When you receive this letter, you will not be the least bit interested in saving money. You will believe that money is easy to come by and you will one day make lots of money. I’m here to tell you that despite going to a great University, earning an MBA from a Top 20 Business School, and later a JD from a Top 20 Law School, you will NOT be raking in money hand over fist. In fact, you will be knee deep in student loans and you will owe hundreds of thousands of dollars. Yikes! Allow that to settle in. Take a deep breath and calm down. That’s not how the story ends because you won’t allow it to end that way. Also, I have some advice for you that will help you out.
- Invest Early
You do not know the least bit about investing – I know. But you can learn and I’m here to teach you. Here is some real basic stuff that can get you started. I cannot say enough about investing early. Check out any stock market chart and look at how it inevitably grows. The Dow Jones, the S&P 500, and the Nasdaq – they all have upward trajectories! If you invest, your money will inevitably grow. That’s easy enough to understand, right? Also, there’s this thing called compound interest, and this is when your interest actually makes interest. So if you invest early, the money will grow with the market and the interest will compound. It’s a no-brainer. I know that growing up you won’t have much money, but whatever money that you receive from your parents for birthdays and Christmases should be saved and invested. Please do not go out and waste your money on video game systems and stuff that is just instant gratification. Save and invest!
Another thing that I will tell you is to be patient. You cannot watch your investments everyday – it will drive you crazy. You need to have a long-term money plan. If you’re patient and don’t touch that money, you will be able to celebrate and enjoy your money soon enough.
- Open a Vanguard Account
Now you’re wondering how and where to invest. Nobody in your family or your social circle will talk about it so you won’t know where to begin. So let me qualify the above by saying that you should not invest in individual stocks. If you do that, then you are subject to the risks that any one stock might not perform. It’s basically gambling. My advice would be to go open a Vanguard account and invest in some exchange traded funds (“ETFs”). These are investments that basically cover the entire market – this way you’re not exposed to any one stock and your investment will grow with the market. It’s not the sexiest way to invest, but it is safe and safe is good when it comes to money.
- Educate Yourself About Money
When you are growing up, and when you get to high school, you will be better off if you spend less time thinking about partying and more time thinking about money. I know it doesn’t sound fun, but trust me, you’ll thank me later. There are great websites that I have found later in life that I wish I had found earlier. These websites are free, educational, and they will open your mind up and show you the right way to think about money. The theme of these websites are financial independence and early retirement. Now, while you might think that going out with friends and running up crazy bar tabs is a good use of your time and money, I’ll tell you now that educating yourself about money will go a long ways. Check these websites out and try to apply some of their lessons to your management of money:
- Get a Job During High School and College
Your parents are going to encourage you to focus solely on academics. They will support you financially so long as you focus on school and they will tell you not to get a job. I’m going to jump in here and tell you to get a job, any job. Now that we’re older, I will tell you that you need to get a job for a number of different reasons: none of which is necessarily the money. First, you need to get a job to learn discipline. If you work while you’re going to school, you will learn the important life lesson of time management. And don’t worry, you’ll have plenty of time to do homework. From your future self – let me tell you that high school and college are not that difficult, and you can spare some time to have a part-time job. Second, you need to get a few jobs at an early age to learn what you do and what you do not like. Over the course of your career, you will have many different jobs. The first job you take will not define the rest of your career trajectory. Please take the opportunities to broaden your horizons and see what type of different jobs are out there.
That’s it for now, and I’ll write a Part 2 in the coming days. But that should be a good start. My takeaway message to you is that you need to start thinking about money differently than you currently are. If you are smart, you can do good things with your money. If you’re not smart, you’ll be in a world of hurt. After college and grad school and when you are getting married, you’ll thank me for showing you these life lessons early on because those are the times when you’ll wish you saved and invested more.
Trust me, I wouldn’t lie to you.