"You can't get where you want to go if you don't know where you are" - Anonymous
The second step in the financial planning process is evaluating our current financial picture. Without an understanding of the current situation, I couldn't assess what steps to take to meet the financial goals.
Because I'm "detail oriented" with regard to entering transactions into Microsoft Money
, this next step is very simple - I used the "What I'm Worth" and "Where My Money Goes" reports. I then transferred the data into custom net worth and cash flow statements
. (Why? you ask. The spreadsheet includes some financial ratios.)
This exercise was very educational. I learned, for example, that we spend a lot of money dining out and improving our home. Theoretically, the home improvement expenses increase the value of our home or at least make it more comfortable for us. That seems like a worthwhile use of our money. Home improvements aside, I've identified several ways that we can reduce spending to save a few hundred dollars a month. If I can cut down on taxes, I might be able to squeeze a few more dollars to apply toward savings or retirement.
With step 2 finished, it's time to begin the real work - identifying goals and objectives.Additional Resources: