4 Personal Finance Lessons from Becoming a Licensed CPA

Does anyone remember those personal finance classes we took in school? The ones where the teacher explained the importance of balancing a checkbook or the power of compound interest? Oh, that’s right. Those classes did not exist.

Luckily, we can rely on financial experts to guide us in the realm of personal finance. Some even have fancy titles such as Chartered Financial Analyst or Certified Public Accountant. They have all the answers, right?

Well, as a fellow CPA, I’m here to share some of those trade secrets and to pop the bubble on what they teach us.

What being a licensed CPA has taught me about personal finance.

My first business school class on finance sparked something deep inside me. Within the next 12 months, I had picked up a biography of Warren Buffett and started reading anything and everything relating to finance, economics, and of course, accounting. Accounting is what I ended up focusing on and, after college, I took the tests to become a licensed CPA.

Becoming a CPA is no easy task. Depending on the difficulty of the exam, the pass rates range between 45% and 55%. There are four exams altogether, so there are many nights and early mornings spent studying.

There is a lot of studying required. A lot of dry business knowledge that needs to be absorbed.

Despite the amount of material we covered, the topic of personal finance never came up.

We never had to study the impact credit scores have on mortgage rates, or how saving 11% of our income instead of 10% of our income translated to retiring two years earlier.

Don’t get me wrong, I’ve had to deal with my fair share of interest accruals, but I did it from a corporate or partnership perspective.

Becoming a CPA taught me how to view my personal finances as a business.

I now seek a higher profit each quarter and I ignore the market valuation of my stock price, otherwise known as, my net worth.

By optimizing my budget, I’m able to build assets while reducing liabilities. I can identify leaks in my structure and reorganize my cash flows to be tax-efficient.

Plus, it helps to not take things too personally. When I slip up and make a big purchase, let’s say a nice bottle of Whiskey,I can allocate that to the cost of doing business.

Becoming a CPA also helped me see how society automatically assumes someone in my position would be good with personal finance.

Society today views people in my profession as being good with money. I find that ridiculous since I know my fair share of CPAs who are still living paycheck to paycheck.

With the way our society is structured today, we often view people as “rich and successful” based on their display of shiny toys or career choices. Luckily, books such as The Millionaire Next Door, teach us millionaires are more often driving used cars than the imported luxury models.

Being aware of this has helped me to identify true experts when it comes to financial advice. The truth is, having letters representing credentials behind your name does not guarantee you have my best interest at heart.

I continue to learn about personal finance from books and blogs because my professional career isn’t teaching me anything.

After all, if we spend 2,000 hours a year earning money, shouldn’t we spend a few minutes each week learning how to manage that money?

Distilled Dollar

19 comments… add one
  • Jon @ Be Net Worthy Oct 19, 2016, 4:41 am

    Matt, it’s true that I would assume that a CPA would be good with their personal finances. But, you are right that they are just like anyone else and they haven’t received any special education or training in that area, they are just good corporate accountants!

    On the other hand, once they decide they want to pursue financial independence, I would think that they would be killing it! Case in point, Matt and fiance! 🙂

    • [email protected] Smarter Decisions Oct 19, 2016, 5:57 am

      I was thinking the same thing Jon. I work with teachers who struggle to understand their health insurance policies and health reimbursement funds (let alone the whole retirement system tiers). But you’d think people trained in accounting would be good with their own finances. This is a great reminder about personal finance (and it’s sad they don’t teach that in these programs too!)

    • Distilled Dollar Oct 22, 2016, 8:19 am

      Thanks! There is a great amount of overlapping material that provides a great framework. But, applying that framework takes a conscious effort and hopefully more CPAs are doing so!

  • The Vigilante Oct 19, 2016, 6:20 am

    Whiskey is the cost of doing personal finance business? I can’t WAIT to tell Mrs. Vigilante!

  • Ricard Torres @ Escaping to Freedom Oct 19, 2016, 6:41 am

    Hey Matt, great article! It always makes me slightly angry that personal finance isn’t properly taught in schools, but it’s probably even more infuriating that it’s not taught well in finance school. It’s almost as though we’re not supposed to know how to manage our own money and optimise our spending… or as though it was in some people’s interest that we overspent. As “conspiracy theory” as that sounds, I really think education needs to address this from a young age.

    I would suggest making a few textbooks by collating some of the best articles in the PF blogosphere – including some from Distilled Dollar, of course. Job done!

    • Distilled Dollar Oct 22, 2016, 8:25 am

      If textbooks end up with a job well done then sign me up! My only concern with teachers being the guiding light in this scenario is that many teachers are not financial role models. In other words, who would teach the teachers?

