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Did people you personally knew lose everything in the real estate bubble crash of 2008-09?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 259.7 million views in recent years.

In the answers below I focused on the following topics and issues

  • Do I personally know people who lost everything in the 2008-2009 financial crisis? What lessons can be learned about risk taking, greed and leverage?
  • Why does Malaysia fail to attract as many expats as Thailand?
  • Is it true that many wealthy people drive cheap cars? If so, why do many wealthy people prefer cheaper vehicles?
  • What habits and hobbies changed my life the most, and what did I learn from this?

Some of the links and videos referred to might only be available on the original answers.

If you want me to answer any questions on Quora or YouTube, or you are looking to invest, don’t hesitate to contact me, email (advice@adamfayed.com) or use the WhatsApp function below.

Did people you personally knew lose everything in the real estate bubble crash of 2008-09?

Source: Quora

I didn’t personally know him at the time, but he was my manager a few years later.

He ran a very successful property business in the UK. He was super rich at one point.

The way he tells the story is he leveraged up as his confidence grew. He went on an expansion after several Eastern European countries joined the Euro.

It resulted in a situation whereby his business wasn’t just leverage but also balancing many things:

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Lehman went bust. If they had gone bust six months later, he probably would have been one of the richest people in Europe.

To cut a long story short, he needed to sell properties to pay the bill, staff etc.

A vicious cycle was the result. Leverage is great on the way up, but awful on the way down.

It would have been easier if he was running an online property company with fewer overheads.

It just wasn’t workable, and he was left with just one-family house. So, he didn’t lose everything, but almost 100%.

He certainly lost his business, lifestyle, 99% of his savings and investments he accumulated and tried to sell off to save the business.

If he was less greedy, he would have used cash more, and de-leveraged as he got bigger.

In that case, he could have just waited for valuations and rental yields to recover, and make some staff members redundant.

So, the bottom line is people don’t usually lose everything when the stock or property market crashes.

Asset price do recover. They tend to lose everything when two or more events happen.

Like a crash results in a credit crunch, and you are too leveraged as a business to get out of it.

What’s more, businesses who have been successful for a decade or two, tend to become more relaxed about risk, as they assume they can always come out of crisis.

Covid-19 has exposed many more businesses than even 2008–2009, despite the stronger economic recovery.

Better to strike a balance between taking too many risks, and too few.

Most people actually suffer from the latter, and being petrified of losses or even declines, more than the former.

The former tends to affect people who have taken many calculated risks, and it has worked out for them, and then they relax more.

Calculated risks in investing is key rather than the two extremes.

What hobby completely transformed your life for better or worse?

Source: Quora

When I was at school, the education system didn’t suit me. I didn’t do well, most years, in class.

That all changed when I started to read a lot, and focused on my hobbies. I didn’t start to read to help me in school.

Like most 12, 13 or 14-year-olds I wasn’t that motivated. The reading inadvertently helped me, and I went from struggling to near the top of the class in subjects like English in two or three years:

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I then gradated with the best grade barely seven or eight years later.

That taught me an important life lessons early on. It helped me when I became more motivated.

The lessons were:

  • Standard ways of learning, and doing things, aren’t always the best. Few teachers (at least at the time) encouraged young kids to read about sports, travel, politics or whatever less interested them.
  • Reading a lot can help you get ahead of people who used to be in front.
  • Being behind for years doesn’t mean that will always be the case.
  • Being independently minded and doing things my own way can work.

Now studying isn’t life, as I have said on other answers, but I also found reading opened my eyes to travel, business and many other subjects.

Most of the world’s most successful business people read a lot, and for that matter, many struggled at school or university.

The only other hobbies that transformed my life were:

  • Gaining new experiences. Meeting new people, travelling to new places and getting out of my comfort zone all helped.
  • Failing at a hobby or business and learning from those failures.
  • Investing on a long-term basis rather than saving. Maybe it isn’t a hobby though.
  • Being a producer and not just a consumer. If you focus on producing services and products, and content, as well as consuming them, that will help in the long-term.
  • Completely relaxing your brain. For some that can be meditation. For others, it could be computer games. The point is, some of the best ideas in business come from those moments.

What matters even more than hobbies though is actions and habits in general.

Habits really do change your life, for better or worse. Even the most successful people can be pulled down by negative habits like engaging in excessive vices such as gambling.

Why do some wealthy people drive cheap cars?

Source: Quora

There are broadly different kinds of wealthy people:

  • The inherited wealthy.
  • Those who haven’t inherited the money. Within this group there are subgroups:

1). People who have got rich at a young age from things like sports and entertainment

2), Those who have became wealthy slowly, by for example investing for decades

There are other groups as well, but we don’t have time to go into that.

