AUDIT YOUR PERSONAL FINANCES
Do you often ask yourself, “where does all my money go?” If you’re on a good salary, you could still find that you go through your money. You could be spending too much on goods and services you don’t need. Here is a guide to show you how to do an audit of your finances.
Get your credit report
To know where you stand with banks and lenders, you should get a copy of your credit report. This will be needed, if you ever decide to consolidate debts or take out a new credit card. Your credit report lists your last seven years of credit applications and defaults.
Defaults are failures to pay a bill or loan repayment after 60 days. This will also show you your habits when it comes to paying back debts in full or on time. It is important to aim towards having a good, clean credit report.
Review current income and expenditure
Your bank statement is a good place to start, to look at and review your everyday spending habits.
If you have a poor record of paying debts back, focus on shifting more income toward servicing debt. You should create a budget around utilities, transport, food, grooming, luxuries, going out, and so on. If you are spending too much on luxuries, rein it in. See where you can make savings eg. If you don’t use all your calls or data per month, see if you can get a cheaper phone plan.
Consolidate or reduce debt
Australians have the highest ratio of debt to income in the world, at a whopping 212%! (source: Organisation for Economic Co-operation and Development). If you have high amounts of debt from credit cards, personal loans and other loans, talk to a financial professional about consolidating your debts into one loan. This puts you on top by paying off one loan instead of several at varying interest rates.
Budget and save
Once you’ve made all these changes, create a budget – and stick to it! This is the hardest part of your financial audit. Once you have made the changes, you can break free from debt and start saving your money!