First time Career CPA. Priortizing Spending

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Ni0ck
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First time Career CPA. Priortizing Spending

Post by Ni0ck »

Hi,
I'm starting my career at an accounting firm this January. I'd like an interesting discussing on on how others prioritize their spending. How they prioritized their spending on their first years out of school, and philosophy for a young person. I want to live frugal. I still want to live. For those of you who go back and forth on decisions like what luxuries you afford yourself, I want to hear your principals. Like.. What will you ultimately not skimp on? What do you without? How have your habits changed? what advice do you give your ~23 old sons/daughters.

Here's where I want you to be critical of me.
On my side. I only want to live in a nice area close to the water and away from the busy portion of town. That increases my rent by roughly 40%. Still my saving rate can be 30. No one makes plans based off a spreadsheet. It still offers some confidence. Still.. my thinking is always "How do I make choice that I can stick to long term?" Its challenging to go longterm

Looking forward to this discussion.
Best
jaqenhghar
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Re: First time Career CPA. Priortizing Spending

Post by jaqenhghar »

Welcome! When I was in your shoes in my first job, I asked myself a couple of questions:

(1) Did I see my employer as a long-term stint or simply a stop on a career journey?
(2) What were my must-have's in terms of life outside of work (nice place to live, going out frequently, spending on clothes, etc)?
(3) After accounting for my needs and must-have's, how much could I realistically save?

For me, I knew I'd only spend a few years at my first employer, so questions 2 and 3 answered themselves accordingly. For question 2, my only must-have was to live in a nice apartment. I was in a VHCOL city so I definitely spent more than I needed to on housing, but I did enjoy every minute of living in that apartment. So for questions 2 and 3, it's a matter of know thyself (or to start figuring what makes you happy/content/satisfied).

As a side note, if I thought I wanted to stay longer at my first employer, I would've definitely had a different game plan -- i.e., attending networking events known to be visible to the higher ups, making sure I fit in/dressing the part, etc.
bogletay
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Re: First time Career CPA. Priortizing Spending

Post by bogletay »

My philosophy is and was...

1) Have spending priorities - some people love nice clothes, others don't care. Your priority is living in the area you want to live. That's perfectly fine! You can spend there, not feel guilty about it, and save in other places that don't matter as much to you.

2) Pay yourself first - if you never see the "savings" money in your account, you won't spend it. If your goal is to put 30% in savings, do that immediately when the paycheck hits (or automate the transfer). That way, what's leftover is your spending money for that pay period.

Other things I do: Shop at Trader Joe's (amazing how much this can save for high quality items), buy the things you want on sale/with a code (you can hunt the internet for coupon codes or use something like Rakuten - I can almost always find one and never pay full price), gamify credit card points (towards travel, which is a priority of mine) and pay in full every month), save over time for large purchases (I keep an account in my HYSA where I funnel a small amount of money to every month towards larger purchases that are wants not needs).

As you are just starting out, I also recommend Ramit Sethi's book I Will Teach You to be Rich - it's perfect for where you are combined with the Bogleheads philosophy!
dcabler
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Re: First time Career CPA. Priortizing Spending

Post by dcabler »

Ni0ck wrote: Sun Dec 05, 2021 11:29 pm Hi,
I'm starting my career at an accounting firm this January. I'd like an interesting discussing on on how others prioritize their spending. How they prioritized their spending on their first years out of school, and philosophy for a young person. I want to live frugal. I still want to live. For those of you who go back and forth on decisions like what luxuries you afford yourself, I want to hear your principals. Like.. What will you ultimately not skimp on? What do you without? How have your habits changed? what advice do you give your ~23 old sons/daughters.

Here's where I want you to be critical of me.
On my side. I only want to live in a nice area close to the water and away from the busy portion of town. That increases my rent by roughly 40%. Still my saving rate can be 30. No one makes plans based off a spreadsheet. It still offers some confidence. Still.. my thinking is always "How do I make choice that I can stick to long term?" Its challenging to go longterm

Looking forward to this discussion.
Best
The fact that you're thinking about this before you start your new career puts you miles ahead of many people. The fact that you're going into accounting also means you start with some skills that many other people who are starting a career don't have.

When I graduated college and started work, I had no clue. Bought a car (Dad co-signed), rented an apartment, then started work in that order. No thought of saving anything at all and it became clear after about 3 months that I was in a negative cash flow situation. Unfortunately (or fortunately) the first job was awful and by the 6th month, I changed jobs and moved cities. Car insurance dropped dramatically and rent dropped by about 50% much of which was because I now had a roommate, plus I got a little bit of a raise vs. my first job. Positive cash flow achieved, but still no thought of savings - my checking account just sorta built up. A little while later I refinanced my car. Eventually turned 25 and car insurance dropped by 50%. All good stuff and savings was starting to build up without me thinking much about it. Could have done better but I was young and still having a lot of fun and I was insisting on eating out for lunch most every day and wasn't really very prudent about my spending.

401K introduced a few years later and I dedicated all of my raises to my 401K till I maxed it out. Then started adding to my taxable account. Got married to someone in a similar field and we saved 100% of her salary and lived off of mine for about 10 years or so. Along the way, we bought a house, eventually had a kid, did a 2 year expat assignment in Germany, and all sort of other interesting life events. Unless needed for something else, proceeds from ESPP, stock options/RSU's, bonuses all just went to savings. I never have targeted a certain % of my salary to savings, just a monthly $ amount +/- and saving almost all of the previously mentioned variable comp components.

