A Certified Financial Planner and Economics Professor Breaks Down the Real Trade Off
I came across an article today from The Wall Street Journal, and they were going through some data on a question that a lot of parents are asking right now. Does it still make sense to send our kids to college?
As a father of four, I talk to my kids about college all the time. About the jobs it opens up and the different avenues it creates. But I always take a step back and try to explain it to them from a different perspective. There is a math equation here. There is math, and there is the satisfaction we get in life.
At the end of the day, economics is very straightforward. It is about having unlimited desires, things we want to do, and only a limited amount of time and money and resources. You have to figure out what trade offs you are willing to make, because you only have so much time and so much money.
In case you are wondering what qualifies me to talk about this, I am Dre Griggs. I am a Certified Financial Planner, the founder of Obsidian Wisdom, and I teach economics at the college level. I spend all of my time figuring out how to make the trade offs that give you more of what you want while taking the least amount from you.
Why Non-Degree Workers Are Suddenly Doing Better
The data showed something interesting. The unemployment rate for non-degree workers ages 22 to 34 is at a 20 year low, while young college graduates are having a difficult time finding work.
So why is someone with a college degree struggling to get a job while someone with a skill set outside of a degree is doing just fine? I think I know where this is coming from, and I want to tell you a story.
My Own Path Taught Me This the Hard Way
When I first graduated, I had a degree in economics. My first job was as a credit manager at Wells Fargo. Then I moved to Deutsche Bank and went into investment banking, working in a department that dealt with profitability and accounting for the traders. We went through the numbers on how well the trades and their strategies were performing.
My third job after college was in the pricing department. I became the carload pricing manager for a small rail line, Florida East Coast Railway. It took a couple of meetings with my AVP at the time before it clicked. He told me, “If you like economics, then you will really like pricing, because pricing is figuring out the economic value of things. I think you are going to get a lot of those itches that you enjoy. It may not be as fast paced as investment banking, but I think you will be very satisfied.”
It took me a little time to understand that he was completely right. I took a leap of faith. I had never had anyone actively recruiting me before. He introduced me to the person I would work with, we all had lunch, and I remember thinking, “This is different. I have never been sought after. I have always been the one chasing people to get jobs.”
A few years into that career, I had built a very specific skill set. Not many people combine an economics background with pricing expertise. Economics on its own is fairly general, but pair it with pricing and it becomes very specific. You are not going to find as many people with an economics degree paired with pricing as you would find someone with a general business or finance degree.
So when another pricing role opened up, one that companies had been trying to fill for multiple years, I applied. At the time I was making around $52,000 to $55,000. The role was listed around $65,000. But because they had been searching so long and I had the exact skill set they needed, they offered me $70,000. That was $5,000 more than what the position was even listed for, because they felt the skill set was too rare to let go.
I naturally took the position. And what that story ultimately teaches us is that everything comes down to supply and demand.
We Are Producing Generalists in a World That Rewards Specialists
Fast forward to today, and we are telling everyone to go to college. But people are earning very general degrees without trying to find a niche in their career or their skill set, whether that niche comes from pairing the degree with a certification or something else. That general approach opens you up to competing with everyone.
If you are a business owner, you already know this is true. If I say, “I want to be in leadership,” I am now a generalist in leadership. That puts me in competition with someone like David Goggins, who is extremely high level in leadership built around military discipline, or Mel Robbins, who is high level in leadership built around mindset. Versus if you work your way into a very specific skill set, you become a big fish in a small pond.
So a lot of the time, when you look at the numbers, the real question is not whether college makes sense. It is whether a specific degree makes sense for you. There are situations where college clearly makes sense. If you want to be a lawyer or a doctor, that still holds true. If you want to be a chef, I am not sure college is the answer. It depends entirely on what you plan to do with that skill set.
You do not need a college degree to become a plumber or an electrician and master a specific trade. I have even seen people build very successful businesses cutting down trees. You do not need a degree for that skill, but it is specific enough that when I have that particular problem, I need to know that person exists. Someone with the experience, the certification, or the training to solve that exact problem.
