As I write new posts, I do a lot of looking back to the past. I want to be able to pass along the mistakes I’ve made, so others do not make the same mistakes, and to share the things that have really put me ahead of the game.
As a kid fresh out of college, the people I looked to most for personal finance advice were my seniors at work. They were probably four or five years out of college, CPAs, and I thought they could enlighten me on getting ahead with my finances. This seems like a decent idea, but the problem was, the people I was taking advice from had car loans, overreached when purchasing a home, were day trading stocks, etc. I started to notice this when one of them was eating bologna sandwiches for lunch on the regular.
I was in my early 20’s and instead of saving up for an emergency fund, or accelerating my student loan payments, or contributing to an IRA, I was taking penny stock trading advice from my coworkers. I assumed that since they had their CPA, they would know about personal finance and personal income taxes. These are untrue assumptions based on a few reasons.
Number One – No personal finance education is taught in accounting classes
As I was getting my accounting degree, there was one class on tax and only a small part of the class was on personal income tax, and NO classes on personal finance. I did not encounter a class that involved personal finance until my masters program, and that class was an elective and therefore not required to graduate.
From what I recall, I’m almost positive that no personal finance knowledge was tested on the CPA exam. There are four tests which make up the exam, and only one part of one test was on personal income taxes.
Number Two – Accountants may become very specialized
Just like any career after years on the job, accountants find themselves in an niche, and perhaps specialize in one area of accounting. One year I had a question on qualified dividends and asked my buddy who is a tax accountant by trade, figuring he’d be able to help me out. Well it turns out he did corporate tax returns for one huge corporate client basically all year long, and had no idea about personal taxes and relied on TurboTax to do his 1040.
Number Three – “Financial adviser” internships in college are very deceiving
Some of my friends received “financial adviser” internships during college, some of which were accounting majors. What these jobs really were was a way for large insurance companies to peddle their high commission insurance products on the interns’ friends and families. From what I saw there was no actual advising going on, and this probably gave students and their friends a poor perception of what financial advisers really do or at least should be doing.
Number Four – Their bosses have very high incomes
This right off the bat leads to lifestyle inflation. When I started working I became very star struck by the partners in the firm I worked for. They made a ton of money, and some more senior partners at bigger firms push seven figure incomes. They all have summer homes, spouses that don’t work, and go on amazing vacations. One partner at the firm I worked for right out of college even raced Porches on the weekends (he owned the Porches).
This was very mesmerizing to a young 20-something professional. People start to think (myself included) “well if I’m going to be making hundreds of thousands of dollars in 15 years, why save now?” To try and keep up with their superiors, CPAs will start to stretch themselves financially. They’ll buy cars on credit, overreach for a home, and spend, spend, spend. Basically the “I’ll spend now and save later” mentality sets in.
Moral of the story is don’t go to your neighbor or coworker who has a CPA for personal finance advice, because unless they have been specifically trained, or they have taken time to personally research and teach themselves, you’re better off listening to strangers on the internet*. I know the strangers on the internet approach has definitely helped me the most.
Who did you take personal finance advice from right out of school? Has taking personal finance advice from strangers on the internet worked out for the better?
* – Just to be clear, take this with a grain of salt and consult professionals before you make any financial decision 🙂