3556: [Part 1] How to Complete Your Very First Spending Audit by Amanda Brownlow on Personal Finance Basics

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[00:00:51] This is Optimal Finance Daily. How to Complete Your Very First Spending Audit. Part 1 by Amanda Brownlow of HelloBrownlow.com

[00:01:01] In a world of excess, it pays off to take a hard look at your spending habits. Society tells us buy more and save. But really, you'll save 100% if you don't buy that product at all. So what do you spend money on every month in this buy more world? Are you spending more than you make? Can you think of any areas of excess spending you can trim back? All of these questions can be answered with a spending audit.

[00:01:29] What the heck is a spending audit? A spending audit is when you and your partner sit down to review or audit all of your transactions over the past month. Bank and credit card statements get pulled out and marked up. All this info you'll gather gets put into a spreadsheet or written out. You'll get to see just exactly where your money is going every month. And why should I do an audit? My money habits are just fine. If you live without a budget, you'll go without knowing exactly where your money went.

[00:01:59] Yes, you can kind of sort of keep tabs on your money mentally. $15 on lunch yesterday. $45 on gas Monday. Mortgage was about $850. Paycheck was somewhere around $1,500 this week. You get the idea. Treating your money without respect is an easy way to spend more than you earn and end up in debt with no savings. Yikes. Worse yet, you'll ask yourself at the end of every month, where the heck did my money go?

[00:02:26] If you have a well put together budget and keep track of every single transaction, good for you. You can still do a spending audit to assess if any areas could be cut back on to increase savings. A spending audit will show you exactly how much you're spending every month, give you the exact amount of debt you have, puts into perspective how much you should have in savings, allows you the opportunity to cut back on spending now before it gets worse,

[00:02:53] and helps make room in your budget to achieve your financial goals. How to actually do your spending audit. Number one, gather bank statements, credit card statements, and any loan statements. First things first, get your statements together. If you're an online-only type person, it's okay to use your online banking to pull statements. You'll need your most recent statement for everything. Look for bank accounts, credit cards, loans or mortgage,

[00:03:21] and retirement accounts or other savings or investment accounts. If you cash your paycheck every week instead of depositing it, grab your last month's worth of pay stubs too. Using cash only is tricky. We'll get to that later. Number two, review income. In your spreadsheet or on your paper, write down every credit you received in the last month. This includes paychecks, gifts, refunds, and additional income from side hustles, like selling things, mowing lawns, etc.

[00:03:51] Make a total for the month, highlight it, make it bold, just make it stand out. This is the money you're working with for a full month. Some things to consider. Are your paychecks regular or are you commission-based? If your checks aren't regular, you'll want to look at the average for each month over the last year. This is easily done online through your bank's website and pulling statements. You can also find last year's income on your tax return.

[00:04:16] Some employers also include an average pay on your pay stubs or the HR website. Number three, review your debt payments. It's typical for most American families to have several different types of debt, including mortgage, auto loan, credit card debt, student loan debt, and medical debt. Personally, we have an auto loan and a mortgage. Together, the payment is over $1,000. That's a big chunk of money, and our payments are on the low side.

[00:04:45] I've seen car payments as high or higher than a person's mortgage. So get together your statements for each debt you have. All the credit card statements, the mortgage, your car loan, that student loan debt that just won't go away. With your statements, do two things. Write down your monthly payment for each loan on the same sheet as you did for your income, and write down the total amount you currently owe. If debt weighs heavy on your shoulders, this is why you've kept listening.

[00:05:13] This is why you're doing a spending audit. To set a goal to pay off debt and get finances back in order. You can do this. Number four, review your regular bills. Bills. You've got them. I've got them. We gotta pay them. Find your most recent statements for all of your utilities, insurance, and all things that come out monthly. Can't find statements? Never fear. Just look through your online banking or your last bank statement.

[00:05:40] Do any of those debits or transactions occur on a monthly basis? Write all of your regular monthly bills next to your debt payments. These are things that need to get paid. However, and this is a big however, not all monthly transactions are necessities. Some are subscriptions to things you don't even need. You still need to write these down. You're paying for them every single month whether or not you use them. Number five, hear that on tomorrow's episode.

[00:06:08] You just listened to part one of the post titled, How to Complete Your Very First Spending Audit, by Amanda Brownlow of HelloBrownlow.com. Summer's almost here. And honestly, I want to be planning a vacation, not stressing about whether I can actually afford it. That's why I keep my finances organized with Monarch, so I can enjoy my summer knowing my money's taken care of.

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[00:07:04] can I afford this vacation without touching savings? And get a real answer. Use code OPTIMAL at Monarch.com to get your first year half off at just $50. That's 50% off your first year at Monarch.com with code OPTIMAL. Dell PCs with Intel inside are built for the moments that matter. For the moments you plan and the ones you don't. Built for the busy days that turn into all-night study sessions.

[00:07:34] The moment you're working from a cafe and realize every outlet's taken. The times you're deep in your flow and the absolute last thing you need is an auto-update throwing off your momentum. That's why Dell builds tech that adapts to the way you actually work. Built with long-lasting batteries so you're not scrambling for the closest outlet. And built-in intelligence that makes updates around your schedule, not in the middle of it. They don't build tech for tech's sake. They build it for you.

[00:08:04] Find technology built for the way you work at dell.com slash dellpcs. Built for you. I think it's important to find a way to monitor your money that isn't painful. Many people find budgets restrictive, and I'd guess that's mostly because they're more susceptible to overspending. But when it comes to restrictions based on an acceptable spending range,

[00:08:29] this is not coming from an outside force or being forced on you from the budgeting gods. This is you determining for yourself what is an acceptable amount of spending based on your income, values, and financial goals. You are in absolute control of your own budget. I think if your budget feels like a straitjacket, it's probably because it's unrealistic. So tweak it and work towards making tiny 1% improvements each month

[00:08:56] rather than making yourself feel bad about the overly restrictive budget that you created. And if over time this still doesn't help you reach your financial goals, it's possible that you don't have a spending problem. Maybe you have an income problem. Perhaps you need to focus your efforts on increasing your income rather than reducing expenses. But that doesn't mean you should give up on your budget. If you're not engaging with a budget and or somehow tracking your spending and income,

[00:09:24] then how will you know if you're moving towards your financial goals? But that's just the first half of the post. So be sure to come back tomorrow where we'll finish up this post and where optimal life awaits.