Now if you have become wealthy due to inheritance or early in life, you might not be sensible with money. It just depends on your upbringing.

In comparison, if you gradually became wealthier over time, you are most likely sensible with money.

That doesn’t mean being cheap on every little item, but it does mean having some common sense with spending.

If you spend 100% of what comes in, you will be broke, no matter how much you earn.

A car is a depreciating asset, unless you are good at buying and selling vintage cars.

If you are going to spend loads of money on things, at least buy goods that go up in price or hold their price.

A Rolex might be a waste of money, but you will be able to sell it back and probably make inflation in a few decades time.

Houses might not go up as much as stocks, but that holiday home will at least make inflation and give you rental income.

The same can’t be said for cars.

Even those wealthy people who do buy luxury cars often only buy them due to creating cashflow.

I saw this on Twitter recently and there is an element of truth in it:

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The reason I say an element is that most of the wealthy people I know don’t even buy new cars.

Most drive used cars. An increasing number seldom drive, or don’t drive at all, due to environmental concerns.

A meta-analysis which was done ten years ago showed the average decamillionaire ($10m+) only spends about 60k on a car.

It wouldn’t surprise me if that figures goes down as environmental consciousness increases.

You also have to remember 

  • Most people who stay wealthy don’t care about what other people think as much as the average person does. Some luxury car purchases are for vanity and to show off.
  • If you spend more money on a car, you might worry about keeping it clean. Let’s say you are wealthy and have a dog. Why you want a luxury car? Perhaps a normal car would be better!
  • It might result in more stress and problems, such as trips to the car mechanic. 
  • Plenty of people bought a luxury car previously but then realized it isn’t that great. We tend to get a sugar rush from purchases. The technical word for this is hedonic adaptation. Basically, even if good or bad events happen, our base level happiness can stay similar. Therefore, it is better to focus on experiences rather than things, and for that matter on people rather than things. 
  • In some parts of the world, there isn’t much fun in driving. There are too many cars, loads of rules and traffic everywhere. 
  • Even though too many people still think that high income = wealthy and that “wealthy people” tend to drive flash cars, more people are getting wise due to the internet and more information being available. Appearing on a YouTube video with a luxury car might fool some youngsters who are being persuaded to buy a course from a guru…….“he has made it”. It fools fewer people compared to the past though.
  • Most wealthy people understood the importance of time. If you spend $100,000 on a car, you aren’t spending 100k. You are spending millions. Why? You have the extra taxes, maintenance costs and the indirect cost of not investing that money. Let’s give a simple example. If somebody had spent about $75,000 on a luxury car in 1992, they would now have about $1.5m less wealth than somebody who invested the money in indexes, if you also adjust for costs. That doesn’t mean you should invest 100% of your money.It merely means the indirect costs of purchases can be huge…..therefore spend wisely on things that really matter.
  • In some countries you can rent cars so cheaply that buying them is pointless. In the UK, for example, many people have worked out that renting a new car every three years can be cheaper than buying it outright.

Of course that doesn’t mean that 100% of wealthy people don’t buy luxury cars. 

Many don’t. That’s the point.

Why does Malaysia fail to attract expats like Thailand?

Source: Quora

You are quite right that Malaysia doesn’t attract as many expats, and indeed tourists, as Thailand.

One reason is Thailand’s image in the world. Speak to somebody who lives in most Western countries about Thailand.

What’s the image? Maybe something like this:

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A nice beach.

Or maybe some great street food and bustling city life:

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Only those two pictures were taken from Malaysia!

Many people don’t know some basic facts about Malaysia, such as the English is great, the cost of living is probably lower than Thailand these days, and it isn’t some kind of intolerant religious country for the most part.

The people who know have typically worked in Malaysia, or nearby countries like Singapore.

Malaysia therefore attracts quite a few long-term expats who have lived in the region for a long time.

There are negatives too, for example buying property in Malaysia isn’t such a great idea.

The government bureaucracy isn’t great. I almost moved to Malaysia years ago but got fed up with that side of things.

The same is true of Thailand though.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 259.7 million answers views on Quora.com and a widely sold book on Amazon

Further Reading 

In the article below I spoke about the following issues and subjects:

  • What are some hard personal finance lessons that most people learn too late in life? I focus on a range of issues, such as the fact that academic success doesn’t guarantee financial accomplishments.
  • How can you get support from rich people? Or perhaps, rather than support, people should focus on co-operation and learning from others?

To read more click below

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