Navigating Financial Transitions: Insights for Young Accountants

One of the best things you can do for your financial wellness is also one of the simplest: establish a budget – in writing. If you don’t have a budget, it’s much more difficult to plan and save and it can lead to critical oversights. A budget is the cornerstone of financial wellness, providing clarity on what’s coming in, what’s going out and what puts you in a more proactive financial position. And technology can make the budgeting process easier for young adults – with plenty of apps available to help get started and track progress.

The other indispensable basic: having a robust emergency fund – ideally six months’ worth of expenses, which can provide a safety net during career transitions or unexpected life events. This is especially relevant for you as a young professional who may experience shifts in career paths or contemplate relocation. A healthy savings account can empower you to make more deliberate employment decisions and help you avoid taking a less than ideal role just to generate income.

Ultimately, equipping yourself with these fundamentals can help you navigate your career with confidence and financial resilience, enhancing your overall well-being and professional success. That’s a big win all the way around.

Understanding Benefits 

Employee benefits conversations can be mystifying when you’re first starting out (and even beyond) because there’s just so much to take in. But being knowledgeable about the benefits offered by your current employer is essential as you navigate your career. So, ask lots of questions as you make decisions about healthcare, disability and life insurance, among other coverage options and benefits like healthcare savings accounts and transit benefits that can help you prepare for expected and unexpected expenses and, in some cases, even save you money. It’s also important to understand that these benefits do not transfer with you if you take a hiatus from the accounting industry or transition to a new role. Therefore, you may want to look at supplementing your own coverage, so you aren’t left vulnerable.

Additionally, while retirement might seem like it’s a million years away at this point in your career, starting to save for that milestone now will make a big difference in the long run. Having a good understanding of retirement savings options, such as your employer’s 401(k), is imperative. Equally important – know your options for transferring 401k funds in the event you leave your current employer. Understanding these options – like rollovers and Roth IRAs – and the benefits of each will help you protect the investments you worked so hard to build.

Managing Debt

While inflation rates may fluctuate, the reality is that essential expenses like rent, utilities, and groceries have steadily increased over the past few years, outpacing income growth for many. This dynamic becomes more challenging when you’re trying to pay down debt like student loans, car loans and credit card balances. A recent The Wall Street Journal article illustrates the current situation well. According to the story, young Americans are starting out with more credit card debt than generations before them and they’re also facing a median rent that’s increased nearly 22% over the past four years.

Clearly this situation calls for proactive debt management, but that’s often easier said than done. Taking proactive steps to manage debt effectively depends on an individual. That budget we covered earlier can be a great start to help you identify areas where you need to cut back and allocate more funds towards debt repayment. Additionally, practicing disciplined spending habits and avoiding unnecessary expenses can free up more funds to allocate towards debt repayment and your savings fund, ultimately paving the way towards financial stability and freedom. Handling debt may not adhere to a strict formula, but what truly matters is confronting it directly.  

Conclusion 

Financial literacy doesn’t just help you pay the bills and invest wisely – it can truly empower you, enabling you to make better decisions about your career and your life overall.

Whether transitioning between firms, considering entrepreneurship, or exploring new industries, having a solid understanding of personal finance fundamentals is indispensable. From budgeting and savings strategies to comprehending employee benefits and managing debt, these financial skills provide you with the resilience and flexibility needed to adapt to evolving economic landscapes. By being financially literate, you can mitigate financial risks, seize opportunities, and pave the way for long-term success and financial well-being in your professional journey.

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Mark Thomas CLU, ChFC is a senior vice president on the Aon Professional Firms team. Mark has over 35 years’ experience helping individuals manage risk in their personal lives. You can contact him at mark.thomas@aon.com.