Welcome to the April 19, 2010 edition of “make money on the Web”. This is my first attempt at hosting a blog carnival and I must confess the response has been overwhelming. Fifty-two, Yes, 52 submissions were made and I have taken time out …

Education: Choose a cheap school, close to home. Beg and search for scholarships and grants, put in thousands of applications. Work, even if it means taking semesters off school. Federally insured college loans are not dischargeable in the case of bankruptcy. If you have student loans, don’t keep them around simply because they have low interest rates, pay them off like any other debt (treat them like a credit card).

The myth is that pedigree and degree matter forever, the fact is most businesses only care about education if you don’t have the experience. So, you need a degree to get a first or second “real” job. After that, no one cares where you went; they care what you can do for them — and that’s best messured by what you did at your last job(s).

Housing loan: This is the only type of debt that I think is acceptable; but it’s still not good. If you are intense, then you can do the 100% down method of home buying. But, even then pay it off early, and don’t buy more home than you can afford. It should be bellow 25% or 35% of your Annual income.

Car loan: You can have a car without a loan. It is not a necessity of life. $2000 will buy you a used clunker. It will get you where you need to go. It won’t lose much value (as there is little value to lose, and you’re not sitting on it a long time). While you drive it a few months, you save another couple of thousand dollars. Sell your last car for just about what you paid for it, add the couple of thousand you saved and now you own a $4000 car… Keep doing this. Never need a loan and you can own pretty nice cars in no time at all. I currently have 2 paid for cars, will be selling them shortly to by one better car. The value of cars, especially new cars, falls so fast that to borrow for one doesn’t make any sense. Instead of a cash for clunkers program, my family has a clunkers for cash program — we buy clunkers (well, actually our cars aren’t bad these days) for cold hard cash.

Consolidated loan: This assumes you have anything to consolidate, and this doesn’t address the real issue. Consolidating loans makes your minimum smaller, and if your not wise to it, can encourage people to spend more time in debt. Especially because the behavior that got you to the point of consolidation hasn’t been addressed — spending more than you make. Live within your means and you won’t need to consolidate, because you won’t have to borrow anything.

Investment: All investments are risks, no matter how “solid” the investment. Buying on margin or gambling with “other people’s money” is just asking for a call from Murphy (of Murphy’s Law). Only invest money that you actually have, and that you don’t need for other things. Investing is a good idea, it’s almost essential, but doing it on someone else’s dime is folly. Henry Ford and J. C. “Cash” Penny both condemned the use of debt as folly. Walgreens and Microsoft are both debt free. No reason to think that to make a great investment deal means you have to borrow money.

Normally, banks give better package if your loan amount is higher. You can take the flexible loan package where you get maximum loan amount, then put in the cash you have to offset the interest. You still have the flexibility to withdraw the money if you need it in future.

For EPF withdrawal, it all comes down to the effective interest rate. When EPF is paying more than 5% return while your home loan only charge 4%, you will get your a better return for your money if it is remain in EPF.

If not mistaken, you can withdraw from Account II for one house at a time. It is better to check with EPF to verify this.

Do you think it is smart to withdraw money from EPF to top-up the down payment as well? Are we eligible to withdraw money from EPF more than once (Let’s say we buy 2 properties at different year, are we able to withdraw money from EPF to finance both properties?

Anybody with a sound mind understands that it is better to get a new car than spending thousands to maintain the car.

Guess you have got it wrong

My 2 cents; when you categorising car loan as good debt, it must come with words of caution.

#1: Unless you are a public figure or a businessman, who needs good image, do not buy expensive luxury/imported car. Get an ‘OK’ car which is suitable for your lifestyle (think of medium-long term’s lifestyle). From my own experience: I am working in manufacturing industry; and I see some manufacturing operators are driving brand new Waja, while some/few engineers are driving old/used Kancil. As for those engineers mentioned; they are spending less for their cars, more for other things or savings/investments. Good debt! As for those operators mentioned; they are spending too much for their cars, less for other things e.g. children’s education. This is when car loan becomes bad debt!

#2: And car owners seldom keep their cars until full settlement; they trade their car for more expensive car. This is good for car manufacturers, car importers/exporters, car sellers and for banks (and for our country, Malaysia). But this is not good for car owners themselves. My advice, keep you car until and beyond full settlement, well as long as you can. After the car loan is fully settled, use that extra money for other expenses OR better, invest e.g. buy another house (i.e. pay monthly instalment) – for investment! (My car is nearly full settlement, yipee!)

Thanks.