If you read my prior posts,you have learnt how to create your own personal cashflow statement and your personal balance sheet.
Today, I am going to touch on 8 FINANCIAL RATIOS that you can use to interpret your current financial standing.
I have created a mindmap, to help me recall the financial ratios.
1) Basic Liquidity Ratio
Cash/Near Cash Monthly expenses
You must have a basic liquidity ratio of 3-6 times. It signifies your ability to pay for your expenses if anything were to happen to you.
2) Liquid Assets To Networth Ratio
Cash/Near Cash Networth
Measures the proportion of networth an individual have in terms of cash or near cash. You need to have at least 15%.
3) Debt To Assets Ratio
Total Liabilities Total Assets
You need to have less than 50%. If you have more than 50%, you do not have enough assets to pay off your total debts.
4) Solvency Ratio
Networth Total Assets
It measures the long term solvency problem. The higher, the ratio, the better.
5) Debt Service Ratio
Total Debt Yearly Repayment Annualised Take Home Pay
This ratio measures the proportion of take home income, used to make regular payment of debts. If it is lower than 35%, means HEALTHY.
6) Non Mortgage Debt Service Ratio
Total Non Mortgage Debt Yearly Repayment Annualised Take Home Pay
This ratio measures the proportion of “take home income” used for regular payments of non mortgage debts.If it is lower than 15%, means HEALTHY.
7) Investment Assets To Net Worth Ratio
Invested Assets Networth
This ratio compares teh value of invested assets with networth. If it is more than 50%, means HEALTHY.
8) Savings Ratio
Savings Gross Income
This ratio calculate the proportion of your income, you set up for savings. You need to save at least 10% of your gross income.
I suggest you create your cashflow statement and your personal balance sheet and try the ratio out!
Its fun! Try it! 🙂
p.s. By the way, if you wish to discover a simple & halal way to create a positive monthly cashflow and calculate your net worth for FREE, then please click here…
…and I realised, I have contributed over 200 posts in this blog.
Phew…I feel that is really a feat.
It is very easy to create a blog, but to maintain it, you need patience, you need energy and you need a DIEING INTEREST to share your knowledge with the public.
Today’s post, I will like to share with you on what is a contract and what constitutes a contract.
I remembered learning about contractual law while studying one of my favourite modules, Business Law back in Ngee Ann Polytechnic and I revisit this this theory again, while studying for my (BICP) Basic Insurance Concepts and Principles examination.
…and now,I am taking my first module for my CFP course, Foundations In Financial Planning, I am visiting this concept again.
So…again, what exactly constitutes a VALID contract?
For a contract to be valid, there must be 4 things.
1) Offer
Example: I OFFER you to take up insurance.
2) Acceptance
Example: You ACCEPT by signing the contract.
3) Intention To Create Legal Relation
Example: You understand that I am your FINANCIAL ADVISOR and you are my CLIENT.
4) Consideration
Example: You pay the premium to me in EXCHANGE for your coverage.
So in order for a contract to be legally binding, these 4 elements must be imminent.
Any one of the elements missing, the contract is VOIDABLE.
Think of all the contracts that you have signed…. Is it binding? 🙂
p.s. By the way, if you wish to discover a simple & halal way to create a positive monthly cashflow and calculate your net worth for FREE, then please click here…
I just found chanced upon a song on Singapore most famous, jealously guardedERP gantries.
We understand the government had reduced the ownership taxes, ARF, excise duty and so on, and at the same time issued more COEs to ensure more Singaporeans are able to afford buying cars.
The major policy shift from ownership to usage thus prompt the idea of the most revolutionary ERP (Electronic Road Pricing).
The government pragmatic move in pushing up ERP to control traffic congestion in Singapore is understandable.
I can go on,yet I dont want….enjoy the song. Very creative! 🙂
P.S: You can click the link below,if you want to view the Singapore National Day Rally Speech 2008 on why Singaporeans need ERP.Click Here
p.s. By the way, if you wish to discover a simple & halal way to create a positive monthly cashflow and calculate your net worth for FREE, then please click here…
In family financial planning, there are a few INDICATORS, to help you gauge your own financial level of success.
Ladies, in particular, will love the tips that I am about to share. 🙂
Well, I am going to share with you a very IMPORTANT discovery.
I am going to share with you on how YOU can determine whether your current boyfriend potential husband, is a person who always got money, or always has that annoying, flickering, ZERO digit in his bank account every month.
You can actually find out if the person got money or not, by asking him to take out his wallet creating his personal statement of cashflows.
A statement of cash flow captures 2 things.