Nobody makes plans based off a spreadsheet? If I had had access to spreadsheets back then, you bet I would have used it after my first job. 20/20 hindsight and all that. And while we don't budget explicitly, I do use spreadsheets even today to track things like withholdings and overall cash flows. And I've been also been using spreadsheets to track and plan my investments since around 2003.

Best of luck!
Cheers.
fourwheelcycle
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Re: First time Career CPA. Priortizing Spending

Post by fourwheelcycle »

Ni0ck wrote: Sun Dec 05, 2021 11:29 pm I want to live frugal. I still want to live.
I only want to live ... close to the water. That increases my rent by roughly 40%. Still my saving rate can be 30.
The fact you juxtapose living frugally, but still live, shows you do do not consider living frugally to be true living. To me, that puts you in the group of BHs who count some degree of luxury spending as an important reward for being frugal in other aspects of their life. That's fine. I am sure, as an accountant who is thinking carefully about saving vs. spending, you will make it all work out. During our early years, my wife and I were in a group I would call "natural" BHs. That was during the 70's, before BH was even a thing. Our perspective on living was to complete our education, get our first jobs, spend what was necessary to provide a reasonable level of housing, furniture, clothing, food, and transportation, and save what was leftover.

Since you are an accountant, I am surprised you would just say "30" as your savings goal. I assume you mean 30%, but 30% of what? We never had a savings target, but what we saved, through age 35, turned out to be 30% of our gross income and 43% of our net income after taxes and employer-based paycheck deductions.
Hoosier CPA
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Re: First time Career CPA. Priortizing Spending

Post by Hoosier CPA »

I'd concentrate on moving up the ladder, either at that firm or another one, over savings rates. Spend the money you need to do networking, etc.

Accounting firm salaries can increase fairly quickly. Much better off concentrating on improving your earning power than saving a few extra percentage points. IMO.

Edit - to be actionable - if you expect to put in long hours at the office, maybe get an apartment close to it to cut down commute. But you may be putting those hours in at client sites, or remotely
SubPar
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Re: First time Career CPA. Priortizing Spending

Post by SubPar »

I'm also a CPA and did my obligatory stint in public accounting. It can be a grind, but I made lasting friendships, learned a lot, and have zero regrets about the the time I spend in that area. It set me up for success once I moved to the private industry.

I, too, subscribe to the "pay yourself first" mentality. Spend on things that bring you joy (within reason, of course) and hold yourself to a budget. Beyond that, it's simple: contribute what you can to a 401(k) and/or IRA. You're probably not going to be maxing these things out, but just getting in the habit of contributing aggressively (relative to your earnings) is a great start.

I also agree with Hoosier CPA's comment. Take every opportunity to learn and building your skillset in the early years. If you're in audit, see if there are opportunities to dabble a bit in corporate tax. Similarly, if you're in tax, make a point to understand financial reporting. The eventual earnings reward for being well-rounded will be worth it, regardless as to whether you stay in public accounting or not.

Edit because I didn't fully answer your question:

In retrospect, I was financially immature at that age. While I did the whole "pay yourself first" thing before I even know it was a thing, I favored cash on hand to retirement contributions. I did do a pretty solid job paying down student loans, but then I bought a car that was like 60% of my gross income at the time, drove it for ~11mos, grew tired of making the payments, and traded it in at a loss (*shudder*). I guess that's what I'd consider my early-twenty-something "luxury". I also picked up golf, developed a taste for nice dress shoes, yada yada yada.

At this point, I still like cars, I still like some other expensive "luxuries" like golfing, watches, firearms, outdoor gear, etc. But I'm much more judicious about how I spend my money now. I'm making up for my lost 20's from a savings/investing perspective, so that's a powerful motivator to me.

Beyond the advice I noted above re: saving -- you didn't mention the size of firm your joining or tax/audit focus. So, I'll just say that on the audit side, I traveled to clients a lot. For a solid chunk of the year (read: year-end planning/interim work and throughout busy season), I couldn't have cared less about my lodging as long as there was a comfy bed and internet. I was out of the home from 6am-9pm+ on weeknights, with a good chunk of hours on the weekends, too. For that reason, I chose to rent a room from my buddy on the cheap. Personally, I would have been annoyed dropping coinage on an expensive place only to not fully enjoy it for a chunk of the year.
Last edited by SubPar on Mon Dec 06, 2021 4:32 pm, edited 2 times in total.
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hand
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Re: First time Career CPA. Priortizing Spending

Post by hand »

I'm also in the pay yourself first camp - with a professional career, there is no reason not to max tax deferred savings every single year of your career.
After that, spending decisions become easy - how do I get the maximum utility out of whatever remaining money I have available.

In a couple of years you'll want to start thinking about saving for a house and a family, but a year or two worth of "living" will have given you some personal experience about what consumption is worth it to you and what can be turned off (or offset by salary growth) to address your bigger / longer term needs.
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khangaroo
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Re: First time Career CPA. Priortizing Spending

Post by khangaroo »

My wife is a CPA (senior audit manager) and spent her first years out of school similar to your wants and lived on the Portland waterfront. She really liked it because she was close to work and her friends and enjoyed it for a few years. The cost started to become more prohibitive so she moved further away from the water but glad she had the experience so I would say go for it since you’re aware of the cost premium.

