Most people know that they spend more than they should, but few take the time to carry out a financial diagnosis to balance their accounts.
It’s like living in denial: you know that the problem exists and that sooner or later it will cause problems, but you go on with your life as if nothing were happening.
If you are ready to get to know your finances in depth and improve your financial health , check out the tips we have separated in the article.
Follow!
What is financial diagnosis?
Financial diagnosis is a solution used to completely map the budget of a company or even a family . With it, it is possible to understand the accumulated assets, the monthly income, the volume of expenses and the percentage of money spent in each category.
In other words, it is a true x-ray of finances , which allows you to project situations and evaluate necessary changes.
Personal financial diagnosis
On a personal level, knowing your budget is also essential for those who want to stay away from debt and loans. In addition, it is the chance to identify opportunities, whether for investments or even to save money that will be used to make your dreams come true.
Financial diagnosis in the company
For companies, carrying out a financial diagnosis periodically is an important step to ensure that the business remains sustainable . After all, revenue is not profit, that is, sales may be growing, but this does not solve much if production costs have increased excessively.
Having up-to-date data on hand is the best way to make safer projections, which can even allow you to identify the arrival of a crisis before it even occurs. One example is to have good cash flow control .
Why do a financial diagnosis?
The main reason for choosing to do a diagnosis like this is to understand your financial health . This will allow you to:
- Avoid unnecessary expenses
- Consume more consciously
- Identify opportunities to invest your money
- Recognize habits that need to be changed
- Design more precise strategies to achieve your goals.
Personal financial diagnosis in 4 steps
Ready to put your financial diagnosis into practice? Follow the 4 steps below.
1. Analyze your income
When we talk about analyzing income-related values, it is important to consider the various taxes and discounts involved. The amount described on the work record, for example, is very different from the amount that arrives in the account.
On the other hand, don’t forget to include other amounts that add up to your monthly income, such as rent or remuneration for services as a freelancer. Even small sales of personal items should be included.
And even if the analysis is done month by month, it is important that it covers a longer period of time, such as a semester. This allows you to better understand the situation of your accounts , since there are seasonal expenses – which only appear at certain times, such as car insurance, property tax and vehicle tax.
2. Identify the volume of expenses
Just as you did in the previous step, now is the time to identify all your expenses, including the most trivial ones. Your bank’s app will be an important ally at this point, offering a complete statement of the transactions in your current account and also the expenses accumulated on your credit card.
Repeat the analysis during the same period chosen for the income assessment stage. If you are paying interest on something, include the amounts – and make a mental note of the need to review this habit.
3. Separate expenses into categories
When we look at the absolute numbers, it can be difficult to understand how we spend so much. So, the tip is to separate the amounts into categories, to make it easier to visualize.
Some common options are housing, transportation, food, clothing, gifts, gym and pharmacy. However, you can customize them according to your reality.
4. Evaluate opportunities to improve numbers
If, in the previous step, you realize that you are spending disproportionately on transportation, it may be time to think about reviewing some habits . Between insurance, IPVA and fuel, daily use of the car may not be worth it.
Having this information at hand will help you when it comes to rethinking habits and discovering opportunities , such as carpooling with a colleague who lives nearby every now and then or even using public transport more.