As we discussed last week, the first step towards taking control of your finances and building a solid financial future is to take stock and get organized. What do I mean by that? Quite simply, set financial and life goals, take the time to evaluate your current situation, and set up your accounts to help you acheive those goals.

Setting goals can be fun and challenging. You can be as extravagant as you like…buy a home, sail around the world, live in a foreign country, learn a foreign language. Take a few minutes and put together a quick list, then read on.

There are a few fundamental goals that folks our age should keep in mind, including building an emergency reserve, managing your debt, and saving adequately for retirement. Once we’ve covered these basics, we’ll move along to the fun stuff.

Money can’t buy happiness, but chances are that having control over your finances will help dramatically with most of your goals.

To take control of your personal finances, you first need to know where you stand. Our immediate goal is to create a picture of your finances in a way that makes sense to you. Start now; grab a blank sheet of paper and make a list of all your accounts.

Start at the top with “cash flow” accounts: checking, savings, and credit card accounts. The next category should be “investment” accounts. First list non-retirement accounts, then retirement accounts: 401(k), IRAs, and so on. Next, list your major assets - home, vehicles, stamp collection, et cetera.

Finally, list your major liabilities, such as mortgages, auto loans, and student loans.

Once you’re done, add up the totals to find your Net Worth.

When you are finished, your list should look something like this:

Account Balance

Cash Flow:
Chase Checking Account $285.03
PayPal Money Market Savings $ 27.19
Citi Visa Card -$126.77

Investment:
Sharebuilder $325.77
Company 401(k) $1,376.65

Assets:
‘94 Subaru $1,700

Liabilities:
UNCNS Student Loan -$11,224

NET WORTH: -$7,636.13

Congratulations! You’ve just created a balance sheet for your personal finances, and determined your net worth. Don’t worry if your net worth comes out negative. At this point, we’re just trying to get an idea of where you stand. To go a step further, you can create this balance sheet in Excel. Personally, I use Quicken to track all my finances, and have found it to be a great tool if you are willing to take some time and set it up properly. At this point, a simple sheet of paper or Excel spreadsheet will serve just fine, but as we move along, using Quicken may be very helpful.

Now that you have an idea of where you stand right now and where you want to be, let’s get you set up to get there!

Action Items:

• Come up with financial and life goals; save this list for later.
• Using a sheet of paper, Excel, or Quicken, list all of your cash flow, investment, asset, and liability accounts. You should end up with a clear picture of your personal finances as well as your net worth.