The AICPA and its members continue to be at the forefront of the financial literacy movement with free programs, resources and thousands of CPAs across all 50 states volunteering to help Americans with their financial understanding.
There are many ways to invest your hard-earned money, but the goal is always the same: to grow your wealth. But a recent survey conducted by Harris Poll on behalf of the AICPA found that many Americans are embracing high-risk strategies that put their savings in jeopardy while doing minimal, if any, financial research upfront.
David Almonte, CPA, member of the AICPA’s National CPA Financial Literacy Commission, spoke to AICPA Insights about the survey results and what Americans should know about investing strategy.
School's out for summer! And, for some, school is out for good. In honor of America declaring its independence, here are 8 tips from the American Institute of CPAs' National CPA Financial Literacy Commission to help recent college grads declare their own FINANCIAL independence now and for the future:
1. Have a plan to repay student loan debt. While paying off significant debt takes time, establishing and sticking to a plan will put you on a good path toward your financial independence. The AICPA’s 360 Degrees of Financial Literacy website has free resources to help create a plan to reach your financial goals.
Have you ever been to the gym the first week in January? It’s usually packed with folks looking to improve their health. Many of these newcomers are there as part of their New Year’s resolution, while others may be trying to rebound after a particularly indulgent holiday season. And that’s a noble pursuit. However, very few of them are likely to still be going to the gym a few months later. I’m not a psychologist, but it seems to me that human nature responds to a setback or feeling of being stuck in a rut with a flurry of positive changes. Unfortunately, once our memory of what caused us to want to make those changes fades, we tend to slip back into our old ways.
I sat down with Neal Stern of the AICPA’s National CPA Financial Literacy Commission to talk about how Americans can make some positive changes to their financial plans – and stick with them for the long term.
With some areas still dealing with the impact of last year’s disastrous hurricane season, it’s hard to believe we’re yet again in the midst of another one. This year, the National Oceanic and Atmospheric Administration (NOAA) predicts there will be 10 to 16 named storms, including up to four Category 3 or higher hurricanes. This is slightly above the 30-year average of 12 named storms, including three major hurricanes.
The extent of devastation in 2017 may have your clients wondering how they can prepare financially for worst-case scenarios. As their trusted advisor, you can help. Share these helpful tips, all of which can be found in the Disasters and Financial Planning guide for preparedness and recovery:
Entrepreneur Mikaila Ulmer founded Me & the Bees Lemonade when she was just four years old. At age 12, Mikaila won funding from Shark Tank investor Daymond John. Now 13, her product line is available at Whole Foods Market stores. Mikaila represents a growing movement of young entrepreneurs throughout the country.
Children are watching their entrepreneurial parents every day and they’re picking up on best practices. Kids are much further ahead in their understanding of the business world than what we, as parents, realize.
You can help your kids get involved and start thinking about business. Here are five TV shows you can watch with your young children this summer. All shows are age appropriate and have an element of excitement to get your child’s business ideas flowing:
It’s that time of year again. The Kentucky Derby is back, and people from all over the world are coming together to watch the race. It’s an exciting (and expensive) day. This year, ten racehorses were purchased for more than $300,000 each. In fact, one horse had a price tag of $3 million.
One of the biggest hurdles in volunteering is knowing where to start. While some may say “just get out there and do it,” it’s not so easy when it comes to volunteering in financial literacy. As a CPA, you have the knowledge you need, but finding the right opportunity that best matches your skills and interests can be a challenge. Luckily, the AICPA has volunteer tools to help.
While preparing to host a webcast on women and money for a client company recently, I was asked why I thought we needed to have a separate webcast just for women – doesn't money work the same way for everyone?
The fact is that yes, money is money. But the way we relate to money, combined with differing life expectancies and career factors, means that we need to approach the "why" behind exercising healthy financial behaviors a little differently.
While everyone has questions about money, here are 3 common questions that I hear from women clients, and how I typically advise them to approach those concerns. What better day to think about this than on International Women’s Day?
Hold up! Before you whip out the eggnog, don’t forget there’s another holiday between Halloween and Christmas. You know the one, where stretchy pants are part of the dress code so you can devour ALL the stuffing and cranberry sauce.
