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What to Do With Your New Salary

June 20, 2018

A good portion of the VSCPA’s Leaders’ Institute, kicking off today at the University of Richmond, is focused on gaining and succeeding in employment. But another part of the transition from college to the “real world” is knowing what to do with what seems like an unfathomable amount of money. And despite all their financial training, accountants aren’t immune to money troubles.

Jonathan Kraftchick, CPA, can attest to that. The senior manager at Cherry Bekaert, who will lead Saturday’s Leaders’ Institute session “I Have a Salary, Now What?”, fell victim to some financial missteps of his own in his younger days, which he calls upon to show attendees that even the most financially astute people can make mistakes.

“My wife and I, when we first got married, she got in a car wreck,” Kraftchick said. “We didn’t have any emergency fund. We didn’t really have anything other than a few thousand dollars in the bank, and we needed a new car, and quickly, because she needed to get to work. I wound up putting a $13,000 car on a credit card — actually, on multiple credit cards.

“She kept asking if it was a mistake, and for some reason, I didn’t want to get a car loan. When I woke up and added all the debt we had, we had about $48,000 in consumer debt, not including a mortgage or student debt. It was a big wake-up call to have 50 grand in consumer debt.”

Knowing his audience, Kraftchick likes to begin his presentation by discussing student debt. Then he factors costs in buying a house and a car, getting married, having kids and taking care of aging parents, all to show how an entry-level salary can disappear pretty quickly even under the best of circumstances.

Fortunately, there are good habits that can offset those issues and help young professionals get on good financial footing from the get-go.

“As a college kid, for the most part, you’re very good at stretching a dollar,” Kraftchick said. “As soon as you get that first job, 30 grand or 40 grand or whatever they’re paying kids out of school these days, it seems like an infinite amount of money. My goal is to show that it’s really not and that you can make a lot of mistakes when you get out of school that can last a very long time. But there are some habits you can set in your mid-20s that can pay huge dividends if you put them in place when you’re young.”

And those habits aren’t rocket science to figure out. Kraftchick likes to refer to the process as “being intentional about getting rich.”

“Simple changes can get you a lot of money if you do it while you’re young,” he said “That’s why it fits in so well at a student leadership conference. The million bucks is theirs to lose.”

A big part of that is budgeting, but not just the simple month-to-month, food-shelter-incidentals plan espoused by financial literacy experts. Saving significant amounts of money requires a longer view of five, 10 or even 30 years.

“You don’t get rich by accident. It doesn’t just happen,” Kraftchick said. “It’s something you’ve got to set out to do.

“Everyone thinks they’re going to have a million dollars and retire early. But unless you’re very diligent from the beginning, it’s going to be an uphill battle.”

Kraftchick has been doing variations on this topic at Leaders’ Institute for five years. He keeps coming back for the audience, the chance to make a difference and to observe the event for ideas to take back to his native North Carolina, where he helped launch a similar event for the North Carolina Association of CPAs (NCACPA).

“It’s being a mole,” he said. “I like to see the agenda. I like to see how you guys structure it. But I like the audience a lot, and I like the passion for the topic among this level of student.”

And that $48 grand in consumer debt? It’s gone now. It wasn’t easy, but the Kraftchick family (now bigger than it was at the time of the car accident) is on good financial footing.

“We have no consumer debt now, and we have a good emergency fund and a college fund for the kids. But it took a few years to get out of that,” Kraftchick said. “I wouldn’t say it was smooth sailing, but it’s predictable sailing at this point.”

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