The Insane Math Behind Investing in Yourself - The Personal Growth Channel

The Insane Math Behind Investing in Yourself

Education investment calculator

We've all heard it many times, investing in ourselves is the best investment we can make.

Is that really true though?  Is it better to invest in education instead of stocks when the cost of a 4 year college degree in the USA can run up to $334,000 over 4 years according to Forbes?  That's a major investment, you'd better be sure you're getting a return on it!

To answer the question, I dug through several salary surveys, looked at costs of education, and ran the numbers through the online education investment return calculator at the end of this article to see if this is really worth investing in.

What I found is insane, especially with certifications...

What does traditional education cost?

While costs of a four-year degree can be up to $334,000, the average cost for a four-year degree from a public college is $28,000 per year according to Forbes.  $28,000/yr X 4 years is $112,000 total.

How much more will you make with a college degree?

The salary numbers in all of these calculations may seem really high or really low to you depending on where you live and what you do.  Bear in mind that if you live in an area where houses start at $50,000, you're obviously going to be making much less than people in a metropolitan area where houses start at $500,000.

For purposes of this article, we'll be focusing only on averages.  According to CNN Money, the average college grad makes $1,227 per week, compared to the average high school grad who makes $678 per week.  That's a difference of $28,548 per year ($1,227-$678 * 52 weeks/yr).

Now some calculations to get your ROI:

Take $28,548 per year (difference in salary between a high school grad and a graduate with a 4-year degree) divided by the total cost of the education ($112,000).

That's a 25% per year return on investment for an average four-year degree from a public college.  Compare that to stocks which have an average rate of 7% return on investment!

Return on college investment showing a 25.5% return with payback in 3.9 years
Return on Investment for College

Bottom line, a $112,000 investment in your education should be a no-brainer!  You'll recoup those costs in 3.9 years, and then you'll be making $28k more each year than you would have if you had not attended college.

While college is a great investment, consider pursuing certifications in order to get another major salary bump.  As you'll see in a moment, continuing your education after college can provide enormous returns on your investment.

Our training partner ed2go offers many certification programs.  Let's take a quick peek at what adding a PMP® Project Management Professional Certification to your resume might do as an example.

For less than a few thousand dollars invested in certification, you can expect to increase your base salary by $20,000 EVERY YEAR according to this PMI Global Study.  Take a look at what that investment looks like on our education investment calculator below.

Return on certification investment showing 1,000% return with a payback in a few months
Return on Certification Investment

As I mentioned earlier, the salary numbers in these pictures may seem high or low to you based on your area so I encourage you to localize this by plugging in your own research into the calculator at the end of the article.  An easy way to think about this is that if houses in your area start at $50,000 you are not going to be making as much as a major metro area on the coast where the houses start at $500,000. It is all about supply and demand.

Regardless of where you live, what I found through researching this is that the percentage difference in salary with and without certification is pretty universal.

Stop and think about that for a moment.  You're investing less than $2,000 to make $20,000 more a year.  That's a 1,000% return on your investment!!!  If the numbers are off even by a factor of 100, you are still outpacing the average stock return!  That's one hell of a safety net.  In investing terms we call that a significant margin of safety or margin of error.  Even if our returns fall a bit short of projections, with that margin of safety, you can be sure it's still a better investment than nearly any other investment on the planet.

I encourage you to do some research for yourself, but I believe you'll find the same kinds of returns on most certifications.

You should also consider investing in yourself through Toastmasters, an organization that allows you to practice your communication and leadership skills plus build relationships with other like minded individuals.  CNBC found that oral and written communications is the #1 soft skill that employers look for, so investing in improving that should be at the top of your list.

Want to play with the numbers yourself to see what adding a specific certification to your resume could do for you? Here is the simple online education investment calculator that I used for this article.  Drag the sliders or type in how much you will invest in your education, your current salary, and what you expect your new salary will be and it'll spit out your return.

Education Investment Calculator

I think this goes to show that Warren Buffett was right when he said "Investing in yourself is the best thing you can do." By my calculations, you are NOT going to find a better investment than investing in yourself!

By the way, investing in yourself is what this site is all about. Most of the information you'll find here is free, so sign up for your free account today. You'll get special offers from our course providers udemy and ed2go, discounts from major retailers, a book recommendation each month to stretch yourself, and weekly inspiration.  See you on the other side!

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The Insane Math Behind Investing in Yourself The Insane Math Behind Investing in Yourself Reviewed by Don Smith on 9/26/2017 Rating: 5
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