AI Is Making This Even More True
If you go up a notch from there, AI is part of what is driving this shift. If you have general knowledge, AI already has all the general knowledge you could need. But if you have specific knowledge, a unique combination of life experience and skills, you create economic value that gives you a real advantage.
I am someone with advanced degrees in economics. I teach economics at the college level, and I am also a Certified Financial Planner. When you put those pieces together, it gives me a perspective that AI currently cannot offer. When I talk to other people in financial planning, I can say, “I have a specific certification. I also have years of experience across a variety of financial industry positions, and I teach economics at the college level.” If that combination has value to you, that is how I separate myself, and that is the kind of separation I think everyone should be building toward.
Think about how you search for help when you have a problem. Do you Google “I need a general doctor,” or do you search for the doctor who specifically solves your exact pain point? If I broke my foot running, I need a foot doctor. If I hurt my shoulder lifting weights, I need a shoulder doctor. For my kids, I want a pediatrician. For my dog, I want a veterinarian. If I need surgery, I want a specific surgeon with the exact skill set for my exact problem, not a general surgeon.
How to Actually Decide If a Degree Makes Sense
If you are trying to figure out whether your degree makes sense, there are a few things worth looking at. How often is this role hiring? What are the future hiring projections for that role? What is the income, and what cities do you have to live in to get it? There is a lot of information to gather to make a decision that is specific and beneficial to you.
But when it comes to the pure math, what we need to calculate is the opportunity cost.
Let us say I went to school for four years. What would I have earned instead during that time? If I would have made $50,000 a year, then over four years my opportunity cost is $200,000. I am rounding the numbers to keep the math simple, as I like to do.
Now let us add in the money I am actually paying out of pocket. Tuition costs vary by state, so let us just say tuition is $100,000. That means college cost me a total of $300,000 when you combine tuition and opportunity cost.
Once you know your total cost, you need to determine the trade off. What are you trying to gain from this decision? Most people have never actually calculated the real benefit of something against its real cost. They just assume, “Of course you go to college, you make more money,” which is still generally true. Even with the unemployment rate at a 20 year low for people without a college degree, the unemployment rate is still lower for people with a degree. It is still more likely that you will have a job.
Of course, the unemployment rate does not capture everything. It does not tell you if you are overqualified for your job, whether you got a job in the field you studied, or whether you even needed the degree for the position you hold. Those data points matter too. But purely in terms of employment odds, a college degree still helps.
Running the Real Numbers
Let us say without a degree you would have made $50,000 a year. With a degree in a field like healthcare, engineering, or finance, let us say you would make $80,000 a year. That is an extra $30,000 a year.
How many years would it take to earn back the $300,000 you invested in yourself? At $30,000 a year, that is 10 years.
Let us say you graduate at 25. Ten years later, you are 35 and you have broken even. If you plan to work until 65, that means you have 30 more years of earning that extra $30,000 a year, assuming no raises or promotions along the way, just to keep the math simple.
Thirty years at an extra $30,000 a year comes out to $900,000. Over your working life, that degree has given you the ability to earn close to an extra million dollars. That is the trade off. You gave up four years of earning $50,000 a year, you spent 10 years paying back your $300,000 investment, and everything after that is pure profit on your investment in yourself.
This is also part of why the value of a degree tends to matter more at certain ages. The higher the degree ceiling in a field, meaning the level you cannot reach without one, the more that degree is worth. That is often true even when the degree is not directly related to the field. But the older you are when you consider going back, the fewer years you have left to earn back that investment, which is exactly why it stops making sense for some people to go back to school later in life.
Sometimes the Math Is Not the Whole Story
Now, there are other reasons people choose to pursue a degree. Economists call this utility. It simply means personal satisfaction.
I remember reading about a man in his 70s who went back to medical school. He had promised his parents he would become a doctor, and he felt compelled to keep that promise. He graduated. He never intended to practice medicine in any capacity. He just wanted to earn the degree and become a doctor as a promise to his parents. That kind of decision exists too, and it is valid.
