Understand Where You Are Today
Life is like a moving target. You're first step is to stop that target for an instant with a snapshot of your current financial situation to gain an understanding of where you are today. This process includes taking an inventory of your assets, liabilities and cash flow. It also includes maintaining accurate records, ensuring that your personal documents are up-to-date.
Your Net Worth
Determining your net worth will give you a snapshot of your financial position. It is simply the difference between what you own (your assets) and what you owe (your liabilities). You will want to complete your net worth statement at least once a year so that you can monitor progress towards your financial goals.
Your Cash Flow
A cash flow worksheet will help you determine where your money comes from and where it goes. By understanding your cash flow, you will be able to identify areas where you can free up extra savings to apply towards your long-term savings goals.
Organize Your Financial Documents
Keeping good financial records is just as important as understanding how you use money. When completed, you will want to keep these records in a safe place where you and your family will have easy access to them. You'll find the following list a good starting point for creating this file. These documents will also come in handy should you choose to meet with a professional financial planner.
- Personal Information
- Professional Advisors (CPAs, Lawyers, etc.)
- Account Information (Bank, Brokerage, 401k, etc.)
- Debt Position (Accounts, Balances, Interest Rate, etc.)
Now, on to Step 3: Develop A Plan
Before taking steps towards your goals, look into all your options and solutions. This approach will help you achieve your goals by defining your next steps. Your plan should identify if your goals are achievable and your Harborstone professional can help define what you need to do to ensure that you reach these goals.
Step 1: Set Financial Goals
Step 2: Take Inventory
Step 3: Develop A Plan
Step 4: Implement Your Plan
Step 5: Review Annually