Hi Students of the Graduating class of 2010,

Here are some lessons which I wish somebody gives to all graduates. It does not matter whether you are a CA, MBA, a doctor, Engineer or a plain graduate. These lessons are the basics of finance which is nice to know and MUST to implement. Let us enumerate them:

1. Avoid credit cards: Well Warren Buffet (forget his recent behavior, he is still a genius) says this is the most important lesson which a college graduate should know. If you understand compounding you will realize what 3.25% p.m (compounded monthly) can do to your portfolio. If somebody was paying you that on your deposit you would be a millionaire several times over!

2. Learn self -control: What ever you need today see if you can count to 25. If you can hold on to a desire for 25 days and then buy a lot of harsh, impulse purchases can be avoided. Of course if your parents taught you self control that is great!

3. Take to some sport: Company deadlines are all fine..but do not miss out on the fun, it is not worth it. Continue playing with the kids of your building – they will provide more energy than your friends. The energy of a 14 year old is higher than the energy of a 24 year old! Playing some ad-hoc sport and some organized sport both have their advantages.

4. Take charge of your personal finance: Let not your parents, elder brother or even worse a financial adviser not tell you ‘It is too complicated for you to understand’. Get the books to read, understand, and be responsible for your financial welfare.

5. Share the Economic responsibility with your parents: It means learning how to run the house within a budget. Learn if you do not already know how to do it and your parents have not taught it to you.

6. Learn compounding – it will inspire you to invest for the longer term. In the year 2065 or in the year 2070 YOU TOO WILL RETIRE! Start preparing for it. Sign up for a nice equity mutual fund with a clear large cap mandate. Do not buy a pension plan from a life insurance company.

7. Create an Emergency fund: ‘Just in case’ if something goes wrong – an accident, loss of job, replacing a laptop – you do not know from where the emergency could come. So be prepared for it. Of course it you are staying with your parent and he has an emergency fund …you may be better off, but still it is better to create a fund for your own self.

8. Take trouble to understand your C T C (cost to the company) – and your monthly statement. See if you need to make investments to save tax. If the answer is yes start NOW. Today, not tomorrow.

9. Treat your employment as a business: Your boss pays you a salary out of the profits that you make for him (i.e. the income you earned for him MINUS the expenses that you incurred – including salary paid to YOU) adjusted for the risk that he takes. If you brought no revenue learn to be happy with what you are getting.

10. Look after your health: Do everything in moderation – eating, freaking out, drinking, scullying, having fun. All these have their place under the sun, but your health cannot be ignored. Damage done now will haunt you for life. Be careful and take care.

11. Look after your wealth (and your parent’s wealth): If your parents / siblings depend on your income (or even if they do not) see whether you need medical, auto, life insurance – it is important to protect your wealth.

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  1. Simply great thoughts..people may know most of these already but reading in this article seems covered everything the younger generation should take care of. I will pass this article to all my friends graduating soon.

    Thanks Subra!

  2. Great Post..

    Can you explain this a bit more ‘Do not buy a pension plan from a life insurance company..’. Currently I have a pension plan and would like to know why this is not a great idea..

  3. sigh.. great advice.but truth is -it is like preaching to the converted/choir here. when i was a young college graduate, there was no way i would listen to such advice or even visit such webpages or read such books. i learnt from the school of hard knocks.by losing my job in the dotcom bust.nothing teaches like experience.

  4. subra

    superb piece.. am forwarding to my son.. tho he has some years to go before he graduates.

    also to a couple of youngsters who i think will be happier for having read this and hopefully imbibed it

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