8 Money Moves CPAs Say You Must Make


Everybody and their brother can talk to you about your finances until they're blue in the face, but that doesn't mean their counsel is sound. Frankly, unless they've been formally educated in finance, you should heed their advice with caution. If you want solid suggestions on personal finance best practices, go straight to the source — CPAs, who make a living crunching the numbers that constitute their clients' lives. What do they recommend? Take a look at these tips we've cultivated from a few successful CPAs on money moves you must make — starting today.

1. Get Out of Debt

You've got to start somewhere, and the best place is taking a good, hard, honest look at your debt and devising a plan to eliminate it. According to Federal Reserve statistics, Americans owe nearly $900 billion in credit card debt, or about $2800 for every man, woman, and child. Add in student loans, mortgages, auto loans and you're talking serious money.

Not all debt is bad, says Roanoke, VA based CPA Micah Fraim — mortgages are viewed as "good debt," for example — but consumer debt can be ruinous.

"Unlike small business loans or mortgages, [credit cards] are rarely used to purchase investments or appreciating assets," he says. "It's much more likely that they will be used for living expenses — poof, and it's gone. With average interest rates in the teens, credit card debt should be avoided at all costs, and if someone has consumer debt or is forced to take it on, intelligently reducing and eliminating it should be their number one priority. It will save them far more money than most investments could yield and will let them rest much easier at night."

2. Get on a Budget — Today

Spending money willy-nilly is the easiest way to drive yourself deep into debt, and you want to avoid that as best you can. The best way to do that is with foresight in the form of a budget. Monitor closely money coming in and going out, and curb your spending accordingly.

Why do you need a budget?

"It's simple: Death by 1,000 cuts," says Amanda Argue, a 26-year-old CPA in Florida who, with her husband, spent the past 14 months on an extremely tight budget to pay off $55K worth of student loan debt. "If you're not careful, you can easily rack up those credit card bills, just by eating out for a majority of your meals. By becoming conscious about where your money is going, you can take charge of your finances, instead of your finances taking charge of you."

Based on her own successful debt elimination, Argue also provides a few resources that helped her along the way.

"The best free tools I have found for budgeting are Mint.com or Everydollar.com," she advises. "Both have mobile phone applications and will send notifications if you go over budget. With Mint's free version, you can link up your credit cards and bank accounts to receive up-to-date data as to where your money is going. Everydollar is the Dave Ramsey budgeting tool. It's great for beginners, but if you want to link your accounts, you will have to shell out some cash."

3. Pay Attention to Taxes

In creating our budgets, we primarily concentrate on our day-to-day expenses to make sure they're covered. But what about taxes? Those are often hefty, overlooked expenses that can quite literally make or break you. It's critical to know what's coming, when it's coming, and how much it's going to cost you.

"People spend all kinds of time budgeting for groceries, but not their largest expense — taxes," says Dan Lucas, CPA and CEO of Credo Financial Services in Alpharetta, Ga. "Taxes are not 'it is what it is.' They can be managed, mitigated, and planned year-to-year. Tax savings can be invested for retirement and grow with compounding interest. It can be the difference between retiring at 65 and retiring at 75."

4. Contribute to Your 401(k) and IRA Accounts

Pensions are becoming a thing of the past, and the promise of Social Security when you retire is shaky at best. Given those unfortunate scenarios, it's up to you to invest in your future, starting with a 401(k) and/or an IRA or Roth IRA accounts.

"Very simply, the money move everyone should make is to contribute the maximum allowable to your 401(k) or other retirement plan," says Lisa Bashur, a self-employed CPA in Missouri. "And in my opinion, if cash allows, folks should also be contributing annually to an IRA or Roth IRA, depending on income levels. Even if a person makes too much to take an income tax deduction for an IRA contribution, it will still grow tax-deferred, or can later be converted to a Roth IRA, which grows tax-free."

5. Up Your 401(k) Withholding

While contributing to your 401(k) is a recommended money move you should be making according to CPAs, that's not to say that you should be blindly funneling money into it. You want to understand the ins and outs of the account so you can maximize its benefits. Tim Gagnon, partner at law firm Coleman & Gagnon, a practice covering personal law, corporate, and taxation areas, explains how to navigate a 401(k) withholding strategy.

"Make sure you have upped your 401(k) withholding for the year to maximize the new cap — $18K and $24K," he says. "Remember, adding $100 more to the 401(k) only costs you $75 if you are in a 25% tax bracket. Review your withholding and if you tend to get large refunds back each year, reduce your withholding and give yourself a take home raise, which could offset the increase in the 401(k) contribution."

6. Learn How to Cook

You're probably asking yourself what learning how to cook has to do with your finances. Simple: it allows you to stop spending so much money on expensive takeout (it adds up after a while, and it costs much more than groceries when you consider how many meals you get out of each). Send that money to more useful and beneficial parts of your budget — like savings.

Argue — in pursuit of paying down her $55K in student loans — counts cooking as one of the methods that freed up a lot of cash that went toward her debt.

"If you develop cooking skills, you will no longer need to go out to eat tonight, or try to scramble to find food; instead, plan out your meals for the week, head to the grocery store with a list. and stick to it," she says.

While that may sound daunting to kitchen newbies, there are ways to make the process more efficient.

"For those individuals who don't seem to have time to cook during the week, plan to cook one day on the weekend," Argue suggests. "Make simple recipes, such as soups and casseroles, that can be easily frozen. Then prep veggies and fruits to utilize as quick snacks during the week."

"During this past tax season, I was working 80-plus hours a week with no time to make dinners at night," she continues. "Instead, I spent all day Sunday cooking eight different meals, half of which I placed in the freezer to be utilized towards the end of the week. My husband and I had enough food and leftovers for lunches and dinner throughout the whole week. Plus, I made sure to bake a cake, cookies, or brownies to keep my sweet tooth in check during the week."

7. Take Full Advantage of Pre-Tax Accounts

Gagnon brings up a very good point that many Americans probably overlook — the underuse of their pre-tax health savings and dependent care accounts. If you qualify for these accounts, make sure you're taking full advantage of the pre-tax perk.

"Check if your pre-tax health savings accounts and dependent care accounts are on track to be used in full this year," he reminds. "If dependent care will not be used, maybe a child needs to go to day camp (not overnight) this year, or if health savings will not be used up you may want to plan some year-end purchases."

8. Let Your Future Serve as Motivation

You want to live a quality, fulfilling, and rewarding life, don't you? Of course you do, and that's exactly why you need to dream. Dream big even, and use those dreams as motivation to get and keep your finances on track. It can be done — by anyone. You just have to want it bad enough.

"The only way you can sustain a lifestyle on a budget, save each month, and begin to develop financial freedom is to realize why you are doing this. What are your financial goals? How much money would you like to retire with? What is your ideal job? How long will it take to pay off your home?" Argue asks.

"[My husband and I] had zero dollars in our bank account and $55K in student loan debt to deal with [when we got married]; we were flat-out broke," she explains. "Fast forward 14 months, we got on a budget, stopped eating out, cut our lifestyle in half, and we are now 100% debt free! We also accumulated enough savings for us to travel and work at the same time. Our dream was to knock off the debt as soon as possible and save for a house that we will pay for in cash in two to three years — and we're well on our way to that house."

What do you think of these tips? Are you actively engaged in any of them currently? Will you institute any of them into your lifestyle? I'd love to hear from you in the comments below.

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