Monday, March 19, 2012

How much to spend on rent?

Renting a house can be a killer. When you rent a place, you are actually paying for the landlord's loan service plus interest plus maintenance fees plus stamp duties plus appreciation value plus profits plus many pluses.

In order to understand what is a reasonable price to look out for when renting a flat, you got to check the property price or value in the region.

If the last know transaction of a house sold next door is $200,000, then the price of the flat you are going to rent should not vary too much.

Most landlords would consider a 5% to 9% P.A rental gain based on the property's current market value. So for instance, if the property is worth $500,000, the rent should be somewhere from $2500/month to $3750/month.

What makes a rent hit skyrocket is the furnishing done. A fully furnished house with all the facilities in place, the rent can be 20% to 30% more than one that is not. Therefore you got to consider, how much of the facilities do you actually use. Remember, you are renting the furniture too.

It is advisable not to spend more than 35% of your income to your rent. In fact, it is good to use less than 25% of your income in rental. Of course, the best advise would be, if you could afford, buy, not rent.

Friday, March 16, 2012

How much to spend on housing?

A maximum 20% to 30% of your monthly income should be used for your house. Some people just can't find the balance on how much to spend on housing. If you spend too little on housing, you would probably take a higher loan amount or longer loan period. If you spend too much on housing, you could potentially get yourself into heavy debts.

Before a buying you first house, consider:

How old are you and what is the comfortable time period to service your housing loan?
Some people would go for 10 or 15 years loan, depending on their affordability.

Do you intend to stay in the house for a long period?
Some people just want a home. A sweet place to stay in. Others may look at it as an investment opportunity, hoping that future developments will boost the price of the property. For personal use, it is okay to stretch the loan a little bit longer. For investment, bear in mind that the interest rate will take up most of the profits before you could realize.

Do you have enough cash for your renovation?
We often see beautiful houses along the street and we wonder how does it look inside. Sometimes, the interior could be totally out of the world atrocious. Don't spend too much on the property itself that you do not have enough budget for the renovation. It is always better to live good than to look good.

Land lease period?
Always, and forever, get a property that is more than 30 years in lease. Always.

Down payment?
At least 20% of the initial payment, including any property tax or stamp duties.

Good luck and happy hunting!

Thursday, March 15, 2012

3 simple steps to save money

Can't seem to save any money end of the month?

Most of us, when we receive our paycheck, we spend. Then we save whatever residual.

That sucks. Period.

Soon enough, we realize that our money in the bank is plunging faster than the stock market. Why? We do not keep track on what we spend. We never do, and it is an extremely tough habit to cultivate.
Paycheck in, spend. Any spare cash left, save. That flow of financial planning will screw most of us.

1. Know what you are saving for
Never do things without a reason. It goes the same for saving money. Be clear of what are you saving up for! It can be used to fund your house, your car, children's education, retirement, holiday and whatsoever. Set your own target and clearly define the amount of money you intend to save.

2. Do it once, do it good
I never believe in keeping track of our spending. Some may disagree, but only 1 out of 100,000 people is disciplined enough to record every single spending. Do a breakdown of your fixed expenses, pen it down clearly. Plan with details, how much you intend to save per month. Just do this exercise once and you can stop looking at your personal balance sheet.

3. Save before you spend
First thing when you receive your paycheck. Bank it into a separate bank account. Remember you have commit the amount  to save up every month. Make sure you do not touch a single cent of the savings unless you have reached your target.

To summarize:
Know why you are saving.
Plan how much to save.
Save before you spend.

I can guarantee you a rise of digits in your bank account. I have taught this to many friends and it worked 100% of the time.

Tuesday, March 13, 2012

Stocks and shares as retirement fund?

In our lifetime, we have seen friends, relatives and co-workers lose tons of money in the stock exchange market. On papers, big time celebrities go bankrupt from the stock market.

Bad luck? Bad judgement?

Poor planning would be the correct phrase.
If you buy a share of Apple Inc. because it is cheap, you are gambling. There may be tons of indicators and signals that tell you to buy, but do you really know what you are doing? Indicators or news from your "friends" are always lagging! Late information is bad information. Bad information is bad money. So be wary.

If you buy a share of Apple Inc. because you believe the bull trend is coming and you can sell it off within two days to make a contra profit, you are gambling. NO ONE IN THE WORLD CAN PREDICT THE MARKET DIRECTION. I mean no one. Not even the banks, analysts on Bloomberg or whatsoever. No one can predict what happens tomorrow. Unless they have ESP or some other god-like skills, otherwise everything that they say is bullcrap.

So why does the stock market even exist when it is so evil?
Please remember that: Stocks are being bought for investing, not gambling or for chancing.
When you purchase a share of Google, you are investing money into Google. You see prospects and growth in the company. Any investment should be long term of at least 3 years, anything less is a blind fire. Stock market guru, Warren Buffet, does not buy and sell shares like what they do in the fish market. He keeps his shares in his portfolio, gain dividends over time and then reinvest.

Saving money in the bank vs saving money in various companies
If you save money in any bank, you get an interest of less than 1%. If you "save" money in shares, you get dividends of more than 3%. So if anyone is saving up for retirement, where would you save your money to? Investing in government related companies or blue chips is one of the safer methods to build up your retirement fund.

Start saving up while you can! Banking in your savings in stocks and shares can potentially shorten your time spent on saving

Sunday, March 11, 2012

Where is my money? Rich Kids, Poor Folks

Singapore is known as one of the biggest financial hub in Asia. The average gross monthly paycheck for individuals range from $5500 to $7000. There is no doubt to such a figure, but we are talking about average nationwide. Some Singaporeans earn up to $200,000 a month while most make merely $1200 a month.

What is going wrong?
Eggs that used to cost $0.45 10 year ago is now $1.50. Housing that used to be 15 times cheaper is now crazily unaffordable now. The average inflation in Singapore is about 4% - 6% P.A, while the average wage growth is only 1% - 3% P.A.

How could anyone survive?
Business owners survive because they make more than 10% P.A.
Self employed individuals survive because their earnings walk hand in hand with inflation.
Employees survive because they invest any disposable income.
People who do not survive because they are none of the above.