I’m often asked, “How do I start investing?” Since we all have unique circumstances, the answer isn’t always straightforward. There are, however, some basic rules and strategies for building wealth.

If you want to be prepared for the future you need to know where you stand today. Sit down and push a pencil through the process outlined below. Once you’ve done that, you’ll have a much better vantage point from which to start.

Think of your household as a small business and prepare your financial statements. Make a game of it and you just might enjoy it. First, what is your income? Break it down to include all of your monthly income by source: your salary, rental income, bonuses, social security and others. Detail each month of the year and then total the twelve months to calculate your annual income. (Companies call this annual revenue.)

Then, compile a list of all of your expenses. Start with your mortgage or rent, property taxes and life insurance premiums. Do you have tuition payments or child-care expenses? Include household expenses such as your homeowner’s insurance, utilities and transportation costs (including car payments, insurance, gas and predictable maintenance). Calculate what you spend on groceries, entertainment and dry cleaning. Don’t forget vacations or Scooter’s pet supplies. Remember to list credit card payments, charitable contributions and other expenses.

Total your monthly expenses to determine annual expenses. Then subtract your annual expenses from your annual income. This is your personal income statement, which is like the income statement of a business. We’ll assume you’ve calculated a positive number. This is the amount available to invest or save; a business would consider a positive number its profit.

Next, compile a personal balance sheet. List all your assets: your home’s current value, savings accounts, checking accounts and any stocks or mutual funds that you own. Add certificates of deposit and bonds, the Blue Book value of your car(s) and the value of any retirement accounts: 401k (403B), IRAs, Roth IRAs and Simple or SEP plans. Include your valuables and vacation or rental property. When your list of assets is complete, calculate the total value.

Finally, list your liabilities or what you owe: the balance on your mortgage, student and home-equity loans, credit-card balances, car loans and medical expenses. Include any personal debts or obligations. Total your liabilities and subtract the value from the value of your assets. This is your “total net worth,” what a business would call shareholders’ equity.

If you’re the techie type, you can easily find guides and forms to help determine your cash flow and net worth on websites like Yahoo Finance and MSN Money. If you’re really crazy, like me, set up a spread sheet and keep track of your inflows and outflows on a monthly basis. It’s surprising how much this recordkeeping helps you plan and it’s relatively easy. You’ll get a better handle on upcoming expenses and whether you can afford that new flat-screen TV now or in another month or two.

Once you have a handle on where you stand, you’ll be better equipped to start saving, investing and building your personal wealth. You’ll also have a better sense of how and when money is coming in and going out—your personal cash flow. That’s what everyone should know before investing.