May 25, 2017

Essential Financial Advice for College Graduates

My husband began his last undergraduate exams ever today. He graduates from the University of Virginia in a little over two weeks. As I approach this time with him from the other side of the ceremony, I find myself reflecting about how college graduates face a particular set of financial and life planning needs.

As they take their diploma many find they’ve also mysteriously taken the full status of adulthood. I know I did at my 2012 graduation.

I remember going to my parents and asking them, “Can you make a list of everything you do financially?”
“Are you serious?” they rebutted. I could see they were overwhelmed by even the thought of the task.

However, just the other day, I stumbled upon a Wall Street Journal article where they interviewed a number of “experts” in the field of finances to ask what “The Best Financial Advice for Young People Starting Out” is. I wish I had found such an article a year ago. Below, I’ve tried to summarize the best of their answers into clear bullet points and provide links to more in depth analysis of each idea.

  1. Know what healthy spending looks like: 35% long term savings / 65% lifestyle.
  2. Start saving now, especially for retirement.
  3. Don’t expect to live like mom and dad right out of the gate. 
  4. Make good decisions about the big things like what you drive and where you live. Avoid setting your lifestyle too high and permanently burdening your future.
  5. Get human capital—namely, the education, training, skills and experience.
  6. Build an emergency savings cushion.
  7. Start contributing to your company 401(k) plan immediately, maximize your contributions if possible and always get your employer match.
  8. You should be focused on systematically paying off any student loans or credit cards.
  9. Check your credit now to look for inaccuracies and to see how far your current credit score is from the ideal score for lending, 740.
  10. Start setting money aside each month toward your future down payment.

As a recent college graduate, I would want to tack on the end:

  1. Save your money in investments, not just bank accounts. You can do it.
    Open a brokerage account. Set an asset allocation. Rebalance in May.
  2. With great complexity comes great opportunity. Know when to seek the help of financial advisors, like tax preparers and fee-only financial planners.
  3. Open and use (at least) one credit card to get a credit history, but avoid bad credit.
  4. People in the third world live off mere dollars a day. Do not trick yourself: you could always save more.
  5. What seems too good to be true is. No return on investment is guaranteed.
  6. Ask politely and liberally for what you want. You do not have because you do not ask.
  7. Before age 30, find a spouse, a house, and a purpose.
  8. Post-college can be a lonely time, but don’t make it worse by being a hermit.
  9. There is a honeymoon period to every new endeavor.
    You’ll be infatuated, then disappointed, and then satisfied. Don’t give up early.
  10. Every day, the work you do matters.

What advice do you want to give to college graduates?


 

Photo used under Flickr Creative Commons

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About Megan Russell

Megan Russell+ is the Chief Operating Officer for Marotta Wealth Management. She studied Cognitive Science at the University of Virginia and now specializes in explaining the complexities of economics and finance. Megan loves formal logic, creative writing, and kittens.

Comments

  1. brenda mayfield fish says:

    Well done Megan, hope married life is treating you well. Brenda

  2. For those of you who are interested in this topic, Meg Jay — a clinical psychologist, UVA alum and assistant professor — is hosting a webinar on the topic called “The Defining Decade: Why Your 20s Matter and How to Make the Most of Them Now“. The webinar, based on her new book by the same title, will be May 10, 2013 at 12:00 PM – 1:00 PM EDT. Upon registering, they will send you a link to participate.

    Here’s an excerpt from her TED2013 interview:

    There are 50 million 20-somethings in the US — that’s 15% of population. And Jay wants them to consider themselves adults, and know that this period is as important for their development as the first five years of life. Because the first 10 years of a career have an exponential impact on how much money a person is going to earn. Love is the same way: Half of Americans are with their future partner by the age of 30.

    “Claiming your 20s is one of simplest things you can do for work, happiness, love, maybe even for the world,” says Jay. ”We know your brain caps off its second and last growth spurt in your 20s as it rewires itself for adulthood. Which means whatever you want to change, now is the time to change it.”

    So what can 20-somethings do? They can own their adulthood. They can invest in identity capital—courses, skills, friends—that add value toward who they might want to be. They can work on building a wide social network, instead of a tightknit one that doesn’t allow for outside opportunities.

    Jay explains, “Twenty-somethings are like airplanes, just taking off from LAX heading for somewhere west. A slight change in course on takeoff is the difference between landing in Alaska or Fiji.”

  3. This post was featured in the Festival of Frugality carnival hosted by Lance of Money Life and More.

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