Higher Education and Money

Imagine Dr. Josh

I currently have a Master’s degree and I always like the idea of getting my Doctorate degree, (because Dr. Josh just sounds awesome!), but I can’t justify the price of getting one.  I get emails about once a month from SMU, where I got my Master’s degree through scholarships and paying in cash while teaching, and they always have good deals.  This time around they emailed me to let me know that if I sign up for the Doctorate program, I could qualify for a six hour scholarship for teachers, and another six hour scholarship for community leaders.  That’s a third of the cost covered for a PhD!  So, like usual I went online to check it out, and saw that the courses went up in price since my Master’s degree six years ago, and it would cost me over $20,000 to get Master’s degree.  I thought that was cheap, so I put together a little plan. I would take one course a semester in Fall, Spring, and Summer and It would cost me about $411.57 a month to pay in cash for the title of “Doctor.”  I would have five years to finish the courses, and seven years to finish writing and defending my work, so I would be 43 when I finished if I used all the time I needed (I used 5 years to get my Master’s).  I would also get a pay bump of $2,000 a year for this hard academic work, and the title on the door to my classroom alone will get me so much respect with my 14-16 year old students (Sarcasm intended).  So, with a bargain price like $20,000 for a doctorate degree from a prestigious private university what is holding me back?   Let’s break it down some more.

I plan to retire at age 52 from teaching, because I can get my full retirement at that point.  If I get a $2,000 raise from my new degree (nine years of working left), and it costs $20,000 to obtain it (seven years of studying), then I would only make $18,000 with my raise before retirement.  So, simple math says this is bad investment for my bank accounts.  However, in my retirement, my number, is based off my top five highest salaried years of service, so if I boost my salary at the end, and get regular raises along the way then the extra $2,000 a year would pay off big in retirement payouts for the rest of my life.  It could mean an extra $100 a month until I die and my wife dies (since the benefits would go to her after my death).  That’s $1,200 a year extra, and if I live to 85, that’s 33 years of collecting that extra money or $39,600 total.  So I would be making the $18,000 while working plus the $39,600 in retirement for a total payout of $57,600 over 42 years of having a Doctorate degree.  That sounds like a win for getting the doctorate degree!! Plus, I would be Dr. Josh!!

Wait a minute Dr. Josh, lets look at our other option of just saving the $20,000 and see how that works out.  So, lets say that instead of paying for the extra degree, I instead broke the $20,000 in monthly installments over the next 7 years of getting the doctorate degree.  So, I saved $238.10 a month in an conservative account gaining 4% for the next 7 years.  Then after 7 years, I let the money sit and grow with no more additions until I’m 85, using the most powerful force in the world…Compound Interest!!  My $20,000 investment after 42 years would be $311,463.64 at the age of 85, if I never touched the $20,000 again!!  Also, if I wanted to look at the account when I am ready to retire at 52 it would have $59,498.60 instead of my $18,000 of earnings from my raise.  Did I mention that those numbers are based on 4% returns on my money?  (Dr. Josh<Mr.Josh)

So, I guess, that you guessed, why I won’t be Dr. Josh anytime soon.  I didn’t do this when I got my Master’s degree which I finished at age 30 for the $2,000 raise, but in education you need to eventually get a Master’s degree to teach the upper level classes.  You also have more driven students in the upper level college credit courses, and it is fun to watch them grow and thirst for more knowledge.  I also got my Master’s for under $15,000 with no thesis to write either (bonus!).

I hope that if you are on the fence about getting more education you will run the numbers and see which is better for you, compound interest or your new degree.  I understand that the degree usually means more opportunities for higher pay, and other benefits to your quality of life.  Usually when you are younger the answer is get the degree to open up a world of economic opportunities to yourself.  Then you can run the numbers when you have the option to go back to school when you are older.  I would have always loved to brag that I’m Dr. Josh, but I would like to brag later that my net worth gave me financial independence, and that is something worth getting excited about. (FI>Dr.)



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