In the USA, it’s pretty much OK to be broke. Oh, yeah, some of you are going to say, “You don’t understand, it really sucks to be poor!”
And yes, I will agree with you on that. But I will also say,there are darn few people in the USA who really have any idea of what it means to be _really_ poor.
The very fact that you are sitting there reading this on a computer screen is proof that you ain’t that poor .. even if you are reading it in your public library on their computer.
You won’t find little American niceties like free clinics, food stamps, school lunch programs, school buses, utility programs that keep your lights on even when you can’t pay your bill, Medicare, Medicaid and especially, one of the most amazing things the US has, 99 weeks of unemployment insurance … cash just flowing in while you sit around wishing the Democrats will get you a job, or that those bums get thrown out and the kind-hearted Republicans will get you a job. Or, you just “wish”.
It’s lot different here in the Philippines. Those of you who come here on search phrases like “Can I live in the Philippines for $770 a month” and other such queries had better do a little realistic thinking.
Eleven if you have an income that you think will be steady and sufficient to your needs here in the Philippines … or back there in the USA while you make plans for coming to the Philip[pines in the future ... I'm going to give you some more of my famous, straight from the shoulder, no BS, Philly advice.
Put on your glasses if you need them so you can read the fine print below:
YOU NEED AN EMERGENCY FUND
Yes, you. Not someone else reading this blog, but you ... the one whose face you last saw in the bathroom mirror when you brushed your teeth.
Now many of you are going to agree with me on this. But also, many of you are going to try to weasel out with the excuse of, "But, Philly, don't you see, things are tough right now, I just can't mange to do any saving at the moment."
I guess what got me going on this was one such message I received on this subject just recently. Know what caught my attention? At the bottom of the tale of woe, after all the litany of excuses and rambling reasons why things were so tough for this fellow and his family, you know what the email ended with? (maybe you can guess)
Sent From My iPad!
Folks, as I said, the definition and actual experience of "being poor" can vary greatly from person to person. In Internet terms we say, YMMV. But one thing is for sure. If you are reading this on your iPad, you CAN save money for an emergency fund. Your real problem is, you just can't figure out the difference between CAN'T and WON'T.
The establishment of an emergency fund is one of the first recommendations you’ll hear from any recognized personal finance “expert”. While you will hear a range of opinions on how much you should stash away for a rainy day fund, the underlying reason for the recommendation is the same.
An emergency fund, or a rainy day fund, is savings you have accumulated to protect yourself and your family from a catastrophe such as losing your job or having to unexpectedly face large expenses such as medical bills. It is an attempt to move away from being one pay check from broke.
How much you should save for a rainy day is debatable and mostly dependent on your own risk appetite. But for the most part you will hear people say that you should have at least six months worth of your expenses saved in an emergency fund.
Six months is a good place to start, and in my opinion should be increased in tough economic times when corporations are downsizing. You can always release some of the cash from your emergency fund when things start to look hunky dory again.
But I Can't Save Six Months Worth of Expenses.
The answer to that, by and large, is bullshit! In almost any circumstances conceivable, you CAN. The operative factor is whether or not you WILL.
I didn't say it would be easy, and I didn't say it would be fast. But it absolutely CAN be done if you have the will to do so.
One statistic I read not long ago really disturbed me. The source claimed that less than 10% of Americans can actually put there hands on $2,000 USD, in cash ... at least without going and getting a cash advance on a credit card or, even worse, buying into some crappy pay day loan scheme.
In most cases I am pretty sure that $2,000 is not enough for a six-month "cushion" for most of you. In many cases, that wouldn't even be enough for one month, let alone six.
But that fact doesn't change the other fact that you ought to take this up as a goal .. a real New Year's resolution, if you will.
And something else to consider. If you are very interested in moving to the Philippines (as, of course, most of you reading this are), having a "cash cushion" is even more important.
Not only will you spend money to move here and get set up ... more than you think, and especially more than your girlfriend says you will need ... no matter how thrifty you are, life is life and, as they say, "Shit Happens".
But why six months? There is really no good reason except one financial expert heard another say it and repeated it and soon the message spread across the industry. Realistically, this number should be whatever it needs to be to give you the comfort and peace of mind you need.
OK, I can hear some of you saying, but what about retirement. Don't those same experts all say I have to save for retirement as well.
Yep, they do, and they are certainly not wrong there.
