From saving to investing: 5 tips for OFWs

MANILA - Most overseas Filipino workers (OFW) leave their homeland and loved ones to work abroad in pursuit of financial prosperity. If you are now working abroad, it is not enough to simply save up your money. Instead, you should invest these savings so that your money can grow faster.

For OFWs, the need to invest smartly is particularly urgent since your opportunity to raise funds is linked to the length of your contract. Once your contract of work is over, it is possible that you would find yourself without having a source of income, until you find a contract again. For this reason, you need to come up with the right investment choices that match your circumstances and make your money work harder for you.

Essentially, OFWs should be guided by the same investment principles as Filipinos who are working and based at home, save for a few considerations to reflect your circumstances, in particular not being in the country.

Here’s a simple five-step guide to help you in making your investment decisions:

1. Consider liquid and professionally managed investments.

Shop for investment products that are easy to purchase and dispose off even if you are not in the Philippines. The nice thing with today’s technology is you can scan online, start by looking at the individual websites of financial institutions. Your choices include the following:

· Mutual funds – These are pooled funds invested in different types of assets to match your desired time frame and level of risk. Some may have the potential for high gains but will also come with higher risk. These are available to retail investors for a beginning account of as low as P5,000.

· Unitary investment trust funds – These are also pooled funds invested in various assets to match your risk profile and investment horizon. These are available to retail investors for a beginning account of as low as P5,000.

· Insurance-linked investments – This is an insurance product combined with an investment fund, fulfilling your need for protection and capital gains. Your monthly payment would depend on the amount of coverage you purchased, as well as the type of asset you chose to invest in.

· Equities – These shares represent shareholdings in a company. You profit from the trading of these shares in the stock market. Online brokerages can facilitate your trades, with some of them requiring an opening balance beginning at P10,000.

· Bonds – These represent debt taken by either the Philippine government or companies. They usually have a fixed return and are therefore safer. They may be purchased through most banks for as low as P5,000.

2. Keep your papers in order.

Ensure that you have proper documentation to open and maintain these accounts, either while you are visiting the Philippines, or from abroad. Download their online forms, then mail a clear copy of your required IDs. Before sending these documents over, it may be helpful to personally contact the financial institution through their emails so that they can review your signed forms and requirements before you send these. This will save you a lot of time and effort.

3. Use safe and direct channels for sending money.

Find a secure and cost-effective way to put money into your investment from where you are. Online banking services, which are now available to those with accounts in local banks, are among the safest channels you can use. You can also use bank-to-bank transfers. If you wish to go through remittance channels, consider companies with long track records and recommended for customer service if something should go wrong. Unsafe ways of sending money are physically through people, no matter how much you trust them; through other people’s bank accounts; or by sending the money in the mail.

4. Make your payments or remittances regularly.

If you send money to the Philippines, it would be good to do so following a schedule, so that you and your loved ones back home can plan your cash flows better. Have the discipline to send money on schedule so that your loved ones can make payments on time, letting you avoid penalties in the process. Luckily, major financial institutions all allow you to make payments or transfers online. You may want to check out https://remittanceprices.worldbank.org/en to know how much it costs to send money from one part of the world to another.

5. Ensure the legality and integrity of your planned investment.

OFWs are often the target of investment scams. Check out the site of the Commission of Filipinos http://www.cfo.gov.ph/ to read the latest news and updates on legitimate and illegitimate business deals. You may also have relatives luring you into get-rich-schemes that offer nothing but false promises. While you may trust your loved ones, it is but prudent to check out everything about the proposed investment deal before you turn over your hard-earned money.

source: www.abs-cbnnews.com

Want to retire at 60? Here's 5 smart ways to prepare

(Editor's note: Life is full of uncertainties. While you can never really predict life’s twists and turns, you can at least prepare for them by thoughtful planning. For the month of September, we are running a series of articles on various protection basics to help you address your own need for greater insurance planning.)

