When you get your first job after school, you’re the happiest man when it’s the perfect job. After earning some good money and saving for your first two or three years, you have about GHc36,000 to play with. Many are the assets that career starters invest in. But which one makes a good investment.
Most of the career starters I meet are making a simple decision. They either save enough or take a loan to do one of two things: to buy a parcel of land or buy a car. And here’s how I see it
Buying a car
The classification of car as an asset in personal finance is one that remains a big debate on everyday basis. The arguments for and against its classification as an asset make sense to me, but that’s not my focus now. Young men and women save or take loans from financial institutions or their employers to buy a car for the following reasons
- To drive to and back from work, early and comfortably
- Public transport is unreliable and frustrating
- Hired cabs are too expensive
- Prestige and show-off
Fuel and maintenance costs are required on an ongoing basis, to use the car for the reasons stated above. These amount to about GHc300 monthly, with variations based on distance between home and office and the type of car. In the later life of the car, a third expense line appears – repairs. The terminal value of the car dwindles over time. So usually, you are not able to sell it at the same price you bought it after a year or two.
The amount spent on the purchase of a used-car, in most cases, can buy a plot of land in some parts of Accra (likely outskirts of Accra). For example, the GHc36,000 in our preamble can buy a normal home-used car or a plot of land in some parts of Accra. But buying land at the outskirts of Accra isn’t a bad investment at all, considering the outskirts become mainland after a decade or less.
- No ongoing cost
- Value of the land rises over time in Ghana
- You still have to pay for public transportation to work
These features make land superior investment than buying a car for immediate comfort. The value of land in Ghana would usually double in about 5years. Eventually, the one who buys the land today has to save money again to buy a car, and the one who buys a car today also gathers money to buy a plot of land, both at about twice the value after about four years. So why is buying land superior – it’s in the ongoing costs and appreciation or depreciation of the asset purchased today.