So what if I told you there was a vehicle with which you could do both?
Think About a Roth IRA
Paying Taxes Now Might Be Cheaper
I got into learning about Roth IRA’s a few months ago when I was having a conversation with my son about savings in general, and in particular about saving for his annual taxes and homeowner’s insurance bills.
You see he recently paid off his home, 100%, so there is now no bank or mortgage company to “impound” or collect his property tax payments and annual homeowners’ insurance payments.
My son was chatting with me about different types of specialized savings accounts so he could just keep putting savings in them every month and then withdraw insurance or property tax payments when required.
It’s a good idea, but many savings accounts are paying very low rates … any savings are better than no savings, but at the rates many banks are offering it hardly seems worth the while.
Enter The Roth IRA
Now most of you know that a standard IRA. although an excellent vehicle for funding retirement, has a very difficult “gotcha’ involved for those under 59 1/2 years of age. You can take out money from the IRA any time you want to, but you’ll have to pay a non-trivial penalty, as well as taxes at your current rate. Needless to say, getting money out of your conventional IRA before retirement age is a very unattractive option.
But the Roth IRA operates sort of in reverse to the conventional IRA. Money that you put into your Roth IRA is taxed .. just as the money you put into a savings account, money fund account or stock market broker’s plan would be.
This make it less attractive at the front end.
But it becomes infinitely m0re attractive at the ‘back end”. reason? You can take out any amount of the money you have contributed to the Roth IRA at any time, at any age, without penalty.
Just look at a real world example.
Joe wants to save money for his retirement, so he puts $200 a month into his traditional IRA. $2400 a year. Joe wants to build his emergency fund, so he scrapes and scrimps and finagles and manages to find another $100 a month to put into an Emergency Fund savings account. $1200 a year.
So end of the year he takes out $1,000 from the Emergency funds becuase his taxes are due. No problem, it’s for a good cause.
But on his way home from the bank he hits a patch of black ice … winter, yeah I remember that crap … distantly … and hits curb and cuts two ties and mangles two wheels. Call it $500 in damages to get the car back on the road after all is said and done.
All the money from the emergency fund and then $300 more on the credit cards, which he ha been trying so hard to pay down.
Some days it seems like you just can’t get ahead.
Had Joe been putting $300 a month into a Roth IRA, he’d have $3600 in there, plus whatever interest it earned during the year. He can withdraw, without penalty, $1500 and he has no additional credit card debt,and still has $2100 plus earnings in his Roth IRA to start 2013 with.
Note: You do have to pay tax and penalties on money you withdraw over and above the post-tax contributions you have made, but in Joe’s case he’d be able to take out the full amount of his contributions, $3500, if he really felt the need. As always, this is my opinion only, get qualified advice from a qualified professional before charting your own course.
So, what do you think? Anyone out there thought of using a Roth IRA for their Emergency Fund while they wait to build up enough cash to move and start living in the Philippines?
Related posts:
- Philippine Cost Of Living — Can I Live in the Philippines on $1300 a Month?
- Philippine Living — Bursting the Bubble
- Another Philippine Pony Found — True Life Living In The Philippines
- Things To Consider Aside From Philippine Cost Of Living
- Living in the Philippines on $770 a Month — Part 2
I am somewhat in a crossroad over this. I used to have an emergency fund which lasted me six months—but the goal was going for 1 year. Well, something did happen, and all those funds went dry +loans to boot… so now, even though, I would love to start bringing this back up again…. I keep thinking what if I should just dump it all on my loans so I don’t have to pay them interests… of course, I won’t see the instant result of having money in the bank.. but in the long run, it saves me money from the interest rates…..
Hello, Jojie, thanks for writing in. Indeed, I see the predicament. There’s about as many different strategies to deal with it than there are people giving advice. There is no _one_ single way to solve this situation thta I know of.
But I will tell you what worked for me. I used what some call the “snowball” method. I made only the smallest possible payments on all my other debts and threw every bit of spare money I could at the debt with the highest interest rate. Then, when that was paid, I started on the loan with the next highest interest rate until it was paid. I paid off debts after my divorce that I thought would take 10 years to pay in only two years using this method.
You can’t save much doing it this way, but, to my mind, paying down the debt is the number one thing to do, then savings should follow. Godspeed.
