Timeless Life Advice for 2020 Grads
Both college and high school grads of 2020 are facing unprecedented challenges and uncertainty that have affected every part of “normal” life. Planning for the future has never been more difficult. Will campuses reopen in the fall? Will your job offer still be there? Is your career field going to survive?
Luckily, there are still some pieces of advice that transcend times of difficulty. No matter what happens with the economy, your college plans, or your career path, this advice should serve you well.
Start Saving Now
One of the things we’ve learned from the coronavirus pandemic is the importance of having emergency savings. So, as soon as you start your career after graduation, it’s important to put money in your savings account before paying other bills and spending money on activities and purchases. You can even automate your savings so you never have to think about it.
Over time, you should build your emergency fund up to cover three to six months’ worth of living expenses and keep that money in an FDIC-insured account that you can access at any time.
Make paying yourself first a priority for your financial life. Having that money in the bank can give you financial peace of mind and can help you navigate life’s ups and downs with more confidence.
Live Within Your Means
If you’re a college grad, you’ve probably gotten used to living like a college student—with roommates in a dorm or fraternity/sorority house, with your parents or relatives, or in a shared apartment.
When you get your first real paycheck, you might be tempted to start living a more expensive lifestyle, but your first job’s take-home pay might not get you as far as you think. It could be a good move to try to keep living as cheaply as possible for the next few years. For example:
- Don’t buy an expensive car; opt for an older, used model for a few years. Or take public transit, bike or walk to work.
- Keep saving money on housing costs by living with roommates.
- Cook at home instead of paying for takeout.
- Instead of paying for a gym membership, jog or bike in the park, where it also may be easier to social distance.
- Host casual board game nights at home with family or a few friends, instead of spending big money on bar tabs.
Making a basic budget and tracking how much money is coming in and going out each month can also help you stay on top of your financial health.
Build Good Credit Habits
You can use credit cards without worrying about credit card debt—if you understand how they work and follow good habits.
Credit Card Interest Rates Are High
Credit card debt is extremely high-interest debt. If you don’t pay it off completely each month, you’ll start racking up interest, which gets expensive fast.
Credit Cards Can Be Helpful Tools
If used correctly, credit cards can help your personal finances in a few important ways:
- Build your credit. Using credit cards responsibly and paying your bills on time can help you build a credit history, improve your credit score and qualify for other types of loans like car loans and home mortgages with a lower interest rate in the future.
- Become a “points” person. Some credit cards offer great rewards to help you save money on travel or earn cash back on everyday purchases. Some people have made a hobby out of maximizing their credit card reward points to travel the world for free, sometimes in luxury.
- Manage your month-to-month cash flow. Credit cards can give you some extra time to pay for a major purchase. For example, if you wanted to buy a new TV or pay for a vacation, you could buy it today with your credit card, and then pay it off next month when your credit card bill is due. Or you can even take advantage of a 0% APR credit card offer to avoid paying interest for a limited time.
Avoid Carrying Credit Card Debt
Credit card debt can grow very quickly. More than 44% of Americans have a balance on their credit cards, and total US credit card debt has reached $930 billion. Don’t make a habit of living off your credit cards or using it to pay for a lifestyle beyond your means.
Don’t be afraid to use your credit card, but use it responsibly.
Never Stop Learning
Never stop learning marketable skills or learning everything you can on the job.
This is your chance to try something different if you aren’t interested in climbing a traditional career ladder. What needs do you see in your community? Could you start your own business or become a freelancer? Today, some of the most successful people create their own career paths.
Save for Retirement and Learn to Invest Today
You might think you have time before you start worrying about retirement—you just graduated, after all. But you can start saving now and set yourself up to be much better off later in life. Think of it this way: the more time your money has to grow, the more well-off you’ll be.
Here are a few key retirement and investing strategies:
- Start contributing to a retirement plan. As soon as you have your first real job with a real paycheck, you should start contributing to a retirement plan. Your employer may offer a 401(k) plan. If they don’t, you should consider opening your own individual retirement account (IRA).
- Don’t wait until after you pay off your student loans. Even if you have student loans, you should still save for retirement every month, while paying down other debts. Why? Again, it comes down to compounding returns. Beginning to save for retirement just a few years earlier can have an exponential impact on the growth of your retirement savings over the long term.
- Max out your employer match. Many employers match your 401(k) contributions to help you save for retirement. For example, if you save 5% of your pretax income in your 401(k), your company might match 50% of that amount. This “free money” is a major job benefit, and you need to ensure you’ve set your plan contribution rate high enough to take full advantage of it.
- Open a brokerage account and learn how to invest. Over approximately the last 90 years, U.S. stocks have returned an average of 10% a year—as periods of irrational enthusiasm and steep, sickening declines tend to cancel each other out. Learning about investing will help you optimize your retirement strategy, and investing on your own in a brokerage account is a great way to help leverage your savings game overall.
Retirement might seem a long way off, but as soon as you have a steady income, start saving for retirement and investing for the future. Your future self will thank you.
Practice ‘CPR’: Community, Purpose and Resilience
You might be graduating into a time of unprecedented difficulty, but this generation is uniquely equipped to navigate the challenges. To build a successful career and a happy life, try to focus on the concepts of “CPR”: Community, Purpose and Resilience.
Build your community. That includes creating and nurturing relationships with good people and organizing people for common goals. Old friends and classmates will turn into valuable contacts, and every boss or coworker from your first job could potentially help you out later in life.
Be active on LinkedIn and stay in touch with people from school. They might matter more than money in the long run.
Finding a sense of purpose in your life and your work is imperative. People with a sense of purpose tend to be more focused and productive, so find your “why.”
You’ve heard the saying “money can’t buy happiness,” and it’s true. Always keep searching for meaning and building genuine connections and relationships throughout your life.
Resilience and reinvention are likely to be buzzwords in the business world for a while. What does that mean for you? Personal resilience is important, too. Go with the flow and focus on a spirit of agility and calm. Companies will be more likely to hire people with good interpersonal skills, who are flexible and adaptable, who are willing to learn and eager to grow.
The future might feel especially uncertain right about now, but when has it ever been certain? This isn’t the first crisis we’ve faced, and it won’t be the last. Regardless of what happens with the economy or unemployment rate, the world needs community builders and leaders. That’s what your generation is.
Congratulations to the Class of 2020. May you have a long and happy life of community, purpose and resilience.