Formal Education Makes You A Living But Self-Education Makes You A Fortune
The United States places an immense emphasis on receiving an advanced education. After graduation, practically every single high school student is encouraged to go straight to college to get a bachelor’s degree. This decision almost always means racking up significant debt. Meanwhile, there is a much more affordable style of education out there. In this article, we’ll discuss why formal education may make you a living, but self-education makes you a fortune.
What Do We Mean Formal Education?
When we say formal education, we mean any type of education after the mandatory K-12 schooling. This includes:
- Bachelor’s Degree (4 years)
- Master of Business Administration (MBA)
- Doctorate
- PhD
The main reasoning behind getting an advanced degree is that it will make you a more attractive employee and increase your earning power. There might be some truth to this comment.
Expected Salaries
According to data from the APLU, college graduates do indeed earn more money than high school graduates. In 2021, the median salary for people aged 22-27 with a Bachelor’s degree was $52,000. Meanwhile, high school graduates in the same age group earned just $30,000.
For advanced degrees, the gap continues to widen. A survey by MBA.com estimates that the median starting salary for MBA recipients is $115,000.
At first glance, it looks like getting an advanced degree is a surefire way to make more money.
However, these statistics are just based on salary information. They don’t factor in the immense cost of getting a degree. The cost of a Bachelor’s degree is approximately $35,551 per year. For a four-year degree, this means that you are spending over $140,000 for your education (assuming you pay out of pocket). Even worse, MBA degrees can range anywhere from $50,000-$120,000 per year, making them even more unaffordable.
In many cases, taking on loans to pay for the immense education costs just isn’t worth the slight bump in pay. Even with your higher earnings, you’ll likely spend almost a decade just paying for your diploma.
Fortunately, there is a much cheaper education alternative out there.
What’s Self-Education?
Simply put, self-education is the process of teaching yourself new things through reading or informal studying. You can really educate yourself about any different topic. But, for the purposes of this article, we are going to focus on one specific topic:
- Investing: The act of allocating capital in order to generate a profit
For the most part, learning to invest money is a topic that is entirely absent in the US school system. This means that, if you want to learn how to invest, then you have no choice but to teach yourself. We consider this good news because it means that everyone is on a level playing field.
There are high barriers of entry when it comes to getting an MBA. But, when it comes to teaching yourself new skills, the only barrier is your work ethic.
Even the most formally educated astrophysicist doesn’t necessarily have a leg up on a high school grad when it comes to knowing how to invest.
Why Invest?
If you look at a list of the world’s richest people, many of them will have advanced degrees. But, the main source of their wealth is almost never attributed to a $30,000 increase in their salary. In fact, except for maybe the highest-paid CEOs, nobody has ever made a fortune by receiving a high salary. So how do people make fortunes? Simple. They invest or start a business.
To validate this fact, let’s take a quick look at Forbes List of Richest Americans and their accompanying source of wealth:
- Elon Musk: Tesla
- Jeff Bezos: Amazon
- Bill Gates: Microsoft
- Larry Ellison: Software
- Warren Buffet: Berkshire Hathaway
- Larry Page: Google
- Sergey Brin: Google
- Steve Ballmer: Microsoft
- Michael Bloomberg: Bloomberg
- Jim Walton: Walmart
In every single case, the person’s fortune is almost directly attributed to their business and investments.
Since formal education almost never teaches you how to start a business or invest, where do you think the knowledge to start and run these businesses came from? You guessed it! Self-education. In fact, there are dozens of examples of famous entrepreneurs who dropped out of school to pursue a business.
Getting started
Now, this doesn’t mean that you have to start the next Walmart in order to make a fortune. There are plenty of more realistic ways to get started.
For example, one of the easiest strategies to start investing is through real estate. This is a little bit simpler than starting an entire business and can be done in a couple of different ways. Real estate is a great vehicle for creating wealth because it can:
- Appreciate in value
- Generate cash flow
- Save you money on taxes
- Allow you to use leverage to amplify your returns
Final thoughts
With all that said, the final answer becomes clear. It’s true that a formal education can certainly help you make a good living. But, without a doubt, it’s self-education that will make you a fortune.
We hope that you’ve found this article on the differences between formal education and self-education to be valuable! We hope that it has given you a better idea of why you should continue to educate yourself even after school ends.
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Sachin Maskey is a physician, real estate investor, philanthropist, and entrepreneur. He has over 17 years of expertise in the medical industry as a family medicine specialist. Outside of medicine, he is the founder of the commercial real estate investment firm Avatar Equity as well as the Dhana Yoga Foundation. You can follow along with Sachin on Instagram, TikTok, Facebook, and LinkedIn.