In terms of spending, I would suggest you create a budget spreadsheet if you haven’t already done so and make categories. I would focus on getting debt-free first if you’re not already and then after that make sure you’re adequately saving for retirement. The next decisions will be all about your short/mid/long term goals.

For me, when I was 22 I really didn’t know what I was doing with finances so I was all over the place with saving 15% but also buying my dream car. I got settled in at 25-26 and became debt-free. From 26-29 I was determined FIRE was my path and tried to max out all retirement accounts and buy a rental property. At 30, I met my wife and we want to do the van life thing for several years so have slowed retirement and starting saving money to buy/build a van.

Like others have said, choose what is important in your various term goals and then allocate your spending accordingly. Just make sure you’re putting away something in your nest egg at all times.
KlangFool
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Re: First time Career CPA. Priortizing Spending

Post by KlangFool »

OP,

1) I spend as much as I save. Aka, I save one year of expense every year. Hence, I am balanced on my approach.

2) Within my annual expense, I prioritize whatever is important to me.

3) In summary, I save first and spend later.

4) In your case, if you do not put a limit on your spending, how do you know you put a priority on your spending? You may just spend all your paycheck plus a lot more. Priority only comes into play when a person choose to put a limit on something. So, your first question should be how much you choose to save. Then, you can prioritize your spending. If not, why bother?

<< Still my saving rate can be 30.>>

5) 30% of what? Gross income? I prefer saving rate base on expense excluding taxes. I saved 100%.

<< On my side. I only want to live in a nice area close to the water and away from the busy portion of town. >>

6) How much commute time does this include? Do you have enough time and energy to enjoy the water area after the long commute?

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Re: First time Career CPA. Priortizing Spending

Post by WAROB »

A lot of good advice already. As for rent, find something nice enough and with a short commute but don’t overdo it, you won’t be spending too much time there. I had roommates and it worked out great for both cost and social reasons. Keep in mind though that if you’ll be working from home a lot it can be a distraction.

I’d also add to take advantage of all the ancillary benefits provided by your company. Depending on what they offer you shouldn’t be paying anything out of pocket for your cell phone, gym membership etc. I got my fair share of free meals my first few years in public and bring your own lunch when there isn’t food at the office.

I don’t do a line item budget but set automatic retirement contributions and I have a monthly transfer to a taxable brokerage account that makes it pretty effortless to save. Live and spend accordingly on what is left after that.
EdNorton
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Re: First time Career CPA. Priortizing Spending

Post by EdNorton »

I was a CPA also, a car parking attendant. If you save 30% of your earnings, you'll be.fine.

Is there travel involved with your accounting job? I was on a 2 year project, with new hires from NYC office. They got a fancy apartment in the city and spent 1 weekend there a month. This was for a Big 4 firm, probably not a lot of travel with smaller firm

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AnnetteLouisan
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Re: First time Career CPA. Priortizing Spending

Post by AnnetteLouisan »

Throughout my working life I saved around 25-50 percent of my net through automated deposits into savings, which kept me from seeing the funds and feeling flush.

In some ways I was too frugal starting out. I had student loans and a small amount of credit card debt from a minor working wardrobe purchase and felt a need to pay them off asap, and I did, but in doing so I skimped elsewhere and in retrospect that was a mistake.

My parents, who were in a position to help, pretty much let me sink or swim. and while that philosophy has a lot going for it as an idea, and did have some good results, it has a lot of real negatives in real life.

When you are starting your career it’s a major life shift from school to work and it’s stressful. you’re working long hours, learning your profession and meeting people. And you need nice clothes. And you need to eat healthy and stay healthy. You need a safe clean quiet and comfortable place to live. And you’re young and you need to stay fit, travel and socialize. Mostly the budget can’t cover it all.

After about five years you’ll feel more flush and income will easily exceed expenses, but I wish I had done more wellness stuff and spent more on clothes in my early career rather than cutting costs, agonizing over spending and prioritizing paying off loans. Because not taking enough care of your health and not having the right clothes actually matter a lot and can cost more than you save. I mean I could have paid the loans off reasonably comfortably in eight years instead of four.

In my 30s I spent too much dining out, traveling and on some low level luxury goods. But it was my money, I earned it and I wanted to reward myself. After a while I realized how much marketing I was exposed to and ratcheted back a lot.

These days it’s not an issue really but in your career formative years I think cutting yourself reasonable slack might be okay.
Last edited by AnnetteLouisan on Mon Dec 06, 2021 8:56 pm, edited 1 time in total.
soxfan10
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Re: First time Career CPA. Priortizing Spending

Post by soxfan10 »

Not a CPA, but spent almost 8 years in the Big4 up to the level of experienced senior manager. If that is where you are going, no one cares about what you wear/drive or networking really (at least not to manager level). Especially at the staff level, success is almost entirely being available and grinding.

Spend on what you want and not what you think will give you a leg up... because it wont. If after four or five years you think you want to stay for a partner run, then maybe you start worrying about it.
JBTX
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Re: First time Career CPA. Priortizing Spending

Post by JBTX »

What I did right after grad school is a had a good roommate, rented, drove generally affordable cars and didn't waste a lot of money on big ticket items. However here and there I was able to make some trips/vacations that were well worth it.

