STRONGBRANDS    Professor Tim Calkins, Kellogg School of Management

In less than two weeks, more than 500 students will graduate from Northwestern University’s Kellogg School of Management. While I teach marketing strategy and branding, each year I provide some financial advice to the graduates.

If you follow my blog this will be familiar. Some things change over the years, but the core concepts remain.

Save

The most important piece of advice is also the simplest: Save some money.

If you save up funds, you will have less stress and more options. A financial buffer gives you the freedom to take risks. You don’t have to worry about paying the electricity bill and buying dinner when you have a nest egg of savings.

It is important to start saving right away. Money compounds in a most constructive fashion.

You may be tempted to delay saving until your income increases. Don’t do this. Unfortunately, expenses rise over time, too. As you move ahead in your post-business school life, you will accumulate costs. Kids are a joy but a major financial drain; owning a home is satisfying but full of unexpected expenses.

So live a frugal life. Keep an eye on the big numbers: housing, cars and meals. An expensive apartment, a new Tesla and a taste for fine dining can consume even a hefty income.

Buy Stocks

The best way to invest your money is to buy stocks. Index funds are great—and I have several—but individual stocks are even better. Buy a collection of securities and hold on. Don’t ever sell.

Buying individual stocks has three advantages.

First, it is a very low-cost approach. You can buy a stock for $5 or $10. Once you own a stock, you don’t pay additional fees. A mutual fund will charge a fee every year.

Second, if you hold an individual security you will never pay a capital gains tax. When your time is up, your heirs might owe something, or not, depending on the estate tax rules in place at the time. During your life, the gains just build. If you are tax savvy, you can make charitable contributions with your appreciated stock, avoiding taxes.

Third, it doesn’t really matter what you buy. You can just pick randomly. Some of your stocks will go up a lot, many won’t do anything and others will decline. It is hard to predict. Overall, things should work out. Worst case, if a firm goes bankrupt you can deduct the loss on your taxes, and the government will offset much of your loss. Established firms that pay a dividend will be lower risk. I would avoid new outfits like Snap.

The first stock I bought was State Street Bank, back in 1995 when I was working for Kraft Foods. Over the years it has been up and down. It currently is worth 9x what I paid. The dividends have kept rolling in, year after year. Since 1995 I’ve paid nothing in fees and no capital gains taxes. I hope to hold the shares for another fifty years or more.

Watch the Downside

We all like to think that things will go well and—happily—they usually do.

Still, trouble is never far away. In recent weeks a friend’s nephew passed away abruptly, another friend lost her job and another was diagnosed with cancer.

Protecting the downside is key. Don’t focus exclusively on the upside. Buy some life insurance—term policies are cheap. Get some disability insurance. Make sure you have good health coverage, keep some cash on hand, and pay down your debts.

If you prepare for the tough times, you will be better equipped to handle them when they arrive. You don’t want to be worried about money when dealing with big issues.

Give Back

Remember to be generous with your resources. Support causes you care about and help people. When friends and colleagues ask you to contribute to a cause, always make a donation.

Contributing is the right thing to do. If things in your life are going well, know this is not the case for everyone. Many people are struggling.

Donating is also rewarding. Research tells us that people feel great when they lend a hand. We are wired to care and help.

It also builds relationships. If you support a friend’s cause, you strengthen the connection. In the long run, relationships have far more value than money.

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This all isn’t complicated; the challenge is actually implementing these ideas. Get off to a quick start and stick with it.

Good luck.

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