An open letter to new college grads

Congrats! You have just completed an important stage of your life. It's over. You aren't a college kid anymore. I repeat, you aren't a college kid anymore. Your sensibility must change. That's what always needs to happen when you complete a stage of your life. When you complete your career and retire, then your sensibility will need to change then too. It's your ability to shift your thinking and actions quickly, that will allow you to survive, and better yet, thrive.

You will have friends that keep their college kid mentality too long. Just don't let it be you. You will/should have a finite, repeatable income. In college, you most likely either lived off of student loans, which you will now pay for, or you lived off of your parents' income. Either way, it's time to take the training wheels off. The temptation is to delay reality. You may want your parents to continue to support you until you "get on your feet" a little bit. Don't do that. Cut the cord. The longer you drink from the money teat of your parents, the harder it is to break the addiction.

Base your entire financial life on this pie chart. No matter how much money you make, you will never have more than 100% of your income to live off of. On top of that, if you have student loans to repay, then you will have to reduce spending across the board in order to get rid of these financial anchors. It's quite possible that your student loans will occupy up to 20% of your take home pay. Don't try to avoid this by deferring your loans. Deferring your student loans is a really bad idea. Student loans have a way of hanging around for twenty years. Don't let this happen. Try to pay them off within seven years. This means that you will need to pay more than the minimum payment. Do this.

In addition, here are 10 other quick tips to help you make the right decisions from the jump:


  1. Like your new income? Cool, but It isn’t all yours. Meet your Uncle Sam. You’re right, he is creepy, but you still need to break him off. Pay the man. Taxes suck, but you need to get over that and pay them.

  2. Start your 401k ASAP. Time and money are your best friends. Use them together by allowing time to help you grow your retirement fund. The sooner you invest (appropriately), the more time can help you.

  3. Don’t spend over 25% of your take home pay on housing. Get a roommate if you have to. Don't make a terrible housing decision. It could crush you for years.

  4. Your friend that appears to be “doing the best” isn’t. Don’t be like him. He's eventually going to learn from his mistakes. You need to learn from his mistakes right now.

  5. Always save at least 10% of your take-home pay. If you always do this, then you will never be broke. You need a savings account that you don’t touch with at least one month’s expenses. Once you accumulate one month worth of expenses, take a break, and then save three months worth of expenses.

  6. Don’t go out and buy a new car right away. Many people do it. Many people are wrong. Try to keep your transportation budget below 15% of your income.

  7. Don’t cash a paycheck. Never a good idea for a 23 year old (read: anyone) to carry around a few hundred/thousand dollars.

  8. Buy your parents something nice for the first Mother’s Day or Father’s Day while you are employed. It’s the right thing to do.

  9. When the times comes, don’t listen to the guy trying to sell you the engagement ring. He isn’t your accountant, financial planner, or friend. 3 months my ass.

  10. Don’t be in a hurry to accumulate all the things that you have ever wanted. I am guessing that you never have wanted to get kicked out of your apartment because you can’t pay rent. Take your time. The goal isn't to buy more, it's to need less.


You don't need money to be great. And being great doesn't mean that you will have money. Just be smart, be patient, and work hard. The rest kinda takes care of itself.

Good luck. Don't mess this up.

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