June is typically associated with Dads and Grads. Dads for the celebration of father’s day and Grads for all of the recent graduates who have now enter the next phase of their lives.
Whether you are a high school or college graduate, you have some exciting, and maybe even scary times ahead. As a dad of three children myself, I understand. Two of my three children have graduated from high school, and my third is a year away. All three have goals of becoming college graduates.
To help ease some of those fears, I possed the following question to some of my fellow bloggers: What financial advice would you offer to a new high school or college graduate beginning their financial lives? What recommendations would you give to graduates? Include any books, blogs, apps, or other resources you believe would be helpful.
The response was the following list of fantastic advice. Congratulations and best of luck recent graduates, now on to one more reading assignment.
Advice for Graduates
Adebayo from Dr. Breathe Easy Finance advice for graduates:
Congratulations on a very important stage of life. Unfortunately, financial literacy is not taught enough to us in high school and college. Gosh! I wish one of those calculus classes were financial literacy class instead. I am a mathematician, yet, I am willing to let go of calculus. That’s how serious this is. If you have only one space left for financial advice, the best I can give you is to start thinking of building a very solid personal finance pyramid at a very young age.
It is never too early to start thinking of these things. To build a solid financial pyramid, you have to think like Maslow. According to Maslow’s theory, you have to meet your most basic level of human needs before you can meet your higher-level needs. So the first step is to get the necessary insurance. Do not skip on this step. Have solid auto insurance, disability insurance, life insurance, and health insurance (check your parent’s policy).
The next step is to start thinking of wealth accumulation. This step is quite simple, learn how to save money and learn how to invest money. Compound interest is your friend when you invest very early in life. You will be a millionaire at a very young age if you do.
The wealth preservation and distribution part of the pyramid can wait. Master those two base steps of your financial pyramid, and you will be far ahead of your mates. A book to get you started is Millionaire next door. This book will open your eyes to the fact that the majority of millionaires are regular people who do not look like one. I summarised it here.
Michael from Your Money Geek’s advice for graduates:
Interviewing successful people I learned there are no shortcuts or secrets. Success in life is a function of respecting and outworking your competition. The key is to invest in yourself and continuously strive to improve. The number one trait all successful people have in common is they do not say no.
Actors and celebrities don’t consider the size of a role; instead, they view every opportunity as a chance to network. The know bringing they’re a game to the small part may land them a big role down the road.
Camilo from the Financial Twins advice for graduates:
“Graduating from college at 22 is a pretty awesome experience. You’re finally entering the real world, and you never have to study for another test again.
But it can also be pretty scary. You no longer have student loans to fall back on to buy food or go out with friends. If you are lucky, you already have a job and will finally start to take the first steps in a new career.
All of the responsibility can be overwhelming, but there’s one thing all new graduates should know — the difference between rich and wealthy. When most people start their career, they are focused on a few things, but most have one thing in common, they want to be rich.
They realize that being rich means that they won’t have to worry about money and will be able to have whatever they want. There’s only one problem. They don’t realize that there’s a difference between rich and wealthy.
Being rich means that you have nice things: a big house, new cars, a garage full of toys. But being wealthy is even more powerful because it means you have freedom.
The wealthy don’t even worry about money because they have more than enough for anything they’d want. They also have something even more special, and they have the freedom to spend their precious time however they want. So if you are a new graduate, just remember one thing, if you focus on being wealthy, you’ll have a better life than you can even imagine.”
Riley from Young and the Invested advice for graduates:
When you’re entering the world after college, you need to understand what lies before you. Quite often, what you learned in school won’t always sync with reality. I learned a lot through my finance classes, like how to use a depreciation calculator, how to apply activities-based costing, what a Sharpe ratio is and tells you, and many other academic topics.
What I didn’t learn was the importance of saving for retirement or planning to accomplish your financial needs. Fortunately, I had parents well-practiced in living within your means, saving for a rainy day, and paying yourself before buying new things with newfound money.
My advice would involve a combination of those three concepts because they will lead to a better chance of having financial success. The earlier you can live by these tenets, the better because their effects compound with time.
Jarek from Time In Market advice for graduates:
Graduation is exciting but also scary. You’re entering a whole new world of jobs and finances and decisions. First, focus on getting a job that can turn into a career. Earning an income is important because your early years are the best time to start building wealth.
Read a good simple book about investing, something like The Bogleheads Guide to Investing. After that, start investing, the easiest path being via your company 401k if one is offered or an IRA. My suggestion is to take your first paycheck and make sure that at least 10% of it is going into investments automatically. You won’t miss the money if you never see it and you’ll get used to a lifestyle that automatically funds your retirement without you having to do anything.
That’s the best way to take advantage of compound interest and build wealth. Every time you get a raise, put at least half of it into savings and keep bumping up that number so that your financial future is secured for you without having to do much work.
That’s the best part about investing. The easiest automated path is the best you can get and setting it up is easy if you do it early and forget that money is even there. That way, once you hit your 30s or 40s, you’ll have a financial background that will allow you more flexibility in whatever you want to do at that point!
Ryan from Arrest Your Debt advice for graduates:
I am jealous that you are reading this at the beginning of your working career. You have the potential to be much better off than I am because I was not reading personal finance blogs until much later in life. With that being said, I encourage you to read the book, “The Richest Man In Babylon” by George Clason.
By looking at life through a different lens, you will begin to understand that you have the ability to build wealth and add value more than you ever thought possible. Continue to read and save at least 18% of your income towards retirement, even when you are in your 20’s. By doing this, you will be a multimillionaire when you retire.
Andrew from Wealthy Nickel advice for graduates:
“Your college classes taught you a lot about how to succeed in your chosen career path, but one thing that often doesn’t get taught is basic personal finance and investing. One of the best things you can do to set yourself up for financial success is to start investing NOW instead of waiting until your 30s or 40s. The power of compounding is on your side – you have 40+ years for your money to work for you!
Sometimes getting started is the hardest part. If you can just invest $1000 to start, you’ll be well ahead of your peers and on your way to financial freedom! If you don’t know where to start, make sure you’re taking advantage of your employer’s 401(k) match if you get one, and contribute as much as possible to your tax-deferred accounts (401k and IRA).
Make things simple – choose an index fund with low fees. If it sounds boring, you’re doing it right. As a recent college graduate, the best asset you have is time to let your investments grow.”
This is an excellent list of financial advice for recent graduates. Now I’ll add my thoughts. Please have a plan for your money. If you want to build wealth, you need to know where and your money is being spent. I’d suggest avoiding debt at all costs. Debt limits your choices and adds stress to your life.
Learn to save for things, like vacations, cars, or a house. It’s essential to have some type of cash saving for when life punches you in the mouth, and it will. Having an emergency fund makes that punch feel like a light tap.
If none of this excellent advice resonates with you, please consider this last one from the book Your Money or Your Life. We often traded our time here on earth for money. Our time on earth is precious. Don’t trade your time here on earth to make money to spend on frivolous things. Spend your time and money wisely and on things your value.
Best of luck recent graduates, we are rooting for you!
Brian is a Dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013. Who, with his family, has successfully paid off over $100K worth of consumer debt. Now that Brian is debt-free, his mission is to help his three children prepare for their financial lives and educate others to achieved financial success. Brian is involved in his local community. As a Financial Committee Chair with the Board of Education of his local school district, he has helped successfully launch a K-12 financial literacy program in a six thousand student district.