Your net worth is a measure of how wealthy you are.

A person may be cash rich, while another may be cash poor. But because the cash poor person owns a property, both of them could have equal net worth.

And do you know there’s a rule of thumb for telling whether your net worth is up to scratch?

According to the book The Millionaire Next Door if your net worth equals (or exceeds) your age times your annual income divided by 10, then you are a “wealth accumulator”. I suppose that means it’s good. This is your target net worth.

So if you are 30 years old and make \$60,000 a year, you’ll be called a wealth accumulator if you have an actual net worth of \$180,000 or more.

To calculate your actual net worth, you simply add up all your assets, and subtract from that sum all your liabilities.

Er, exactly how?

For assets, add up all your cash savings, CPF balances, insurance cash value (you may want to take the surrender value of all your policies). Then add the market values of all your shares, unit trusts and properties. The result is the sum of all your assets.

For liabilities, add up your mortgage balance (how much you still owe the bank or HDB), credit card balance, renovation loan balance, and car loan balance. Add other sums of money you still owe banks, financial institutions, CPF, HDB, relatives and friends, and you’ll get the sum of all your liabilities.

Then apply this simple formula:

Your Net Worth = Sum of Assets – Sum of Liabilities

And compare it with your target net worth.

To save you time, here’s a tool to help you calculate and benchmark your net worth:

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### 14 Comments

1. If you bought a condo that costs S\$600k but have not fully paid for it, can you use that S\$600k as part of your net worth or asset?

2. Masindi, you can take the market value of that condo, say S\$650k as part of your assets. BUT you also have to include the mortgage balance – what you still owe the bank – as part of your liabilities.

3. after all these years, i came to realise that salaried workers should never equate fix pay with wealth. anyone who wants REAL wealth, go be a self employed. it is silly to push HR so hard for a pathetic \$300-\$500 increment and end of the day, the real wealth increase is not even worth 1% to a self employed.

if a worker’s salary is not ridiculously low compared to the mass, leave it. fight for minimal increment for the sake to expand “wealth” is silly. fight for “acceptable living allowance” sounds better to me.

bonuses and director fees are different altogether.

4. No need to fight with HR. The market will determine your pay. As in, shop around. If you’re making 6000 per month, and the HR refuse to give you a single cent more than 500 increment (which makes it 6500), then shop around.

Go for interviews and ask for 7500. Can you get one? If you can, leave. If you can’t, and everybody pushes you down to 6600, then either (1) you’re not that hot of an employee, or (2) maybe you’re near the ceiling of your profession or post.

I totally agree with you that fighting for minimal increment for the sake of expanding wealth is silly. Because the fact is you can’t get wealthy by getting 300-500 increment every year.

5. I agree with Razor.

You can’t expect REAL wealth from your employer who only employ you to work.

Save/plan/budget/invest your way outside the scope of your job to expand your wealth.

One might be able to afford better luxury items with better income, but WEALTH IS another ballgame altogether.More often than not, wealth IS NOT determined by your monthly income.

6. “You are not a wealth accumulator.
Your net worth is \$34,000. The target for you is \$112,000”

I’m still not a wealth accumulator… /wrist

7. My net worth is 600k. Gross salary is 2.8k. Target is 168k. How come they set the target so low? I consider myself poor because I have little cash or near cash assets