MONEY MANAGEMENTFrom the Virginia Society of Certified Public Accountants - Presented by Dean Knepper, CPA, CFP®
FINANCIAL TIPS: CPAs' GIFT TO COLLEGE GRADUATES
(June 1, 2006) -- Graduation for millions of college students means its time to trade in books and binders for bills and budgets. The Virginia Society of CPAs provides the following advice to help college graduates become financially independent.
Move Back Home?
There are two schools of thought when it comes to moving back in with your parents after college. Some believe that it's best to live independently. Others maintain that by living at home for a year or two and saving money, you can get a head start on a financially secure future. A lot depends on your circumstances, including whether you have any savings to use in setting up a new residence. If you have little to no financial resources, it's best to stay at home and discipline yourself to save the money you will need to move out.
Learn how to budget.
As a student, you were probably used to living on the cheap. Once you have a job and a steady paycheck, you may be inclined to overspend. That's why it is so important to create a budget to guide your saving and your spending patterns. There are plenty of personal finance books and Internet sites with advice on creating a budget that works for you.
Pay yourself first.
Get in the habit of setting aside a specific amount of money each month for saving or investing. Don't fall into the trap of paying everything else first, with the intent to save what's left over. One effective strategy is to sign up to have funds automatically deducted from your paycheck or checking account and deposited into a savings or investment plan.
Plan for the unexpected.
When you're just starting out, the money you set aside each month should be earmarked for an emergency fund equal to roughly six months worth of living expenses. An emergency fund means you won't have to resort to your credit card if your car needs major repairs or you lose your job. Keep emergency funds in a savings or money market account -- both are safe, liquid investments.
Get out of credit card debt.
Many college graduates leave school with thousands of dollars in credit card debt. If you're one of them, follow a payment plan and pay off debt on the highest interest rate cards first. Don't fall into the trap of paying only the minimum monthly amount due - that strategy could cost you a great deal in interest.
Preserve your credit.
Remember -- your diploma may be your ticket to a good job, but your credit report is your ticket to borrowing money for a home or car. Always pay your bills on time.
Understand student loan repayment options.
Be sure you understand the rules regarding student loan repayment and the options for consolidating your loans. Consolidating several student loans into one refinanced loan reduces your monthly payment and makes debt repayment more manageable. But if you choose to extend your repayment term, bear in mind that it will take longer to pay off your loan balance and you'll pay more in total interest.
Save for retirement.
Retirement may be the furthest thing from your mind when you start working, but saving even a small amount while you're young can grow into a sizeable nest egg. If your employer offers a 401(k) plan and matches a percentage of the money you contribute, try to contribute at least enough to take advantage of the match. If you don't, you'll be throwing away free money. A traditional or Roth IRA (Individual Retirement Account) is an alternative if your employer doesn't offer a 401(k).
Ask for advice.
A meeting with a CPA is a great way to map out a long-term financial plan that will help you create a strong financial future.
The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at www.vscpa.com.
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