It’s been a while! I haven’t had much time to blog lately due to work commitments and car-related negotiations.
My current net worth is
PhP 1,898,492.00 / USD 37,969.84
This is comprised of:
Stocks and others 8.76%
Retirement account 2.63%
Real properties 42.67%
Car reservation 2.63%
Enter the depreciating asset
You will notice a new entry in my assets list – a car reservation. We are currently awaiting delivery of a brand new car, a depreciating asset which I will be financing through a three-year car loan with a total interest rate of 14.7% with a down-payment of about 50%. Nothing is final as we haven’t signed the deed of sale yet. I will write about my car-buying process later.
I toyed around with a shorter term of maybe one or two years but was advised by frugal mom that I should account for potential job loss and loss of savings and investments due to a large amortization. Also, I need the peace of mind.
Frugal husband and I reserved* a brand new car and we are currently waiting for delivery before we officially pay the down-payment (about 50% DP). This was mostly an impulse and emotional purchase borne out of frustration. We were in the middle of negotiating our third land purchase when negotiations broke down. We had been looking for a parcel of land to buy located within Cebu city for a few months already when we found that property. I was sad to see it go considering its great location and price.
Out of my frustration, I decided to put a pin on real estate buying and get a car. I had been planning on getting one anyway (after getting the parcel of land) and anticipated the pending tax increase on car sales would result to higher car prices in the future. Since the land purchase did not pan out for now, it made sense to do this. We don’t have a car in our asset inventory yet and we haven’t had reliable access to private transport lately.
Moreover, this purchase would help us out in managing our out-of-town properties. We don’t plan on driving a lot, we will mostly use the car for inter-city travel.
Accounting for depreciation to show true net worth
Don’t fret as I will hold myself accountable – as will be true of any depreciating asset, future net worth updates will account for 20 % depreciation per year. Thus, the gross selling price on the car will be depreciated by 20% per year of holding it. As this isn’t a cash purchase, the interest on the car loan shouldn’t be treated as an asset but as an interest expense. That’s the sad reality of cars.
Why brand new
Most personal finance blogs advocate going the second hand car route, but that isn’t always good for the Philippines, where only 6% of the population have cars. Thus, people here only dispose of their cars once they have major issues, unlike in more developed countries where cars are disposed usually just to upgrade them. This results to a usual inventory of majorly unreliable second hand cars. At least that’s what I’ve seen from mistakes made by some close friends and family.
Close to two million mark!
I’ve been so busy lately it almost didn’t register on me that I’m close to the two million mark! Certainly, this came at great personal cost in terms of making hard choices (should I buy the bag or not? Lol). Joking aside, nothing that is worth it ever came easy.
It has been easier too, compared to trying to reach my first million. I’ve sort of been budgeting like a robot lately – it comes so naturally to me that once payday comes I just allocate about 60%, place that amount in my accounts and I’m done! Nothing else to think about.
Have you calculated your net worth lately?
*Unfortunately, car dealers in the Philippines require a “reservation” of PhP 50,000.00 / 1,000.00 USD just for them to order and ship your car order. This shouldn’t be necessary (I’ve read that in the US you can refuse to pay this) unless the car you ordered is in demand.
This isn’t earnest money so you’ll be free to cancel your order and car dealer will refund your money in full.. Which it actually did in my case. A negative experience with my sales agent prompted me to cancel my first reservation. I paid in cash but was refunded via check in two weeks.