CHECKING OUT YOUR FINANCIAL HEALTH

How able are you to fork out cash in an emergency?

Calculate your liquid assets to net worth ratio. This is your cash or near-cash divided by your net worth.

Liquid assets include money you have in the bank, shares and unit trusts, while net worth is all your assets, including house and car, minus all your liabilities like housing loans.

Rule of thumb: The ratio should be 15 per cent or more.

The ratio indicates how easy it would be for you to convert your assets to cash in the event of an emergency.

However, Mr Ben Fok, the chief executive of Grandtag Financial Consultancy, pointed out that a higher ratio is not necessarily good in all cases.

This is because cash or near-cash does not generate good returns in the long run relative to what you would get if you invested the money in less liquid assets like property.