Dear Graduate,

You have now obtained a degree. While this doesn’t show you to have any particularly useful skills, save for a few notable professions, it will make you employable in the corporate world. You now have a choice to make: You can join the majority, have a career, and work for the next 30 years while dreaming of retiring to Florida someday, unless prematurely stopped by a heart attack, or you could retire in five years.

For the former, the cookie-cutter lifestyle, allocate 15% of your income to a so-called retirement account (401k, IRA, etc.) and invest it in an index fund (I suggest 50% world and 50% US), and buy a house in the suburbs so you can start itemizing your deductions. Get a mortgage you can understand (e.g. 6% fixed for 360 months). Pay attention to the resale value. Also, buy a car that will survive the commute. Equip the house with furniture, entertainment electronics, and a barbecue. Don’t make any modifications to the house. While it may be cool to have a fireman’s pole from the attic, this will not help the resale value. If you get married, don’t get divorced, or at least get a prenup. Hire an accountant, a lawyer, a gardener, a plumber, a babysitter, a personal trainer, etc. for the things you don’t have time or skills to do yourself, and you’ll be set.

For the latter option, you’ve got some learning to do. It is very likely that you do not know how to cook (especially if you went to a fancier school where dinner was served), which foods are good and which are bad, how to mend socks and patch clothes, how to fill out a tax return, how to evaluate businesses and invest in them, how to fix a clogged sink, how to raise kids, how to clean a house, how to stay in shape, how to wash clothes (while making them last), how to change a car’s oil, how to ride 10 miles on a bike, or how to grow your own food. So regardless of how tempting it is, learn this instead of crashing in front of the TV all the time. Get a job, but don’t get the house in the suburbs. Furthermore, find somewhere to live within walking or cycling distance of your job and the nearest supermarket. Get your furniture used and get a roommate or two. Cook your own meals. Buy a very small but classic wardrobe. Buy quality, not quantity—this may require some research, as most things today are not built to last. Stay healthy, watch what you eat and take care of your teeth. Avoid owning a car, or get an old beater if you absolutely have to. Never pay interest on your credit cards. Save 75% of your income while learning the difference between gross profit margin and net profit margin, then start investing slowly for income.

If you choose the second approach, then after five years you will be a fairly competent and independent individual, and you will have enough money from your investments to pay your living costs, forever. Don’t forget–life is an adventure, not a race.

Good luck!
Jacob@ERE