It’s always a good idea to look back at your earnings and spending at the end of each year to guide you in making better choices during the next one! Here’s how to do a DIY end-of-year budget audit.
The end of the year comes with a much-needed break. This allows us some time to reflect on the year that was, not only when it comes to our career and personal goals but our financial goals as well.
Deborah Fowles, former financial planning expert for digital media giant Dotdash, is a firm believer in an annual financial “check-up” because it is an opportunity to see how you have performed when it comes to managing your money over the last 12 months. It also helps you to see if you are still on track for the future (and if you’re not, to recentre) in order to meet your money goals.
“If you are on a road trip, you’d stop occasionally to look at a map to see if you are heading in the right direction. An annual audit serves exactly the same purpose,” she explains. Some people rely on the services of financial planners to help them manage their money.
But a personal audit is a great way to be personally invested in your finances and get a holistic overview of your financial activity in the last year.
You can identify where you have succeeded and where you have stumbled, and make a practical plan to do better and reach those savings goals in 2023. Here are six tips on how to do it yourself.
1. ASSESS YOUR CURRENT AND UPCOMING CIRCUMSTANCES
“Any life event, big or small, could impact your financial decisions and savings goals,” explains Deborah. “Have changes in your personal situation taken place in the last year or do you anticipate any major changes in the near future?
These could be a job change, divorce, adding a baby to your family, retiring, buying a house, getting married, studying or moving, and they can all alter your income and your lifestyle significantly.”
When doing a personal audit, consider things that may, or are likely to, affect your financial circumstances and prepare yourself.
2. SET GOALS AND WORK TOWARDS THEM
After getting an idea of where life may or may not be taking you, it’s important to evaluate your financial goals and whether you were able to meet them in 2021.
“Then ask yourself whether you have made progress on them this year. If not, where have you fallen short and why?” advises Deborah. Finally, you need to consider the new money milestones you’d like to work towards in the new year.
“Establish clear goals and break down the practical steps you need to take monthly, quarterly and annually to reach them.”
3. EVALUATE THE PROGRESS OF YOUR SAVINGS
Most often, savings objectives tend to be medium- to long-term – for the “big-ticket items” in life, such as buying property or paying university fees – and it’s important to stay on track (or get ahead).
During your audit, check if your saving is still on target and evaluate your timeline. Is the desired amount still attainable within the given time frame? If not, make a few adjustments and lower your expectations (and weekly or monthly contributions) until your bank balance is feeling more stable.
4. SEE WHERE YOU STAND WITH DEBT
The average South African has R19 265 owing on their credit card, R514 938 outstanding on their home loan and R187 193 in vehicle-financing debt. It’s clear that we have a national problem when it comes to debt.
An audit gives you the chance to see how your debt repayments are going and if there is anything you can do to manage them more effectively. “It’s difficult to get ahead and invest and save when a large chunk of your income is going towards interest payments on your credit card,” says Deborah.
5. DRAW UP A NEW YEAR FINANCIAL PLAN
It took living through a pandemic for most of us to learn that things can change dramatically, both in an instant and over the course of a year. Consider that what may have been a reasonable goal at the beginning of this year may now be unmanageable if your circumstances have changed.
However, while we can’t predict the future, it is still important to have a plan in place. This will help us to establish goals, help us stay focused on them and keep track of our progress. Decide on your short- and long-term financial goals and assess how long and what is required on your part to meet them.
6. EXPLORE DIFFERENT WAYS TO SAVE
Are you saving as much as you can but want to speed up the process to meet your money goals sooner? This requires a bit of homework, a few sacrifices and some ingenuity, but it can make all the difference when it comes to boosting your bank balance.
Doing a personal financial audit allows you to see exactly where your money is going. If you notice that you are spending a lot in certain areas of your life, such as entertainment or shopping, you can devise a better strategy for the coming year and make better decisions. This will also help you to “think twice before you swipe”.
BONUS TIP: PREPARE FOR THE UNEXPECTED
Research by FNB revealed that less than 6% of middle-income earners have enough money set aside in case they fall on hard times.
Our advice? Open an emergency savings account and, as a priority, deposit an amount into it monthly to give you peace of mind when the unexpected happens.
Text by: Helen Wallace
Image: Shutterstock
Most often, savings objectives tend to be medium- to long-term – for the “big-ticket items” in life, such as buying property or paying university fees – and it’s important to stay on track (or get ahead).
During your audit, check if your saving is still on target and evaluate your timeline. Is the desired amount still attainable within the given time frame? If not, make a few adjustments and lower your expectations (and weekly or monthly contributions) until your bank balance is feeling more stable.
4. SEE WHERE YOU STAND WITH DEBT
The average South African has R19 265 owing on their credit card, R514 938 outstanding on their home loan and R187 193 in vehicle-financing debt. It’s clear that we have a national problem when it comes to debt.
An audit gives you the chance to see how your debt repayments are going and if there is anything you can do to manage them more effectively. “It’s difficult to get ahead and invest and save when a large chunk of your income is going towards interest payments on your credit card,” says Deborah.
5. DRAW UP A NEW YEAR FINANCIAL PLAN
It took living through a pandemic for most of us to learn that things can change dramatically, both in an instant and over the course of a year. Consider that what may have been a reasonable goal at the beginning of this year may now be unmanageable if your circumstances have changed.
However, while we can’t predict the future, it is still important to have a plan in place. This will help us to establish goals, help us stay focused on them and keep track of our progress. Decide on your short- and long-term financial goals and assess how long and what is required on your part to meet them.
6. EXPLORE DIFFERENT WAYS TO SAVE
Are you saving as much as you can but want to speed up the process to meet your money goals sooner? This requires a bit of homework, a few sacrifices and some ingenuity, but it can make all the difference when it comes to boosting your bank balance.
Doing a personal financial audit allows you to see exactly where your money is going. If you notice that you are spending a lot in certain areas of your life, such as entertainment or shopping, you can devise a better strategy for the coming year and make better decisions. This will also help you to “think twice before you swipe”.
BONUS TIP: PREPARE FOR THE UNEXPECTED
Research by FNB revealed that less than 6% of middle-income earners have enough money set aside in case they fall on hard times.
Our advice? Open an emergency savings account and, as a priority, deposit an amount into it monthly to give you peace of mind when the unexpected happens.
Text by: Helen Wallace
Image: Shutterstock
HOW TO PREPARE FOR YOUR FINANCIAL YEAR-END AUDIT
Reviewed by Michelle Pienaar
on
December 21, 2022
Rating:
Reviewed by Michelle Pienaar
on
December 21, 2022
Rating:
