Ex-Banker Likes Chalking Up Good Debt

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Ex-Banker Likes Chalking Up Good Debt

Post by Dennis Ng »

"Me and My Money" Column is a must read for me every Sunday.

Below is the interview entitled "Ex-banker Likes Chalking up Good Debt" I had on 4 Nov 2007 for the "Me and My Money Column" sharing my "story", I was still on my way to reaching my first million dollars then.

Ex-banker likes chalking up good debt
Lorna Tan, Sunday Times 4 Nov 2007

DEBT holds no fears for Dennis Ng, as long as it's the right sort of debt.
Since he is the founder of mortgage consultancy Leverage Holdings www.HousingLoanSG.com, this view isn't unusual, but it does contradict everything his parents taught him when he was growing up.

He told The Sunday Times: 'They always told me that if I do borrow, I should pay off my loan as soon as possible. I used to think that way too.
'However, after I became financially literate, I realised there was good debt and bad debt.'

Debt is bad, says Mr Ng, 38, when you incur it to fund your consumption through, say, car or personal loans or credit card spending. Avoid this type of debt or settle it as soon as possible.

Debt is good when you can use it to earn a return that is higher than the interest on the debt. For instance, keep your mortgage if 'it makes financial sense'. Mr Ng's comes to just over $100,000.

'Many people are unversed in finance and debt, so they stick to concepts such as 'be debt-free as soon as possible' without really examining them. If you really think about it, a housing loan is the cheapest loan anyone can ever get,' he said.

Interest rates come to 3 per cent to 4 per cent for housing loans, about 6 per cent for car loans and about 8 per cent for renovation loans. You pay about 20 per cent for GE Money EzyCash and 24 per cent for credit cards, he added.

Instead of using his savings to pay off his housing loan as quickly as possible, he channels his cash into higher-yielding investments such as shares, land banking and traded endowment plans.

He explains that he considers himself to be debt-free overall as his investible funds are more than three times what he owes in loans.

He also backs insurance planning as a way of transferring the potential risk of financial losses that might arise from unforeseen circumstances.

'Insurance is like a goalkeeper in a soccer match. It fends off disasters,' he said. 'But you win by scoring, not defending. Financial investments, like strikers in a match, help you hit the goal.'

Mr Ng was deputy manager of international banking at Keppel TatLee until 2000.

In 2003, he co-founded Leverage Holdings www.HousingLoanSG.com with his wife Patricia Hung, 36. They help clients sieve through all the loans packages put together by banks and finance companies. The service is free as the banks pay Leverage if a match is made.

Q What are your money habits?
A When I started working, I saved at least 10 per cent of my income. Even when I earned more, I tried to maintain the same living standards to keep costs down. I have saved about 40 per cent every year for the past few years.

Q What financial planning have you done for yourself?
A I keep a 'just in case' fund that can cover my expenses for 12 months. I also have an 'opportunity' fund. This is cash set aside to take advantage of rare bargains. For instance, when stock markets crashed in 2002, I used it to buy stocks whose returns have exceeded 500 per cent in some cases.

Q What about insurance planning?
A With insurance, I make a much smaller capital outlay in the form of premiums but I can still cover any heavy expenses if something happens.

I have comprehensive medical insurance and endowment plans for myself, and other plans such as critical illness for my family. Most of the risks have been transferred to the insurance companies.

Recently, I invested in UK-traded endowments, which are expected to generate returns of 6-8 per cent a year, double those of policies in Singapore.

My total annual premiums exceed $12,000.
Q What's your investment philosophy?
A When people invest, most think only of making money. When I invest, I always ask myself what the worst-case scenario would be, and whether my financial position would be hurt.

Q Any other investments?
A Property - I believe Singapore's market is on an uptrend and might rise another 10 to 30 per cent.

A few months ago, I bought a flat at Kent Ridge for $900,000. If the collective sale is successful, it could bring in $1.7 million.

In April, I bought a two-bedroom, 900 sq ft apartment at Tanah Merah for $600,000 and sold it in August for $700,000. I've re-invested the profits in a 600 sq ft studio apartment on Lavender Street. I paid $480,00 for it in June; it's worth $650,000 now.

