Step Two:  Organize Your Finance. 

You're a person with financial goals.  Now determine where your finances stand. 

1. Write down your cash balance at the beginning of the year.

2. Add your expected income for the year.  Check your most recent income tax return so you are sure to include all sources of income.

3. Subtract your estimated savings and investments

4. Subtract your annual expenses.  Consult your checkbook to make sure you include all expenses.  The amount remaining is your cash balance at the end of the year.  If it is negative, you'll have to go back and see if you can eliminate some unnecessary expenses.

5. List all of your assets.  These are the things you own, including your investments, home, life insurance, etc.

6. Subtract your liabilities; that is, everything you owe. Liabilities include your mortgage, charge account balances, loans, and taxes due.  The difference between your assets and liabilities is your net worth.  If you calculate your net worth annually, you can monitor the growth in your personal wealth. 

Click here to go to step 3:

Asset Allocation