In my last article, I wrote about the first step of the YMH Model for Financial Freedom — Define Your Good Life. In this article, I would like to share on the second step of the model — listing your assets.
Once you are clear about your definition of a “good life” and financial goals, you will need to know the financial resources you have, currently. Only then, will you be able to use the assets to fund your financial goals and support your good life.
It may sound like a very simple thing when I say know your financial assets. However, like so many things in life, it is never about how easy the action is, it is always about you actually acting on it.
You may be surprised to know that more than 70 per cent of potential clients don’t know how many assets they actually have. Ask yourself if you know how much you have? How much is your net worth now? If you know the answer, you fall under the minority. For the step to list your assets, I don’t mean just listing. You need to also ascertain your liabilities, incomes and expenses.
THE ASSETS
Ask yourself the following questions to find out the assets that you have:
1. What are the assets you have?
2. Do you have your own house? How much it is worth now?
3. Do you have your own car? How much is your car worth now?
4. How much is your jewellery worth?
5. Do you have properties that you bought for investment purpose? How much are they worth now?
6. Do you hold any shares? How much are they worth now?
7. Do you invest in unit trust funds? How much using your own cash and how much money from EPF savings is used?
8. What are the bank accounts that you have?
9. Do you use private fund managers for your investment? How much are each of the investments?
10. What is your EPF balance?
11. What other assets do you have?
THE LIABILITIES
Ask yourself the following questions to find out the liabilities that you have:
1. What are the liabilities that you have?
2. Do you have a mortgage over your house? How much?
3. Do you have credit card balances? How much?
4. Do you owe the income tax department any money? How much?
5. Do you have personal loans from banks? How much?
6. Do you have an outstanding car loan? How much?
7. Did you take a loan to finance your investment property purchases? How much?
8. What other liabilities do you have?
After knowing your total assets and your total liabilities, you can proceed to calculate your net worth. You will get your net worth when you minus your total liabilities from your total assets. If you happen to get a negative number from the calculation, you are in serious financial trouble. You need to act fast to rescue your position.
THE INCOMES
Ask yourself the following questions to find out the incomes that you have:
1. What are the incomes that you receive?
2. How much is your salary?
3. How much are your director’s fees?
4. Do you have any other active income?
5. How much is your rental income?
6. How much is your interest income?
7. How much is your dividend income?
8. Do you have any other passive incomes?
THE EXPENSES
Ask yourself the following questions to find out the expenses that you have:
1. What are your expenses?
2. How much do you spend to maintain your own house?
3. How much do you spend on your daily living?
4. How much do you spend on paying back loans?
5. How much do you spend on vacations?
6. How much do you spend on insurance premiums?
7. What are your other miscellaneous expenses?
After knowing your total incomes and your total expenses, you can proceed to calculate your savings. You will get your savings when you minus your total expenses from your total incomes. If you get a positive number after the calculation, you are in a surplus position. If you get a negative number, it means that you are suffering a deficit. To achieve financial freedom, you must put serious effort into getting out of this deficit position.
I suggest that you do this exercise of listing your assets at least once a year. Don’t be frustrated when you are not able to get an accurate number. It is important that you don’t let that frustration get in your way. For example, if you are not sure about an expense item, you can always get a more accurate number next year by monitoring the actual expenses this year. In the meantime, just put an estimate for now.
Visit www.yapminghui.com to download the YMH Family Wealth Inventory. You can use it to produce your own Personal Balance Sheet, Personal Income Statement and Detailed Assets List.
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