Is College Right for You? (Spreadsheet Included!)

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Written by Matt

This article and video talks about:

  • The Costs of American college
  • The sunk cost of going to school and changing jobs
  • Finding your passion prior to college
  • The "Experience" of college
  • Choose Yourself Education - Sales, business, coding etc.

If you Listen to Dave Ramsey you would avoid all debt at all costs. I have nothing against Dave Ramsey, he is the entry point for so many to personal finance, but I think the community in pursuit of Financial Independence is a little bit beyond the simplicities of "Avoid all Debt". Debt is a double edged sword. It can absolutely cut both ways so the key word when dealing with debt is Prudence. I don't know about you but when I think of my 17 and 18 year old self "Prudence" is not the word that comes to mind!

Unfortunately, the education system in the United States does virtually nothing to prepare students and young adults to make wise financial decisions. Particularly, when it comes to going to college, which is one of the largest financial decisions young adults make. One that can saddle them with the negative net worth of 10's of thousands of dollars when exiting school and that can take years or even decades to pay off. That negative net worth has the 8th wonder of the world (compound interest) working against you instead of for you. Those prime years early on in your earning career when you should be putting money into retirement savings (because they literally multiply over time) are spent paying down debt and working to get to zero.

Now I don't just want to paint a negative picture of higher education. I think it has its place and particularly for certain people. After all, I have a college degree and it has served me very well financially.

The problem for kids in today's society is that it doesn't feel like college is optional. Society puts a lot of pressure on high school age kids to figure out what they want to do with their life when they've barely been cognizant of their actions for a 10th of their lifespan. It's insane honestly, and it's no wonder most college graduates don't get it right.  After all Its hard to know what you want to do when you've got so little experience.

Only 62% of college graduates work a job that requires a college degree and a mere 27% work in a job that is closely related to their major!

Personally, I view the main reasons to go to college as an opportunity to advance your knowledge, understanding, and value in a particular field you want to work in or think that will provide financially. Others may say it's to broaden your horizons, explore yourself and experience freedom and self-reliance. I think of school as an investment - You put money in, you want to see money come back out. If you're attending college for other exploratory reasons, you're really on an expensive vacation from the real world, not investing in an asset (yourself). Explore yourself in the real world for a little while and make some money while you do it! I think the statistics above show that many college goers have a less than productive outcome following college or at least mistook what they really wanted to do when they embarked on the road to higher education.

In this persons case, college actually made him poorer.  Download our spreadsheet to see if university will make you richer or poorer!
In this persons case, college actually made him poorer. Download our spreadsheet to see if university will make you richer or poorer!

Almost 40% of graduates are working a job that they could have gotten without even attending higher education. I think it's pretty clear to say that those 40% clearly missed the mark and would be way ahead financially had they started those same professions just out of high school. Another 35% of college grads work in jobs that are different than their field of study. Now these grads are working jobs that required a college degree so I think statistics will show that they are generally making more than their high school graduating counterparts and likely more than the 40% of graduates who are working jobs that don't require a degree.  However, they aren't doing what they thought they wanted to do when they went to college.

I Imagine many of them are happy where they are and enjoy their new jobs. I generally attribute this to the fact that most of them really didn't know what they wanted in the first place.  So really, they like something that pays them, and that they don't detest too awfully much.  Now I'm not going to pass judgement as one who thinks everyone needs to do a job that lights them on fire inside, but having a job that pays the bills gives you the FREEDOM to explore your "soul on fire" projects.

I think this is the most important and anchoring aspect of FI for me. If suddenly I won the lottery and never had to worry about money again I think we'd all agree that the vast majority of us would hand in our 2-weeks the following day if we even went in at all! Nothing wrong with that, we work to live, not live to work as I like to say. If all you want to do is volunteer at an animal shelter because caring for lost animals is what lights you up then you should do that. However, if you do that from day one you will undoubtedly have a much longer road to financial freedom. If you love your work and you would do it even if you didn’t get paid then that is amazing. Just beware, you are also strapping yourself to the next 40-50 years of working a job for which your enthusiasm may not be as long winded.

So if you haven't picked up on it by now I am big believer in analyzing your options and deciding what is best for you. Nothing is one size fits all in life! That said, It can be difficult to forecast our ideal future because just like those high school seniors we used to be, it's difficult to know exactly what we want to do and what will make us happy. For that reason I think some real world experience can make all the difference in preparing someone to go to school. You can try different careers and I would encourage you to use the apprenticeship model. Work with someone who is doing what you think you might like to do. You'll get a first-hand look at what that job is like and you can decide if you want to invest in yourself to develop the skills that job requires. You'll have a better understanding of what your financial prospects look like upon graduation. Something that many young adults fail to consider when they are determining what their passions are.

At the minimum you MUST run the ROI of your college education. Consider it an investment and consider what you'll make when you get out, what you'll spend while you're studying and the opportunity cost of lost wages. My personal philosophy has been maximize income early on and ride that into retirement. Use my spreadsheet to input your expected college expenses, expected income upon graduation,

College ROI spreadsheet

In the future I think you will see companies moving away from the emphasis on a college education. With the ability to take a class or certification in almost any discipline like coding, business, marketing, sales or any array of other professions which can be learned on Skillshare or GreatCoursesPlus we will start to see more and more specialized workers in the workforce who found something that interested them and went deep on it. I spent a lot of my college learning information that I have not used since the day I left that class and that all seems like lost time and effort to me.

The American Education system hasn't significantly changed in form or structure in decades. Other than the advent of online universities opening up night and remote classes it's been static. I think it will move to an interest-based study system. Instead of forcing kids to cram knowledge into their brain which they could easily just google if they were curious. Allow kids to study the things that make them excited and curious. We all learn better when we care about what we are doing. This is evident from the vast number of entrepreneurs who did horribly in school and ultimately turn out ultra-successful. It's not an uncommon story and I think it just takes someone finding their passion and going deep on that. That’s why I think the school system should be structured to expose kids to a ton of ideas and subjects and help them flourish in the ones they are drawn too.

If you have your future career firmly in sight and know what you want then I think you should go deep on that subject. The world recognizes world class and the only way you get world class is to put in the intentional practice to develop the skills. As the world gets more and more specialized people will be forced to niche down because things get more and more complex which is difficult for the generalist.

So now that I've given you tons to think about, use my Spreadsheet to calculate if college, university, or graduate would even help you on your path to financial independence!

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