Taking control of your financial future is a process. As with any process, it is important to monitor your progress and measure your results. Doing so will help you understand how well you are doing and help you determine if the financial strategies you are using are working.
A balance sheet provides a business with a snapshot view of its financial status. An income statement measures progress. You should do the same with your personal finances.
Preparing a personal balance sheet annually should be part of your financial management strategy. You simply add up all your assets, and subtract your liabilities to determine your net worth.
When preparing your personal balance sheet, separate your investment assets into stocks, bonds and cash. Understanding your personal asset allocation will help you organize your finances and your monitoring of them.
It also makes sense to track changes from year to year to monitor your progress and determine if you are on track to reach your financial objectives. Here is a chart that provides a basic format you may want to consider using.