taking stock

Making a Financial Assessment

The first step to creating a sound money management strategy is to evaluate your current personal finances. Where do you stand? One place to start is to total up your assets and liabilities. What is an asset?

1. A thing you presently own, such as the money in your bank accounts, retirement savings, or the cash value of life insurance policies or investments.
2. Your paycheck or the income you expect to receive from working.
3. Money you hope to receive from applying for grants or benefits.

“A” is correct. Personal property or real estate you already own, such as your car or home, also are considered assets. Liabilities are those things for which you owe, such as the balance on credit cards, your mortgage, car loan, student loans, or outstanding bills. Subtracting your liabilities from your assets will give you a preliminary picture of your current financial situation. This is known as your “net worth.”