It is graduation week at Kellogg! Later today, students will walk across the stage, receive their degrees and head into the working world.
For the past few years, I’ve posted some words of advice for the graduates, and I’m continuing the tradition. Today, I’m focusing on finances (I posted some similar financial advance in 2017). Next week, I will post my thoughts on building a strong personal brand in my Inc.com column.
In a few weeks, something wonderful will happen: you’ll get a paycheck. You will transition from just spending money – for tuition and trips and drinks – to earning money. It will be tempting to celebrate with new furniture and avocado toast, but I would like to suggest that you should instead get busy laying the groundwork for your career and life.
This is the most important thing. Put aside some money. Lots of it, if you can. A career in business is not like being a professor with tenure (although I don’t have tenure, I can imagine what it would be like)
– you could be fired at any moment. You might find yourself dealing with a demeaning boss or a toxic work environment. Maybe you will tire of traveling five days a week.
If you have money saved up, you will be ready for the bumpy times. You will have the freedom to walk away and look for the next big thing, start a new venture, or pursue a career in politics. You never want to be financially dependent.
So save. All the time. Once you have some money in the bank, pay off your debts.
The only way you can save is to limit your spending. So rent a small apartment or buy an inexpensive house. Don’t order from Uber Eats every night. Hold off on the new Tesla.
Remember that a big mansion looks great, but it brings with it insurance costs, maintenance expenses and real estate taxes. All of this limits your saving and increases your burn rate – making you more dependent on having a big income.
The stock market is an amazing thing – you can in hundreds of different companies at almost no cost. Over time, stocks tend to do well. So buy them.
Index funds are diversified, and cheap. You don’t need a financial advisor to put money into the Vanguard 500 index fund. You don’t need Wealthfront or Betterment. Just send in a check!
Individual stocks are great, too. Remember that if you buy an individual stock and hold onto it, you will never pay a fee and never pay a capital gains tax. If the stock goes down, you can sell it and deduct the loss from your income. Just be sure to diversify.
Roth IRAs are the best accounts. If you put money into a Roth, it can grow for decades and decades, completely tax-free. Amazing.
Give back, As a Kellogg MBA, you are at the top of the world’s economy. Remember that many smart, hard-working people will never get the opportunities you will, so be generous and helpful. Giving will also improve your life; the data is quite clear that when you help others, you feel better, too.
If a friend or colleague asks you to support their charitable cause, always say yes. Even a small donation will build your relationship. If you are there for someone when they ask for help, they may well be there when you ask. You can’t beat the ROI on that.
And, it goes without saying, give to Kellogg. During your time at Kellogg, you benefitted from the efforts of many, many donors. In the years to come, you will benefit from Kellogg’s success. We are all part of the Kellogg brand.
If you save, invest, live modestly and are generous, I am confident that you will have a rewarding, satisfying life, and you will help make this world a better place.