HDB resale prices took 10 years to recover from a crash

Property price! Property price! Property price! Why does property price keep rising? This has been a much talked about topic for quite some time. Everyone talks about rising property prices but why doesn't anyone remember falling property prices? I'll tell you a secret. It took HDB prices 10 years to recover from a crash! Yes, 10 long years. Now what was I doing 10 years ago? I was still in secondary school. To be exact, the crash happened in 1997 when I was just 9 years old. So how did I know or remember it? The truth is I don't but history is always documented somewhere.

Let me show you the evidence.

HDB resale prices from 1994 to 2013

The year 1996 was the prelude to the Asian financial crisis. I'll skip all the nitty gritty of what exactly happened. If you're interested, you can search for Asian financial crisis and find out more about it. Briefly, it began with the Thai baht currency collapsing and the negative effect spread to the rest of the Asian countries.

It'll be hard to remember how much HDB prices cost exactly during that time so I'll be using an indicator called HDB resale price index(RSI). This index tracks the average HDB resale prices in Singapore for each Quarter. The RSI was at a high of 136 in 1997 before it crashed to 95 in 1998. After that prices remain stagnant in the 95-110 range for 10 years until 2008.

It's hard to imagine the trend so here's a chart from HDB themselves to show the RSI trend:

Credit: http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatResaleIndex?OpenDocument

As you can see, prices of HDB were up steeply before the crash. In percentage terms, RSI increased almost 100% from 1994 to 1997 before crashing 30% in 1998.



What caused the crash?

Interest rates. I'm referring to home loan interest rates. When interest rates are cheap, people take loan to buy property and when interest rates are expensive, people put on hold their buying of homes. This is one of the factors but there are many other factors too such as available number of properties, number of buyers, government policy for loans and the property market.



Will prices fall again?

Recently, the news on property market have changed. No longer does the news keep saying that property prices are hitting record high. We hearing things like number of housing sales decline, cooling measures slows down rising prices. Analyst are predicting that property prices may fall around the 5% range next year. Will prices fall again? It does seem like it will at least decline marginally or stay stagnant since there's a huge number of supply now and more coming, government has imposed many cooling measures, and interest rates are set to rise soon as US begins tapering.



What does it mean for young couples planning to get their first home now?

If you're getting married and planning to buy a new house, take into consideration that prices may fall. By how much, no one will know exactly.

Here's how you can decrease the impact that may affect you:

1)  Take the HDB housing loan.

It's higher than the housing loan offered by banks now but at least it'll save you the worry of rising interest rates. Interest rates on bank loans are definitely lower now but banks will only offer fix rate for a limited amount of time. The longest i've seen is the POSB home loan which fix the rate for 4 years. HDB housing loan is not a fixed rate but it's pegged to 0.1% above the CPF OA interest rates which rarely changes. You don't want to take a bank home loan at 1% now to see it rise to 4% in the future.

2) Buy a house that you can afford comfortably.

Everyone wants to buy a big house. But who thinks of whether you can service the loan for 30 years? Avoid stretching yourself by taking too much debt. You don't want to end up having the difficulty to pay for your house forcing you to sell it prematurely. And if just nice its during the property crash that you are forced to sell, you'll sell it at a loss for sure. Remember if the property market does crash, it'll mean that the economy is not that good and it also means you're very likely to lose your job.

3) Always have an emergency fund ready

No matter what, it is important to put aside some savings for rainy days. In case you lose your high paying job, you still can survive for at least a few more months.

Retrenchment? It'll never happen to me since i'm still young. Don't say it too early. You will never know if it will happen to you. Read: Recession Heroes Ep 4 - Got retrenched at a young age of 23 but still full of passion in life


Conclusion

In conclusion, don't forget that property prices can fall. When it falls, it can stay down for 10 years or more. It has happened before and it can happen again. It may be worse or it may not be worse. Whatever it is, stay safe and don't get caught in it.

This post was sparked off by a conversation with my colleague that his sister just sold her house for a small 30k profit recently. They bought their house at the peak of 1997. That's only 30k profit after 16 years. They had to wait more than 14 years just to breakeven!

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Are you a logical or an emotional investor?

In life, there are logical and emotional people. Which one are you? Which kind of personality will be more successful in investing?

What is logical and what is emotional?
Being logical is liken to being rational. Logical people use facts to reason out life. They are known to be reasonable people who work in accordance to rules of logic. They are most likely good in analysis, computer coding and IT stuffs.

Being emotional on the other hand is liken to being irrational. Emotional people make decisions base on their feelings or gut feel. They are sometimes known as unreasonable people who does not work in accordance to logic.

The discussion on being logical or emotional
Over the Christmas holidays, me and my relatives were discussing on the difference of being logical or emotional. My uncles were saying that my cousin was too logical and he could not believe anything if there were no facts. He needs facts to believe that something is reasonable. One of my uncles then went on to comment that we can't be too logical when finding our life partner. Many of us will have a list of characteristics when looking for a partner of the opposite sex. However, sometimes it is quite impossible to find our "perfect" someone. If we're too logical and strictly follow a guideline, we may never find that someone. Sometimes, emotions are what brings two people together. My uncle went on to explain that it is the same with starting a business. A logical person will find that starting a business is too risky. All facts will point to the impossibility of starting a business. To a logical person, it is always too risky to start a business. 

Now I'm not telling you that being logical is bad. It is only bad if you're overly logical. It is also bad if you're overly emotional. We don't want to be on the extremes of each side. The key is to find a balance between the both. In investing, we often hear that we can't be too emotional. Being too emotional will result in us making all the wrong investment decisions. On the other hand, we can't be too logical also. Every investor will know that we cannot know whether a stock is at its bottom or at its peak. When a stock goes up, it can go higher and when a stock goes down, it can go even lower. If you're too logical and try to predict the perfect entry point, then you will never find one at all. It's the same as finding a perfect partner which is virtually none existence.

Always be prepared that nothing is perfect
Therefore, to be a successful investor, one needs to know that there are no perfect entry points. We need to acknowledge this imperfection and work around it. When you buy a stock, be prepared for prices to go down so you can buy more. This means you should put aside extra capital at every instance. This is liken to an opportunity fund where you deploy in when the market declines. This imperfection may exist throughout your investing journey no matter how much experience you have. You need to prepare yourself for it. It's the same in your marriage or relationships. You know your partner is imperfect and you acknowledge that. You work around it by knowing the imperfection and prepare for it. How you prepare for it is up to individuals. However, relationships are more complicated. Sometimes you just have to accept the imperfections and live through it.

In investing, we do our part by researching on the company, analysing its financial statements, calculating its intrinsic value and determine the fair value to enter. As long as the company's fundamentals remain strong, an investor continues buying at or below the fair value. In the long term, gains are realised in the form of dividends and capital appreciation.

When you first started investing, it is liken to starting a business. An overly logical person will find investing too risky and never get in while an overly emotional person will jump into the market ignoring risk and get themselves burnt. If you manage to find the balance between the both, you will be on your way to being a successful investor.

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A success story - Olivia Lum, the person who created water for Singapore

In this next success story, i'm bringing to you Olivia Lum, founder and Group CEO of Hyflux group. I'm sure you have heard of this company before but you may not know the success story behind it. In a rare video i'm about to show you, it depicts Olivia's journey towards success and how she manage to achieve all that she has now.

According to Forbes, Olivia is Singapore's 27th richest person with an estimated net worth of $460 Million. She was originally from Malaysia, living in a small town of Kampur in Perak, Malaysia. In her younger days, she would hear people quarrelling because of money, especially husbands and wives. The village was poor and Olivia was living in a leaky shack without running water with her grandmother. She thought to herself that she cannot live in such a poverty stricken place and she must get out of the poverty cycle one day...... She came to Singapore in search for better education at the tender age of 16. This was the life changing event for her.

An interesting fact is Hyflux's first project in Singapore was to cater clean drinking water for birds. Yes, you did not read wrongly, it was for birds. The project was to recycle waste water into pure drinking water for birds at Jurong Bird Park. The company has thus come far to create Singapore's first own drinking water called NEWater.

They have recently opened their new innovation centre which i've been there before. The new centre is really nice with modern architecture. It's a symbol of their success till date. They have innovated to create water from air. This new product is called Hyflux dragon fly which produces clean water from air. There is no requirement to fix the machine to a water pipe like our regular water cooler. This produces drinking water for anyone anywhere even without a water source. 

