A couple of weeks ago, I had a conversation with our landlord here in Dubai and found out that his finances are in tatters. Mired in debt with no clear solution. He even owes money to relatives, friends and some people in church. I’m not talking about 5 digits of debt; he owes the bank and other people a total of AED 365K (PHP 5.152 Million)! That’s a staggering amount especially for someone whose income is not even enough to cover the monthly payments.
I first sensed that he was having money issues when he told me about the various networking and MLM schemes he has been getting himself into just to make money. During our conversation, I asked him how his problems started. His financial woes began when he tried venturing into Forex Trading. Apparently, he doesn’t have any sort of training or even the basics of how Forex Trading works. He just dove right into, and as one would expect- he lost money…lots of it! Forex Trading isn’t like Trading equities or paper assets. There’s no such thing as Paper Loss. Once you lose money in Forex it’s gone! You can even lose your entire portfolio. I didn’t ask how much he actually lost, but he said he lost big!
After losing a lot of money in Forex Trading, he tried to borrow some money to cover for some of his expenses. Next thing he did was go into various MLM and networking businesses hoping to quickly recoup his losses from his previous mistakes, but without really understanding what he was getting himself into, he got scammed. Big time! While all this was happening, I also noticed that they had a penchant for spending beyond their means which can be seen from the family photos posted on the fridge, and the boxes of unused stuff at home that they bought online.
One financial mistake followed another. He also tried going into Stock Market Trading, hoping to make a quick buck; only to lose even more money, again because he doesn’t have the proper knowledge, skills or training. He can’t even read charts! He just buys based on what’s being hyped on Facebook without really understanding why the stock moved up or down. He lost so much money to the point that his wife forbid him from putting more money in the stock market. Last year, he told me that he also started going into crypto-currency trading. I was shocked at his boldness. I warned him against it and told him to stop before he loses more money. I’m not sure if he took my advice though.
My landlord used to own a house in the Philippines too. He sold that house, but instead of using the proceeds to pay for his outstanding liabilities, he used the money to buy another house. This was a very costly mistake and he admitted it. He deeply regretted that decision and said that if only he used the proceeds to pay for his loans, his problems would have been solved already.
He confessed, that he and his wife are already physically, mentally and emotionally drained because of their financial situation. They have a 9 year old daughter, he’s not getting any younger at 50 years of age, negative cashflow with a 6-digit debt in a foreign country where defaulting on a loan results in incarceration. I wish there was something I could do for him, other than praying that God gives him the financial provision that he needs because with his current Debt-to-Burden ratio and credit score, no financial institution is willing to loan him any money. As of this writing, just to raise any amount of money to pay some of his debts he has sold a lot of things like an unused X-Box with Pedal and Steering Wheel accessory, a foot massager, some toys, even their bed-frame!
“If you buy things you do not need, soon you will have to sell things you need.”- Warren Buffet
Sadly, he is not the only one in this kind of dilemma. Many Filipinos both at home and in other countries have the same problem. Trapped in a never ending cycle of debt and negative cashflow month after month, year after year with no end in sight. The main cause of his problem is mainly the lack of financial education and knowledge in investing. He wanted to make money by investing in different instruments, but because he wasn’t equipped with the right knowledge or information, instead of making money he lost a lot more than he ever imagined.
This is why it’s really imperative that we should all invest in knowledge first before investing our money. Investing in financial education helps to build the right foundation; without which our finances will surely crumble because of one too many uninformed financial decisions just like what happened to my landlord. Financial Seminars may cost you anywhere between AED 50-200 depending on the topics covered, but that is a very small price to pay compared to the money you’ll lose to scams and wrong financial decisions; and the potential gains you can make when you equip yourself with the proper knowledge and understanding. Investing without proper knowledge is like going to battle without the right equipment. It’s financial suicide! Investing is a great way to build your wealth, but only if you know what you’re doing and when you have the proper financial foundation.
If you’re an OFW here in the UAE, don’t miss out on this year’s biggest event in Financial Literacy. Experts in Personal Finance and Investing such as J. Randell Tiongson, Salve Duplito and Rex Mendoza will be sharing their expertise to Filipinos on how to manage their finances and pick the right investments. Also joining them will be Dr. Alvin Ang, Economics Professor at the Ateneo de Manila University, to share his knowledge on Macroeconomics and how these can affect your investment.
If you’re interested, click here to register.
If you’re serious about building your financial future, not just for you but for your loved ones; take financial literacy and education seriously. Here in the UAE alone there are a lot of free events all year round, and some will only cost you no more than AED 50-100.
Don’t let my landlord’s story be yours. Learn from it. Learn from the experts, and more importantly, apply the knowledge that you’ve learned because more than just knowing, your execution counts. It’s what you do with the knowledge you have that will create results.
Wisdom is knowing what to do next, Virtue is doing it.- David Starr Jordan