Expenses

This category looks at stuff that we spend money on!

Wow! Cars ARE expensive…

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Well, we bought a new car about 2 years ago. Prior to purchasing the Mazda 323, we were unaware of the total expenses that owning a car would incur. The list is quite long:

  1. loan payments
  2. taxes
  3. repairs
  4. oil changes
  5. gasoline
  6. insurance
  7. parking fees

… to name just a few. More importantly, we were surprised by the amount of depreciation in the first year, alone. Now our car is only worth about 60% of its purchase price. This has to be the biggest single expense that we hadn’t factored into the equation. So I am wondering if purchasing a second hand car would be a viable alternative to purchasing new.

Of course, if you purchase secondhand, you will need a reliable way to find out that the secondhand car of your dreams! Otherwise, those hard earned savings may be thrown away. Opinions, thoughts?…

Small Loan, Big Returns

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If you can get a no fax cash advance, then perhaps you don’t have to turn to a family member. But if you can’t, a family loan is a great thing, indeed. I found this to be true. In fact, my father was kind enough when I was out of college to loan me the grand sum of $200 to pay for my ELT course training. Turned out to be the loan that started a chain of events that led to where I am now. As a result of his generosity, I took training that enabled me to get a job in a community center role teaching ESL, then with that experience, I was able to get on a Certificate Course (RSA CERT of TEFL). After that, I emigrated and found work teaching in Taiwan. I have now my own business, and a satisfying career. All from a $200 loan. I’d encourage anyone taking a similar route, to look at the page for these tips. In the event that your loan has to be repaid, this page can really help you focus on paying back your loan, properly and efficiently.

Assets vs. Liabilities

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A reprise of Rich Dad Poor Dad. There has been much discussion of the authenticity of RDPD’s and the background of the author. You can read about that at other blogs: Rich Dad, Poor Dad, Liar Dad, Thief.  However, one criticism of the book is below along with my own interpretation of RDPD’s theories.

Jeff writes – “You tried to demonstrate that a house is a liability because you pay property tax on it. That is irrelevant. You also have to pay a tax on your car (license fee). Does that make your car a liability? You pay taxes on your income. Does that mean that earned income is a liability?”

Actually, RDPD clearly defines an asset as something that puts money in your pocket and a liability as something that takes money out of your pocket. So, if you live in your house, you pay a mortgage, taxes, etc., it is effectively a liability because the money comes out of your salary to pay this stuff. In other words, the house is costing YOU money.

Whereas if you rent out a house to someone who pays rent, as long as the rental income covers ALL expenses (inc. taxes) plus a little, the house becomes an ASSET, ie. it is making money for you.

In truth, this is a simplification of the situation, as in a balance sheet, a house with a mortgage would be recorded twice, as an Asset and a Liability. Anyway, he makes an interesting point that our passion for buying houses to live in really isn’t such a great way to make wealth (except through capital gains) as it produces no regular benefit.

But I do think he makes an interesting point: somethings that we attribute as having asset value aren’t really assets at all. A Car is a quickly depreciating asset, and if you are paying car loans, some of the time, the net difference between the value of your car and your outstanding loan may turn it into a clear liability on your personal balance sheet, esp. in the first six months where you haven’t paid anything off, and the car has suffered the sharpest decline in its value.

“A house is an asset, period. ”

Another point that RDPD makes is that yes, the house is an asset, but the question is whose? If you buy a house and its price decreases, your mortgage (assuming you have one) shifts into negative equity position, ie. if you sold, you would still have to repay the amount of the loan beyond the sale price of the house. Could it be said to be an asset then?

And if you don’t believe, do you honestly think that housing prices will keep heading up as they have been doing so ‘Mmm’.

Does this clarify things a little?

What I admire is RDPD’s ability to string simple observations out to a whole book! That’s quite an achievement. I did enjoy playing the game, though it is pricy.

Kenneth