Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine it would go something like this:

Congratulations, future workforce! Finally, you’re armed with your degree and plans for the future. And guess what? Before long you’ll receive your first real paycheck. And soon after, a second one. Hopefully, you’ll have hundreds of increasing paychecks over the next several years. But here’s my first question: Are you prepared to actually live on those paychecks?

Regardless of your course of study, few of you know very much about personal finance. At their first day on the job, horticulture majors will quickly learn money doesn’t grow on trees. After seeing their only $100 bill go entirely to groceries, bioethics majors may revisit their former concerns about cloning. How about the aspiring physicist? He knows all about gravitational force, but zero about the most powerful force of them all: the miracle of compounding interest. The economics major has mastered supply and demand, yet knows precious little about what she can truly afford on her first-year salary.

Attention English, psychology, and music majors: the business and math majors don’t know anymore about personal finance than you do. They might even know less.

I was a business major. My first job? As a CPA. At a big-name CPA firm. My title? Personal financial planner! Yet I still knew nothing about money! Of course, I learned quickly; I had to in order to perform my job. But I also learned two more things:

First: everyone needed the financial education I was getting at work and, second: no one else was actually getting the information. Heck, most of my friends had no idea they were even missing the knowledge.

That won’t be the case for you. Not for this graduating class. I can’t teach you everything you need to know about money in the short time we have together, but why throw the baby out with the bathwater, right?

I’m a big fan of simplicity, so I am going to give you 10 things, 10 rules, to live by. Just 10. After all these years in school, what’s one more top 10 list?

[Additional parts of the speech are/have been released all the time. To keep reading, click here and then just read the next post]

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 2. To see the entire speech released so far, click here and read from the bottom up.

Rule 1: Tell your money to go to work.

As I said, before long you’ll be in the workforce. Yes, even those graduating at the very bottom of this grand institution will eventually receive job offers. And when you start working, you’ll begin to receive a paycheck. From that point on, for the rest of your life, you’ll have two choices. And trust me, they are choices. You can choose to either spend less than you make or you can choose to spend more than you make. If you spend more than you make, you’re taking on debt. That’s a fact. Think about it. It’s definitional: if you’re spending money you don’t have, you’re borrowing it. If you borrow money, you owe money to someone. And since the real world is full of people not as nice as your parents, they’ll charge you for the right to borrow money from them. That means that you owe not only what you borrowed, but also interest.

Graduates, interest is important. It’s a bold-faced term.

Of course you can choose to receive interest instead. You go down that path by simply spending less than you make. When you do so, you’re saving. When you put your savings into a savings account, it earns interest. That interest goes to you. It’s your money, and it’s money you didn’t have to work for. It’s money you receive simply because you put some of your money to work for you.

You will spend most of the next forty years working. Most of you will work hours longer than 9 to 5, and many of you will even work more than five days a week. And you will do this not for a semester or two, not for a year or two, but for decades. Why? Hopefully because you like what you do but, for most people, you will do it for the money.

Wouldn’t it be nice to receive money other than by working for it? By having it work for you?

You can choose to pay interest or to receive it. There will be many hard choices in life. This is not one of them. Choose to have your money go to work.

The earlier you take advantage of this lesson the more important it will be, thanks to the miracle of compounding interest. Let’s say that from the time you turn 21 years old, you save just $10 a day. If so, you can reach age 65 with about $1.4 million dollars. I hope it sounds easy. It is easy. Ten bucks should be a lay-up for any employed 21 year-old. One typically with no family to support, no large home, and relatively low taxes to pay.

In fact, it will arguably never be easier for you to save than right now. Look at it this way: last year, what did you make? So little it practically rounds to or actually is zero. So even if you get a job making three-quarters of the median class average, say $25,000 a year, that’s a $25,000 raise over last year. You’re unlikely to ever see a raise that big again. Last year you got by on Ramen noodles, Faygo pop, and Lord knows what else (Milwaukee’s Best, anyone?) Want to be able to save next year? Simple: live life a lot better than you did last year, but not like you really want to. Not like they do on television either.

