College graduations are a whirl of excitement wrapped in a sadness of goodbyes.
At the core, though, there’s hope.
It’s been three years since I attended a commencement ceremony, but the memory lingers. It was Duke University’s, and I was beaming as my niece accepted her Bachelor of Science diploma.
That day, singer-songwriter John Legend addressed the Class of 2021 in Wallace Wade Stadium, urging the Blue Devils to delight in the moment.
“Being together is the point,” he said. “Being joyous is the point. Celebrating is the point. We have so few moments to enjoy these rites of passage — to just revel in our accomplishments with the people we love.”
His final push was this message: Keep learning, be curious about other people, and let love guide you.
In the spirit of the wealth of knowledge I’ve scooped over the years as a financial columnist and author, I offer these tips to this year’s graduates.
Lay out audacious financial goals
Money may not buy you happiness, but it does buy you freedom. The goal is to have enough money to spend your life the way you want. That might mean prioritizing time with family and friends. Or soaking up sweet moments like vacations. Or having the ability to pursue hobbies and things you’re passionate about without being anxious about money.
Give yourself permission to dream
My dad always said, “You have to dream to get there.” Design a vision board with photos, either a virtual one or place actual photos on your desk that show places you’d like to go, where you hope to live one day, and even a cause you want to be able to support.
For years, as my motivation to save for things I wanted in my life, I have kept a photo of a beautiful farm in Virginia with views of the Blue Ridge mountains in the background as my motivator and a beach in St. Barths. It worked when I was in my 20s, and it still works its magic. I have achieved these things.
Make an actionable plan
For me, setting a dollar amount as my goal doesn’t motivate me as much as envisioning what it is I’m saving and investing for. These change as you roll through the years, so be nimble and ready to let some go to make room for ones you can’t even imagine right now.
The first step is building a budget. Once you’ve been working for a couple of months, take the time to run your numbers. By then you’ll have a grip on your take-home pay (after taxes) and your monthly spending.
Add up the basics, like your rent, utilities, groceries, transportation, student loans, and car loan. That’ll let you know how much is left over for discretionary spending and saving. Aim for low-cost living expenses where those fixed living costs are below 50% of your gross income.
Read more: Need a new budgeting tool? Try one of these 5 Mint alternatives.
Steer clear of the ‘I’ll pay it back tomorrow’ mentality
Debt is a dream killer and is the biggest roadblock to building a life filled with possibilities and options.
One in 3 Americans carries credit card balances from month to month, and that adds up. I got caught myself. After I graduated, I lived in New York City and spent far more than was reasonable on my reporter salary.
One of the fallouts of debt that’s frequently overlooked is it can trap you in a job simply because you need it to pay those monthly bills. That’s soul-sucking.
I admit this anti-debt advice will be tough for many new grads to follow. According to Fidelity Investments, 2 in 3 students will graduate with student loan debt. One possible helpline: A growing number of employers are offering student loan matching, thanks to the SECURE 2.0 legislation, which allows employers to treat student loan debt payments as if they are 401(k) contributions.
Read more: The best ways to pay off credit card debt
Save for retirement at work
You might be reluctant to set aside money that you can’t tap easily for years to come and rationalize that you need the dough right now for more pressing living expenses. I get that, but the automatic feature of a 401(k) makes it seamless, and when the money is skimmed off pre-tax, you hardly notice it.
Saving for retirement seems so far in the future, but replace the word retirement with life. You are saving for life.
To do this, take advantage of your employer’s 401(k) or similar retirement plan. The earlier you start saving, the more that money will compound and grow for you. So contribute as much as you can to your employer’s retirement plan, and don’t cash out if you feel pinched for cash or when you change jobs. More on this in a minute.
At the very least, set aside enough to qualify for your employer’s full matching funds if you can. Most employers require workers to save between 4% and 6% of their pay to get the full match.
Read more: How much can you contribute to your 401(k)?
Invest in a diverse mix of low-cost index funds
For most people, beating the market is unrealistic. An easy way to get started is to buy three funds: an index fund offering exposure to the entire US stock market; an index fund that will give you exposure to both developed foreign stock markets and emerging stock markets; and an index fund that owns the broad US bond market. Index funds let you grab the market return at the lowest possible cost.
