It's graduation time, and congrats to all of you that have worked so hard and are moving on to the next stage of your life!
Unfortunately, higher education does not always prepare our young adults for the “real” world. When they begin their first post-college job, the habits they initiate will have an impact for years to come.
I'd like to share a letter I wrote to my partner David Rappaport’s daughter Leah, upon her college graduation a few years ago, sharing some life lessons.
Leah is a special young woman. At 18 months old she was diagnosed as being on the autism spectrum. She worked hard to meet her challenges, and graduated Magna Cum Laude with a degree in Mathematics from Carthage College. Upon graduation, she started work at Aspiritech, a non-profit company that hires adults on the autism spectrum to provide software testing and quality assurance services to corporate clients. She loves her job as a software testing analyst!
Congratulations on your graduation and new job. We are all so proud of you. You had many challenges to overcome and you did it with hard work, determination, and a cheerful attitude. What an accomplishment!
I have known you for the past 20 years and it has been a joy to see you grow up. You are now entering the next, exciting phase of your life, and I’d like to offer a few thoughts (some financial, some not so much) about starting out on the right track. After all, I’m in the advice business.
So, enjoy my Top Ten List for recent college grads. (There are actually 11 items because I am all about giving more than what’s expected – and I think you are too.)
1. Get started with that first job – don’t be too picky
Dr. Seuss said…
“You're off to Great Places!
Today is your day!
Your mountain is waiting,
So... get on your way!”
“Hang out ‘til your dream job
Lands in your lap.
And ‘til that day comes…
Nothing wrong with a nap.”
Your first job teaches you responsibility, the value of hard work, and the necessity of teamwork. So take that job and get started. You can move up from there.
2. Always come to work with a good attitude
No problem for you, Leah, always with your sunny outlook! Remember, your job is to make your boss’s job easier. Be on time, dress the part, have a smile on your face, shake hands firmly, turn off your phone and work hard.
Develop a reputation early for getting things done, and that reputation will stick with you for a long time. If you do these things, the other job requirements will fall into place.
As my first supervisor at Arthur Andersen said, “You should be at work five minutes before your boss and leave five minutes after your boss.”
Please don’t ask me… “Arthur Who?”
3. Understand your total compensation package
Salary is one component of your total “comp.” You should understand other benefits, such as health insurance, 401(k) retirement saving plans, and bonuses. Companies often offer creative benefits such as stock options, life and disability insurance, and even discounts on health club memberships.
Take the time to understand your full package and ask questions if you need help. It all may be a little confusing at first, but those benefits are for you – take advantage of them.
4. Know what comes out of your paycheck before you see a dime
Guess what - your salary divided by the number of pay periods does NOT equal your paycheck. There is money withheld for all sorts of stuff – retirement account contributions (more on that to come!), taxes, health insurance, etc.
Make sure that you have the proper amount withheld for income taxes. Again, ask for help if you need it.
And another congratulations is due – you are now paying into our Social Security and Medicare system. Really, your dad thanks you, because he’s not that far off from… Anyways, understand each box on your paycheck stub – including the taxes you are paying.
5. Pay yourself first
Saving for retirement forty-plus years away may seem like an odd concept, but you have such an advantage – time. Get started now. Contribute as much as you can to your 401(k) - your employer may match your contributions up to a certain percentage. That’s free money, so strive to get the full matching amount. Other savings options include Roth IRAs, and non-retirement investment accounts as well. Start building that rainy-day fund. Here’s an example of why…
If you started working in 1975, and invested $1 in stocks, by the end of 2020 when you were ready to retire, that original $1 would had have grown to $205.1 That’s the power of long-term investing.
Start investing early, stay disciplined, think long-term, and you’ll do great.
P.S. Your dad will help with the investment selections for your 401(k) plan. Take his advice – he’s pretty smart.
6. Have a plan for spending
I know you will live at home initially. Smart. Here are some other smart thoughts to get you started.
