Sunday, January 5, 2014

Realisation & The Game Plan

Realisation is 50% of the battle won.

At some point in time, we all get sucked into this consumerism black hole and we try to keep up with the purchases our peers made. First comes the branded items, then the fancy cars and finally the house which makes it seem like we are doing well (ending up with a 30-40 year mortgage). You see, all of these are not assets.

Branded items have little or no resale value but are bought to feed one's ego. To quote Dave Ramsey, "We buy things we don't need with money we don't have to impress people we don't like".

A car on the other hand depreciates by up to 30-50% by the first day of ownership and the house cannot be sold as long as you plan to stay in it - making it a long term liability and not an asset. While these points may seem rather obvious, this is the typical path that white collar 'prisoners' take, entangling them in the middle class strata for the rest of their lives.

I choose to take the other path - the one less travelled.

My game plan for 2014 is as follows:

1) Clear off my debt
2) Build up an emergency fund which will last at least 2 months of unemployment.
3) Save 30% or $1000 of my monthly income, whichever is higher.
4) Invest the difference in dividend stocks (basically to hedge against inflation)
5) Leverage on property investments in the longer term.
6) Increase streams of income.

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