My biggest concern about emergencies has to do with hospitalization. If I am ill or injured who has the ability to get to my emergency fund and pay the hospital so I will receive treament? I haven’t worked this out yet.
Hi David, thanks for writing in.
Yes indeed this is an issue. I see this a lot, especially with older foreigners who come here on their own. Many do not have a plan to deal with things if they should become disabled or incapacitated, hospitalized, etc. I don’t have any good solutions to recommend.
Something else to consider is that in the US, all people worry about in hospitalization is getting the bill paid. But in the Philippines, you are really expected to have a “bantay” … watcher … with you in the hospital. When you live alone, this poses a real problem.
David, I was in a very serious motorbike accident last year and, although I had my insurance card with me, the hospital insisted on a 30k deposit or I would not have been admitted and would have had to go to the public hospital. Good likelihood I would have died. I had a US credit (debit) card and they took that no problem. If you have a valid card with a high enough credit limit (or balance) you should be ok. You still need a caretaker or someone you can trust if you are in that unfortunate situation. My gf (bless her) filled that role.
Hi Mike, thanks for contributing. May I ask what “insurance card” you were trying to use after your accident? This is a big problem I note all the time with folks wanting to move here to live in the Philippines. They keep asking about finding medicla care like we have in the USA, where you drop a card on the counter and then get treatment.
It doesn’t work that way here, as you found out. In my case, although I am technically covered by TRICARE, a DoD program for retired military folks, I know that anything I might get from that will come long after the fact.
My personal plan is three relatively high credit limit US credit cards and my wife has her own card on each account as well. It’s the only way to be halfway sure of getting care when you need it. I like living here, still, but a low-cost “paradise” as so many people like to characterize the Philippines … well, it ain’t.
I have Blue Cross Philippines. I was told the hospital would accept the card and bill the insurance directly in case of emergency but it just ain’t so. Eventually, they did bill for most of it but I had to come up with almost 500k on the day of discharge for the 6 doctors’ “professional fees”, that had to be paid by credit card and reimbursed. I have good things to say about BC though, almost everything I paid out was reimbursed within 15 business days; they even did all the paperwork, I just handed them receipts. Total cost for the hospital, surgery, and aftercare was about 1.4 million. Would have been in the hundreds of thousands of dollars in the states. And, as you said, you MUST have a caregiver, the nurses will only do so much. I was very very lucky, I had a complete recovery. I’ll never ride another motorbike here – ever.
Hi Mike. thanks for the info on that. I have never heard of a case where Blue cross Philippines did not honor their commitment, but as you point out, having even a ‘name brand’ insurance plan here is NOT the same as having a “just show your card” plan in the USA. You are going to need to have cash or acceptable credit in advance, almost invariably.
Also, thanks for the motorcycle comment. I get queries from time to time about the advisability of motorcycle riding here, and when I give a negative view, many times “experienced” riders from the US will start trying to ‘baffle me with bullshit” statistics and tell me how experienced, safe, skilled, etc. they are.
I still don’t recommend it. You can wind up under a bus so easily, and if you live, you can then find yourself held responsible for the scratches you made on the bus as it cut you off and knocked you down. The Philippines is a good place _not_ to ride, in my experience.
Mike,
Can you tell me approximately what your annual premium is for Blue Cross. I was looking into getting it when i retire there. Thanks so much for any info you can give me.
Hello Papaduck, Mike is certainly free to respond, but I would suggest you go direct to the source:
http://www.bluecross.com.ph/
and find out what plans are available and what you might have to pay … Blue Cross rates vary widely, especially dependent upon age and the locations you want coverage (ie, coverage in both the Philippines and the US typically costs five times as much as Philippine-only coverage.
You also might want to look at some other providers, here’s a start:
http://philfaqs.com/live-there/medical/health-insurance-quotes-philippines/
In particular, MedEx (ad on that page) seems to me to provide one heck of alot more coverage for expats thna anything you can get from Blue Cross Philippines (but I don’t use either one).
I have the Blue Royale plan A, I elected the core benefits only, no outpatient or dental because the costs are pretty cheap for that here. I wanted a policy that would cover a catastrophic incident which is exactly what happened a month after I bought the policy. Annual cost was $1358, I got the 25% discount for electing no coverage in the US. I fall in the 61-65 age bracket. The premium is paid in dollars, not pesos.
@ Mike “Total cost for the hospital, surgery, and aftercare was about 1.4 million. Would have been in the hundreds of thousands of dollars in the states.”
