How to conduct a complete audit with your personal finances
Bessie Hassan | Money Expert at finder.com.au
Does paying too much interest grind your gears? Well, it certainly should. If you suspect you’re overpaying interest or fees, you should tidy up your finances, and make it a priority quick smart.
To carry out an audit on your accounts – whether it’s a personal loan, mortgage, credit card, household accounts, or a combination of any of these, follow the steps below to get your finances sorted.
Consider your financial habits.
To kick start your audit, think about your financial behaviour and your attitude towards saving, spending, and budgeting. Do you have an untarnished credit score and a strong repayment history or does the thought of your credit card bill make you want to hide under a rock?
Are you an impulse spender or do you carefully budget your expenses? Do you have any ‘rainy day’ savings in the bank or do you live pay cheque to pay cheque? Are you easily influenced by in-store promotions or do you often find yourself saying ‘no’?
Approaching your financial behaviour head on, will enable you to understand your weaknesses as a consumer or borrower. This means you can make actionable changes that will improve your financial position.
Refine your existing expenses.
After giving thought to your financial personality, assess your current expenses and decide how to allocate your energy. If you have a poor credit card repayment history, you may want to focus on meeting your credit card repayment terms, or if you realise you’re an impulse spender, you may decide to throw your energy towards developing a budget.
List all your expenses and group them in themes. For instance, for your total transport costs you’ll need to list vehicle expenses (e.g. petrol, insurance, registration, service/inspections, repairs, tolls, parking permits), ride-sharing costs (e.g. taxi and Uber fares), and public transport (e.g. Opal fares).
Repeat this process for all your existing lifestyle costs by itemizing expenses, down to the last dollar and cent.
Consolidate or reduce debt where you see fit.
Studying your personal finances will help you understand whether you need to consolidate your debt to save on interest or account-keeping fees. Often, this is a good strategy to help you get your finances in order. For instance, you may decide to consolidate your debts if you’re struggling to meet your loan repayments as this offers the convenience of a single repayment.
Alternatively, if you have a lot of plastic debt, you may take out a balance transfer credit card to help you repay the debt during the 0% interest period.
Come up with a plan of attack (and get into good money habits).
Once you’ve completed your financial audit by taking time out to understand your relationship with money, refining your expenses, negotiating for better financial deals, and consolidating debt, come up with a long-term plan to keep your finances on track.
Moving forward, there are many tactics you can pursue to stay on top of your financial obligations. Simple tasks such as downloading a budgeting app, setting up automatic transfers, placing your money in a high-interest savings account, or making overpayments on loan repayments, are just a few things you can do.
Completing a financial audit doesn’t need to be a chore. Follow these steps to review and improve your personal finances and you’ll set yourself up for a bright future.