1) Your Cash Inflows
-inflows are all monies received by a person and include gross salaries, rental income, interests and dividends
2) Your Cash Outflows
–outflows are monies that a person has paid out, it can be fixed or variable.
…that have occured over time, normally over the course of a year.
I always create a statement of cashflow for my client when he or she claims, that they dont have the extra money to save.
So, now, how do you create that personal statement of cashflow?
First of all, I will ask his average paycheck (disposable income) he brings home every month and add up to other income if he has any, like dividends, rental income etc. (MONEY COMING IN)
After that, I will segregate his outflow (MONEY GOING OUT) into 2 portions.
1) Fixed Outflow
This refers to expenses that is FIXED, like rental, handphone bill, mortgage loan +++
2) Variable Outflow
This refers to something that FLUNCTUATE, something that he CAN CONTROL.
Example, like cigaratte, holiday expenses, food, +++
I will then take the total inflows and subtract it with his total outflows.
If the balance is positive, he is OKAY.
If it is negative, he has a cashflow problem.
I will then analyse, how they spend their money, and propose recommendations on how to control and reduce their variable outflow.
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My accountant friend used to joke that, a naive, uneducated lady will look at a guy’s car to determine whether he is rich or poor.
In contrast, an intelligent lady, will look into his bank account to determine whether he is rich or poor.
Now, I will recommend her, to also create that CASHFLOW STATEMENT for her guy, to determine whether this guy got money or not.
Of course,if love binds everything…girls, do help your boyfriends manage their cashflow to a negative POSITIVE one! 🙂
p.s. By the way, if you wish to discover a simple & halal way to create a positive monthly cashflow and calculate your net worth for FREE, then please click here…
I was invited to contribute my thoughts for Personal Finance Blog Carnival.
The question goes…
“What is the single most important lesson you learnt in personal finance?”
Here are my thoughts 🙂
Managing your personal finance is the responsibility of every individual.
Be it, if you are a student, an employee, a business person, a full time investor, EVERYONE, I meant all of us, has the inherent responsibility to manage our finance well.
The most important lesson, I learnt in personal finance, boils down to setting financial goals.
In my capacity as a financial associate in Singapore, I get to talk to lots of people, every single day.
I realise most of them have an insurance plan, have an endowment plan, have an investment linked policy, yet many do not set that OBJECTIVES for having those plans.
When asked, “Why do you get that endowment plan?”
Most will answer, “For savings purpose.”
When pressed for specific objectives, most will retort, “Don’t know. Just savings”.
You need to set your objectives right.
You need to set up your objectives clear.
A soccer player can’t score goals, if he does not know where his goal post is.
An athlete in the Olympics cannot win the game, if he is not clear on the perquisites to winning.
You get life insurance, for your coverage against death, permanent disability and 30 critical illnesses.
You save your money in the bank as a form of contingency funds for emergency use or for your everyday use.
You save your money in endowments, in investment linked products for child’s university education, for your retirement or simply to improve your living standards in the future.
The goal, the time frame and where you money is allocated to; everything is instrumental to your financial success.
Being clear of what exactly you want, and how much exactly you need, will help you in achieving your financial goals.
When setting financial goals, I always share with my clients this simple acronym, simple formula, which I termed as SMART.
Your goal must be Specific, Measurable, Attainable, Realistic and Timely.
1)Specific.
What is your OBJECTIVE of getting that savings plan?
How much money exactly, do you want to accumulate?
2)Measurable
Your goal must be measurable.
If your child is 8 years old, and 10 years later, she wants to go to a local university; do you have at least $84,000 for her 3 years university education?
3)Attainable
When you identify the goals that are important to you, you must find ways to make them come true.
Align yourself with professionals to ATTAIN your goals.
Align with people who already achieved the outcome you want, and learn from them.
4)Realistic
If you have been saving only $100 per month, to save $1000 per month in an endowment plan now, may seems farfetched.
Unrealistic.
Set yourself, a realistic goal.
5)Timely
When exactly do you need, the money that you has saved?
10 years? 15 years? 20 years?
You decide!
So, just remember, setting financial goals are important, and when you set those goals, make sure it is SMART financial goals.
Thank you. We will catch up soon. 🙂
p.s. By the way, if you wish to discover a simple & halal way to create a positive monthly cashflow and calculate your net worth for FREE, then please click here…
A certified financial consultant, Helmi Hakim has won praise for his patience, perseverance and practicality when solving his clients’ financial concerns. For more information on how you can manage your finances better, contact Helmi Hakim at 96520134.
