"We survive on adversity and perish in ease and comfort" - Mencius (Chinese Philosopher)
We were In Over Our HeadsPosted: 2 July 2007.
This week, we received the final payment to the house we sold in Malaysia. We were so happy to complete this transaction, that we celebrated with dinner at White Spot (after our Family Trip to Granville Island). Selling the house was an extremely painful process (buying and owning the house was an extremely painful experience too), and not because we were attached to it emotionally in any way. But since it's all over, it's time for a little closure, and maybe talk about the financial aspects of owning a house for those of you considering to do so (at least in Malaysia).
Buying the House:
Maintaining the House:
We were in WAY over our heads with this house. After spending tens of thousands fixing up just the house basics (we didn't even get a chance to replace the roof, which was old. We only patched it up), we had used up most of our savings. And our parents also contributed a considerable amount in the renovations. Costs of the renovations were well above our original estimates. I think we'd make terrible house flippers.
The house was slowly deteriorating through's roof patch work. Small leaks began forming, and our original contractor that fixed the house fled. I guess he didn't want anything to do with the house anymore. The small leaks became big leaks, especially in heavy rain. And before long, it got pretty bad. The awning covering the front porch collapsed one weekend while we were out of town, and had to be replaced. Another costly incident.
We were not happy in this house. The financial strain caused a lot of grief in the family. Not only we were slowing growing more and more in debt (after depleting our savings), the house itself was not the best of houses. The state of house made it seem like it was uninhabitated. People frequently (especially people visiting the neighbors across the street) parked in our driveway. We couldn't get in or out. And all because they thought nobody lived there. That really did a number on our self-esteem.
Selling the House:
We considered selling the house about a year after moving in. At first, we did it passively. We weren't prepared to lose money on it, and it seemed like there was no hurry to sell the house. But with my wife starting her PhD program in 2007, we had to step up the pace. The house was on the market for over two years. And despite all that, we weren't able to fetch a good price on it.
Staying in this house wasn't all bad. There were moments we just didn't care about our financial situation, and swept everything to the back our minds (it's quite financially irresponsible to do that). But we were happy momentarily. The house is great for toddlers. It's an expanseful single-storey bungalow, which our kids enjoyed roaming about without fear of falling down stairs. But in the end, it was rough... Our take aways (which can be confirmed if you read the books I mention in this article), are as follows:
Think twice before you buy a house.
Frugal, Frugal, FrugalPosted: 7 April 2007.
It's April, and I'm reading this book called "The Millionaire Next Door" by Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D. You can expect my book review some time this month. So far, I've only read the first 3 chapters, but the second chapter entitled "Frugal, Frugal, Frugal" really inspired me to do something about my wealth situation.
I'm jumping the gun a little bit on my book review, but the book basically defines wealth as a person's net worth. And you can calculate your expected net worth based on the following formula:
I won't tell you what my expected net worth should be, but my current net worth is ZERO. Yup... nothing, nada, zilch. Interestingly enough, at the end of 2002, after working 3 years in the US, I accumulated wealth amounting to approximately RM80,000. But after living in Malaysia for 4 years, my accumulated wealth was reduced to nothing. Not only did not increase my net worth, I actually squandered it. And I attribute this to my behaviour as a UAW.
That's right... The book defines 3 types or people, the Prodigious Accumulate of Wealth (PAW), the Average Accumulate or Wealth (AAW) and the Under Accumulate of Wealth (UAW). A PAW has a net worth of at least double the expected net worth estimated from the formula above. A UAW has a net worth of less than half the estimated net worth. I am (at least currently) a UAW...
It's so strange that when I was in the US, I was a PAW, if not an AAW. I lived well below my means, and saved a significant portion of my salary. 80K in 3 years is quite a sum of money. The Malaysian lifestyle is that of the hyperconsumer. Almost everyone in Malaysia is a hyperconsumer, buying things for their status. I'm not sure if I'm a hyperconsumer, but one thing's for sure.. the house we purchased was well above our means. The book states that statistically, millionaires own modest homes. Most of them don't have mortgages. And here I am spending close to half my income on mortgage payments. A BIG NO-NO if you want to accumulate wealth. And for what? A big bungalow in an affluent neighborhood...? Buying that house in Malaysia really affected my life.
So what now...? Well, I'm living from paycheck to paycheck... still. But I'm starting over. The house is being sold, and the debt I accumulated while owning that house is being paid out. I'm earning a lot more now that I'm in Vancouver. Vancouver is an expensive place to live, especially if you have children. Childcare in Vancouver is border-line highway robbery. But at least it's good childcare. I don't earn enough to simply put aside 30% of my income, and go about my merry way. So I'll need to take a more pro-active approach to finance. I'll start with (1) an annual budget (which I don't have yet), (2) a plan to save 10% - 20% of my pre-tax income, and (3) an investment plan for my wealth, as I accumulate it. I'll try to learn as much as I can from the Millionaires Next Door.
Financial IndependencePosted: 11 March 2007.
I don't get it. This should be one of my most important goals, yet it is the one area that gets the least attention!
I became aware of the concept of 'Financial Independence' when I first started working with Aris at Maestro Planning Solutions, back in 2003. I've known Aris since we were kids... well 'kind of'. My mom and his aunty Sam both worked for MARA, and my mom frequently tried to motivate me to do well in high school by comparing me with Aris. I think Aris and I were both high-achievers. But I didn't get to know Aris personally until college. We both studied Engineering at Cornell University.
Anyway, Aris is now an entrepreneur, pursuing his dream. He quit his 'day job' in Silicon Valley, got together with some friends, and started a new technology business in Malaysia. This is after winning Malaysia's Venture 2002 Best Business Plan award. Even though we're of the same age, and worked together on many occasions (we also worked together promoting Malaysia at the Malaysia Association at Cornell University), I look up to him in many ways. Aris is a man of vision, a man who knows what he wants. And having a vision for the future is half the battle for going to where you need to go.
I think my biggest obstacle achieving more financially, is the fact that I've had it easy. Like the quote at the top of this page says, "We survive on adversity and perish in ease and comfort", and I've been living quite comfortably most of my life. And there's another saying "Good is the Enemy of Great" by Jim Collins, which I also agree with. I just can't settle for good. I HAVE to strive for GREATNESS! But what do I want? How will I achieve Financial Independence? Do I need to start my own business? Am I ready? So many questions...
Well, the good news is, I kinda know where I need to go. My vision isn't clear yet. But with some direction, and a lot of reading, I should be able to go to where I need to go. I'll start by putting into practice, the things I've learned from all the motivational books I've been reading (well so far, I've only read one).
By the way, my definition of 'Financial Independence' is having enough passive income such that one does not HAVE to work, and would pursue work in something one truly desires. I couldn't find a better definition of 'Financial Independence' on Wikipedia. Maybe it's called something else to other people. Anyway, it's like retiring, but does not imply a retirement age.
Make it BIG!
Copyright Azroy Kandan 2007
Last Updated: 2 July 2007