While a dinner in your hometown is sometimes the preferred way to spend Thanksgiving, the financial impact can be daunting. On average in the United States, more than $2.9 million dollars is spent on Thanksgiving dinner food, and the average household spending clocks in at around $342 for the weekend. This is why many Americans are opting for a “Friendsgiving” instead, celebrating Thanksgiving locally with friends. It’s a popular way of saving time, travel and, most of all, money.
Ghosts, skeletons and zombies – most of us can agree these are all pretty scary, right? Turns out, when you talk about “investing,” many people have a similar reaction to that of getting spooked in a haunted house.
Instead of running from investments and screaming like a banshee anytime someone mutters the words “stock market,” AICPA’s National CPA Financial Literacy Commission members want to put these investing myths to rest with tips for how to get past them:
Myth #1: I need a lot of money to invest.
False! Sean Stein Smith, CPA, CGMA, says that with the development of investing apps, and the increased number of opportunities to purchase fractional shares of companies, anyone can start investing simply with spare change from credit card transactions. It’s that easy! Employer offered 401(k) programs make it especially easy to invest by deducting straight from each paycheck; the automation means you likely won’t notice the money is gone.
When it comes to saving for retirement, there is no one-size-fits-all plan. Each American has a unique and fluid situation, impacted by a variety of factors. Fortunately, CPA financial planners are well-versed in the different aspects that go into a tailoring a retirement plan that best fits their client’s needs.
I sat down with Leonard Wright, CPA/PFS and member of the AICPA Personal Financial Specialist Credential Committee, to learn some best practices for starting a retirement plan that helps maximize enjoyment during your golden years.
Jonathan Lynch: A recent survey found that less than half of non-retired Americans are confident they will reach their retirement goals. With all the uncertainty surrounding retirement -- where should someone without a plan begin?
Leonard Wright: Before bringing numbers and calculations into retirement planning, simply think about where you want to be when you reach that stage of your life. Ask yourself how you envision enjoying your retirement years. Define exactly what your desired lifestyle will entail. Will you downsize your residence? Do you plan on travelling? Would you consider working part-time? And perhaps most importantly, what age would you like to retire?
Once you have a clear vision in mind, you can start building the plan to make it a reality.
Do you ever feel like people are constantly saying what you should be doing, without actually telling you how to do it? Same. I bet your clients feel the same way. That’s why I love our Feed the Pig campaign – it’s more like a best friend giving a subtle nudge in the right direction, instead of the typical guilt trip.
To get a better idea of exactly how millennials feel about their finances, we hit the streets to ask the hard-hitting questions that most prefer not to discuss. In doing this, our hope is to help others feel more comfortable discussing their own finances, and provide resources to reach their financial goals.
Here are a few millennial money woes we’ve come across while filming, along with strategies you can share with your clients to help guide them back to the path toward financial success.
As a young accountant who recently passed the Exam, things are going very well for you. You have gotten into a rhythm and you know the ropes. But, you’re looking to make a difference in your community – have you considered volunteering at a nonprofit?
David Almonte, CPA, CGMA and member of the AICPA’s National CPA Financial Literacy Commission, knows the merit of giving back. He was taught from an early age the value of education, a strong work ethic and volunteerism. Additionally, his skills as a CPA have given him the opportunity to make a difference in peoples’ lives. He frequently gives presentations across the country, many of them focusing on his main passion: financial literacy. By providing free and accessible resources from websites like 360finlit.org and feedthepig.org, Almonte hopes to break down the walls that very often lead to financial insecurity.
Like Almonte, you too can use the skills you’ve gained throughout your career to give back. Not sure where to begin? Here are three tips to jumpstart your community service:
Brag a little. You’d be surprised by how many of your talents align with activities you genuinely enjoy. Write down your talents, then research various volunteer opportunities that utilize your skills. For example, are you a pro at creating a résumé, or know exactly how to nail an interview? Oftentimes, local homeless shelters seek out professionals to lead workshops that help clients get back on their feet. Or maybe you love writing – so find a small nonprofit that needs help keeping up its blog. Just as David uses his passion for financial literacy to give back, there are countless other needs in your community. All you have to do is look.
Even though the beach is still calling, it’s almost time for students to think about the days when they’ll be loading up their backpacks, charging those computers and setting alarms for earlier than 10 a.m. – because the new school year will be here before you can say ‘fall semester.’
