bolts
July 31st, 2003, 01:45 PM
I copied this from BT website.
"Make your money work for you...
Nine years ago, financial controller Peter Ho nearly died in a car accident. As he lay in hospital thinking about life, he decided to quit his job and teach. His fervent message: learn financial planning so you can have financial freedom. LEONG CHAN TEIK reports.
... not the other way round. To do so, turn your back on consumption and lead a lifestyle of investment
So you have just got a pay rise or made a tidy sum from your stock investments.
Before long, you are thinking that you are one step closer to upgrading your property or splashing out on a car despite the big outlay.
You are not alone. Many people would think along the same lines.
But, as Mr Peter Ho, 50, a Malaysian-born accountant-turned-financial speaker, will tell you, this is not the wisest course of action for that cash burning a hole in your pocket.
""Singapore has one of the best transport systems around -- most people don't really need a car,'' points out the New Zealand-based expert in an interview ahead of his financial planning seminar in Singapore, which ends today.
""But the car is to feed their ego. Some people can only operate if they have a car that boosts their ego,'' he asserts.
And for that, they will work gruelling hours at a job they may not even like just to pay for those desirable wheels.
""How many people go to work because they love their work, their boss and their company? Most don't.''
Mr Ho says he has never owned a luxury car even though he can afford it.
His reason -- ""cars are wasting assets'' -- is all the more striking considering that cars in New Zealand, or anywhere else for that matter, cost a fraction of the price here.
He drives a four-year-old Toyota Corolla while his wife owns a six-year-old Daihatsu Applause. He bought both cars new for under $30,000 each.
""Why do I want to buy a big car? I'd rather invest the money. At the end of the day, there are only two ways: either you invest or you consume.''
Singaporeans' penchant for upgrading their homes continually has also caught the attention of the pragmatic Mr Ho.
He asks them to pause and consider the huge amount of interest they are paying on loans that bulge bigger with every upgrade.
In a quick check at one seminar he held, it turned out that the average interest paid by participants was a hefty $2,500, out of a monthly repayment of $3,000.
""You are working so hard for the bank, and then you wonder where all your money has gone to,'' he says.
He blames the situation on people not being equipped with financial literacy and skills to enable them to use money with more savvy.
As a result, many people, even high-income earners, do not enjoy financial freedom, which is the ability to do what you want to do when you want it, says Mr Ho, who migrated to New Zealand in 1986. JUMPING OFF THE BANDWAGON But he was none too free either, financially speaking, until 10 years ago when a friend persuaded him to attend a seminar on wealth-building.
Subsequent courses of a similar nature helped transform his outlook on financial matters.
Shortly later, while recuperating from a car accident that left him in a coma for three days, he decided to take the plunge and quit his job as a financial controller.
He would pursue his true love -- teaching -- and do it full-time even if it meant giving up a well-paying job for the unknown world of hosting financial seminars.
Well, it has turned out to be a good decision.
He has taught financial and analytical skills to employees of hundreds of companies in the region, including PricewaterhouseCoopers, IBM, Ericsson and Shell and the Singapore Institute of Management.
And practising what he preaches, he turned from a lifestyle of consumption to one of investment, zooming in largely on properties and partly on shares.
But how does this leaning to property square with the fact that he takes issue with Singaporeans tying themselves to ever increasing housing loans?
INVESTING IN PROPERTY
He says he makes a distinction between upgrading one's home and investing in properties.
Unlike the former, the latter can generate a steady stream of income.
In fact, he has a bias towards such an investment and has properties in New Zealand, Malaysia and India.
To make properties work for you, he says, you have to obtain sufficient rental income to cover the mortgage repayment, so it is the tenant who is ""working hard for the bank, not you''.
When the mortgage is paid up, the property is yours -- plus capital gains, if any. And the rental income you collect regularly becomes an unending source of money.
That is the whole idea of investing in properties.
It is not achievable everywhere, though: Singapore and Hongkong properties do not command good enough rental yields.
Also, the properties are too expensive in absolute terms in the first place, he says.
When he is not teaching, he has a captive audience at home: his sons aged 10, 14 and 17.
He regularly plays an American board game called Cashflow with them to instil ""money smarts''.
The game, which is available only to financial seminar insiders and not off supermarket shelves, has every player starting in a rat race.
Along the way, players develop the financial savvy to recognise good deals from bad ones, and gather the discipline to invest rather than consume.
GROWING UP MONEY-WISE
Mr Ho takes pride in relating another method by which he ensures that his children grow up money-wise.
They get pocket money every Monday only if they remember to ask for it by 3 pm. This instils in them the idea that they have to make an effort to get money, he says.
In the same vein, they get paid for doing chores such as gardening.
While they can spend the money they have worked for, they have to deposit all their pocket money in the bank.
This way, they learn about the magic of compounding: their deposit earns interest and the enlarged sum earns further interest, and so on.
The result is wondrous: A plan to invest, say, $50 every month for 50 years with a 10 per cent annual return will yield $1 million in the end.
What Mr Ho wants most is for them to avoid the tendency among young adults these days to outspend their income such as going on holiday using money borrowed on their credit cards.
Not only is holidaying on borrowed money a bad idea in itself but the interest payable -- a whopping 24 per cent a year being the norm in Singapore -- will leave them languishing in debt for some time.
He worries that students and even adults are not equipped to understand personal finance. ""School does not teach you how to manage your money. You may earn a lot but you may not know how to handle it.''
The consequences can be terrible. As he describes it: ""Cash is like blood. Your body continues to produce blood, but what if somewhere there are leaks?'' "
"Make your money work for you...
