While much has been written about the importance of having a financial plan, still many if not most people don’t even do basic financial planning. Utilizing a professional planner such as a CPA or CFP can be beneficial to the process. However, many will not spend the money to do so. This does not mean most of us can not start with a basic approach.

That basic approach can be as simple as planning around an annual Personnel Financial Statement (PFS). This is simply listing your assets and liabilities. The difference between your assets minus your liabilities is your net worth. Once you have prepared your PFS, you can start to manage how to change your situation for the better. Start asking yourself such questions as follows:

  • How can I add to my assets?
  • Which liabilities should I pay off first?
  • Am I spending more than I make (indicated by liabilities growing faster than assets)?
  • What is my savings plan?
  • Am I using my company’s 401K plan or an IRA to maximize savings tax deferred?
  • Does refinancing my mortgages make sense?
  • Should I restructure my debt?
  • Should I consider an investment plan?
  • Many other questions

At the point you have the resources you could at a minimum have a consultation with a CPA or CFP to discuss alternatives to address the above and other questions and explore opportunities to do better. Eventually you can move to developing a more formal and robust financial and investment plan.

No matter what your circumstances, taking the time to understand your financial situation and plan to make it better, even baby steps, is important to your financial future.