The video starts with Olivia showing us her childhood living environment to her former schools and interviews with ex teachers, principals and so on. 

Watch the video below for her whole story and exclusive interview with Olivia herself:

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Reflections for 2013

In a few days time, 2013 will come to a close. It is time to reflect on this year before setting resolutions for next year. So here goes.

Finances
I've finished paying the school fees for my part time degree course. It has been tough juggling with work and school but i'm glad i've survived another year. Total school fees paid was about $15000. After paying for school fees, i'm still able to have savings from my salary which is a good thing. Without a huge chunk of my money going towards paying for school fees from now onwards, my savings rate will increase too. This lets me have more money to buy stocks.

Salary Increment and Bonus
The work year has been good. I've received a salary increment of more than 10% and an above average bonus in total of about 4.5 months. This in my opinion is already very good as i'm only a junior executive now in a diploma level job. In case you didn't know, diploma holders on average are not paid highly in Singapore. An average person receives about $2200 per month with 2-3 years of work experience. This is also one of the reason why i continued to further my studies to get a degree. It is simply too little to live comfortably in Singapore if you want to start a family.

Family Life
Talking about family, i'm still single and living a carefree life. However, i'm already preparing myself in case i would get married one day. Wedding, honeymoon, getting a house are all major expenses which need to be prepared for. Good that other financial bloggers share their expenditures of their life after marriage. This gives me a rough gauge of how much is actually needed. Thanks to you guys! (You know who you are.)

Investments
The Singapore stock market has been flat this year with a rally in the first few months of the year and a drop in later half of the year. I've added in more stocks which i feel is undervalued and has the potential for growth.

Some of the counters are Marco Polo Marine and HPH trust for shipping and exports related growth. Croesus retail trust for Japanese economic growth which i believe will happen as Japan embark on its own QE program. Yongnam for investment into the construction sector which will benefit from the various projects such as the new marina bay CBD which they have recently clinched the contract to fabricate and construct structural steelwork.

Miscellaneous
I've managed to clear my annual IPPT  for the second time this year. For those who do not know what IPPT is, it is actually an annual fitness test that is required for every Singaporean National Service Men. For me, i'll still have to serve the army for the next 7 years. Next year will be my 3rd reservist.

This is also a year where i started my blog in June. Blogging has enabled me to know other financial bloggers and also the readers who have been reading what i write. Thanks to all of you who have supported my blog which motivates me to continue writing more articles. My Facebook page is reaching 100 Likes soon and my blog will also reach 100000 views soon. This is a small humble beginning of my journey. I hope to provide all of you with more quality articles as we continue this journey. Feel free to comment or email me if you got any topic suggestions or request.

Lastly, here's wishing all of you a Merry Christmas and a Happy new year. Let's celebrate and finish this year with a grateful and happy spirit.

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Company in focus - Hutchison Port Holdings Trust

Hutchison Port Holdings Trust ("HPH Trust") is the first publicly traded container port business trust. HPH trust is a subsidiary of Hutchison Whampoa Limited. This company is owned by Hong Kong's billionaire Li Ka Shing. The IPO on SGX was deemed one of the largest in Singapore. Since trading on SGX, the stock has fallen by quite a bit and this has caught my attention. It has fallen from a high of 0.86 to the current price of 0.64. This is already a 25% drop.

HPH Trust's portfolio consists of controlling interests in world class deep-water container port assets, namely Hongkong International Terminals ("HIT") and Asia Container Terminals ("ACT") in Kwai Tsing Port, Hong Kong; and Yantian International Container Terminals ("YICT") in Shenzhen Port, PRC. HPH Trust also has 50% interest in COSCO-HIT Terminals ("COSCO-HIT") in Kwai Tsing Port. The assets also comprise certain port ancillary services and river ports complementary to the deep-water container ports operated by HPH Trust.

It's Net income and cash flow have been affected by the slow economic growth worldwide. Port activities have been slow as exports decrease. However, i expect there to be a turnaround as US, Europe and Japan's economy gradually recovers. The good thing about this trust is that it has a very strong free cash flow that is still resilient during the economic downturn.

PE for this trust is at 21x. PB ratio is at 0.7x. Even though PE ratio is on the high side, it is expected for a company with high Free cash flow. The attractive part for this stock is the low PB ratio. This means if we buy at the current price, we're buying at less than what the company is actually worth in terms of its net assets. This is good news.

