Saturday, February 23, 2008

Do you think married people are richer?

Are you married or are you still single? How do you manage your personal finance while you’re still single? Are there any changes in managing your personal finance after your marriage? Is it become more wealthy or worst?

In my opinion, I do think majority married people are richer than those who are still single for the following reasons:

(1) Dual-Income but Expenses Remain

When I was in single, I spend $2k per month but after my marriage I spend $3k per month together with my spouse. Since both of us are working, we have double income with $1k saving (theoretically should spend $4k per month with 2 person). I interviewed few of my colleagues and friends. They are experiencing the same thing. In fact, one of friends’ expenses is lower than his single’s life expenses after marriage. Wow!

(2) Changing in Personality and Lifestyle

My single life and married life are totally a different life. At least this is to true for me but I do see people still enjoying a single life after marriage. However, I believe that is only for temporary unless you divorce every often. While I was still single, every action of mine usually requires me to spend money (e.g clubbing and etc.). On the other hand after my marriage, every action on if mine I think about saving first. Married people are more responsible and tend to save for the future, think about how to build wealth but usually single don’t think so much. Both of them have totally a different mind-set, don’t you think so?

Marriage is a very Powerful Financial Tool

Whether you believe it or not, marriage is a very powerful financial tool to help you build wealth. If you’re single, you may probably disagree with me but I think that is just statistic data. I would like to know your comments. If you’re married, you may want to make sure of this very powerful financial tool and don’t misuse it. If your marriage is causing you to move away from wealth (yes, some people do – they spend more after marriage), it is time to think about it.

Theoretically, single people can manage a better personal finance than those are married one especially they have kids. Don’t you think so? If you are single, you do not have to care about the expenses of your kids. You do not need to care the kid’s education fees and many more. However practically, it doesn’t happen in the real world.

Most single screw up in their personal finance. How true is this statement?

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Sunday, February 17, 2008

If Only I Had (Live Within Your Means)

Look at the cartoon below, does this happen in your real life? Do you see your friends have what you don’t have and you really admire him? You wish you could be him and own what he owns now and you know what, I bet he is also wishing for the same thing that could own something that you’ve already owned.

Okay, there is nothing wrong with wishing!

You wish for something you don’t have is a good thing. In fact, wish for something is the basic fist step in the Law of Attraction. Without wish, your dream won’t come true at all.

The problem is to complain about it!

A lot of people like use the complain as an excuse and usually this people wont get any far. They may get short-term gain but definitely not the long-term gain. Unless you’re complaining something that within your control, but that is not called complain already. It is called influence.

You may also compare wrongly!

We have to understand that everyone has their own problem. The person that you admire may not be as good as you thought. They may even worst than you as a person just because they do not show the negative side of themselves. This is especially true for the Chinese (Of course not everyone), because of their faces are the most important thing than anything thing else. Faces mean giving the best positive side of yourselves even thought sometimes that is not the real you.

Here are my conclusions from this cartoon:
  1. Wishes are good only if we able to transform them into action (not complains)
  2. Live within our means (to accept there are thing we have to do without). It is in fact the secret of wealth and happiness.
  3. Compare ourselves is always the best strategy because we know the comparison is valid.

p/s: I know talk is easy and I also understand comparing is a human nature but just don’t spend too much time on it. Focus on something else that made a difference. :)

Sunday, February 10, 2008

How healthy is your bone?

Few weeks ago, I walked by in the grocery store and somehow accidentally did a bone health check (attracted by a pretty promoter). :D It was organized by Anlene in worldwide. What surprised me was not my result but the result of a young guy who queued in front of me.

I am happy that I have the highest score that indicates my bone is at healthiest level. However the fellow in front of me has -2 score. He is very young and looks really healthy. So I silently peek on his personal particular data, he is just 27 years old! Oh my god, 27 years old at the moderate risk?

This tells me that bone problem (sound more technically it is called Osteoporosis) does not happen to old guys only but also young guys. I read the handout from Anlene and it says the following which may explains why this guy has a low score.