As to the apartment near the water, if it signicantly enhances the quality of life it may be worth it. If you are making $75,000+ and it will cost $1400 vs $1000 thats not a huge deal. If you were making $60k and paying $2100 vs $1500 I'd say that isn't optimal.
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Re: First time Career CPA. Priortizing Spending

Post by pseudoiterative »

bit of a tangent
WAROB wrote: Mon Dec 06, 2021 12:19 pm take advantage of all the ancillary benefits provided by your company. Depending on what they offer you shouldn’t be paying anything out of pocket for your cell phone, gym membership
Go nuts with the ancillary benefits, but I'd personally draw the line before giving your employer access to your personal communications. Couple of reasons:

(1) One thing I struggled with earlier in my career, and that some other younger folks struggle with as well, is setting healthy work-life boundaries. I'd strongly recommend keeping your personal phone isolated from your work phone. That way you can turn your work phone off when you're not getting paid and leave all the work-related slack / outlook / whatever notifications until you're back on the clock. If you need a phone for your job, your employer can certainly provide you with one, don't use your personal phone for that.

(2) In the rare but entirely possible event that you end up in some kind of legal disagreement with your employer, it is best to have your personal communications completely isolated from all company-owned devices, so they can't be snooped on by company IT / legal. Even in the event that your manager and the company directors are all lovely people, maybe they sell the business and the next lot of owners you find yourself working for are paranoid control freaks.
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Re: First time Career CPA. Priortizing Spending

Post by pseudoiterative »

dcabler wrote: Mon Dec 06, 2021 6:02 am rent dropped by about 50% much of which was because I now had a roommate
Yeah, sharing a house or an apartment while renting, even with one other person, usually reduces your cost of housing by 30%-40%. Usually instead of a cheap 1bed you can get a somewhat nicer 2bed (better location or more spacious or both) for somewhat cheaper rent per person per week, and then you get to split all the utility bills.

If you've never lived by yourself before it's arguably worth doing for the experience, particularly if you've had some uninspiring house sharing experiences, but on another hand sharing a place with one or more housemates is an easy way to save a bunch of cash every year on housing expenses. If you get along with your housemate and run the occasional shared event and can help expand each other's social circles, all the better.
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Ni0ck
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Re: First time Career CPA. Priortizing Spending

Post by Ni0ck »

jaqenhghar wrote: Sun Dec 05, 2021 11:41 pm Welcome! When I was in your shoes in my first job, I asked myself a couple of questions:

(1) Did I see my employer as a long-term stint or simply a stop on a career journey?
(2) What were my must-have's in terms of life outside of work (nice place to live, going out frequently, spending on clothes, etc)?
(3) After accounting for my needs and must-have's, how much could I realistically save?

For me, I knew I'd only spend a few years at my first employer, so questions 2 and 3 answered themselves accordingly. For question 2, my only must-have was to live in a nice apartment. I was in a VHCOL city so I definitely spent more than I needed to on housing, but I did enjoy every minute of living in that apartment. So for questions 2 and 3, it's a matter of know thyself (or to start figuring what makes you happy/content/satisfied).

As a side note, if I thought I wanted to stay longer at my first employer, I would've definitely had a different game plan -- i.e., attending networking events known to be visible to the higher ups, making sure I fit in/dressing the part, etc.
This company is a great place. I'd stay as long as they will welcome me. Know Thyself... that's for sure. When I'm between 2 decisions. The reason is because their both good. That feeling comes up with a lot of things. Sometimes I'm not comfortable spending more money then I otherwise could. That's enough for me to pause and wait a couple weeks before I move on a place.
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Ni0ck
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Re: First time Career CPA. Priortizing Spending

Post by Ni0ck »

KlangFool wrote: Mon Dec 06, 2021 9:12 am OP,

1) I spend as much as I save. Aka, I save one year of expense every year. Hence, I am balanced on my approach.

2) Within my annual expense, I prioritize whatever is important to me.

3) In summary, I save first and spend later.

4) In your case, if you do not put a limit on your spending, how do you know you put a priority on your spending? You may just spend all your paycheck plus a lot more. Priority only comes into play when a person choose to put a limit on something. So, your first question should be how much you choose to save. Then, you can prioritize your spending. If not, why bother?

<< Still my saving rate can be 30.>>

5) 30% of what? Gross income? I prefer saving rate base on expense excluding taxes. I saved 100%.

<< On my side. I only want to live in a nice area close to the water and away from the busy portion of town. >>

6) How much commute time does this include? Do you have enough time and energy to enjoy the water area after the long commute?

KlangFool
Sure so I assume saving rate was always relative to gross income. 30% of my gross income is pretty easy since I'm contribution fully to my 401k. When people talk about saving rate, do you they mean relative to their take-home pay?
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Taxapalooza
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Re: First time Career CPA. Priortizing Spending

Post by Taxapalooza »

I am a new SM at a Big 4. Started my career 8 years ago at a regional firm and moved to Big 4 as senior.

