finances, the more your savings will be, which also means instead of more money going to unplanned expenses, more money will be saved.
Money Management Tips
If you are an OFW struggling to make ends meet, you must realize that this is not the end of the road for you. We have enlisted some tips for mastering your personal finances while working abroad.
1. Set your financial goals
Don’t work abroad without setting your financial goals first. Assess yourself and identify your short- and long-term goals.
Ask yourself: What are your priorities while working abroad - is it a new house, a car, your children’s education, or an investment? How long do you need to work abroad to achieve these goals? And more importantly, how much do you need to save so you can go back home without having to work abroad again?
Remember the things you have been dreaming about and reflect on them. Remind yourself of these dreams so that you can set your eyes on these financial goals.
2. Manage everyone’s expectations
Once you have set your financial goals, you have to start talking to your family about how they should help you manage finances while you are working abroad. You have to make everyone understand what your plans are, how much money you will be making while abroad, and how much money you will be needing to survive there.
In this way, your family can manage their expectations regarding how much you will be sending them and have that responsibility to spend the money wisely. This will also help them budget the remittances and avoid overspending.
This may seem uncomfortable at first but this will be very helpful so that you and your family will be able to save money while you work abroad.
3. Follow a budget plan
Having a good personal budget plan and following it religiously would help you manage your expenses wisely. It is one of the best ways to control your spending and save money.
Until you know what you earn and spend, you cannot figure out how to live within your means. Trust the process! Creating a budget and following it can be simple, easy, and fun.
4. Wise banking
If you are looking at putting your hard-earned money in the bank, you have to understand that not all banks are the same. They offer different fees and services, so you have to choose a bank that balances these two. Check and compare also which of these banks offer the services you plan to use the most and give you the best benefits.
Saving account
For a savings account, it would be best to know the interest rates, minimum balances, and the number of transactions allowed per month.
Checking account
There are checking accounts that waive fees if you have your paycheck directly deposited into your account. Most of these accounts also come with debit cards, which you can use to withdraw money from your account and pay for items as you would with a credit card.
5. Set aside your savings
A lot of people tell us that savings should come from what remains of our income by the end of the month. But, this is not the best way to secure savings. More often than not, this formula will lead you to overspend on unnecessary things.
A better way to secure your money is to set aside your savings immediately after you get your paycheck. This way, you will find a way to work around the limited budget that you have.
6. Stop incurring debts
The best way to save money is to not incur debts. By borrowing money unnecessarily and extensively, you could end up in a deep financial problem.
So, if you currently have debts, you need to find a way to settle them as soon as you can. When all these are settled, that’s the only time you would be able to move forward and proceed on your journey to financial independence.
7. Invest your money
Many people are hesitant to invest their money because of the risks involving it. Not everyone can see the potential rewards they could benefit from investing. It’s time for you to look for investment opportunities that could help you grow your savings as well as those who can help you earn passive income.
When considering ways to invest your money, you can choose from various investment instruments such as bonds, mutual funds, commodities, stocks, business ventures, and real estate.
You have to note that the riskier the investment is, the more important it is that you have knowledge and expertise on it. You also have to consider how quickly you will be able to cash out of the investment should you need cash for an emergency.
8. Live within your means
There’s nothing wrong with spending your hard-earned money on the things that you and your family want and need but make sure to keep track of your expenses and stay on track with your financial goals.
To save money, it is best to live simply and live within your means while working and living abroad. Not only you would be able to save money but you will also learn to develop a good financial habit.
So, you have to remember to buy only the things that you really need, avoid overspending, save and invest that extra cash for your future and the future of your family.
9. Make use of auto-debit arrangements
Auto debit arrangements enable your money to get automatically debited from your bank account and transferred straight to your savings account, making the entire process easy and hassle-free.
Doing this will keep you from being tempted to spend your money since it doesn’t have to pass through your hands. Keep doing this and you’ll be surprised with how much you have already saved
10. Invest in yourself
Make sure to spend some time with yourself. Learn new skills, enhance your knowledge, and improve your habits. Whenever there is a chance, attend workshops, watch video tutorials, and read books. This will not only help you improve your craft but it will surely be beneficial for you in the long run.
11. Say no to vices
As they say, vices come in all shapes and sizes, and they’re mostly unhealthy for both your body and your wallet.
Unfortunately, many OFWs fall into the trap, be it smoking, drinking, gambling, or over-shopping, as a way to cope with loneliness. Say no to vices and say yes to recreational activities such as working out, playing sports, or meeting with fellow Filipinos are some activities that can help you out.
When you spend time nurturing your body and social life, you also stay away from the big expenses that come with sickness and bad habits.
12. Attend financial literacy courses
Nowadays, there are a lot of financial literacy courses available for OFWs. Some courses are free, others come with a fee. These courses will be very helpful for someone like you who is striving to save up.
If you do not have the resources for this, consider seeking professional help. Look for a financial advisor who could help you make wiser financial decisions.
Now that you fully understand the value of money management, you could be able to manage your money wisely and secure a better future for yourself and your family.
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