If that sound stressful to you, you’re not alone. On top of all the stresses associated with learning new material, meeting new people and challenging yourself intellectually, there is also a significant financial cost associated with the start of a new academic year. Regardless of whether you’re a parent thinking about your children’s back-to-school budget, a college student living away from home, or a full-time worker attending night school, the challenges are similar.
What sounds more appealing to you – reading a bunch of boring facts online or playing a game to learn the same exact thing? You’d probably choose the latter. In fact, research shows a majority of millennials see clear benefits from playing digital games. Two in three (67 percent) say that games are important in helping them to learn how to create winning strategies and 7 out of 10 (70 percent) feel it aids them in learning how to solve problems. The proof is in the pudding, as they say – and that’s where gamification and personal finances come into play (literally!).
Today, the AICPA and the Ad Council launched a free digital game, ‘Yesterday’s Tomorrow.’ The game is a new resource from Feed the Pig to help millennials build savings skills, a product of the idea Scott Garner submitted for the Feed the Pig Game Design Challenge. The challenge invited people to submit ideas for digital games to help educate Feed the Pig’s target audience. More than 70 ideas were submitted, and his concept was chosen to help educate millennials through gamification.
Those fun, light-hearted GEICO commercials that ask if you are tired of paying too much for car insurance hone in on the idea of wasting your money –– paying too much for something or not getting enough.
As a CPA who is passionate about making my hard-earned money work for me, it’s important to take time to critically analyze what my cash is doing. Busy lives often lend themselves to costly complacency in one’s personal finances. Basically, we want bill paying done and our retirement planning intact with as minimal effort as possible.
At least once per year, I do a serious deep-cleaning scrub on my family’s finances. I look at what we’re paying and why, and I see where we need to do better. This “scrub” saves us thousands of dollars and I suggest each of you take a few hours each year to review your finances critically. Don’t let your money run itself; it needs you to keep it on track.
The AICPA National CPA Financial Literacy Commission Shares Insight on How to Beat the Real Threat of Fake Financial News
If it’s on the internet and in ALL CAPS it must be true! Whether it’s the GUY WHO TURNED $10,000 INTO $20 MILLION or the HOT TECH STOCK THAT WILL SHOCK YOU, you’ve probably seen some version of this fake news dozens of times a day. And, if you’re like me, you’ve probably clicked on one of these articles out of curiosity and quickly found yourself lost in a sea of misinformation. Sometimes it seems like you need to be a detective to decipher what financial news is real and what is fabricated. In this post, I’ll provide some information to help consumers be better prepared.
Imagine a world where high school graduates confidently understand the pros and cons of credit cards, recognize the significance of an emergency savings fund and even have a strong grasp on what student loans mean for their financial future. Does it sound utopian to you? Maybe, but at the AICPA we strive to provide students with resources to obtain this kind of knowledge each and every day.
A recent financial literacy test given by the National Financial Educator’s Council found that test-takers from 15-18 years old scored an average of only 63.17%. To experts, personal finance topics are seemingly common sense, however, there is a huge discrepancy between what is taught in school and what students are expected to know upon graduation and beyond. To help combat this issue, the AICPA launched Money Minutes, a video module series that gets back to basic concepts of financial management for high school students.
If you watched the Masters this past weekend, you were most likely sitting on the edge of your seat. Sergio Garcia from Spain clinched the title from English player Justin Rose in a playoff that turned golf rookies into fans for life.
The most notable part of Garcia’s victory wasn’t the nail-biting 18th hole, but that he had nearly two decades of tournament experience – and this was his first major victory. Although considered one of the best players in golf, he never rose to the top like Tiger Woods, Nick Faldo, Jack Nicklaus and other golf “greats.” Until now.
Walk into any drug store, and you’ll be bombarded with holiday music insisting “‘Tis the season to be jolly…” and other calls for assorted cheer. And while the holidays offer plenty of opportunities for moments of merriment, fun and being jolly, they can also be a source of anxiety and financial stress for many Americans.
Consider me among those many Americans this year. I have eight nieces and nephews, a few young cousins, grandparents, godchildren, and my husband and two-year-old son on my list. Oh, and I’m having kid number two on December 27. Where to begin? I find it helpful to follow these 10 steps to stay on track while doing your holiday shopping.
Make a list, check it twice. A big, scary don’t-leave-anyone-or-anything-out list. This includes the office Secret Santa gift, a few bottles of wine for the neighbors, gifts you donate to places of worship or charitable organizations, stocking stuffers, and the various friends and family members you’ll be sending gifts to. Then, take a deep breath.
