It is commencement week at Kellogg. Yesterday, I processed into the commencement ceremony with my faculty colleagues and watched the graduates receive their degrees. It was a terrific event. Seeing young, talented people embark on a new phase of life with energy and excitement is inspirational.
Each year I offer graduates some financial advice. I’m not entirely sure how this tradition started. I teach marketing, not finance, after all. This advice is more from experience and observation than academic financial theory.
Most of my recommendations haven’t changed over the years. Invest steadily, little by little. Buy stocks, a mix of individual names and index funds or ETFs. Hold onto things forever. You can read some of the prior recommendations here and here.
This year, I will focus on four things.
This is the foundation. Save some money. It is tempting to spend a lot of money when you get a new job. Going out for dinner and drinks can be costly.
My advice: live on less than you earn. If you do this, you’ll be able to save some money, and this can go to paying down debts or investing or giving. You’ll also have a smaller burn rate, so if you lose your job, you’ll be able to stretch out that severance payment.
To minimize your expenses, focus on the big numbers: housing and cars. If you get an inexpensive place to live and drive a cheap car you will be in good shape.
Having some financial reserves gives you freedom to move. If you are financially secure, you can walk away from an ethically questionable boss, or go after an exciting but risky opportunity.
I’ve always believed that eliminating debt is a good policy. I don’t approach it with quite the enthusiasm of Dave Ramsey, but I am 100% in favor of working quickly to pay down and eliminate loans.
Financially, it is a smart thing to do. Here is my view: if someone believed that lending me money was a good financial decision for them, then paying back that loan is an even better financial decision for me. They stepped up with no certainty that I would pay back the money. I know I’ll be paying back the loan, so the rate of return must be attractive.
Now technically some debt might be a good thing. If you took out a mortgage a few years ago and you are paying 3%, you can invest funds at perhaps 5% instead of paying down that loan and make a little bit after tax. Perhaps you can deduct the interest on the loan. I wouldn’t get too focused on these small returns. Just pay off the loan.
You are your biggest asset. Your career success will determine your financial future. So, invest in yourself. This might involve getting a career coach, or an editor to proofread your presentations. Perhaps you need some training on how to create tight recommendations. If you are doing zoom meetings, be sure your background sends the right message (FYI – a copy of Kellogg on Marketing and How to Wash a Chicken will add a nice touch).
Investments in your personal brand will pay back over time.
There is a lot of research out there on happiness. One learning is that things don’t create happiness. Friends create happiness. And a spirit of generosity. And gratitude.
So be generous. Support causes that you care about. Remember that you are lucky in your success; you’ve been helped by many people, and you’ve been fortunate to have reached this point. Help those coming along and those that haven’t been as blessed.
If a friend asks you to support a cause that is important to them, give, quickly and happily. You don’t have to give a lot, but if you contribute, it communicates that you heard them, and you are there for them. If you don’t give, it communicates that you don’t care about their cause or about them. Don’t miss the opportunity to help someone.
Commencement is a remarkable phase – there are new adventures ahead. Take time this week to celebrate and thank those who have helped you along your journey.