Personal Financial Advice Young People DON’T Want To Hear

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New York Times writer Damon Darlin wrote a great article called “More Advice Graduates Don’t Want to Hear.” It’s a follow up from an article he wrote last year at graduation time in which he suggested to young college graduates different ways to save money. The advice he gave didn’t settle well with many grads and they wrote Mr. Darlin complaining that his advice was impractical.

How impractical was Mr. Darlin’s advice? Let’s take a look at his money savings suggestions:

• Diverting 10% of your income to savings and ignoring raises and putting them into savings as well. This is a corner stone principle of sound financial security. Verdict: Practical
• Learn to cook. Eating out is expensive. You can save hundreds of dollars if you prepared your meals instead of eating out all the time. Verdict: Practical.
• Never borrow money for a depreciating asset. Assets that depreciate are the majority of consumer goods like CDs, DVDs, and computers. I guess cars would go under assets that depreciate in value. Many people use credit to buy cars, but you don’t have to. Be like my grandpa: pay cash for your cars. Verdict: Practical
• Cut the latte habit. The latte factor was made famous by David Back in The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich. The idea is that small purchases (like $4.00 lattes) if done daily, can add up to a huge chunk of change in a year. Save the money you would use to buy a soda or a latte and sock it away in a high yield savings account. Verdict: Practical

Damon Darlin’s New Advice

Damon Darlin felt that last year’s advice wasn’t sufficient and decided to add some more money savings tips. Let’s see if they’re impractical as well.

• Find a partner and stay together. Being married rocks. You get to hang out with your best friend all the time. I’ve also found I’ve been able to live much more cheaply than I did when I was alone. If you get married, be in it to win it. Divorce is a very nasty and very expensive affair. Verdict: Practical
• Start saving while you’re young. Not only will you take advantage of compounding interest, but by getting in the saving habit, you develop a lower rate of consumption. By having a lower rate of consumption, you’ll need less money when you retire. Verdict: Practical
• Maximize workplace matching mechanisms. If your company has a 401k plan, and they’ll match your contribution by a percentage, then for the love of Pete, take advantage of it. It’s free money! Verdict: Practical

Final Verdict

All of Damon Darlin’s advice seems pretty practical. I don’t understand why anyone would feel it’s impractical. I guess it’s another sign of my generation being extremely whinny and refusing to grow up. All he’s suggesting is to delay your gratification and you’ll reap financial benefits later on in life.

Hat tip to my wonderful wife, Kate, for sending me the article.

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[tags]New York Times, personal finance, college, Damon Darlin[/tags]

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11 Comments

1. strange bird on 05.06.2007 at 09:05 (Reply)

   All of it makes sense. The only thing I would maybe take issue with/empathize with young people who feel it’s impractical is ignoring raises. Most of us don’t make enough to live very comfortably at entry level, so continuing to save 10%, even after raises, for a little while makes sense. It’s hard to be too squeezed for too long. After a while, though, putting away the extra from raises makes sense if your life isn’t changing significantly.

2. Brett McKay on 05.06.2007 at 10:39 (Reply)

   Strangebird-
   I can see your point. Living on a shoestring budget does get old sometimes. My wife and I were discussing the other day how we’ll probably never be in a position where we can just throw down some cash to buy something we wanted. However, in the end, we figured it was still better to continue living on a shoe string budget and save as much as possible. The rewards in the end definitely outweigh the short term benefits.

3. Jennifer Lynn on 05.06.2007 at 13:17 (Reply)

   Interesting article. It’s really a shame more folks can’t recognize the value and wisdom of some of these points.

   If more young people enacted this advice (instead of begrudgingly ignoring it), they would be financially sound much quicker than probably anticipated.

   =^..^=

4. Brett McKay on 05.06.2007 at 14:31 (Reply)

   Jennifer-
   Thanks for stopping by and commenting. You’re right. More young people would be well on their way to financial security if they followed this advice. What kills me about the article is that the ideas are really easy. Why don’t more people follow it? I guess that’s the way it goes in life. Sometimes the easiest things to do end up being the hardest.

5. The Simple Dollar » The Simple Dollar Morning Roundup: Good Faith Estimate Edition on 06.06.2007 at 05:33

   […] Personal Finance Advice Graduates Don’t Want To Hear I agree with almost every point, but I would have completely blown it off five years ago. Stupid me. (@ nytimes via frugal law student) […]

6. K on 09.06.2007 at 04:38 (Reply)

   Well, it’s not like most of us are unmarried because we’re fiscally irresponsible - we’re unmarried because we haven’t found someone we mutually want to be married to. It’s not exactly in our complete control, and it’s kind of stupid to act as if that’s either (a) the reason we should married, or (b) something that’s irresponsible of us not to have done.

7. Brett McKay on 09.06.2007 at 06:16 (Reply)

   K-
   I’m sure Damon Darlin wasn’t implying that all young people who are unmarried are fiscally irresponsible. I also agree it shouldn’t be the only reason you get married. I don’t think you even have to be married to enjoy many of the financial benefits of having a long term relationship and living with someone. By living with someone else (be it a friend or more than a friend) you save on rent, utilities, and possibly food.

8. pf101 on 10.06.2007 at 23:48 (Reply)

   Well, being pratical and planning ahead is boring. Living day to day is fun. I think it boils down to that. Most people want to take the easy route and won’t change until they learn the hard way. I think we need to start teaching earlier and then these won’t be foreign concepts so they’re more likely to be followed.

   Another great post for my Post of the Day

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11. FamilyLaw on 18.07.2008 at 08:00 (Reply)

    I liked this article a lot and I think so many young people today are not getting the right advice about money. I would say the very first thing you should do is start a budget so you can keep track of where your money is going and not wondering where the money went this week. Nickel and Dime your way out of dept. So many think they are doing all they can to save but never account for all there trips to the ATM or Starbucks! Keep track, if you know you are going to buy that Latte, budget it in but stick to the amount you set! Make sure you write down all expenses for the year and learn to work with the variable expenses. Always have room for savings and give ALL you can to dept while still having enough to live on. I recommend to put every extra dime to a dept, every cent counts!

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