There are some memories in life that are as clear as yesterday afternoon, and some that fade so quickly that I struggle to remember any details. The memory of my first job out of college is one of those memories that is as clear in mind as yesterday morning. I remember walking to my car that morning, driving in from my new apartment, dressed in new business cloths and ready for work with the feeling of excitement combined with anxiety.
I was required to report to human resources first, where I would receive my “orientation” of my new career and the company policies, benefits, and general information that most large corporations go through for new employees.
As I think back now, much of the orientation is a blur and I don’t remember a thing they told me. But what I do remember is some of the best financial advice I’ve ever received…. yet sadly ignored.
The Best Financial Advice I Ever Received
After orientation I remember my “one on one” with the HR manager. He was a tall black man with a white crisp dress shirt and shaved head, probably in his early forties at the time. I don’t remember his name, but I remember clearly his kindness and character in how he treated me. (funny how we remember certain interactions in life…)
To be honest, I was somewhat struck by his authenticity in his desire to see me do well, not just at my job – but financially as well. I have never come across a person that engaged me personally that way in such a short amount of time, with a general desire to see me succeed in life. It’s unfortunate that I never got an opportunity to talk to him again after that day.
What he told me has stuck with me for many years, even though I never took his advice that day. His advice was simple, yet powerful – and it is my advice to any new college graduate taking a new job. What he said went something like this…
“Jason, today is your first day at work and you will most likely work for the next 40 years. This is a copy of the company’s 401k plan. I highly recommend you max out your retirement contribution on your first day and learn to live on the rest of your paycheck. It is much easier to take this step now, instead of 10 years from now. Take this step now, and you will be set for retirement.”
As I said earlier, I didn’t take his sound advice but instead went on with life thinking I knew better and would do ok. (Yes, I was dumb) I did end up saving for retirement, and in many ways have done just fine over the last 12 years, but I can only image what my retirement balance would be if I had taken his advice on the first day of work.
My Financial Advice for New Graduates
Little did I know on that day 12 years ago I received some of the best financial advice I ever heard. It is the same advice I give out to you today, no matter where you are in your career – but especially if you are just out of school.
The best time to max out your retirement is when you start your first job. This is because you have yet to live on a normal paycheck (at least most college grads have not) and can adjust your life immediately to the income you are receiving after saving.
Unfortunately, this is extremely difficult to do once you begin setting up your standard of living and get used to that standard. It’s not impossible, it’s just difficult. If you throw marriage and kids into the mix, it is near impossible to adjust your standard of living significantly – as we all know that life is financially demanding.
So, in many ways maxing out your retirement on the first day of work is the simplest way I know to set yourself up for significant financial reward in the future. If you take this simple step and invest your retirement savings wisely – you should do just fine when you leave the workplace to start your next phase in life.
Ask the Readers
Readers, what is your advice for new college graduates? Is there a time in your life, like me, where you received amazing financial advice and took it (or ignored it)? Please comment below…
Jason is the founder of frugal habits - a personal finance blog about eliminating debt, saving your hard earned cash, and giving generously. When not enjoying time with his beautiful wife and two daughters - Jason enjoys the great outdoors, reading a great book, traveling the globe, triathlons, and a good cup of coffee.
{ 18 comments… read them below or add one }
Very sound advice. Even if you are not maxing out retirement, you should invest as soon as possible. Let the market do the job for you over time. With $100 per month invested in index stocks you can get a comfortable retirement nest egg if you start early.
Pauline recently posted..Can you gamble responsibly?
True that. Starting early is key.
That is some great advice Jason. When we started the retirement plan for my business I suggest everyone do the same. However my plan isn’t a 401k but rather a SIMPLE IRA plan. Workers can contribute up to 6% of their paycheck and the company will match up to 3% of what you put in.
Chris @ Stumble Forward recently posted..10 New Home Upgrades To Consider Before You Build
Chris, that’s awesome. I always find it generous when a company offers a free match for just investing.
Great advice Jason. The earlier you start the more you can accrue by the time you need to use it.
Glen @ Monster Piggy Bank recently posted..Ways to Get Money While Unemployed
Good advice. I’d also say, pay off your student loans as fast as possible. You can’t discharge them in bankruptcy and have to pay them back no matter what (unless you die), so get them out of the way early and avoid years of interest.
KK @ Student Debt Survivor recently posted..Date the Boss to Get Ahead
Yes KK, also great advice. Best to live poor and get out of debt ASAP.
I’ve read lots of good stuff on your site, Jason. I think this is the best ever. Excellent story and powerful advice. Thanks for sharing. He did you a huge service….
AverageJoe recently posted..5 Smart Money Moves For Young Families
It’s funny how one person with one bit of advice can shape your whole career. Thanks for sharing.
Kim@Eyesonthedollar recently posted..My Lack of Attention Cost Me Money in Fees!
I echo Joe! This is some very solid advice and advice that I too did not heed right away. There are so many reasons why this should be done, both short and long term. In addition to this advice I would also add living within your means. So little is taught about it and I think many have no clue about it. That’s what helped me get out of debt, a very kind person telling me “see what you make…spend less than that and make it work for you”. It was so simple, yet so true.
John S @ Frugal Rules recently posted..Frugal Friday: Blog Posts That Ruled This Week, More of the Same Edition
Great advice for sure. People will always say that they can’t afford to do it, but even a 10% investment won’t be felt that much. You get used to it!!!
Tony@WeOnlyDoThisOnce recently posted..How to Stay One Paycheck Ahead of the Game
This is great advice… I ended up doing exactly what you suggest, but ended up taking a 401k loan out, and then had to leave the company… I paid a ridiculous penalty and lost a large portion of those initial savings as a result. Yuck!
jefferson @SeeDebtRun recently posted..Financial Lessons To Learn After College
Starting out as early as possible is insurance you will have the retirement that you need. It’s amazing how much more money you can have. It can lead many to just think they will do it later but it’s important to start right away.
Definitely a smart move for a new grade or anyone landing a job that offers retirement plans. I think people should also engage the experience. They don’t need to become a master or anything, just a basic idea of what they are doing and what their expectations should be. It’s something that’s pretty important.
Ian recently posted..Prosper Loans Review: January 2013
Thanks Ian. I would think if a new Grad took this advice, they would be able to retire well.
I would have to agree with investing in a 401k or preferably a Roth 401k starting with the first paycheck. Maxing out the contribution may be difficult for most grads. I would recommend using bonuses and raises as an opportunity to increase investment contribution rates.
Paul @ The Frugal Toad recently posted..Budgeting Tips: How to Stop Spending Money on Things You Don’t Need
Nice financial advice. My niece will be leaving Ipswich to go to college next year. Great advice I’m going to pass on to her.
Awesome advice. It should definitely be something you do directly out of school, because as you said, changing your lifestyle later on can be so difficult. It is hard for new grads to be mindful of the future, but in the end this sort of decision can be extremely beneficial and pay off.
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