Lunch prices are getting out of control. For instance, working in midtown Manhattan, it is a challenge to find lunch for $10 or less. That amounts to spending approximately $50 a week or $2,600 a year. Consider how these funds could instead be used to help you reach your intermediate or long-term goals— such as buying a home or saving for retirement.
According to a recent study by research firm NDP Group, the average lunch costs $8.36 nationwide. Because of this, Americans are starting to change their lunchtime habits. In fact, the same study reported that traffic at eateries during lunchtime is down 7% since last year. Below are some tips to help you stick to a lunchtime budget regardless of whether you choose to make lunch, buy it already prepared or join the (shorter) line at the sandwich, salad, and soup place near your office.
In these waning days of summer, my Instagram feed looks like a Lonely Planet top 10 list. I don’t know how, but it seems like the 300+ people I’m following have all conspired to be someplace awesome, while I’m toiling away in the office. It can feel frustrating when it seems like everyone (except for you) is having the time of their lives – and bragging about it online.
A new survey, conducted by Harris Poll on behalf of the AICPA, found that when it comes to feeling envious on social media, I’m far from alone. In fact, many Americans are caught in a cycle of feeling jealous of friends who post about their lavish vacations and extravagant purchases, while admitting that they also post things solely because they are fancy or expensive.
I don’t always get mail, but when I do it’s usually a credit card offer. And these cards are often tied to a particular hotel chain or airline. Many of these offers tout initial low-APRs, a waived annual fee and, increasingly, an obscene amount of rewards points – enough for a ROUND TRIP flight!!!! - if I only spend a few thousand dollars in the first couple of months.
However, my wife and I have been diligent about putting all of our charges on a credit card with a rewards program for a particular hotel chain and booking rooms at this brand whenever possible. The last thing I want is to lose our status with that chain by spreading ourselves too thin. This approach is working for us; over the past few years alone, we’ve paid for hotels in Denver, Boston, Puerto Rico, Baltimore and New Orleans using our rewards points. I’m by no means an expert travel hacker – that is, someone who has mastered collecting rewards points to earn free travel – but I’m making sure the money I spend on my card and the trips I take is working to my advantage. Seems simple, right?
Anyone who is going through the process of buying a home knows that it can be a long and expensive process. And it’s one that you need to get right to build a solid financial future. From finding the right realtor to determining the most important factors for your next home, there are many important steps to take. Luckily, 360 Degrees of Financial Literacy and Feed the Pig are here to help. Here are four essential tips (including one many people overlook) to help you with the home-buying process:
The AICPA constantly searches for ways to enhance the 360 Degrees of Financial Literacy program and provide a wider audience with knowledge that will start them on the path to financial success. For this reason, the AICPA’s 360 Degrees of Financial Literacy program recently launched a new consumer Spanish-language resource center to address the need to educate the growing number of Spanish-language consumers in the United States.
The resource center offers help in several areas, such as fraud, paying for an education, how to raise a saver, tips for online shopping and credit card information. In the next few months, we plan to provide more content for the resource center that touches on popular personal finance issues and questions.
Most everyone, at least once, has received an email from a “Wealthy Prince” who claims to know of a massive inheritance in their name. If only you would wire $10,000 U.S. to unlock $10 million … Sounds too good to be true, right? It is. In order to get the inheritance, this “Wealthy Prince” typically requires you send your bank account information, social security number, birthdate and other personal information. This leads to a financial disaster.
Unfortunately, this is just one of an increasing number of financial scams that people have fallen victim to, especially older Americans. Recently, an American World War II veteran was scammed out of $43,000 due to a fake sweepstakes that told him he won $4.7 million and a new Mercedes-Benz, as long as he provided personal information and opened a bank account where the money could be deposited. The elaborate scam involved multiple bank transactions over an extended period of time, each with the purpose of gaining the victim’s trust. Unfortunately, once the money is wired, it is very difficult to recover.
If you have some semblance of common sense, then managing your money should be a piece of cake, right? Unfortunately, as I have seen in myself and in those around me, that is not always the case. Financial knowledge is a topic that many people think should be inherent, but in reality, this is oftentimes not true.