With the 30% you are saving, first build an emergency fund. Driving from client site to client site resulted in my car getting wrecked once. While insurance covered the cost I still had ancillary expenses like fixing my carpet and needing new tires which didn't get covered. Once this is cushioned enough, focus on investing the remainder. I also didn't read if you have any debt - if you do, pay it off after you get your emergency fund built.

It's good to worry about looking the part but don't overthink this. Smell good, wear decent clothes, get a nice haircut. Your appearance makes much less of a difference than your ability to deliver early on. Nobody cares about a staff or seniors ability to "network." It doesn't matter much at manager either - other than being generally approachable and confident.

Lastly, the advice to deliver and put yourself if an upwardly mobile position cannot be overstated. I got lucky being in a growing market. The financial rewards will come with delivering results for your firm/company. GL.
Don't give up the ship.
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Ni0ck
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Re: First time Career CPA. Priortizing Spending

Post by Ni0ck »

Taxapalooza wrote: Wed Dec 08, 2021 1:26 pm I am a new SM at a Big 4. Started my career 8 years ago at a regional firm and moved to Big 4 as senior.

With the 30% you are saving, first build an emergency fund. Driving from client site to client site resulted in my car getting wrecked once. While insurance covered the cost I still had ancillary expenses like fixing my carpet and needing new tires which didn't get covered. Once this is cushioned enough, focus on investing the remainder. I also didn't read if you have any debt - if you do, pay it off after you get your emergency fund built.

It's good to worry about looking the part but don't overthink this. Smell good, wear decent clothes, get a nice haircut. Your appearance makes much less of a difference than your ability to deliver early on. Nobody cares about a staff or seniors ability to "network." It doesn't matter much at manager either - other than being generally approachable and confident.

Lastly, the advice to deliver and put yourself if an upwardly mobile position cannot be overstated. I got lucky being in a growing market. The financial rewards will come with delivering results for your firm/company. GL.
Put my myself in an upwardly mobile position. what does that look like?
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Taxapalooza
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Re: First time Career CPA. Priortizing Spending

Post by Taxapalooza »

Ni0ck wrote: Wed Dec 08, 2021 11:36 pm
Taxapalooza wrote: Wed Dec 08, 2021 1:26 pm I am a new SM at a Big 4. Started my career 8 years ago at a regional firm and moved to Big 4 as senior.

With the 30% you are saving, first build an emergency fund. Driving from client site to client site resulted in my car getting wrecked once. While insurance covered the cost I still had ancillary expenses like fixing my carpet and needing new tires which didn't get covered. Once this is cushioned enough, focus on investing the remainder. I also didn't read if you have any debt - if you do, pay it off after you get your emergency fund built.

It's good to worry about looking the part but don't overthink this. Smell good, wear decent clothes, get a nice haircut. Your appearance makes much less of a difference than your ability to deliver early on. Nobody cares about a staff or seniors ability to "network." It doesn't matter much at manager either - other than being generally approachable and confident.

Lastly, the advice to deliver and put yourself if an upwardly mobile position cannot be overstated. I got lucky being in a growing market. The financial rewards will come with delivering results for your firm/company. GL.
Put my myself in an upwardly mobile position. what does that look like?
The easiest way to assess is by looking around the firm or company you work for and seeing people move up. Whether or not being "upwardly" mobile is possible is significantly determined by either business development or company culture - typically the latter. I work for a Big 4 firm where upward mobility is nearly guaranteed until partner. All the levels before that are basically auto-promotions - staff-->senior-->manager-->senior manager. Most CPAs in Big 4 move to industry for a pay raise and stability; the price being the prospect of promoting goes down as industry tends to promote only when needed (which could be never).

Some accounting firms have a strong promotion culture; others don't. If you find younger folks at your firm stay staff/senior longer than 2-3 years, or the promotion to manager gets delayed extensively, you are in a place which either can't or won't promote you either.
Don't give up the ship.
BogleCPA
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Re: First time Career CPA. Priortizing Spending

Post by BogleCPA »

I worked 7 years in audit for Deloitte. Left the firm two years ago for a big raise, and now I just started a new job working at one of my old audit clients. Plan to work here forever.

Your pay will increase quickly. I’m 32 years old and currently making 3.25 times as much money as I was when I joined Deloitte at age 23.

The biggest key is learn to live on your first year salary and then save all your annual raises as much as possible. Avoid the tendency to spend every extra dollar you earn once you get promoted. Get to a point as quickly as possible where you’re able to max out both a Roth IRA and your 401k, which means you’ll be saving about 26.5k per year for retirement. If you get to that point in your 20s and you keep that up the rest of your career, you’ll be in great shape.

Good luck!
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Re: First time Career CPA. Priortizing Spending

Post by Nickinsticks »

I started at Deloitte at 43k in 2007. Half of my class was let go in 2008 during the financial crisis. All of them had jobs in 1-2 months. I was making 4x this after 10 years. I literally just worked hard and had some lucky breaks. I wouldn't worry about networking, those things will happen automatically at work. Your reputation is enormous though. It's what helped me get 2 jobs from my days at Deloitte. I also second the idea of not trying too hard to impress. Drive a reliable car, stay well groomed, take work serious and you are fine. You'll meet clients you will want to hire you.

