If we had to raise a child, we’d be able to afford a landed property in about 60 years. If we had to raise four, the only landed property we’ll ever have is someone’s front porch when they aren’t looking. It’s not impossible though; here’s how it happened for two people:
Meet The Couple
James and Paula (not their real names) are Secondary school teachers in Singapore. And before you comment on how our teachers are hardly struggling middle income types, take note: they also had to raise four children.
(I don’t know if dealing with a few hundred children as a job makes that easier or even worse).
Their delicate financial balance aside , the couple were intent on getting private property – with the hope of one day getting a landed property. Thanks to SingCapital’s Alfred Chia, they were able to navigate their way there eventually.
The First Opportunity
Their first chance at a private property came with a colleague left Singapore in 2003:
“We were looking to buy our first private property because a colleague was moving to Australia and asked us to buy the home. It was our real estate salesperson who told us to meet Alfred first, to see if we would handle the purchase financially.”
On a recommendation they contacted Alfred, who conducted a financial planning process for them. The process measured the couple’s financial health, taking into consideration factors like:
- Paula was considering quitting her job at the time, to focus on the family
- A purchase would mean a lack of funding for their children’s education
- The value of their HDB flat was about the same as the purchase price of the new property
- The private property was more than 15 years into its 99 year lease, and in a remote location. It’s only real appeal was that it was big.
Considerations also included endowment plans for their children, CPF investments, and enough insurance to cover their children if anything happened to them.
Alfred determined that they didn’t have enough to buy the property, and he didn’t do this by shaking a Magic 8ball. A Comprehensive Financial Planning Process was applied by Alfred to help the couple come to a conclusion.
Alfred’s in-depth financial planning process works as follows:
- Define roles and responsibilities (Explain the relationship between his firm and the people who consult him)
- Obtain financial information on the client’s financial situation (see above)
- Analyse client’s financial circumstances
- Propose recommendations, to get what the clients wants financially (recommendations in investment, loans, protection, etc.)
- Implement recommendations the clients agree to
- Update the client’s strategy to accommodate changes
- Produce the financial plan for the client to hold on to
The Second Opportunity
Five years later, James and Paula had to start looking again. Their three children were growing up. And if you have kids, you know the play space required for a growing child ranges between one continent and infinite.
Well they had a flat, and the three children shared a single bedroom.
The couple started looking for a unit with four bedrooms, to accommodate the entire family. Their choice was a condominium, with the usual pool and clubhouse. Alfred suggested they rethink it:
“Alfred showed us how we were going to pay more than $1 million for a little space in the sky,” Paula says. Alfred also asked how often they were going to use the facilities.
“We would still be going for our holidays, and we won’t use the pool every single day, so after a while, the novelty would fade.”
The Third Opportunity
A couple of months later, James and Paula found another property they liked. This time they went ahead with the Option to Purchase (OTP), which meant a $1,000 deposit.
At which point, the consultation with Alfred went: *Disgruntled look* “You did what? Oh well, may as well go through with it.” Well, that would be the case if it was the average financial consultant.
Actually Alfred checked out how much the property cost, how long they intended to stay in the property, and how much they expected to sell it for. His final question was: “Do you want to lose money now, or later?”
They decided to lose the deposit.
The Landed Property
Today, James and Paula live in a landed property. The rejection of the first three properties, together with some careful financial management, laid the groundwork for it.
Paula, conservative by nature, was hesitant about taking up a loan. The couple also didn’t have side income from private tuition. But Alfred worked out that this time, they could afford it – their holding off on the second property, even with the loss of the deposit, meant they were in a much healthier position financially.
Do you think that you will always be one of those people who have to live from paycheck to paycheck and the story above is a special case? Well maybe you should come find out how you can implement a bit more structure into your financial life at Alfred Chia’s “Grow Rich Singapore Style” Wealth Management Seminar 2014.
Learn key planning skills and where you should start if you want to grow your wealth. With a small conference fee of $20, this is definitely something that is worth investing your time in. Interested? You can find out more and apply here.