There are many people who write about finance. There are also many people who write truly entertaining content. There are very few who do both. Nelson Smith, who writes at Financial Uproar, is their standard bearer. He combines authority, intelligence, and wit, and has been an inspiration to me since I’ve started writing.
In what can only be described as a stunning coup, guess who I’ve wrangled to provide my first ever guest post today? Oh and it gets even better. Not only is Nelson writing here – in his worst trade ever, he’s also agreed to let me post on his site.
Get ready for some dueling banjos. Nelson, having eschewed college and done just fine without it, is here to tell us why college IS a good idea. I’m writing on Financial Uproar why college is a waste of time and money despite having gone myself.
Please join me in welcoming Nelson!
Throughout high school, I always assumed I would be heading off to college.
I was interested in three things back then: sports, business, and girls. I was hopeless at the latter (edit from Nelson’s wife: STILL IS), and my teachers were very insistent college was a necessary path for the prior two.
So I started to make preparations to go, starting in grade 10. I intentionally took the hard math and English classes. I reluctantly enrolled in physics and calculus. And despite my inherent laziness, I planned to graduate high school with more than the minimum required number of credits in order to make my inevitable college application look all the better.
And then I got introduced to the concept of earning money.
Suddenly, my studies were secondary. I was taking every shift I could get my hands on at the local Dairy Queen. By the time I finished grade 10, I was working five or six nights a week flipping burgers and inventing terrible new Blizzard flavors.
Peanut butter Oreo? What was I on?
My studies took a back seat to the $5.50/hour I was getting from my part-time gig. The job that was supposed to help me earn money for college was now taking over my life. Work offered cash now. Going to college only promised the potential for more money at some point in the future.
By the time grade 12 ended, I had parlayed that Dairy Queen job into one at a grocery store making $8 per hour. That came with a promise of $10 per hour once I could work during school hours. I was going to make $21,000 per year. That was all the money in the world!
So I did what many other 18-year-old kids would do in my shoes. I officially abandoned any college aspirations for a different plan. I was going to earn as much as possible, live in my parents’ basement, and invest every spare nickel.
I started with real estate, buoyed by my dad’s experience as a landlord. I spent my entire college nest egg on the saddest rental house you’ve ever seen. It cost $16,000 and was renting for $285 per month. I confidently strode up to the door shortly after buying it and raised the rent to $350. The tenant — who was at least 20 years older than me — responded by promptly giving me the (figurative) finger and moving out.
I didn’t do this willy-nilly; I had a plan. During my last year in high school, my teachers had given me a document to “encourage” going to college. It said that the average college graduate out-earned someone with a mere high school diploma by about $500,000 over their working lives.
Assuming a 50-year working life, I only had to generate $10,000 annually in passive income to earn the equivalent of a college education. So, I bought another house. And then another. By the time I was 23 I hit my goal of $10,000 a year in passive income, so I expanded into a myriad of other assets. Today I invest in everything from stocks to private mortgages.
I’ve continued to grow my portfolio over the ensuing decade to the point where I’m comfortably in the top 1% for my age — despite taking some missteps in my career and, of course, never setting foot in a college classroom.
I’m the poster child of the not-going-to-college movement. It’s worked out very well for me. And yet, if I had it to do over again, I think I’d take a different path. I think I’d go to college.
Access to better jobs
I like to think I have a pretty good resume. I have tons of grocery experience, both working in the store and for outside vendors. I also temporarily sold real estate (poorly, I might add) and I’m currently a freelance stock market writer. I’ve never spent longer than a month in my adult life without a job.
And yet, I’ve noticed something over the years. Whenever I apply to better jobs, I usually don’t do too well. There’s zero chance I’m getting a job for the government, for instance. I was laughed out of a financial services job interview partially because I wasn’t wearing a suit and because I didn’t have a university degree.
(Why’d they even interview me then? Damned if I know.)
