Dear John

Dear John,

You just turned old enough to drink (legally) and you don’t quite appreciate your ability to maintain washboard abs just by meditating about it. You don’t yet struggle with male-pattern baldness. I mean, no XY in your bloodline suffers from that. DNA fail. You can also sleep past noon on weekends. Enjoy that while you can. It’s fleeting.

What I’m trying to say is that life is pretty good for you now. You don’t have debt yet and you haven’t made a lifetime’s worth of financial mistakes in less than a decade. That could, in no small part, why you have no comprehension about money. Your biggest financial struggle is that you . . . well . . . haven’t had any financial struggles. Aside from not getting your allowance once, you’re pretty well taken care of. This is a pattern that will repeat itself throughout life.

You don’t understand the value of a dollar. There’s no relation to compounding interest and beer pong, so what’s the point? Right? Your father talks about investing, but that’s a gray-hair’s hobby. Isn’t it? You also won’t clip your phone to your belt, either. Everyone will have a phone in their pocket one day.

With all due respect, John, you’re a financial neophyte. That’s why I’m Quantum Leaping this email (email is digital paper) with some sort of Stephen Hawking space-calculous to give you a little what for about money. With the 20+ years of experience I have on you, I hope to impart some fiscal wisdom.

  1. Not a Kennedy

Though you share the standard barer’s first name, you’re actually not a Kennedy. You will one day have to work for your money. You may want to know that money doesn’t grow on trees, money doesn’t really come by that easily and it will be pathetic to expect your parents to take care of you when you’re fifty. Oh, you also won’t be rich and famous and rolling in dough (at least not by the time you’re in your mid-forties). So, you may want to learn to “cut-back” and control your spending now. Your parents will cut up your Discover card upon graduation and it will be a cold reality (if not for the fact that they let you move back home, room and board and car payment-free, for two more years). Hold onto the money you earn. Most stuff you buy will be worthless.

Not  a Kennedy

Compounding interest is your best friend. You will graduate college and not see members of your college-made family as easily and regularly as you once did. There will no longer be anyone ready anytime, day or night, with whom to study (get into trouble). College is over. The party doesn’t need to end, but it’s time to embrace life goals. Get a job and start investing as much as you can as often as you can ASAP. Hey, like I said, you’re going to live with your parents after college for another two years expense-free in a small town. That’s an ideal situation for a new investor. If you invest $9,500 (1997 maximum allowed contribution) in a 401(k) each of the next two years at 7 percent, it will grow to $304,431 without any other additional contribution by 2038 when you turn 65. You lucky bastard!

No to the Credit Cards

You aren’t mature enough for credit cards. If compounding interest is your Krystle, credit cards are you Alexis. You have no patience and you have champagne tastes. You will buy all sorts of overly priced things to show the world you’ve arrived only to hate it all because it’ll hold you back financially for years. Don’t sign up for any credit card. Use only cash. It will be painful at first, but you won’t die.

Start Now!

Immediately invest all your graduation present money. Put it in an asset allocation mutual fund and don’t think about it until your thirties.

Play Too

Remember that it’s not how much you make, but how much you save and invest. Yes, you went to college to make as much money as you can, but even “rich people” drown in debt. You’re laid back, easy going and would rather play than work. Why wait until retirement to enjoy the casual life? I’m not recommending you leach off the government. I’m recommending that you find a solid job and save and invest the majority of your income. In the not-too-distant future, you’ll be able to play all you want, stress-free and boss-free.

No to the MBA

Finally, don’t go to graduate school to use your employer reimbursement to pay off your debt. While an MBA will feed your ego and advance your career, this strategy is really just a stupid move. Don’t be stupid. Repeat this many times throughout life.

John, I say all of this in the most loving, respectful way and with the utmost of sincerity. Life is good for your now, maybe too good. You’ve never struggled and tanning yourself in a lifeguard chair is not really “earning” money. You’ll inevitably make financial mistakes regardless of what I say. Just don’t make the six above and you’ll be light-years ahead of where you are today.

Sincerely,

John

P.S. The bald look will be popular, so don’t fret. Being told you look like a pocket-sized Vin Diesel is a compliment. Vin Diesel is an actor. You’ll see.

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Comment List

  • I totally agree that it’s not how much you make, but how much you save and invest. I pay myself first, make sure to pay all my bills before I spend the remaining money.

  • I love your letter! I just sat down with a couple of friends earlier this evening in which we discussed what we wish we had known about money. There were some interesting takeaways that I will most certainly write about.

    • David Auten 12 / 09 / 2015 Reply

      Hind sight is 20/20, but you can still use the reverse mirror to see into your future if you are willing to use it. Things will not change unless you do. 😉

  • Jason Vitug 11 / 09 / 2015 Reply

    So true about credit card and maturity. It’s the worst kind of tool that can lead to a huge ball-and-chain.

    • David Auten 12 / 09 / 2015 Reply

      You said it. Slavery to our debt is the new slavery. The difference is we are willingly handing over the ball and chain to the banks and card companies and saying, “please.”

  • Stockbeard 15 / 09 / 2015 Reply

    Inspiring post. Debt should be crushed asap!

    • John Schneider 16 / 09 / 2015 Reply

      Thank you and we agree. Thanks for reading and commenting!

    • David Auten 23 / 09 / 2015 Reply

      Agreed! As @AdamCarroll says, “Live for 2 years like no one else will, to live the rest of your life like no one else can!” Paying off your debt really allows you to focus on making your money work for you rather than making it work for the banks. What has been your debt story?

  • Sylvia @ Miss PF 27 / 09 / 2015 Reply

    What a great letter! I wrote letters to my neighbors before they left for college, but I did not include personal finance advice.

    • David Auten 30 / 09 / 2015 Reply

      John had a lot of fun writing this. We hope that more young people will get the snarky comments as well as the money lessons. It’s hard to learn from a 40 something, blading, gray guy, but he is awful darn cute in my book. 🙂

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