What is financial planning ?

Understanding the Financial Plan

Whether you’re going it alone or with a financial planner, the first step in creating a financial plan is gathering a lot of bits of paper—or, more likely these days, cutting and pasting numbers from various web-based accounts into a document or spreadsheet.

You may complete the following steps as an individual or a couple:

Calculating net worth

To figure out your current net worth, list all of the following:

  • Your assets: This may include a home and a car, some cash in the bank, money invested in a 401(k) plan, and anything else of value that you own.
  • Your liabilities: These may include credit card debt, student debt, an outstanding mortgage, and a car loan. In some cases, you may have access to a grace period or moratorium.

The formula for your current net worth is your total assets minus your total liabilities.

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