Smart Money Tips for the Class of 2014
Whether you are a college grad or a high school grad, here are some helpful suggestions as you embark on your new endeavors.
For college grads -- live like you are still in college. Your first (or new job) may be exciting, especially if you are making more money. Do not let it burn a hole in your pocket. You may have to move so your best bet is to get yourself established in your new city, first. For the high school grads -- don’t live like you are living with your parents. Take control of your finances, whether you’re going on to school or getting a job.
The best way to take control is to create a budget and stick to it. What monies are coming in? What monies are going out? What is your discretionary income? You may need to make sacrifices to your “Want” and “Nice to have” lists. Information is key. The more information you have, the better the decisions YOU CAN make. There are no guarantees that you won’t spend money on every shiny object you see. Patience is indeed a virtue when you are heading out on you own.
Tax Return - Deductions for job hunting and moving expenses may not apply to you, if this is your first job in your field. However, to be sure, you should ask an accountant. At a minimum, you should review Publication 529, from the IRS. These two examples fall under Miscellaneous Deductions. This publication can be found at www.irs.gov.
KEEP YOUR RECEIPTS -- either as a hardcopy or electronically. For school, you may be able to take advantage of educational tax benefits. You may also have expenses for your work. I think that it is best, though, to keep all of your receipts. This includes cash receipts. If, for no other reason, you can use these receipts to at least analyze your spending habits. If you need to cut back, this is a great way to look at your options.
Put money away. If you are like most people, you believe that you will live for many years. Will you have the resources put away so that you are able retire at some point in the future? If not, do you plan on working until you just can’t work anymore? If you start saving early on, you won’t have to rush at the end to fill your coffers. Your company’s 401K may be your best option to begin with, especially if they match or exceed your contributions. A Roth IRA, a savings account, and a certificate of deposit are also good options. The two latter options, will currently not provide the greatest returns. If you have excess funds and want to invest, a Certified Financial Planner is a good resource for that arena.
Manage your W-4 Form. When you begin your new job, make sure that you do not take too many allowances. I have seen people mark down “Single” with 10 allowances. That’s because they want more monies in their pocket now. Then, the following year, they end up owing taxes and can’t understand why. Planning can make a world of difference. Many ”single” people can usually mark down “zero” allowances and play it safe, but very situation is different, so you may want to consult with tax professional to find out what is best for your situation.
Get insurance, especially health insurance. Some of you may still be covered under your parents’ policy and that is fine. If that window is of opportunity is gone or will be gone soon, you need to consider getting insurance through another source. The first obvious source is through your employer. You can also get life, dental, vision, LTD, and other insurances. If it is available, it would be best to take it. If this is not possible and you cannot take advantage of a spouse’s insurance, there is always the Healthcare Exchange. Having insurance protects your financial future.
Do not look at these as unnecessary controls, but as good, long-term habits that will help you. Be excited about graduating! Be excited about getting out on your own! Remember that the fledgling bird may fall out the nest on the first attempt, but when it has its feathers in place, it can soar.
-Michael Hermanson, CPA | CGMA