Knowing your current financial situation will help you determine if you are accomplishing your financial goals . If you are not accomplishing your financial goals, assessing your current financial situation will help you determine what you need to do to reach your financial goals. A personal balance sheet will help you determine where you stand financially. It will help you add up you assets and subtract your liabilities to determine your net worth . Assets are cash and other property with a monetary value.
Liabilities are amounts owed to others.
Net worth is the difference between total assets and total liabilities. Increases in net worth as a result of increased assets or decreased liabilities are evidence that you are accomplishing your financial goals . Regularly assessing your financial standing with a personal balancesheet will provide a point of reference for your money management decisions. The second step to developing a budget is to plan what direction you want your finances to take. This step involves setting financial goals and deciding how to allocate money in your budget on various spending and saving categories.