There are many things that can put you in financial trouble. Most people run into money troubles as a result of an emergency. Illness, job loss, break downs and disasters can easily eat up your money, leaving you with few options. If you take the time to plan ahead, you can avoid a financial crisis and the stress that comes along with it.

Start by understanding what you own and what you owe. You need to sit down and take a look at your total financial picture. Take the time to prepare a net worth statement. This will let you know what your assets and liabilities are.

Start with listing your assets. These are things of value that you own. Include your savings, checking and other bank accounts, your stocks, bonds, mutual funds, retirement accounts and the cash value of any insurance policies. You can also include the fair market value of your home and other real personal property, such as automobiles and boats. But keep in mind that when you have to sell property quickly, you often have to give a little on the value.

Next list all of your debts. Include your mortgage, credit cards, automobiles and student loans. Include everything you owe on.

Now simply subtract your total liabilities from you total assets. This amount is your net worth. This could help you identify what assets you can use to meet your debt obligations if necessary.

You should have an emergency fund that will pay for anywhere between three to six months of expenses. Some advisors even recommend that you have up to nine months of expenses in savings. The amount depends on your finances and circumstances.

It does take time to build up your emergency fund, but it is worth it. When something breaks down or an emergency occurs, you can take care of it without worrying about the money.