Auditing personal finances quarterly is a prudent way for people who intend to be financially healthy and stay on track with their short-and long-term financial objectives while making informed decisions. According to Scott Tominaga, by looking at income, expenses, assets, and liabilities over a three-month period, they can easily spot lacking areas, increase savings and lessen stress related to financial insecurities. Here is a guide on how can individual can conduct a personal finance audit efficiently.
1. Review Income Sources
The very first thing to do when carrying out a financial audit is to assess all sources of income. These include earnings from a primary job, payments from freelancing or gigs, dividends, rental income, and government benefits. Having income recorded and comparing income quarter by quarter gives one an idea of the trends of income, for instance, if there is a decline in income or simply inconsistency.
It needs to be ensured that all income actually goes into the bank account and is duly recorded. In the case of individuals with variable incomes like freelancers or commission-based employees, quarterly analysis of income helps in creating more accurate budgets for the forthcoming months.
2. Track and Categorize Expenses
Second, a clear and detailed breakdown of expenses is essential. These are the fixed expenses like rent or mortgage, utilities, insurance, and debt, and variable expenses like food, eating out, subscriptions, and entertainment.
Employing money tracking apps or spreadsheets can make this process easier. Organizing every expense into categories establishes spending patterns and indicates areas where savings can be made. If discretionary expenses continue to outstrip planned budgeting, it is high time to stop overspending habits or reconsider priorities.
3. Assess Debt and Liabilities
According to Scott Tominaga, every quarter, it makes sense to have a look at the status of all debts: credit card balances, student loans, personal loans, automobile loans, and mortgages. Keeping an eye on interest loans, changes in credit utilization ratios, credit card statements will be helpful to consider a smarter for paying off debts.
In fact, when this kind of audit is performed, a debt payoff plan should be created or updated to ensure that financial resources are being used efficiently to reduce liabilities. Individuals should assess if it would be beneficial to refinance or consolidate some of their debts for lowering the interest rate and easier management.
4. Evaluate Savings and Investments
A financial audit remains incomplete without having a closer look at savings accounts, emergency funds, retirement plans, and investment portfolios. One should check if the balances are sufficient, the contribution method is regular, and whether returns on investments are at desired level.
During the audit, people should ascertain if savings goals are being achieved and whether investment allocations are fitting in light of their risk tolerance capacity and conditions of the market. Re-balancing the portfolio or a focus on maximizing contributions to accounts deemed important can provide greater long-term financial growth.
5. Review Financial Objectives and Revise Plans
Lastly, comparing planned financial objectives in earlier quarters with outcomes enables one to track progress. This guide can help to assess the necessity of changing techniques, savings goals, or bench-marking spending limit.
If targets continually fail to meet expectations, one might need to rework them to make them more realistic or to determine whether there are other factors influencing performance. This task helps ensure the financial plans still apply and remain attainable.
Performing a quarterly personal finance audit gives worthwhile insight into one’s financial position and encourages proactive money management while enabling them to achieve their short-term requirements and long-term goals.
