As from April 2013 my Journey in Investing is to create Retirement Income for Life till 80 years old for two over market cycles of Bull and Bear.

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Monday, 2 April 2012

Understanding Asset and Liability (3)

Read? Understanding Asset and Liability (2)


Read? The place of residence you bought is not an asset?

Interesting question to think about. Right?

The international standard of computing our net worth is to exclude the value of our residential home as an asset and there is obvious reason to do that. I don't think the international standard don't suka suka exclude it.

In Toa Payoh Central, there will be many more 5 rooms HDB millionaires if they are to include the value of their HDB flats as part of their net worth.

But, how much of these folks will begin to live and feel like millionaire if most of their assets come from the worth of their million dollars HDB flat? How many of these "millionaire" can fire their boss tomorrow if they can't tahan their boss anymore?

These "millionaires" may be sitting on Gold mine; but without extracting the Gold out of the mine to exchange for basic needs. They will soon become starving "millionaires". Will they still feel like millionaire?

The moral of story

A conventional millionaire is the one who has other assets producing investment income as cash flow or can easily convert  part of their other assets into cash flow and without having to do much adjustment to their current life style by a major down grade.

May be we can classify our residential home as one extra line below the conventional net worth as contingency asset and that may make every property owners happy.

3 comments:

  1. Hee hee, I'll call your bluff.

    http://www.investopedia.com/terms/n/networth.asp#axzz1qqVJWbAc

    I play a mean game of Facebook Texas Hold'em Poker!

    LOL!

    ReplyDelete
  2. Remind me of "The Millionaire Next Door". He may be one of your neighbours yet he seems to have nothing on him. He drives a "poor-man-working-class" 7-year old car. His house is his castle. He really looks very ordinary working class. Have you read this book? "The Millionaire Next Door".

    ReplyDelete
  3. In any case, they have that million dollar apartment while I am still struggling to save up for the down payment.

    ReplyDelete

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