TAKE CHARGE OF YOUR MONEY

Coping with a strong peso

INQUIRER.net
First Posted 09:28am (Mla time) 01/15/2008

Question: My husband's $1,000 used to give us P55,000; now it only amounts to P41,000. I’m having difficulty making ends meet and paying all our bills. How can I wisely handle this remittance in spite of its dwindling value? – Catherine C.

Aswer: The peso is stronger than ever and remains on the upswing. While the US dollar continues to weaken due to developments in the US subprime mortgage market, the Philippine peso is riding the waves, doing much better than other Asian currencies.

Remittances from OFWs have been coming in strong, thus there is much supply of dollars in the Philippines. This makes the peso appreciate even more. While this is good news for importers (since goods they are importing from other countries are now cheaper), it is bad news for exporters, since they are paid in foreign currency for the goods they export.

OFW families are also greatly affected, as you have experienced. Whereas before, the US dollar fetched a higher peso value, now it’s much lower than before.

Analysts say the Philippine peso will remain strong this year. Given that scenario, it will be wise to take steps to cope with the effects of a strong peso.

Below are simple ways you can adopt to deal with this development:

1. Tighten your belts. That means cut costs whenever possible. Look at your lifestyle and see where you can minimize your expenses. If you have two phones, landline or mobile, try to live on one. If you use the air conditioner every night in all rooms, try sleeping in just one room to save on electricity. If you have two cars but can live on one, do so. Other ways to live simply: watch DVDs at home instead of going to the movie house, eat more at home than in restaurants, walk, carpool or take public transport rather than drive all the time.

It’s not really about depriving yourself, but maximizing the use of your resources to drive down expenses.

2. Budget wisely. You’ve probably heard it all before about how a budget can help one manage finances well. It really does. So make a list of your expected money inflow and money outflow (expenses) and exert all efforts not to go over your budget.

3. Prioritize what’s needed. Children’s tuition, for instance, is more important than taking a vacation abroad. Make sure you pay off important bills to meet your family’s needs. Remember: always put needs first before wants.

4. Do not go into debt. If you can, don’t borrow money just to maintain your previous lifestyle. You will just dig a deep hole for you as it may be difficult to pay off your debts in the long run. There are good debts for sure – a housing loan, for instance, or a credit facility to run your business – but make sure the debts will yield a better benefit for you in the future.

5. Find ways to increase your income. If you have been solely relying on your husband’s remittance all these time, then it may be time for you to do something. It doesn’t mean you have to go abroad to work too. You can start a business right in your home by offering a product you can do yourself (such as cakes made to order) or a service you can offer (such as tutoring or graphic design). Or you may want to apply for a part-time or full-time job nearby. The income you add to your family’s coffers will help you and your family greatly.

6. Save for a rainy day. If you haven’t been diligently saving over the years, start doing so now. Aim to have an emergency fund you can dip into when situations like job loss and illness happen. A good start is saving 10 percent of your husband’s remittance every month. Don’t touch this amount unless necessary.

7. Talk to your husband. Keep communication lines open and inform your husband of what’s happening. This will help him gauge if it’s time to increase his remittance or seek a better-paying job.

We hope these tips will help you stretch your budget and manage your cash flow better. Remember: Good financial planning is not about having enough money to spend on your needs (and a few wants) – it's about making do with what you have and the discipline to keep doing it. Good luck!