Opportunity cost of college

12 Replies

I am 21 years old and currently taking online classes at a tech school to earn an associates in business/leadership. At the same time I am working full-time and I pay all the bills, while my fiancé uses her income towards savings. I will be finished with this degree in May and considering going to school in August to obtain a bachelors in finance. I wanted some different viewpoints/opinions on my dilemma. If I go to school in August I will not be able to work full time anymore and we would most likely dip into the savings and possibly school debt. In the long run I would be earning a higher salary, so I could potentially invest more, but I would also be starting over/later. If I do not go to school then I could potentially buy my first rental next year and be on track to owning a portfolio of rentals. The only problem is that my salary isn’t very high ($45k), so the process would be a slow one. Do I go to college, or do I start investing?

It all depends on what your goal is. Do you need a bachelors degree to get a job that you are going to enjoy doing? Are you wanting your job to real estate investing? Do you want to pursue a career that you enjoy and just use real estate to reach a point of financial freedom but never 'retiring' from your professional career?

There are so many different factors that influence the decision of pursuing higher education. Think through these questions and find out what your goal is. Once you decided what your goal is then start thinking about what option will work best to help you achieve your goal.

Starting investing!! I'm a graphic designer and landed a job in my industry, but 50k isn't going to make me satisfied, so I'm planning to do REI to pay off my student loans. Use your 45k and buy your investment property, that way, you don't have to worry about going back to college and collect more loans.

@Colten Powell

Reminds me quite a bit of the situation I was in not too long ago. I chose to finish school (I paid for it) and worked 50 hour weeks while going to school full time.

The irony was, because I applied myself at my job I was making $70k plus had all my transportation costs covered before I even graduated. I learned quite a bit from my job, but very little from my “education”. I graduated with a double major (business administration/management & leadership) and I’ll tell you the courses I took were borderline useless. The job I had (managing others) was very instructive.

Looking back on it I wish I had not finished school and that I had used that money to start investing earlier. I would be so much further ahead if I had. Education is absolutely invaluable, but with the availability of information in today’s world you can learn (almost) anything you want if you apply yourself. Also, (based on the schools I was at) colleges tend to be extremely isolated and insular and their courses are grounded in theory and idealism, not reality.

Now, you need to ask yourself whether you want to quit school because it’s hard to go while working simultaneously or if it’s genuinely because you want to pursue entrepreneurial ventures. If you’re really going to use the extra time to work and pursue your business goals then I (personally) would not finish.

That’s my $.02

-Dan

@Jon Reed thanks Jon I really appreciate the advice. These are definitely questions I will be asking myself and writing out. Even now I tried writing out answers to questions you just asked and I couldn’t seem to get the right answer. Just continued to go back and delete them. Much to think about. Thanks again

@Colten Powell

There is no right or wrong answer.  Answers will be different depending on what perspective the person is answering from.  

I am answering from the point of view of a 48 year old man with a masters degree and a nice paying W-2 job.  I am not a full time investor and do not make my living from it. This is my perspective:

I am 100% sold on getting a getting a university education.  I am 100% committed to giving my kids (18 and 19 years old) the opportunity to being employable at the highest income levels upon graduating.  I am committed to giving my kids financial literacy which includes saving money, living within their means, making diversified investments including mutual funds and real estate.  I am committed to making sure they don't graduate with any school debt or school loans.  I also know that life is a marathon and not a sprint and that whatever path you choose now at 21 is not the end all be all.  There is no fatal flaw in either path.

This is the advice I am giving my kids so if you were my kid I would tell you the same thing.

In life you will have many perspectives and this is mine.  Good luck kid! 

Bottom line is if you believe in yourself, work hard and follow some basic principles you will be successful.

@Daniel Haberkost thanks for the advice Daniel. I am definitely not looking for an easy way out so it isn’t that. I am currently in school full-time (online) and working full-time, so hard work is nothing new to me. I also know that once I finish with my associates , the time I am spending studying and doing homework could then be spent doing side work or even analyzing deals.

@Colten Powell This is entirely my personal opinion but hear me out. I feel very strongly about having a “Plan B” in life, which would lend me to recommend you finish your schooling and seek full time employment in your field before you continue investing. Each of our journeys is different but I bet you will sleep better at night knowing you have a back up plan. I have two rental properties (4 units) and decided to go back to school this fall. I found a professional niche where I will always be able to be employed even if the real estate market totally flips. Yes my investing is taking a back seat now, and it will take longer to grow my portfolio, but I sleep well at night and am quite happy with all the options in my life. Even if I were to become a single parent someday I could still keep things afloat. Figure out what your goals are, have a SOLID plan B, and go at your own pace that you are comfortable with. Good luck!

@Colten Powell most likely more information is needed to truly answer this in an objective, non-opinion way.

What is the estimated starting salary for your area and that school for a degree in finance? Let’s say it’s 65k vs the 45k you make with an associates. Okay, now what’s it cost dollar wise (tuition, food, rent etc) for you to get that degree? Let’s say that number is 10k per year.

Then the opportunity cost of getting the finance degree is 10k plus 10k (assuming 2 years of school) plus 90k (not making 45k a year for two years) for total of 110k.

But if you get that degree and spend 20 years working In finance you make 400k extra then just with a associates, meaning the opportunity cost to not get the degree is much higher than getting the degree. Do you want to spend 20 years in finance? Or not?

I don’t know but I can tell you as someone with a bachelors, working on a masters and investing in real estate, it doesn’t have to be all or one. You can do both, but you won’t get much sleep lol

@Colten Powell imo at this stage in life you should focus on your career and generating more income. Your income is the biggest wealth generating tool you have. Therefore, focus on finishing school with as little debt as possible. Get your career on track and your income up and you will have a solid foundation from which to invest in the near future.

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