2018 has come to an end, and it is time for a financial health checkup. I am not a set-your-budget or track-your-expense guy. I tried that before, and I felt really terrible. It is more enjoyable to do things we love instead of things we hate. The idea of tracking my networth came towards the end of 2017 and I began tracking my network religiously since the start of 2018. I envisioned how fun and enjoyable it would be to see my networth grow. And indeed, one of the most enjoyable thing to do is to tabulate my networth at every month end.
The best way to learn how to do it, is of course to “copy” or “model” how others do it. Visiting personal finance blogs and reading books gave me the idea to start. But the main thing is to actually START tracking.
NETWORTH FORMULA
In simple terms, Networth = Assets – Liabilities. Use Microsoft Excel or Google Sheets, tabulate all assets, tabulate all liabilities, subtract and taaadaaa… that is the networth.
69.21% growth in networth may seem like a staggering figure. Actually, I didn’t do anything unique at all. I simply did not overspend nor buy useless things that I did not need. My only source of income is from my job. Every month, money is set aside to an account, waiting to be deployed/invested. This 69.21% growth is due to a low starting point. I spent quite a lot of money on medical expenses in recent years. As my networth increases, this growth may slow down unless my income shoots up exponentially. One thing to note, I have very little debt/loan as I do not own a house.
INVESTING
For people who want to be “rich” or “high networth”, generally they need to invest. It can be in business, stock market or real estate etc. Do note that I do not deem “guessing of price” as investing. If you take a good look at the top 10 richest people in the world, they own, run or invest in businesses. Their main role is not to guess if prices are going up or down today. Maybe this can be a good starting reference point for everyone.
I started investing maybe in 2017, I can’t really remember exactly when. However, I only started tracking my portfolios in 2018 as well. I set up two portfolios and you can take a look at the returns.
S&P 500 – Standard & Poor’s, 500 companies, American stock market index
HSI 50 – Hang Seng Index, 50 companies, Hong Kong stock market index
STI 30 – Straits Times Index, 30 companies, Singapore stock market index
Portfolio A – Concentrated portfolio with 5 positions *Error: correct return is -3.02%
Portfolio B – Diversified portfolio with less than 20 positions
FINAL THOUGHTS
Debt/Networth Ratio: 3.23%
Investment/Networth Ratio: 24.75%
Just to make it clear, I am not a millionaire /billionaire /trillionaire nor financially free right now. I am simply organising my thoughts and documenting my journey. Hopefully, this journey inspires a few people to take a good look at their financial health.
Hi Boon How. I am Elvis. Good sharing! I did track my asset since 2018 January too. Good point that you add in the liability as I did not track liability. Do you mind sharing what is your liability since you said you don’t own a house? Do you include future payment for life insurance as liability? How about medical/accident plan yearly premium? My liability mainly consists of these yearly insurance payments and telco contract. Thanks. Let’s improve together!
Hi Elvis, thank you for your comment and question. It is nice that you too embarked on this journey. My only liability is my credit card installment plan. I signed up for a course, so I am paying off the monthly amount in full. I do not add in my insurance premium as payables. I will simply deduct this amount from my cash (assets) when the premium is due. Whenever there is an annual premium paid, theoretically my networth will drop abit. Telco bill is paid off in full every month too. Yes let’s improve together, I will (hopefully) post every week. If you have a blog, do let me know, so that I can visit as well. Thanks a lot!