Is Condo consider a good assets?

Remember what is an assets? Assets are thing you bought that bring in money. Yes, you can collect rental from the condo but does it bring in money? In this post, I will not be saying how much you will be selling your condo in the future. Why? Because you will never know. DO NOT ASSUME that you can sell HIGHER.

I putting three loan value $600000, $800000, $1000000 and a fixed interest of 3.5%. If you are loaning $600000, you are paying $2694.26. Say maintenance cost is $300, the minimum rental you must collect is $3000. For $800,000, the minimun rental is $3900 and for $1000,000 the minimum rental is $4800. In order for your condo to be qualified as asset, you must charge higher than the minimum rental cost.

There are a lot of thing to consider if you intend to rent you condo.
Firstly, you have to find people who are willing to pay the minimum rental that you set. This may be difficult when economy is no good.

Secondly, people who rent your house may one day move out again. You have to factor in the lost in rental for certain month.

Lastly people who rent your house may accidentally damage some parts of your house. You must factor in the repair cost.

So do you think is a good assets?

Electricity tariffs for households to go up by 12.5% in Q4

The following news was taken from Channelnewsasia.com:

SINGAPORE : For the quarter starting in October, electricity tariffs for households will go up by 12.5 per cent or 2.41 cents to 21.69 cents per kilowatt-hour.

SP Services said the increase is due largely to significantly higher fuel oil prices over the last three months, which rose by about 21 per cent to S$92.03 per barrel.

The company added that this brings the fuel oil price to around the level in the first quarter of this year.

This is the second quarter tariffs have gone up, after they dipped in the first two quarters of this year.

In July, tariffs went up by 7 per cent.

Starting from July, the Energy Market Authority has used a new formula for calculating tariffs - taking the average price of oil in the three months of the previous quarter, instead of the first month of the previous quarter. - CNA /ls

Based on the news from channelnewsasia.com, do you know why the oil price increases? Are you protected by hedging yet?

How to prevent your money from becoming a liability?

In my previous post, I mentioned that money is a liability simply because it will keep losing its value every year due to inflation. If you save more, you will lose more. This will be very hard for those die-hard savers to accept this fact. So what to do? To prevent the lost of money value, you must learn the term "Hedging".

What is hedging?
Give you an example. Let say you have two item 'A' and 'B'. When item 'A' price goes down, item B price will go up at the same rate. At any time if you add up 'A' + 'B', the value will always be the same. Please note that hedging is not about increasing the value. It is use to maintain the same value at any time. Let say you have 'A' amount of money, the first thing to do is to spend half of the 'A' amount to buy item B.

So what can be item B. There are a few investment tools which can use as item B. One of them is to buy gold. I am agreeable with our senior citizens who insist to keep gold instead of money. They somehow have the knowledge of preserving the value of their money. See the graph above, gold keep going up.

Why gold keep going up?
The total amount of gold is a constant. You can never create gold, but you can print money. In the current financial system, where money is printing without stopping, naturally the price of gold will go up.

You may read the following related posts on gold by click the links below:
GOLD VS SGD Chart. Why Gold might be a good investment?
How to buy gold for hedging purposes?

How to reduce your liabilities to zero.

Before you can reduce your liabilities, you must know the difference between necessities and liabilities.

Necessities are the "MUST HAVE" items in your life. They are things that you cannot go without. Some examples of necessities are food, water, shelter and even mobile phone.

Liabilities are the "GOOD TO HAVE" items in your life. They are things just to "beautify" your life. One example is high tech gadget. These items will deplete in value after some time.

Sometimes it will depend on your usage to determine a certain item is a necessity or liability. One example is internet broadband subscription. I had explained in my other post why I had chosen the 3Mbps plan instead of higher plan. In short, it is a necessity for me to use the internet and 3Mbps plan is sufficient for me. Higher plan will cost more and it will build up my liability. In Chinese, there is a saying "if you do not have big head, you don't wear a big hat". It means buying what is necessary, do not over bought.

Here are some questions that you might want to ask yourself:
Q1) Do I need a big house for my family?
Having a big house is not wrong if you are intending to sub-let one or two free rooms to collect rental. It will become a asset. But if you not willing to sub-let, there is no need for big house as some rooms will be un-occupied. Remember, do not pay for thing that you do not need.

