Love Your Money. It Will Love You Back.

While America is reeling in the possibility of a recession, here in Asia, we are facing a boom. Singapore's GDP last year grown by 7.5%. Many people started spending on luxury goods even though they are not in a need to spend extravagantly to replace a still new item.

I have heard quite a handful of people asking if they should change their 3 years old car, for a new car. Exploring what a car salesman would say to his potential car buyer.
1) No Warranty
Sales talk : Your car is 3 years old, warranty has run out.
Truth : A 3 years old car is still rather new and even if you do not have a warranty, it is still cheaper to drive on than change car.

2) Lower Installment
Sales talk : You may save by changing to a new car (lesser monthly installment, but prolong 10yrs loan)
Truth : You have paid 3 years installment, how many more years do you have left? It will be cheaper to continue with this installment.

3) Why Pay Government
Sales talk : Your current COE (Certificate of Entitlement) cost $30,000 while it is $14,000 now. Why pay government the extra when you can save with lower COE.
Truth : Import tax is about 170%. How much more will you pay for a new car as compared with the savings on COE?

I read an interesting article and shall share, with the inclusion of your savings that could otherwise be wasted on something unnecessary.

If you long for a more fulfilling relationship with your money (stretch your dollar), remember this simple truth: When your money doesn't feel appreciated (waste away), it won't appreciate for you in return (you end up having lesser).

1. Don't squander its potential
Put your cash some place that can earn more money for you. Don't demean it by locking it up in a pitiful savings account. Let's take a look at what your $20,000, say, over 20 years, could do for you.
1.1 On average, traditional bank savings accounts pay 0.3% (currently) on deposits. Your $20,000 after 20 years will be $21,236 (only grew by $1,236).

1.2 If you had invested this money in a money-market mutual fund, giving you 3-4% yield, you will have $36,415 to $44,451 after 20 years (grew by $16,415 to $24,451)

1.3 If you had invested this money in a high return investment, giving a 15% yield, your $20,000 will be worth $394,390 in 20 years (grew by $374,390)

See how a sum of $20,000 can grow with the right investment?


2. Show your sensitive side
Abusing your money, spending unwisely and being oblivious to bad habits are surefire ways to doom your financial relationship. If you cut back your wasteful spending (eg traffic fines, credit card interest, daily lifestyle, etc).

A monthly savings (in-turn, invested) of $300 over 20 years would give you a total savings of $72,000

2.1 If it's left in the bank with 0.3% interest, the $72,000 is only worth $74,194 after 20 years.

2.2 If it had been wisely invested with a yield of 10%, this $72,000 will now be worth $227,810.


3. Plan for a future together
No doubt you dream about your future, and no doubt that future involves growing old together with your money. That means you need to invest for the long haul.

When you're in your twenties and thirties, you would have more years to invest your money to make even more long term growth.

For example, if a 20-year-old saved just $100 a month in a fund earning 10% annually, he'd have nearly $1.05 million by the time he turned 65. And if he increased his contributions as his paychecks increased, his money could grow to $1.5 million or $2 million.


(source : http://www.kiplinger.com/columns/starting/archive/2008/st0213.htm)