Unlock Your Financial Super Power
In case you haven’t noticed, super hero movies are all the rage the last few years. It seems you can’t drive by a movie theater without seeing showtimes for another X-Men movie or Avenger origin story. Each of these heroes has some sort of super power, like super human strength, telekinesis, or the ability to fly.
In personal finance I believe there is also a super power that we all have access to and can develop: education. You may not think of education as a super power, but maybe I can convince you by the end of this post.
By definition, a super power gives you capabilities above and beyond your normal abilities. For example, Captain America had strength and speed above what an average human would have. In personal finance, the more education you get, the more powerful you become as well. This includes both formal and informal education. Today I want to tell the story of how education has boosted my earning potential and net worth above what my normal capabilities would have been, just like a super power.
Formal Education
Formal education can greatly boost your earning potential. This begins with a high school diploma. Beyond that, you can pursue an undergraduate college degree or skills specific to a trade or craft through vocational school. Advanced degrees, such as a masters degree or doctorate, can elevate your value and earning potential even further.
Over the last 25 years I have had a number of different jobs across the entire spectrum of skill and pay grade. Whenever I try to teach my kids about the value of education, I take them through my progression over this period of time and the impact of education. I won’t list every job I have ever had here, but those that had an hourly wage readily demonstrate how education can act as a financial super power.
Starting at the Bottom
The first job I ever had was as a dishwasher. This was the epitome of an unskilled, manual labor, entry level job. And it was hard work, probably some of the dirtiest and hardest work I have ever done. I earned minimum wage at the time, which was $4.35/hr. And that was before taxes. If I worked a full time 40 hour week it would only pay $174. In a full year that would only pay $8,700, assuming 2 weeks off during the course of the year. And again, that’s before any taxes are taken out! Anyone thinking of dropping out of high school should have to work a job like that for 2 weeks to see what type of work their future may hold. I guarantee many would quickly change their mind. I tell my kids that not only was it the hardest work, but it also paid the very least because it was unskilled labor.
Later in high school I had a much better job working in an ice cream and sandwich shop. It was a family owned business and they were a great family. I started at about $7.00/hr and I was thrilled. Not only was the pay much better, but the work was way more fun and in a better environment. Eventually I became a shift manager and made about $8.00/hr which felt like I was moving up in the world. But even if I was working full time (which I wasn’t since I was in high school) this would still only be $320/wk before taxes. Working 50 weeks a year would bring in $16,000 without considering taxes. So even though the pay was a little better with a little more responsibility, it certainly was not enough to support a family or have a comfortable lifestyle.
Education Begins to Play a Role
I continued in unskilled, entry level jobs until I completed my sophomore year of college. I was planning to major in biochemistry at Arizona State University and had just finished taking organic chemistry. The opportunity came up to apply for a position as a teaching assistant (T.A.) in general chemistry. While T.A. positions were typically filled by graduate students, they needed more people at the time. My teachers told me I qualified for the job based on the chemistry classes I had taken and the good grades I had received. I decided to apply for the position and was hired by the department.
It turned out to be a great job. I discovered I really enjoyed teaching chemistry. Plus, the pay was $15.00/hr! This was amazing to me and a revelation of sorts. Not only was the work easier and more enjoyable, but the pay was double what I was typically earning before, and three times what I’d get as a dishwasher. My education, without even earning a degree yet, was what made this possible. A whole new world had opened up to me. Sure, everyone always tells you that education will help you to earn more money, but this was the first time I had a real paycheck as proof of that.
This theme continued as a I gained more education. After studying hard and doing well on the MCAT, I applied for a teaching position with Kaplan, the test preparation company I had studied with. I was hired to teach biology, chemistry and physics. As you might expect, the qualifications to teach these classes were a little higher, and as a result so was the pay. Now I was making $25.00/hr. And while Fortune Magazine wasn’t knocking at my door to try and get an interview, this previous dishwasher felt like he was rolling in the Benjamins.
The Medical Doctorate Degree
The next major bump my education gave my earning potential was after receiving my medical doctorate (M.D.) degree. This wasn’t through my residency training, however.
As a resident physician I earned about $50,000/yr to start. By any measure this is decent salary. But not if you look closer at the hourly wage. If I were working 40 hour weeks for 50 weeks of the year, that would be $1,000 per week and $25.00/hr, the same wage I was making teaching MCAT classes. But we all know that residents don’t work 40 hours per week. I began training at the same time the 80 hour resident physician work week was introduced by the ACGME. Needless to say, some specialties were slower to adopt that philosophy than others, and that included neurosurgery. So in reality I was probably working 80-100 hrs/wk, so let’s use 90 hr/wk as an average. If I was earning $1000 per week as a first year resident and working 90 hrs/wk, this breaks down to $11.11/hr. This is why some call residency training slave labor.
I first felt the impact of my M.D. degree on my earning potential during my research year of my residency training. During this time you have significantly less clinical duties, leaving some time to pursue other things. I chose to work as an Advanced Cardiac Life Support (ACLS) instructor to earn extra money. I worked along side EMTs, RNs, and a few other MDs. It was a great job with great pay. I earned $80.00/hr for 6-8 hour shifts. I was blown away, and here’s the kicker. I was doing the same job as the EMTs and RNs, but because I had my M.D. degree, I was paid a significantly higher amount. I couldn’t believe the power of education.