As an educator myself, I enjoy contributing to future generations. Outside of a child’s parents and family, a teacher can be one of the most influential people in that child’s life, and I find real satisfaction in that. I also love economics, which is part of why I became a Certified Financial Planner. It lets me use economics to help people make better decisions with their time and their money, so they experience less regret and more satisfaction in life.
You can take these same numbers, adjust them for your own situation, and decide if the math still works for you.
Why the Value of a Degree Is Dropping
Right now, so many people are earning college degrees that it is driving down the value of the degree itself, meaning how much you can actually demand because of it. If there are 50 people applying for the same position and they all hold the same degree, the only way to separate yourself is by building a unique skill set that makes you more qualified than the average applicant.
In my opinion, the conversation needs to shift. It is not really about treating the degree as the finish line. It is about whether the degree is even required for what you want to do in life, and if it is, treating it as the first step rather than the destination.
When I entered the finance industry, I knew I needed a specific combination of skills. I earned a bachelor’s degree in economics, then a master’s degree in economics. When I decided to become a financial planner, I knew I needed something to separate myself from the average planner, since almost everyone in the industry holds some kind of license. I held a Series 65, a Series 7, and a Series 6 along the way. Today I hold just the Series 65.
Since anyone with a Series 65 is already a fiduciary by law, I knew I needed to go further. I became a Certified Financial Planner, a designation far fewer people hold, and I leaned into my genuine love of economics because that is authentically me. I believe it also helps people make better decisions, because when you understand the trade offs and you understand the goal, you are able to make the right call. When there is a disconnect between your decision making process and the actual reward and cost, that is when we make poor decisions.
The Same Principle Applies Beyond College
I see this same disconnect play out in politics. People vote based on party identification without considering the actual reward of that vote. If we voted purely based on economics, we would hold our politicians far more accountable. It would not be about whether they can tell me how good I am. It would be about the trade off itself. Based on what I am giving you, what am I actually getting back?
The wealthiest people among us tend to understand this instinctively. Their relationship with politicians is never about whether they like them or whether they hear something they want to hear. It is about what contracts they will get, what laws will pass, and what decisions will be made in their benefit. I believe that is closer to the relationship we should all have with our government. My government doesn’t need to like me. I need that kind of relationship with my children, my wife, my parents, my friends, and my coworkers. Not with the government. What laws do I use to control you, and what laws do you use to control me, and how does our relationship benefit us both?
What I Wish Colleges Would Be Honest About
I think universities need to move toward that same kind of honest, mutually beneficial relationship.
- Yes, I attend the college.
- Yes, you grant me a degree.
- Yes, on average that degree might mean an extra two million dollars over my lifetime.
But which specific degree programs are actually going to help me get the position I need? Are you cutting the programs that do not deliver real value, or at the very least, are you warning students honestly?
We all measure satisfaction differently, so if you are choosing a degree for a reason other than money, like the doctor who made a promise to his parents, that is wonderful. But if you believe a degree is going to make you a lot of money and the data shows it will actually leave you earning about the same as you would have without it, while adding four years of debt and four years of lost wages and lost experience, you deserve to know that before you enroll, not after.
We need more honest conversations like that. The more information we have, the better the decisions we are able to make, and the more mutually beneficial these economic relationships can become.
Dre Griggs, CFP®, MSAE, is the founder of Obsidian Wisdom, a fee only registered investment advisory firm specializing in tax smart retirement income planning for pre retirees and business owners. He also teaches economics at St. Johns River State College. This article is for educational purposes only and reflects personal opinion and experience. It is not financial, legal, or career advice.
P.S. If this got you thinking about the trade offs in your own life, whether that is a degree, a career change, or the bigger question of how you turn your time into lasting financial freedom, that is exactly the kind of thinking I help my clients apply to their retirement and their money. If you are within five to ten years of retirement and want to make sure your own trade offs are working in your favor, schedule your Retirement Stress Test and let us run the real numbers on your situation. Schedule your Retirement Stress Test here →