Have a plan for your paycheck that puts you in control. I’ve already discussed saving and investing. Now the tough part, spending. I’ve seen too many young adults spend without a plan in place, and that leads to problems— credit card debt or constantly asking a parent for help.
Start with a realistic budget. You are good at math, so this should be fun for you! Here are some general guidelines for spending your after-tax income. (That’s your salary, reduced by the amount withheld for federal taxes, state taxes, and payroll taxes. Be careful... after-tax income is not the net amount in your paycheck, because there are probably other deductions, such as health insurance, or 401(k) contributions.)
- 50% - the basics – rent, utilities and groceries, etc.
- 20% - retirement plan contributions, additional savings, or paying debt.
- 30% - the fun stuff – clothes, entertainment, eating out, etc.
Use Quicken or similar personal finance software to track and categorize your spending. It only takes a few minutes a week – and you will love the feeling of control.
Remember: You can have anything you want, but not everything you want, so spend carefully.
7. Keep a clean credit record and check your credit annually
It is important that you start establishing credit. Open a credit card account - one with low fees. Please, please, please NEVER keep a balance. ALWAYS pay off your credit card each month. That means ON TIME. Are you forgetful? Then set up an automatic payment system for your bills – but check each purchase to make sure it’s legit.
Don’t forget to check your credit annually through a free service such as annualcreditreport.com.
8. Clean up and check your social media
We are Facebook friends and I love all your posts and pictures. Continue to keep it clean! Don’t be surprised that potential employers will be taking a look. Your LinkedIn account also looks great. Love your picture. You go girl! Try to increase your connections on LinkedIn, review it often to keep informed about your friends and future contacts. I just sent you an invitation to connect. Please accept it promptly.
It’s never too early to think about networking. Keep in touch with your friends and contacts from school and elsewhere. Be helpful to them as they begin their journeys as well.
9. Don’t forget about your Health Care Power of Attorney
I know you filled out this form when you turned 18. Good job! It lets health care providers know who can make decisions for you in case of an emergency, etc. Remind your parents or whoever you have chosen to keep this in a safe place.
I realize it’s not the first thing that comes up when you are hanging out with your friends, but encourage them to have one as well.
10. Invest in your values and invest in yourself
This may be the most important to do of all. Too many young people (well, maybe older folks as well) focus their time, energy, and money on keeping up with the lifestyles of those who surround them. They see friends with new cars, clothes, jewelry, vacations etc. In the long run, all that “stuff” isn’t what brings happiness or contentment.
Spend some time thinking about what is important to you. Maybe it’s spending quality time with those you love, or giving back to your community. I understand how much it meant to you to volunteer your time and raise funds for cancer research. Keep up this wonderful work. It is part of who you are.
In addition to helping others, do take care of yourself. A health club membership isn’t an extravagance if you use it— it's an investment in your continued wellness. And the occasional mani & pedi, well that’s ok too!
11. Call your parents and grandparents
I know this is a time of independence and finding your way, but your parents and relatives will play an important part in this journey. They enjoy your calls and texts more than you can imagine. I know you’re busy, but even a hello will make their day!
They are so proud of you and truly look forward to the time they spend with you. Time flies… cherish the time you have with your parents. You are lucky… they are pretty great people.
Leah, I can’t put into words how proud of you I am today. I enjoy chatting when you call looking for your dad. When we talk, you always take the time to ask about Maddie and Isabel. I also love seeing that big smile on your face.
Keep that smile, because over the years ahead you’ll face your share of tough days. But don’t forget there will be more good ones than bad ones. And you have friends and family to see you through the rough times. Always.
I know you will be a success at anything you put your mind to. I can’t wait to see the next chapter of your life!
Shari Greco Reiches
Shari co-founded Rappaport Reiches Capital Management with one goal - to maximize the return on life for her clients. Please connect with Shari below. She loves to talk about investing, financial planning, and Barry Manilow.