Bankruptcy before property, not after property, perhaps.

Youths aged 25 and below, 579 of them were declared bankrupt within the first 6 months of this year (2014). In many major dailies today, bankruptcy was a popular topic. In fact majority of the online medias has it as well. There were some comments from the online readers that the cause of this was because of the high property prices. May I point out that the reasons for them being declared bankruptcy was also stated and none of them were due to housing loans?

The major reasons which majority of us can guess would be vehicle loans, personal loans and credit card payments. Vehicle loan is dangerous because one friend told me that as soon as you drive the car out of the showroom, you have lost 30% of its value. Personal loans typically is dangerous because banks continue to push to you money that you do not have enabling to buy things you can ill afford. Credit card is suitable only for those who knows how to manage their expenses prudently. For these youths of 25 years old and below, it’s hard to expect them to be financial savvy yet.

Remember the time when you wanted to buy your first property? Well, that is the time I feel that we have reached a certain time in our lives that we felt that settling down and owning an asset becomes a responsibility. The great thing about owning a property is this: It’s an asset no matter how you look at it, unless of course you really have to buy something which is totally useless or you happen to be very unlucky to have bought just before a financial crisis. Otherwise, the money you paid would help you to start building your wealth. Even a RM250,000 property, increasing at a slow 2% every year meant that you would have more than doubled your wealth by the time you finished paying for it. Yeah, perhaps inflation has also eaten up a lot of your wealth but imagine if you never did buy in the first place, what would happen?

akpkYouths of today are not all those mentioned above. Youths today, especially the smart ones are many times more financial savvy than the older generation. Seriously, we always love to find reasons when we fail at certain tasks but truth is, majority of it was due to us anyway. Instead of using the time to watch Korean dramas, how many actually read business news online and invest in good stocks? How many saw the falling stock price for past few weeks as an opportunity to accumulate and be rewarded today? (Market up on 20 Oct 2014).

How many are able to think beyond just the usual, ‘spending on things we do not need to impress people we don’t need to care?’ Think about it. Perhaps, just perhaps a property investment may have used up a huge portion of the available money for spending and the youths may not be declared bankrupt due to overspending via car, personal loan or credit card. Truth was, I struggled during the first year of my housing loan too because at the same time, I had to pay for my MBA, for my wedding, for my honeymoon and still give my mother some allowance. I did not even have enough for an usual cup of Starbucks at that time! That property I struggled with gave me enough when I sold it to buy my second one and third one and on and on…   🙂

written on 20 Oct 2014

Next suggested article: Playing with ‘Borrowed’ risk. Are you one of them?

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