The time for your own apartment in the top-tier building may come, and along with it the mid-range sports car, but if you want to get started on the right financial foot, you’ve got to first live rule number one: put your money to work. And, in order to do this, you’re going to need to spend less than you make. In fact, if you do this one thing repeatedly, if you only spend less than you make, you’ll be well-off, even if you screw everything else up. Well that, and if you don’t commit any major crimes.

This doesn’t mean a life of frugality. That wouldn’t be any fun. It’s also would not be sustainable. You’ve heard of all those folks on crash diets who have all their weight back on a few months later. Someone who tries a miserly life will be annoyed, discouraged, and, more than likely, at the mall buying crap they don’t need before too long. So instead of that overly frugal path, simply follow rule number two:

[To be continued]

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 3. To see the entire speech released so far, click here and read from the bottom up.

Rule 2. Don’t be cheap, be fiscally responsible.

Personally, I follow 10 simple saving strategies. I recommend you learn them all one day, but you’ve got parties to get to this afternoon. So I’ll just share one saving strategy with you now: Major on the major, minor on the minor.

Many financial experts feel that the problems of the world (and especially of young people) would instantly disappear if we could only get rid of our coffee shops.

Look, if you’re going to Starbucks five times a day, spending $100+ a week there, you’ve got problems. But your money problem isn’t the first one to address. (FYI, it’s called an addiction.) Of course, most people don’t use Starbucks that way, and so what the financial talking heads miss is that nobody—not even the most coffee-addicted person you know—is going to find ten grand a year by pinching pennies at Starbucks.

Instead, you’ve got to put major focus on major expenses, like your housing and car choices. The typical underpaid twenty-something simply can’t live on the same block as the manager two levels up from her or drive the car her boss drives. Not yet. When you commit to high housing or car expenses, you pay them for a long time. Therefore, that’s where you want to put most of your financial energy and discipline. Remember: just because someone will sell you something doesn’t mean you can afford it.

Still, day-to-day spending can make a difference, so it’s important to stay emotionally connected to your money. Most working adults have no idea how much cash they have in their wallets until they find themselves at a place that has the audacity not to accept credit cards. This disconnection matters because when you’re emotionally separated from your money, you spend more. Spending cash hurts—right away. Using credit cards is painless—until you get the bill.

Use cash as your primary source of day-to-day spending. When you see two options for something you need, one at $55 which is “good enough” and another at $89 that is “better,” spending cash means you’ll likely take the one for $55. Handing over three twenties to the cashier feels a lot better than saying goodbye to five of them.

By prioritizing what really matters to you, constant budgeting isn’t required. The beauty of following the saving strategies is that you save so much you don’t need to micromanage your finances. Budgeting can limit your desire for spontaneity, making it hard to keep at it. But you can get away without budgeting entirely if you simply commit to saving. After all, if you’re putting away 15 percent of your income, what’s the difference how you spend the other 85 percent?

The key is not to begin cutting all of your discretionary spending. Instead, you need to find a way to spend on the items you value the most. If it’s coffee, pull up a chair and enjoy. But if it’s not, simply keep walking.

The kinesiology major could probably tell you that walking is good for your future anyway.

On the other hand, those who studied American Culture could tell you that many years ago, another individual speaking to a new graduate spoke of the future importance of “plastics.” Turns out he was very close, but overshot. By just one letter. The right term is “plastic.” You probably already have at least one version of those 3.5” by 2” little pieces of plastic in your wallet with one of several possible bank logos on it, the card you got for “free” along with a “free” tee-shirt or “free” pizza. Maybe Mr. McGuire knew you’d have several credit cards, not just one, so that’s why he used the plural version. But either way,
[To be continued]

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 4. To see the entire speech released so far, click here and read from the bottom up.

Rule 3: Debt Sucks (your money away)

It turns out there really isn’t such a thing as free lunch: if something looks too good to be true, it probably is. So when the credit card company “gave” you the tee shirt or pizza along with the card with their logo on it, they weren’t being generous – they were being greedy.

