How to successfully perform an audit on your financial accounts

Whether it’s paying too much in fees, coping an exorbitantly high interest rate, or simply taking out a product with irrelevant features (that are costing you a premium), there are many traps you can fall into when managing your financial accounts.

To take charge of your finances and to ensure you’re not being taken for a “ride”, carry out a financial audit on your accounts. You can do this by reviewing your financial behaviour, going through expenses with a fine-tooth comb, and coming up with practical solutions to better your financial well-being.

It may sound like hard work, but in reality, it’s not difficult (and the rewards are certainly worth your while).

To get your finances in shape, consider the following:

1. Think about your financial behaviour.

The best way to start your audit is to reflect on your financial behaviour and your attitudes towards saving and budgeting. Do you regularly fall behind on your debt or have you never missed a beat with your credit card repayments? Do you make irrational, impulse purchases or do you carefully plan out your expenditure?

Considering your financial behaviour will help you understand your pain points or areas you need to change. For instance, if you regularly forget to pay your bills on time, you may decide to set up automatic transfers through your internet banking to manage your payments better.

2. Look up your credit score.

Once you have a general understanding of your relationship with money, look up your credit score online. You can access your credit score for free and it’s often telling of your financial position which can help you gauge how a lender will view you when applying for finance. For instance, if you have a poor credit score or several defaults listed on your file (e.g. missed repayments), a bank may be skeptical about lending to you.

Again, knowing your credit score can help you decide how to improve your financial behaviour. For example, if you have a below-average score and you notice red marks on your file from applying for too many loans, you may decide to space out your applications to avoid rejection (and the negative impact that multiple applications can have on your score).

3. List your expenses (even the small ones).

Listing your current expenses will give you clarity when looking at your cashflow. List all your expenses and group them under different categories. For example, for “transport costs”, you’ll need to list petrol, car registration and insurance, and road tolls costs.

Continue this process for all your major expenses and remember there’s no expense too small to list. Use a spreadsheet or even a budgeting app to help you get it all down.

4. Pull back on the ‘nice-to-haves’.

After identifying your existing costs, it’s time to reduce them (be ruthless). Separate your ‘needs’ from your ‘wants’ and work to minimize your non-essential items such as travel, entertainment, food and beverage, and so on.

Pocketing an extra $150 – $250 per month will add up over time – every dollar counts! With these savings, deposit them into a high-interest account or savings account that you can’t touch so you’re not tempted to spend it.

5. Consolidate your personal debt.

Merging your financial accounts can help you save on interest costs and account-keeping fees. Generally, debt consolidation means transferring existing debt onto one account that will generally have a lower interest rate or fewer fees.

For example, if you have more than one credit card, you may want to do a balance transfer as this will help you reduce your interest costs (especially if it’s a 0% balance transfer offer). However, just make sure you repay debt during the 0% balance transfer period, otherwise you’ll be stung with a high revert rate once the promotional period ends.

6. Come up with practical solutions (the lightbulb moments).

Last (but certainly not least), you need to come up with solutions about how you’ll improve your financial health. Your solutions will come from insights or light bulb moments you’ve made during your audit. For example, if you’ve realised you’re paying too much interest on your mortgage, you may decide to refinance or if you’ve discovered you have a bad credit score you may decide to consolidate your debt.–

Aside from this, there are many other things you can do that will have a positive impact on your finances. Negotiating for a better deal, placing your money in a high-interest savings account, making extra repayments on your mortgage, or even renting out a spare bedroom in your property are just some of the many ways you can better your financial position