Personal Net Worth – The ONLY Financial Concept that really Matters

Hi Everyone, last week I wrote about the 10 websites that you should be following on your investing journey. Today I will be covering the only Financial Concept that really matters for the budding investor – Personal Net Worth. I will also suggest a few apps and tools that I’ve found helpful in tracking that metric as you continue on your journey towards Financial Independence.

What is Personal Net Worth?

Net Worth, simply put, is what you OWN (Assets) less what you OWE (Liabilities).

You can think of Net Worth as the Financial Capital that you accrue by harnessing your Human Capital in this stylized chart below:

It is also the metric used by Forbes magazine in its annual list of Billionaires.

Examples of Assets are as below, in order of Liquidity (high to low):

Cash (Savings Accounts)
Liquid Investments (Stocks, Bonds, Funds etc.)
Car (It IS an asset, albeit one that usually depreciates over 10 years in Singapore due to COE)
House / Investment Property (typically requires a Property Agent to facilitate transactions)
SRS (5% early withdrawal penalty before the statutory retirement age)
CPF (Exit opportunities at 55, 65-70, depending on how much you have)

Here are some examples of Liabilities, again in order of Liquidity (high to low):

Credit Card Debt
Other Loans and Bills
Tution Loans
Car Loans
Mortgage Loans

Why does Net Worth matter?

It matters because despite what your life goals are, all wealth is ultimately fungible, meaning that your car can be exchanged for cash or something else of equivalent value, e.g. one more exotic holiday destination each year. Net worth is thus often distilled into dollars, and we have financial bloggers/sites in Singapore that have come up with financial goals such as:

Other goals that used to work well in the past included owning additional properties and becoming a landlord, or hope for an en bloc windfall. I say that it used to work well because of the ability to leverage and the fact that financing and maintenance costs are tax deductible. However, after ABSD was introduced in 2011, the economics don’t look quite as compelling. Also, unless you were wealthy enough to own a diversified portfolio of properties, you would have been subjected to concentration risks above and beyond that of a traditional investment portfolio mix of stocks and bonds.

Personally, I am quite privileged to have achieved a 6 Figure Investment Portfolio by 30, but bear in mind that I have not conquered other life goals such as owning a BTO, or getting married (yet) – goals that my peers have achieved at my age. I am also fortunate that I did not have any tuition loans to pay off – thanks Mom and Dad!

Right, so what’s a good Net Worth to shoot for?

In any case, I think it’s good to set goals for yourself – don’t worry if they may not seem as lofty as some of those listed above in the earlier section. Everyone’s situation is different – as long as your Net Worth continues to grow steadily, I think you are doing well! That said, I believe that it is important for a significant part of your portfolio to be liquid, in order to take advantage of opportunities, and also to prepare for contingencies, such as the ongoing Covid19 that has touched everyone’s lives.

This means that you should probably hold more emergency savings than you would otherwise have set aside before you start investing, as both breadwinners may lose their jobs at the same time during a pandemic or crisis like this – 6 months of emergency savings will now only last for 3 months. Relying on the kindness of strangers, or the government for handouts, may take its toll on your mental health, so why not ensure that you have sufficient savings to tide you over times like these.

You also need to make sure that your human capital is adequately protected, so that your dependents do not have to worry about your major liabilities (e.g. Mortgage) should something unfortunate happen to you. I will follow up with a post on the levels of savings and insurance that one should have in place, to ensure that you can invest without having to liquidate your investments against your will, and often at a poor price.

Ok I’m sold, how do I keep tabs on my Net Worth and ensure that I remain on track?

Don’t worry, I got you – I came across a few tools and apps over the years that I found quite helpful in tracking my Net Worth, so that you won’t have to key stuff on a spreadsheet (because who really has time for that after work?).

UP Plan

This is a new tool by a Fintech that allows you to MODEL the impact of life goals such as Education, Weddings, Holidays on the path that your Net Worth takes
What’s cool is that the app takes parameters from Singapore government agencies, such as salary growth, inflation rates; loan rates; retirement age etc.

Wealth+

Up Plan is great for simulations, but it can’t track the changes to your Net Worth going forward. That’s because it’s intended to be a financial planning tool that refers you to a financial advisor (from Prudential) or Syfe (for investing)
Here’s where Wealth+ comes in – it’s an iOS app that I use to log my assets and liabilities every month to track the ACTUAL changes to my Net Worth
The resulting dashboard provides sleek line charts that elegantly paint a picture of your Financial Health over time

Seedly

Of course, how can I forget Seedly – I started using it in the good old days when you could still sync your DBS accounts
I am a little bit sad that they haven’t fixed this with DBS yet, as we could all benefit from a holistic overview of our finances
They have since expanded to become a content platform, and there is a lot of good localised content there, but be mindful that a lot of the contributors and forum members may not be as independent in the advice that they give, as some of them are financial advisors / insurance agents
Regardless, the app still serves a key function to help you aggregate your spending across accounts and credit cards, greatly aiding your budgeting and savings plans

Financial Butler

I came across Financial Butler’s ad when I was scrolling through IG stories, and thought to check it out, and I was not disappointed
Like Seedly, Financial Butler is an account aggregator app – in fact, they run on the same white label aggregator platform (Salt Edge)
However, the syncing process for FB is more seamless, as I only needed to key in an OTP or tap approve in my mobile banking app
Also, they can sync my DBS Account !
I guess if you like reading the content on Seedly, and you don’t mind having both apps on your phone – much like how we have more than one ride hailing app (~~Uber~~/Grab/GoJek) – then you can consider having them both on your phone in order to get a complete view of your accounts

PolicyPal

PolicyPal isn’t strictly a Net Worth tracker, but it is useful in keeping track of your insurance policies, and maybe some of your investment plans that you purchase from your Insurance Agent/Company (not a fan of 2-in-1 insurance and investment products, but more on that in a later post)
As I said at the end of the previous section, an adequate level of Insurance is important to ensure that your Human Capital is sufficiently protected
I will also take this opportunity to tell my readers that Insurance is not meant to make you money – you should be thankful if you don’t actually need to claim anything as it means that you are physically safe and well
What’s cool is that PolicyPal relies on OCR technology that’s refined by AI – all you need to do is to take a photo of your Insurance Policy Schedule and most of your fields will be populated to a surprisingly high level of accuracy!
Another neat feature is that you can also include policies of your other family members, such as your parents or grandparents, so you can track and manage the policies of your whole family in one place

So there you have it – everything you need to know about Personal Net Worth and a few tools that make tracking it a breeze! Leave a comment to let me know whether you agree with the apps that I have chosen.

Happy Hari Raya Aidilfitri to my Muslim readers during these extraordinary times! To the rest of us, enjoy the off-in-lieu tomorrow. Thanks for being here.