44 - Carry Out Your Annual Financial Health Audit Today!

It is February, and the perfect time to talk about personal finances.

Whilst this topic is not everyone’s favourite cup of tea, it is a topic I love. Why? Because we all need healthy finances, and the more we know about our financial health, the better we can enjoy today and prepare for our future. It is even more important if you are wanting to change job or career, to avoid unnecessary stress and worry. 

First and foremost I want to caveat that I am not a financial advisor, these are the steps I take throughout the year to ensure I am on track to hitting my financial goals. You can only improve what you track right?!

Your Audit

When was the last time you checked in with your finances? Not just glancing at your bank account or paying off a bill, but truly sitting down and getting real about where you and your household stand financially?

If your answer is “I can’t remember” or “never,” don’t worry – you are not alone. But here’s the thing: your financial health is just as important as your physical health or mental well-being. A financial health audit is a chance to catch issues early, identify opportunities, and set yourself up for a stronger, more secure future. This is a jam packed post so stick with it, use it as your guide step-by-step and be proud when you get to the end of your audit.

The Facts

Before I jump in, I wanted to share a few facts.

Around 46% of UK adults have debt, the average is £5,600 per person (non-mortgage debt) and this peaks around middle age.

A common 5-year loan has around 5.5% APR, the total interest paid over the term would be £4,125.

On a credit card with an 18% APR, the total interest paid over the same 5 years could amount to £13,500 (assuming minimum payments are made).

The difference is £9,375!! You could literally save yourself thousands of pounds each year by taking some time to look at your financial health. This may be the difference between you working full time or part time, picking up the children from school every day, quitting the job you hate to do something you love.

Ultimately the aim is to eliminate all debt (mortgages are different, one for a future post) and to build net wealth that compounds - grows - over time with little to no effort. 

Think of it as a little TLC for your finances. Now let’s break it down.

Step 1: Assess Where You Are At Right Now

Before you can make any improvements, you need a clear picture of your current financial situation. This is about taking stock - no judgment, no shame, just facts.

• Income: What’s your monthly income after taxes? Include all sources, such as salary, investments, side hustles etc.

• Expenses: Track where your money goes each month. Housing, food, transport, subscriptions, entertainment - every category counts. There are some fancy apps out there that can make this much easier, I use Moneyhub.

• Debts: List all outstanding debts, including credit cards, loans, or anything owed to friends and family. Include interest rates and minimum payments.

• Savings: What’s in your emergency fund? Your retirement account? Any savings for specific goals, like a holiday or a house deposit?

By the end of this step, you should have a clear snapshot of what’s coming in, what’s going out, and where you stand overall. It doesn't need to be complicated, a simple excel spreadsheet will work.

Be proud of yourself for getting this far, it can be uncomfortable but it will be worth it.

Step 2: Evaluate Your Financial Goals

Now that you know where you are at, it’s time to figure out where you are going. Financial goals don’t need to be complicated, but they do need to be intentional.

Ask yourself:

• What do I want to achieve financially in the next year? 

• What about the next 3–5 years?

• Am I saving for a specific milestone, like buying a home, starting a family, or early retirement?

• Do I feel secure, or do I need to build more financial stability?

Write these goals down. Having them in black and white makes them real, and it gives you something to work toward.

Step 3: Check Your Spending Habits

Let’s be honest - spending is where many of us fall off track. But this isn’t about guilt or deprivation, it is about aligning your spending with your priorities.

Review everything that has left your bank accounts by going through them line by line. Look at the past few months (six months would be best) and ask yourself:

• Are there areas where I’m overspending? (Hello unused subscriptions or impulsive online shopping!)

• Am I spending on things that actually matter to me, or am I wasting money on stuff that doesn’t bring joy or value?

• Can I redirect some of this spending toward my goals?

This isn’t about cutting out all the fun stuff – it is about making conscious choices. If like me, a daily coffee genuinely makes you happy, keep it. Just make sure your spending reflects your values and priorities. I prioritise my pension, investments, the family and household stuff way before my coffee.  

