Some financial tips for OFWs and advice on how to make their money grow.
I would rather write an article to answer the queries of a Filipina posted in one of the Facebook Group. 60% of this blog visitors are from North America, that’s why I want to answer the said inquiries in English. I am not a good writer but I hope this article will help my fellow Filipinos to understand what is the importance of “financial planning”.
In the Facebook group, Pinoy Insurance Talk – the P.I.T. the queries was stated as follows;
” Need advice po. Salamat .. If i can set aside 10k a month from our family budget, ano po maganda gawin para mag grow xa..take note po, wala kmi kht anong plan.Both of us have sss, philhealth and my parter have pag ibig… Im turning 27 and my partner is 28 and we have a 4yr old daughter.not married po. Ofw po xa. So far wala po utang and walang hinuhulugang kht ano.. Ano po maaadvice nyo mga sir/mam na gawin ko s 10k n sobra monthly? Salamat po..”
- What does the woman wants? An Advice not an offer.
- How much she can set aside? P10,000 per month.
- What does she ask? What is the best thing to do to make her money grow?
- Does she had any plan with her family? No financial plan.
- They have social security system, PhilHealth and Pag-Ibig (his partner)
- Her age: Turning 27 and her partner is 28
- Do they have kids? A 4 year old daughter.
- Married: Not a legal partner
- OFW: Overseas Filipino Worker (Partner Only)
- In Debt?: They are both debt free individuals.
Financial Tips on How to Make Your Money Grow?
First of all, let us analyze her situation. She is not married but has a 4 year old daughter.
The best thing to do is to get married first, if she can set aside P10,000, there is no reason why she and her partner can’t save money for a “simple wedding”.
The purpose of this wedding is of course, “love, vow and sacred commitment” and legalities such as “paper documents” which she need during the process of doing a financial matters such as acquiring a life insurance insurance and investing.
Although, she can acquire an insurance and invest her money, the document can be used for her “beneficiaries” such as her “daughter and husband” just in case something happened to her as a insurance policy holder and investor. The document will be needed when time comes.
A P10,000 investment per month is also an issue. Until when can she invest a P10,000 per month? A year or two? We don’t know. Because along the way, the cost of her living will increase such as the cost of her “daughter education”, and other necessities while getting older.
Maybe she just need a 20% of their income, if they earn a P50,000 per month. P10,000 is exactly what they need to invest.
Important: Investing is the best answer for her question, how to make her money grow?
But before investing her P10,000, she must consider the following;
Financial Tips 1: Build Cash Reserve or Emergency Funds
The total cash reserve must be amounting to P300,000. Why? P50,000 income times at least 6 months = P300,000. An emergency funds should at least equivalent to 6 months of an income.
Important: The cash reserve can be put in the bank account that is accessible 24 hours a day in case of emergencies.
Financial Tips 2: Have a Life Insurance and Health Care
If her family is earning P50,000, she need a life insurance with a coverage amounting to P1,800,000. Why? it is because she need to recover at least 3 years when something bad happened to her partner or vice versa. P50,000 x 12 months = P600,000 annual income x 3 years = P1,800,000
She must also have an healthcare insurance together with her partner, a P50,000 health care benefits and a P1,000 per day hospital benefits to both of them.
There are great insurance companies in the Philippines namely; BPI-Phil Am, Sun Life Financials, AXA Life in Metro Bank, Generali Pilipinas in BDO, Prudential Life, Pru-Life, Insular Life, Pioneer Life, etc.
Financial Tips 3: A Specific Financial Plan
Until when did her partner wants to work abroad, when do they want to get retire? When they reached 65 years of age? We don’t know. That’s why she should have a plan. If she and her husband want to retire at 65, they still have 37 years preparation.
If the P10,000 per month is invested properly, that amount of money will worth millions. To be specific, a P10,000 per month investment will worth (see table).
|Investment||Years||Earn 8%||Earn 12%||Earn 15%||Earn 18%|
Required Monthly Savings
She only required P1,201.06 per month investment that earns 18% in 37 years to acquire her target earning asset of P36,488,400. How do I know? Keep on reading.
This simply means, if she can really disciplined herself to set aside P10,000 and invest that earns 18% annually, she will retire young and rich. Congratulations to her, may her plan be “at work”.
As a guides: she and her partner must know how to compute their retirement target earning asset.
- How to Compute Your Target Earning Asset
- Retirement Target Earning Asset for Age 20’s
How to Invest Her P10,000 per month?
Assuming she already had her cash reserve or emergency funds and the life insurance + health care. She should know how to invest her money in these types of investments.
As guide she must know: Types of Investments in the Philippines
Which type of investment that can earn 18% annually?
Invest in stocks or invest in mutual fund equity or UITF equity. We’ll talk these types of investment one by one, but firs, know your risk profile.
Grow Your Money with Stocks, Mutual Funds and UITFs
COLFinancial can help you invest in the stock market. There are guides in their official website for you to understand investing in stocks. Or try to read the book of Mr. Marvin Germo – Stock Smarts, or the book of Bro. Bo Sanchez – My Maid Invest in the Stock Market
As a guide: COL Financial Easy Investment Program for Stock Investors
Investing in mutual fund equity type. For you to choose better mutual fund companies, choose in these mutual fund awardees such as Philequity Fund Inc, or First Metro Save and Learn Equity Fund, Inc.
As a guide: Mutual Fund Awardees 2014 PIFA Awards Night
If you want to invest through banks, UITF is the answer. UITF stands for unit investment trust funds. The BDO-EIP can help you grow your money via investing in their UITF euqity type.
As a guide: BDO UITF Easy Investment Plan
Financial Tips for OFW to Make Their Money Grow?
The answer to the question of our fellas, should be these.
- Have a simple wedding
- Build an emergency funds
- Acquire life insurance and health care insurance
- Know her target earning asset
- Create a plan and work for it
- Know her risk appetite
- Invest her money to grow
- Ask financial experts
I am not a financial expert. It will cost you too much money if you made a wrong decision, it’s better to hire a financial planner. You read this before in my comments, right? Make sure you ask the financial experts only, that will really meet your needs (to grow your P10,000 per month).
If you will make a wrong decision, that simply means, you are wasting your money and time. Do not hesitate to ask the “reputable” financial experts in our country. Tell your partner also to attend seminars to understand and learn personal finances.
I am so glad that our fellow Pinoy who are expert in finances are conducting seminars overseas to help the OFWs and educate them about financial literacy. I am very proud of them.
Now, go ahead with your plan and have a bright future.
For financial experts reading this article, please add some ideas and suggestions on what to do. Let us help the couple together with their daughter to have a great investment decision.
Want to say something about these financial tips? I hope you find this article very helpful. Keep visiting InvestmentTotal.com and learn financial education.