Stock Investing For Dummies®, 3rd Edition

Chapter 2. Taking Stock of Your Current Financial Situation and Goals

In This Chapter

• Preparing your personal balance sheet

• Looking at your cash flow statement

• Determining your financial goals

Yes, you want to make the big bucks. Or maybe you just want to get back the big bucks you lost in stocks during the bear market (a long period of falling prices) of 2000–2002, or perhaps in the tumultuous volatility of 2007 and early 2008. (Investors who followed the guidelines from the 1st and 2nd editions of this book did much better than the crowd!) Either way, you want your money to grow so that you can have a better life. But before you make reservations for that Caribbean cruise you're dreaming about, you have to map out your action plan for getting there. Stocks can be a great component of most wealth-building programs, but you must first do some homework on a topic that you should be very familiar with — yourself. That's right. Understanding your current financial situation and clearly defining your financial goals are the first steps in successful investing.

Let me give you an example. I met an investor at one of my seminars who had a million dollars worth of Proctor & Gamble (PG) stock, and he was nearing retirement. He asked me whether he should sell his stock and be more growth-oriented and invest in a batch of small cap stocks (stocks of a company worth $250 million to $1 billion; see Chapter 1 for more information). Because he already had enough assets to retire on at that time, I ...