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.
- Know what healthy spending looks like: 35% long term savings / 65% lifestyle.
- Start saving now, especially for retirement.
- Don’t expect to live like mom and dad right out of the gate.
- 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.
- Get human capital—namely, the education, training, skills and experience.
- Build an emergency savings cushion.
- Start contributing to your company 401(k) plan immediately, maximize your contributions if possible and always get your employer match.
- You should be focused on systematically paying off any student loans or credit cards.
- 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.
- Start setting money aside each month toward your future down payment.
As a recent college graduate, I would want to tack on the end:
- Save your money in investments, not just bank accounts. You can do it.
Open a brokerage account. Set an asset allocation. Rebalance in May.
- With great complexity comes great opportunity. Know when to seek the help of financial advisors, like tax preparers and fee-only financial planners.
- Open and use (at least) one credit card to get a credit history, but avoid bad credit.
- People in the third world live off mere dollars a day. Do not trick yourself: you could always save more.
- What seems too good to be true is. No return on investment is guaranteed.
- Ask politely and liberally for what you want. You do not have because you do not ask.
- Before age 30, find a spouse, a house, and a purpose.
- Post-college can be a lonely time, but don’t make it worse by being a hermit.
- There is a honeymoon period to every new endeavor.
You’ll be infatuated, then disappointed, and then satisfied. Don’t give up early.
- Every day, the work you do matters.
What advice do you want to give to college graduates?
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