As a millennial, frequent life changes become commonplace, and it can feel overwhelming. Whether transitioning to a new job, moving to a new city or deciding to get married – it’s easy to get distracted by the excitement and let personal finance fall by the wayside. According to a recent survey, over a third of millennials (34%) said that saving money was their top priority this year – more than leading a healthy lifestyle (20%) or losing weight (14%). Yet, millennials’ spending habits may be one reason they struggle to reach their financial goals: 65% of the young adults surveyed said impulse shopping got in the way of saving.
When I was just starting out my career, I was in the same boat financially as a lot of recent college graduates. My primary focus was making ends meet. For me, this meant making decisions about how much I could afford for rent and managing my day-to-day expenses so that bills got paid on time.
In the back of my mind, I understood that my student loans and a few thousand dollars in high interest credit card debt also needed to be addressed, and that paying the monthly minimum was a bad look. In those days saving for retirement and building up a nest egg was a nice, if seemingly unattainable idea, like summering in the South of France or playing professional baseball. Surely there are people who do these things, but I had no idea how they made it happen.
With songs like “Purple Rain” and “Little Red Corvette,” Prince wrote the soundtrack of a generation.
However, his failure to write a will could spell trouble for his $250 million fortune. Last week, people around the world mourned the death of this gifted singer and songwriter, and many were shocked to hear that Prince didn’t have a will or an estate plan in place. Even though he was a notoriously hands-on negotiator who meticulously controlled the intellectual property rights of his song collection, this unfortunate lack of planning has left uncertainty for Prince’s heirs. The future inheritance process could cost tens of millions of dollars in legal fees, and state and federal estate taxes. Surprisingly, he’s not the first famous person who left this world without a plan.
Not yet famous with a quarter billion dollar estate to leave loved ones? It’s still important to draft a will and keep it up-to-date based on changing personal and financial situations. Here are a few tips to make sure you have an effective will:
Where I live in Queens, New York, recycling is mandatory. My husband and I keep a plastic sorting bin with two compartments—one for glass and plastic, the other for paper and cardboard—right next to our garbage can to make things easy…and messy, since our almost 20-month-old son thinks that the cardboard recycling is there for his entertainment. But a little mess in our living room is a small price to pay to help the planet. While recycling has become common practice in many parts of the United States, there are so many other things you can do that will help both the earth and your bottom line, and, in some cases, offer a tax break.
Shut off the tap when brushing your teeth. Doing this twice a day saves up to 8 gallons of water.
Install low-flow shower heads in bathrooms.
If remodeling, consider low-flow toilets. These give the user the option of how much water will be used to flush based on the amount of waste.
Don’t buy disposable water bottles. Instead fill reusable water bottles.
Be sure sprinkler systems won’t go off when it has rained or during the sunniest times of the day and be mindful of drought conditions.
When running water to wash dishes, collect the initial cool water to water houseplants.
Potential cost savings: A family of four that upgrades and optimizes their water usage can save nearly $300 a year in utility bills and 32,000 gallons of water. For more tips on water conservation and to calculate how much you might save, visit the Environmental Protection Agency website.
Every second, America’s trillion dollar student loan debt grows by nearly $3,000. This debt that people begin to carry at an early age often leads to more uninformed financial decisions, such as taking on credit card debt and other loans they can’t afford. Typically, this occurs because of limited access to financial education tools and resources. This alone points to the urgent need for financial literacy in this country.
The AICPA and state CPA societies across the country are leading the effort to address this growing problem through new programs and initiatives. April is Financial Literacy Month, and we continue to be diligent in spreading the important message of financial literacy to millions of Americans. Through the AICPA’s flagship 360 Degrees of Financial Literacy program, the national volunteer effort of CPAs to help all Americans understand their personal finances through every life stage, we have combined grassroots advocacy with free public resources and tools for CPAs to educate Americans of all ages. Additionally, Feed the Pig, the AICPA’s award-winning public service campaign with the Ad Council, has provided tools and resources aimed specifically at Americans aged 25-34, an age group that is making major life decisions, often with little financial experience or guidance.
Getting Away from it All After Busy Season: Trips for Any Budget
As busy season finally draws to a close, your senses dulled by long nights staring at a monitor and routing through piles of disorganized receipts, you might understandably be thinking about taking a well-earned break. Recharging your batteries, getting acquainted once again with those people who share your house and enjoying a few days of relaxation mean different things to different people, but in the end it always comes down to budget. Here are three family-friendly vacation types you can plan today, designed for modest, moderate and extreme budgets.
