My New Year's resolution was to tidy up my financial matters. So far, I've been making good progress. Among other things, I reviewed my insurance policies; closed two useless bank accounts; switched to a better online funds distributor; switched to a better mortgage package charging lower interest; engaged a financial adviser; opened a trading account; rebalanced my wife's investment portfolio and redeemed all my credit card points.
I realise that financial planning is not exactly the most exciting topic in the world. However, it is a highly practical topic and therefore it's very much worth knowing something about it.
Today, just for general educational purposes, I'm going to explain how to calculate your personal net worth (that really means - how rich or poor you are).
If you want to be very exact, this could be a rather tedious exercise. However, for most people, it works fine if you just want a "big picture" snapshot of your current financial condition.
Step 1. List your biggest fixed assets, such as your apartment and your car, at their current market value.
Step 2. List all of your financial assets, such as your cash savings, fixed deposits, shares, unit trusts, CPF balances etc.
Step 3. List any other possessions which you might conceivably be able to sell, if you needed the money. Gold and other jewelry, for instance.
Step 4. Add together all of the above, and you get your total assets.
Step 5. Subtract all of your debts, such as your mortgage, car loan and credit card balances, from your total assets.
And there, the result is your net worth. An instant snapshot of how rich or poor you are, today.
That should start you thinking about how you can improve your financial condition. Sometimes there are ridiculously easy ways to cut a few expenses or make a bit more money.
Keep your spreadsheet or that piece of paper somewhere safe. One year later, do this exercise again. Hopefully, you'll find that you've grown richer. Good luck.