The incoming economic crisis? I am not going to cry as Chick Little.
Now, here's what I believe, in the next 2-3 years - I am not psychic, nor can I predict the future, so it's just my stupid opinion, and the rest you can read from the Internet:
1. I believe the sky is NOT falling, nor will the world come to an end.
2. I believe there will NOT be mass chaos in the United States, but increase in crime rate, probably
3. I believe the economic crisis has just began and there's more lying ahead of us.
4. I believe the US dollar will be significantly devaluated to probably 50-75% of what is worth now.
5. I believe the housing market will continue to drop till a medium average single family house is about $160K compared to the current $218K.
6. I believe gold will go over $1500/oz and stay there for a period of more than 1 year.
7. I believe stock market will fall and stay low in the next 1-2 years
8. I believe we will all pull out of this mess in about 5 years.
9. I believe most of us will be poorer after this mess and many will get their saving wiped out and must work for more years before retiring.
10. I believe Brittney Spears is getting too fat and ugly for my taste.
I actually hope I am wrong because I want to live in a peaceful time; on the other hand, i look forward to it as economy downturn is also a great opportunity for those who are prepared.
Wednesday, March 19, 2008
Money comes from savings
The best ever book to read is "The Millionaire Next Door." Read it and it WILL change your life. Pay attention to how most millionaires accumulated enormous wealth throughout their life and how they unwisely spoiled their children (most of the time) and the wealth was gone within a generation or two.
Wealth is defined as "net worth," not "net income!" To accumulate net worth, you must have a positive number between "net income" and "net spending."
I am not going to burden anybody with all the statistics. The basic rule of wealth is that money comes from savings.
1. Be confident and secure about yourself - DO NOT TRY TO IMPRESS ANYBODY with material things!!! Actually avoid people who are easily impressed by material things because they are shallow and superficial.
2. live below your means - be frugal
3. spend your money wisely - mostly on things that hold long term value and/or generate income/dividend.
4. work hard
5. continue to educate yourself, especially on finances
6. get out of debt as soon as you can
For most people, 1 and 2 are very difficult. I am going to tell you this. Detach yourself from all the material stuff. You, firstly, need to be confident and secure. You must understand and demonstrate that you DO NOT NEED to impress anybody!!! Why do you need flashy cars, boats, fancy cloth etc.? The only thing those things can tell me is that you are unsure about yourself. You package yourself in those superficial stuff in hope that nobody would see the real you - the weak, the insecure, the boring and the empty.
Whom do we try to impress? I may be stupid, but I do not need to impress anybody. Girls? I need to judge if they are good enough for me before they judge me, and I get all the girls I want. Other people? What do I care about whether they think I am successful or not? I am successful. Period. :-)
Does it mean I am stingy? No, I am actually quite generous. I donate money to support the causes that I believe in. Does it mean I have no fun? Well, one of my hobbies cost me about $5000/year, and the other one costs even more. Go figure. Does it mean I make half million in a year? No, I am just a working class person just like many of you.
I don't drink, don't smoke, don't gamble, don't do drugs. My only vice is that I love women - the kind that is psychologically mature, knowledgeable, and beautiful. I detest shallow women who only know cloth, shoes, cosmetics, spending money, and partying. No matter how beautiful they are, if they have nothing to offer except for being pretty they do not deserve my attention!
Wealth is defined as "net worth," not "net income!" To accumulate net worth, you must have a positive number between "net income" and "net spending."
I am not going to burden anybody with all the statistics. The basic rule of wealth is that money comes from savings.
1. Be confident and secure about yourself - DO NOT TRY TO IMPRESS ANYBODY with material things!!! Actually avoid people who are easily impressed by material things because they are shallow and superficial.
2. live below your means - be frugal
3. spend your money wisely - mostly on things that hold long term value and/or generate income/dividend.
4. work hard
5. continue to educate yourself, especially on finances
6. get out of debt as soon as you can
For most people, 1 and 2 are very difficult. I am going to tell you this. Detach yourself from all the material stuff. You, firstly, need to be confident and secure. You must understand and demonstrate that you DO NOT NEED to impress anybody!!! Why do you need flashy cars, boats, fancy cloth etc.? The only thing those things can tell me is that you are unsure about yourself. You package yourself in those superficial stuff in hope that nobody would see the real you - the weak, the insecure, the boring and the empty.
