Whether you are searching ‘how to organise my finances’ or want to embrace the latest personal finance strategies, giving yourself a personal financial audit should be your next step.

Plenty of personal finance professionals have been preaching this trend, and it will revolutionise the way you view your financial well-being. So, let’s learn what this strategy includes and how you can get started.

What does it mean to do a financial audit?

A financial audit is when you examine your personal finances to get an overview of your financial situation. This allows you to see what is working and if there is anything you need to improve.

Typically, a financial well-being audit includes looking at your income, expenses, debt and investments. You may also want to check your credit score, budget and taxes, too.

Once you have examined all aspects of your financial situation, it is easier to plan for the future and identify unhealthy spending habits or poor financial decisions.

Why more people are auditing their financial well-being

If you are a keen personal finance enthusiast and follow influencers or media outlets, you may have noticed more content recently about how to financially audit yourself.

While examining your finances is by no means a new trend, it is a popular talking point right now. Plenty of content creators are being honest about their money, inspiring their viewers to do the same.

YouTube creator Caleb Hammer is a fantastic example. Caleb experienced significant debt while in his early 20s and, while fixing his finances, he started to create personal finance content. Today, he has over 1.3 million subscribers who tune in to watch his one-hour-long personal finance audit videos. In these, he invites normal people onto his show and gives them honest advice on their financial decisions.

Whether you need inspiration or want a glimpse into other people’s bank accounts, check out a few audit videos today.

How to give yourself a financial audit

Read to improve your financial well-being? Alongside strict budgeting, it is time to audit your income and spending. Here is a brief overview of the process:

  • Step One – Gather your financial documents (e.g., income or payslips, debt information, expenses, bank statements, details of any significant assets that you own and your credit score).
  • Step Two – Calculate your annual income. You should also calculate your net worth. Once you have this figure, subtract your liabilities (e.g. credit card debt or loans) from it.
  • Step Three – Examine your spending. Go through your bank statements and look at how much you spend per month on bills, rent, groceries and entertainment. Is there anywhere you can cut back?
  • Step Four – Look at the progress of your investments (if applicable). Do you have any underperforming investments that you might want to change?
  • Step Five – Consider your future financial goals, both long and short-term. Are you on track to meet them? Or do you need to start saving more? Are you paying off your debts?
  • Step Six – Edit your budget according to your financial goals. This might mean cutting disposable income spending or allocating more money to debt repayments.
  • Step Seven – Ensure your emergency fund is sufficient to cover unexpected costs.

Bonus Step: Add a date in your calendar so you don’t forget your next audit! Most experts recommend checking your finances every few months.

Keep learning about personal finance today. Read more on the Cash Asap blog.