Financial Advice Every New Grad Should Take

May 19, 2017

I’m at that age where my oldest child will graduate from high school next year and several of our friends have kids graduating from high school or college this month. It got me thinking about graduation speeches and what I wish someone had told me about personal finance when I was their age. So here is the world’s shortest, 3 point graduation speech:

Avoid debt, even student loans. My kids are blessed. We have scrimped and saved so that they will have enough to cover 4 years of costs at an in-state university. They know that if they go to a private school or an out-of-state school that any difference in cost is on them. My younger child is considering one out-of-state school but only because they offer in-state tuition if her test scores are high enough. I have a nephew from Texas who went to Kansas State University because the scholarships he received made it the same or less than in-state costs at the University of Texas. This won’t be the reality for a lot of kids, but the point is to do whatever you can to avoid debt for anything less than a masters degree – apply for scholarships, take a year off to work, work part-time during school, look into the military if that interests you or consider community college. This way you have the freedom of being debt free when you finish or if you do need advanced education or training, you will have less total debt and hopefully more income to counter.
Live on 2/3 of your income. The wealthiest relative I have was taught this at his small high school in southern Kansas decades ago. He always saved 1/3 of what he made. Today I translate that to putting at least 10% into the 401k – or at least what the company will match, then increase it by 1% each year until you hit 10% or more (automate this with the rate escalator if your employer offers it) – and then save 1/3 of your take home while living on other 2/3. If you do have student loan debt, I would count paying down your debt as part of the saving piece. This may mean some sacrifices such as getting a roommate, not buying a new car, not upgrading your phone every year, etc., but if you live this way from the start, you get used to it. Imagine how quickly your loans could be paid off or you could save enough for a house down payment or you could take that trip of a lifetime by dedicating 1/3 of your take home pay to these goals! This is also important for when you start a family. The challenge that a lot of younger Baby Boomers and Gen X’ers like myself faced is that for many of us our parents couldn’t tell us or show us how stressful life can be with two people working full-time, paying for child care, etc. This way, if you and your spouse/partner have each been living on only 2/3 of your income all along, you can much more easily afford child care or if one of you decides to cut back to part-time for awhile or take a couple of years off, it won’t blow up your budget.
Have a side hustle. My best friend realized last year that he could no longer coach his kids’ teams since they were both in high school, and he found himself with a void in his life. For years he was busy but fulfilled from coaching kids – he loves sports and he loves being around kids. To fill the void, he decided to try officiating as a way to stay around youth sports and get paid and he LOVES it! He has an outlet for his passion and the extra money is going to help put his kids through college. It is ideal if you can find a hobby that pays, but even if it doesn’t pay, we all need something outside of work. One way or another, whether it is for pay or volunteer, your life will be richer and more rewarding and it will make those inevitable rough days at work much easier to deal with.

Congratulations to the class of 2017! There are a lot of other important life lessons in the real speeches you will hear but I hope that when it comes to your money you remember to avoid debt, live on 2/3 of your income and have a side hustle! May you never lose faith in yourself, your future or your fellow Americans.

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