Monthly Archives: October 2013

How much is house costing me( or you)?

As I written in previous post, I bought a house with the price tag RM 196,000, it make me wonder how much is this house costing me in absolute cost and working years.

I listed the the cost involved so far and interest I expected to pay if we pay the mortgage off in 10 years.

Deposit :RM1,000

Insurance :RM4,530

Lawyer fee :RM3,100

Disbursement :RM1,130

House loan :RM196,000

Housing loan interest for first 10 years :RM 78,122.68 

Total :RM 283,882.68

As I am sharing the ownership with my sister, my part of responsibility will be RM141,941.34 and that is excluding all the renovation cost , maintenance cost and car cost which might be coming along when my parent move from village to a small town.

Since I am working in Singapore right now, I will use my saving rate in Singapore currency and the current exchange rate to calculate the real cost of my future house.

Current monthly saving amount: SGD 1,500

Exchange rate: SGD 1.00 to RM 2.50

House cost in SGD = RM 141,941.34 / 2.50 = SGD 56,776.54

So, I will need about 38 months of work to cover that cost of my house. Not to mention the opportunity cost I will need bear during those 10 years. 5% of SGD 56,776.54 will give out SGD 2838.83, that is one good passive income to hold on 🙂

Situation here in Singapore is a bit different, a small simple 3 rooms flat here is priced at SGD 330,000(I am talking about minimum). With median salary now at SGD 3,000, it is no wonder not many people staying in Singapore now think they can retire early in Singapore. Besides that, there are other influences here to that make it difficult to retire early too.

It is kind of socially unacceptable for man to not working here, a man look weak without a job here and not many man can accept that.

Secondly, it is very consumer/spending driven here in Singapore, this country is importing everything and we can buy almost everything we need in our daily live and a little bit extra. There are all kinds of interesting product and services that waiting there for us to spend our money on them.

Thirdly, supporting old age parent is expected here in Singapore given there is no solid retirement support system and I think the problem will be even bigger in the future. You might be thinking your living cost will be lower after you paid off your mortgage but the medical cost kick in in old age, so expect more spending during your parent old age (and your own old age).

I just realized I am a bit out of topic here, the points I want to make here is view your house as a liability before you pay off your mortgage and don’t think the house price is always going up. Only buy when you are ready, sometime renting is not a bad decision either.

What do you think?

 

 

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Filed under Debt, Insurance, Passive Income, Spend

What is mortgage teaching us?

Mortgage is one of the loan that having the longest loan tenure, lowest interest rate and most neglected commitment. I guess it is partly because it can be extend to 30 years or even 35 years and its monthly payment is so low. There are even countless advice teaching us how to choose a suitable loan package, how many percent of our salary should we direct to mortgage payment and how much we can afford.

For the past one year, I have been looking around for a place for my parent who are now staying in Malaysia. This was not in my retirement plan before because investment income is more important to me. To me, having investment income actually more stable than buying a house now. For example, if you are paying RM 989.74 a month for your RM 200,000 mortgage for 30 years, you are paying in total RM356,307.44. The interest of the mortgage alone has cost you RM 156,307.44 over 30 years( see image below, calculation from http://www.calculator.net/).

mortgage cost

At the other hand, RM 240,000 invested in an investment vehicle with 5% will give us RM 12,000 yearly and cover that mortgage for years to come. Currently, my savings is still quite low after paid off my student loan. I am still in the stage of saving money to accumulate at least certain amount of capital before I can try my hand on investment. There are many resources on the web now that provide basic knowledge on investment, teaching us what is stock, option,mutual fund, index fund, etc…  I am planning to spend some time on learning all these basic before I start putting in my own money into any market.

Renting or buying is always a debate topic when we are talking about housing. One simple rule of thumb when you are deciding whether to rent or buy a place is the property price. It is wise to rent when the property price is high and it is wiser to buy a house when the property price is low. How to decide whether is the current property price high or low? It depend on you, if you think you can afford the house, it is low, else it is high. It might sounds like a irresponsible advice here but it is also true because everyone situation is different. Only you yourself can decide whether you can afford a house, keep in mind that buying a house involves cost during the transaction and also renovation cost before you are even in the house.

Renting a house will not give you all this cost and you are free from all the hassle that come from owning a house. Another benefit come with renting house is you can choose your neighbor. If your neighbor happen to be some crazy people that like to making noise during the night, you can easily move to another place when your rental agreement expired.

 

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Filed under Debt, Passive Income, Save

Beware of the bank

Bank is our best friend and our worst enemy in managing our personal finance, it provide a relatively safer place for us to keep our fund. But as said in the universal statement “There’s no such thing as a free lunch”, bank as a business entity also trying means and ways to earn money from us, sometimes without our knowing if you are not careful.

One of the most popular way bank use to take your money without your knowing are all the annual fee of their card product. The waiver of annual fee for the first few years helps them kept you as a customer and as a barrier to make sure you spend money when you are holding the card. Even thought the product was promoted to you as a saving account (with a debit card feature), you cannot let your guard down. I just made a mistake for not paying attention to all this small detail of my saving account.

I have 2 saving accounts, one of them is there for daily expense and the other one is for me to keep my saving in there. The second saving account come with debit card feature and was not charging any fee for the past 2 years. The bank start charging annual fee of SGD 12 this year and my account was affected. I was lucky because I have the habit of recording all my expense and I normally deposit my saving at the start of the month, so I call the bank immediately to put in my waiver request.

So, lesson learnt. Always be careful and paying attention to your finance matter, nobody should care it more than you do. 🙂

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Filed under Spend

Super market? Battlefield?

Super market is one of the places I like to spend time at, the display of huge amount of product on the shelves reminds me of how abundant the world we are live in now.

Super market is also a good place for me to think through what are the things I really need to support my daily life. Of course it is much more easier for me to sort this out because I am still single now. I like to browse around the super market and check what are the things I can buy from there. I realized that most of the time I have nothing to buy, there is time I spent 1-2 hours walking around the supermarket and buy nothing.

At the rare occasion I do buy something from the super market, I like to observe the buyers around the checkout cashier. Supermarket normally will put some small little item around checkout cashier like chocolate, candy or tibit to encourage what we call impulse buying.

Sometime I think super market look like a modern battlefield to our personal finance life. It is a convenient place to get most of our essential life support item but it is also a convenient place for us to spend too much on things that are not essential.

Always be careful when you are going to war super market.

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Filed under Spend