Bummer.

Turns out that credit card is really expensive. That debt? You do have to pay it back. APR isn’t an abbreviation for “Any Particular Reason,” so you can’t say “I was going to pay for it later” and hope the bills will simply go away. As you will learn, the bills will quite simply go away when you quite simply just pay them off.

And the sooner the better. Every day you continue to owe that expensive debt is another day’s worth of interest you owe. It gets more difficult, not less, to pay back expensive debt, because it adds to itself. This is compounding interest in its evil form. You know pure evil, right? You’ve seen your arch-rival dance on your emblem at midfield or, worse, steal your girlfriend or boyfriend. Compounding interest is a wonderful thing when it’s working for you, but against you can be devastating. Choose to have it work for you. The less debt you have, the less it sucks.

[To be continued]

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 5. To see the entire speech released so far, click here and read from the bottom up.

Rule 4: Taxes on taxes are taxing

In the real world, you’re going to pay real taxes. You may have already paid some taxes, but you probably haven’t paid real taxes. You will pay far more taxes than you ever expected. It doesn’t matter how much money you make. Even those making way less than the class average; if it’s the first time you’ve had a job, you’ll be shocked at how much you will pay. Of course, the more you make, the more you pay; yet the initial shock still won’t go away.

There’s no incredible lesson here, so quit waiting for it. Sure there are strategies available to legally lower the impact of taxes, but quite honestly the most important thing for you, a new graduate, to understand about taxes is that you will pay them.

So when you’re shopping for a new car or apartment and you think about how much money you’ll be making once your job starts, be careful. If your salary is to be $36,000 a year, you won’t have three grand a month available to you. Not even close. It will be more like two grand. Crazy, but true. Far better to go in with your eyes wide open than to make the all-too-common mistake of a major irreversible financial commitment during that first summer only to find yourself struggling as your new debt starts to really suck . . . your money away from you. All this while despite you’re successfully keeping your day-to-day spending in check. Taxes are real and they can be very taxing, especially if you’re not prepared.

See, number four was quick. Not too much longer until you can throw your cap in the air and catch someone else’s

[To be continued]

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 6. To see the entire speech released so far, click here and read from the bottom up.

Rule 5. Use Protection

Was it Mom, Dad, an older sibling, or perhaps Kenny at sleep-away camp? Who first taught you about the birds and the bees? Whoever it was, they probably told you about the importance of protection as part of that same conversation. At least I hope so. If you don’t know what I’m talking about, well, let’s just say I don’t believe you.

Protection is important in the real world, and not just the kind they sell at the truck stop restrooms. No, I’m talking about insurance.

Insurance can be made to be very confusing, but it boils down to one simple rule: never risk a lot for a little. For the newly graduated, that means getting health insurance (even if you get a plan that covers little more than a catastrophe). Get renter’s insurance too since, for a couple hundred dollars a year, you protect everything you own, including the CDs you don’t use anymore thanks to Mr. Jobs and his partially eaten fruit.

And, despite what some people would have you to believe, life insurance will likely be important one day in the future when you have a kid or two who depend on your income. However, when the most dramatic financial impact felt by your untimely demise would not be your spouse or child, but rather by the owner of the convenience store where you get your midnight fix, you don’t need life insurance.

[To be continued]

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 7. To see the entire speech released so far, click here and read from the bottom up.

Rule 6: Take advantage of your benefits or you’re being kind of dumb.

Don’t like total candor? Sorry, wrong number.

Every company in America that pays you a wage will withhold Social Security taxes. They have to. It’s the law. Theoretically, Social Security is a retirement plan. I hope that works out for you.

As you’ll quickly learn, the Social Security tax you pay each paycheck isn’t actually saved for your retirement, it’s used. Immediately. Shocked? This doesn’t have a thing to do with Democrats or Republicans—this is the U.S. federal government we’re talking about. Bipartisan silliness.

