Between What You Own and What You Owe? That’s Your Net Worth

Aneth Ng-Lim

Posted at Jan 28 2019 09:08 AM

Commuters traverse a footbridge with the Makati City skyline in the background. Mark Demayo, ABS-CBN News/File

MANILA -- Do you know what HNI stands for?

It’s an acronym commonly tossed around by bankers and financial advisers to refer to their target clients. HNI means high net worth individuals, or customers who are highly liquid with many, many millions to save and invest. If you add the letter U before HNI, which means Ultra, expect the same bankers and financial advisers to start drooling.

When your disposable income hits a certain mark, you start to see the importance of knowing your net worth. This way, you can decide how much money you can set aside for long-term investments, whether it makes sense to pay for a new house in cash or take a loan from the bank, or can you afford to take a risk in a new business.

But the reality is you don’t need to wait to have millions in the bank before checking your net worth. Not even hundreds of thousands.

Net worth is simply the difference between what you own and what you owe. The textbook definition is that one’s net worth is basically the amount by which a person’s assets exceed his liabilities.

When you know your net worth, you will have a clear picture of your financial health. You could say it’s like having an X-ray of your wallet. Everything is exposed, and when properly diagnosed, you can start a treatment plan to ensure long-term financial wellness.

Sadly, most people don’t bother to calculate their net worth, and that’s their first mistake when it comes to building their wealth.


Let’s begin with the first variable: Assets. Computing for your net worth requires knowing all your assets. This would include the cash you have, whether saved in the bank or money you lent to someone. It would also cover investments, house or houses, any real estate property, cars, and other items of value from art to jewelry to furniture. If you have one or more insurance policies, count their cash values as assets too. Do you own baseball cards that are collector’s items? Don’t forget those. Simply put, assets are items you own free and clear, which you can sell and turn into cash should you need too.

If you just started working, chances are your assets will be few, even nil. That’s fine as you have the rest of your working life to build your assets, and preferably make the right choices on what to acquire.

Note that not all assets are created equal. Let’s take real estate for example. There are those who prefer buying lots and constructing their own home. Others prefer to buy a house that’s ready for move in. Or maybe a condominium so maintenance and security are handled by a property management agency. Whatever you choose, make sure that it is an asset that you will be able to utilize or liquidate when the time comes. An asset that is hard to sell and not in use can be a drag on anyone’s net worth, and may even turn into a liability at some point.


Now let’s look at the second of the only two variables in computing for net worth: liabilities. Include here your debts, from your credit card balance, money owed to family and friends, or long-term debt like car or home mortgage. Did you take out an installment loan for a laptop or mobile phone? Add that too along with any other personal loans.

Once you have a list of what you own and owe, tally them up and check your net worth. If your assets are greater than your liabilities, congratulations on your positive net worth. But if the liabilities are greater than your assets, which means you’re in the red, you’ll have to work to turn that around.

But don’t panic yet – many financial advisers will tell you most individuals under the age of 40 have a negative net worth. Daniel Routh, a Certified Financial Planner at Exencial Wealth Advisors in the U.S., interviewed by said, "that's not unusual and not something to be afraid of."


The great thing about knowing your net worth is that it provides you a snapshot of your money situation in real time. Make a habit of tracking it once every six months, or at least annually to check if you are moving in the right direction.

Think of yourself as a business (Your Name, Inc.) that needs to track its expenses and profits. Maybe you baked and sold cookies when you were in high school? You must have looked at how much you spent on all the ingredients, and then counted your total sales to check if you made more money right? It’s the same thing when it comes to Your Name, Inc. or your net worth.

No business will thrive unless they monitor their profit and loss numbers consistently. When you see your personal financial trends, you cannot lie to yourself if things look bad. And if things look good, you may just be psyched to do better!

So, on this last week of the first month of the year, we invite you to add “know my net worth” to your “2019 to do” list. Maybe you’ll get the wake-up call you need to be smarter about money. Or it will give you reasons to celebrate if you have been doing a good job. When it comes to your net worth, ignorance is definitely not bliss.