Updated: June 1, 2022
It’s so easy for Overseas Filipino Workers to get a personal loan, especially in the Middle East. And this has caused a lot of them to become buried in debt.
To make things worse, a lot of OFWs borrow money just to buy unnecessary stuff. They purchase cars, new gadgets, luxury bags, flat-screen TVs, and many other things that are really not important.
I learned about this reality straight from them. The first time, when I visited Singapore a few years ago to do a financial literacy and entrepreneurship seminar.
And the same story has been told to me in other places, from OFWs in Hong Kong, in Seoul; from those working in Riyadh, in Dubai; and even seafarers.
So how can OFWs get out of debt and start saving? If you’re one of them, then below are some practical tips that can help.
Accept the fact that a lot will change.
If you want to change your debt situation, then you would have to start doing things differently. This means changing how you spend money and how you live your life.
Accepting the challenge that’s ahead is necessary to remedy your debt problem. It will be a difficult journey, so you need to prepare your mindset.
If you feel that you need emotional and moral support, then seek out an OFW financial advocacy group. There’s a lot of them online, but there could also be one in or near your city.
Know exactly how much debt you have.
It’s time to face reality and calculate the total amount of your debts. It sounds silly, but many people, when asked, don’t know how much exactly they owe. It’s time to stop being one of them.
List down all your debts. Particularly, how much you owe, to whom, the interest rate you’re paying, and the minimum amount you need to pay monthly for the debt.
If you know exactly how much debt you have, making a debt payment strategy will be easier. More on this later.
Stop incurring additional debt.
Stop using your credit cards. Stop applying for personal loans. And stop borrowing money from other OFWs.
From now on, the only reason why you should borrow money is if it’s a “life or death situation” — such as to pay for medical emergencies.
Sometimes, just following this rule is enough to get you out of debt. I’ve met OFWs who paid all their debts by simply doing this.
Manage your cashflow.
Find ways to lower your expenses. Seek opportunities to increase your income. But among these two, focus first on controlling your spending because that’s easier to do.
Most often, this requires telling your family in the Philippines that you’d have to send less money. It helps to know exactly how much they need to live comfortably, so you can send only the necessary amount.
When it comes to earning more, explore income opportunities that are immediately available to you. Usual options are to take on a second job, work extra hours, do a sideline business, or become an online freelancer.
Learn to say “No”.
Be prudent when lending money to relatives, friends, and other OFWs. Imagine and assume that they won’t ever pay you back. If this worst-case scenario is not okay with you or it will affect your finances drastically, then just say “No.”
Moreover, say “No” to your family who’s asking you to buy unnecessary stuff or pay for something unimportant. Say “No” to buying that iPhone or flat-screen TV, and say “No” to spending for the town fiesta or the family reunion.
It will be painful to deny your loved ones of something they want. But working abroad for several more years because you can’t get out of debt will be more painful — both for you and your loved ones. So sacrifice now, and avoid more pain later.
Snowball your debt payments.
The most effective strategy to pay off your debts that I know is the Debt Snowball Method. This was what I did to pay off my own credit card debts years ago. And I know a lot of people who were also successful in using this method.
I’ve written about this strategy before so if you want to learn how to do this, then you can read all about it here: How To Get Out Of Debt With The Snowball Method
Stay away from get-rich-quick schemes.
Last, but not least, is to avoid getting scammed by dubious groups and companies offering a way to earn easy money. If a business opportunity or an investment is promising you guaranteed profits — turn back and run away.
Search online and read about OFW success stories and you’ll see that most, if not all of them, became rich and were able to come back home because they worked hard, saved money, and started a business.
If becoming an entrepreneur was the key to success for many OFWs, then there’s no reason why you can’t do it too. Manage your cash flow, pay off your debts, and build your wealth the right way — slowly but surely.
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