What is the most important financial lesson that young graduates should learn?
I have learned over the years that every dollar counts and it adds up. Start making smart financial decisions now, not when you have to. This will create healthy financial habits and give you peace of mind during tough times in life because you will have your savings to fall back on.
Pay off your debts and don’t use credit cards unless it’s an emergency. $5,000 credit debt, with a 22% APR means you are giving away $1,100 in interest to the credit card company every year. This is very important, don’t do it! You must live within your means. Create a budget, and do all you can to stay within it. Credit card debt is very hard to get out of. After you are debt-free, build an emergency savings account with 6 months of cash reserves. If your monthly expenses are $3,000 per month, you should have $18,000 as cash reserves.
You want to partake in your retirement plans being offered through your employer. Even though most retirement plans contributions come from your paycheck, it is still a great benefit to take advantage of. After you have built your cash reserves, you should put your long term savings to work in the market. You don’t want your long term savings to be sitting in a savings account as it’s losing to inflation and your real return will be negative. You might have intermediate term goals, for example to save to buy a home in 3 years. Work with a financial advisor to create a plan to meet this goal. Since 3 years is not long term, an advisor will guide you in how to invest these funds prudently.
What advice would you have given to your younger self when you graduated from college?
Looking back at my last 10 years of being a professional after graduating from college, I have learned that you must have passion for your line of work. Passion will drive your effort and it will make it much easier to get up every day and give it your all. I don’t believe you need to ask for permission to pursue your goals. Sometimes quitting your first job or changing careers will make you think about the judgement of others and what family or friends might think. You don’t need their permission to put yourself in a better situation.
Put yourself in challenging situations early in your career. Challenges will stimulate growth and can present you with some of the greatest opportunities. Take opportunities to swing the bat, after gaining experience you may be able to hit home runs. If you follow your dreams and take risks then failure and disappointment will be part of life. Don’t let it kill your spirit.
Most importantly, take care of yourself. Understand the pillars to living a well-balanced life. Take time to take care of your body, mind and soul. Take part in specific activities to ensure you are attempting to create a well-balanced lifestyle. Some of the well-known examples are working-out, eating healthy, meditation, and yoga. Taking care of yourself and living a well-balanced lifestyle will add to your professional life.
What advice would you give to students interested in a career in Finance?
I believe working in Finance can be an amazing experience. It is a very challenging field to be in and there are many different types of jobs that are available. The key to be successful is to stand out with your knowledge base. That does not stop with your college education. Financial news is ever-changing therefore you have to commit to this career every day. Specialize in your field and earn the credentials to make yourself stand out. CFA charter holders are globally recognized and most CFA charter holders work as Analysts. CFP credentials is also highly recognized and is used by financial planners and advisors.