Personal Finance 101: We should aim at minimum RM600,000 if our intention is not to own any property

Personal Finance 101: We should aim at minimum of RM600,000 if our intention is not to own any property

If anyone tells you to skip property investment totally…

These days, there are many personal finance experts in the market. Most of them do videos, some write and somehow for many of them, their advice is always to skip property investment. Erm… Let me tell you this fact yeah. If someone says they are a personal finance expert and are giving personal finance advice about all other investments except for property investment, then it’s important to note the numbers below which will without any doubt affect anyone without a property of their own.

They can be right but you must still have a roof over your head! You cannot stay at the homes of these personal finance experts just because they told you that property investment is not necessary yeah.

I assume the personal finance expert already own their own home, that’s why they think it’s no longer important. They may have forgotten that many of their readers still do not yet own a single property. Or they believe renting is the best strategy? Cheaper? Easier? Maybe better to be more responsible and tell the full story and not just the narrow perspective one which is ‘property investment is too slow… troublesome… risky… etc’

Simple calculation and yet it’s a compulsory one

Anyone without a property MUST be ready with the necessary amount because this following number is non-negotiable yeah. No one in Malaysia, including myself and you would like to just sleep under the sky every evening yeah. Occasionally we like to lie on the beach and looking at stars when we are on vacation but NO ONE wants to look at the sky 365 nights every year. We would need a roof over our head, somehow. If not our home, then someone else’s home. Calculation for that amount is up to RM600,000.

Rental (RM2,000 per month) x 12 (months) x 25 (years) is equal to RM600,000 

Why 25 years?

This is the amount everyone needs to have prepared if they are to stop working at 55, does not own any property they could stay in and thus have to rent and they live to 80 years of age. We also assume the landlord is a super nice person and does not increase the rental for 25 years or forever and ever.

Why RM2,000 and not RM800 for that smallest room?

Once upon a time, you stayed with housemates. Are you really sure when you are 40, you still prefer to live with housemates? Who are these housemates anyway? And when you retire, you still want to rent a room and occasionally a new tenant moves in and you have a stranger in the house like every other year? Sorry, maybe just me but I do not wish to rent a room when I already have enough money to have one place to myself, whether renting or buying. if you insist on that RM800 room, then remember to keep adding the number every year since NOT a single homeowner I know who does not increase their rental for 25 years.

More assumptions that all other expenses are also negligible

This RM600,000 does not include the following yeah. We assume electricity bill is negligible, we assume food and drink cost negligible, we assume internet is free all the time, we assume this person does not need to watch TV, does not own a car and thus no need to pump petrol and we assume this person hates holidays and just want to stay home. That’s why this person only needs RM600,000 and nothing more.

This is why at least one property should be the right recommendation

This RM600,000 (or more) is the sole reason why everyone should have at least 1 property which they could call their own. So that until one time, they stop needing to prepare for this RM600,000. Please feel free to google for property investment and property prices. Regardless of whether developed countries or countries where the government is able to provide cheap housing or even countries where the people are earning a high salary, a property is always needed and property prices always go up too. Even in that country where the government builds over 80 percent of all the homes which their citizens stay in. Prices STILL went up… a lot.

Natural Hedge Against Inflation

This is why it’s a natural hedge against inflation yeah. Plus, renting a good place at a good rental is a great thing but renting is forever. That’s how generations after generations, some families remain very rich due to real estate and some families remain poor also because of real estate. Perhaps one day, everyone will stay inside their car instead, which could expand to become a house when needed and then transform back into a car. Then, I think we no longer need property. Just buy a car.

Maybe that personal finance expert is right. Maybe if you just follow him / her advice you can earn more than enough from all other investments to skip property investment totally. Else, just get one small one. It’s fine too.

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