Financial Management For Grads
Texas CPAs Explain What They Didn’t Teach You in College

DALLAS — Whether you graduated from college with a degree in linguistics or biophysics, it’s likely that one of your biggest challenges right now is managing your finances. Here is what the Texas Society of Certified Public Accountants says you need to know now that Mom and Dad aren’t footing the bills.

Understanding Financial Planning

Personal financial planning is the process for managing how you spend, save, borrow, and invest money. It involves balancing your checkbook, getting the best savings rate, paying off your student loan, buying a car, saving for retirement, and more. It is essentially a way of managing your money that is consistent with your personal financial goals and objectives.

The Cost of Independence Is Bills, Bill, Bills

Most graduates are surprised by the number of bills they are responsible for once they are on their own. Make a list as soon as you graduate of your current financial liabilities – what you owe, to whom, and when you are expected to make payments. Don’t forget to include new financial responsibilities you may have to assume such as payments for health insurance and automobile insurance.
Be sure to also consider the financial implications of the decisions you make. The true cost of being independent may be more than you originally thought.

For example, signing a lease to rent an apartment means more than just paying the rent. There’s the security deposit, utilities, renter’s insurance, and other related costs. And that’s on top of other day-to-day expenses, such as auto insurance, food, and commuting to your job. Don’t forget to factor these items in to your planning.

The Answer Is Budget, Budget, Budget

To take charge of your spending and savings, you’ll need to develop a budget. Think of a budget as a plan to guide your spending and savings. To create a budget, start by adding up your monthly take-home pay and any other sources of income. Next, add up all your fixed expenses, such as rent and credit card or student loan payments. Then, do the same for flexible expenses. Flexible expenses are those that can be reduced, such as food, gifts, dining out, and recreation. If your expenses exceed your income, find places to cut back so you can free up money for saving and for paying off debt.

Use Credit Wisely

Many graduates leave school with a lot more than a diploma. If you’ve accumulated credit card debt while in college, paying it off should be your top financial priority. Going forward, make it a point to never charge more than you can pay back at the end of the month.

If you find credit cards too tempting, replace your credit card with a debit card. A debit card offers the convenience of a credit card, but works like the electronic equivalent of a check. When you pay with a debit card, your checking account is automatically debited for the amount you spend.

Savings accounts and money market funds are good places to keep cash you may need on short notice. Add to the fund regularly until you reach your goal and only withdraw for true emergencies.

Save For Retirement

Saving for retirement might be the last thing on the minds of most college graduates. But starting early can make a big difference, particularly if your employer offers a 401(k) plan and matches a percentage of your contribution. Try to participate – even if you can only afford to set aside two or three percent of your income. Not enrolling is the equivalent of passing up free money.

Additional Information

For more personal finance tips, visit www.ValueYourMoney.org. While there, sign up to receive a free monthly electronic newsletter.

ABOUT TSCPA

TSCPA (http://www.tscpa.org) is a nonprofit, voluntary, professional organization representing Texas CPAs. The society has 20 local chapters statewide and has 27,000 members, one of the largest in-state memberships of any state CPA society in the United States. TSCPA is committed to serving the public interest with programs that advance the highest standards of ethics and practice within the CPA profession.