If you learn a little bit about investing in stocks, you'll learn that publicly traded companies in the U.S. are required to offer financial statements each quarter, revealing their health and recent results. We individuals would also do well to prepare that kind of document -- a personal financial statement -- that will give us an eye-opening view of our financial health.

This is not a revolutionary idea. As entrepreneurs and others know, if you're looking to borrow money for a small business, you'll typically need to prepare a personal financial statement for lenders to review. But even salaried folks can benefit from preparing a personal financial statement. 

Your balance sheet
The most fitting financial statement to model your personal financial statement after is the balance sheet. It reflects a company's financial health at a single point in time and sets shareholders' equity equal to assets minus liabilities. In other words, shareholders can lay claim to whatever is left over after what is owed has been subtracted from what is owned.

Similarly, in your personal financial statement, you'll see that your personal net worth is simply all your assets less your debts. Here's how you might go about it:

  1. Total your assets, which include: cash, the value of savings and checking accounts, stocks, bonds, CDs, retirement funds, and so on. Add in any equity value for your home, plus the value of your belongings (car, furniture, music collection, clothes, jewelry, board games, etc.). Include the cash surrender value of any insurance policies, any funds owed to you, and any other assets you can think of.
  2. Total your liabilities next. These include the remaining debt on your mortgage, as well as car loans, student loans, credit card debt, and so on. If you know you owe a certain sum in taxes, include that. If you owe your uncle or best friend some money, include that, as well.
  3. Subtract your liabilities from your assets, and presto -- you're looking at your net worth. Preparing a personal financial statement can give you an idea of how healthy your finances are.

Take action
If you don't like the picture you see, know that you can change it, over time -- especially if you have a lot of time.

If you have $50,000 socked away in a brokerage account, it can grow to more than $330,000 over 20 years if it averages 10% annually. If you want more than that or don't have $50,000 socked away, you can start saving and investing now.

You can also plump up your net worth over time by spending less, taking on some extra work, and delaying your retirement by a few years.

Don't just guess about your financial health and your financial future. Take some time to assess your situation -- perhaps by starting with a personal financial statement -- and then create a retirement plan to get you where you want to be.