• Daniel Lee

4 Financial lesson for graduates and graduating students

Updated: May 9

First of all, congratulations on completing your University Education! You are finally done grinding for more than 15 years within the education system and that is an achievement by itself.


Unlike my other articles which are mostly guides and analyses, this article is written more as a reflection piece and to provide some of my opinions regarding what is next after university.


The things I will be sharing in this article are derived mainly from my observation of my client’s experience and the outcome of the decisions that they made to get to where till where they are today when they engage me for their financial planning.


Hopefully from the experience of others who have been through this part of the journey that we are now, you will be able to draw some insights that will help shape your life after graduation and most importantly make better decisions that you will not regret 10-15 years down the road.


It’s okay to not know what you are interested in

“What interests you is involuntary” – Jordan Peterson.

As humans, we cannot control what we are interested in. Furthermore, the only way we would know what grabs our interest is if we are adequately exposed to it.


Let’s be real, you’ve just graduated.


The bulk of your time in school is spent studying or pursuing co-curricular activities to beef up your portfolio in preparation for graduation. How much exposure do you have to find what you enjoy doing AND would like to pursue it as a career?


It is okay to not know what you want to do after graduation. In my opinion, what is not okay is if you settle for something that you do not enjoy without taking the effort and risk to expose yourself to other areas that may grip your interest.


However, exploration comes at a cost (literally). To be able to afford “trying” new things, you first need to be financially prepared to ensure that your basic livelihood and the livelihood of your dependents are taken care of in the event when things go wrong.


Do not get comfortable with $2,000 to $4,000 monthly salary

As a financial planner, I have the luxury to work with people from vastly different backgrounds, net worth, and income levels. Over time, here’s what I realize:


While $2,000 to $4,000 gross salary is sufficient for someone single. It is by no means desirable if you would like to start a family in the future. Sure, it may be borderline sufficient, but a lot of compromises and sacrifices must be made to your standard of living to be able to get by.


Furthermore, for graduates especially, every increment beyond a certain income level will make a significant difference to your ability to achieve financial freedom or retirement in the future.


Think about it, Person A who’s earning $3,000 may have sufficient disposable income to prepare for his short-term plans (i.e. marriage and property) but he would not have enough for his long-term retirement.


On the other hand, Person B who’s earning $5,000 will have more than enough to prepare for both his short-term plans and long-term retirement.


Assuming that Person A saves $1,000 a month and dedicates $500 for his retirement while Person B saves $2,000 and dedicates $1,500 for his retirement investments.


With a return of 6% per year, the difference of $1,000 per month becomes significantly drastic that could make or break their retirement plans.

Lesson learned: Long story short, it is okay that you start with a lower starting pay, but you should not get comfortable with it and should work at improving yourself to be able to command a higher paygrade.


It pays – literally – to plan and prepare ahead

While everybody is unique and leads a very different lifestyle, the type of life stages that we would have to go through is somewhat similar (fortunately or unfortunately).


That said, it is foolish for you to turn a blind eye to the events that have a high probability of occurring as the years go by. Things such as

  • Settling down with a partner

  • Getting a property

  • Having children

  • Getting hospitalized

  • Contracting a critical illness

To give you an analogy, if you know that a truck is coming from the opposite direction, would you make an effort to get out of its way or just simply stand there and pray that the collision won’t kill you.


Similarly, if you know that these events have a high chance of occurring in the future, would you make an effort to ensure that you are financially prepared for it or simply wait for the bills to crush you?


What I realize is that generally, people who are young and single are most prone to getting caught off guard as they lack the visibility to see themselves going through the things that people generally go through when they are attached. As a result, they tend to not think about it and address it “when the time comes” – which more often than not is too late.


Once again, whether you make a conscious effort to plan and prepare for things that have a high probability of occurring as the years go by will make a difference in how well you fare financially in the future.


Let me explain: Assuming that person A and B both needs $80,000 for their marriage and renovation in 5 years' time.


Person A takes a conscious effort to save and prepare for the $80,000 while person B did not bother to prepare it and had to rely on loans to pay for his needs.


Assuming a return rate or interest rate of 4% per year…

With a simple act of planning and preparing ahead, person A is now $12,545 ahead of person B. You get the point.


Lesson learned: You will get paid to plan and prepare ahead while you will have to pay if you don’t.


Money matters because it grants you options

In my opinion, I believe that a lot of problems in life can be solved with money. I would go as far as to say that not having money creates more problems than having money.


The reason is that having money grants you the option to focus your time, attention, and resources on addressing the problems you are facing in life.


On the other hand, if you do not have any money, you will not have the luxury of time to work on these problems because you would be busy making the damn money to make ends meet. As a result, the problem that you have will only snowball over time.


As graduates, you have the advantage of the time to accumulate your wealth and position ourself in a way that allows you to dedicate your time and attention to other areas of your lives as and when you need it.


This is an advantage that I think we should not underestimate.


While you still can, you should milk the sh** out of it and grow your wealth as fast as possible before the other problems in your lives start to kick In as time goes by and you progress to the next stage in life.


Because when the problems start to surface, you would be thankful that you have the option to take time off and address this problem and not let them snowball into greater problems down the road.


Lesson learned: Grow and accumulate your wealth as fast as possible – sustainably of course – while you still can before you run out of time to do so.


What’s Next? What should you be focusing on?

Your focus now, as a graduate or a graduating student, should be to find your direction in life and accumulate sufficient wealth to enable you to do the things you want without being bound by the dreadful thought of not having enough money.


Based on my observation, clients who are more financially successful are those who focus on increasing their income and make a conscious decision to plan and prepare ahead to avoid having unwanted surprises that will compromise their financial progress.


Once again, let me stress the point that you should not get comfortable with a $2,000 to $4,000 income. It makes a HUGE difference over time, especially in the realm of wealth accumulation.


As an advisor, what we can provide for our clients are:

  1. Greater visibility as to what you should plan and prepare for

  2. Tailor a financial plan that delivers the performances you need

  3. Multiply your wealth through investments

Regarding the third point, you have to realize while investment performances are relative, the nominal effects it has on your portfolio differ greatly depending on your invested capital.


A 100% return on $50,000 is just $50,000. Whereas a 100% return on $500,000 is $500,000. Even though both person A and B earned the same percentage returns, the nominal result of their performances is drastically different.


You get the point.


So yeah… this took me longer to write than I originally expected (╯°□°)╯︵ ┻━┻.


I hope what I’ve shared with you regarding my observation on my existing clients would help you understand a little bit better what you should be focusing on and what are pitfalls you should avoid if you want to achieve financial freedom.


Please share this article with your friends who have graduated or are graduating!


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Daniel is a Licensed Independent Financial Consultant with MAS and a certified Associate Wealth Planner that provides:

Disclaimer:

This article is meant to be the opinion of the author and is for information purposes only.

This article should not be seen as financial advice

This advertisement has not been reviewed by the Monetary Authority of Singapore

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