A net worth statement is a financial “scorecard” used to assess a person’s financial position. It can be an important reference when making financial decisions and shows the assets and liabilities owned.
Assets include cash, savings, properties, unit trusts and shares. Meanwhile, liabilities involve all types of debt such as bank loans including credit card debt, debts with family or friends, and commitments such as rent and utility bills.
Net worth can be increased through the use of a budget and spending monitoring system. A budget helps control daily expenses, thus allowing you to save and invest to increase assets.
Overall, reducing costs and increasing savings are the main factors in increasing a person’s net worth.
Method of Calculating Net Asset Value
STEP 1 – LIST ALL THE VALUABLE ASSETS YOU OWN
| Cash and related items such as fixed deposits and fixed savings accounts | Investments such as stocks, bonds and unit trusts | Retirement funds such as EPF and personal savings accounts | Real estate such as houses, apartments and land | Personal items that can be sold such as gold jewelry, artwork and antiques |
STEP 2 – INCREASE YOUR TOTAL ASSETS
STEP 3 – RECORD ALL YOUR DEBTS TO OTHER PARTIES
| Loans such as education loans, bank loans and other types of debt | Outstanding credit card balance | Tax liabilities include property tax as well as income tax | Debt liabilities to relatives, friends and other individuals | Payment balances for consumer goods such as televisions or furniture |
STEP 4 – SUMMARY OF ALL YOUR LIABILITIES
STEP 5 – SUBTRACT LIABILITIES FROM ASSETS
| If your results are positive, you are encouraged to plan to increase your net worth. If negative, don't be disappointed as there are still steps you can take to improve your financial situation. |