When was the last time you did a serious audit on your finances?
We’re not talking about income taxes. And we don’t mean simply reviewing your budget (although that’s definitely important). We mean taking a serious deep dive into every facet of your financial situation, from your monthly income and expenses to your short-term savings and retirement funds. A self-audit is a great way to assess your situation, identify areas to improve, and set goals for the future.
Ready to do your own self-audit but not sure where to begin? Everyone’s financial situation is a little different, so use the list below as a starting point.
- Review your budget. Whether you use a fancy smartphone app, a spreadsheet, or good old-fashioned pencil and paper, you should have a budget in place. And a thorough review of that budget is a great way to start your audit. A few questions to ask: What’s working with my budget? What’s not working? Are there any expenses I can cut? Did I add any expenses? Any categories I want to adjust? Has my income changed?
- Set a few goals. This is a great time to think about your financial goals. Need to save up for a big-ticket purchase or put money aside for a vacation? Ready to get serious about your retirement fund or emergency fund? Choose one or two goals that you’d like to focus on, and make them a priority.
- Review your retirement plan. Do you have retirement through your employer? Are you setting money aside in a special savings account or 401k? Are you saving enough to enjoy a comfortable post-career life? Your future (retired) self will thank you for paying attention to this now.
- Take stock of your savings. Are you saving enough out of every paycheck? Do you have a savings goal you’re trying to reach? Have you gotten a raise? If so, you should up your savings to match your increase in income. Do you find that you forget to add to your savings account? Now’s a great time to visit your bank’s website and set up recurring, automatic transfers.
- Assess your emergency fund. Most experts recommend having at least three months of living expenses set aside. In addition to helping you stay afloat if you or your spouse lost your job or got injured, an emergency fund can help you cope with unexpected expenses (think: major car repair, emergency dental work, replacing a big-ticket appliance).
- Consider any lifestyle changes that might affect your finances. This includes income-related events like getting a promotion, changing jobs, or being laid off. It also includes changes in personal circumstances: Moving, getting married, or sending your kids to college are all life events that can affect your budget.
- Get your free credit report. If you haven’t read your credit report, now’s the time! You can access your free annual report here. Read it carefully, looking out for any unfamiliar accounts, late/missed payments, and anything else that could be affecting your score. If you see anything suspicious, contact your lenders right away.
- Check your credit score. Most banks and credit card companies will allow you to view your credit score for free. Unlike your credit report, which gives a detailed breakdown of your accounts and payment history, your three-digit credit score rates your “creditworthiness” – in other words, how likely you are to repay a debt. Credit scores range from the 300s up to the 800s – the higher your score, the easier it’ll be for you do things like buy a house or a car, get a bank loan, or apply for new credit. For more information about credit scores, check out our previous article here.
Need some help getting your finances back on track? Looking for help dealing with debt or credit problems? Remember, you don’t have to go it alone. The friendly folks at DebtGuru.com are always here to help.