My other non-negotiable is books, if there is a book I would like, I don’t hesitate – when I made this decision a few years ago the guilt of spending on something that wasn’t a necessity but made me happy just melted away. Figure out your priorities, based on your current spending and your future goals.

Step 4: Tackle Your Debt

Debt can be one of the biggest barriers to financial health, so this step is crucial. But don’t panic - it is all about creating a realistic plan.

Start by prioritising:

• High-interest debts: These, like credit card balances, should be your top focus since they cost you the most over time.

• Low-interest debts: Things like student loans or mortgages may be less urgent, but still deserve attention.

Decide on a strategy:

• The snowball method involves paying off the smallest debt first to build momentum.

• The avalanche method focuses on paying off the debt with the highest interest rate first to save money overall.

Whatever you choose, stick with it. Progress, no matter how small, is progress. Check out my blog post that goes into this in more detail here.

Becoming debt free is an amazing feeling, believe me, I know. 

Step 5: Boost Your Savings

Savings are your financial safety net. Whether it’s for emergencies, big dreams, or retirement, building your savings should always be a priority.

Here’s how to get started:

• Emergency fund: Aim for 3 - 6 months’ worth of living expenses in an easy to access account that gives you a good interest rate. If that feels overwhelming, start small - saving even £50 a month can make a big difference over time.

• Automate savings: Set up automatic transfers to your savings or investment account each payday, before you even see it. This takes the decision-making out of the equation. I use Hargreaves Lansdown, there are many others out there so find one that works for you and set up automatic payments just after payday.  

• Prioritise retirement: Contributing to your pension or retirement account early is one of the smartest financial moves you can make, thanks to the magic of compound interest. Make sure to max out your employee-employer contribution, your future self will thank you. 

Step 6: Review Your Investments

If you’re investing (or thinking about it), an annual financial audit is the perfect time to check in on your portfolio.

Ask yourself:

• Are my investments aligned with my goals and risk tolerance?

• Am I diversified across different asset classes (stocks, bonds, real estate)?

• Have I re-balanced my portfolio recently to maintain the right mix?

If investing feels overwhelming, consider working with a financial advisor. They can help you build a strategy that works for your goals and comfort level.

I would highly recommend Ramit Sethi’s book called 'I will teach you to be rich' – He takes you step by step on how to build wealth simply and automatically. 

Step 7: Protect Your Future

This step is all about planning for the “what ifs.” It’s not the most exciting part of financial health, but it’s essential.

• Insurance: Do you have the right coverage for your needs? Think health, life, home, and income protection.

• Will and estate planning: If you don’t already have a will, make one. It is one of the most responsible financial steps you can take. Remember you need to update it when your circumstances change (marriage, divorce etc).

• Tax efficiency: Are you making the most of tax-advantaged accounts such as ISA’s or deductions available to you?

Protecting your financial future is about creating peace of mind - for you and your loved ones.

Step 8: Track Your Progress Throughout Each Year

Why annually? This is the absolute minimum you should do it, so it is a good place to start. A financial audit isn’t a “set and forget” process. Once you’ve done the hard work of assessing and planning, make it a habit to check in regularly.

Set monthly or quarterly dates to review your budget, track progress on your goals, and make any necessary adjustments. This keeps you on top of your finances and prevents surprises.

If this is new to you then JUST DO IT NOW AND FIGURE THE REST OUT LATER.

Remember, taking control of your finances isn’t about perfection, it is about progress. An annual financial health audit is your chance to pause, reflect, and re-calibrate so you can move forward with confidence and clarity.

So grab a notebook, a cup of tea (or a glass of wine), and set aside a few hours to focus on your financial well-being. You will thank yourself when you see how far you have come this time next year.

You’ve got this!

Always with love,
Elsa x

p.s. I am not a financial planner or advisor, this is what I do myself and based on years of research and experience. I would highly recommend a certified financial planner if you feel you need more personalised support.