One of the most contentious argument in deriving Net Worth and skew most of our calculation is the Property and Loan, simply is the biggest ticket item for most people.
Let's use a scenario to prick the logic. If a multi-millionaire has a 5 Million apartment and has a monthly balance of zero after loan and spending whereas a 5K salary man owning a HDB with also outstanding loan has a saving of 100K. Does it make sense to say the HDB man has higher networth than a man who has a 5 Million apartment who has zero saving ?
The best way to know is not whether we need to service the loan or not. Or who has higher saving. To know net positive or negative, I would get the market value of the property and minus all the outstanding loans. Property Market value may change, so does your Net Worth. We are just reflecting Reality of it. That's the whole idea.
An asset is an asset. Net Worth is not about creating buffer, safety zone, principle, financial planning, living standard or whatsoever. It is what it is.
Cory
20160413
Remove the asset value of residential home to make it easier to compare if wish to compare. My net worth exclude asset value of my home. :-)
ReplyDeleteI will put you in the "whatsoever" category ! :P
DeleteCory,
ReplyDeleteIt's been a long time!
Finally someone that speak common sense and logic!
LOL!
Scary right?
Some of the things that come out from financial bloggers...
Hey SMOL, welcome man ! Topic has been deep deep inside me for long long time liao lor. :)
DeleteCory,
DeleteI know how you feel.
When it comes to "asset" and "networth", boring financial bloggers who think with precision in decimal places suddenly become super "creative" like literature writers.
Each coming up with their "own" definitions ;)
LOL!
Which is perfectly fine; just as long it stays within "yours".
Very high EQ replies to your commenters by the way ;)
thanks bro. I am still horning my skill from your comments in other blogs I read. Really lah. Don't blink !
DeleteDon't like that SMOL, I'm not boring! I can sing can dance, can wrote riddles that rhythm, can poke can defend, can say what's on my mind! ;)
DeleteDon't like that SMOL, I'm not boring! I can sing can dance, can wrote riddles that rhythm, can poke can defend, can say what's on my mind! ;)
DeleteLP, still dare say? Check boxes every week not boring?
DeleteThere are asset rich people living in landed properties going to Meet-The-People session to ask MP for help as they just can't let it go. HOME as an asset class can be very emotional. They rather suffer now and die rich!
ReplyDeleteHi Cory,
ReplyDeleteI think any metric that you use also shows the value of your beliefs. There's no such things as it is what it is. Everything is tainted by opinions and value. If you want net worth to be what it is, then that already is your stand.
I will remove the asset value of my residential home, like bro8888, and only include debts, because I'm tracking how my human asset and financial asset varies over the years, without the fluctuations of the property market. Maybe it shouldn't be called networth, but it's still 'my networth'.
Agreed. It is your "networth'.
DeleteThis comment has been removed by the author.
ReplyDeleteI compute my net asset every 6 months and usually will recognised my loan liability but not my HDB as an asset. The purpose of computing is to get a sense of my net investable asset after covering my liability. A prudent approach in my view.
DeleteHowever, MAS would agree with your assessment.
accredited investor‖ means
(i)
an individual
(A)
whose net personal assets exceed in value the minimum amount of $2
million (or its equivalent in a foreign currency) or such other
amount as the Authority may prescribe in place of the first amount, and in
determining whether an individual’s net personal assets exceeds the minimum amount,
the estimated fair market value of an individual’s primary residence less any
outstanding amounts in respect of any credit facility granted to the
individual or any other person that is secured by that residence, shall not account for more than $1 million (or its equivalent in a foreign currency) of the minimum amount
Investable asset as it means investable. Being prudent is a principle. If the current HDB is your home sweet home I agreed you won't want to sell to do investment. Look from another angle, if you have borrowed a lot of money to invest, do you agreed investable can be much larger than your net asset ?
Deletethanks for the search on MAS information. Good to know I am not alone. :)
DeleteHah! Good post. There seems to be too many financial bloggers these days. Some are really trying too hard. I remember being amused by articles such like 5 Financial Lessons I Learnt from a Yakun Visit. One blog even has a popup asking you to subscribe to it with the options "Yes, I want to be rich" and "No, I want to be poor".
ReplyDeleteThat fellow so desperate to help people to become rich. When I encountered that popup I said Walan. WTF! Can like that meh? LOL!
DeleteGood programming skills. I would like to learn to do pop-up to ask "M" or "F". If "F", "Photo and Phone Number" else "Ignore" !
DeleteThat one. You can use your FB to link up with as many chio bo out there as you like. Sexy ones in sexy pose also have. LOL
Delete