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Financial tips: CPAs' gift to college graduates

Graduation for millions of college students means it's time to trade in books and binders for bills and budgets. The Maryland Association 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 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 loans 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.

Only CPAs are equipped to address your full range of financial needs with integrity and insight. In Maryland, CPAs must pass a rigorous two-day examination, adhere to strict ethical and professional standards, and, beyond college, complete 80 hours of continuing education every two years to be certified by the state — accountants do not.

Your doctor is certified; your lawyer is certified. Make sure your accountant is a certified public accountant.

For CPA referrals in your area, contact the MACPA at (410) 296-6250 or click here.

The Maryland Association of Certified Public Accountants (MACPA) is a statewide professional association that provides leadership, information and services for its nearly 10,000 CPA members, who are employed in private practice, industry, government and education. CPAs are business and financial professionals who have passed a rigorous two-day examination in order to be licensed by the state. CPAs are committed to protecting the public interest, and must adhere to stringent ethical and professional standards and continuing professional education requirements.