The car I qualify for versus the one I could afford. Huge difference.

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Please read the title again. Yes, we can also substitute the ‘car’ with property. In the university world, when we qualify for a certain course, we may apply for that course. For example, lots of people apply to study medicine. Yet, I have known so many medical doctors who are no longer doctors because they hate something along the process. Well, perhaps it’s better to only apply for that course if we also like that course?

Anyway, when it comes to the selection of cars, someone earning RM5,000 a month could technically afford to spend 35% of their income on a car. That’s RM1,650 per month. If we look at a 9-year loan, this person could buy a RM178,000 car. Cool? Or cold sweat?

Alternatively, becoming a more responsible person may mean RM1,000 per month for a car and a 9-year loan meant a RM100,000 car. My advise? That RM100,000 car is likely to impress just your peers… Hardly any senior managers or businessmen would look at you differently just because you are driving a RM100,000 car. They are driving a much more expensive car most of the time because their salary is higher.

So, everyone knows property is such a good investment and everyone says they believe one day they will buy a property. Moving the $$ from buying a car into a home because no one could see the property we are staying in and well, once we start paying for the property, we will have less money for everything else!

Okay, it’s a personal choice whether buying a car is better or buying a property is better. For some, buying a car is important because people may see him as successful and may want to follow him. For example, multi-level marketing people. It’s hardly reassuring if they tell you to follow them and you will be successful but you are driving a better car than that person, right?

It applies for a property as well, not just the car. If we could stretch ourselves and get a RM500,000 mortgage, it’s more prudent to get a RM400,000 one instead. The extra savings? There’s that next property to go for in the very near future. Manage our wants because even that RM500,000 property which we thought is a dream home is merely a current stop. Soon, when our income is up, we will be dreaming of another… property. Bigger one, perhaps. More luxurious one perhaps. And many more other new requirements simply because we have more money now…

Please remember the term ‘opportunity cost.’ Most of us will always have limited funds but we will always have unlimited wants. We can then try and earn a higher income BUT then the wants can also increase at a faster rate. Thus, it is NOT about having more funds but also to limit our wants and convert them into wealth generation ones (wants) instead. Last but not least, that RM100,000 car? The day you drove it home, it has depreciated 15%… That home will make you happy or if you are renting it out will make the tenant happy and you… richer. Haha. Happy understanding.

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Article written and edited by Charles. News article summarised by Dina Batrisyia.

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