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Chapter 2. Examine and Diagnose: Determi... > Three Important Financial Statements

Three Important Financial Statements

Now that your most important financial goals have been defined and you have a basic idea of what it will take to accomplish them, the following three financial exercises will help you determine your overall financial condition:

  1. Completion of a Personal Income Statement. The income statement is simply a listing of all of your income and expenses. It enables you to see what you need to live on and how much you can allocate to savings and investments in order to accomplish your goals. Tracking your spending habits will help you formulate judgments about what is most important to you and when to shift your priorities.

  2. Completion of a Personal Balance Sheet. This is an inventory of your financial resources. It shows what you have to work with as a starting point in the planning process.

  3. Developing a Budget. This is a projection of future expenditures. It will help you control consumption (day-to-day living expenses) and teach you to save money.


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