Six Step Financial Advice: Beyond the High School and College Years!

Congratulations!  I know you’ve already heard that from family and friends, but after four years of high school or college – or more if you have obtained an advanced degree, you deserve it.  And the well-wishing cheers go beyond Johnny or Jane – Well done, Mom and Dad!

 A couple of weeks ago, my wife and I hosted an afternoon BBQ celebrating our grad’s conquest – a high school diploma.  As all parents, we are so relieved and proud at the same time, it was a wonderful day to share.  We also attended numerous other grad parties over the last four weeks and we found ourselves following a similar pattern.  When we saw his/her Mom and Dad, we were not going to miss the opportunity to praise them.  They had done a fantastic job raising their son/daughter, now a young adult filled with optimism and ready to take on the world.  Mom and Dad had also earned a place in the spotlight. 

While at the various parties, I couldn’t help but be reminded of the movie The Graduate and one of the most memorable scenes in 20^th century pop culture.

If you haven’t seen the 1960s classic, an oblivious college grad, Ben, played by Dustin Hoffman, is offered some shallow advice. “I just want to say one word to you, just one word.  Are you listening?” family friend Mr. McGuire asks him. 

And then he says it: “Plastics.”  Ben looks totally bewildered by the advice as if to say what the heck are you talking about?  

Ben is smart, but he’s unmotivated and lacks direction.  I believe kids are different today, but for someone like Ben, yourself, or your children, it can still be a daunting task to transition from school to a career.  

Speaking of school, I recently read a great blog piece titled, “Student Perspective on Freshman Year of College Realities”.  I will print it will give it to my daughter before she leaves for school this fall, I encourage everyone with incoming college freshman to do the same.  The article speaks of expectations, both realized and those that were not.  

 But what about college?  You’ve just graduated from college…what are you going do now? 

You’re leaving your dorm and entering the best job market in years.  The unemployment rate just dropped to 3.8% in May, tying the lowest reading since record keeping began in the early 1970’s.   According to the Bureau of Labor Statistics, for the first time on record, today’s graduates are entering the job market where the number of job openings exceed the number of candidates looking for work.   Be thankful for that.   

Now, let’s look at some steps that can bridge the divide between cramming for exams and the new challenges that lie ahead. 

1.  Social and business networking 

Or as I call it, making new friends. Many of you have jobs lined up, others may not be so fortunate. You may be moving across town. Or, you may be headed to new city. It’s both an exciting and frightening prospect.

Whether you will remain in close contact with familiar faces or not, it’s time to meet new people. Being in community and connecting with new folks will go a long way in helping to ease the pressure and loneliness of your new environment. New friends not only allow for a robust social life, but these contacts may lead to new business opportunities.

 Don’t go into a new venue thinking, “What can he or she do for me?” People will see through you, and it’s hard to make a good second impression. Instead, build relationships. That’s “business-speak” for making genuine friends.

 2.  The dorm is no longer an option 

You may move back home, and if you do, it’s only fair that you pay rent. 

Another thought–get out on your own and rent an apartment. You’ve lived with roommates in college, so consider getting a roommate or two to share your new place. You’ll save hundreds of dollars each month and you won’t be coming back to an empty place every evening. 

One young man I know purchased a condo and rents the second bedroom. Not only does it reduce his monthly outlays, but he has someone helping him pay the mortgage and he's building equity. 

3.  Time to budget 

You may be earning more money than you’ve ever made. But your expenses will blossom, too. It’s important to balance the inflow and outflow of cash. 

Write down your daily purchases. Create categories that match your spending pattern–rent, utilities, entertainment, student loans, and so on. It’s important to know how you spend so you can create a realistic budget. 

You want money at the end of the month, not month and the end of the money. 

Money problems are sometimes unavoidable. They create unwanted stress. I get that. But needlessly digging a financial hole will create needless stress.

 4. Manage your debt 

That brings us to the next topic–credit cards. Many of you have them. They are a great convenience, but pay them off at the end of each month, period. The first time you are unable to pay off the card, STOP using it until the balance is zero. 

Many cards have extremely high interest rates. Once trapped under the weight of a credit card, the struggle can last a lifetime. I’ve seen it before. 

You may have friends who sport flashy new cars. The new car smell will wear off, but the payments won’t. That may not be an issue for you if you live in an urban environment. Fun times are within walking distance or a Lyft ride. 

However, your friends may love to post beautiful pictures from exotic vacations on social media. 

Be careful not to fall into the same trap–trading memories for debt. Vacations offer new experiences, but you’ll be much happier if they have been paid for up front. 

5.  Good debt and bad debt 

Debt used to buy an asset like a home is good debt, since the asset is expected to appreciate over time. Debt invested in productive assets is good debt, i.e., a rental property. A reasonable outlay for a car is acceptable. Credit card debt is not good debt. 

Many of you have student loan debt. Student loans are an investment in yourself. But they can also feel like a burden when the payments come due. 

I’ve seen various stats. Here’s one from the Wall Street Journal.  According to the Department of Education data, the typical student borrower owes $17,000, and the number of those who owe at least $100,000 has risen to around 2.5 million, nearly 6% of the borrowing pool. Let’s get these under control. 

Timely student loan and credit card payments will put you on the path to a high credit score. That not only translates into lower interest rates when you need to borrow, but some prospective employers and landlords will check your credit history. Too many bad marks and you’ll find that job or place to live is off limits. 

6.  One thousand dollars saved is one thousand dollars earned 

Short-term savings earmarked for a vacation, an emergency, or a down payment on a home will give you a sense of comfort and satisfaction. 

Now, let’s talk longer term–retirement. You’re young and I understand retirement may feel like another universe. But let’s look at it through a shorter-term lens. 

You’ve reached the age of 32 and you have nothing set aside in a retirement account. Feeling a little queasy now? Things just got real. 

Please, take full advantage of your company’s 401k and any match by your employer. In addition to the tax benefits, you’ll soon create a sizable nest egg.

 Saving just $300 a month for 10 years at a modest 7% return would grow to $51,300. Are you more ambitious? $500 will grow to $85,500 in 10 years; not bad for someone who just turned 32. Any employer match will ease the burden on you.

If the starting points seem too high, start at a lower rung and gradually boost your monthly savings. It’s easier than you think. 

If you need assistance on any of the points I’ve shared, my team is happy to assist. Some items may take effort, but they will pay enormous dividends. 

Table 1: Key Index Returns

Source: Wall Street Journal, MSCI.com, MarketWatch, Morningstar

MTD returns: Apr 30, 2018-May 31, 2018

YTD returns: Dec 29, 2017-May 31, 2018

*Annualized

**in US dollars

I hope you’ve found this review to be educational and helpful. If you have any concerns or questions, please feel free to reach out to me. That’s what I’m here for. 

As always, I’m honored and humbled that you have given me the opportunity to serve as your financial advisor.

Phil E. Gose

Portions of this article were created with the assistance of Horsesmouth, LLC 

The views expressed are not necessarily the opinion of FSC Securities Corporation, and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Individual circumstances vary. Investing is subject to risks including loss of principal invested. No strategy can assure a profit against loss. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.