Make A Financial Plan

Figuring Out Your Finances

You can never take a journey without knowing where you're starting from, and a journey to financial security is no different. You'll need to figure out on paper your current situation--what you own and what you owe.

You'll be creating a "net worth statement." Print out this page and list what you own (these are your "assets") and on the other side list what you owe (these are your "liabilities" or debts.)

Subtract your liabilities from your assets. If your assets are larger than your liabilities, you have a "positive" net worth. If your liabilities are greater than your assets, you have a "negative" net worth.

Your Net Worth Statement

Update your "net worth statement" every year to keep track of how you are doing. Don't be discouraged if you have a negative net worth. If you follow a plan to get into a positive position, you're doing the right thing. That leads us to the next step in the journey toward saving, figuring out your income and expenses.

KNOW YOUR INCOME AND EXPENSES

Now, you need to make a record of your income and your expenses for every month. Write down what you and others in your family earn, and then your monthly expenses.

Print out this page and fill out the chart at the right. Start out with how much you take home and then figure out where it goes every month. Many people get into the habit of savings and investing by following this advice: Always pay yourself or your family first.

Many people find it easier to pay themselves first, if they allow their bank to automatically remove money from their paycheck and deposit it into a savings or investment account. That way they are never tempted to spend the money before they pay themselves first.

If you are spending all your income, and never have money to save or invest, you'll need to look for ways to cut back on your expenses. When you watch where you spend your money, you will be surprised how little everyday expenses that you can do without add up over a year.

You're in the savings habit!