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Adrian Mastracci, president of KCM Wealth Management, says "Let me tell the graduates a short story about four money tips. They are simple and essential in helping them achieve their financial aspirations." |
Vancouver, BC (June 26, 2006): Congratulations and best wishes to all the 2006 graduates. From high schools, colleges, institutes, universities and other avenues of higher learning.
An unknown author once said, “We cannot direct the wind but we can adjust the sails.”
Adrian Mastracci, investment counsel at Vancouver’s fee-only KCM Wealth Management, comments, “Let me tell the graduates a short story about four money tips. They are simple and essential in helping them achieve their financial aspirations.”
Many students require some financial help during their school years. It was true in my day, and I think it’s more true today.
A lot of parents know this all too well. It’s quite easy to rack up education loans in the $50,000 to $100,000 ballpark.
I was fortunate to be accepted by General Motors into their engineering school. That meant I had a job when I was not attending school. As well, I didn’t have to incur loans.
Together with the help from my Mom and Dad, GM provided me the opportunity to expand my index of learning. I still had some cash in the bank in 1972 after my MBA graduation.
I’m very grateful for all the help I received. But now to adjust the graduating sails:
1. Your human capital
Your education has helped expand your intellect, known as “human capital”. Your task, over time, is to convert it to “financial capital” on your balance sheet.
Hopefully, you’ll devote ample time to finding what makes you tick. What job pursuits make you happy and excited. Finding the passion that really motivates you.
It sure makes it easier to get up each day. I can attest to that. That passion not only provides oodles of personal satisfaction, but is also instrumental in converting your human capital.
I found my passion during my third year of university. There I was, happily aiming at a career in electrical engineering, until I took a required personal finance course.
Then the lights went on. My engineering wheels slowed and finance started to take flight. The rest is history. Fortunately, my engineering training is really helpful in guiding the financial flight plans.
2. Pay yourself first
One very wise habit is to pay yourself first. Start as soon as you can and aim at 5% to 10%.
Allocate some of your earnings to savings. Perhaps by automatic deposit. It hurts less if you don’t see the money.
Discipline yourself to a steady savings habit that you can sustain. Build an emergency fund that approximates three to six months of expenses and use it as a cushion if necessary.
Don’t fret about its rate of return. A simple saving account gets you started. Just open it at an institution that has not lent you any money.
3. Avoid debt traps
Don’t fall into the dreaded debt trap. It’s the quickest and surest way to financial ruin. Not a pretty picture.
I still receive at least two monthly requests to sign up with those tempting, must have, platinum credit cards. You’re probably inundated with these offers. And it may get worse.
However, in my book, student loans are still one of the “good” debts. They helped accumulate your human capital.
You know the drill. Pay yourself first and you’re likely to repay the outstanding loans faster. Better yet, you may need to borrow less often.
4. Learn to invest
You may have learned a lot in school about personal finances. Maybe you’re fully conversant with modern portfolio theory. But, that’s only the first half.
The next half is to learn how to invest. It’s called experience. Like the trauma of the first lousy investment or bear market mauling. Believe me, they will come. More than once.
Do yourself a favour. Find a suitable investment club and get involved in as many aspects of investing as possible. Concentrate on the how and don’t get carried away with hot performance.
Here is what I did. I rounded up five friends in my last two undergraduate years. We met regularly as a pseudo investment club. All of us did some investment research and made presentations at meetings. Then we each bought whatever we could afford in our personal portfolios.
That informal investment club look-alike was very helpful for me. It can be duplicated by virtually anyone. It’s easy and it’s a great learning tool.
If you need it, I’m happy to send you my newsletter I wrote five years ago on investment clubs.
Remember these four money tips. They’re not rocket science, but are very powerful.
Adjust your sails amid all that wind. Take firm control of your path.
I found my passion. I hope you find yours.
I do have a small request. Tell me your story about what happened after your graduation. Maybe there is a follow up newsletter. No names will be used.
One more thing. Please forward this newsletter to a graduate or one in training.
I welcome your questions, comments and feedback.
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