“You may think your bones are strong this is because you feel strong from the outside. What you don’t know is your bones could actually be rotting and decaying form the inside.”

“Do you know that your bones have 2 layers? The outer layer is hard and solid. But the inner layer is sponge-like, making it weaker and more vulnerable to decay. Because of this, bone decay usually goes unnoticed, until it’s too late.”

Understanding Your Bones

You may not aware that our bone is living and growing tissue. It is constantly breaking down, rebuilding, regenerating and repairing itself. Through this cycle, your entire skeleton is completely renewed every 10 years. Because of this reason, you can change your health bone status to become better or worst. Since I have a healthy bone now, I will have to make sure I maintain the healthy level:
  1. Continue my exercise routine (At least twice a week)
  2. Continue eating diet rich in calcium (E.g. Milk, yogurt, fruit and green vegetable)
  3. Continue my healthy lifestyle
    • I smoke and drink alcohol occasionally but I guess I have to stop smoking completely.
    • I think I will still drink alcohol occasionally because I think drink a little bit is in fact good for health. Is it the true?
    • I will still continue drinking coffee but maximum is 1 glass per day.
  4. Perform bone health check in every 5 years.
Do you have a healthy bone? Maybe you should start doing bone health check now if you haven’t done so :)

Friday, February 01, 2008

Calculate Investment Return on Real Estate

If you buy property or real estate, how do you calculate the ROI (Return of Investment)? Is it by your rental income or capital gain? Do you include the ownership fees to purchase your house? How about renovation cost? Let’s look at the calculation below how to calculate the ROI by rental income and capital gain. Calculating the ROI for property can help you decide whether you should buy that house or not.

ROI by Rental Income

If you purchase a house for the purpose of rental income, you may want to calculate your ROI based on rental income.

Property Purchase Prize: $180K
Ownership Fees: $2K
Renovation Cost & Furniture: $40K

*Ownership fees are legal fees, government stamp duties, loan agreement fees and etc.

Total Purchase Price = $222K ($180K + $2K + $40K

Maintenance Fees (Monthly): $100
Monthly Rental Income: $800

* Maintenance fees are insurance, security fees, property damages and whatever cost to maintain the house.

Monthly Net Rental Income: $700 ($800 - $100)

ROI = Net Rental Income for Year / Total Purchase Price X 100%

ROI = 3.8% ($700 X 12 / $222K X 100 %)

So, the ROI for income rental gain is 3.8%.

ROI by Capital Gain
Total Purchase Price: $222K (Calculated from above)
Selling Price (in a year): $230K

ROI = ($230K - $222K) / $222K X 100%

ROI = 3.6%

So, the ROI for capital gain is 3.6%.

If you purchase the property for the sake of investment by earning the rental income, the ROI is 3.8%. To be more optimistic, you may also include your capital gain which is 3.6%. So the total ROI for the house that you invest is 7.4% (3.8%+3.6%).

If you purchase the property for staying, you can only calculate the ROI based on the capital gain. In this case, your ROI is 3.6%. Please note that you’re now enjoying the house and at same time you’re also enjoying the capital appreciation at 3.6%. Isn’t this a perfect investment?

My 2 Cents

If I am buying a house for investment by renting out my property, I would look at the property that has at least 7% ROI (exclude the capital gain – conservative calculation). Reason is the Fixed Deposit (FD) is 4% and my average investment return from unit trust is 7%. If the ROI is less than 7%, I may as well invest it in unit trust. Remember that the rental income gain or capital gain from property is not the actual gain because we haven't consider the mortgage interest yet. On the other hand, if I am buying a house for staying, I will also look at the property with at least 7% ROI as well. The reason is same with what I mentioned.

How do you calculate the ROI for your property? What ROI value will make you decide to buy the house? Do you really calculate the ROI when purchase a house? If no, maybe it is time to think about it.

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