It’s ironic, but accounting professionals can struggle with their personal finances.
Due to their accounting career, they are especially challenged to reach out and seek help, according to research from caba, a UK-based service for accountants.
There is no federal or state standard for teaching financial literacy, even in high schools. The National Financial Educators Council is pushing for such standards.
This means that financial literacy is often left up to family or the individual’s pursuit of this knowledge and skill building.
Fortunately, there are more tools and opportunities available to accounting professionals, and really anyone interested in building good, early career financial habits.
Here are a few early career financial habits that everyone should know. We have also provided some resources and tools to help you get started.
How to Create a Budget
Understand your weekly or monthly expenses compared to what you earn each month. That is the first step toward improving your financial literacy. A personal financial planner does this in their initial consultation with clients, but you can also do it in your accounting career through your online banking tool or free budget planning tools.
- Create a list of your major debts/expenses
- Create a list of your discretionary/fun purchases
- Organize expenses and debts into categories
- Determine how much you need each month to cover expenses/debts
- Subtract that number from your take-home earnings
Is there an expense category you can reduce? Can you avoid overspending and leave some money left over for savings? If not, you may need to ask for a raise, seek additional income or seek support for debt consolidation. The goal of financial stability is to have money left over for emergency savings and long-term savings.
Here is a list of free and paid budget planning tools. If you are concerned about your debt to income ratio, choose a free tool or seek help from a colleague or family member to sort out your budget.
How to Pay Down Debt
A common reason that young professionals struggle with debt is their reliance on credit cards to extend their purchasing power. These cards often carry high interest rates that expand debt and make it hard to pay off the card each month.
- Look at your credit card spending, either manually or automated. Are there charges that occur automatically every month that you aren’t aware of? Eliminate automated charges as much as possible or move them to a debit card that comes out of your bank account.
- As you eliminate monthly credit card debt, apply that monthly payment to your next biggest debt such as a car loan or student loan.
- Avoid adding to debt by only spending what you can afford from your bank account or savings. Defer large purchases or travel until you have saved for it.
If you are struggling with large, unmanageable debt, you may need professional help to sort it out. Choose a free or low-cost debt counseling agency through your city or county or visit the National Foundation for Credit Counseling (NFCC) to get started.
How to Calculate Savings Per Month
As you create a budget and address your debt, you can begin to see savings options. A portion of your income should be saved for short-term and long-term needs. Your savings is the amount left over after paying all expenses/debt each month.
- Pay attention to pre-tax deductions through your payroll. Does your employer offer a matching percentage to your personal retirement plan contributions? Take advantage of that benefit!
- If you receive a cost of living raise, a bonus or a tax refund, take that additional cash and earmark it for savings when possible
- Gifts, inheritance or extra income from activities such as coaching or teaching can all be added to your short-term and long-term savings
If you would like other tips for saving money, check out this NerdWallet article.
How to Give to Causes
One of the most satisfying things about being financially literate is not only the satisfaction of caring for yourself and your family, but also giving to causes you care about.
Whether you donate to cancer research, animal welfare, your community’s park improvements or other interests, giving feels good.
- Give through automated deductions from your bank account and build it into your monthly budget
- Allocate a portion of your earnings each month to giving and then explore opportunities as they come up
- Join a co-op or a giving group, which helps you meet people who share your interests
Extra money set aside for giving makes it easier to respond when a need comes up, such as a natural disaster or a friend in need. For more ideas about giving, see this article from Credit.org.
How to Invest for the Future
As your life and career change, you will have bigger financial goals to explore. If your first goal is to pay down debt, other common goals are to travel more, purchase a home or build your retirement savings.
These goals may seem more out of reach than ever. A prosperity index survey by Intuit found that 69% of respondents think long-term financial planning is out of reach. Similarly, 68% do not expect to retire, at least not in the traditional sense. The survey was taken by 1,500 individuals, ages 18 to 60.
How can a young or mid-career professional plan for future financial stability? The survey cited that financial prosperity is defined by agility, upskilling and enjoying life rather than the amount in a bank account.
- Determine what is enough for today and build in financial agility for tomorrow
- Continue to improve skills for future work environments and career shifts
- Explore DIY tools and financial literacy education, even on TikTok and Reddit!
- As your financial needs become more complex in your accounting career, consider hiring a personal financial planner.
Fortunately for today’s accounting professionals, financial literacy can come through online groups, free resources and sharing your concerns with colleagues and other professionals who are certified to help you.
It’s ok to not have all the financial answers.
Seek help. Balance spending, saving and giving. Define what wealth means to you.
