Ten financial tips for graduates (and everyone else!)

As this is graduation season, here are some important financial lessons which graduates and everyone else can benefit from.graduation_cap_gown_diploma_postcard-p239275434123408938z85wg_400

Spend less than you earn. This is a key factor in building a financially secure life. Develop good spending habits.

Use credit cards and debt wisely. Buy a house that you can afford. Don’t be house poor. Monitor your FICO score, as it is a key factor in the interest rate you will pay when you need a mortgage or buy/lease a car. Check your credit report for free at least once a year. See my blog post,  Annual Reminder:  How to Verify Your Credit Information. If you get married, make sure to always have at least one or two credit cards that are only in your name, and not in joint name with your spouse.

Save early and regularly, regardless of your income. If your job offers a 401(k) or similar retirement plan, start participating and saving as soon as you are eligible. Increase your savings each time your income increases.

Treat both small and big purchases as important. They all add up. Spending $4.50 three times at week at Starbucks is over $700 per year. That could be part of a trip! The cost of your car, the house that you buy or apartment you rent will affect your financial future more than you realize. If you choose a car or house/apartment that saves you $100 less than per month for 50 years is a difference of $60,000. But wait….

Understand the incredible value of compound interest. If you save $100 per month by getting a cheaper car or smaller mortgage payment and it grows at 5% per year, the $60,000 saved turns into $266,877, with compounding. That is why you should start to save as early as possible for retirement and college for your kids. Even starting to save $50 or $100 per month can grow into thousands over time.

Use a financial advisor who you can trust or has been recommended to you. Would you be operated on by a friend or do it yourself? Your financial life is too important. The financial advisor should not charge commissions or use investments with back end loads. You should be able to understand them, their investment philosophy and how they are paid. Talk to them about financial issues all throughout your life.

Be grateful. Be grateful for the organizations that have played a big part in your life. Give back generously, with your time and your money, to the schools, camps, hospitals or other institutions that are important to you and your family. Your checkbook and credit card statements reflect your personal values. Do not be resentful about paying taxes. See my blog post, A different perspective on taxes, and my blog post, Giving Thanks, regarding the lottery you actually won the day you were born in the US, with all the opportunities you have.

Talk to those you trust about money and financial decisions. Talk to your parents, grandparents and others that you respect. Ask them about what they did right and what mistakes they made financially. Learn from their experiences, so you can avoid similar mistakes.

Invest for the long term by using low cost, globally diversified portfolio of mutual funds, which are not actively managed. Do not try to time the stock market. That is a losers game. Avoid hedge funds and investments you can’t understand. If it sounds too good, it probably is. If you want to buy some individual stocks, that should only be a very small portion of your investments. Do not be afraid of market drops, even large ones. The long term trend is up and has been for almost a century. It will continue that way, with bumps along the way.

Invest in yourself. It is the best investment that you can make. Be a life-long learner. Attend conferences. Buy books and read them. Create great experiences for yourself and your family.

If these ideas resonate with you, and you think others would benefit from them, please forward this email to your friends, family, kids or grandchildren.

Purely personal.…I am very proud and thrilled that my daughter graduated from high school last night and will attend Kalamazoo College next fall. My son graduated from Michigan State University in May and is starting his own video marketing firm in Metro Detroit. They have each accomplished a lot, grown and challenged themselves. They each left a lasting mark on their schools and other institutions which they were involved in. I wish them both continued success!








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