MANILA - Mention retirement and most of us see hours spent relaxing and enjoying the rewards of our life’s work. Under the most ideal circumstances, you would have saved enough to tide you through this phase of your life. By then, you would have less cares with the children grown and the house paid for and with life becoming become much, much easier.

Unfortunately, your life plans do not always pan out and there is the real threat that despite working during all of your productive years, you can still reach retirement with less than what you need in your bank account.

Even if you have stashed away what you think are sizable funds to see you through, remember that you would probably live for 20 or so years after retirement—long enough for your savings to run out.

Considering that old age is also the time when most of us cope with health concerns, being cash strapped at this time could be particularly difficult. Unfortunately, it is a harsh reality for many senior citizens.

How much you would need to protect you through your retirement years depends largely on a number of factors, such as your lifestyle, income, and expectations, so there is no one right number for everyone. You can, however, take steps to protect yourself financially when you reach your retirement years.

By building up passive income sources, you will be able to generate an income stream to protect you in your senior years. Although there are no hard and fast rules on how much you should have in passive income sources to cover your needs, you would want to be able to cover 70-80 percent of your current expenses from both passive income sources and your retirement savings.

To know how much you should be able to cover, estimate how much you expect to have versus how much you expect to spend. The difference is the amount that your passive income sources and retirement funds should be able to cover.

Let’s look at the numbers. If you’re a 30-year-old earning P50,000 monthly today, plan to retire at age 60 and expect to live up to age 85, you will need to have around P26 million to cover your financial needs. That’s because your P600,000 annual income today will just be worth around P330,000 30 years from now due to inflation (which we conservatively computed at 2 percent per year).

To have the same purchasing power that you currently have 30 years from now, you would need to have at least P1.1 million a year. Multiply that by 25 years, and that’s P26 million.

Don’t be discouraged if the number you come up with turns out to be huge. It should simply serve as a wake-up call for you to think about your retirement years. Simply put, protecting yourself in your senior years means taking appropriate measures early enough, when retirement is still a distant reality.

Here are five ways that you can protect yourself for your sunset years:

1. Start building your nest egg early.

You need to have time to build up your nest egg. The earlier you start, the better for you. Your returns build up over the years, allowing you to have enough to cover your later years. Savings accumulated over the years can grow substantially through capital gains or through the magic of compounding, or both. If you are starting retirement planning late, it simply means that you need to adjust your investment strategy so that you can have better yields, allowing you to make up for lost time. Ideally, you should be putting 10-15 percent of your income into your retirement fund.

2. Invest in a good mix of assets.

The last thing you would like to do is to put your life savings in one asset which suddenly loses its value, wiping out your retirement funds. Allocate your investments across various funds exposed to different kinds of risks—traditional safe havens like money market placements and government bonds, as well as more aggressive and high yielding instruments such as equities and foreign exchange. You may also want to put some money in real estate, art, and businesses.

3. Cover all bases.

Do remember to protect yourself against life’s many other risks which may force you to dip into your retirement savings. For instance, you may wish to purchase health insurance to protect yourself from the financial challenges that health problems can bring. Also look into getting accident or disability insurance, and if needed, fire insurance for your home and auto insurance for your vehicle.

4. Review your retirement plan from time to time.

Depending on your life changes, your retirement needs may grow. It is therefore important to check if you need to recalibrate your pension payments to reflect your needs more accurately. Retirement planning is a lifelong process of constant realignments to ensure that you are adequately protected in your later years.

5. Consult a financial professional.

If you have no time to understand all the different investment choices available to you, one short cut is to put money in various mutual funds or Unitary Investment Trust Funds (UITFs), which are professionally managed, pooled funds invested in various instruments to meet different investment objectives and profiles. To ensure that you are saving enough and investing according to your financial goals, do not hesitate to check with a financial professional, who can guide you through your investment decisions.

With careful planning and discipline, you can protect your future and ensure that your retirement years are blissful and stress-free.

source: www.abs-cbnnews.com