From the Virginia Society of Certified Public Accountants - Presented by Dean Knepper, CPA, CFP®


(May 23, 2005) - 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 Virginia Society of CPAs says you need to know now that Mom and Dad aren't footing the bills.

Understanding financial planning

Personal financial planning refers to 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 process for managing your money that is consistent with your personal financial goals and objectives.

The cost of independence is bills, bills, 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.

Plan for unexpected expenses

CPAs recommend that you build an emergency fund by saving three to six months worth of living expenses. This way you won't have to resort to your credit card for unanticipated events. 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.

Make time for tax planning

A little tax planning can save you a lot of money. Plan to meet with a CPA, who can answer your questions and give you valuable advice on managing and meeting your tax liability. He or she can also provide general financial planning advice to help you start off on firm financial footing.


The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at


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