I recently moved to a new job and I am grateful to have extra PHP20k cash flow per month. I have paid off my loan and cancelled my one and only credit card. I also have emergency funds and is covered by unit-linked insurance.
I’m considering getting a condo unit or a new car. Would like to hear your thoughts on my next planned investments as it seems I have covered the basics as you suggested.
– Mark Anthony C (verbal query)
Congratulations on being debt free and having a sizable extra cash flow. Every month. Wow. I’m very happy for you. I’m sure you feel good about yourself being debt free and is now raring to explore more options.
It is really up to you whether it will be a condo unit or a new car. I had a similar dilemma a few years back. Note though that both will require you taking out new loans, either a home loan or auto loan. Which is not bad in itself, but still, will make you no longer debt free. But that is okay as long as you can manage the monthly amortizations.
The condominium will be the longer term investment and longer term loan. Initially you will have to service the down payments maybe for the next 24 to 48 months, depending on the developer. Your PHP20k might be enough for the down payments monthly. Then take out a home loan after. Remind yourself that if you want a condo by 2016 or 2017, you should be availing of pre-sell ones soon within this year. Unless you’re open to purchase units that are nearing completion and nearing turnover, hence those units that have already appreciated in value. Other expenses related to condo units are dues, insurance, parking (if you will get a slot), utilities, internal furnishings, etc. There is a higher chance that a condo investment will appreciate in value. Or you can also lease it for passive income.
This one might be faster to have than a condo as long as you have some extra cash (aside from your PHP20k monthly) to finance your down payment. Either you go for in-house financing (those “all in promos” at less than PHP100k) but usually their rates are higher than those of banks. Or if you consider bank financing, be ready to cash out of 10% to 30% of the price of the vehicle you are eyeing. Your PHP20k is enough for the monthly amortization and part of fuel expense depending on your trips. Other expenses to watch out for are parking, repair and maintenance (more frequent if you get a 2nd hand or older vehicle), insurance, etc. Once you get a car, it’s value will be downhill due to depreciation. I’d still consider a car as an asset and good investment, as long as it enables and helps you to generate more income more efficiently via other means. Carpool? How about a taxi cab?
Both options above are illiquid and very long term commitments. Meaning if you change your mind, or have a need for cash beyond your emergency funds, it will be more difficult to sell these items to have cash. Likewise, their appreciation or earning potential for you is very limited, if any at all. So they may be necessities or wants but you’ll have to be more creative to generate returns from them. As such, I suggest you also consider more liquid investments such as UITF or Mutual Funds, Time Deposits , and the stock market. Do consider these long term investments which are more liquid than a condo unit or a car. Oh, you might want to start a business as well with your extra cash.
PS. If you’re bent on these two options, you might want to read further. Again, I also had a similar dilemma a few years back. You might want to check out how I arrived at my decision.