Are you on track with your personal financial situation? Unfortunately, if you are like most people, you will probably say you really don’t know. Most of us don’t take enough time to seriously consider our personal financial plan.

 

Now is a great time to take inventory of your personal financial situation and determine if you are on track. Following the following steps will help get you on track.

 

 

Step One: Goal setting.

 

Take time to identify and write down your specific financial goals? Don’t be general; for example, “Retire at age 55” is not specific enough. “Retire at age 55 with an income of $100,000 in today’s dollars” would be much better. “Pay for my children’s college” is too general. “Create a fund to cover the cost of college tuition at Northwestern College for my son John in 12 years” is specific enough to map a plan to achieve.

 

 

 

Prepare a schedule of your assets and liabilities (net worth statement). Divide your assets into three groups; Liquid assets (cash and equivalents needed for day to day expenses), restricted assets (assets used in your personal life such as your home, car and medical practice) and investment assets (assets which are earmarked to for you to achieve your financial goals). Take stock of your income and expenses. Determine what expenses are necessary (home mortgage and car payment) and what expenses you could reduce or eliminate (food and entertainment).

 

 

 

Base on the funds needed to achieve your goals, your current investment assets, expected inflation and return rates, calculate how much you will need to add to your investment assets each year. Look at your cash flow to see if you will be able to fund your goals; if not look to see where you can adjust you expenses to provide the need funds.

 

 

Monitor your plan periodically, and make adjustments as needed. Changing goals, investment results and inflation will all impact your plan. You will need to constantly assess your plan and your progress in achieving it. As you see yourself moving closer toward your goals, you will gain a peace of mind knowing you are on track

 

Of course, financial planning can become far more complex than outlined above, considering, taxes, insurance, rates of returns, inflation, asset mix, time horizons and risks. That’s why it is usually a good idea to get help from professionals. But help from the best financial advisors won’t help without your involvement. After all it is your financial plan!