The year-end personal financial audit

Published: December 26, 2013 at 9:15 am

Each December, I conduct a personal financial audit. That is, I take stock of ,

  • financial goals
    • what is the value of my investments for each goal. What is their worth?
    • have I invested what I resolved to invest last December?
    • Will I have enough to invest for all my goals in the year ahead?
    • Review calculations for retirement and all other goals, especially long-term ones.
  • insurance and emergency fund needs/expenses
  • check if I have any big expenses in the year-ahead
  • tax-planning. It is integrated with my financial goals?
  • inflation check. How much have my expenses increased?
  • any other thing that I should worry about!

This time, I thought it may not be a bad idea (hopefully!) to write a post about it.

Note: This post is not to boast or brag about my financial life. It is to urge to you conduct such an audit yourself. If I don’t put in my story, I will have say, ‘do this’ and ‘do that’. That would sound preachy. My point is to share with you what I do. If you start to do this yourself, I am sure you will come up with a version best suited to you (and better than mine).

personal financial audit
Image courtesy of Stuart Miles /”.

Financial goals

1. Retirement: This year was a pretty decent year for retirement. Each month, last year I managed to invest 110-120% of my monthly expenses. This year began the same way, but I managed to increase  the monthly investment to more than  175% of monthly expenses.

Each year I must increase my monthly investment by about 10-13%, in order to achieve my targetted retirement corpus I am a couple of years ahead of this schedule.

This means that my financial freedom is about 10-12 years away. Pretty decent, considering retirement is 26 years away (at least on paper).

The advantage of investing as much as possible and as early as possible is, if for some reason investments decrease a few years from now, I can simply rely on my new pension scheme contributions and hope I have the health to retire at 65.

This year, I have already reached that stage.

If I can mange to invest at current levels and delay my retirement, my return expectation on my portfolio can be significantly lowered. I know need only about 9% return from equity.

A lot of ifs and buts. Can’t be helped though, that is life.

Asset allocation: Equity 60% (equity MFs) and Debt 40%. No gold, no real estate. Most of the debt comes from my mandatory New Pension Scheme subscription (see here for a performance review) with a little bit of PPF.

If you are wondering how I manage to invest so much, it is because of a frugal life we lead. All credit to my wife for keeping our expenses down.

Calculators used to compute this information

Verdict: Since a hundred things can derail a retirement plan, this is nothing to cheer about. Try to keep expenses down and hope for the best.

2. My sons education. My son turns 4 in January. After 14 years, he will graduate from School. He will turn 18 before  he completes school as got into pre-Kg a year later than others.

Each month I put away about 50-60% of monthly expenses (increasing by 10% each year) for his education in equity MFs and PPF.

Asset allocation: Equity 60%, Debt 40%.

Verdict: As of now I can afford an undergraduate course like a BE/B. Tech. Hopefully I will be able to handle his post-graduate education too, possibly abroad.  If he wants to take up medicine, I would need an education loan. We will cross that bridge when we get to it.

Calculators used to compute this information

3. My sons marriage. This year, I started saving for his marriage expenses. Assuming my son would marry at 25, I should have enough for a frugal wedding.

Asset allocation: Equity: 90%, Debt 10%. No gold. Not optimal, but there is enough time , and this is not a high priority goal. So I would like to worry about this later.

Related post: Do not buy Gold ETFs because you need gold for your child’s marriage!

Those are my long-term goals. I don’t have short-term goals at the time of writing. I do have recurring goals, like payment of term insurance, health insurance etc.

Related Calculator:  Recurring Financial Goals Calculator

Life insurance and Health insurance

  • These are in auto-pilot mode. So not much to do here.
  • I have a term insurance from LIC (Amulya Jeevan) and a group term insurance from IITM. Why not cheaper online policies? Why not indeed. Not for me though. Thanks to my Myasthenia Gravis, no one would offer me term policies anymore!
  • For the same reason, my mediclaim premium was loaded this year.


The best advantage of being in the highest tax-slab is one does not have to worry much about tax-planning! Section 80 C is taken care by NPS, Section 80CCD by NPS, 80D by mediclaim, 80G with WorldVision, done.

If you need some help planning your taxes, consult this excellent article by Mr. Narendra Kondajii.

Inflation Check  This is the most crucial aspect of this audit. How much have my expenses increased this December compared to last December?  Unfortunately, there is an 11% increase. Partly due to inflation and partly due to lifestyle expenses – mainly medicines for my Myasthenia.

These days I don’t do a monthly budget. I make sure I invest enough for all my long-term financial goals and use the rest for expenses.

As a result, within a few days after I receive my salary, my SB account has a low balance.  Which is why I have not been contacted by any relationship manager!

How about you? How often do you take stock of your goals and expenses?

Here is an integrated financial plan creator to evaluate your fiscal fitness. This is the perfect time to take stock of your finances, plan and invest accordingly.

If you are interesed in knowing more about my personal financial journey: The Financial Arrow of Time

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
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