Net worth

Understand your personal net worth

Standard Chartered Bank

How do you know what your net worth is? But first, what
net value?

Net worth is the difference between your total assets and your total liabilities. It is important to understand your net worth because an analysis of your net worth can tell you if you are creditworthy or have a negative rating.

Total assets can be defined as everything you own that has some financial value. Total liabilities can be defined as everything you owe others.

To perform your net worth analysis, you need to be knowledgeable and aware of your total assets and total liabilities – this includes short, medium and long term liabilities.

To calculate your net worth, you need to match your total assets and liabilities.


Total Assets = Total Cash Savings + Stocks/Fixed Income + TAP/CP Assets + Personal Assets + Other

Total cash savings (liquid assets) will include total savings account balances, all term deposits and cash value of insurance. Equity/fixed income is the total of all your bonds, stocks and trust units. TAP/SCP assets are the balance of your Employee Trust Fund (TAP)/Supplementary Contribution Retirement Account (SCP). Personal property is the total of your property, investment properties and cars. Others could be investments in companies.


Total Liabilities = Current Liabilities + Long Term Liabilities

Short-term liabilities can be classified as loans that will be settled within three years, while long-term liabilities can be classified as loans to be settled after three years.

Some examples of liabilities are mortgages, personal loans, auto loans, credit cards, and overdrafts.


Net Worth = Total Assets – Total Liabilities

Negative net worth occurs when total liabilities are greater than total assets, while positive net worth occurs when total assets are greater than total liabilities.

From the net worth analysis, you can also derive other useful information such as a person’s debt level and solvency ratio.

Level of indebtedness (debt to asset ratio) = Total liabilities ÷ Total assets

Solvency ratio = total net worth ÷ total assets

The above two ratios give you a measure of a person’s liquidity position as well as their ability to pay. For the “Debt level ratio”, the recommended level is lower than 50%, and for the “Solvency ratio”, the recommended threshold is 50% and higher.

When you have negative net worth, it means you have more loans than assets.

It’s not uncommon but it’s unhealthy. Technically, a person is insolvent if their net worth is negative because if they do not repay or cannot repay their loan, they would not have enough assets to cover their obligations to lenders. That said, there are ways to improve one’s net worth.

Negative net worth occurs through a number of factors. Usually, these are loans for the purchase of items or services that are not considered assets, such as vacations.

So how can you improve your net worth? This can be done through discipline. If you do not have sufficient funds, you need to start saving for it. This should be your number one priority before anything else, as it will be your safety net for any eventuality.


– Reevaluate and reduce/reduce your non-essential expenses, such as entertainment, shopping expenses, etc.
– Aim to save at least an additional five percent of this exercise if possible.
– Create an emergency fund account to cover about four to six months of expenses.
– Continue to build this “asset” and learn how to further accelerate growth with investments tailored to your goals and risk category.
– Avoid watching quick returns. Hard work and patience bring healthy returns.
– Shop the market for all the opportunities one can gain by refinancing existing loans.

It is important to note that fixing this problem requires a lot of hard work and patience. It may take months or even a few years, but with this hard work and patience, the end result will be a healthier financial situation.

This article is for general information purposes only and although the information contained herein is believed to be reliable, it has not been independently verified by us. You are advised to exercise your own independent judgment with the content of this article.