Thrifty Thinking: Tips to Start Taking Control of Your Finances

Financial hardship is redefining the American dream. A new survey conducted for the American Institute of CPAs by Harris Poll shows that although three out of four U.S. adults believe they are worse off or about the same financially as they were a year ago, stress levels about finances have not increased in the past year. Within the past year, shrinking household budgets, increasing debt loads and difficulty coping with living expenses have been the reality for many Americans. 

“With slightly more than half of U.S. adults expressing little to no stress about their increasingly difficult financial circumstances, it seems that many Americans are reconciled to an uphill financial battle and that financial juggling and sacrifice will be a part of the foreseeable future,” said Ernie Almonte, chair of the AICPA’s National CPA Financial Literacy Commission. “The good news, however, is that you can improve your situation through simple steps—many of which Americans are already being forced to do. Creating a monthly budget, sticking to it and putting $50 a month into savings are small actions that can make a big difference over time.”

The AICPA’s National CPA Financial Literacy Commission recommends the following additional steps to help alleviate the four major financial concerns identified by survey respondents:

·        Managing day-to-day expenses. Look at all of your daily expenses and ask yourself: do I need this or do I want this? If I spend the money on this, what will I have to do without?  Tracking where your money goes and making sure that your spending doesn’t exceed your income is the best way to stay financially healthy.

·        Paying for medical care. Pay attention to your insurance plan. Your out-of-pocket costs can vary significantly depending on which providers you choose, especially if your insurance has a narrow network. If you find yourself with steep medical bills, it’s important that you address issues with your healthcare provider as soon as possible, even when you have a billing dispute, as medical billing companies are quick to send bills to collections which will affect your credit.

·        Funding retirement. An easy rule of thumb in estimating how much you’ll need to save for retirement is to multiply your salary (that you are earning immediately prior to retirement) by 16. That’s roughly how much you should have saved before you can retire. If you haven’t already started putting money away for retirement, start with something simple like contributing to your 401(k) or other retirement accounts—especially if your company will match contributions. Every bit helps and it’s never too early to be building your savings.

·        Paying off student loans. Pay down your higher-interest-rate student loans first (those that impose more than 4.5 percent interest). After you pay them, decide if it makes sense to pay down those with rates around 2 percent. Paying down higher-rate loans first is often a good starting point to get debt under control.

Putting away any amount of money each month is a great start. Whether it’s $50 or $200 or $500. It doesn’t matter how much, it just matters that you do it—and try to do it regularly. One way that CPAs recommend to start saving it to have a small amount of money taken from your paycheck each month and directing that to your savings account. If you have direct deposit with your paycheck, you can specify where that money goes. If you don’t see the money that goes into savings, you won’t miss it.

  

  

Many additional recommendations are available at www.360financialliteracy.org, the CPA profession’s dedicated resource to help Americans achieve financial soundness.

About the AICPA
The American Institute of CPAs (AICPA) is the world’s largest member association representing the accounting profession, with more than 394,000 members in 128 countries and a 125-year heritage of serving the public interest.  AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for the profession and U.S. auditing standards for audits of private companies, nonprofit organizations, federal, state and local governments.