Working in Dubai is a dream for many OFWs. This modern and rich city provides countless job opportunities and lucrative salaries. If given the chance to work here, you need to have a financial plan to make the most of your blessings.
One such plan is to have an emergency fund. This article focuses on how you can develop such a fund and make a habit of realizing it every time the monthly wage arrives.
Disclaimer: The information posted here is based on the experience shared by an OFW in the video below. Any of these information may change without prior notice. Please let this post serve as a guide only.
Steps on Setting Up an Emergency Fund for OFWs
Where can we get money during emergency? When should we save money for emergency? These are just some of the questions tackled by a YouTube video of two OFWs in UAE through the channel Mae x Mae.
Importance of emergency fund
So why is having an emergency fund important? According to the video, it serves as an emergency cushion.
During these trying times, having a stable job is not yet fully assured. When you lose your job, what will you spend for your daily expenses?
If you have an emergency fund, you have some money to rely on during the months when you have no cash flow.
You don’t have to use credit cards or apply for loans that have interests.
How to start an emergency fund
Ideally, you should start your emergency fund right away; during your first salary.
However, you need to plan first. You have to consider the following details when planning for an emergency fund:
- Figure out your expenses per month – these include your basic necessities, bills, etc.
- Have a target amount to save for the emergency fund – at least 3 months of your expenses.
- For emphasis, it’s not 3 months of your salary, but 3 months of your expenses.
- After doing 3 months, you can extend that to 6 months or even more.
While these tips are good, in reality, your target emergency fund value really depends on your financial status.
Those who don’t really have much to spend and have adequate salary can start as high a value as 6 months of expenses.
Tips on how to save for an emergency fund
Set a target amount
First, you need to know how much you are going to save for emergency fund. You will only know this amount if you know your monthly expenses.
By having a goal, you will have a direction with which to pursue. Also, if you see this target becoming fulfilled, it will motivate you to complete it and perhaps even increase the target.
Have a time line
Let’s say your goal is 3 months of expenses for your emergency fund.
It doesn’t necessarily mean that you have to complete this target amount in the next 3 months. You can say, for example, that you will target this amount in one year.
For example, if you earn 10,000 pesos monthly, and 6,000 pesos goes to your monthly expenses, then you can have a target of 6,000 x 3 = 18,000 pesos for your emergency fund.
And if you plan to complete that emergency fund target in one year, then you will be setting aside 1,500 pesos per month for that goal.
Once your salary arrives, automatically redirect that money for your emergency fund.
It is better if you have multiple streams of income. Don’t rely on your salary alone.
Here are some things you can do as a sideline job:
- Bake and cook – If you have the skills, do it, and sell and promote your goodies online.
- Sell pre-loved items online
- Engage in online freelance work.
- And so much more.
If you are resourceful, it is easier to add more to your emergency fund. Plus, you get to be creative and innovative.
Having an emergency fund means building your character to develop a habit of saving money, and staying committed to the long term goal.
It is easy to get distracted when you have all that money and there’s something that you want to purchase so much.
Just know that not all events are considered “emergencies.” You need to define what an emergency is.
An emergency can be losing your job, having a family member getting sick, etc. The important thing is that you focus on your goal and be careful and persistent.
As OFWs, it is really important that we know how to save for emergencies. During the lock down, we have an opportunity to witness first-hand the value of having extra money when we can’t go out to work. We shouldn’t wait for the next global crisis to be prepared.