If college isn't your thing, you're not alone. According to the Bureau of Labor Statistics, 31.6% of Americans who graduated from high school in 2014 had not enrolled in a college or university by spring of this year.
Although a college degree can lead to a higher-paying job that can offer financial security, higher education doesn't guarantee financial success. Read on to learn three ways that you can still make a big pile of cash without a college degree.
1. Leverage compound interest
There's no better wealth-building strategy than investing early and leveraging many years of compounded annual returns.
Let's consider two people: Mark and Jim.
Mark didn't go to college, but he did start working right away at 18 and was savvy enough to put $2,000 annually into an investment over 47 years until he retired at age 65. That investment earned a hypothetical 8.5% per year and provided him with a $1.06 million investment portfolio at retirement.
Jim went to college, but because he was saddled with college debt it took him longer to start investing for his future. Finally, at age 26, Jim put $3,000 into the same investment Mark used, and then added $3,000 annually until he hit age 65. Although Jim invested 50% more per year than Mark, Jim's portfolio was worth just $814,790 upon retirement.
Why did Mark, who didn't get a college degree, end up with a bigger portfolio than Jim? Because of compound interest, or interest that is added to an investment that earns interest from then on. Since Mark started investing when he was younger than Jim, he earned years of additional interest that Jim didn't, and that interest over the decades resulted in nearly $200,000 in extra portfolio value.
The lesson to be learned from Mark and Jim is that when you begin investing can be more important than how much you invest.
2. Start a business
Many businesses are started by people who don't have a higher-education degree. This includes people who study trades to become electricians, heavy equipment operators, and plumbers -- high-paying jobs that offer plenty of potential for small business owners.
For example, the average U.S. plumber earned $53,820 in 2013, and many earn much more than that. If someone earning that amount of money takes advantage of retirement plans available to business owners, such as the simplified employee pension, or SEP-IRA, plan, then they can salt away a large amount of money over a career.
For example, the average person can invest the lesser of either 25% of their compensation or $52,000 in a SEP-IRA in 2015. If that self-employed plumber sets aside 25% of a hypothetical $53,820 in annual earnings from age 26 to age 65, he or she would retire with a $3.65 million portfolio -- trouncing both Mark and Jim's savings.
3. Watching your wallet
Most Americans have a hard time staying debt free, but few things can have as big of a positive impact on your financials as curbing spending and avoiding debt.
The average American household as of this month has over $32,000 in student loan debt and owes $15,706 in credit card debt. That means that thousands of dollars are going to paying principal and interest that could otherwise be invested.
Although most Americans without a college degree avoid that hefty student loan burden, they can still benefit greatly by being able to set aside money that would otherwise have to be used to pay off any and all debts.
Additionally, small daily expenses can add up to big money over a lifetime, which suggests that scrutinizing every dollar in your monthly budget makes a lot of sense. Budget-friendly moves include buying a gently used car rather than a new car, cutting the cord to save on cable fees, and avoiding high-cost vices such as smoking.
If you're not convinced that small daily decisions can add up, consider this: According to a study by WalletHub, smoking a pack of day over five decades costs the average smoker more than $1 million. That's a game-changing amount of money.
Tying it together
Sure, a college degree can open doors that can lead to more money for retirement, but plenty of people can retire rich if they follow a few simple rules, such as starting investing when they're young, investing as much as possible as consistently as possible, and keeping spending in check. If you follow that advice you could end up with an envy-inspiring portfolio, regardless of whether or not you have a college diploma.
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