Your 2019 Resolution – Practice Financial Discipline

By Property Soul (guest contributor)

Do you have a new year resolution for 2019? A common goal for many is to lose weight and stay fit.

Today has an article on the Ministry of Health’s vision to help us “live long, live well and with peace of mind”. To lower obesity and the diabetes rates, the government will introduce a sugar tax.

It is fine. Fresh and healthy drinks don’t need sugar to sweeten the taste. Just like reasonably-priced properties don’t need gimmicks to sweeten the deal.

The government will also raise the legal smoking age every year up to twenty-one by 2021. You can only have your first puff after you reach twenty-one? That’s exactly the age I graduated from college and had my first job.

For my generation, I remember eighteen is the age we were considered adults. Once we reach eighteen, we are expected to be mature enough to exercise our personal judgement and make our own decisions.

Are we regressing or what?

Exercise is about discipline

On the first day of the new year, the park connector where I go for my morning jogs was jam-packed.

Everybody was eager to shed off those extra pounds gained from the year-end celebrations. From a distance, the areas along the canal looked like there was a running event.

The next day only a quarter came back for their morning exercise before work. On the third day, most of the original crowd disappeared. According to past experience, everything will be back to normal by the fourth day.

I have been staying in the same estate for over eleven years. Over the years, I have seen familiar faces who run regularly. Most would run for some time, then disappear.

But there are two retired uncles who run every morning – the only two for the last eleven years or so. We will say hi when we jog past each other in the morning. They may have grey hair. But the shape of their body is comparable to the young chaps.

Jogging has become my morning routine, except when I am overseas, sick, injured or pregnant. I went back to running six weeks after I gave birth.

The good thing is I never need to go on a diet to lose weight. The bad thing is I am still wearing the same clothes I wore twenty years ago.

Financial discipline is living within your means

If your wish in 2019 is to get rich, to be lucky at the casino tables, to win the lottery, or to profit from a short-term investment, instead of saying “Huat Ah” every day, you might want to read what MJ DeMarco wrote in his book The Millionaire Fastlane:

“More money is not a solution to poor financial management. Poor money management is like gambling at a casino, because, over time, the house always wins. Tossing more money at the deficiency is like trying to plug a hole in a dam with more water. More money doesn’t buy financial discipline.”

The two keywords here are “financial discipline”.

My 3-3-5 rule on housing affordability is all about financial discipline.

Till today there are still people who ask me whether the three rules are too restrictive and conservative, whether this is still relevant in today’s property market.

I think these people would be very happy if I wrote the next blog post to introduce a new “1-2-10 rule”: Buy when you have 10 percent of the property’s price. Buy when your monthly mortgage does not exceed half of your salary. Buy when the property does not exceed ten times of your annual income.

Humans tend to forget unfortunate events. That’s why we can’t learn from our mistakes. We are talking about lessons from mistakes we made that caused the Asian Financial Crisis, the dotcom crash and the sub-prime crisis.

“We behave as if the Black Swan does not exist. Human nature is not programmed for Black Swans. We have far too many ways to interpret past events to our own goal.”

– Nassim Nicholas Taleb, The Black Swan

‎Because of financial discipline, I won’t buy that home if I don’t have more savings than its asking price.

Because of financial discipline, I didn’t buy my own home until I bought all my rental properties.

Because of financial discipline, I won’t buy any investment property lower than my target return.

Because of financial discipline, I never buy any property at market price.

As Warren Buffet taught us, you must have the discipline to know what you can’t do and stay away from it. You will do fine with your investments if you have the right temperament and patience.

If you dare to be a contrarian and invest against the property cycle, ask yourself whether you have the patience to wait.

Have patience. Don’t be desperate. Because desperate buyers almost always end up buying the wrong thing.

“Unless you are a property trader, buying properties is a waiting game. Patience and perseverance are the prerequisites to win the game. It is researching, waiting, waiting again and buying — a four-step process that you are repeating over and over again.”

– Property Soul, No B.S. Guide to Property Investment

“I have learned that when you’ve done your homework, once you recognize that supply and demand is totally out of whack, and you make your move, you are definitely going to get very lucky.”

– Jim Rogers, Hot Commodities

Financial discipline is to do what you have to do

Saying it is easy. Doing it is another thing.

There are too many people in this world who are most creative when they have to find excuses to not do things:

You can buy a condo unit at a young age because you have well-to-do parents.

You can make money from property investment because you are lucky.

You can find investment properties with high return because you bought many years ago.

You can afford to retire early because you have a high paying job and a rich spouse.

Although none of the above is true, they still choose to believe in these explanations. To cope with their guilt of doing and achieving nothing, they feel much better by justifying other people’s successes with false interpretations. Then they can sit back and relax with no urge to do anything.

Japanese author Yamashita Hideko (山下英子) had a vivid description of people who have the habit to find excuses not to do the right thing in her book Dan-sha-ri (断舍离) or “To Break Away”:

“Some people have this habit to say ‘I have passed the age to …’, ‘You know I am already xxx-years-old’, ‘I can’t do this with my age now’ or ‘I am too late to …’ as an excuse not to try anything new.

Hiding behind the perfect excuse of getting older, they are justified to be lazy, forgetful, ignorant, careless and unreasonable.”

Hideko called these excuses the reasons for failure.

“People who look for the reasons for failure deter self-development. People who look for the reasons for success can change the future.”

It is true that our muscles will weaken as we age, especially when they are not used. What we don’t know is that the muscles of our will and determination will also be weakened over the years if we don’t train them.

Whether you choose to find reasons for success or failure, to do nothing or to do the right thing, it is entirely your choice.

Happy investing in 2019!

By guest contributor Property Soul, a successful property investor, blogger, and author of the No B.S. Guide to Property Investment.

 

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