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What if I told you that a simple decision you make could put more than $1 million extra in your pocket over the course of your lifetime? Sounds intriguing, right? But it's the truth, according to data culled by the U.S. Census Bureau in 2011.
Your million-dollar decision
In the Census Bureau's four-page report entitled Work-Life Earnings by Field of Degree and Occupation for People With a Bachelor's Degree: 2011, author Tiffany Julian looked at the dynamics of how higher education affects lifetime earning potential. Although Census data is backward-looking, and this is no different with the average earnings of full-time workers being explored from the 2011 American Community Survey, there is a discernible trend apparent based on the level of education a person attains.
Based on the assumption of a 40-year work history (from age 25 to 64) and using 2011 dollars for its example, the Census Bureau finds that full-time workers' lifetime earnings capacity soars as their education level rises. Non-high school graduates with a ninth through 12th grade education level and high school graduates in its example bring home $936,000 and $1.1 million in earnings over their lifetimes. Individuals with at least some college experience netted an average of $1.6 million, while those with an associate's degree brought home $1.8 million over their lifetime.
Now here's where things get interesting. The data showed that people graduating with a four-year bachelor's degree earned an average of $2.4 million over their lifetime in 2011 dollars, with people attaining a master's degree bringing home $2.8 million. More specialized degrees, such as a doctoral or professional degree (for example, law or engineering), led to lifetime earnings of $3.5 million and $4.2 million, respectively.
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It's important to keep in mind that we're talking about dollar figures from five years ago, so the difference in lifetime earnings between going to college and not going to college could be magnified even more in present-day terms.
The data is pretty clear that if you get a bachelor's degree or higher, your chance of doubling your lifetime earning potential increases by a lot. Furthermore, your socioeconomic mobility is also improved by going to college, which can in turn help your ability to save more money for retirement and allow you to invest for your future. When all is said and done, a college degree could allow you to earn well over double what you would have earned if you hadn't gone to college.
Three considerations to keep in mind
However, students shouldn't simply enter college with the expectation that they'll be a success. Three additional factors could be vital to your financial success.
First, it pays to do your homework on higher institution returns on investment (ROI). It may be the belief that higher-priced colleges yield better paying jobs once you graduate, but this isn't necessarily the case. More importantly, if you have to pay an arm and a leg to get a post-secondary education, then your student loans can act as a concrete weight that drags down your ability to succeed financially. This is where consulting PayScale's College ROI Report can come in handy.
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PayScale's College ROI Report is an annual release that analyzes the median annual income of college graduates over a 20-year period and compares this income to the four-year cost of attending a college in question. Those colleges which yield high-paying jobs with a minimal four-year cost have the best ROI, and should therefore be at the top of your list. What you'll find with PayScale's ROI rankings is that the nation's most prestigious schools may not be the best value for you. Instead, looking at in-state institutions and saving yourself from a mountain of student debt could be a smart move.
Second, it's important to focus on a field where demand and pay are high. There are obvious occupations, such as management, doctors, and engineers, where pay is naturally high to begin with. But we don't all want to be doctors or engineers, so it's important to pick out a profession that gives you an opportunity for socioeconomic advancement.
Based on data from ThinkAdvisor, which recently ranked the 30 best-paying college majors, jobs that involve science tend to lead to some of the highest salaries right out of college. A separate report from CareerBuilder.com last year points out that majoring in broader topics like communications or liberal arts may not be all bad, as it makes you hirable across a number of industries. Of course, focusing on business or math will likely result in a better paycheck right out of college.
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Finally, and this goes for everyone regardless of their education level, using a monthly budget is a must if you want to be financially successful. If you don't understand how your cash inflows become an outflow, then it becomes almost impossible to adjust your saving and spending habits to optimize them. Yet, discouragingly, a 2013 Gallup poll found that only a third of Americans kept a detailed monthly budget.
Formulating a budget is thankfully pretty simple with the tools needed being found online these days. In a matter of 30 minutes you can have a detailed monthly budget ready to roll, with the intent being to save and invest as much as possible for retirement. The bigger challenge is probably going to be in ensuring that you stick to your budget. This may require the assistance of everyone in your household, moving money to separate accounts to reduce your desire to spend, and even setting up an automatic weekly or monthly withdrawal plan to hold yourself accountable.
With a little planning, your decision to go to college could be worth more than $1 million!
