“An important distinction is that rich people buy luxuries last, while the poor and middle class tend to buy luxuries first. The poor and middle class often buy luxury items such as big houses, diamonds, furs, jewelry or boats because they want to look rich. They look rich, but in reality they just get deeper in debt on credit. The old-money people, the long-term rich, built their asset column first. Then the income from the asset column bought their luxuries. The poor and middle class buy luxuries with their own sweat, blood and children’s inheritance.” Robert Kiyosaki, author of Rich Dad, Poor Dad.
If you understand the words of Robert Kiyosaki, author of Rich Dad, Poor Dad, then you would better understand why money woes affect many people around the world. While individual opinions will always differ, there is without doubt a high strangling amount of debt hanging over the heads of many people out there who have unwisely spent beyond their means on flashy things they do not really need but want. The irony in today’s modern world is that we often buy things we do not need to impress people we do not like.
For a few years already, my Friendster and Facebook profiles have clearly indicated my long-established disagreement with materialism and consumerism. I knew long ago with certainty who I am and what I believed in. I wrote this on my Facebook profile.
“I prefer life in Australia where… I am away from, and less affected by, Asian taboos, superstitions, narrow-mindedness, traditionally rigid social expectations, male chauvinistic hypocrisy, insecure materialism and soul-less consumerism.”
Much of our consumerist attitude results in impulsive and excessive expenditure instead of saving to invest and later buy only what we really need for a comfortable lifestyle, for a marriage, for children's education, and for life after retirement. Banks have leniently given credit cards and loans to satisfy the impatient wants of typical Generation Y who ambitiously wants everything now. It encourages greater spending to incur higher debt that is to be repaid more with interest and fees. Unlike bankers of the past, bankers today have become riskier and reckless with money.
I know I do not spend beyond my means to deliberately impress anybody with luxury material possessions. I have no consumer debt lingering over my head that give me constant worries.
“Today, I am still challenged on the idea of a house not being an asset. And I know that for many people, it is their dream as well as their largest investment. And owning your own home is better than nothing. I simply offer an alternate way of looking at this dogma. If my wife and I were to buy a bigger, more flashy house we realize it would not be an asset, it would be a liability, since it would take money out of our pocket. So here is the argument I put forth. I really do not expect most people to agree with it because a nice home is an emotional thing. And when it comes to money, high emotions tend to lower financial intelligence.” Robert Kiyosaki, author of Rich Dad, Poor Dad.
Robert Kiyosaki holds the opinion that many young couples make the mistake of buying property too early because it locks them typically into a 30-year mortgage of which robs them of money in the future that could be used to invest in other opportunities that could grow their wealth. Like a brand new car and a large flat screen television, he sees a house as a possible liability, not as a definite asset, and reminds that property prices do not always go up. Bear in mind that in his book, his rich dad lived frugally in an aging house.
Facebook founder Mark Zuckerberg is a billionaire worth over US$6 billion, but he still lives with his girlfriend in a sparsely furnished rented house in California. Latest news revealed that Zuckerberg has recently bought a modest house which he is due to move into soon. His girlfriend continues to drive an entry-level luxury car instead of a high-end prestige model. Media reports suggested that Zuckerberg may be taking after fellow frugal billionaire and investor Warren Buffet who was ranked by Forbes as the richest man in the world in 2008 but is still living in the modest house he had bought in the 1950s.
I do not believe that I am a stingy miser but just sensibly frugal towards reaching certain goals, especially being more careful during these uncertain times with bad events occurring around the world threatening financial stability. Living in Australia also allows me to be less pressured by the conformist society of Singapore where many chase after luxury material possessions that cause high levels of debt by credit spending among those who could be more careful with their money.
The obsessive acquisition and excessive accumulation of material possessions is not very appealing to me. Like many typical Australians, I generally prefer spending money on having an enjoyable time with friends and loved ones to be happily remembered such as dinners, house parties and road trips. I am pleased and proud to have done many of these activities to the envy of some.
For years living in Australia, with much self discipline and careful thinking, I bought only what I really need that would make me feel happier. Years ago, when I was actively photographing, I bought 2 new prime lenses for portraits, and also upgraded a general purpose zoom lens twice. From these items, I received happiness in my photography. Since I slowed to a near halt on portrait photography, I strongly resisted the urge to buy the newer Canon EOS 50D digital SLR camera and a new prime lens because I knew that those things would probably not make me happier. However, I upgraded my compact digital camera seeking better functionality 4 times to improve social life and love life photos for which I have no regrets even today. These compact digital cameras gave me much happiness capturing images of events I want to remember far into the future. Many of these images are in my Facebook profile.
I also resisted replacing my old-fashion still-good bulky television with a new large flat screen television because I seldom watch television anyway. A brand new DVD player I bought months ago to connect to the television was rarely used. I knew that a new large flat screen television may be underused again, or worse, overused causing me to be less productive with my time on other important matters such as friendship, love and investment. Either way, seriously, a new television would not have made me happier, maybe even more miserable, and I knew this long ago.
Already a benefiting iPhone user, I now question whether I need or want a larger portable computing device such as an iPad or a laptop which I can use for mobile data storage, emailing, social networking, share market monitoring, e-book reading, movie watching. This was temporarily and partially resolved with a cheap handheld media player slightly bigger than the iPhone.
Strangely, spurred by unexplained emotions, since the start of 2011, I bought 2 model cars, a beautiful Japanese anime figurine, and 2 Japanese photo books. These items do not have any strong useful purpose to me, and are only beautiful to show off on a shelf. These purchases were examples of emotional consumerism.
Just as strangely and foolishly, the money I had saved for over 6 months towards something important was blown away quickly on road trips in an attempt to heal emotional anguish. This money could have been wisely invested on assets to grow more money.
Robert Kiyosaki was probably correct when he said “And when it comes to money, high emotions tend to lower financial intelligence.”
Due to the Japanese earthquake and tsunami, the massive US debt, and the European debt crisis, share markets have weakened because of emotions - panic has caused massive selling that resulted in falling share prices and losses.
My father is not an investment guru. He was fairly frugal throughout his life. I understood why he did not buy a car and refused to buy luxury products in favour of spending to enjoy a good time with the family. Saving to invest, and investing smartly to make his money work for him, somehow he managed to afford a large 6-digit sum of money on his 2 children’s university education in Australia, and never asked to be repaid that huge expenditure. He has done a lot for his children, and he assured me that he has enough to retire.
Emotion can cloud logic. Emotion leads us to unwise decisions, unkind words and uncharacteristic actions. Logic helps us make clearer sense of some difficult matters. Some people surely know this, perhaps better than others.
I know logic tells me to be sensibly frugal for the uncertain future in our constantly troubled world.