If you feel comfortable in your location, I would buy a duplex. You will have a place to live and you will know dozens of renters for the other side. I personally bought a townhouse with another Deloitte person and we lived there for 5 years and we rented out the room to one of our Deloitte buddies. In our townhouse complex on our street, there were 6-7 other really young Big 4 kids living there. When I moved out to get married, I didn't come out as far ahead on the equity as I should have, but I also was only paying $500 a month to live in a major city.

We noticed most people wanted to live where the partying was happening and therefore high rents. I would stay away from that and big SUVs. You need a Corolla or a Honda Civic.

This is my last point.. don't think you are big time because you now have an important job. I used to see this happen all the time when new people started. They'd proclaim I am going to make partner here and burn out in a couple years. My class of 24 had 0 people make Partner. Opportunities will present themselves. Life will change. Stay humble and work hard.
Pau_Hana
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Re: First time Career CPA. Priortizing Spending

Post by Pau_Hana »

I can't tell you what to do, but if I were in your situation, pay off all debt and really strive to max out the retirement plans. Find yourself 2 free/cheap hobbies (mine were studying for EA exam and reading books/Xbox) and 2 moderate hobbies (firearms and wine collecting/appreciation).

Working out for me thus far. I want to purchase a home (as the family is about to grow), but the current interest rate and housing crunch has me renting until a more clear outlook from the Federal Reserve develops.
Last edited by Pau_Hana on Tue Apr 19, 2022 11:55 am, edited 1 time in total.
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dogagility
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Re: First time Career CPA. Priortizing Spending

Post by dogagility »

Ni0ck wrote: Sun Dec 05, 2021 11:29 pm Hi,
I'm starting my career at an accounting firm this January. I'd like an interesting discussing on on how others prioritize their spending. How they prioritized their spending on their first years out of school, and philosophy for a young person. I want to live frugal. I still want to live. For those of you who go back and forth on decisions like what luxuries you afford yourself, I want to hear your principals. Like.. What will you ultimately not skimp on? What do you without? How have your habits changed? what advice do you give your ~23 old sons/daughters.

Here's where I want you to be critical of me.
On my side. I only want to live in a nice area close to the water and away from the busy portion of town. That increases my rent by roughly 40%. Still my saving rate can be 30. No one makes plans based off a spreadsheet. It still offers some confidence. Still.. my thinking is always "How do I make choice that I can stick to long term?" Its challenging to go longterm

Looking forward to this discussion.
Best
Here's a book that was written for this topic. It's excellent. https://www.amazon.com/Think-About-Mone ... 1523770813
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MAKsdad
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Re: First time Career CPA. Priortizing Spending

Post by MAKsdad »

Nickinsticks wrote: Tue Dec 21, 2021 9:09 am I started at Deloitte at 43k in 2007. ... I was making 4x this after 10 years.
So this is something I think is key, and I'm going to use it to play devil's advocate on the "pay yourself first" crew.

I was Big 4 also. I knew many people early on that I worked with who were '401k poor'. They saved so much in their retirement plans that they could barely get by month to month.

On the other hand, I didn't put a single cent into my 401k until after I turned 30. At first it was because I had major student loan payments and couldn't afford to, but ultimately it was because I knew that I was going to significantly increase my earnings in my 30s. The money I missed out on by not saving in my 20s wouldn't amount to even 1/2% of my net worth today, even with compounding. If you start in Big 4 and are successful, you're setting yourself up for much better earnings later in your career. I didn't save any money for almost a decade and I'm still getting ready to retire in January at age 44.

If you can avoid significant lifestyle inflation as you move forward, you don't need to sacrifice "living" in your first few years. If you perform well, the money will follow and you'll make up for missed savings really quickly in your 30s.
Nickinsticks
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Re: First time Career CPA. Priortizing Spending

Post by Nickinsticks »

Ok, I see your devils advocate and I’ll raise you another one. While we all know there is no guarantee in that wage growth, there are distinct, quantifiable advantages for beginning your career in Big 4 and putting everything else aside. This isn’t the case for all public accounting people and for that matter all Big 4 folks. I do know in my class half are 3-4x now and everyone is at least 2x. I caution the poster that the impression here is it’s automatic. It’s not.

You were investing in yourself, not securities. Lots of wealth is created by small business. It’s a very similar thought process.

I’m not sure what kind of BH I am if one at all. I use my investments to allow me to take more risk professionally. I took a job at a PE backed company with lots of fluctuation because I saw it as opportunity and I knew I would still drive my GMC Terrain if it took off. Within 18 months I was the CFO and was able to participate in company stock. I give a lot of credit in the decision to take the job based on my saving. When I would get my year end bonuses, I used as down payments on rental properties.

I turn 37 this week and I don’t see how I’ll be in a FIRE situation at 44, so I commend you there.

But your original idea, how can you not at least get the company match. Typically being in a plan as large as a Big 4 plan, the plan expenses are so little.
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Ni0ck
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Re: First time Career CPA. Priortizing Spending

Post by Ni0ck »

Pau_Hana wrote: Tue Dec 21, 2021 1:12 pm Graduated in 2018. First job in healthcare was 92,000. Left after 1 year. Second job was also in healthcare and paid 110,00. Left after 2 years. Current job pays 180,000 and still working it.

We always had to rent because my spouse was finishing up her medical residency. However, I always paid myself first (maxed out my 401K and Backdoor Roth IRA - however, that may be going away...).

