Tip 41: Liabilities a necessity for dad?

Its in the bible that we should owe no man anything and debt is viewed negatively. However, in today's world of money as a collateral, everyone else is owing something to somebody. You buy a coke for $1 dollar and that dollar comes from either your previous day's work or your future day's work. Besides the function of money as a standard of deferred payment, a dad would also need to buy life insurance for himself to secure his income and maybe take out a home mortgage from the bank so he need not pay a monthly rental expense. A life insurance premium we pay every month or every year is a liability that we have committed to for X number of years and so is the monthly home mortgage. So, is debt good? In my opinion, yes if you are sure of not owing anybody anything and work an honest days job to support your family. In fact, a certain amount of liability can be saving the family a lot of money and making dad commit to providing well for the family. This post is a follow up to tip 27 and tip 30 on purchasing properties and investing and covers the liabilities portion that follows such as mortgages and insurance.

When starting my first job after graduation at age 23, I first bought a life insurance for my mum and for myself. I figured that since I was earning the most in my family, I should ensure my income is secured to provide for my mum and dad should something happen to me and I should also buy an insurance for my mum who had no life/medical insurance to ensure any medical bills she would incur in the future would be paid for. And since our family did not had a car, I also later took out a car loan so we can have a leisurely drive to the supermarket instead of carrying goods in a train or a bus. I ensured I had sufficient income every month for savings besides paying off all these loans and since I was staying together with my parents, there were no other substantial expenses. Then when I came to Tokyo to work, I disciplined myself to save my salary substantially. After 2 years, I got married and my savings was huge enough to earn the conservative Japanese bank's trust that I could pay off the loan. I did my figures and calculated that taking a loan mortgage actually brings more savings each month. A monthly rental expense would be around USD1300 and my loan mortgage for 15 years was only around USD900 every month. That allows me to save an extra USD400 every month besides having to own the property I live in. Since the bank loan rate was only 2% (BLR in Japan is the lowest of all developed countries at 0.5%), it was a good liability to own. I negotiated with the bank to have a shorter loan term of only 15 years to save on interest rate cost and asked my company to write a letter to confirm my years of service to them. In Japan, its hard to get the Japanese to trust foreigners and few foreigners who live in Japan less than 5 years can get a home mortgage. Thank God I did and I can surely introduce others in Tokyo who want to be introduced to the Japanese bank officer who is open to lending to foreigners a yen based mortgage. Of course, that officer also considered the fact that I am half Japanese, having married a Japanese who could bridge the communication and mindset gap. My commitments now to such liabilities has made me committed to be a provider to both my new family - Tomomi and Haruka and my parents back in Malaysia. There surely is less freedom to do whatever I want and go backpacking around the world but I am glad to be able to give to the people I love very much. In my opinion, if a daddy would evaluate his future income and if he can afford to pay a loan off and secure that with a life insurance policy should illness deter him from getting earnings to pay off those loans, liabilities can provide a more comfortable life for the family. Of course, one needs to be mindful of taking good care of ones health as thats the most important asset a daddy has from God.