By Thomas Moser, CPA

If you’ve ever read one of these books, you know that low IQ isn’t a prerequisite.  In fact, even the seasoned professional would likely learn some things from reading one on personal finance.  New professionals, in particular, may find themselves in uncharted waters after being (ceremoniously) cast out of school, and facing financial dilemmas more complicated than repaying a roommate for pizza.  They face a number of unfamiliar and unique financial issues that can easily be relegated and overlooked.  Here are some practical tips for new professionals navigating the “real world.”

Look to your employer.  A job is the first place to start.  New professionals will rely heavily on their wages to survive, but salary is not the only thing to be concerned about when accepting a new job.  Many employers will offer a number of benefits, ranging from health insurance packages (now required by the Affordable Care Act) and pensions to employee discounts, gym memberships, and expense reimbursements.  Participating in an employer-sponsored retirement plan is an easy way to set aside some of each paycheck and employers may offer matching contributions, which is basically free money.

Save, save, and save some more.  When you think of saving, you probably think of retirement.  And you should – retirement is the predominant purpose for saving money, and it’s never too early to start.  For new professionals, retirement is often a distant consideration and money is often scarce.  However, there are many other reasons to save, including medical expenses, a new car, a house, vacations, and maybe even a very expensive ring.  There are many ways to save money – the key is to find one that meets your needs and will generate a respectable return (not a checking/savings account or under the mattress).

Things to consider when selecting a savings vehicle include types of assets that can be held, availability of funds (and potential withdrawal penalties), low costs, and favorable tax attributes.  For example, a Roth IRA can be attractive for young professionals because contributions are made after-tax and can generally be withdrawn as needed without penalty.  Earnings can be withdrawn tax-free in retirement and for emergencies. You won’t get a deduction for your maximum annual contribution of $5,500 to a Roth IRA so fill it up before your tax rate dictates using a deductible Regular IRA.

Make smart plans and stay on top of your finances.  Prepare a budget.  Have reliable estimates for your expenses so you know where your money goes and how much you will have left over for retirement savings, planned big-ticket expenditures, and any unpleasant surprises that could collapse your carefully constructed budget.

Other strategies for maximizing your wealth:

- Shop smart and take advantage of discounts
- Prioritize – don’t buy everything you want (even little things add up)
- Avoid penalties and interest for late bill payments
- Understand taxes and pay the right amount (take advantage of available tax breaks)
- Keep close tabs on your credit (check your credit history regularly)

You might think, if you pay your bills on time, you don’t need to worry about your credit.  Wrong.  Not only is identity theft a significant concern, but a company you regularly do business with could just as easily mess up and put a dent in your credit.  You can check your credit history once a year, for free, at AnnualCreditReport.com.  In addition, if you apply for a credit card or loan, request a copy of the credit report the lender used.

Prudent planning and informed decision making are paramount to a balanced budget, a generous rainy (or sunny) day fund, and a healthy retirement account.  Check next month’s newsletter for the second part of this article, which will cover debt and other essential personal finance topics.