How to personally audit your financial life to ensure you are on track

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Nemo judex in causa sua, which roughly translates as: “No one should be a judge in their own cause." In this article, while we will try to establish a structure to personal financial audits, we should also acknowledge that since we are emotionally attached to our finances (and we also have our own biases), it would be necessary at times and for some people to have some external intervention, like getting professional investment advisers to take a look at their finances and identify gaps to fill up fast. Now, coming to the audits. The purpose of a personal financial audit is to take a look at all aspects of your finances.

At times, these things might seem boring and obvious. But please remember that these are the building blocks of the foundation on which the skyscraper of your financial life will rise eventually. So, you have to get these right if you don’t want periodic earthquakes to bring down your skyscraper, i.e., your financial life.

That said, here are the heads under which you should assess your financial life. The first thing is to check if you have a sufficiently large life insurance cover. Traditional LIC policies of yesteryear (often of ₹5-10 lakh) are of no use now.

Your life insurance policy should be large enough to clear all loans, provide money for goals like children’s schooling, higher education and first house purchase, plus also help provide income for regular day-to-day expenses of your dependents. Also read | How Aditya Birla Sun Life MF, one of India’s first global Gift City funds, works If your spouse is earning and contributing to expenses/investments, then ensure they also have a large enough life cover. Also, don’t depend just on your employer’s life insurance.