Are you estimating that P1.4 mil before/after insurance and the same with the quote regarding the price in the US. At the end of the day what matters is what comes out of your pocket. (Not including the insurance premiums.)
Dave, that was a ballpark estimate that the insurance company quoted of the total expenses including 90 days of aftercare doctor’s visits and prescriptions. I was mistaken, they said it was in the neighborhood of 1.3 million pesos or about $30k USD. I think that estimate was on the high side, I haven’t seen the total bill. They paid for everything excluding some items like toilet paper that they don’t reimburse. I don’t know what 23 days in a private suite, including 3 CT scans and surgery to remove a ruptured and infected spleen would cost in the US, I’m guessing it would be in the hundred of thousands of dollars but there are a lot of factors that would go into determining that. After reimbursement very little came out of my pocket, probably less then 5,000 pesos.
I don’t know how many of your readers know this but the onus of getting blood and platelets for transfusions is on the patient. If the hospital does not have your blood type it is the responsibility of the patient and his family/caregiver to get it any way possible, the hospital will not help and it can really be a nightmare. That’s quite a big difference to what it is in the west. I wish I knew all of this before I went through it. The important thing is they saved my life and I get a 2nd chance. I’m very grateful for that.
Actually I think the question was from PhilC.
Very good point about the blood/platelets issue. Same issues will happen over even routine drugs, medical supplies like colostomy bags, insulin testing strips, etc. You haven’t lived until you’ve been sent off in the middle of the night in Manila to search for open drug stores which actually have medicines in stock.
The differences in hospital care are so much more than the typical facile price comparisons. It’s definitely not an apples to apples thing. That’s a major reason I have drifted away from my frequent and detailed cost breakdowns. As soon as you post a prioce you will get comments from a., those who know where you can get it cheaper, b. those who wnat to argue Philippine/US similarities/differences and c., those who want to critizes over what you pay versus what they pay.
To me it isn’t worth it. I pay what I pay, things cost what they cost, but for sure, there is no way to compare being hospitalized in the US versus being hospitalized in the Philippines.
Really? Toilet paper? You were in a hospital that furnished toilet paper?
They “furnished” and then charged for it. If you need a bedpan, you buy it – 350p. I’m sure they all have different policies, my experience was at Chong Hua in Cebu City but YMMV as they say.
wife…there loyal good and only wantr love and care
You are right on the money with this one,,,lol.
BTW I once lived with all of my possesions and my large dog in a MGB (not one of those plush new MGBs one that I bought at a salvage auction as a recovered theft for $275) and at another time after an industrial accident I lived on $242 per month for 3 years. So yes I have been poor,,, really poor.
Well James, I know you do have some experience in Asia. but in the Philippines, the MGB would have been cut to pieces and hauled to the scrap dealer as you slept, and the dog would have been killed and eaten very early in the game as well. A large dog could feed a couple families for a week.
And $242 a month is more than P10,000 a month at today’s rate … there are about 80,000,000 people living here in the Philippines who would consider that a small fortune … many of them may never see that income their entire life.
I still maintain that most Americans have _no_ concept of being actually poor. Last year I watched a US documentary about a nurse who had organized and run a free medical clinic in Kentucky, IIRC. She was commenting on how bad the US financial crisis/jobless rate had impacted the clinic. They were short on funds and actually had to close several days a week. The nurse/ciinic director’s comment that got to me?
“It’s so sad to see the parking lot empty now on the days we are closed.” My wife and I both marveled at the concept of poor people having cars. There are a lot of people here in the Philippines that would consider having a car a concept akin to having your own personal business jet … the stuff day dreams are made of.
Everything is relative, I guess. I will say this … living here in the Philippines and seeing the grinding poverty, day in and day out, is wearing on a person. There’s so little that can be done. I’ve thought more than once of going back to a land where even poor people have cars … even if the car is only a junker used as living quarters.
Dave:
As you know with what happened with us last year, I had an emergency fund of 6 months, and as it turned out, it was a good thing that I did… Though now I’m working on replacing it.
And, as you state, I know that most people in the USA, no matter how “poor”, haven’t got the slightest clue as to what real poverty is. Tomorrow I head down to Tondo again for a meeting… It wouldn’t take very long there for most people to realize just how good they have it.
Amen to that, John. Amen.