Q2) Do I need to have a car?
Car can be an asset if it can bring in money. How? For example, if you are a housing agent and you can drive your clients to see houses. It helps to provide good service which increase the chances of making a deal. But if you just buy a car to drive from home to office and from office back home, basically you are under utilising your car. The car did not bring in money, and instead take away your money. It will become a big liability. So if your work required very little on car usage, I suggest you don't buy it. A car costs about $50000 to $100000 excluding all the ridiculous miscellaneous cost. Why not use it for investment since you have the intention to waste it on a car?

From today onwards, if you don't buy any "GOOD TO HAVE" items and don't overbuy the "MUST HAVE" items, sooner or later your liabilities will be reduced to zero.

My Assets and Liabilites.

I am trying to identify my assets and liabilites and guess what, I have neither of them. In my last blog "the expenses of a married man with a kid", all the expenses are necessities, so cannot be treated as liabiites. I have been reading up a lot in the past one year on how to build up assets and started trying out some methods.

Expenses of a married man with a kid.

My Monthly Expenses:

The above picture show you a rough breakdown on the expenses. The total is about $3000. This give you an idea if you instead to get married and wish to have a kid in the future.

Just recontracted my broadband plan

I just recontracted my 3mbps unlimited broadband plan. The cost is roughly $24 a month as compared to $35 per month in my last contract. Wow $11 cost saving per month, ($132 per year or 1 day work). I had been thinking last few days whether I should upgrade my plan. I ask myself these questions:

Q1: What is my current utilization rate?
A1: I spend at most 4 hours per day. So in one month I use 4 X 30 = 120 hours. $24/120hours = $0.2 per hour. No different even I have higher bandwidth plan.

Q2: Do I really need higher bandwidth like 6Mbps or more?
A2: Normally I only watch YouTube videos and even in HD, there are no lags at all. So I really no need any bandwidth higher than 3Mbps.

Q3: Will my liability increase if I subscribe to higher bandwidth like 6Mbps or more?
A3: Of course, higher bandwidth will cost more. This is against my plan to reduce my liability.

All these questions pointed to a conclusion which is to stay in the same plan.

If you are thinking of having higher bandwidth to download video, think again. You are in fact paying more subscription to have these video downloaded.

How much does a plate of chicken rice in 2040?

I remember that in my primary school times in 1980s, I always go to hawker center near my place to eat chicken rice. The normal type cost $1.20. During my secondary school, the chicken rice cost $1.50 and in my unversity time is cost $2.00. Now in 2009, the chicken rice cost at least $2.50 in hawker center, and in food court at least $3.50. Wow, from $1.20 to $3.50, nearly increase 3 times. See the chart below to find out how much a plate of chicken rice might cost in 2040.

Is money a form of liabilities?

The above picture is an Inflation rate (consumer prices) (%) chart. It shows that most of the years between 2000 to 2008, the rate is positive. So it means that the value of the money will reduce most of the time. So if you keep the money in bank with low interest (or under your bed), the value of money will keep dropping. Based on my previous post on Assets and Liabilities, I mention that Liabilities are things that you owns which take money from you. So doesn't it mean that money itself is also a form of liability? Click there to see how much does a plate of chicken may cost in year 2040.

Assets and Liabilities

In order to achieve financial freedom, it is important to identify what are assets and liabilities.

What are Assets?
People always have a misinterpretation that assets are things that belong to them. Well that is only half true. The true meaning of assets is things that you own which help you to create money. For example, you have bought a house, and you pay $1000 for instalment every month. Instead of living in the house, you rented it out for $1500 per month. You can call your house as an asset because it brings in $500 to you every month.

What are Liabilities?
Liabilities are exactly opposite to assets. Liabilities are things that you own which take money from you. Using the same example, you have bought a house, and you pay $2000 for instalment every month. Instead of living in the house, you rented it out for $1500 per month. You can call your house as a liability because it takes $500 from you every month.


Learning how to increase your assets and reduces your liabilities is an important step towards finance freedom. By the way, is money itself a liability?