In terms of risk, the company has a debt to equity ratio of about 35%. This is the risk in exchange of the high dividends and high free cash flow the company has. At current price of 0.64, the trust is having a yield of about 9%. The trust also has a 100% income distribution policy. This explains the high dividend yield. If the distribution policy were to change in the future, this would affect the dividends greatly.

I'm believing that profits should increase for this trust as the economy gradually recovers. I'm vested in this counter and will be prepared to add more if it stabilises at the current price.

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Is it possible to make financial plans without hiring a financial planner? [Guest Post]

Maybe you have wondered in the past whether it is possible to make some of the financial plans such as retirement strategy and investment management of your own or not. If you are still wondering on the issue than here is the answer – yes, you can! Making your financial planning effectively without paying for a financial planner is very well possible if you know your financial position right and are sure what to expect in future. For instance, if you have a good idea on how much your current yearly expenses are, how much will the average Inflation be in the coming years, how much you need at your retirement time, then you can make the investment management and retirement strategies all by yourself.

Life expectancy is an important variable while making retirement plans. Singaporeans now live longer compared to earlier years. Life expectancy for males born in 1957 was 59 but now it has gone up to 79. For females, it used to be 63 and is now 84. Retirement age is 65. So on average a male will have to plan for that extra 14 years while a female will have to plan for 19 years.  It is not that difficult to plan for it if you have a clear idea about what you want. You can do it yourself and save the money that you needed to give the financial planner. For a straight forward retirement planning and investment management, you should follow these procedures:

Step 1: Calculate your current yearly expenses.

Step 2: Roughly calculate how the Inflation would act in the years to come.

Step 3: Calculate how much money you should save per month from your income in order to have your desired level of money after retirement.

Step 4: Evaluate and clearly understand your own investor type.

Step 5: Understand your tolerance for risk.

Step 6: Determine how your current holdings fit your requirements.

Step 7: Make a concrete investing strategy.

Step 8: Monitor your investments time to time and reallocate if necessary.

Most of the information and details about the retirement plans and investment options can be extracted from MoneySENSE - A National Financial Education Programme's website and iMoney. Both these sites present initiatives from the government, industry and public sector to enhance basic financial literacy of the consumers. Once you gather all the information, make a comparison and take decision on how to go about.

However, no matter how good the investing choices are, if it is made outside the framework of a larger plan, trouble is evident. "We'll work out the details as we go along" approach will not work. You have to make a concrete plan and work on it. For instance, having a spending plan and budget is quite important in order to come up with a decent plan. These two work as absolutely essential tools. Without a spending plan and a budget layout, you will not be able to wisely implement saving and investing strategies.  

It is better to start planning at an early stage so that more dividends are ensured at the time of retirement.

iMoney Singapore helps people make the right decision on financial planning.

The above article is contributed by iMoney Singapore

Changing the world

"When I was young and free and my imagination had no limits,I dreamed of changing the world.
As I grew older and wiser, I discovered the world would not change, so I shortened my sights some what and decided to change only my country. But it, too, seemed immovable.
As I grew into my twilight years, in one last desperate attempt, I settled for changing only my family, those closest to me, but alas, they would have none of it.
And now, as lie on my deathbed, I suddenly realize:
If I had only changed myself first, then by example I would have changed my family.
From their inspiration and encouragement, I would then have been able to better my country,and who knows, I may have even changed the world."
- Anonymous

When young Nelson Mandela read this inspiring quote, he was awaken to something in his life. He thought to himself that he had found the keys to changing his country, South Africa and even the world. After returning to South Africa, he changed his views and his way of treating people. Starting from changing himself, he changed his family, his friends and after several years, he finally managed to change his country.

Really, to change the world, the starting point is not Earth, not a country, not a race and even not other people. To change the world, you have to start with yourself. Change yourself to make the world a better place.

The above was an inspiration story which I came across. Thought it was good to share it here. Nelson Mandela passed away on 5th December 2013. The world remembers the sacrifices that he has made. He has indeed left a legacy behind. RIP Mr Nelson Mandela.

