When it comes to gaining choice, there’s few more powerful enablers than increased skills. Financial Autonomy is about gaining control and choice over your life – not enduring a working life that is unfulfilling. It’s about getting the most out of the one precious life that we are allotted.
In this post, we’re going to look how an investment in your education, could help you gain that choice and control.
What brings each of us happiness differs, but what is consistent is that in the modern world, money is a necessity. And whilst in the long term it may be possible to generate the money you need from accumulated wealth – for example dividends and rent from tenants – for most of our adult lives, the money equation will be solved through us doing something that someone else values, and getting paid for it.
The intent with any sort of education is to learn from those before us. We don’t need to figure out the mechanics of a wheel, or a versatile number system that can both track how many sheep we own, and calculate the speed at which the earth circles the sun. That knowledge has been discovered in the past and handed down to us so that we can build from there. Education is like hitting the fast forward button.
Our ability to generate income can be regarded as our greatest asset. Building on your skills through education, is therefore likely to be a wise investment of both time and money.
Most parents put a high value, and often make considerable sacrifice, to give their children the best education possible, in recognition that this investment has a very high payoff.
As adults, we might invest in education as a way to progress up the ladder in our profession, or to learn skills in a complementary area so as to move into a role with greater enjoyment and satisfaction. Or you might look to re-skill entirely to shift to a sector in the economy with greater prospects.
I started my working life at a bank, initially doing back office clerical work, and then getting “promoted” to be a bank teller. I could have stayed on that path, and today I’d perhaps be some mid-level manager with a whole lot of pressure and not much ability to change things. Fortunately I chose to return to study, and the completion of my Economics degree was the foundation upon which my working life has been built.
Sarah Kessler’s great book Gigged, identified that in the modern economy, with less job security, highly skilled workers did well – they had negotiating power and could choose between maximising income, or trade income for more time. Lower skilled workers however – drivers, cleaners, and the like, were the losers from this new world. Their jobs get outsourced, or hourly rates stagnate. In many cases, technology ultimately makes then redundant entirely.
So how can we determine the value of education?
According to the AMP-NATSEM’s Smart Australians income and wealth report, those with a university degree are likely to earn almost twice as much as their peers in the same industry with no university degree.
Grattan Institute research underscores the significant impact of a degree on lifetime earnings:
- A male with year 12 equivalent earns $1.7 million whereas a male with a bachelor degree earns $2.8 million.
- A female with year 12 equivalent earns $1 million whereas a female with a bachelor degree earns $1.8 million.
It also highlights the difference in income across the sexes, but that nut is beyond the scope of our little audio blog to crack.
Taking the time to earn a degree is worth on average between $800,000 and $1.1million. Now that is a great investment.
A university degree also impacts employability, with the OECD’s Education at a glance 2017 report showing unemployment rates in Australia are significantly lower for those with a degree than those without.
The accessibility of education is better than it has ever been. You can now do entire degrees online via services like Open Universities.
And of course degrees aren’t the only form of education. Short from online courses are more prevalent than ever, giving you access to wisdom from around the globe.
Another way to think about the value of education, is to reflect on the number of hours you wish to devote to income earning activities. Let’s say you’re happy with a typical 40 hour working week. You could sell those limited hours for $20 per hour, in which case you’ll make a little over $40,000 per year.
But if you find that you need to earn $80,000 to live the life that you want, do you want to work 80 hours a week? Probably not. So the answer must be to get more for the hours you give. And the way to earn more is to provide more value through more skills and expertise.
Getting a higher rate per hour of available working time could also provide you with the flexibility to reduce your hours worked. If your need is $80,000 of income each year, and you can generate that in 30 hours per week – happy days.
Now the truth is that many of us would keep working 40 hours and just earn more. Get a better car, or some other form of lifestyle inflation. And that’s fine – but it’s great to have that choice. And choice of course is what Financial Autonomy is all about. So give some thought to what sort of investment in education you could make. The payoff is likely to be very rewarding indeed.