Warren Buffett, one of the richest men in the world and considered by many to be the greatest investor who ever lived, said, “Ultimately, there's one investment that supersedes all others: Invest in yourself.”
You can listen to one of his many speeches on this subject below.
Is that really true, though? Is it wise to invest in education especially 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. Then I looked at the 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 Does Traditional Education Cost?
Let's start with college. According to Forbes, the average cost for a four-year degree from a public college is $28,000 per year. $28,000/yr X 4 years is $112,000 total.
How Much More Will You Make With a College Degree?
For this article, we'll be focusing only on averages. According to CNN Money, the average college grad makes $1,227 per week. That's in contrast to the average high school grad who makes $678 per week. Punching those numbers into my calculator, I come up with a difference of $28,548 per year (($1,227-$678) * 52 weeks/yr).
Calculating Your College ROI
Take the difference in salary of $28,548 per year divided by the average total cost of a college education at $112,000, and you'll get more than a 25% return! Compare that to stocks that have an average rate of 7% return on investment!
Calculating ROI on Certifications
I added more than $20,000 every year to my paycheck early on in my career by taking some IT certifications. As you'll see in a moment, continuing your education after college can provide enormous returns on your investment.
Our training partners offer many certification programs. Let's take a look at what adding a PMP® Project Management Professional Certification to your resume might do as an example.
According to this PMI Global Study, you can expect to increase your base salary by $20,000 EVERY YEAR for a few thousand invested in certification. Let's take a look at what that investment looks like on our education investment calculator below.
Note that these are averages. Obviously, if houses in your area start at $50,000, you will probably not 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, the percentage difference in salary with and without certification appears to be pretty universal. I looked at the PMP certification in this example, but most industries place a premium on certifications. They are almost always worth getting unless you are already overqualified for what you want to do.
1000% Return When You Invest in Yourself?
Stop and think about what we just discussed for a moment. You could invest a few thousand dollars and potentially make $20,000 or more in extra income every 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 by a wide margin.
That's one hell of a safety net. In investing terms, we call that a significant margin of safety or margin of error.
You'll find similar returns on many certifications, which is why I've lost count of the number of certifications I now hold. Investing in myself has allowed me to rise to the top of my company and even get hired as a Director on several other companies' boards. There are diminishing returns on certifications, but it would be hard for me to calculate how big that return on investment has been. I believe in it so strongly that I created this site, which is all about investing in yourself.
Other Ways to Invest In Yourself
- Hire a Private Coach: Many business owners massively improve their bottom line by hiring a private coach or consultant.
- Networking: Networking with the right people can give you ideas and opportunities to grow your income.
- Add Streams of Revenue: Most millionaires do not have just one income stream; many of them have up to 50 different income sources. If becoming wealthy is one of your goals, you'll want to branch out a little beyond your job and retirement savings. Just be careful about going into takhigh risk investments.
- Join Toastmasters: 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 are the #1 soft skill that employers look for, so improving those skills should be at the top of your list.
Want to play with the numbers yourself to see what investing in yourself could do for you? Here is the simple online education investment calculator that I used for this article. Input 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.
Calculate Your Return When You Invest in Yourself
It appears 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 our community is all about! If you are interested in investing in yourself, be sure to join us!