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Towards the end of December and year 2013

In a few weeks time, we'll be saying bye to 2013 and welcome the year 2014. Yet another year has passed and it feels like time passes faster every year. I've been busy with work and exams lately thus the decrease in blog posts for the past 1 week. Now that exams are over, i'll have time to blog again.

As i start my journey as a blogger this year, i realise every single thing that i encountered in life gives me inspiration for a blog post. Many things can be linked to finance and i think you would agree almost everything in our lives revolves around the world of finance. Your topic with friends and colleagues will lead to money one way or another. Buying a new house? It involves budgeting, getting a loan etc. Getting married? It involves money also. How about our daily lives? Bills to pay, expenses to budget for..... and the list goes on.

I realised also that some of my colleagues in their 40s are worrying about not having enough to retire. This is a real issue you'll face some day in your life. No wonder Singaporeans are feeling life is getting more and more stressful. This is why we should plan as early as possible. No matter what age you are now, start planning for retirement. In schools, we plan and study for exams. In work, we plan for projects deadlines and make sure we're on target. But sadly when it comes to life, many people do not plan. They just drift through life in their younger days and only come to senses when they are older.

One reason why i believe most people do not plan for their lives or retirement is because there is no guidance on how to plan it. In schools, we have study guides and exam tips. In work, there is a mentor or a system on how you should plan and manage the project. But in life, we're not taught how to do it. In the end, we end up listening to a financial advisor and sometimes end up getting the wrong advise. This has happened to many people before.

I'll keep this post short and will post more posts in the coming weeks leading to the end of 2013. It is timely to look back at this year and be grateful for your achievements. At the same time, if there are mistakes made, we can learn from it. It is also a time to think through and see what we want to achieve in the year 2014.

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A generation of instant gratification - The cause of unhappiness

In our current generation, everything moves at the speed of light. Information can be attained and transferred almost immediately.

Gone are the days of snail mail where you have to wait 2-3 days to receive a mail.

Gone are the days where you have to walk hours from your school back to your kampong house.

Gone are the days where you have to wait for someone at a location and couldn't contact him because you didn't have a mobile phone.


Growing up in the 80s and 90s

I too was born into an era where most things were made convenient for us. Now its even more convenient.

I witnessed the evolution of computers from the old windows 3.2 to windows 95, 98, 2000, ME, XP, vista and now windows 7.

I witnessed the evolution of the internet from the slow dial up 56k to 256/512k broadband to the 300mbps fibre broadband now.

I witnessed the evolution of mobile devices from pagers to big Motorola mobile phones with extendible antennas, to Nokia non colour phone with the famous Nokia ringtone and snake game, to Sony Ericsson colour and camera phone and to the Apple and Samsung smart phones.

All these I experienced while I was growing up as a small kid living in the small island state of Singapore. If you witnessed all these as a kid too, most likely you're also like me born in the 80s, living as a kid in the 90s. I remembered every year when there was a new thing coming out, I would get excited. The first few rides on the MRT was exciting even though we didn't had much stations back then, most people were grateful for it as it added convenience for us. Having the first computer on windows 3.2 was exciting as i could play simple games on it even though it was slow and hanged continuously. Having 56k internet was exciting as i first explored the world of internet even though dial up can be unsuccessful a lot of times and connection can be cut off often. Having the first mobile phone was exciting as we experienced calling each other at any location.


Living in the current generation

Fast forward to 2013. Now we see friends posting their frustrations on Facebook because they got a slow mobile or broadband connection. We experience frustrations when the MRT breaks down even though there is free feeder bus provided to your next station. We complain about long waiting times of the bus when its just slightly more than 10 mins.

Welcome to the world of instant gratification where most of us have lost the patience to wait and even pause for awhile. We want everything to be fast and instant. Everything must be smooth. We want things instantly and we cannot wait.

Instant gratification can be devastating when the kid grows up to be a young adult. He or she may grow up having little patience and low tolerance for people. They will have problems with most of their bosses and change jobs frequently.

Credits: glee.wikia.com

He or she always want to get the latest trendy clothes or gadgets and end up being broke on most of the months. They may even make poor financial decisions and chalk up huge amounts of credit card debts or over leverage themselves on car loans or housing loans.

He or she may speculate in the stock market thinking they can get rich quick and make lots of money in a short time without much effort. Most people burnt their fingers in the end.

