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How to Determine Your Financial Position

Self-worth takes you further than net worth.

Matshona Dhliwayo

What is your financial position? Very few people can answer this question with certainty. Understanding your financial position is very important as it gives an indication of your financial health. It also gives you an indication of where you are in relation to your financial journey.

We all have different financial goals. The one thing most of those goals have in common is that they all seek to improve our wealth. But we often make a mistake of thinking that the amount of money we have in our accounts is our wealth. Or the material positions that we have. This is not the case. Your net worth is your wealth. Your net worth is simply what you own (assets) less what you owe (liabilities).

  • Let us explore each item.


Assets are everything you own. Assets can be classified under three items; Cash and cash equivalents, invested assets, and personal use assets.

Cash and Cash Equivalents

This is the cash that you are holding together with assets that can be converted into cash quickly without any loss of value. They include cash in hand, money held in bank accounts, and mobile money balances.

These assets give an indication of whether you are able to settle your regular expenses and how well prepared you are for emergencies.

Pro Tip: You should use this class of asset to keep money for monthly expenses and emergency expenses. The emergency expenses should be in an interest-earning account that can be accessed easily.

Invested Assets

These are assets that generate regular income or that can be sold in the future for a profit. They include holdings in money market funds, other unit trust funds, and saccos, financial securities, pension benefits, land, and rental property, among others.

Your invested assets indicate how well prepared you are for retirement and how financially independent you are. As you build your investments, your reliance on a salary will reduce.

Pro Tip: You should aim to increase these types of assets. Have investment goals at all times and save for them in a money market fund.

Personal Use Assets

Personal use assets are assets that you do not use for investment or business purposes. These include personal cars, furniture, clothes, electronics, etc. You can sell them, sure, but you will often sell them at a loss.

Pro Tip: Such items are necessary but don’t spend too much on them. You might need a car of course, but probably not a high-end luxury model.


This is basically what you owe others. With the advent of instant mobile loans, accumulating debt has become a common thing in our society.

In some cases, debt might be necessary. Perhaps you want to build rentals and you have the land and some money but you need more to finish the project. You might obviously need a loan. This is not a bad way of using debt since you are using it on an asset that will generate income and appreciate in price.

In other cases, debt might be avoided with some foresight. For example, you get a medical emergency and you can’t settle the bill, so you opt for a loan. Or the new term starts next week and you don’t have enough money at the moment, so you take a “soft” loan. Both of these cases might be avoided if you saved for emergencies. Also, expenses such as fees are not emergencies. Try and save monthly for such expected expenses.

Pro Tips: As the saying goes, “Kukopa harusi, kulipa matanga.” This is because of the interest these loans require you to pay. Be on the lookout for the interest rates quoted. When someone gives you a loan at an interest rate of 10% per month, may end up paying 120% per annum depending on the terms.

Try and avoid debts as much as you can by building up emergency savings. Only take up a loan that will help you increase your investments and future earnings.

When it comes to loan repayment, ensure that your monthly repayment does not exceed 20% of your monthly income. If you have a mortgage, unsure the total monthly does not exceed 36% of your monthly earning.

Net Worth Statement

Below is a sample Net Worth Statement.

Mary Mapesa
Net Worth Statement as at 1st January 2020
Cash & EquivalentsBank Loans3,500,000
Cash at Hand14,000Car Loan400,000
Bank Balances267,000Mobile App Loan0
M-Pesa Balance56,000Total Loan3,900,000
Emergency Fund100,0000
Total Cash437,000
Invested Assets
Zimele Savings Plan865,125
Zimele Guaranteed Pension1,253,000
Rental Property4,500,000
Total Invested9,618,125
Personal Use Assets
Miscellaneous Property200,000
Total Personal2,150,000
Total Assets12,205,125 Net Worth 8,305,125

Pro Tip: Some experts say that your ideal Net Worth should be about 1/10 of your annual income multiplied by your age. Aim for that.


Regular checkups are important to determine your physical wellbeing. Similarly, regular financial checkups are important in determining your financial wellbeing. Write your Net Worth Statement today to know where you really are financially. Then do it every year to track your progress.


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