The following is a transcript of " Money Girl's Quick and Dirty Tips for a Richer Life, " a podcast from QuickAndDirtyTips.com. The audio program is available via RSS feed here and at TheStreet.com's podcast home page .
Hello and welcome to Money Girl's Quick and Dirty Tips for a Richer Life. Today's topic: Your net worth and your cash flow. Reviewing your finances at the end of the year is a great way to get ready to set financial goals for the year ahead. Now, planning your financial future is a lot like planning a road trip. To plan a road trip, you first need to know where you're starting from. The same thing goes for your financial future. To plan where you're going financially, you first need to have a clear picture of where you are now. And that's what taking a financial inventory is all about -- knowing where you are today. If you haven't taken a financial inventory before, here's how to do it. There are two fundamental components of financial health: your net worth and your cash flow.
Know Your Net Worth
Calculating your net worth is the best way to get a quick read on your financial health. Your net worth is simply your assets minus your debts. To calculate it, add up the value of all the assets you now own including cash, stocks, bonds, retirement accounts, the value of your home and investment real estate, the value of any businesses you own, and the approximate value of your stuff, like your car, your furniture, and your secret prized collection of vintage Beatles lunch boxes.