Why Uncovering Your Net Worth Is More Important Than You Think

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04 Apr 2019

Over the weekend, I saw a friend who was around my age driving a BMW to a lunch meeting. Knowing his background and current working history, I immediately knew that he was definitely stretching himself.

On top of that, he recently also bought a private condominium with his other half.

Unlike most Singaporeans who would fall prey to the 5Cs and probably be green with envy at this point. Only one thought came to me: “How much debt is he taking on right now?”

By my estimates, he’s probably in about $1.02M of Debt…

Purchased a 3-room condominium ($900k committed home loan)
Driving a big brand name car (BMW) ($120k committed car loan)

Of course, I didn’t blurt it out.

Being a part of Team Seedly, I decided to investigate further into the issue of people who look wealthy from the outside. But in reality, they are just Poor AF. #justsaying

A finance professional would say call this, “Being severely over-leveraged“. Assuming they didn’t inherit the money or have rich parents of course (haha).

Here’s Li Ka Shing with a cheap Casio wristwatch for good measure. Fun fact, he’s also the richest man in Hong Kong.

Financial lingo aside, I will share with you why Net Worth, being a personal number (and often taboo subject) is a critical number to get right from the start, and an easy way to get started.

TL;DR: Why Is Net Worth Important?

Now that we established that there’s always more than meets the eye. It’s important to know some practical reasons you should spend some time discovering your ‘Number’.

Knowing how much Liabilities you have determines the amount of “Life insurance” you will need. Because in the event you pass away, you’ll transfer your debts to your loved ones, and you definitely do not want them to be in that situation.
It gives you an idea to know how much and how long a timeframe you need to accumulate to get out of a debt position.
Knowing when your liabilities become assets (are crucial). One common one is a home loan that most Singaporeans take up upon graduation and starting a family. And beyond that making a private property purchase to hold for capital appreciation.

The Net Worth Of A Normal Singaporean

Your 20s to 50s: Your Most Productive Years

Assets:

Your main source of income
Your early investments (index funds or stocks)

Liabilities:

Your student loan
Your first home loan
Your car loan (if you do decide)

Your 50s to 80s: Your Retirement Years

Assets:

You should have paid down your home loan and maybe bought another property driving rental yield (finally it’s an asset)
Your investments should now be generating you returns (both capital gain and importantly dividends)
Your CPF would be unlocked at this point

Liabilities:

Almost none left
In your early 50s it should be clearing up the remainder of your home loans

How To Determine Your Net Worth In Less Than 5 Minutes

So now that you’ve understood the importance of knowing your own net worth, you probably are wondering what’s the easiest way to get your net worth

**The Hard Way: Downloading Your Bank Statements And Using gasp Excel**

This method takes you probably 1 to 2 hours. Skip below if you want the 5 minutes approach.

Go to all your banks
Download CSV one by one
Tabulate all your balances together in an excel sheet

The Easy Way: Via The Seedly App Which Consolidates Your Overall Net Worth

Download the Seedly App (available on both iOS and Android) and follow these 3 simple steps:

It’s really that simple! In 5 to 10 minutes, you’ll be able to get a quick snapshot of your finances and money.

For things like Insurance, for example. If you don’t want to make it overly complicated and wish to exclude it from your net worth position, remember to indicate here and uncheck this!