Insurance and Finance

DIY Financial Audit

By Joshua Baethge 1.4.19

As you embark on a new year, take a minute to review your finances. This is a great time to do a financial audit: You have a sense of what you’ve earned in the past year (and how much of that you’ve spent) and you may even be suffering from lingering sticker-shock after the holiday present-buying extravaganza — so you’re more likely to be serious about getting your finances in order.

Don’t get overwhelmed — you can take this one step at a time. Here’s an easy way to make sure you and your family are making the most of your hard-earned money, with all the questions you should be asking yourself and how to plan accordingly. There are a lot of details to consider, but just a few easy steps.

1. Review Your Expenses

The first step in your personal financial audit will require some reckoning. Coming to terms with your year’s expenses can be stressful, but it’s like ripping off a Band-Aid — and you’ll likely gain a lot of insight into your spending. Go through your online or paper banking statements for the year — or sift through the piles of receipts you’ve saved. It’s not an easy task, but it’s critical to performing a true self-audit.

Once you’ve gotten this step out of the way, you’ll be ready to make some decisions about how you want to keep spending your money, stop spending, or start saving for other things.

2. Honestly Evaluate Your Situation

Once you have a better idea of where your money is going, you can begin to make an honest assessment. Are you where you would like to be financially? If so, great! If not, how much of that is in your control?

One thing that is in your control is your spending. If you’ve done this before, compare and see if your spending has gone up. If so, where did that extra money go? How many of those meals out were well-spent? How many of the magazines you subscribe to do you actually read? If you’re using and enjoying these expenses, they’re probably worth forking over for. But if not, it’s time to clean house.

3. Cut Out the Waste

The small expenditures that weave themselves easily into our daily lives can add up really fast. Be tough but realistic with yourself. If you don’t think you’re going to give up your $5 coffee every morning, then give yourself that gift and budget for it. If when you really think about something, you consider it a waste of money, make the decision to cut it out. Here are a few key areas to examine:

Daily Expenses

  • Do you buy coffee on the way in to work?
  • Do you buy your lunch every day?
  • How do you get to work?

Weekly Expenses

  • How often do you dine out?
  • Do you budget your grocery list or is your bill a surprise every time?
  • Do you often throw away uneaten food in the fridge?

Monthly Expenses

  • Which entertainment subscriptions do you use and value? It’s easy to rack up a significant bill when you keep adding them on. Go through all your TV, streaming, magazine, and service subscriptions and figure out which ones you really need.
  • How many payments are direct-debited from your account? These are especially easy to overlook, so now is a good time to go through and cancel any that shouldn’t be there.

Random Expenses

  • What are your shopping habits?
  • Do you budget for nonessentials like new clothes and self-care, or are these just holes in which money disappears?
  • What do you like and value spending money on? Try to account for this in your new budget.

4. Tackle the Big Stuff

Once you’ve weeded through your small expenditures, it’s time to take stock of the bigger expenses, which you probably pay for without a second thought, and may not realize there are other options. Here are a few key areas:

Your Car

  • How many cars does your family have? How many do you need? You may be able to consolidate; if you need to upgrade, put that in your budget.
  • How is your gas mileage? Your car might be eating up your dollars if you’re having to refuel too often.
  • How often are you doing repairs, and are you getting a good price for them? Do some research to figure this out.
  • Are your car payments a burden? Reevaluate when you’ll be able to finish paying them off.
  • Has any of your money gone down the drain on speeding tickets? Commit to safe driving.

Your Home

  • Are there any repairs or big projects you’ve been itching to do? What would you need to do to be able to afford those? Set a goal and budget for them now.
  • Is it time to refinance? If you’ve improved the value of your home, this could be a good option.
  • Is your house in need of any serious repairs? Make these a priority over pet projects or other expenses.
  • How are your mortgage payments looking? Are you on track for paying off your house?

Loans and Debt

Do you have lingering student loans or others that are accruing interest? What about credit card or other debt? Sometimes it can feel impossible to make a dent in your debt, even though you are meeting your required payments.

Come up with a plan for when you want to be debt-free and commit to making the necessary payments — you can also sometimes look for opportunities to lower your interest or consolidate your debt.

Your Insurance

  • Does your family have all the coverage it needs? It’s important to budget for this, and not cut corners that could keep your family safe.
  • Are you getting the best price for the quality and service you are receiving? Do you know if you’re getting all available discounts? It might help to consolidate your policies.
  • Have you met with your agent recently? Set up a meeting with your local Texas Farm Bureau Insurance Agent to review all of your policies, discounts, and coverages.
  • Have you done a home inventory recently? Make it easy by using this handy checklist — it will help you make sure everything is covered in case of an accident.

Your Taxes

  • Are you planning adequately for taxes? There’s nothing worse than finding out you owe on your tax return and you haven’t budgeted for it. If you got burned last year, consider paying quarterly.
  • Are you taking into account all available tax write-offs?
  • Head into tax season without fear this time; take a look at these resources that can help you get your taxes under control.

Your Investments

If you have investments, this is a good time to check in and make sure they are doing well and still make sense.

Your Long-Term Goals

These really depend on where you are in life and what’s important to you. If you are working toward a big goal like moving, saving up for retirement, or planning for your children’s college funds, factor these big-picture needs into how you’re thinking about your immediate spending. It will pay off in the long run.

5. Complete Your Budget

After reckoning with all these questions and taking the necessary steps based on what you’ve found during your financial audit, you should be in great shape. Take a look at your new budget and see if it makes sense and feels right, and how it compares to what you were spending in the past. You may be surprised. When you’re done, organize all your findings and any necessary paperwork — that way, it will be easy when the next year comes around. 

Hopefully, this experience can actually give you some relief and peace of mind, even if it’s a tough process. You may even start to see the benefits immediately as you start the new year. The most important thing is to be true to yourself and what you need. Set goals that excite you, make plans that feel right to you, and be realistic. It’s all about balance.

Ask your Texas Farm Bureau Insurance Agent for a little help along the way — they’ll be happy to sit down with you to review your coverages and make sure your family’s safe and protected for the year ahead.

Coverage and discounts are subject to qualifications and policy terms and may vary by situation. © 2019 Texas Farm Bureau Insurance