I always made sure that the car was safe and secure and that the housing was safe and secure. Note, that this doesn't mean the most expensive. I drive Japanese cars and rented in nice(r) areas. I paid off my student loans in 2 year and paid off the two cars I bought for myself and my spouse the year after.

Priority for me was secure retirement (hence the max out), purchasing firearms, and quality alcohol (Sauternes, aged brandy and whiskey).

I can't tell you what to do, but if I were in your situation, pay off all debt and really strive to max out the retirement plans. Find yourself 2 free/cheap hobbies (mine were studying for EA exam and reading books/Xbox) and 2 moderate hobbies (firearms and wine collecting/appreciation).

Working out for me thus far. I want to purchase a home (as the family is about to grow), but the current interest rate and housing crunch has me renting until a more clear outlook from the Federal Reserve develops.
I'll work hard. Prioritize work and situate my life around that. A 5 minute drive to the office would be ideal. I'll consider the place nearest to the office and clients.
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Ni0ck
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Re: First time Career CPA. Priortizing Spending

Post by Ni0ck »

MAKsdad wrote: Tue Dec 21, 2021 1:33 pm
Nickinsticks wrote: Tue Dec 21, 2021 9:09 am I started at Deloitte at 43k in 2007. ... I was making 4x this after 10 years.
So this is something I think is key, and I'm going to use it to play devil's advocate on the "pay yourself first" crew.

I was Big 4 also. I knew many people early on that I worked with who were '401k poor'. They saved so much in their retirement plans that they could barely get by month to month.

On the other hand, I didn't put a single cent into my 401k until after I turned 30. At first it was because I had major student loan payments and couldn't afford to, but ultimately it was because I knew that I was going to significantly increase my earnings in my 30s. The money I missed out on by not saving in my 20s wouldn't amount to even 1/2% of my net worth today, even with compounding. If you start in Big 4 and are successful, you're setting yourself up for much better earnings later in your career. I didn't save any money for almost a decade and I'm still getting ready to retire in January at age 44.

If you can avoid significant lifestyle inflation as you move forward, you don't need to sacrifice "living" in your first few years. If you perform well, the money will follow and you'll make up for missed savings really quickly in your 30s.
This is so encouraging. I just need to focus. The money will follow if I am among the better performing and capable team members.
The 401k poor feel so stifling and sad. What's the moral of that story? I guess moderation is key...
jfave33
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Re: First time Career CPA. Priortizing Spending

Post by jfave33 »

Everything in life requires balance. You can't really go wrong with that. You don't want to ignore saving and you don't want to ignore spending. Sounds like you get it.

One thing for sure is commuting sucks. You might think you can handle it but the less time communiting the better. No place is worth spending hours in traffic each day.
boogiehead
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Re: First time Career CPA. Priortizing Spending

Post by boogiehead »

If you are working in public accounting here are a couple pointers I learned after working in public accounting for 10 years in a large metro market after I graduated college. I would prioritize in minimizing housing cost when you start out and be flexible because you won't know where your clients will be. You could be assigned to a long term client 1 hour from downtown, you could be travelling 50% of the time (although with covid this has probably changed for now), so even if you live in a prime area you'll realize you aren't spending that much time there especially during busy season.

Focus on passing your CPA asap... try not to put it off.. as you move up the ranks you'll get busier believe it or not and it could prevent you from getting promoted to manager and once you have your CPA you have a lot more options.
EdNorton
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Re: First time Career CPA. Priortizing Spending

Post by EdNorton »

MAKsdad wrote: Tue Dec 21, 2021 1:33 pm
Nickinsticks wrote: Tue Dec 21, 2021 9:09 am I started at Deloitte at 43k in 2007. ... I was making 4x this after 10 years.
So this is something I think is key, and I'm going to use it to play devil's advocate on the "pay yourself first" crew.

I was Big 4 also. I knew many people early on that I worked with who were '401k poor'. They saved so much in their retirement plans that they could barely get by month to month.

On the other hand, I didn't put a single cent into my 401k until after I turned 30. At first it was because I had major student loan payments and couldn't afford to, but ultimately it was because I knew that I was going to significantly increase my earnings in my 30s. The money I missed out on by not saving in my 20s wouldn't amount to even 1/2% of my net worth today, even with compounding. If you start in Big 4 and are successful, you're setting yourself up for much better earnings later in your career. I didn't save any money for almost a decade and I'm still getting ready to retire in January at age 44.

If you can avoid significant lifestyle inflation as you move forward, you don't need to sacrifice "living" in your first few years. If you perform well, the money will follow and you'll make up for missed savings really quickly in your 30s.
All Big 4 firms have a 401k match. I might be a little dimwitted, but I would have at least contributed enough to get the match. Would the match be a free lunch?

:sharebeer
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MAKsdad
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Re: First time Career CPA. Priortizing Spending

Post by MAKsdad »

EdNorton wrote: Wed Dec 22, 2021 7:41 am
MAKsdad wrote: Tue Dec 21, 2021 1:33 pm
Nickinsticks wrote: Tue Dec 21, 2021 9:09 am I started at Deloitte at 43k in 2007. ... I was making 4x this after 10 years.
So this is something I think is key, and I'm going to use it to play devil's advocate on the "pay yourself first" crew.

