It just hit me the other day: my 10 year high school reunion is this year. Woah!
So I’m officially not a kid anymore. I have some gray hairs, I can’t workout for more than 30 minutes without feeling like I’m gonna die, and it’s been a decade since I was in high school.
When I think back to 10 years ago I was a starry eyed kid. I knew I was going to go to school, get a great job and be a millionaire. And I was going to do it all before my 30th birthday.
I wanted to succeed. I needed to succeed. Heck I was offended my class didn’t vote me most likely to succeed.
Now the reunion is here and I’m certainly not a millionaire. Heck, I’m not even a hundred-thousandaire (although I’m getting kinda close).
I do consider myself a “success”. I have a great job that pays me a healthy salary. I am engaged to be married next year. I have a great dog. I have an engineering degree from one of the best schools in the country. I own a house. I am active at my church. Heck, I even have a blog.
There are lots of ways to measure success, but if we are measuring success by net worth then I imagine a lot of my classmates will be more successful than me.
How to Be Worth $100k After 10 Years
Let’s arbitrarily define a net worth of $100,000 as “successful” at your 10 year high school reunion. It definitely means you are well ahead of the financial curve in this country.
The median net worth for someone 25-34 years old is only $8,525 according to CNN Money.
The median net worth doesn’t hit $100k (well, $98,350) until you hit the 45-54 age range.
If you are worth $100k by the time you are 28 years old, I think it’s safe to say you are a financial success. Sadly, I’m not there yet.
But let’s see what it would take to get there following a two different career paths.
Manager at a Pizza Restaurant
I worked at a pizza restaurant in high school with a bunch of my classmates. Many of us left the restaurant to go to college or find other jobs, but my friend Nick stayed there. He was there 5 years after graduation and he might still be there today if they hadn’t closed down.
Could he be worth $100k after 10 years?
While many of us were taking out huge loans to go to college, Nick was simply working. He had been working at the restaurant for a long time and had gotten a few raises. Let’s pretend that his average hourly wage over 10 years was $15 an hour.
That means he earned $31,200 each year (assuming he worked full time). He won’t pay much in taxes with an income that low, so let’s say his take home pay was $28,000 each year. That means he took home $280,000 over 10 years of working.
If he was able to save 35.7% of his income over 10 years, he would have a net worth of $100,000. That would be hard because he’d have to live on $18,000 a year, or $1,500 a month. But what if he got married to his coworker at the pizza place? (which my friend did)
Let’s say his wife also makes $31,200 a year. Combined they make $62,400 each year. Let’s say their take home is only $53,000 after taxes.
If they saved $10,000 a year they’d still have $43,000 to live off each year. That means they have $3,583 each month. You can have a pretty decent standard of living for $3,500 a month.
The bottom line 10 years after high school: a restaurant manager can have $100k after 10 years, and if he marries another restaurant manager it’s actually pretty easy.
At this point they have $100k saved up and maybe they are ready to start their own pizza restaurant. Now instead of making $15 an hour their earnings are only limited by the amount of business they can do with their restaurant. If they decide to become entrepreneurs then their earning potential is huge moving forward.
Go to College
The other popular option for myself and my classmates was to go to college. Most of us took out huge loans to attend school in the hopes that we would get high paying jobs.
Take me for example. I had about $35,000 in student loans when I graduated. Remember Nick? He and his wife might have had $50k saved up after five years. I was at negative $35k. Not good.
I did get a good job making around $60,000 a year right out of college. Great! I’ll pay it all back and be rich in no time.
Too bad a single person making $60k pays more in taxes than a married couple. My $60k was maybe only $48,000 take home.
Five years of working at $60,000 a year earns me a cool $240,000 after taxes. Too bad I had to pay back all those pesky student loans, which costs say $40,000 after interest. Now I’m down to $200,000 over 5 years, or $40,000 a year. I only have 5 years of income, so I’d have to save 50%, or $20,000 for five years to get $100,000. That’s living off the same amount as the single pizza manager. But wait, I thought college was supposed to make me MORE wealthy than a restaurant manager?!
Maybe like my friend I marry a beautiful woman (which I will do next year). The problem is my beautiful wife also has student loan debt. And what if my future wife’s college degree didn’t lend itself to a $60,000 salary?
Now my wife is making about the same as the restaurant managers, but she spent 4 years accumulating debt instead of working. It will take her years to pay for living expenses and pay down her loans before she even breaks even.
The bottom line 10 years after high school: Having $100k in net worth is extremely hard for anyone who took out loans to pay for college. It is possible if they have a very high paying job or if they didn’t need loans to pay for school.
The future earning potential for the college grad is probably pretty good, but not necessarily any better than an entrepreneur about to open a restaurant.
There Are Many Paths to Financial Success
I know if I show up to my high school reunion and stand next to Nick, people will probably look at me as a success and him as just another guy living paycheck to paycheck.
That may be the case. Or it may be that Nick has a greater net worth than me, and greater earning potential as he starts his own small business.