At this stage of your life, stocks should be your priority. For a rough idea of how much, take 125 minus your age, and that’s what percent of your retirement savings should be earmarked for stock funds. The best strategy is to capture the market return at the lowest possible cost and the way you do that is through index funds.
If you really want to keep it simple, you might do what Jordan Belfort, author of “The Wolf of Investing,” told me: Stick to an S&P 500 index fund, which so far this year is up 10.99% and has gained about 10.7% on average annually since it was introduced in 1957.
Sure it sounds dull, but there are some sizzling tech stocks along with proven winners in the S&P 500 index, which includes Microsoft, Amazon, Alphabet, Tesla, Meta, and Berkshire Hathaway.
Read more: How to start investing: A step-by-step guide
Take advantage of a Roth 401(k) or IRA
Many of you will be starting off as a contract worker or working for an employer who doesn’t offer a retirement plan. About half of Americans are in that boat. Automating savings can help — even $25 per pay period that you set aside in an IRA that you open at a financial services firm such as Fidelity, T. Rowe Price, or Vanguard.
Kickstart your saving habit now. It’s not the dollar amount that matters. Once you get going, you’ll see you can do that, and you can increase it to $50, then $100, and so on.
Time is on your side: The average savings tenure of Fidelity’s 401(k) account millionaires is 26 years. What that means is that steadily investing over the long term adds up.
Ramp up your investment mojo
Take the time to learn how the stock and bond markets function. This will help you stay the course when the market gets rattled. There are several good books you might pick up, such as the bestselling “Get a Financial Life: Personal Finance In Your 20s and 30s” by Beth Kobliner, a noted personal finance commentator; Farnoosh Torabi’s “A Healthy State of Panic: Follow Your Fears to Build Wealth, Crush Your Career, and Win at Life.” or Brian Preston’s “Millionaire Mission: A 9-Step System to Level-Up Your Finances and Build Wealth.”
Don’t raid your 401(k)
I stumbled here. When I switched jobs at age 30, I cashed out my first 401(k). Imagining what that money might be worth today, decades later, is disturbing.
Build your emergency fund.
Most financial advisers suggest you set aside six months of living expenses for an emergency. But if you can gradually ramp up to a year’s worth, do. A money market mutual fund or a high-yield savings account is a smart, safe place to stash this money.
Read more: The best money market account rates and 10 best high-yield savings accounts
Be the CEO of your career
You will probably have lots of twists and turns in your career. I doubt it will be a linear one with one employer. So you need to keep your skills sharp and add new ones. Importantly, nourish your network by staying in touch with classmates and former colleagues from summer jobs and internships. Do this at every step of the way as you move through your working life from job to job.
You never know when you might be able to help them with their career and job search or vice versa.
Be proactive
Don’t wait to be asked to work on projects that interest you. Raise your hand. If there’s a training program that can push you ahead, ask to be included in it.
Go to industry conferences and meet people in your field. Find a mentor and work together to create your career path.
Be confident about negotiating for a higher salary, but do your research on what others in your position are paid and be clear on why you should get a bump up. You’ll need to show it with results, preferably ones that are quantifiable.
Give back
When you feel smothered and pressured on the job, get outside of your head and into the world. Doing something for someone else always makes you feel better. And volunteering can open up networking opportunities, so it could one day lead you to your next job.
Spend on life adventures
Spending for fun exploits has a different kind of payback. (And as my Irish father always said about money, “You can’t take it with you.”)
The summer I graduated from college, I shelled out $1,500 I’d saved from summer jobs to go on my first trip to Europe with my older brother. That experience has paid me back with decades of storytelling and memories that are priceless. For three weeks, we slept on trains and in youth hostels, lugging our knapsacks from town to town and country to country. I hope that you use a portion of any graduation check you might receive for a travel fund.
Read more: Best travel credit cards
Pause and laugh
Money aside, perhaps my biggest piece of advice is to pause from time to time and savor where you are right now. Be present for the conversation, the moon rise, the laughter. There is so much pressure to succeed and build wealth, that we forget to appreciate what’s happening now.
One more note about the value of laughter from this year’s Duke commencement speaker, Jerry Seinfeld: “Do not lose your sense of humor. You can have no idea at this point in your life how much you are going to need it to get through.”
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in The New World of Work” and “Never Too Old To Get Rich.” Follow her on X @kerryhannon.
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