There are annual medical check-ups, there are service rounds for cars and air conditioners, the kitchens get deep-cleaned. In a similar way, our finances need to be tended to. A financial self-audit can help you get a clearer idea about your financial status and worth. Simply put, the practice of going through your personal financial records, taking note of all your income sources and checking your ongoing monthly expenses, unexpected one-time expenses, splurges is an effective way ahead of financial surprises. An audit is a reflection of your financial health and diagnosis of any departure from it. Such self-reflection can help you address some key questions: is your spending reasonable? Is your lifestyle sustainable? Is paying too much interest grinding your gears? Do you have enough to provide for emergency expenses? Is your life insurance cover sufficient to provide for your family in your absence?
Here’s a quick checklist for reference when you decide to run an audit upon yourself.
1. Income from all sources:
The starting point is to look at your total income from different sources. This isn’t limited to your salaries or fees for your services. You should also count the returns from investments in stocks, shares, managed funds etc. If there are fixed deposits in banks, account for the interest. If you are receiving any benefits from other schemes, include them. Some life insurance plans, like the Future Generali Assured Money back Plan, bring you guaranteed payouts amounting to 10% of sum assured at the end of every year after the Premium Payment Term as survival benefits. There are other endowment plans and pension schemes that provide regular payouts as well.
If you have accumulated savings, include them too.
2. Expenses You Incur Across Segments:
The next step in your audit is to look at your total expenses. These include, but are not limited to, mortgage repayments or rent, groceries, travel costs, loan and credit card payments, utility bills, personal expenses on clothes, grooming etc. There are also less regular payments, like servicing costs for appliances, or medical costs for regular check-ups or for illnesses. Again, the looming question here is whether you have enough funds to provide for an emergency expense.
3. Financial Goals:
An important action item within the financial audit is setting up your financial goals. What’s your current financial status and how would you like to change it? The audit is your chance to answer this question and then make a plan to reach that financial position. If you are paying off a debt, then make it a priority to repay it. If your regular payments keep consuming a portion of your income, it could hold you back from making other financial diversifications in your portfolio.
If your goal is wealth creation with regular payouts, you’d want to consider investment products that bring returns like the Future Generali Assured Money Back Plan. Under this plan, you can opt to receive survival benefits as per the frequency that suits you, along with a life insurance cover.
4. Your Financial Habits:
A financial audit is also important to identify your own financial behaviour and spending habits. If you know your current approach towards spending and budgeting, you will be in a better position to accommodate the changes needed to reach the goals outlined in the previous point. At this juncture, important questions to address are: is the credit card bill unsustainable? Is a particular expense or spending habit breaking your budget? 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? Reflect on your personality as a customer and consumer, so that you can capitalise on the strong suits and beware of your weak spots when you are in the market to make a purchase or investment decision.
5. Manage Debt:
As pointed before, as you get your finances in order, prioritise your debts. Once you are able to bring debt to manageable levels, you can make more judicious allocations of the rest of your money.
6. Protection against Uncertainties:
Finally, make sure your financial planning provides for your family and dependents in the case of your untimely demise. They shouldn’t suffer financially too when they are already dealing with the emotional blow of a loss. Make sure you have robust life insurance in your portfolio to enable your family to maintain their lifestyle and pay for the regular items: pure life insurance plans offer either a lump sum or a monthly income on your death till such time you would have turned 60 or for 10 years whichever is higher.
Thus, in totality, your financial audit should equip you with information and awareness about your financial standing so that you can make better investment decisions going forward.