In his Financial Literacy course, Pacific Ridge math teacher Noureddine El Alam provides students with the necessary knowledge, skills, and resources to take control of their financial destiny. Here, Mr. El Alam shares practical and ethical advice for this year’s graduating seniors.
Seniors, there are so many life lessons that I wish I could share with you before you embark upon this exciting phase of your adult life. Most things you will have to learn on your own through experience, however, there is one area where a little advice and some preventative measures could go a long way. Although a few lines are not enough to teach you everything you need to know about financial literacy, I hope these tips will encourage you to be proactive with your financial choices, to seek and question advice, and make wise decisions with your money.
Here are my Top 10 Rules:
Recognize that your greatest asset is your age. Most of us would trade anything for your youth. You can afford to take more risk without gambling with your money because you have the time to make mistakes and rebound. The power of compounding can do wonders for you!
Invest in yourself. Going to college is a great start and it is perhaps the best investment at this time. Simply put, stay in school.
Differentiate between assets and liabilities. Buy assets and keep away from liabilities. As they say, assets feed you and liabilities eat you.
Educate yourself on financial matters. Whether you’re planning to be a physicist or a poet, you owe it to yourself to become financially literate. If you have not already taken a course on the subject, make sure you take a few. Take classes on finance, economics and business. A public speaking course will pay dividends as well. Read The Economist, The Wall Street Journal and other financially informative publications on a regular basis.
No matter how much or how little you earn, pay yourself first. That is, invest a portion of your pre-taxed dollars on a consistent basis. I would suggest a minimum of 10%.
Seek financial advice from knowledgeable people only. Do not ask inexperienced or uninformed friends or family, even though they care about you.
This rule is deceptively simple. Don’t spend what you don’t have. Make a budget and stick to it. Leveraging is a great tool to build wealth, but leveraging works both ways. Overleveraging can devastate you financially.
Make sure to understand the difference between wants and needs. You may feel tempted to buy the latest gadget, but do you really need it? You will soon be bombarded with credit card applications, by the way, and you will have to exert self-control not to charge all the latest gear to your Visa. Learn the fine line between being frugal and being stingy. Be frugal, but be a giver.
Don’t rely on your parents. Parents: please don’t give your son or daughter crutches. You’re not doing them a favor if you create a financial safety net that allows them to spend recklessly and irresponsibly. Early adulthood is a crucial time for them to learn fiscal discipline and fiscal responsibility.
One of the world’s wealthiest men, Warren Buffet, is perhaps the most frugal and grounded investor. He advises everyone to be true to his/her “inner card.” He’s referring to being true to your financial situation and not doing things for show. If you find yourself living in a fantasy world so you can impress your friends and people around you, you are doomed to fail financially.
Finally, no matter what, do the right thing because it is the right thing to do. Think of top executives of Enron, think of BP scandal, think of Bernie Madoff! Make financial decisions--like all decisions--with integrity.
If you simply apply “Ethical Responsibility,” a pillar of the Pacific Ridge mission statement, you will already be ahead of the game and have a positive impact on the world.
Pursue your dreams, enjoy life, make use of your talents . . . but keep in mind that money is a reality of daily life, and while money can’t buy you love, it can provide security and, when used properly, can increase everyone’s prosperity.
Thank you for a fantastic year and I wish you the very best in your future endeavors!