So what’s the point?
When and if I go to my high school reunion, I will NEVER look down on someone for working the same job they had 10 years ago. There’s a good chance he or she is in a better financial position than I am.
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT atย Buildingstars, Co-Founder of Padmission, and organizer ofย Laravel STL. He is also the creator of www.contributetoopensource.com. When heโs not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
it seems like the definition of success as net worth of $100k should be per person.
what if your friend is a polygamist and has 3 wives working at a pizza store and as a family unit they accumulate $100K in net worth is that success?
I consider net worth a household number. If he wants to marry 3 women and they all want to combine their finances, then sure.
They don’t even have to be married. It could be 5 dudes who have all decided to combine their income and resources. I doubt that happens often, but if it did then who cares?
if 5 dudes got together and accumulated $100k, you would call that successful?
If they used that money to start a successful pizza restaurant, then yes.
This may be slightly off topic, but I firmly believe that the increase in college tuition rates, and the increase in health care costs have stifled entrepreneurship in this country. Kids graduate with so much debt in some cases that they always opt for the safer choice. I’ve seen scores of math and applied science majors segue into careers on Wall Street, rather then going to work in their respective fields because Wall St was willing to pay them significantly more to start. It’s not much of a choice for an MIT grad who’s staring at thousands of dollars in debt. Always makes me wonder however what we’ve potentially lost in innovation and technological advancements if some of these kids had gone the other way.
Definitely an interesting way to look at it.
I’ve been thinking a lot about what it means to be a financial success lately. I recently found out my friend from college is making significantly more than me (approximately 300% more to be exact) and I was immediately jealous of his success. But with his salary increase came a lifestyle inflation. As I’m sitting here, slowly but surely getting rid of my debt, he’s incurring new debt because he can now “afford” it.
If you think in terms of salary, he’s more successful. But if you define financial success as someone who has control over theirs, then I’d like to argue that I am ๐ But then again, you never know what people really do with their money.
The reality is you may never know. Comparing yourself to others can be frustrating! I think you should monitor your progress against your plan or goals. There will always be someone who may do better thaan you at any particular time.
For example, I was drafted into the army soon after I graduated college. My starting pay was $7,500 at the time (1968). There was a 19 year old truck driver who earned $11,000 that same year. I went to college for 4 years and he was making 50% more than me at a younger age! His career was limited and mine wasn’t. Remember that when you compare yourself to others.
I would argue his career wasn’t limited. He could have saved money to buy his own truck and start his own business. Then he could have hired drivers to do his work for him. He could have become an entrepreneur and billionaire. Who knows?
There are an infinite number of paths to prosperity. As long as you get there honestly then no one path is better than the other.
Anything is possible, but not necessarily likely. A college degree does not guarantee success. It just provides the skills to help you succeed.
In my opinion a powerful person can lead the succesfull business just with its soft skills to manage other people. Everytime can employ the expert from colledge to do the job for him.
You are not comparing apples to apples (as much as you can in these two situations).
In the non-college example, a married couple has a combined $100k savings ($50k each) and you assume the spouse makes the same income with no debts for either person.
In the college example, you double the debt (2 college educations) and then assume the spouse makes LESS income; hence has less money to pay back the loans and makes the pizza couple look way better.
As for the comment “But wait, I thought college was supposed to make me MORE wealthy than a restaurant manager?!”
I would predict that a recent college graduate would be “poorer” than a person the same age who was a manager without college (4 yrs work experience, no college debt). Of course, add 10 years to the situation and then compare. How does the net worth of the pizza couple after 20 years compare to the net worth of the college couple after 16 years (+4 years for college = 20 yrs). All else being equal, the college couple should start lower (possibly negative) yet have a more exponential curve while the pizza couple has an initially higher yet more linear net worth curve.
Either way, I agree with your conclusion: there are multiple success paths and don’t look down on others.
I wasn’t trying to compare apples to apples. I was trying to compare myself to my friend Nick. ๐
The point is that you can spend 4-6 years in college trying to get a degree to get you a lot of money, or you can spend 4-6 years earning money and saving capital to start a business and make a lot of money. Either way works.
Great post. It’s definitely what you make of it. People like Mark Z. (Facebook) didn’t finish college and are billionaires, so it definitely depends on the person. I’m glad I went to college and kind of regret going to grad school. I think either way, I would have been okay. ๐
Knowledge specialty is just the main purpose of studying in college, I think.
It is therefore wise to determine whether this skill acquisition investment is really necessary for future agenda, whether for business or exercise of profession.
Hi Kevin, great article, made me laugh! I think there is not too much value in higher education, I wish I had invested in a pizza restaurant ! Cheers
Kevin,
Awesome article! I knew I should have just started working in a pizza restaurant!
But, seriously, going to college and then getting a great job which quickly makes you a thousandaire isn’t bad either!
Nice one, Kevin. Makes one wonder why people go to college at all. Even worse is going to grad school after you’ve held a job for awhile. It’s a whole new slew of debt!