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What advice would you offer those graduating college this month? I imagine it’s a long list. Mine sure is. Here are just five of the items I’d emphasize:
Move quickly to build a financial cushion. That money should be in a regular taxable account, but it doesn’t have to be sitting in cash investments. If you’re comfortable, feel free to stash some of those dollars in stock funds, so you have a shot at earning decent long-run returns. The idea is to buy yourself some financial peace of mind and build a buffer that’ll soften the blow of life’s turmoil. As I’ve argued before, the dollars that bring us the greatest happiness are often those we choose not to spend.
Expect to change jobs and perhaps careers. That’s one of the reasons you’ll want that financial cushion. It’ll give you options if you decide you’re in the wrong job or the wrong career.
Buy diversified stock index funds—and don’t touch them. I wish I hadn’t messed around so much with my portfolio, imagining I knew something about the future that’s unknowable. If I could to it all over again, I’d buy a world stock-index fund, invest every penny I could and just let the money ride.
Pick your partner carefully. If your goal is to spend thoughtfully and save diligently, you need a partner who shares those goals—or your home life will be fraught with tension and your financial ambitions will likely be thwarted. Step No. 1: Pay close attention to how potential partners talk about money and behave financially. Step No. 2: For added insight into your potential life partner, also observe what the parents say and do.
Doubt yourself. By all means, approach your career and your personal life with a healthy degree of self-confidence. Nobody wants an employee or a friend who is racked by self-doubt. But when it comes to money, self-doubt is a virtue.
The fact is, none of us knows which investments will soar and which way financial markets are headed. We can never be sure the house we buy will appreciate handsomely, or the purchases we make will bring great happiness. That’s why we should try to insert a pause before pulling the trigger on financial decisions.
What a nice surprise! I can’t wait for the next one!
Concise and valuable. The important stuff in a nutshell.
The first one sort of includes “spend less and save more”, but I’d make that explicit. And I might add “understand the time value of money and the power of compounding” at the end, but let’s not be picky.
I am going to be sad when the last of Jonathan Clements’ pre-scheduled columns posts. He was a lovely light.
Make sure you start a yearly discussion with a financial planner. This will help confirm your plans, correct potential mistakes, and give you ideas you hadn’t thought about.
My priorities would be: 1) 401k contributions in a roth. 2) building upto a six month emergency account. 3) start a taxable and HSA account as discretionary funding allows.
Make your financial plan a remaining life plan of 70-80 years. First phase save, next phase spend.
Remember that tax effeciency and diversity are important. Start 401ks in roth, as income growths and tax brackets raise, add traditional. Finish with traditional and roughly equal amounts in roth, traditional, and taxable.
Invest in index funds and include tech like semiconductors and NASDAQ to a point you feel a little uncomfortable. Buy and hold.
Somebody stop me… I’ve learned so much these first 5 years of retirement. I made a lot of mistakes, but I’m getting back on track.
I miss Jonathan’s writing. I am sure many of us are. Always thoughtful and kind! Thank you, Jonathan!
I’m presuming this is a prior post of Jon’s as the current date is after his passing, but regardless, sound advice. I’d add (I have a relative graduating from university today) to expect that adversity will certainly cross your path, and that it will not be anticipated. It’ll be important at that time, after getting hit, to collect oneself and get off the mat. Perseverance, in life, love, career, can be a bigger contributor to long term success than pure smarts that wilt at the first encounter with adversity..
Oh, knowing Jonathan as us HD old timers did through this site this is writing he performed before his passing to still provide great advice, even from the grave.
Thanks for the Excellent reminders, this should be discussed in high school and again in college. These words of Wisdom are great guides to not only financial life but personal life. Thank you Jonathan.
The advice about “pick your partner carefully” especially stood out to me. I honestly “lucked out” because when I got married, I didn’t know enough about personal finance to really evaluate financial compatibility. Romance played a much bigger role than practical discussions about money, saving, spending, future goals, children, or lifestyle choices. Thankfully, my wife and I ended up on the same page financially, and I’m very grateful for that. I think many people, underestimate how important shared financial values are to a healthy marriage. There are never guarantees because people change over time, but starting on the same page certainly helps.
One piece of advice I would offer those graduating college this month is to continue learning about personal finance throughout life. Read good books, learn from trustworthy educators, and be careful about who you get advice from. Communities like HumbleDollar and Bogleheads have helped many people learn how to manage money wisely without the noise and salesmanship that often exist in today’s financial world.
On the subject of ‘expect to change jobs and careers’, I would add, “Life is not a straight line. Expect lots zigs and zags in all areas of your life, not merely your career. It will not go as planned.”
As usual, Jonathon always gives the the absolute greatest wisdom and advice. He has helped me , to no end, tremendously, and I will no longer try to guess the best investments , I shall only buy the total stock market global etf, and a short term TIP ETF, a short government bond fund, and an ultra short bond ETF. Thanks, so much. As I approach my seventh decade , his wisdom is even more imperitive.
How wonderful—and so like Jonathan—to pre-schedule this article, with more to come. I greatly miss him and really appreciate this “current” posting.
Thanks Elaine, Bogdan, and Jonathan. It is such a treat to read this. I especially appreciate the thread of humility throughout the article.
There is 11 more coming!
Great advice from the consummate planner. Thank you Bogdan or Elaine for assuring this post got published. And it’s a great reminder that Jonathan provided loads more timely advice to us all by making his Guide available for the click of a mouse. For those who aren’t familiar with it, I recommend a read-through. Jonathan covered every financial topic in his usual wise and engaging way.
11 more to come. All scheduled by Jonathan himself!
Ed, the Guide is such a wonderful resource and helped me so much through the years. Thanks for mentioning it. It can help any age, not just young people. Chris
Well, the thanks goes to Jonathan, who pre-scheduled a number of posts during his last couple of months.
Good to know and I’m sure we all anticipate the other pre-articles!
Thank you Jonathan! ❤️
I wondered…
Good advice! Our daughter graduates this week, but has one more year to go with her Master’s program.
She has been contributing to her Roth IRA for six years, all invested in FZROX (she’s young!) and also has a Fidelity high-yield savings account with a five-figure balance.
She had a summer internship in her field last year, and the company asked her to come back in January. She’s been working twenty hours a week, and will bump it up to thirty-five while working on her Master’s degree. She likes the people there, and they’ve been happy with her work, so she has a stable position coming out of college, which is great.
She has been with her boyfriend for around eighteen months now. When they first met, he played a lot of video games and had average grades. She told him she wasn’t planning on supporting a partner on her income, so he better get his butt in gear and get his grades up. He did.
They do seem compatible financially, so if they stay together things should be fine.
I can’t imagine being with someone who was reckless with money. Even at a young age, it would have been a deal-breaker for me, no matter how well we clicked in other areas.
My other advice is the be debt-free ASAP, including your mortgage. This earliest deft-free lifestyle will give you freedom of stress, flexibility, and options. So how are you to do that is to increase as much of your income as much as you can while you are still very young and able to do 2-3 side jobs.
Good luck and God bless.