What is Your Net Worth?

Apart from cash flow statement, net worth is an important benchmark in gauging your financial situation. It gives you a reference point for measuring progress toward your financial goals.

Net worth is the value of the assets minus the liabilities.

Net Worth = Assets – Debts

Determining your net worth is a fairly easy task. You list and add up all your assets and all your liabilities. Then, you subtract your liabilities from your assets. 

Your assets are everything that you own that has monetary value. It can both liquid and non-liquid. Liquid means you don’t have to sell it first to realize its monetary value. Some examples of assets are:

  • The current value of your house.
  • The current value of your vehicles.
  • The money in all investment accounts (including your retirement accounts (EPF/PRS) and life insurances).
  • The amount you have in your current and savings accounts, including CDs and money market accounts.
  • Notable items of value you own, such as artwork, furniture, fine jewellery, or collectibles.

The value of items like artwork and jewellery can be highly subjective, it is best to get them professionally appraised.

Liabilities are obligations you have to pay. Your total liabilities aren’t determined by monthly payments owed, but rather by the entire debt you owe. Examples of liabilities include:

  • Mortgages
  • Car loans
  • Credit cards
  • Student loans
  • Outstanding medical bills
  • Back taxes

Cash in Savings Accounts 10,000 
Cash in Current Accounts 7,000 
Certificates of Deposit (CDs) – 
Cash on Hand 3,000 
Money Owed to Me (Rent Deposits, etc.) – 
Cash Value of Life Insurance 80,000 
Stocks (Equities) 55,000 
Bonds 35,000 
Unit Trust Funds 30.000 
Vested Value of Share Options – 
EPF 450,000 
Other Investment……..  
Other Retirement Plans…… 50,000 
Market Value of Your Home 550,000 
Market Value of Other Real Estate – 
Book Value of Cars/Trucks80.000  
Other Vehicles….  
Jewelry 10,000 
Collectibles – 
Others – 
TOTAL ASSETS1,360,000  
Housing Loans 300,000 
Car Loans 10,000 
Bank Loans 50,000 
Student Loans – 
Other Loans 200,000
Credit Card Balances 20,000 
Income Taxes Owed – 
Other Taxes Owed – 
Other Debts – 

In the example above, the net worth is RM 780,000. Most people have negative net worth especially those who have just started working, with student loans contributing a large sum

Your net worth is only snapshot of where you are at financially. It doesn’t offer information about cash flow, or your monthly income and expenses. It provides insight regarding how well you’re accomplishing your long-term financial goals

Regularly calculating and tracking net worth is just one important item in your personal financial management.

Once you know your net worth, the next questions to ask yourself are:

  • Is it enough to ensure a comfortable lifestyle for the rest of your and your family?
  • What is your strategy to achieve this, or if you’re on track, to maintain it   that way?

Please keep in mind that while net worth is a valuable indicator, it does not give you the depth of information you need to fully assess your financial situation. A good financial adviser can help you do that.