How to Conduct a Quick Audit of Your Family Finances

Are you feeling overwhelmed by your family’s finances? Do you struggle to keep track of where your money is going each month? If so, it may be time for a financial audit. A quick review of your income, expenses, debts, and savings can provide valuable insights and help you make more informed decisions about your money.

Gather Your Financial Documents

The first step in conducting a financial audit is to gather all relevant documents. This includes:

• Bank statements

• Credit card bills

• Investment account statements

• Loan documents

• Pay stubs

• Tax returns

Having these documents on hand will make it easier to get a comprehensive view of your financial situation.

Calculate Your Net Worth

Your net worth is the difference between your assets (what you own) and your liabilities (what you owe). To calculate your net worth:

1. List all of your assets, including cash, investments, property, and personal belongings.

1. List all of your liabilities, including credit card balances, student loans, and mortgages.

1. Subtract your total liabilities from your total assets.

According to a 2021 survey by Personal Capital, the average net worth of American households is $748,800. However, this figure varies widely depending on factors such as age, income, and location.

Review Your Income and Expenses

Next, take a close look at your income and expenses. Start by listing all sources of income, including:

• Salary or wages

• Investment income

• Rental income

• Government benefits

Then, categorize your expenses into fixed costs (e.g., rent/mortgage, utilities, insurance) and variable costs (e.g., groceries, entertainment, clothing). Look for areas where you may be overspending or could cut back.

A 2020 report by the Bureau of Labor Statistics found that the average American household spends $5,111 per month on living expenses. Housing is typically the largest expense, followed by transportation and food.

Evaluate Your Debt

Debt can be a major drain on your finances. Make a list of all outstanding debts, including:

• Credit card balances

• Student loans

• Car loans

• Mortgages

For each debt, note the total amount owed, interest rate, and minimum monthly payment. Consider strategies for paying down high-interest debt more quickly, such as the debt snowball or avalanche methods.

According to Experian, the average American carries $6,194 in credit card debt and $92,727 in total debt (including mortgages, auto loans, and student loans).

Assess Your Savings and Investments

Finally, review your savings and investment accounts. This may include:

• Emergency fund

• Retirement accounts (e.g., 401(k), IRA)

• College savings plans

• Brokerage accounts

Evaluate whether you are saving enough for your short-term and long-term goals. A common rule of thumb is to have an emergency fund with 3-6 months’ worth of living expenses. For retirement, aim to save at least 10-15% of your income each year.

Make a Plan

Once you have a clear picture of your financial situation, it’s time to make a plan. Set specific, measurable goals for paying down debt, increasing savings, and improving your overall financial health. Consider working with a financial advisor or using budgeting tools to help you stay on track.

Remember, conducting a financial audit is not a one-time event. Make it a habit to review your finances regularly – at least once a year – to ensure you are making progress towards your goals and making the most of your hard-earned money.