cash

What’s in your wallet? Money Meme

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Here’s a picture of my wallet as it is right now… It’s quite a bulky thing, but that’s probably because of all the crap I keep in it! I don’t usually carry it in my pocket! It’s in my bag most of the time.

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So, let’s see what is in it!

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One Taiwan ARC Card; two driving licenses; one car registration; two insurance cards (one already out of date); one bank account number (why?); a 2007 calendar; one NT$1000 bill; a National Health Insurance IC card; an MRT card (called EasyCard!); a CostCo Membership card; a Telephone Card (with IC); a Subway Customer Card (we have one near here!); a MasterCard and some ATM cards, none of which I use particularly often; and a NT$5 coin. That’s it. Oh, and I found an insurance sticker with a phone number that I SHOULD stick on my car window, but always forget to…

It was helpful, I threw out the old calendar, and reminded myself to renew my car registration; I also have to stick the Insurance Sticker on the window, just in case.

OK. So here goes: who’s going to follow me in this meme! Let’s see if Elizabeth at Table for Five will…!

Do mention in the meme: This meme was started by InvestorBlogger.

Buying a house: saving for the deposit? It does have advantages…!

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With the advent of 100%+ mortgages, borrowers these days find it easy to borrow the money they need to buy the house they want. It didn’t always use to be that way. In fact, up until the recent credit boom, borrowers were required to pay a deposit on the house from their own savings. In fact, in Taiwan, it is still this way. For new houses and pre-construction units, the deposit is actually between 10%-20%, but for second hand units, it is typically 30%-40% of the sale price.

When my wife and I first married, saving any kind of deposit was quite difficult, because we were starting from nothing. We had nothing in the bank after our wedding; so purchasing any property was simply out of the question. If we had been living in the UK or US, it would have been quite simple to go out and borrow the money for our house, our furnishings, and everything else we needed for the house.

Looking back, though, I realized that the fiscal discipline that we learned from saving for the deposit taught us much more about how (dare I say NOT) to manage our cash, cash flow, savings and credit cards. So, today when I was chatting with my good friend, Cindy, about buying a house. She had just moved into her own apartment, and was dreaming about buying a house. But it’s difficult when you are starting out to save money, because even renting a house requires quite a bit of cash.

After I got home, I realized that it was having to save for the deposit that helped us to manage our cash flow much better. It took us over 5 years to save up enough for a house, but we did it! And, at the beginning of the five years, only my wife had a proper job!

So why? Simply, because if you can save a cash deposit, then you have learned a number of important skills for a house-holder:

  1. you can manage your income/expenses carefully;
  2. you have budgeted properly;
  3. you have consistently saved up money;
  4. you know that it’s possible to manage your money without spending it all; and,
  5. by committing your own money to your house, you are making an emotional commitment that having a 100% mortgage may not allow because you are risking your OWN money.

Together, these qualities are more than enough to prepare your for the task of buying and managing your own house. More importantly, with these skills, you are setting your stage for managing your finances for the rest of your life (God willing!).

In addition, when you do purchase your house, you will have a ton of advantages that you didn’t reckon on in the first place:

  1. lower overall mortgage rate than 100% mortgage;
  2. lower overall mortgage payments vis-a-vis if you had paid for the house in a 100% mortage!
  3. a better credit record because you’re not overleveraged;
  4. you’re not overleveraged;
  5. in a tough seller’s market, you’ll have some more ‘protection’ against negative equity situations;
  6. you may even be able to use the savings habit to pay off your entire mortage much sooner saving a lot of interest payments over the term of your mortgage!

So, if you are forced by circumstances to save for a deposit for your house, look on it as an opportunity not a burden! We learned a lot… Seize the chance to save! No matter how hard it is for you to cut back, it will be worth it in the end.

Did you have to save for a deposit for your first house? How much was it? Was it difficult or easy for you to get it together? I’d love to hear how you

Choose your business partner – CAREFULLY!

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One of the best pieces of business advice I ever got was “You can’t do a good deal with a bad partner.”Having had many partners over the years, I can say that this statement holds true. So I thought I’d offer some personal experiences I’ve had with partners both good and bad. Finding the Right Business Partner by Robert Kiyosaki.

A new line of business

We’ve been considering expanding our business to include ‘after school’ classes for students as a way to supplement our main program and stench defections to other schools that already provide ‘after school’ classes. We have lost a fair number of good students on this issues, students who were making great progress in their language development, but whose parents didn’t quite understand what we were doing, and how our student development programs differ from the more ‘traditional’ programs.

After school classes
In Taiwan, there are many schools that provide these kinds of services; in fact, the ‘industry’ hires thousands of workers to provide for tens of thousands of students. We already know that this is a viable business. And, if we wish to grow our main program further, it may be something that the market requires us to do. However, none of the partners have the skill set to provide this kind of teaching to students, and we’re already quite busy anyway. Inevitably, this means we are forced to choose between hiring an employee or finding a partner.

Finding a partner
We’ve already investigated the possibility of finding a partner, and we found a person who might be very suitable. Unfortunately, she didn’t have any cash to invest in the business. While investing your labor is, indeed, a well recognized form of investment in many countries, it had repercussions for the person concerned. So she brought in a friend of hers, a self-confessed business woman, who had BIG plans, much bigger than we could afford, much bigger than we imagined, and much bigger than we felt viable in our market area.

Therein lies the problem: in finding one partner, we’d have unwillingly gotten into bed with two partners, one of whom was an unknown entity to us; and one who would certainly have wanted a larger piece of the pie.

Cashflow, cash low and rosy predictions
But that wasn’t the only problem: it is likely that the addition of an extra staff member and partner combined with the additional cost of running a business on life support would have drained our primary business beyond what we could have reasonably handled. We’ve always been quite conservative in our predictions from day #1. In fact, when the school managed to pay a full rent on its first three months in business and pay nominal salaries, too, we were all QUITE surprised. We’d budgeted for six months of full rental payments and expenses, until the business started generating cashflow.

Cash, loans, cashflow: Going, going, gone…
 In Taiwan, over the years, I have seen so many businesses come and go. In fact there are several slots on the main street near where we live that regularly change business. In some examples, the businesses are gone in just two or three months. In one location near here, the first business started out as a baby or children’s clothes store, then it became a woman’s clothing store, then it was empty for a while. Now it is a hair salon.

In other places, I’ve seen supermarkets open and close in less than six months, bakeries come and go, etc.. Perhaps in some cases, the business owners have misunderstood the market. In many situations, though, insufficient provision for cashflow while business is building has been the principle problem. Combine this with overly rosy income projections for the first six months, and you’ve got a recipe for disaster. In some cases, I suspect the initial capital was borrowed from friends, family, banks, etc., and once used, there was nothing to follow up!

It pays to be cautious…
So, choosing a partner who understands your business and your own situation, who accepts the risks of running such a business, and who has the financial wherewithall on their own account (without borrowing the cash) is crucially important.

Have you experience working with unsuitable partners? Or suitable partners? How did you find them? Did you deal with the problems?