Pomp and Circumstance and Financial Planning

You’ve put in four, or maybe to your parent’s dismay, five or six years of hard work in college, and now graduation is here. What’s next? Planning for retirement.

While retirement may be the last thing on your mind as you flip that tassel on your mortarboard, it’s one of several things to think about to get started on the right financial foot, say personal financial planning experts at the New Jersey Society of Certified Public Accountants (NJSCPA). A little planning can help you make the most of your education and your financial future.

Top 10 Tips for New Graduates
1. Create a budget. If the word “budget” makes you cringe, think of it instead as a spending plan to achieve your short and long-term goals. If you are like most college graduates today, you have at least some student loan debt. Learn about it – the terms and conditions, interest rate, minimum payments, total cost of the loan – everything. Your spending plan must take this debt into account.

2. There’s no time like the present. Studies show if you start saving for retirement in your 20s, your returns at the end of your investment could actually be six times as much as someone who starts saving in their 30s or 40s. Set aside those retirement dollars now; it could mean the difference between traveling the world during retirement and living on canned beans.

3. Know your options. Did you land a job that offers a 401(k) matching plan? Take advantage of that sweet benefit by contributing at least enough to maximize any employer match. Employer matching means free money. Free money! You don’t hear that every day. Other options include opening a traditional Individual Retirement Account (IRA) or a Roth IRA. If you have student loan debt, you may have opportunities to refinance it on better terms. Keep a sharp lookout for any opportunities to increase your income or reduce your expenses.

4. Save. It’s that simple. Aim to spend only 90 percent of what you make, leaving 10 percent for savings toward your goals.

5. Create an emergency fund. Emergencies happen and it’s important to be prepared. Experts recommend having six months worth of living expenses on hand for unforeseen circumstances. Set aside money each month to tide you over in difficult times.

6. Understand credit scores. As you move through life, you’ll likely get a credit card or two, have a car loan or establish accounts that will begin developing a credit report in your name. Your credit score is a measure of your past ability to make payments on time and manage your credit. It’s designed to help lenders determine how likely you are to pay back a loan. Keep an eye on your credit score and know how it can work for and against you.

7. Keep debt in check. Running up your credit card balance can make it hard to get new credit, and it can potentially lower your credit score. Use credit only when it’s necessary, and pay off your charges each month so you don’t carry a balance and pay an exorbitant amount of interest.

8. Save the Ferrari for later. You have a new job and you need to get there, but don’t run right out and buy the most expensive vehicle you can afford. If you can, save your money and hold off on a car purchase for as long as possible. If it’s an option where you live, take public transportation. You’ll save on car insurance, gas, and maintenance. If you must buy a vehicle, consider something used versus new.

9. Set goals. As mentioned before, your budget and savings should incorporate your goals. Maybe you want to travel, retire early, pursue a special project, or live on a yacht by the time you’re 40. It’s great to have goals. Write them down and make achieving them a part of your daily life.

10. Learn more. Stay up to speed on the latest investment opportunities and what it means to you at each stage in your life.

A CPA Can Help
What’s the top advice CPAs have for new college grads? “Barry Kleiman, CPA, Principal at Untracht Early LLC in Florham Park. “Understand that the decisions you make now can help you thrive financially in the future. Take advantage of this time to set yourself up for success.”

If you have questions about planning for your financial future, contact your CPA. If you don’t have a CPA, you can easily locate one online using the NJSCPA’s free, online Find-A-CPA service. Just go to findacpa.org, and in a few clicks you can locate a highly qualified professional who can assist you.