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Money Math

Image representing the 'Money Math' one pagerGood, solid financial planning is based on facts, money facts. Youíve heard it said, if you donít know where youíre going, any path will do! Build a clear path to your future that will involve fact gathering and some money math.

 


Taking Stock of Your Net Worth: Statement of Financial Position

The first step in planning your financial future is to know where you currently stand.. This means knowing exactly what your assets and liabilities are at a particular moment in time. This will give you a picture of your net worth or, as it is often called, your Statement of Financial Position.


Steps to Wi$ing Up - Step 2.1. Prepare a Statement of Financial Position

Preparing a Statement of Financial Position involves transferring information from money papers you have or will be receiving, like quarterly or annual statements from your bank, retirement fund, and mortgage company, etc.


Taking Stock: Where the Money Goes

Knowing your net worth is important, but it is not enough to know your net worth alone. You should also know where your money goes on an annual, monthly, and daily basis. Before you can engage in good financial planning for the future, you have to assess where your money is going today and every day.


Steps to Wi$ing Up - Step 2.2. A Notebook Tool for Tracking Your Spending

Get a small notebook and make three columns that reflect how you spend your money: cash, check or debit card, and credit card. Carry this notebook with you all the time, and make it a habit to jot down what you spend your money on and how you spend it.


Taking Stock: Do You Like What You See?

Tracking your spending will mean nothing unless you analyze your data. Make your analysis general or specific. The important thing is to do something with the information.


Steps to Wi$ing Up - Step 2.3. Analyze Your Spending: Do You Like
What You See?

As you analyze your own data, create categories that make sense for your life. Pay special attention to the categories of spending over which you have control.


Taking Stock: Where the Money Went - Statement of Income and Expense

There will be times in your life when you are asked to prepare a Statement of Income and Expense. This statement is sometimes known as a cash flow statement. Later, you will use this information for setting financial goals for the future and for managing the money that flows into your life.


Steps to Getting Wi$er - Step 2.4. Prepare a Statement of Income and Expense

A Statement of Income and Expense is time specific. It is a statement that summarizes income received and expenses paid for a full, 12-month year.


Steps to Wi$ing Up - Step 2.5. Set Your Eye on the Goals

What are your life goals? Which ones cost money? Write and keep these goals in your planner, office, or home where you can see them often. Turn your goals into financial action steps.

The Action Plan is a critical exercise that will help you turn the lessons learned into action steps:
My action plan for Money Math will be to improve my money skills.