What Is Your Net Worth?

RIHANNA, the 33-year-old Barbadian beauty, made it to Forbes recently as one of the richest female musician in the world with a net worth of US$1.7bil (RM7.2bil).

It was not her music that pushed her to the billionaire club, reports said, it was her beauty ventures via Fenty Beauty, which is a 50:50 joint venture with LVMH.

There are many millionaires and billionaires across the globe and as stock markets surge, so do their fortunes, increasing their net worth. Just as fortunes rise, they can fall overnight in volatile markets.

Net worth is a key indicator of your personal financial health.

Simply put, net worth is all your assets minus your debt and liabilities.

Assets can be anything from cash in your bank accounts and financial instruments, your house, car, valuable collectibles, etc.

It is essentially anything that’s worth a value, a report said. Liabilities are what you owe such as loans, mortgages and credit card balances.

Have you ever wondered what your net worth is?

You may not realise but when you take into account all that you have, you may well be a millionaire yourself.

“We often feel that making good money is being well off and this is largely due to the fact that our salary is a primary source for creating wealth, but it all depends on how we spend the salary as that determines our wealth,’’ said Gunaseelan Kannan, (pic) a licensed financial planner and academician at Asia Pacific University of Technology and Innovation.

However, as experts pointed out, your net worth is not a reflection of how much you earn.

“Being rich is not about how much money you make or spend but it is about how much money you keep,’’ said a report.

“We often feel that making good money is being well off and this is largely due to the fact that our salary is a primary source for creating wealth, but it all depends on how we spend the salary as that determines our wealth,’’ said Gunaseelan Kannan, (pic) a licensed financial planner and academician at Asia Pacific University of Technology and Innovation.

How big a net worth you aspire really depends on you.

Best is to keep track of your net worth to know if it is going up or down. A report said that you can even have a negative net worth if you have nothing invested, and if all that you own – like a house or car – is owned through loans, then it is all debts.

Gunaseelan said a depreciating asset is one that might not store its value well.

“In fact, once you purchase the asset, its value will typically decline steadily until it hits its ‘salvage value’.

“A car is a great example of a depreciating asset. While there are some cars which increase in value (antique cars), almost all cars decline in value quickly over time,’’ he said.

He added that gadgets, furniture and golf memberships are some examples of depreciating assets.

However, you can raise your net worth by doing several things. These include managing your cashflow, knowing your spending patterns, putting a lot of money aside every month towards building your wealth and investing in appreciating assets.

Gunaseelan said constant rebalancing, investing according to your risk tolerance, giving needed time horizons and having investment diversification definitely can protect your asset value.

“The first criteria in protecting asset value is to make sure at least each asset of ours can generate a return more than the inflation rate (hedge against inflation), as this can ensure that we maintain our purchasing power,” he said.

But life’s journey can be long and arduous. There will be trials and tribulations and sometimes you will need cash urgently during eventualities. How can you ensure you still have enough when you retire to lead a comfortable life and your net worth remains intact?

“Developing a comprehensive financial plan will give you an eagle view of your income and expenses (cashflow), assets and liabilities (net worth) and financial goals,’’ Gunaseelan said.

He said that once you have a plan, it would be easier to strategise your net worth planning because cashflow plays an important role to improve your net worth.

He added that with a financial plan, you can understand the time horizon needed to retire and how much funds would be adequate. If there is a shortfall, you can review your plan to fill the gaps.

Beyond that, he said, you need to work towards improving your financial literacy by reading personal finance books, joining Facebook investment community groups and engaging licensed financial advisers as that helps.

“Remember, only your financial literacy, plan and experience will maximise your net worth,’’ he added.

What you earn as salary is your income and that is money flowing into your account. What you spend as expenses is money flowing out. What you retain and save is your wealth.

Ultimately, if you want to have a high net worth, you need to know how to manage your money and make it work for you by investing into income generating assets.

To find out this report in the StarBiz on 23 August 2021, please click: https://www.thestar.com.my/business/business-news/2021/08/23/what-is-your-net-worth#.YSL7hSM8Ioo.whatsapp​