New Year, New Value for Money

Many blogs have touched on New Year. To be creative, though I know I am not very, but I always try to be, I will give an advice on money for the New Year, which is predicted to be worsened.

Saving may be a great advice in a recession. But the government’s spending policy will be madness if you agreed on the first advice.

As we all know, in a recession inflation hits the sky. Inflation, according to dictionary, means an increase in the volume of money and credit relative to available goods and services resulting in a continuing rise in the general price level.

Or in human languages, money decreases value.

I remember my mom told me that she use to buy a bowl of mee soup with 20 cent and my grandfather used to buy a bungalow with RM1k.

After three or four recessions like what it is happening today, a mee soup costs RM4 ++, while the bungalow costs RM1mil.

If you think that real estate always increase value, I will tell you that mee soup is a great investment because the price multiply as the real estate, and it is very affordable. Why don’t we buy 10 thousands bowls of mee soup and keep it and sell it after ten years? You must be a genius cleverer than Einstein and Rockefeller if you are able to sell those mee soup ten years later.

Obviously, it is not the real estate or mee soup that increases price. It is our money in our pocket and our saving account that decreases value. A bowl of mee will always be a bowl of mee and a bungalow will always be a bungalow. But our banks always print extra money to spend. If you have built a bungalow, consider the price you want to sell it in both these situation:

1. Only 10 people want your bungalow and each have RM1 mil to spend.

2. Only 10 people want your bungalow and each have RM1k to spend.

Consider you are the only bungalow builder in the world and those 10 people are the wealthiest people in the world. How much will you sell your bungalow in both situations?

Apparently, it is not the money that holds the value. It is the product you created and its need among people that backed the money value.

So, next time you save your money, think twice; when you spend for your New Year goods and your latest mobile phone model, think trice.