Money-Wise Advice for New Grads
At this time of year, many recent graduates are
leaving collegiate life behind and embarking on their first “real” career.
It is an exciting time, but it’s also a time of new financial
responsibilities. If you know someone taking their first steps into the work
world, the Iowa Society of Certified Public Accountants advises that there
are several money-wise steps to make sure recent grads start off on sound
financial footing.
Set up a savings plan
Create a realistic budget that balances what you take home in your paycheck
against your regular monthly expenses. Among your expenses, include a small
amount that will go directly into a savings account. Although your money may
not stretch very far at first, it’s important to make savings a habit as
soon as possible. When you need the cash for an emergency–or for a
well-deserved splurge–you’ll be glad you have a savings plan.
Polish your cooking skills
Balancing work and life when starting your first full-time job can be an
experience in itself. Many young people find they have little time or energy
to prepare breakfast or dinner for themselves, or to pack a bag lunch to eat
at work. That can become a big problem, however, because it means these
young workers end up with expensive takeout meals instead of the much more
economical home-prepared meal. As an example, spending $20 a week on takeout
meals adds up to $1,040 a year. That sum could be used to pay a month’s rent
or could be the beginning of a down payment on your first house. If you set
aside time to plan and shop for each week’s meals, your food costs will drop
sharply, and you can make better choices with the money you save.
Keep debt under control
As soon as they enter college, young people begin receiving offers from
credit card companies. While it may be tempting to run up a credit card
balance in order to furnish your apartment, build a work wardrobe, or
acquire some new electronics, it’s not a good idea. Many recent graduates
already have thousands of dollars in student loan obligations. Adding to
that debt makes it more difficult to pay off your balances and begin to save
for your future.
If you do take on consumer or student loan debt, be
sure to make your payments on time and in full. That will ensure that you
maintain a good credit rating so that you can get credit in the future when
you need it. If you have a bad credit rating, you could be refused an
apartment–or have to pay a higher security deposit for it–be turned down for
an auto loan, or even face problems in getting a job. Whenever you take on
debt, be sure you’re being realistic about your ability to pay it off.
Remember retirement
Retirement may be a long way off, but CPAs recommend that you begin
contributing to a retirement account early. That’s because you’ll set aside
more money over time and your nest egg will have more opportunities to grow.
Begin contributing to your company’s 401(k) if one is available or open an
individual retirement account. Each choice offers tax-advantaged
opportunities to build for your future.
Your CPA can help
As you start your adult financial life, it’s a good idea to get to know your
local CPA. He or she can help you understand your choices and make the best
decisions for your financial future. To access “Find a CPA” on the web, go to
www.findanIowaCPA.com.
