Lesson 3
Assessing Your Current Financial Life
Time: ~15 to 18 minutes
You cannot plan your future without understanding your present
Before building a financial plan, you need a clear picture of where you stand right now.
This means knowing:
How much money you earn
Where your money goes
What you owe
What you own
Financial planning starts with an honest assessment.
Step 1: Track your income
Income is money coming in. Understanding your income helps you know what you have to work with.
Common income sources for teens:
Part-time job
Regular paychecks from work
Freelance work
Gigs like tutoring or design
Allowance
Regular money from parents
Gifts or bonuses
Occasional money received
Add up all income sources to calculate your monthly total.
Example monthly income calculation
Part-time job (15 hrs/week at $12/hr)
$720
Freelance tutoring
$100
Weekly allowance ($20/week)
$80
Total Monthly Income
$900
Step 2: Track your expenses
Expenses are money going out. Most people underestimate how much they spend.
Track everything for 30 days:
Fixed expenses
Same every month
Variable expenses
Changes monthly
Irregular expenses
Occasional costs
Common teen expenses:
Transportation
Gas, bus fare, rideshares
Food and drinks
Restaurants, coffee, snacks
Entertainment
Movies, concerts, subscriptions
Phone bill
Monthly service costs
Clothing
Clothes, shoes, accessories
Personal care
Haircuts, toiletries, cosmetics
Small purchases add up fast. Track everything.
Example monthly expenses
Transportation (gas)
$120
Food and drinks out
$180
Phone bill
$50
Entertainment/subscriptions
$80
Clothing
$100
Personal care
$40
Miscellaneous
$80
Total Monthly Expenses
$650
Step 3: Assess assets and liabilities
Assets
Things you own with value
Cash
Money in wallet or under mattress
Bank accounts
Checking and savings balances
Investments
Stocks, bonds, crypto
Valuable items
Electronics, car, equipment
Liabilities
Money you owe
Credit card debt
Outstanding balances
Loans
Student, car, personal loans
Money borrowed
From family or friends
Payment plans
Buy now pay later schemes
Your net worth = Assets minus Liabilities
Net worth calculation example
Assets
Savings account
$1,200
Checking account
$300
Car value
$3,000
Total Assets
$4,500
Liabilities
Car loan
$2,000
Borrowed from parents
$500
Credit card balance
$150
Total Liabilities
$2,650
Net Worth = $4,500 - $2,650
$1,850
Step 4: Analyze your cash flow
Cash flow is income minus expenses. This tells you if you're living within your means.
Positive cash flow
Income exceeds expenses
You have money left to save
Neutral cash flow
Income equals expenses
You're breaking even
Negative cash flow
Expenses exceed income
You're spending more than you earn
Using our example: $900 income - $650 expenses = $250 positive cash flow per month
Why this assessment matters
Reveals spending patterns
See where money actually goes
Identifies problem areas
Spot overspending categories
Shows saving capacity
Know how much you can realistically save
Creates baseline for planning
Foundation for future financial decisions
You cannot improve what you do not measure.
Key vocabulary
Income: Money coming in
Expenses: Money going out
Assets: Things you own with value
Liabilities: Money you owe
Net worth: Assets minus liabilities
Cash flow: Income minus expenses
Quick recap
- Track all income sources
- Monitor expenses for 30 days
- List all assets and liabilities
- Calculate net worth
- Analyze cash flow
- Use data to inform financial plan
Quick Check
1. What is the first step in assessing your financial life?
2. What does net worth equal?
3. What is positive cash flow?
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Building an Emergency Fund →