Using ‘bad debts’ to buy ‘good debts’?

Everyone tells us that we must always aim for good debts. Property mortgage is considered a good debt that everyone must have. This is very true. However, if you have to borrow ‘new’ money instead of own savings in order to buy a property, how can this be a good debt? You have no money but you wish to have money and thus you borrow money to buy a property so that you have more money in future? Pretty simple? I read a news article saying that one young buyer borrowed money so that he can buy his RM720,000 condo. Huh? This is totally absurd and I have to say this. IF every young buyer is doing this so that they can buy a RM720,000 condo, we better all sell and hold cash. A crash is coming.

Secondly, are these young buyers really so precious that only a condo is good enough for them? Please stop saying that the prices of condos are up these days compared to yesterday or whatever. If you cannot afford, please do not buy and concentrate on things you can afford. I remember a scene from a Singaporean movie many years ago. One newly promoted manager wanted to  show off his ‘wealth’, so he bought lots of new electrical goods. In fact he changed the whole house with new appliances and he asked for Easy Payment Scheme with his credit card. There’s little to guess what happened in the end. He was broke after a while. Of course this is worse because he used ‘bad debt’ which is his credit card to buy ‘bad debts’ which are the electrical appliances. Bad + Bad = Worse.

Thirdly, it is really about time that newspapers or property gurus or anyone who speaks in public to remind everyone to spend based on what they can. Stop inflating every number and said there are no more affordable homes. It’s just a matter of choice today. In some countries, there is not even any choice. Yes, we can also blame it on reasons such as too far, no public transport, whatever reasons which are beyond our control, really. There is however one which is within our control; it’s how we choose and what we buy. My first apartment was RM123,000, bought it together with my wife and I stayed there happily for 4 years with my brother and then my sister before I could afford a slightly bigger condo. Today, that same apartment is well within the affordable category. That was in Penang island when I was still a young guy. 🙂

In KL, the choices are even more. Read a little about how one Gen-Y changed his want into what he need and he is reaping his objective decision today. Read here: Are you buying for VALUE or GLAMOUR? Of course, if the decision of these young people remain the same which is to borrow in order to buy, I wish ALL of US the best because these may be the reason why a bubble is building up.

written on 8 Apr 2015

Next suggested article: Gen-Y and property

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