Do you find that you are always broke by mid-month? You might have a lifestyle that is way beyond your means. As much as we enjoy government officials being caught flat-footed when they undergo a lifestyle audit, you probably fall in the same category. A lifestyle audit isn’t about how much you spend but about accounting for your expenses based on your income.
Once you get to a certain stage in life, you need to take your finances more seriously in order to have a comfortable retirement. However, this isn’t restricted to older folks. Carrying out a lifestyle audit has various benefits. Here are some reasons you need to do one.
1. Cut Unnecessary Expenses
A lifestyle audit unearths expenses that you didn’t even know existed. Since you analyze every aspect of your life, you’re likely to find something you don’t need to spend money on. Additionally, many people realize some of the things they spend money on are because they’re expected to.
2. Set Long Term Goals
Your long term goals are closer to realization once you make certain lifestyle changes. If you’re saving to buy a house or for your children’s education, this requires some sacrifices. You’ll need to identify which spending you need to reduce or cut off so as to save effectively. Planning for the future: How to create a Financial Plan
3. Make A Realistic Budget
Some of us have a problem of under budgeting and overspending. Maybe we’re in denial of our spending habits or we have no clue as to how bad it is. Doing a lifestyle audit will open your eyes to these things making your budgets more accurate and realistic. Finance: 5 Tips To Help You Stick To Your Budget
4. Reflect On Your Finances
Once you realize that your employment income cannot sustain the kind of lifestyle you’ve been living, you might consider changing your lifestyle or looking for other financial sources. Either way, it’s a good opportunity to reflect on your finances and make better long-term decisions. Money: 8 Personal Finance Tips That Will Transform Your Life
5. Assess Your Credit Score
If you’ve taken a loan from the bank, you know it’s not as simple as showing up with a title deed and requesting for money. Your credit score plays a huge role to ensure that you qualify for a loan. The bank assesses your account traffic to determine your potential. However, you can do it yourself by checking your bank statements. Finances: How To Check Your CRB Status In Kenya
6. Have An Emergency Fund
As mentioned, a lifestyle audit will unearth many unexpected things. You might find out the importance of having a rainy day fund based on your previous activities. For instance, you went on a road trip and your car broke down or got into an accident. Without an emergency fund, you’ll have to spend a hefty amount of money to fix the car before getting your insurance cover. Finances: When You Should Use Your Emergency Fund
7. Know Your Potential Investment Opportunities
Investing isn’t about putting money in a company with the highest returns. You should also have an interest in that company or field. Having some kind of knowledge about how the company works will help you identify the best investment opportunities. Therefore, your love for flowers could be more rewarding than you think. Investing: why you should start in your 20s
8. Plan On Savings
Finally, your lifestyle determines how you’ll save for your future. Many people fail to save because of their frivolous lifestyles. Therefore, doing a lifestyle audit will help you maximize your saving potential which is more beneficial in the long run. Saving or investing, which way to go?