We all know that delayed gratification is necessary in life sometimes. Chinese has a idiom saying 先苦后甜, which means there is no sweet without sweat or you have to taste bitter first before experiencing sweetness. You need to forsake buying certain things in order to save up money. Everything in life needs sacrifices.


Learn to wait

The one most important trait that a child may lose is patience if everything is given instantly to him or her. Patience is needed in relationships, in investing in the stock market, in business, in their careers and in life itself. Without patience and the ability to slow down and think about life for awhile, a person may lose the simple joy of life. He or she will definitely be lost in the pursuit of life and feel depressed almost every day.

I had the chance to experience what it was like to be living in Singapore in the 70s. I stayed for 3 months in a 3rd world country and I saw how simple life can be. Ironically, it is in this simplicity that I see how happy life can be. I was chosen for overseas internship to Vietnam during my Poly days. The place i was settled in was a small town near to the border of Cambodia. Life was pretty simple there with the streets being emptied at around 10pm. It was all quiet and peaceful at night.

Food was relatively cheap there at $1 per meal eating out. Coffee was only 10 cents per cup. You can buy bread for 20 cents also. For a Singaporean student like me at that time, i was already feeling rich in that land. At first we spent quite a lot on food at higher class restaurants but later on, we settled for the cheap roadside stalls. To the extend, we even saved on drinks and brought our own water bottle out. The amazing thing is why are we saving only a few cents now? 20 cents means nothing in Singapore yet we are saving that amount. It was sort of done subconsciously. Then i realised the reason why we saved just a few cents. It had to be the environment. Most people are poor there and they save on every little money they have.

Some families have no homes to stay in and you can see whole families with kids sleeping on cardboards along the streets at night. Often, the kids will come and beg for food at night when we were having our dinner. There was once my manager there bought a packet of rice for a hungry kid and the smile on the face was unforgettable. The face showed deep gratitude of thankfulness and happiness that I've never seen before in my life. Immediately i thought of kids in Singapore throwing tantrums at their parents while the parents feed them to eat. Kids in Singapore do not want to eat certain stuff. While the poor kids in Vietnam are thankful for every meal they can have.

Because of this lifestyle, people in Vietnam learn to cherish life and not take life for granted. When i was there, i realised how i have taken many things i had for granted. I had no heated water for shower there so i had to bathe in the cold water of the river everyday. There was no clean water from the tap. All water had to be drunk from mineral water. There was rubbish everywhere as the rubbish collector only comes once a week. Everyone piles their rubbish beside the roads with no rubbish bags or containers. So after a few days, the rubbish piles stinks and attracts lots of rats and cockroaches. After a few more days some of the food in the rubbish pile rots and you can see maggots eating on it. This was the actual scenario I've experienced.

When we eat out at roadside stalls, most of the time there will be rats and cockroaches. But we still manage to eat our dinner as we got used to it after awhile. Imagine if there was only one rat at a stall in Singapore, complaints will come flooding in. But here i am with many rats and everyone still eats their dinner as if the rats don't exist. Another thing i took for granted is our electricity. There were electricity outages often. It brought a lot of inconvenience especially at night when it was dark. The streets were dark too as they had very few street lamps.

No doubt there were lots of inconveniences in Vietnam. But, life was much simpler there. There was nothing much to do during your free time as entertainment was very limited. The whole small town only had one small shopping mall similar to a small neighbourhood mall in Singapore. The rest were just markets and small shops. No cinemas in the whole town also. Experiencing the kampong spirit? I think i did experienced that there. Because of the simple life, everyone had more time for each other. Most of the time we're just idling around chit chatting.


The cause of unhappiness

Instant gratification causes us to lose the excitement in life. Kids who always get what they want will not cherish the things they have. They will always want more and complain about the little things. This is the cause of unhappiness. You can still be unhappy even though you have every thing. That's the reason why that rich kid you know is always pulling a long face.

Learning how to delay gratification will benefit your life. Slow down a bit and take time out to appreciate life. Be grateful for the things you have and you'll be happier. Even rich people will say contentment is the path to happiness. You can be rich but still be contented with life. Sometimes, the really rich live a very simple life. Without contentment, you will always be stuck in the rat race working harder each day and still be unhappy even though you have achieved a lot. If you've understood the true meaning of financial freedom, good for you. If not, find out the true meaning and you will be blessed.

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