Know Your Net Worth and Cash Flow

Next, add up all your debts, including mortgages, car loans, credit card debt, student loans, and any other debt you have.

Subtract your total debt from the value of your assets. The number you get is your net worth.

When you have this number, write it down and take a look. If it's smaller than you want it to be or even negative, don't panic, but do plan to set a goal for 2008 to increase your net worth.

Know Your Cash Flow

The other fundamental component of your financial health is your cash flow. Do you have money left over at the end of the month, or month left over at the end of the money?

To see where your cash flow stands, add up all your expenses for a typical month, like your rent or mortgage payment, cost of food, utility bills, childcare, and gas and don't forget those peanut M&Ms you like to get a few times a week. Subtract the total of your typical monthly expenses from your monthly take-home earnings. The result is your monthly cash flow.

If the number is positive, congratulations! You can use your positive cash flow to invest and grow your net worth to accomplish your goals. But if your expenses are higher than your income, then it's time to make changes to increase your income and lower your expenses to create positive cash flow that you can put to work for you.