And those are the jobs that called me back. I know I’ve sent dozens of applications in over the years that disappeared into the ether because some software program identified me as a schlep without a college degree. Hell, I’m told you even need a college degree to work at Starbucks. Starbucks!
A college degree is no guaranteed path to a fun and interesting job. I get that. Correlation (having the degree) does not necessarily equal causation (getting the job). But it sure helps.
A few years ago, I found myself in a strange city with no job, only a few friends, and no idea what to do next. Luckily, the city was booming, and I had a couple of offers in less than a month.
Still, I couldn’t help but regret not having a better Rolodex. My peers who went to college had dozens of contacts they could have called looking for a job. I had contacts too, but after years in the grocery business they were more blue-collar in nature. This wasn’t very helpful when I wanted to break into a white-collar world.
The ability to hit up your college buddies for opportunities should not be discounted. It can be incredibly valuable.
Those of us who stayed at home used to mock our friends who came back from university endlessly. “Oh, your professor said that? Aren’t you Mister La-De-Da.”
The truth is, we were all jealous. College is a bunch of kids all trying to better themselves while having a lot of fun doing it. It’s easy to see why many people look back on their campus days as the happiest of their lives. Who wouldn’t be happy with the equivalent of a part-time job surrounded by all your friends? That’s an early retiree’s wet dream.
There’s one reason that trumps all the rest, though. Here’s the biggest reason you should go to college.
It’s a hell of an investment
The gap has widened over the years since I was presented with the data, but let’s just go with those numbers. We’ll assume the average university grad makes $10,000 more per year than someone with only a high school diploma. I’m told it’s closer to $20,000 today, but we’ll go with the smaller number.
I live in Canada, so I’ll use Canadian numbers. The average student pays $6,373 in tuition annually. Add on another $627 for books and $8,000 per year in food and shelter costs, and it costs the average Canadian $15,000 each year to go to school.
Say our imaginary student is a bit of a slacker and only makes $5,000 each summer. They’re forced to borrow $10,000 annually to remain in school. Assuming no parental help, scholarships, or any other assistance, and our graduate would start their working lives $40,000 in the hole.
The current average Canadian student graduates with just over $27,000 in debt today, so we’re being conservative on both estimating income and debt. But that’s okay, it’ll prove our point all the same.
From a purely financial perspective, a college education is a fantastic investment. Most people can expect $60,000 in total expenses to turn into $10,000 annually, for a return of 16.7%.
I would strangle a hobo for a 16.7% return. You think I’m kidding, but I’m not.
If you borrowed $40,000 towards an education at 5% annually, an extra $10,000 in permanent earning power would cost you $2,000 a year. It would also represent a 25% annual return on the borrowed money, less any interest cost.
Remember, we’re just talking averages here. My high school buddy currently making six figures as an engineer owed $15,000 when he left university. He doesn’t regret that debt for a second.
Another friend ended up owing $40,000 after an aggressive three-year program allowed him to enter the workforce a year earlier than his classmates. He paid off his loans in two years and his house five years later.
Yes, not every college degree ends up paying as well as those two. The world is filled with Starbucks Baristas with Literature degrees. And I’m the first to admit university in Canada is cheaper than the United States. It’s probably easier for Canadians to get a decent return on their schooling.
But ultimately, the evidence is clear. I eschewed college and I’m doing well financially. I am a distinct minority. Defying the odds is probably not the way you want to go through life.
Wrapping it up, yo’
Ultimately, it comes down to this. I’m a firm believer that ambition, intelligence, work ethic, and the ability to seize opportunities will always be more important than your alma mater. Those are the qualities that ultimately make a graduate successful.
But having a college degree opens all sorts of interesting opportunities, something this non-graduate is starting to realize. It’s a great investment too, and guys who didn’t go are too quick to discount intangible benefits like the experience and having a network of former classmates looking out for you.
Go to college. If you’re smart about the whole thing, you won’t regret it.