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Financial Advice for Fresh College Grads

My niece Kara just graduated from a Rhode Island university with a teaching degree; this was a bit of a shock to my system, since I first met her when she was just learning to walk. This week I wanted to offer Kara and other grads some advice on how to think about money and how to use it as a tool to achieve more happiness. Given what's happened over the past year and a half, this isn't an easy assignment.

Too many people are no longer reaping what they sow. They worked hard and got laid off. They saved diligently for college, and their 529 plans tanked (while tuition grew at double the rate of inflation). They contributed regularly to their retirement funds and lost 40 percent or more of their portfolios. They took out a mortgage they understood to buy a home they could afford, and it plummeted in value. They paid for health insurance but ended up bankrupt when they got sick. They followed the rules, and their dreams were derailed.

Some writers have suggested that recent experience means the death of personal-finance advice, because the conventional wisdom turned out to be so wrong under the circumstances. But this is a knee-jerk response that throws the baby out with the bathwater.

Perhaps the real problem is that the personal-finance advisers sold people on the illusion of total control. The underlying message of most personal-finance books is, “Do this and you'll be rich like me! Guaranteed!” This ignores the fact that making big money — and hanging onto it — comes from a confluence of unique factors: upbringing, education, talent, a lucky break, perfectly timing a market bubble, and not bumping into Bernie Madoff at a cocktail party. Read More…

Publish date: June 1, 2009