With the financial landscape shifting seemingly every year, it comes as no surprise that consumer finance tools are also transforming and becoming more necessary. This is especially true when it comes to educating younger generations, and the AICPA’s Feed the Pig campaign knows this all too well.
Since the campaign’s launch in 2006, the promotion of our tools evolved from focusing on TV, radio spots and other traditional media to instead looking to the digital space. As much as this shift has followed advancements in technology, it has also tracked the developing needs of our audience. Young adults look to social media for socialization, news, advice, just about everything. Feed the Pig has taken our message and resources to where our target audience is already: Facebook, Twitter, Pinterest, Tumblr, and now Snapchat. Through these platforms, we can reach hundreds of thousands of people who are in need of personal finance tips.
This year, Americans will spend an estimated $17 billion on Valentine’s Day gifts for significant others, family members, and pets. (Don’t laugh—Americans spent more than $700 million on their pets last Valentine’s Day.) According to the National Retail Federation, the average person spends $142.31 on the day of love. Less likely to spend that much? Those married or coupled for more than five years. Whether they’ve lost that loving feeling or they’ve wised up about inflated prices on Valentine’s Day, young people can learn a thing or two from long marrieds and save a few bucks.
At the start of each New Year, many people make resolutions and vow to stick to them. Some say that they will exercise more frequently or focus on dieting, but what about improving one’s finances? Team AICPA brainstormed some financial New Year’s resolutions to help you meet your 2016 financial goals:
1. Set an achievable budget for the year. Start by reviewing your expenses from last year. Were some of your targeted figures unrealistic? Are there areas where you can cut back? If you’ve never had a budget, now’s the time to make one.
2. Take a deep breath if your December credit card bill is higher than your monthly average. With all of the holiday shopping for family and friends, extravagant parties and meals at restaurants, a larger balance is typical. Remember to reflect on the enjoyment gained from these activities and take the time to plan your upcoming monthly budgets so that you are back on track for the rest of the year. If you really got yourself into an unfortunate financial situation, take time to assess how it happened and address the underlying issues that led you to overspend. Use the 360 Degrees of Financial Literacy credit card pay off calculator to figure out how best to get back on track.
Your own private island. A villa in Tuscany. A sprawling mansion in Malibu. A ticket around the world. Oh, the things you could do with $1.3 billion in lottery winnings. But before you get carried away, consider those past lottery winners who mismanaged vast fortunes, losing everything. Don’t fall victim to the same fate.
Live life as usual, until you develop a plan for how you will handle your winnings. You’re excited. Who wouldn’t be? But it would not be financially wise to buy a house, boat or luxury car the day after winning big. You will want to consult both a CPA and a tax attorney who have experience dealing with unexpected windfalls. These professionals can help you determine if you should take the lump-sum or annuity payment option, and help you develop a plan for how to use your new-found fortune.
How much money will you actually walk away with? Just because the jackpot is now advertised as about $1.3 billion does not mean that is the amount that will wind up in your bank account. Winnings of more than $5,000 are subject to a 25% federal withholding tax. The actual federal tax rate is likely to be higher — possibly as much as 39.6%, depending upon other factors such as income, deductions and residence. Additionally, depending upon where you live, your winnings may be subject to state and local income taxes. Of course, if the jackpot sum is enormous, this likely will not make a huge difference. However, it is important to keep in mind.
CPAs have an innate calling to educate the public about their finances. The need for this education has never been greater. A recent online survey conducted by Harris Poll on behalf of the AICPA showed that a staggering 75% of college students acknowledged that their student loan debt would require some sacrifices in their lives after graduation. So how can we help students develop a better understanding of their financial situations prior to attending college, while also setting them on a path to financial success?
As a teenager, every year I knew where I would be the Saturday before Christmas: getting dragged from store to store by my father, who inevitably waited until then to go shopping for my mother’s gifts. This annual exercise in procrastination and family bonding was a recipe for arguing and, more importantly, left my dad no opportunity to shop around for the best deals.
Here’s how you can avoid these holiday shopping pitfalls and get good deals, stay on budget, and remember to factor in more than just gifts when you calculate your holiday spending goals.
