Final answer:
The statement that assessing your current financial situation, including income, assets, and liabilities, is one of the first steps in developing a personal financial plan is true. This process provides a clear understanding of your net worth and is crucial for setting the foundation for a sound financial future.
Step-by-step explanation:
When developing a personal financial plan, one of the first things you should do is assess your current financial situation, which includes your income, assets, and liabilities, is true. This foundational step is essential in creating a comprehensive financial plan that sets you on a path toward achieving your financial goals.
Assessing your financial situation involves compiling a detailed overview of what you earn (your income), what you own (your assets such as cash, investments, home, etc.), and what you owe (your liabilities like loans, credit card debts, mortgages, etc.). This assessment provides a clear picture of your net worth, which is calculated by subtracting your total liabilities from your total assets.
Creating a budget is a pivotal element of a financial plan; it helps manage your cash flow, ensuring that you have sufficient income to cover all your expenses. Furthermore, understanding how to manage a checking account, evaluating the costs and benefits of using credit, and developing strategies to become a low-risk borrower by improving your credit score are all vital components of personal financial literacy.