Being broke is the worst situation that you’ll end up in if you manage your money the wrong way.
Jumping into decisions without consultation often leads to disaster and poor knowledge of what your putting yourself into. It is like eating food in a dark room with no light. You keep on swallowing the food, but you do not know if it is still food that you are eating.
I grew up in a family of seafarers and that is the reason why I became a seafarer as well. My father’s friends often visits our house and talk about their family and what they have accomplished.
You will often hear the word “Business, Investment, and Savings” in their discussion. These are the common terms that seafarers has in mind, but very few have them.
5 years ago, the franchising business was a big boom in the Philippines. Food carts and other small start-up business are everywhere. Seafarers become targets of marketing agents due to their high income capacity. They started their micro-business venture and end up being a slave to their business.
Their time is consumed by their business and they think that their living their dream. After 3 years, the food cart market is already saturated. Too many product of the same type of food is being offered. Lowering the prices was the option to sell. Income become less than before.
Another big hype is the idea of investing property on land. Buying land is never an investment. Yes, it gains value not because you turned it to something different, but because of inflation. The inflation rate on the year that you bought is higher now that you are selling it.
Aside from that, you loose money yearly due to payment of tax. You can only earn from the land if someone will rent it from you, turn it to something profitable, or lie to someone to sell it to a hefty price.
Savings is more viable than the two. It is less risky and you can manage it remotely.
Let’s face it, our work limits our capability to handle our business remotely due to the fact that we are always on the ship, on different location, limited communication, and a few people to trust our business with.
I’ve seen countless times where seafarers are being rob by their own family and relatives of money that are supposed to be for their business. They end up starting the business, seen it break even, and end up broke and closed the business.
Being broke has a good effect
The experience of starting a business and seeing it prosper is good, but seeing it’s dropping down is not good.
It is ok to risk your money in business before you reach the age of 30 and with less responsibility. But if you are already in your 30’s and married with kids, you have to consider a lot of factors before risking your money to uncertain investments.
I’m not saying that you shy away to opportunities to invest, but rather make a research and learn more of the business that you are planning to invest.
If you have experienced being broke before, learn from it. You may have noticed how it feels like to see your savings account balance having a few peso left and deducted by tax.
You may have also ask for cash advance from your agency and used up your money paying bills and loans. It is a terrible experience a seafarer can feel, but you will learn a lot from it.
You will start to realize that if you have a financial plan before, you could have a better savings and less problem on your loans and business venture.
Don’t do the same mistake that others did.
I always emphasize that you start having your emergency fund. It is a better system of keeping yourself out of debt.
Some people will say that they are already old to have one, but I always told them that debt and being broke doesn’t choose what age you are right now, so why limit yourself from having and keeping an emergency fund.
List down all of the items that you are paying (bills, mortgages, etc.) and make an annual projection so you will know your annual expenses. Compare it with your annual income and you will have an overview on how much you are paying annually and if your earning more than what your are paying.
Make a list of your “Asset and Liabilities”. Asset is anything that brings money to your pocket and Liabilities is anything that gets money out of your pocket. Be realistic writing your list and don’t hold back if you think that it belong to the Liability list.
Make a total of your Asset and compare it to the total of your Liability list. If your Liability list is more than your Asset list, you have to do something about it to avoid ending up being broke.
As I have said a while ago, take your time in making decisions when it comes to financial matters. Remember that it is your hard earned money you are spending, so spend it wisely.
What must you do to protect yourself
Maturity and age opened my eyes to the truth that we all have a choice whether we want to be broke or not. In the past years I have experienced different storms in my life where my faith and financial status was put to test.
I was lucky to meet someone who opened my eyes and thought me financial planning in the early stage of my career.
Remember not to rely on one source of income. Multiple source of income is not bad, as long as you know where you are investing it and how you are earning money, by means of interest.
You must change your attitude towards spending and buying stuff. If you have the extra money then its fine. But as long as you are in a tight budget, it is better to stick to the plan. “Pay your Debts and build your Emergency Fund.”
Do not spend more than what you earn. It is an old idea that I have heard from my grandparents that my parents also told me. But sometimes we tend to forget it because we thought that we are earning a lot now.
But it is better that the bigger your salary becomes, the bigger your chance to save money. We tend to change our lifestyle immediately after earning an increase of salary and because of that, our liabilities increase and later becomes a difficult problem to solve.
Always know what you have (savings) and your limit to spend. Keep away from credit cards and unnecessary loans. Keep a monthly budget to spend and stick with it.
I hope that I have shared enough information that you can consider and opened your eyes to possibilities.
Share your experience and your thoughts in the comments below and let us start a conversation.