Whom do we try to impress? I may be stupid, but I do not need to impress anybody. Girls? I need to judge if they are good enough for me before they judge me, and I get all the girls I want. Other people? What do I care about whether they think I am successful or not? I am successful. Period. :-)
Does it mean I am stingy? No, I am actually quite generous. I donate money to support the causes that I believe in. Does it mean I have no fun? Well, one of my hobbies cost me about $5000/year, and the other one costs even more. Go figure. Does it mean I make half million in a year? No, I am just a working class person just like many of you.
I don't drink, don't smoke, don't gamble, don't do drugs. My only vice is that I love women - the kind that is psychologically mature, knowledgeable, and beautiful. I detest shallow women who only know cloth, shoes, cosmetics, spending money, and partying. No matter how beautiful they are, if they have nothing to offer except for being pretty they do not deserve my attention!
Tuesday, March 11, 2008
Why do I not own a house?
A house is a liability until:
1. you collect rent that covers all expenses and some extra after tax.
2. you sold it
Owning a house does not make much of a financial sense if you can rent cheaper. Buying a house is more a lifestyle change rather than a financial investment. Bear in mind that you must not buy a house and automatically assume it would appreciate - that's not investment, but wishful thinking.
On average, American live in their houses for 3-5 years. This is a very short period of time to allow the house to appreciate - if it appreciates. In fact, house does not appreciate; it actually depreciates. The land/lot/location it sits on appreciates.
Strictly speaking - financially, owning a house means the following are money-down-the-drain:
1. property tax
2. HOA fee
3. interest payment
4. insurance
5. electricity
6. water and other utilities
7. general maintenance and upkeep - garden, lawn, housekeeping, fix-up
8. commute cost
9. lost interest due to money tied into house equity
Many often miss Point 9. Let's say you put $40,000 down and build equity through monthly payment. The $40,000+ could be generating interest just sitting in your bank - hassle free. On a 5% interest, that's $2000+ a year. If you have paid off your house, say, $400,000, that would cost you $20,000/year on lost interest.
If you add up 1-9 and it equals your rent, you are better off renting - financially speaking.
The biggest problem from owning a house is it's a liability that you cannot liquidize quickly. You often hear the term "house poor," meaning people get a house but cannot afford much of anything else. After you pay off your house, you still need to pay 1-9 above. When you need money-cash, you would be like sitting on a pile of cash that you cannot use.
It only makes sense that:
1. you go in at a market low
2. you can live there for a long time, 5-10 years minimum
3. you can rent it out
4. you wouldn't need the cash any time soon
1. you collect rent that covers all expenses and some extra after tax.
2. you sold it
Owning a house does not make much of a financial sense if you can rent cheaper. Buying a house is more a lifestyle change rather than a financial investment. Bear in mind that you must not buy a house and automatically assume it would appreciate - that's not investment, but wishful thinking.
On average, American live in their houses for 3-5 years. This is a very short period of time to allow the house to appreciate - if it appreciates. In fact, house does not appreciate; it actually depreciates. The land/lot/location it sits on appreciates.
Strictly speaking - financially, owning a house means the following are money-down-the-drain:
1. property tax
2. HOA fee
3. interest payment
4. insurance
5. electricity
6. water and other utilities
7. general maintenance and upkeep - garden, lawn, housekeeping, fix-up
8. commute cost
9. lost interest due to money tied into house equity
Many often miss Point 9. Let's say you put $40,000 down and build equity through monthly payment. The $40,000+ could be generating interest just sitting in your bank - hassle free. On a 5% interest, that's $2000+ a year. If you have paid off your house, say, $400,000, that would cost you $20,000/year on lost interest.
If you add up 1-9 and it equals your rent, you are better off renting - financially speaking.
The biggest problem from owning a house is it's a liability that you cannot liquidize quickly. You often hear the term "house poor," meaning people get a house but cannot afford much of anything else. After you pay off your house, you still need to pay 1-9 above. When you need money-cash, you would be like sitting on a pile of cash that you cannot use.
It only makes sense that:
1. you go in at a market low
2. you can live there for a long time, 5-10 years minimum
3. you can rent it out
4. you wouldn't need the cash any time soon
Subscribe to:
Posts (Atom)