This guest post is from Christopher at Thisthatandthemba.com, who started the blog as a way to be honest about his financial situation. Born and raised in Central NY, Christopher was able to graduate with a degree in Finance, and soon after, he obtained his MBA as well. He continues to learn and grow and welcomes you to join him in his financial journey!
We have all heard the expression ,”You have to spend money to make money.” Well did you ever hear it mentioned in relation to college? Why should this be any different than anything else?
Sure we hear in the news all the time that college tuition costs are going through the roof, but there is also the uncertainty of Social Security in the future that we have to worry about. I don’t know about you, but I do not want to be working until I die; I would like to enjoy the fruits of my labor. With this in mind, we have to prepare for our future and potentially the future of our spouses and kids. I have seen time and time again where an individual has not saved enough throughout their career and is forced to work into their higher 60’s to low 70’s before they can retire.
You ask, “Is a degree worth the debt?” The average student loan debt for a student in 2010, according to The Project on Student Debt, was $25,250. This is quite a large figure if you look at it at face value, but think of the potential additional earnings for going onto college as compared to just a high school education.
Show me the Money!
How does $650,000 more than your high school counterpart sound after a 40 year career. With the way the economy is headed it may be longer if they increase the retirement age for Social Security.
If the income disparity hasn’t convinced you enough that you need a degree, what if I told you that you may have to save for your own retirement now. That’s right you heard it, according to analyst estimates the Social Security System may run out of money by 2022. We may need that additional $650k now to relax comfortably.
Take a look at what that $650,000 can do for your retirement account. We are going to bank the difference in pay between a high school degree and a college degree. Assume our portfolio will grow at a modest 5% annually. We are going to make annual contributions of $16,250 for the next 40 years. The power of compounding is going to bring our retirement account to a total of $2,061,146 after 40 years. That is quite a bit of money for going to college and saving all that additional income.
The bottom line is don’t ever sell yourself short and say you cannot afford it, because as you can see the degree will more than pay for itself over your lifetime. From one personal financier to another, compounding is powerful so make sure that you are saving to take advantage of it.
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What do you think about this? Would you take out a loan to get your degree?
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