Asset rich or cash rich

A 20+ year old colleague was sharing on the intention to get a house recently.

Her bf and her combined income exceed the BTO income ceiling, hence she is toying with idea of buying a private property which I reckon would cost at least 1.5 million.

I gave a few insights to her :-

While they earn more than their peers now (which gives them more spending power) but by spending more on housing will close up their gap of dispensable income.

By forking up cash on top up cpf to service a housing loan is not ideal because they lose the opportunity cost to invest.

Moreover using a substantial amount of your working life to service a mortgage means no disruption to livelihood allowed unless one have enough war chest. Nobody can guarantee an earning income for decades unless one have the financial backing from family to tide through any mishap. (Sidenote if mortgage interest is lower than Hdb loan interest, then it makes more sense to not pay up ASAP)

Even if her family are willing to sponsor some money for the house down payment, they would be better off to use that money to invest or form their 12 months emergency fund (1st line of defence).

I concluded with the opinion that time and financial peace is immensely valuable. By using the time during their strong earning years to invest means they has plenty of time to compound their investment. And she will thank herself in 20 years time when she is in her early 40s while some of her peers may likely face a dead end job or a stagnant career or worst retrenchment, which she would have the choice to pursue anything she want without having to worry about expenses or cruise along still.

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