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 California Society of CPAs (www.calcpa.org) 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 listen to podcasts with more financial tips, go to http://www.calcpa.org/Content/community/financialempowerment.aspx.