For CPAs, budgeting is as easy as debits on the left, credits on the right. It is simply the way it is. But not everyone is a talented budgeter. A recent AICPA survey revealed that college students aren’t as monetarily savvy as they think they are.
Just how much do college students need to brush up on their budgeting skills? While 57 percent of students surveyed rated themselves as having excellent or good personal financial management skills, nearly half reported having less than $100 in their bank account at some point in the last year, 38 percent said they had borrowed money from friends or family in the last year, and 11 percent had missed a bill payment. It is clear that college students’ perceptions of their financial skills and reality are not aligned.
Sleepless nights are an unfortunate reality when you become a parent. And nothing can get parents tossing and turning like thinking about how they will pay for their son or daughter’s college. For the very financially minded, this worry may arise as soon as you find out you’re expecting. Others may not start to worry until much later. No matter your child’s age, the staggering cost of college is likely to become a concern at some point. Consider this: a four-year education at a private college is on track to cost $323,900 by 2033. Might as well give up now, right? Wrong. You can build your child’s college fund slowly and steadily as you go from changing diapers to handing over the keys to the family car. The solution? A tax-deferred savings plan.
The cost of college—continuously rising, constantly scrutinized and always in the news—is nothing new. For students enrolling in 2015, the average projected total cost of education (tuition and fees) at a private four-year college is $134,600 and a public four-year college is $39,400. The most expensive four-year colleges (think Ivies and other top-tier universities) are already $272,000, or $68,000 a year. These numbers are enough to make even the most financially prepared parents gasp. But, before you get to actually paying for college, a host of expenses must be taken into account.
Summer. A time for barbeques, trips to the beach, ice cream and, for many teenagers and young adults, their first jobs. What better time, then, to educate the newly employed about sound financial practices, before they’re tempted to spend all of their hard earned income having a good time?
For many Americans, the pursuit of fun is more of a priority than saving money. Just turn on the radio and you’ll hear any number of songs about frivolous consumerism. In the case of one of this summer’s ubiquitous songs, Time of My Life, the rapper Pitbull (né Armando Christian Pérez) celebrates the disastrous practice of spending money he doesn’t have:
“I knew my rent was gon' be late about a week ago I worked my [butt] off, but I still can't pay it though But I just got just enough To get up in this club Have me a good time, before my time is up Hey, let's get it now”
Last month marked my fourth Financial Literacy Month at the AICPA. It’s amazing how much the landscape and messaging has changed in just a few years. While our outreach and exposure for the program has grown, our actual messages to individuals have become shorter. We have moved from lengthy articles on our websites, to a few sentences on Facebook and now to singular images on Tumblr. In a world where younger audiences are looking increasingly to online sources for financial advice, how do we accurately communicate financial literacy lessons with just one animated photo and a few words?
CPAs serve as trusted advisers and provide their clients with expert guidance on a variety of topics. It’s no surprise that they are frequently cited by the media for their expertise in areas such as tax, financial planning and even cyber security best practices. I’ve summarized a few recent examples of CPAs helping people make informed decisions about their financial lives.
As Financial Literacy Month draws to a close, it’s important to reflect on the essential role CPAs play in helping improve the financial knowledge of Americans. Educating consumers about their finances is the volunteer cause of the CPA profession. Through the AICPA’s 360 Degrees of Financial Literacy program (360), thousands of CPAs from all over the country volunteer their time to speak with consumers of all ages about their finances. Increasing our citizens’ financial education is critical to our country’s financial success, and the AICPA is leading the way for the CPA profession.
During my tenure as chair of the National CPA Financial Literacy Commission, CPAs across the country achieved much and celebrated many milestones in financial literacy. I have been involved with developing and releasing several rounds of creative from Feed the Pig, the AICPA’s PSA campaign with the Ad Council, and, along with the rest of the Commission, participated in releasing the AICPA’s first consumer publication, Save Wisely, Spend Happily, authored by Commission member Sharon Lechter, CPA. Commission members promote 360 and its related programs, and represent 360 before the media and national organizations. Our members are essential in promoting 360 with AICPA leadership, committees, state society leadership and key accounting organizations. I am proud of the work Commission members do and the leadership they provide.
