College graduation ceremonies are a whirlwind of excitement mixed with the sadness of farewells.
But there is an underlying hope.
Although it was three years ago that I attended the graduation, the memory remains vivid. I was overjoyed when my niece received her Bachelor of Science degree at Duke University.
That day, singer-songwriter John Legend addressed the Class of 2021 at Wallace Wade Stadium and urged the Blue Devils to enjoy the moment.
“It's about being together,” he said. “It's about rejoicing. It's about celebrating. There isn't much time to enjoy these rites of passage, to just rejoice in the achievement with the people you love.”
His final message was to “keep learning, be curious about others, and be guided by love.”
He draws on the wealth of knowledge he has accumulated over the years as a financial columnist and author to offer these tips to this year's graduating class.
Set bold financial goals
Money may not buy happiness, but it can buy freedom. The goal is to have enough money to live your life the way you want. That might mean prioritizing time with family and friends. Or indulging in sweet moments like vacations. Or having the ability to pursue your hobbies and passions without worrying about money.
Give yourself permission to dream
My dad always said, “If you don't dream it, you'll never get there.” Design a vision board with photos, either virtual or physical on your desk, of places you want to go, places you want to live one day, and even causes you want to support.
For years, I've hung pictures of a beautiful farm in Virginia with the Blue Ridge Mountains in the background and a beach on St. Barts to motivate me to save for the things I want in life. It worked for me in my 20s, and it still works today. I achieved these things.
Make a workable plan
For me, having a vision of what I'm saving and investing for is more motivating than having a monetary goal. These things will change over the years, so be nimble and be prepared to part with some for things you can't imagine now.
The first step is to create a budget. After you've been working for a few months, take the time to calculate it. By then, you should have an idea of how much you take home after taxes and how much you spend each month.
Add up your basic expenses like rent, utilities, groceries, transportation, student loans, car loans, etc. This will tell you how much money you have left over for discretionary spending and savings. Aim to keep your living expenses low so that your fixed living expenses are less than 50% of your total income.
read more: Need a new budgeting tool? Try these 5 Mint alternatives.
Avoid the “I'll pay it off tomorrow” mentality
Debt is a dream destroyer and the biggest obstacle to building a life full of possibilities and options.
One in three Americans carries a growing credit card balance each month, and I'm one of them. After graduating, I was living in New York City and spending far more than was reasonable for a reporter's salary.
One of the often overlooked negative effects of debt is that it can be soul-sucking, trapping you in a job simply because you need it to make the monthly payments.
We admit that this debt prevention advice is hard for many recent grads to follow: According to Fidelity Investments, two in three students graduate with student loan debt. One possible solution is that more and more employers are offering student loan matching, thanks to the SECURE 2.0 Act, which allows employers to treat student loan debt payments as 401(k) contributions.
read more: The best way to pay off credit card debt
Saving for retirement at work
You might feel uncomfortable setting aside money that you can't easily spend for years to come, and justify it by saying you need the money now for more pressing living expenses. I get that, but the automatic features of a 401(k) make it so seamless that you'll barely notice when the money is taken out before taxes are deducted.
Saving for retirement may seem like a distant future, but think of retirement as life: you're saving for life.
You can do this by taking advantage of your employer's 401(k) or similar retirement plan. The earlier you start saving, the more that money will grow with compound interest. So contribute as much as you can to your employer's retirement plan, and don't cash out if you find yourself short on cash or change jobs. We'll explain this in more detail later.
If possible, put aside at least enough to qualify for full employer contributions. Most employers require employees to save 4% to 6% of their salary to qualify for full contributions.
read more: How much can you contribute to a 401(k)?
Invest in a diversified mix of low-cost index funds
For most people, beating the market is unrealistic. An easy way to get started is to buy three funds: an index fund that provides exposure to the entire U.S. stock market, an index fund that provides exposure to both developed and emerging foreign stock markets, and an index fund that holds the entire U.S. bond market. Index funds allow you to capture market returns at the lowest possible cost.
At this stage in life, stocks should be your priority. A rough estimate would be 125 minus your age, and that's what percentage of your retirement savings should go into stock funds. The best strategy is to capture market returns at the lowest possible cost, and the way to do that is through index funds.
