I am sure many of you have heard that expression “Pay Yourself First” before. usually it refers to advice from financial guidance folks, admonishing you to put money into your savings account every month (or other payday) BEFORE you start paying your bills. And it’s darn good advice, IMO, no matter who it comes from. I’m a big believer in the principle and it has paid huge financial benefits for me living here in the Philippines.
Many will say, “Oh yeah, that’s good advice, but “I can’t”. I would counter to that statement that you are making a common mistake even most native English speakers make … being confused about the real definitions ns of “Can’t” versus “Won’t”, but let’s leave that argument for another day, shall we?
What I am talking about in this article is one way how you should mange your finances simply and securely if you choose to live here in the Philippines using income based in the USA (or wherever else your “home” country might be. Possible methods:
Use an ATM Card:
I’ve written before about the disadvantages of trying to live off your US income by using an ATM card to withdraw funds from your US bank account as needed here in the Philippines. Read more here: Don’t Try To Live Your Life On An ATM Card!. Let me say simply that you can and should have an ATM card for backup cash, but using the card as your only means of access to you money in the USA is NOT recommended.
Use Wire Transfer From Your US Bank
This method works (perhaps not for long). Again, you can always try this when you have no over means of access but the disadvantages are big, and many people don’t realize them.
- It may not work in 2014 even if you use this methods now. Many US banks are limiting or refusing to transfer from “retail” accounts to overseas banks. What works today may ‘go away” in 2014.
- The fees add up. And they are going to increase frequently as the USA imposes more and more reporting requirements on both US and foreign banks. Someone has to pay for all the forms the US treasury demands, and you can be sure that eventually, you, the sender, will pay.
- There is always a loss on the exchange rate, and many times I have seen people paying a true cost of as much as $30 to $40 a month in conversion losses, over and above what any per transaction costs. You will ALWAYS pay something for conversion, that is selling dollars to buy Pesos, but at least if you start with dollars in your hand you can control the rate and pick and chose the money changer who gives you the best rate. “Padala” or money transfer companies like Western Union, Xoom, Remit Home and dozens of others you will find on the internet have the same issues. Their per transfer fee may be small but you will wind up paying a real cost of $30 or $40 (or more) per month for the privilege of getting your money “sent”. Not long ago a friend “thought’ that she and her husband were paying on the order of $660 a year to “move” her husband’s US Social security monthly pension, but with an increase of the fees his US bank was charging, it turned out she was paying closer to $1200 a year … nearly $100 a month just to have the convenience of the money being sent in near-real-time.
In many ways this is the best solution. there Is often no fee involved at all and you typically with get exactly as many US dollars as would go into your US bank. I recommend using this method, when you can. There are two big stumbling blocks though:
- Many paying organizations will NOT do direct deposit to Philippine bans. Examples, US Social security will, but the US military DFAS (who pays military and military civil service annuities) will NOT. Not am option for us folks who get pensions via DFAS.
- Secondly, do you really want ALL your money coming to a Philippine bank? I’ve been here going on 8 years now, and I have no plans to move back to the USA, BUT, what if something forces you to? Have you any idea how long it would take, working from back in the USA, to get your Philippine bank to move money back to the USA for you? Hint. I don’t want to ever have to find out. YMMV.
The Simplest, Cheapest and Most secure Way of ALL — Write Yourself a Check:
About the third or fourth of every month, I “Write Myself a Check. Often times it is my only visit to the bank for a whole month. To me, it’s always satisfying to deposit a substantial check, even if it really is my money in the first place. There’s no fee from my US bank to write a check. There’s no fee from my Philippine bank to deposit a check, and no charge for the check itself. (except the few cents per check that they charge me for a book of checks.
Here’s what I do:
- I have my pensions (and income from other sources, like Google), deposited directly into my standard US credit union account.
- I write a check, payable to me, on that US account.
- I endorse the check for deposit only to my Philippine US dollar savings account here in the Philippines. (I use BDO, there are many other good banks here).
- I fill up a deposit ticket for my Philippine US dollars account, travel to my branch and hand over the check drawn on the US-based account, the deposit ticket and my passbook.
- In a few seconds the check is deposited in my Philippine account and my passbook is updated to show the deposit.
- If I need pesos for the month ahead, I also hand over a withdrawal ticket for my Philippine account and ask the bank teller to exchange them for Philippine pesos then and there.
- I’m now done until next month. What could be simpler?
The Infamous Holding Time
Now right away I can hear the murmuring out there in response to my description above. Let me paraphrase what so many of you are already thinking about.
When you deposit a US Dollar check into a Philippine bank, the bank will hold that money for various lengths of time, typically 20 or 25 “banking days” … in practical terms, a month.
But aside from the first month that I used this procedure, what the heck does the approximate one month holding time mean to me?
Answer is, typically nothing at all.
Every month I deposit a check, and every month, by the first of the following month, the check that I deposited last month has “matured”, or waited out its mandatory holding period, so it’s available to me instantly, in US dollars, or converted to Pesos.
So what did the waiting time actually mean to me? Not a darn thing.
I don’t like the Philippine banking holding procedures. I wish there was a way around them. But there is no way, unless you pay a lot every month in fees and conversion rate charges.
I don’t have hair. I sometimes wish I still had hair. But what can I do about not having it? Nothing. What does it cost me to be bald? Not a damn thing.
Don’t spend your life getting mad about things you can’t control … that’s my free advice for today. Just accept the things you can’t change in your life and be happy. Works for me.
Now What About Those Who “Can’t” Live For a Month before Their Check “Matures”?
Here’s some more free advice. If you are not managing your personal finances so that you have AT LEAST a month’s “cushion” … money to live on while that check clears, you have no business at all moving to or trying to live here in the Philippines. Stay in the USA, where there are dozens of ‘safety net” type programs to protect the poor money managers from their own reckless money habits.
Sorry to call a spade a spade, but you owe it to yourself to live your life based on reality, rather than how you “dream” it should be. The Philippines is a great place to live …if you aren’t broke.
The reason you don’t have savings is not that you “Can’t”, the reason is you “Won’t”. Two different words that most Americans think mean the same. They do not.
Learn the difference., and then live well, while you “Write Your Own Paycheck” every month. It feels good.