MANILA, Philippines – When overseas Filipino workers (OFW) leave the country, most of them have one thing in mind: to be able to provide for their families in the Philippines.
Vince Rapisura, president of the Social Enterprise Development Partnerships, Inc., a social enterprise that provides financial literacy trainings to low-income OFWs in 15 countries worldwide, says that the best approach to achieving your financial goal is to work on having a passive income – regular earnings that require little to no effort.
Passive income may derive from different forms of investments like rental property, investing in businesses where you will not be playing an active role, and others.
But many OFWs fail to invest their money.
Investing your money can help grow it even further and help you reach your financial goals even faster.
Who do people not invest?
According to Vince, one thing that hinders many Filipinos from investing is the thinking that investing requires a big amount of money. This is not true.
You can start investing with small amounts by simply opening a savings account. As you get more money using your active income (salary, commission, etc), you gain the propensity to invest in other investment vehicles.
The important thing is you start investing already, even in small amounts, and try to make it a habit.
Making investing a habit also means teaching yourself to live within your means. Vince suggests following the 5-15-20-60 rule – with 5% of income going to insurance premium, 15% to savings, 20% to investments, and 60% to expenses.
You must also be careful with debts – borrow only when you plan to use it for productive purposes, which in this case, is investing. Make sure that the return you will get from this investment is higher than the interest you need to pay for the loan.
Investment scams
Remember: a good investor is a patient one.
Vince says many OFWs fall victim to investment scams, mostly because they want to quickly get rich. This is not necessarily out of greed, but mostly out of the desire to get out of poverty.
The best way to avoid investment scams is by arming yourself with enough knowledge and skill in investing.
A good investor knows what to look for and exerts due diligence in research work before going into any deals.
Gather as much information about your prospect investment and perform background checks on the organization or people you will be investing on. Of course, verify their existence by checking their business registrations and licences too. With the internet and social media at your disposal, research should be easier.
When choosing an investment vehicle, make sure you understand their business model. Keep asking and speculating until it's clear to you.
If they are promising high returns, ask yourself two things:
- How does the company generate revenue? Remember: Revenue should come from products or delivery of services, not from recruitment.
- If the income of the source is legitimate, is it not violating human rights or causing people or the environment harm? These kinds of investments may offer high returns but they are not sustainable in the long run.
Before investing, you must also get to know your agent or broker.
Be careful of the halo effect: do no judge the person based on how they look or sound. Just because they look the part doesn’t mean they are what they claim to be.
Here are some questions you should ask them:
- How long have you been in this business? What has been your experience so far?
- How does your organization earn revenue to afford the returns you are promising?
- What are some challenges that your organization currently faces?
- How long can you wait before I invest?
- Did you invest in the organization yourself? Why or why not?
- What is the historical performance of your organization?
Make sure that your transactions are done in the organization’s official business address. To be sure, ask the building manager or neighbors how long the organization has been in that address to make sure it’s not a ‘fly-by-night’ operation.
You may also talk with both existing and previous customers of the organization to get more insights.
Be careful of salespersons who call, email, or send you text messages out of the blue. Legitimate salespersons do not usually do this.
Also, when you are investing, make sure to document everything. Keep all communications, correspondences, receipts, prospectus, etc. These will protect you in court in case things take a bad turn.
When is an investment too good to be true?
Vince says that if an investment offer sounds too good to be true, then it probably is. Watch out for these signs:
- the promise of high returns in a short period of time;
- the claim of being a no-risk investment, or a full guarantee where you do not stand to lose; and
- the investment offer is a once-in-a-lifetime deal.
"Easy money" is earned through a crime or a wrongdoing such as corruption or an investment scam. Scams usually promise high returns. Before throwing in your savings to invest, make sure you could make sense of the high returns they are offering.
Remember: there is no such thing as a risk-free investment. Do not be pressured to invest, even if you’ve been told that it’s a once-in-a-lifetime deal, or even when everybody else seems to be jumping in.
Be patient and take the time to decide.
“Remember that the fastest way to get rich is to do it slowly. Avoid getting into ‘get rich quick’ schemes,’ wrote Vince in his financial literacy book, (L)earning Wealth.
#UsapangPera
To help even more OFWs and young professionals manage their finances better, SEDPI produces weekly webisodes featuring Vince Rapisura and beauty queen Venus Raj entitled #UsapangPera.
The third episode, to be released on Friday, August 12 at 7pm, will also be discussing investing. Bookmark this page and watch it here on Rappler! – Rappler.com
SEDPI is a Philippine-based capacity-builder in the fields of microfinance, social entrepreneurship, and financial literacy. Learn more about them here.
Got questions for SEDPI about managing your finances? Email us at balikbayan@rappler.com.