Nine years ago, financial controller Peter Ho nearly died in a car accident. As he lay in hospital thinking about life, he decided to quit his job and teach. His fervent message: learn financial planning so you can have financial freedom. LEONG CHAN TEIK reports.
... not the other way round. To do so, turn your back on consumption and lead a lifestyle of investment
So you have just got a pay rise or made a tidy sum from your stock investments.
Before long, you are thinking that you are one step closer to upgrading your property or splashing out on a car despite the big outlay.
You are not alone. Many people would think along the same lines.
But, as Mr Peter Ho, 50, a Malaysian-born accountant-turned-financial speaker, will tell you, this is not the wisest course of action for that cash burning a hole in your pocket.
""Singapore has one of the best transport systems around -- most people don't really need a car,'' points out the New Zealand-based expert in an interview ahead of his financial planning seminar in Singapore, which ends today.
""But the car is to feed their ego. Some people can only operate if they have a car that boosts their ego,'' he asserts.
And for that, they will work gruelling hours at a job they may not even like just to pay for those desirable wheels.
""How many people go to work because they love their work, their boss and their company? Most don't.''
Mr Ho says he has never owned a luxury car even though he can afford it.
His reason -- ""cars are wasting assets'' -- is all the more striking considering that cars in New Zealand, or anywhere else for that matter, cost a fraction of the price here.
He drives a four-year-old Toyota Corolla while his wife owns a six-year-old Daihatsu Applause. He bought both cars new for under $30,000 each.
""Why do I want to buy a big car? I'd rather invest the money. At the end of the day, there are only two ways: either you invest or you consume.''
Singaporeans' penchant for upgrading their homes continually has also caught the attention of the pragmatic Mr Ho.
He asks them to pause and consider the huge amount of interest they are paying on loans that bulge bigger with every upgrade.
In a quick check at one seminar he held, it turned out that the average interest paid by participants was a hefty $2,500, out of a monthly repayment of $3,000.
""You are working so hard for the bank, and then you wonder where all your money has gone to,'' he says.
He blames the situation on people not being equipped with financial literacy and skills to enable them to use money with more savvy.
As a result, many people, even high-income earners, do not enjoy financial freedom, which is the ability to do what you want to do when you want it, says Mr Ho, who migrated to New Zealand in 1986. JUMPING OFF THE BANDWAGON But he was none too free either, financially speaking, until 10 years ago when a friend persuaded him to attend a seminar on wealth-building.
Subsequent courses of a similar nature helped transform his outlook on financial matters.
Shortly later, while recuperating from a car accident that left him in a coma for three days, he decided to take the plunge and quit his job as a financial controller.
He would pursue his true love -- teaching -- and do it full-time even if it meant giving up a well-paying job for the unknown world of hosting financial seminars.
Well, it has turned out to be a good decision.
He has taught financial and analytical skills to employees of hundreds of companies in the region, including PricewaterhouseCoopers, IBM, Ericsson and Shell and the Singapore Institute of Management.
And practising what he preaches, he turned from a lifestyle of consumption to one of investment, zooming in largely on properties and partly on shares.
But how does this leaning to property square with the fact that he takes issue with Singaporeans tying themselves to ever increasing housing loans?
INVESTING IN PROPERTY
He says he makes a distinction between upgrading one's home and investing in properties.
Unlike the former, the latter can generate a steady stream of income.
In fact, he has a bias towards such an investment and has properties in New Zealand, Malaysia and India.
To make properties work for you, he says, you have to obtain sufficient rental income to cover the mortgage repayment, so it is the tenant who is ""working hard for the bank, not you''.
When the mortgage is paid up, the property is yours -- plus capital gains, if any. And the rental income you collect regularly becomes an unending source of money.
That is the whole idea of investing in properties.
It is not achievable everywhere, though: Singapore and Hongkong properties do not command good enough rental yields.
Also, the properties are too expensive in absolute terms in the first place, he says.
When he is not teaching, he has a captive audience at home: his sons aged 10, 14 and 17.
He regularly plays an American board game called Cashflow with them to instil ""money smarts''.
The game, which is available only to financial seminar insiders and not off supermarket shelves, has every player starting in a rat race.
Along the way, players develop the financial savvy to recognise good deals from bad ones, and gather the discipline to invest rather than consume.
GROWING UP MONEY-WISE
Mr Ho takes pride in relating another method by which he ensures that his children grow up money-wise.
They get pocket money every Monday only if they remember to ask for it by 3 pm. This instils in them the idea that they have to make an effort to get money, he says.
In the same vein, they get paid for doing chores such as gardening.
While they can spend the money they have worked for, they have to deposit all their pocket money in the bank.
This way, they learn about the magic of compounding: their deposit earns interest and the enlarged sum earns further interest, and so on.
The result is wondrous: A plan to invest, say, $50 every month for 50 years with a 10 per cent annual return will yield $1 million in the end.
What Mr Ho wants most is for them to avoid the tendency among young adults these days to outspend their income such as going on holiday using money borrowed on their credit cards.
Not only is holidaying on borrowed money a bad idea in itself but the interest payable -- a whopping 24 per cent a year being the norm in Singapore -- will leave them languishing in debt for some time.
He worries that students and even adults are not equipped to understand personal finance. ""School does not teach you how to manage your money. You may earn a lot but you may not know how to handle it.''
The consequences can be terrible. As he describes it: ""Cash is like blood. Your body continues to produce blood, but what if somewhere there are leaks?'' "