While most of the Social Security tax money you pay goes to current retirees (likely including your grandparents), so far there’s been plenty extra for the feds to spend on things like bridges to nowhere, interest on the national debt, missiles, farm subsidies, and so forth. But way before you retire, Social Security taxes paid by workers in a given year will be far less than the benefits promised to retirees during the same year. Like I said, good luck with your retirement benefit from Social Security.

Many employers offer a 401(k) plan. A 401(k) plan is also retirement plan. But it’s very different than Social Security. With a 401(k) plan, any money saved goes into an account with your name on it. It’s there for your future. If it’s not there, it’s because you took it out, not because of government mismanagement.

Ironically, you must choose to participate in a 401(k) plan. Social Security, that the government make you do (I’ve looked for the opt-out form but can’t find it). The 401(k) plan though; your participation is up to you. Be sure to take advantage of your 401(k) plan. You can end up at retirement with a ton of money if you do. With Social Security, I don’t know. Do you?

[To be continued]

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 8. To see the entire speech released so far, click here and read from the bottom up.

Rule 7: Ira Roth is not your congressman

Ira Roth is also not the random guy who knows your name and though you really ought to know his, it’s been like two years since asking him to remind you of his name wouldn’t have incredibly embarrassed both of you.

A Roth IRA is the greatest thing since, well, plastics! Actually, it’s even better because, to the best of my knowledge, profits on plastics were never tax-free. With a Roth IRA, your money can grow and grow and grow, for the next forty years (or more), without you ever having to pay taxes on the account. New grads earning at least $5,000 this year can contribute up to that amount in a Roth IRA. Do so.  This year. No one ever gets into trouble during retirement because they saved too much when they were younger.

At this point, I’m guessing that you wish I would simply turn the conversation back to sex.  You’re thinking: “Sitting down with my parents to have ‘the talk’ was so uncomfortable” or “Man, I totally remember Kenny! That guy was crazy!” But the sex part of today’s talk is over.  Sorry about that.

<CLEAR THROAT>

You’ve perhaps debated whether size matters or if performance counts. Well, of course, it turns out the same thing is true with sex. I hear rumbling – were you already thinking I was referring to sex again? You people!  This is a money talk. No, we’re not going to talk about Eliot Spitzer either!

[To be continued]

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 9. To see the entire speech released so far, click here and read from the bottom up.

Rule 8: Maximize Your (Investing) Performance

The performance of your investments and the size of the amounts you save are of critical importance when it comes to achieving your financial goals. And while your financial goals may be fuzzy today, they won’t be for long. Let me give you some insight of your first goal about money, one that will hit you in about one week: The first financial goal of your life will be: You’d like to have more money than you actually have and ideally you’d like to have that money delivered to you before 5PM.

You’ll also have longer-term goals. Would you like to know your first long-term goal? Your first long-term retirement goal will become crystal clear to you by about 11AM on the first day of your first real job. Your first long-term financial goal: You’d like to have enough money to retire. Retire early. Like at age 29.

While I can’t guarantee you’ll be able to retire that young, I can tell you the two most important factors in determining when you will be able to, from a financial perspective, choose whether to go to work in the morning:

The first is how much you save every month.

The second is how you invest the money you save.

The more you save, the more you have working for you (remember rule 1?) The better you invest, the faster your money can grow. That’s why rule number 8, maximize your performance, exists.

[To be continued]

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 10. To see the entire speech released so far, click here and read from the bottom up

Rule number nine is a downer. Sorry. Ready? One day you will die.

Rule 9: Death happens.

Be prepared for it. If you had a crystal ball, you could spend your last dollar on your last meal. But it seldom works that way. Sadly, there will be those of you out there today who won’t make it to their 30th birthdays. Others will live to be 100. But since we don’t know who’s who, the best thing to do, the thing you must do, is to always be sure to live in balance.

Make sure you plan for your future, but never at the total expense of today, because tomorrow is promised to no one. One day, you will learn that. And it will be painful. Move forward in a way that you are always able to look back without regrets.

And finally,

[To be continued]