I was Big 4 also. I knew many people early on that I worked with who were '401k poor'. They saved so much in their retirement plans that they could barely get by month to month.

On the other hand, I didn't put a single cent into my 401k until after I turned 30. At first it was because I had major student loan payments and couldn't afford to, but ultimately it was because I knew that I was going to significantly increase my earnings in my 30s. The money I missed out on by not saving in my 20s wouldn't amount to even 1/2% of my net worth today, even with compounding. If you start in Big 4 and are successful, you're setting yourself up for much better earnings later in your career. I didn't save any money for almost a decade and I'm still getting ready to retire in January at age 44.

If you can avoid significant lifestyle inflation as you move forward, you don't need to sacrifice "living" in your first few years. If you perform well, the money will follow and you'll make up for missed savings really quickly in your 30s.
All Big 4 firms have a 401k match. I might be a little dimwitted, but I would have at least contributed enough to get the match. Would the match be a free lunch?

:sharebeer
Yes, I agree I missed out on that free money, but again, even using compounding, that match (plus my contribution) would represent an insignificant portion of my current NW. But at the time, putting 6% of my salary away would have had a significantly negative impact on my desired lifestyle.

Just one example...I don't regret living alone instead of having a roommate even though I could have saved that money in my 401k. That was a decision I would make against with perfect hindsight.
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hand
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Re: First time Career CPA. Priortizing Spending

Post by hand »

MAKsdad wrote: Tue Dec 21, 2021 1:33 pm
On the other hand, I didn't put a single cent into my 401k until after I turned 30. At first it was because I had major student loan payments and couldn't afford to, but ultimately it was because I knew that I was going to significantly increase my earnings in my 30s. The money I missed out on by not saving in my 20s wouldn't amount to even 1/2% of my net worth today, even with compounding. If you start in Big 4 and are successful, you're setting yourself up for much better earnings later in your career. I didn't save any money for almost a decade and I'm still getting ready to retire in January at age 44.
If I'm understanding correctly, what you're saying is that your potential retirement savings in your 20's (call it ~20k/yr for 10 years or at least $200k plus investment returns, plus company match) is less than 1/2% of your net worth therefore in the 8 figure range. It is lovely that this approach worked out for you, but pretty obviously not something that is in the cards for most or even most Big 4 CPAs and seems like terrible general advice.

For the vast majority of people, early retirement savings is the most valuable savings by far. I would think a CPA would understand this intuitively, and if not, be able to model pretty quickly.
MAKsdad
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Re: First time Career CPA. Priortizing Spending

Post by MAKsdad »

hand wrote: Wed Dec 22, 2021 8:48 am
MAKsdad wrote: Tue Dec 21, 2021 1:33 pm
On the other hand, I didn't put a single cent into my 401k until after I turned 30. At first it was because I had major student loan payments and couldn't afford to, but ultimately it was because I knew that I was going to significantly increase my earnings in my 30s. The money I missed out on by not saving in my 20s wouldn't amount to even 1/2% of my net worth today, even with compounding. If you start in Big 4 and are successful, you're setting yourself up for much better earnings later in your career. I didn't save any money for almost a decade and I'm still getting ready to retire in January at age 44.
If I'm understanding correctly, what you're saying is that your potential retirement savings in your 20's (call it ~20k/yr for 10 years or at least $200k plus investment returns, plus company match) is less than 1/2% of your net worth therefore in the 8 figure range. It is lovely that this approach worked out for you, but pretty obviously not something that is in the cards for most or even most Big 4 CPAs and seems like terrible general advice.

For the vast majority of people, early retirement savings is the most valuable savings by far. I would think a CPA would understand this intuitively, and if not, be able to model pretty quickly.
I started at $37,000. So my first year savings would have been just under $2,800 if I would've taken advantage of the company match (6% plus company match). I could never have afforded more than that at the time. Even in year 10, my contribution plus match would've been under $10k, so I'm not sure where you're getting $20k per year. You're vastly overstating the amount I would have saved if I had taken advantage of the match.

I've done the math...If I had made the minimum contribution to get company match for each of my first 10 years, with 5% growth annually, the total would be less than 1% of my current net worth. Now, I agree, I have been more successful than average, but that was exactly the bet I was making. Big 4 CPAs should be able to plan on an average of 10% salary growth every year plus bigger bumps with promotions. We always targeted doubling salary every 4-5 years. If you're good, it's absolutely doable.
Hoosier CPA
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Re: First time Career CPA. Priortizing Spending

Post by Hoosier CPA »

Appreciate hearing the career stories in here. As I think I mentioned earlier, I started in Big 4 too, back in 2002. Although I'm doing fine reading the stories on here are motivating to start attempting some bigger career steps in the near future. I left Big 4 after 5 years and did consulting. Place was too small and I think it kept me from moving up as fast as many of of my former peers. I've made some strides and now am in a Director position. I think it's time to start thinking bigger, especially with the job market how it seems to be recently.

I still think the moral of the story for a new CPA is to focus on earning power instead of what % you can put in the 401k. I wish I had invested more in the career side than I did, but I think I can still correct that going forward. I don't regret the focus I had on family and young kids but I think I could have done more so to position myself career-wise, including being more willing to take chances and make changes when I was in very comfortable positions that ultimately didn't have much upside.
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