Wrong Perception about Debt-by KC Lau

8 11 2016

Wrong Perception about Debt

The first wrong perception is that debt is considered evil. Some common advice are:

  • settle your housing loan as early as possible
  • don’t borrow to invest

Your parents told you to settle your housing loan ASAP. My parents used to say that too because they bought their only home with 50% cash, and the remaining loan was settled within 3 years! Even financial planners tell you to clear your debt.
However, the fact still remains that most rich people I know use some form of debt leveraging. Debt is a constant in their lives, whether it is to a expand business or to invest in properties. Some “property gurus” I know have more than RM10 million in mortgages.
But before you go borrow as much as you can, you must know how to make better investment return with the cheap money you borrow. If not, you are destined for disaster.

Wrong Perception about Time

The second wrong perception is about time. Yes, time is money! They are usually tradable, one for another. You work hard all day long for 5 days so you can get 2 days off during weekend. However, if you always end up working overtime just to trade time for money, you’ll get even less time off.
People say “work hard and one day you’ll get rich”. Working hard is the norm nowadays and you’ll face billions of people around the word working 80-100 hours a week and still getting nowhere in life! Some people juggle three jobs a week to pay off their student loans, for instance. It’s frustrating that even after getting a higher education at an Ivy League university and putting in backbreaking effort, it still doesn’t matter in the end!
The fact is rich people hire more people for their expertise and not only their time. People with special expertise and those who put in extra effort are kept for the job while others are laid off. The rich buy other people’s time.
While their gardener is mowing their lawn, they are playing golf and closing business deals. While their employees are taking care of the customers, the bosses are taking their family to vacation. They let time compound their wealth using the power of compound interest but use their own time for more meaningful work.

Wrong Perception about Education

The third wrong perception is about education. Your parents spend on your education and some people also end up with a high student loan owing largely to the PTPTN. In fact, in 2013, the 2nd Deputy Education Minister stated that 1.33 million students could not pay back their loan on time resulting in a whopping RM2.11 billion loss for the PTPTN!
If you think a fancy PhD degree from an Ivy League is your ticket to a high salary job, then you are sorely mistaken. You may get your first job with the higher education certificates, and it just does that. It no longer matters after you’ve work a few years.
If you are smart, chances are you’ll land a good job in your field of study. What then? You’ve landed a job only, one that you might not leave for a very long time, but will that make you rich? Today we see the smartest people go to work for the largest companies and end up slaving away for 40+ years for the richest employers.
Think about a medical student aspiring to be a doctor. He first has to go through 5 years of college, then another few years for their residency and training, then finally study for master in certain specialty. By that time he becomes a specialist, it will be over age 30! Undeniably doctors make a lot of money if you count it by trading time. There are a lot of surgeons who make a ton of money, but most have no time to enjoy it. So some will buy a car which costs over RM500k and sometimes even buy a piano that is more than RM750k!
The fact is education is important, but gaining knowledge doesn’t end in school. A degree can land you a job, but there are a lot of other skills required for a successful entrepreneurship, a lot of which are not taught in schools. Mark Zuckerberg (founder of Facebook), Michael Dell (founder and CEO of Dell Inc.), and Bill Gates (co-founder of Microsoft) are just a few among many billionaires who were college dropouts. They are highly intelligent people, and learning take place all the time, not just during college. That’s why they didn’t need to complete their degree studies.

The Rich Life

Well, I am NOT urging you to become extremely wealthy. You actually don’t need to be rich to live a rich life if you understand what it means. If you are slaving for money, by the time you save enough, you might no longer have the time or health to enjoy life!
Take the story of Laura Dekker who, at just 15 years of age, circumnavigated the entire globe in her tiny sail boat and became the youngest person ever to do so! She spent two years sailing around the world and faced court case by her very own government to take charge of her dream. What do you think is her perception about time and education?
Now that’s what I call a rich life!

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