If you want to keep it really simple, as Jordan Belfort, author of “The Wolf of Investing,” told me, stick with an S&P 500 index fund. The fund is up 10.99% so far this year and has returned an average of about 10.7% per year since its introduction in 1957.
Sure, that sounds boring, but the S&P 500 index is home to some proven winners, such as Microsoft, Amazon, Alphabet, Tesla, Meta and Berkshire Hathaway, as well as some hot tech stocks.
read more: How to start investing: A step-by-step guide
Take advantage of a Roth 401(k) or IRA
Many of you will start working as a contractor or for an employer that doesn't offer a retirement plan. That's the situation for about half of Americans. Automating your savings can help. Even putting away $25 each pay period into an IRA with a financial services firm like Fidelity, T. Rowe Price or Vanguard can help.
Get into the habit of saving right now. It doesn't matter how much you save. Once you start, you'll be able to save money. Then you can start saving $50, $100, and so on.
Time is on your side: The average millionaire saves for Fidelity's 401(k) account for 26 years, meaning investing consistently over the long term can pay off big time.
Increase motivation to invest
Take the time to learn how the stock and bond markets work, so you can stay on track when the markets churn. A few recommended books include best-selling Get a Financial Life: Personal Finance In Your 20s and 30s by well-known personal finance expert Beth Kobliner, A Healthy State of Panic: Follow Your Fears to Build Wealth, Crush Your Career, and Win at Life by Farnoush Torabi, and Millionaire Mission: A 9-Step System to Level-Up Your Finances and Build Wealth by Brian Preston.
Don't trash your 401(k)
I ended up here by accident. I cashed out my first 401(k) when I changed jobs at age 30. It's scary to think how much that money could be worth today, decades later.
Save up an emergency fund.
Most financial advisors recommend setting aside six months' worth of living expenses for emergencies, but if you can gradually build that up to a year's worth, do so. A money market mutual fund or high-yield savings account is a smart place to keep this money safe.
read more: Best Money Market Account Interest Rates and The 10 best high-yield savings accounts
Be the CEO of your career
Chances are, your career will have lots of twists and turns. It probably won't be a linear journey with one employer, so you'll need to keep honing your skills and picking up new ones. It's important to keep in touch and nurture your network with classmates and former colleagues you met during summer jobs and internships. Do this every step of the way as you move from job to job.
You never know when you might be able to help them with their career or job search, or vice versa.
actively
Don't wait until you're asked to work on a project that interests you – raise your hand. If there's a training program that could get you going, ask to participate.
Attend industry conferences and meet people in your field. Find a mentor and chart your career path together.
Be confident in negotiating a salary increase, but make sure you research what others in your position are making and are clear about why you should get a raise — and back that up with results, preferably quantifiable results.
Giving back
If you feel suffocated or pressured at work, get out of your own head and into the world. Doing something for someone else always makes you feel good. Volunteering opens up networking opportunities and might lead to your next job one day.
Spend your life on an adventure
Spending money on fun things pays off in other ways (and as my Irish dad always said, you can't take money with you).
The summer after I graduated from college, I took my first trip to Europe with my brother, using $1,500 I'd saved up from a summer job. The experience paid off with precious memories and stories to last for decades. For three weeks, we slept on trains and in hostels, and backpacked from city to city and country to country. When you got your graduation check, use part of it for your trip.
read more: Best Travel Credit Cards
Stop and laugh
Money aside, perhaps my biggest piece of advice is to stop every now and then and savor where you are. Listen to the conversations, the moonrise, the laughter. There's so much pressure to be successful and build wealth that we forget to be grateful for what's happening right now.
Jerry Seinfeld, who delivered this year's Duke University commencement speech, had another thing to say about the value of laughter: “Never lose your sense of humor. At this point in your life, you'll never know how much you'll need it to get through.”
Kelly Hannon is a senior columnist for Yahoo Finance. She is a career and retirement strategist and author of “Taking control over 50: How to succeed in the new world of work. And, “You're never too old to be rich.” Follow her on X Kelly Hannon.
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