Making the Right Choice – Car First or Property First? A real estate negotiator bought a new sports car and had the engine revamped so that it would go even faster. I asked him why he needed a car that goes 150 m.p.h.? He chuckled and replied, “I advertise this one house as being 5 minutes from city centre and I don’t want to lie!” How do you decide between a car or property first? As I was preparing for this article, I came across a few one–liners that was quite funny yet true. 1. The dream of the older generation was to pay off a mortgage. The dream of todays young families is to get one. 2. There is no longer a need for the neutron bomb. We already have something that destroys people and leaves buildings intact. Its called a mortgage. 3. If you think no one cares youre alive, miss a couple of house payments. As I engage with many Y generationwho just embarked on their career they seem to face this dilemma. Being at the same position previously I can relate immediately to them and share my pitfalls &observation: 1. Cars It is common knowledge we do not have the best transport system as compare to most countries and malaysians hardly take any public transport due to limited connectivity. In this case, most of us are “forced” to purchase a car in order for us to “Survive”. However I would like to highlight that it is not compulsory that you must buy “New” cars for your survival. To make a point of my own mistake, me and my best friend (clement) came to the workforce at the same time. We both bought a proton satria as our first car at the age of 22 yrs old. I bought mine at RM48K (Brand New) while clement bought his second hand at RM25K. I took a loan for 9 years while he took a loan of 5 years. Needless to say who lose more money due to depreciation and who is more prudent with money. Clement manage to invest in more properties then me during the early stages of our lives because he has more disposable income & was able to capitalize on more opportunities then myself. EK: Getting a second hand car might dent your ego but it is better then having big ego with empty pockets. 2. Property Without prejudice, I notice many of my peers & friends who purchased their first property would spend incredible amount of money to renovate & decorate it. While I am happy for them in owning a home, I subscribe to the idea from Robert Kiyosaki which states that a property can only be deemed as an asset if it puts money into your bank account. In this case, your home is not an asset. Most people who have spend heavily in their home renovation would be paying hefty monthly installments which would limit their ability to invest in a 2nd home for investment / passive income purposes. The idea of renting first before buying is something many in Klang Valley is subscribing to. It makes no sense to own a property that forces you to pay RM3500 monthly installment when you can rent it at RM2000. The savings from renting would allow you to build up a cash pile for you to invest in a passive generating property while you actively increase your current income. EK:“The ability to discipline yourself to delay gratification in the short term in order to enjoy greater rewards in the long term, is the indispensable prerequisite for success.” ― Brian Tracy 3. Delayed Gratification He can’t be a millionaire! Peter looks so ordinary! He only owns a nice but second-hand Nissan and lives in a modest place. How do you define a millionaire? Someone who has a big car and house? Being one simply means that if you had to pay off ALL your debts, you would still have RM1mil in assets (savings, fixed deposits, managed funds, stocks or properties). Some characteristics we can learn from self made millionaires: 1. He is only mildly impressed when you show off your Ferrari or your penthouse. He does not care what you think of him for buying a second hand car and living away from the city. 2. He knows that if you keep spending less than what you earn, you are going to be able to spend more when you no longer earn. 3. He puts that savings to work in an investment which gives him a decent rate of return. His investments are in simple portfolio in assets which he understands. 4. He knows his financial standing or looks at it once in six months. Growing his net worth is his aim. 5. He pays his credit card in full every month. He knows that if he can’t afford to pay in full every month, he simply can’t afford it. EK: Property investment is one way to achieve financial freedom. It is not a quick fix as it takes discipline and a long term approach. Driving a Ferrari at 30 years old do not make you successful. Still able to drive one when you are 70 years old does.
Posted on: Sun, 16 Nov 2014 11:45:38 +0000
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