Money Management

Would Your Clients Conduct Personal Financial Audits?

A good ‘spring cleaning’ may help cut back overspending, identify spending triggers

by Jim McKinley

Mr. McKinley is a retired banker. He created MoneywithJim to share his advice and other resources on a variety of financial topics. He hopes to use his knowledge and experience to help people make sound financial decisions.

When it is time to tackle some spring financial cleaning, it is important to do an audit of your personal finances to ensure that you know where your money is going.

Many families have some hotspots where they overspend, and doing a bit of re-budgeting can have a sizeable impact on the money you have left.

Be aware of where your money is going

Putting together a detailed budget of your monthly expenditures is a great place to start when it comes to financial spring cleaning. As My Money Coach explains, oftentimes people simply aren’t fully aware of where their money is going. They estimate things and get caught off-guard when they run low on funds. A key to fixing this problem is to figure out what your spending triggers are and tackle those right away.

Do you feel pressured to spend more than you know you should when you are out with friends? Do you spend money when you are stressed or upset? The more you can pin down these trigger situations, the better you can do when it comes to finding other ways to deal with the situations and put your money to better uses.

Consider going cash-only for many monthly expenditures

Many experts recommend using cash rather than credit or debit cards as much as possible. Money Crashers suggests that as you work through your budget, you come up with how much discretionary income you have for the pay period once you have covered bills, savings, and investments. Allocate that money to different categories such as groceries, entertainment, gas, and fun money, and put each of those amounts into an envelope corresponding to each category.

You then need to rely on those envelope to pay for purchases in each category, and when the money is gone, you’re done until the next pay period. If you have money over, put it toward debt or savings. This type of spending strategy can be a major eye-opener when it comes to finding hot spots for overspending and can give you valuable insight into where you need to tweak your budget.

it can be tricky to accommodate the cost of childcare in a budget unless you make the effort to cut back elsewhere

Childcare costs can wreck havoc on a tight budget

The cost of childcare can be a key area to review when it comes to budgeting and overspending. The Spruce notes that it can be tricky to accommodate the cost of childcare in a budget unless you make the effort to cut back elsewhere. As you are on the hunt for the perfect caregiver situation, explore all of the available options and consider ways to trim costs and maintain a quality level of care.

If you do not research thoroughly, you may end up paying hundreds more a month than you would to for the same level of care elsewhere. For example, daycare centers are typically more expensive than an in-home provider. In addition, some families find it friendlier on their budget to nanny share, tweak work schedules, arrange for care from a family member, or join a childcare cooperative.

Take advantage of opportunities to improve your financial literacy

Financial spring cleaning can be a complex adventure and it can be tough to know where to begin. There are resources available to build your financial literacy and Two Cents shares some great options. For example, you may need guidance on budgeting and overspending, or you might want insight into taxes and investing. Take your financial spring cleaning one step at a time and focus on where you can get the biggest bang for your buck.

One of the best places to start in financial spring cleaning is to tackle overspending hotspots. Turning to cash over credit or debit cards can be helpful, and recognizing spending triggers is important too. Don’t overlook making changes to accommodate big budget items like the cost of childcare and set your priorities so that you don’t stretch things too far. There are resources online that can enhance your financial literacy and with some strategizing, you can live the lifestyle you want while still managing to save and invest.