Wednesday, January 24, 2007

Wednesday: Slow Wednesday

Its a Wednesday, a rather slow and sleepy Wednesday, where in stead of being on the task of chasing the almighty dollar, I'm here at a friend's house bashing out this blog entry in front of his computer and enjoying the company of Tommy, his cat. Tommy is the most affectionate cat I've meet. He enjoys cozying up to me and purrs contentedly while I stroke his ears.

Anyway, its been a fairly quiet week. Need to sort out the cheque from Gollin Harris, collect a few payments and settle a few bills. Life as always has been reduced to a set of daily routine items. First you do this, then you do that and before you know it, you are repeating yourself. Formulas are part and parcel of life, I guess. I've just not been terribly good at following them.

Bashed out an article on how they are allowing the banks to let the poor have a $500 credit limit. One of the arguments in favour of doing so is to stop the cash-strapped from going into the clutches of Loan Sharks. In theory, this is a well meaning idea. In practice, I'm inclined to think of my friend Michael G and his cohort of loan sharks. A credit line would be helpful. I think of the times I've been cash-strapped and the idea of having a $500 credit limit looks very appealing. But I manage my finances badly and people like Michael G manage theirs even worse and so here you have it. Easy credit, instead of being a crutch ends up making you even more dependent on it. - Michael G and his ilk don't need credit - they need a new mindset when it comes to financial management.

I put it down to the fact that I'm broke most of the time but money as a topic interest me. Since I usually don't have enough to talk about grand investments. However, I've become even more interested in the relationship that people have with money.

One of the areas of man's relationship with money that intreagues me is the way in which people precieve wealth. Most of us are obsessed with status. In Singapore it's always about whether you live in "Landed" "Condo" or horror of horrors in an "HDB." In the UK, the obession with real estate also exist - "Are you a council house pleb or one of the posh people in Mayfair?" Another universal obsession is the car that you drive or the places in which you hang out.

Don't get me wrong. High living is great fun but does it actually mean that you have money? What is money? To most of us, money is a status symbol. In Singapore, we get very worked up about the type of home people live in because the house is a status symbol. If you live in an HDB you are probably like the rest of the world. If you live in landed property it implies that you have money.

Having lived in the lap of luxury in my Dad's condo in the heart of Singapore and having been made to live in a hotel in the Red Light district, I've come to realise that alot of these things like big houses, cars and fancy cloths don't actually mean that people have real money. It only means that people have a high income and therefore the ability to service the means of making big-ticket item purchases. I suspect that many of the people who live in luxurious homes and drive flash cars are in actual fact mortgaged to their eye balls in debt. The banks are happy to oblige as long as they continue to earn their big incomes. But what happens when they no longer make those big incomes - will the banks call in their loans and if they do - then what?

I think the  person I have to thank for showing me the fact that high income and status symbols are not everything in life is my late grandmother.

My Grandmother was born poor and perhaps, because of this, became frugal by nature. Although the inheritance that she left her children did not ammount to a lottery ticket, it was a tiddy sum for a woman who spent most of her 85-years on the planet as a housewife. It's true that my grandfather made a tiddy sum in his day (he was a senior civil servant.) It's true that he left her some money when he died. However, he died relatively young, without a will and before he was entitled to a state pension. He also died in an era where inheritance taxes were extraordinarily high. - The way my grandmother survived 32 years without having to look for a job should provide the rest of us with a lesson on money management.

I think the key thing to grandma's survival was SAVINGS and understanding that having money does not mean having a luxury appartment and big car. Instead, money is CASH in the bank. Cash is the lifeblood of any economic activity and grandma understood that she needed to have cash in hand to survive her old age. As a housewife, she understood that her income was dependent on her husband providing her with housekeeping money. But what if that source of income died (Which was one of the reasons why she was against having joint accounts - she would always say - what happens of the other party drops dead - you can't touch the money can you?) So she saved her housekeeping money very prudently.

Granny kept accounts like Swiss gnome. Walk into her house and you would find that the tables would have a stack of blue note books where she would record each and every penny she spent with accuracy. This was, she said, a way of knowing how to manage her savings. Somehow this housewife managed to save a not too small sum of $50,000 in cash from the housekeeping money that Grandfather gave to her.

If Grandfather did not leave her a pension, he did leave her with an understanding of the stock market. Grandmother monitored the stock market very carefully. Her cash pile was well guarded and she was never a wild speculator. She did not make the sums that Warren Buffet and George Soros did but she never got burnt through speculation. She played the market carefully and successfully. It was always buy blue chip shares. Wait for the stock to go up and sell at a certain point - if the stock sky rocketed after she sold, she would just write if off the good fortune of the other shareholders. If the stocks went down, she would wait and cut her losses at a certain point. - The jealous relatives might have accused her of being greedy in the way she horded her cash but the truth was, she was not greedy and managed to ensure that good sense was never overcome by greed and that kept her afloat in the financial market.

Same thing with her property investments. She had to sell the house that she and Grandfather built, thanks to high taxes (That house is apparently worth millions today.) She moved into a smaller house (kept a cash pile from the original) and lived in it for over a decade. Then she sold that house (with a huge profit) and moved into a smaller HDB flat. A few years later, she downgraded (Made a profit - as things would have it she downgraded at the end of the property boom of the early 1990s - a few days before Thailand was hit in the 1997 Asian Crisis) and moved into an even smaller flat where she spent the rest of her life.  At no time did she complain she as personally being down graded - she just accepted the fact that she needed cash (before she actually did) and somehow her property investments were profitable.

Grandma was never unashamed to take a bus. Her constant grumble was that we were all too keen to enrichen taxi drivers. When she was sick, she went into class c wards and poly clinics. Sure, she admited moving from a landed property into a 3-room flat was a downgrade but it said nothing about her personality that she couldn't live without and guess what - She had cash in the bank while her more status concious friends and relatives were forced to come to her when they were in fix.

Cash - somehow its a forgotten comodity in our daily view of life. But somehow, somewhere, those who end up ignoring pressures for this and that status symbol usually end up having the last laugh - particularly in the down turn when recision hits us and we become cash-strapped.

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