I've also invested in fine wine, gold through an exchange-traded fund and land banking.

Q What has been a bad investment?
A In 2001, I invested in Eagle, a Singapore-listed China ceramic tile maker, at 30 cents apiece. I lost 65 per cent of my money. I've sold two-thirds of my holdings; I'm holding on to the balance.

Q Your best investment to date?
A The best returns have been from my investment in TPV, a manufacturing stock. After five years, my returns topped 500 per cent. I bought the stock in 2001 at 25 cents; last year, it went as high as $2.

I believe in investing in growth stocks that have yet to attract fund managers. They're usually interested in a firm only if it makes more than $1 billion in turnover. When I invested in TPV, it was almost there; now, it makes more than $10 billion. I sold the stock last year as I thought the firm would find it hard to continue growing at that pace.

Q What's your retirement plan?
A To achieve financial independence by age 40. I'll need at least a million to provide a monthly income of $5,000, based on a 6 per cent annual yield.

Q Any tips for house owners looking for a loan?
A People always ask which bank's housing loan is the best now.

There are more than 100 different types of packages and what is best for one person might not work for another.

Know your needs and priorities, and pick the package that best fits you.
Buy within your means and aim to pay off the loan by the time you retire.

Q And your home now is...? A A five-room HDB resale flat in Jalan Besar. I bought it in 1995 for more than $400,000.

Q And Your car is?
I don't own a car, as I personally think Singapore is one of the few countries in the world one can do without a car.

--------------------------------------------------------------------------------
On retirement 'I firmly believe the solution to the retirement problem is not extending the retirement age but increasing financial literacy.'
MR NG, who says he will still work after retirement but will devote more time and effort to improving financial education.
Last edited by Dennis Ng on Wed Apr 14, 2010 5:31 pm, edited 2 times in total.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
alvin
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Post by alvin »

Haha, how did I miss this article since I am an avid reader of the column.

I was wondering why Lorna did not had an interview with you since she reviewed your book.

She should really all the interviews in a book. It will be a source of inspiration.
www.bigfatpurse.com - Living a Life of Abundance
Dennis Ng
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Post by Dennis Ng »

alvin wrote:Haha, how did I miss this article since I am an avid reader of the column.

I was wondering why Lorna did not had an interview with you since she reviewed your book.

She should really all the interviews in a book. It will be a source of inspiration.
I will let Lorna know your suggestion. She'll be happy to know you are a loyal reader.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
investor10
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Post by investor10 »

Just read that Lorna is compiling the articles into a book now.

Rgds
Dennis Ng
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Post by Dennis Ng »

investor10 wrote:Just read that Lorna is compiling the articles into a book now.

Rgds
wow. Not sure whether my interview will be selected to be featured in her book. She does 1 interview every week....my interview was in Nov 2007....

Of course, if you read the interview again, you would note that I had not reached my First Million then, and thought I needed another 2 years to achieve it....but in the end, I did it by end 2008 (about 1 year after the interview).

In year 2009, I decided to share my knowledge and experience in the First Bilingual Book on Personal Finance in Singapore, "Mastering Your Personal Finance".

You can buy this book at a Special 20% Discount and at the same time, help donate S$6 (per book sold) to "Make-A-Wish Foundation" at this special link: http://www.AsiaSeminarWorkshop.com/101-7.html

their website is www.makeawish.org.sg
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
findleowong
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Post by findleowong »

Dennis,

Will you be writing any book on property investing? When? I will be looking forward to it.

Cheers
Leo
Dennis Ng
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Post by Dennis Ng »

findleowong wrote:Dennis,

Will you be writing any book on property investing? When? I will be looking forward to it.

Cheers
Leo
I may actually....just can't find the time.....
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
findleowong
Platinum Forum Contributor
Posts: 188
Joined: Mon Nov 16, 2009 12:22 am

Post by findleowong »

Dennis Ng wrote:
findleowong wrote:Dennis,

Will you be writing any book on property investing? When? I will be looking forward to it.

Cheers
Leo
I may actually....just can't find the time.....
I see. Will keep a close lookout on it.

Cheers
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