I was reading Rich Dad and it has some very interesting points. Basically it is highlighting to us the differences in terms of thinking and outlook of life between a poor man and a rich man. The main difference? The poor man works hard for his money but a rich man has his money work hard for him. How to make money work for you? Apparently it is the difference in the way one thinks that will make one get financially stronger or weaker. The poor man will think that "I cannot afford it." and shut his brain down. The rich man will think "How can I afford it?" and continue to exercise his brain to think of a way to make the money. Another difference, a poor man will think that his house is his asset while the rich dad thinks that a house is a liability. Hmm...interesting isn't it? Why is a house a liability when everybody is investing in properties and getting rich with their properties?
Well, I have 1st hand experience...remember the 1997 crisis when so many people went bankrupt by having properties? Well, when the market is good and the property is being rented out at a higher rent than your mortgage repayment, it can be considered an asset. However, when the market is bad and the property you have on hand is still under mortgage, then it is a big liability. I bought my private apartment in Upper East Coast Road during in 1995 and took a 80% mortgage. By mid 1997 the property has dropped 30%~40% from the price that I bought it for and it remained there at the bottom for 10 years. The rental income was less than my mortgage repayment, so for 10 years, the property was not an asset but a liability to me. I was paying through my nose and if I had no other inome to tide me through, I would be gone. I sold it for 5% higher than my purchase price last year and got out of the crap. I may have sold it a little too early...but I had my reasons and I shall not go into details here. The market has turned around and if I still have my property now, I will be taking in a monthly income of at least SGD500 after paying for the loan repayment from the rental. So, a property can be an asset or a liability depending on the market situation. Right?
Anyway, there is a board game by the name of Cashflow 101 that teaches finance, accounting and investing at the same the fun way! I think I am going to buy this board game and start playing it with my children. It is supposed to be suitable for adults and children above 10 years old. Just nice for my family. Good idea to start the kids young! :D