      I agree with the conspiracy theory 100% but I feel it is just the way things are in our consumerist society. Happiness is something that is purchased, or so my TV tells me.

  • Jay Oct 19, 2016, 7:21 am

    Thanks for another great article Matt. I still can’t get past your first line: why don’t personal finance classes exist in schools? It’s pretty much the most important life skill of all!

    I also appreciate what you’re saying about treating your life as a business. When you spend time tracking cash flows and understanding where money is going and at what pace, you can really start to move the needle on your personal finances. After all, what’s measured gets managed! Thanks again!

    • Distilled Dollar Oct 22, 2016, 8:27 am

      I agree. If there was a personal finance 101 class in high school, I would have been the first one to sign up.

      Thanks for the comment Jay!

  • Matt @ Optimize Your Life Oct 19, 2016, 7:48 am

    It’s really interesting that CPAs don’t actually need to know anything about personal finance. I suppose it makes sense, since CPAs and CFPs are in different spheres of work, but I would have anticipated some basic level of coverage there.

    Thanks for the behind-the-scenes look!

    • Distilled Dollar Oct 22, 2016, 8:28 am

      The only real item that carries over is some basic income tax knowledge. Nothing on mortgages, or credit cards, or auto loans, or savings rates, etc. etc.

  • Financial Panther Oct 19, 2016, 9:45 am

    I really like how you talk about viewing your personal finances as a business. Ultimately, we’re all the CEO of our own little world.

    It is pretty interesting how your job makes people think you should be a certain way. I find the same thing when I tell people that our household consists of a lawyer and a dentist. People assume that we should be balling, have a huge house, drive fancy clothes, and basically making it rain.

    • Distilled Dollar Oct 22, 2016, 8:31 am

      People love to project their own world views. I think that’s part of being human so part of being wise is knowing when our projections are accurate or inaccurate to the truth. I think that’s a large reason FIRE is so difficult to comprehend, because many of these young millionaires in their 30s and 40s don’t look or act like millionaires on TV.

  • Tawcan Oct 19, 2016, 12:57 pm

    You’re so correct about CPA automatically get associated as good with their personal finances. That’s probably not true. The CPAs I know seem to have to dress up well for work every day and tend to drive more expensive cars. To me, they’re probably not so good with saving money. 🙂

    • Distilled Dollar Oct 22, 2016, 8:33 am

      I definetly am due for an upgrade on a few new work shirts, but I will drag out my no car situation as looong as possible. Plus, I love walking and riding my bike, so hopefully I never need to get a car solely for a work commute. Thanks for the comment Tawcan. 🙂

  • PatientWealthBuilder Oct 20, 2016, 10:58 pm

    Your last point is really funny. I know so many CPAs who don’t seem to have the personal finance behaviors that will cause them to succeed in their own finances. But despite that, many of them are brilliant managers of billions of dollars for public companies! Very interesting. I do find people overestimate my knowledge and skills just because of the CPA designation. But I’ll take it!

    • Distilled Dollar Oct 22, 2016, 8:36 am

      Hah I agree – I’m also happy to be a recipient of that estimation. I’ll do everything I can to earn it, but I do find it funny when someone is like, “oh he’s a CPA from big4, he’s a real smart guy.”

  • JP Nov 11, 2016, 10:43 am

    In high school I took a crib course called general math 2 in addition to the algebra, etc and business courses. All of my fellow brainy students looked down on this class full of jocks and trade school kids. After 2 years of algebra I wanted a general math refresher. That class had a section all about consumer financing and interest rate amortization. That was the first time I clearly saw the time Vale of money and the cost of borrowing. I went on to become a CPA and never forgot that consumer angle. So many of my classmates were very smart but got deep into debt as soon as they started working. I was able to borrow smartly and pay off car loans and mortgages years early. I could retire right now at age 50 but plan to work 5 more years to pay off our investment properties.

  • Kathryn Nov 19, 2016, 3:30 pm

    As a fellow CPA, I 100% agree with this message :). Recently, I took (and passed) the PFS examination, which is the “personal financial specialist” designation for those already with the CPA license as well. I loved studying these courses and learning more about personal finance, but there was a serious lack even in these advanced courses of basic things like purchasing a home and a car or a view of retirement outside of saving for 40 years and then living off 4%.

    I feel like my background as a CPA helped me immensely in my own personal finances, but really basically only in the aspect of knowing how to use a spreadsheet, an amortization schedule and abit of tax knowledge. There are so many other things out there that every single person should know. Taxes are a HUGE one (payroll and income taxes) as well as the basics of investing in retirement accounts. Creating a budget/cash flow statement and net worth statement are other big ones that everyone should know.

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