AUDITING YOUR PERSONAL EXPENSES

Auditing, the process of inspecting, evaluating and verifying an organisation’s financial accounts is undertaken every accounting period to ascertain its financial standing.  At the end of this exercise a company’s true financial performance can be derived. The importance of auditing cannot be over emphasized because performance is used as a yardstick to measure whether the company is on track or not. No wonder the laws of most countries stipulate that organisations must be audited.

The benefits of auditing include getting a true picture of the financial status of the company, it ensures that the company sticks to what was agreed. The audit is also a kind of report card showcasing the management team’s astuteness and achievements in piloting the affairs of the company. It enables stakeholders like the government, shareholders, investors and partners to act when there are deviations from the expected norm.

It is imperative that the process of auditing be extended to your personal finances. This is because there are many similarities between organisations and individuals; both utilize financial resources and base their performance on the profitability or otherwise of their actions. Both also have similar desires to succeed or progress in their chosen fields of endeavor.

There are many levels of audits you can undertake for your personal finances; however the most essential is to continuously audit your expenses. In order to be able to do this you must have constantly kept records of your actual spend for the month beside that of your budget for the same period. You are thus free to review and evaluate your spend on a monthly basis by looking at your budget versus actual.

The best time to undertake this is as you prepare the budget for the next month at the end of the current month. Start by looking at each expense heading, did you exceed your budget? If you did then you must make comments on the side of the expense highlighting why. The same exercise should also be undertaken when you underspend. Perhaps you over budgeted? It’s also good to know what happened.

The next thing is to look again at those expenses where you met and exceeded the budget. Is there anything you can do to cut them by 20% in the next period? For example if you exceeded your telephone budget perhaps you might make fewer calls or use other non-call methods to communicate? Do you really need to keep spending at the existing levels or could it be capped at a lower level?

Once the decision is taken to reduce expenses then make plans on how to achieve this. In the above telephone call example some might decide to load all their spend for the month at once, while others could divide it into four equal installments to be loaded every week. Take whatever steps that work for you.

Once your plan is implemented ensure to take out the savings and plough it into your savings or investment accounts so that money does not get spent on other expenses. Taking it out means the money will now be diverted into a profitable venture that will benefit you in the future.

I also advise that you take several months of your past Actual versus Budget files and look at your expenses to see how they have grown or declined over time. This activity will help you measure and track your spend on expenses. This is one of the secrets of the rich – they know exactly where their money goes and can tell, while the poor cannot tell where their money went.

This process begins to give you more control over your money as there will be months you might make bigger cuts, and other months when the cuts will be smaller because you are on top of your spend. You eventually begin to free up monies that can be put to work for you growing wealth instead of all of it being wasted away as expenses.

Fortunately the results of your audits are only meant to be seen and acted upon by you. The budget, according to Dave Ramsey is a tool that tells you where your money is going, so that you do not have to wonder where it went. Once auditing is added to it you will get more value from your money because now you are not spending it all.

This is the time to tame, tighten and trim down on your expenses. You have already spent way too much in the past. Now is the time to curtail spending so as to have a better future. Would you prefer to enjoy surplus now and suffer later or vice versa? The latter is more preferable because lessons have been learnt and applied to ensure you enjoy unending supply later in life. So start auditing your personal expenses today! Stop living life without a financial plan or budget.