is college worth it? (part 1)
Based on a few recent comments on some of my articles about careers (this one, for example), I started wondering about the difference in wealth between college graduates and skilled non-college graduates. A college graduate can usually expect to go into the professional world as a “white-collar” worker, earning substantially more than his non-college graduate peers. However, the college graduate – unless he is very athletically or academically gifted – will probably come out of college with at least some student loan debt. He will probably start earning money several years (4 or more) later than a non-college graduate.
So I decided to do a comparison of the two career paths, and see what those big choices meant for someone later down the road. Specifically I wondered if I could answer a few questions:
- Can the late start in saving by the college graduate be overcome through higher salaries?
- Does the lower earning potential of a non-college graduate mean that the non-college graduate will be required to “work until they die”?
- Who will be able to quit the rat race first?
I made a lot of assumptions and put together a spreadsheet to try to come up with answers to some of these questions. I’ll cover that in part 2. I ignored a few things – I didn’t worry about inflation, for example, since it would affect them both equally. You could argue this is wrong, because inflation moves at different rates in different parts of the country, commuting costs (gas, etc.) might expose one or the other to more inflationary pressures, etc. I skipped that. I also assume that both are highly disciplined savers, always saving 10% of their income and getting decent returns over time. If, of course, both started saving as soon as they start earning and never reduce that amount, they would be in the .000001% of the US population that does so.
My findings were a surprise and weren’t a surprise to me. The main point of the exercise was for me to challenge my own personal context (a concept Robert Kiyosaki talks about a LOT in his book “Retire Young, Retire Rich“). My context is that smart people go to college and get desk jobs. My context is that wealth is created through earning as much as possible. I am trying to challenge my own prejudices about what “building wealth” and “escaping the rat race” actually mean to me. It’s interesting, because I don’t have much exposure to people who don’t subscribe to the “go to college, earn money” credo; but fortunately I’m learning more about the opposite mindset and it’s interesting for me. It’s too late for me to undo my decision to go to college for 7+ years. There were alternatives – I could’ve started a business and educated myself. It’s not too late for me to learn something new.