The first step in developing a personal financial plan is assessing your current financial position. Your personal net worth is the value of all your assets minus all your liabilities (debts) at the present time. The worksheet in Figure AIII.2 provides some sample calculations for developing your own personal “balance sheet.” Because assets and liabilities change over time, updating your balance sheet not only allows you to monitor changes but also provides more accurate information for realistic budgeting and planning.

Figure AIII.2

Worksheet for Calculating Net Worth

Step 2 involves setting three different types of future goals: immediate (within one year), intermediate (within five years), and long-term (more than five years). The worksheet in Figure AIII.3 will help you establish these goals. By thinking about your finances in three different time frames, you’ll be better able to set measurable goals and completion times, or to set priorities for rationing your resources if, at some point, you’re not able to pursue all your goals.

Figure AIII.3

Worksheet for Setting Financial Goals

Because step 3 (identifying a plan of action) and step 4 (implementing your plan) will affect your assets and liabilities, your balance sheet will change over time. As a result, step 5 (re-evaluating and revising your plan) needs periodic updating.