Of course the biggest bump for a doctor comes after completing residency training. Your annual salary can increase by a factor of 4 to 20 times what you were earning as a resident, depending on your specialty. I’m not going to disclose my annual salary as a neurosurgeon, but suffice it to say it is many times more than I ever made before. And those 15 years of education (4 years of college, 4 years of medical school, and 7 years of residency training) are certainly paying off.
Recap
Let’s review my jobs over time and the progressive earning potential that education provided:
- Dishwasher: $4.35/hr
- Ice Cream/Sandwich Shop: $7.00/hr
- Chemistry Teaching Assistant: $15.00/hr
- Kaplan MCAT Teacher: $25.00/hr
- ACLS Instructor: $80.00/hr
- Neurosurgeon: Much more/hr
I believe my own personal experience demonstrates how formal education can increase your earning potential, and in effect can act like a personal finance super power.
Playing Devil’s Advocate
However, some people would argue against formal education. In the personal finance space there is an evolving school of thought that formal education may no longer be necessary or worth it in our current “gig economy.” What you really need are street smarts and a drive to succeed. They argue that many people have been successful people without ever getting a formal education. All you do by going to college or graduate school is put yourself farther behind the eight ball by racking up astronomical amounts of student loan debt. Others argue that they don’t even use the skills or degree they earned in college in their current career.
I concede that these are compelling arguments. However, I still believe there is great benefit, even today, in getting all the education you can for at least a few reasons.
First, having a college education or beyond will afford you more opportunities, period. Many careers or professions absolutely require you to have formal higher education. Oftentimes it doesn’t even matter what field it was in, at least for the undergraduate degree; it just matters that you have a degree. If you don’t, there are countless jobs you do not qualify for, opportunities you will miss, and certain circles you can never be a part of. The bottom line is that more doors will open for you with an education, and the research has born that out. The more education you have, the higher the median salary.
Second, the process of getting an education instills a habit of lifelong learning, which I believe is one of the key skills to a successful life. It would be naive to think you learn all you ever need to know in college or graduate school. But one of the skills you are really learning is . . . how to learn. Somewhere in the process of writing essays, typing up lab reports, and pulling all nighters in preparation for a final exam, you develop the ability to learn things on your own, figure things out, and solve problems. If after leaving school you know how to acquire knowledge and apply it, then you are equipped for success in whatever you decide to pursue in the future.
Finally, there is more to formal education than just learning from books. You learn how to interact with others. You learn how to take responsibility for your own future. You learn to be independent. You learn how to seek mentors and network. You make lifelong friends. The list could go on and on, and many of these things are priceless.
Beware of the Dark Side
However, speaking of price, that is something that MUST be strongly considered. Just like there is a dark side to the force, and any super power can destroy those who possess it, there is a very dark side to formal education: student loans. I have some very strong opinions about student loans and I plan to write about this topic in much more detail in the future. For now, though, let me just say that you have to be very careful when considering paying for an education with student loans.
I have seen student loans cripple people financially for literally their entire lives. This usually happens when someone goes to a school with a very good “brand name” for a graduate degree that will place them in a middle income job. If they take out $60,000 a year (say $40,000 for tuition and $20,000 for living expenses) in student loans for 4 years, they are left with nearly a quarter million dollars in debt. While they may be very well educated, the six figure student loan debt they have accrued can be absolutely suffocating financially as their chosen career just does not have the excess income to allow them to pay it back.
What is the moral? Caveat emptor (buyer beware). Excessive student loan debt can negate all of the positives that gaining a formal education can offer.
Informal Education
Back to a more positive note and our super power analogy.
Education as a personal finance super power need not be limited to formal degrees and training certificates. Informal education can be just as powerful. Informal education includes knowledge gained by reading books, listening to podcasts, watching YouTube videos, browsing blogs, and just talking to people and learning from their experiences. There is so much available on the internet and other forms of media that you can learn how to do just about anything these days. The best part is that this is all free, or very close to it, meaning there is a near infinite return on investment.
Knowledge gained through informal education has formed the foundation for essentially everything I have learned about personal finance. I don’t have a degree in accounting or economics. I’ve never paid for any workshops or online courses. But I have spent hundreds of hours learning on my own through the aforementioned avenues.
It is difficult to quantify the return on investment for my informal education, but I know it is substantial. From learning basic things like how to do plumbing to changing the alternator in my car has saved me hundreds, if not thousands of dollars. Learning how to manage my own finances saves me 1-2% of my net worth year after year after year since I don’t have to pay someone else to do it and I can choose wise investments. Over the course of my investing lifetime, that will likely equate to millions of dollars. See my post, The 2% That Will Kill You for more explanation.
My advice is to never stop learning. Try to learn as much as you can, about everything you can, as often as you can. I am constantly listening to audio books or podcasts whenever I drive somewhere in the car, or if I’m mowing the lawn, or going for a run. I’m always reading 3-4 books at a time and try to finish at least one book every 1-2 weeks. You never know what doors your education will open for you. That’s why it is a super power.
Conclusion
Now do you believe that the education you obtain can be a personal finance super power? I know it has in my life. And my super power will continue to grow as the years go on. Will you tap into your super power? I hope so. Here are some take home points to consider:
- A super power increases your capabilites far beyond what you can do on your own. Gaining education, both formally and informally, can dramatically increase your earning potential and financial acumen, accelerating you on the path to financial independence.
- In the pursuit of formal education and training, beware of student loans. Excessive student loan debt can drastically impede, if not destroy, your financial goals.
- Be a lifelong learner. Never stop trying to learn about as much as you can as often as you can. You will not only end up rich in finances, but in life.