CPAs in public service have also played an important role in the profession’s financial literacy efforts. On April 22, U.S. Representative and Congressional Caucus on CPAs and Accountants member Michael Conaway, CPA (TX-11) gave a speech on the House floor highlighting April as Financial Literacy Month. Representative Conaway noted the important role that CPAs across the country play in improving the financial literacy of Americans, and how, for over 10 years, the AICPA, members and state CPA societies have worked together through 360.
In a few short months, millions of new college graduates will enter the job market with an average of $30,000 in student loans. Student loan default rates are rising as recent graduates struggle to pay down their debt. The reason? New graduates will have degrees that have prepared them for careers or graduate school, but most will not have the knowledge to make sound financial decisions. That is why financial literacy is so important.
April is Financial Literacy Month and this year the AICPA marks the occasion with a renewed sense of purpose. With CPAs as our champions, the AICPA has advanced the financial literacy cause for over a decade, and we will continue to provide leadership in improving the financial understanding of future generations. It is critical not only for their individual success, but for the financial success of our country. For more than 10 years, the AICPA, its members and state CPA societies have been leaders in financial literacy by providing free programs, tools and resources for consumers, educators and more. The AICPA’s flagship 360 Degrees of Financial Literacy program is the national volunteer effort of CPAs to help all Americans understand their personal finances through every life stage. The program combines grassroots advocacy with free public resources and tools for CPAs to educate Americans of all ages. In addition, Feed the Pig, the AICPA’s award-winning public service campaign with the Ad Council, provides tools and resources aimed specifically at Americans aged 25-34, an age group that is making major life decisions, often with little financial experience or guidance.
The Reinventing Mi Retirement initiative was introduced by Governor Snyder in June 2014, and it focuses on providing financial education to help Michiganders better prepare for retirement. The initiative officially kicked off in October 2014 with eight locations in Michigan offering free informational sessions for community members. CPA members participated at locations across the state to provide free financial checkups, helping attendees gain a better understanding of budgeting and financial preparedness. Attendees also received an incredibly thorough financial toolkit, which our members contributed to as well. The event came together in just a few months due to the strong partnership we have with the State of Michigan and the incredible commitment of our member volunteers. We look forward to new initiatives planned in 2015, including events targeting younger people who maybe aren’t thinking about retirement yet, but need to be!
Today, April 1, kicks off Financial Literacy Month. In addition to our year-round efforts, the AICPA, and CPAs across the country, participate in this annual event centered on improving Americans understanding of financial principles and practices. As part of this year’s festivities, 360 Degrees of Financial Literacy has launched a newly redesigned website with an updated set of tools and resources to better help Americans understand their personal finances and develop money management skills at every stage of life.
Here are some of the other great, free events and resources to help your friends, family and clients improve their financial knowledge.
There is an abundance of terms and phrases that American’s use to make the act of savings feel less painful, like evaluating, bargaining, or prioritizing. But no matter how you phrase it, saving can be difficult for even the most responsible person, especially with matters that have a strong emotional component. For instance, when it comes to once in a lifetime events, like a wedding, people are much quicker to concede on their financial plan. In fact, according to The Knot's annual Real Weddings Study, the average cost of a wedding (excluding the honeymoon) reached an all-time high of $31,213 in 2014, up 4.5 percent from 2013. This is the fourth consecutive year of gains.
While many argue that increased spending may reflect the improving economy, The Knot’s study showed that the increase in spending goes beyond inflation and was represented across all income levels and regions. Additionally, 45 percent of couples said they strayed from their wedding budget, and 23 percent said they didn't even have a budget to begin with. From a financial planning standpoint, it may seem unreasonable to spend outside your budget, but is it any more reasonable to ask someone to concede on such an important, emotional event? Where do you draw the line?
Do you have a secret bank account or credit card that your spouse doesn't know about? Do you lie to your partner about how much you really spend? The topic of financial infidelity, whereby spouses lie to one another about money, emerged as one of the surprising topics of discussion at a recent meeting of the AICPA National CPA Financial Literacy Commission in Washington, DC.
Commission members discussed a recent creditcards.com financial infidelity report that showed that about 20 percent of people admit to spending $500 or more without telling their significant other. According to the study, men are more likely to both spend more than $500 and have a secret account.
One way to prevent this is by setting aside some time with your partner (away from busy or stressful times) and having an open discussion about your spending and financial goals. Another solution offered was to have a joint account, but open separate accounts to make individual purchases. The key is having a trusting partner with whom you can have an honest and open dialogue about your finances.