This is something that most people ask themselves when they began to build a stock portfolio in stock market to have passive income. It’s worth to pay a specialization course instead of saving this money? So, there’s no better way to analyze it if not mathematically. Photographer with low experience - Average annual salary: $48K (4K per month)
Let’s suppose you’re a photographer. You have $20K saved and you’re able to save +$1K monthly.
You have 2 paths:
1- Invest in stocks the money you have right now;
2- Take a photography degree (looking to improve your salary, find a better job);
So, let’s go for the 1st path:
What if you start investing right away your money and don’t take the course?
In 3 years: you would have around $65K
In 5 years: you would have around $100K
In 10 years: you would have around $215K
In 20 years: you would have about $620K
In 30 years: you would have about $1.4M
In 50 years: you would have about $6.6M
2nd path:
A professional photographer course takes roughly four years to be completed. And is expected to be payed something around $20K
Professional photographer - Average annual salary: $78K (6.5K per month)
So, you spent all your money you have saved ($20K) to take that course.
4 years later, you increase your salary in $2.5K. But now, your job requires some professional equipment that you spent $500 per month. And, as your salary has increased, now (as you get a higher salary) you decide to expand your life cost in $1.5K per month. So, at the end of each month you’re able to save $1.5K.
And if you invest this money into stocks, using S&P500 track record as a guideline
(Considering the average S&P500 monthly return and taking inflation into account)
In 3 years: (3 years investing 1K) you would have about $40K
In 5 years: (4 years investing 1K + 1 year investing 1.5K) you would have almost $78K
In 10 years: (4 years investing 1K + 6 years investing 1.5K) you would have around $220K
In 20 years: (4 years investing 1K + 16 years investing 1.5K) you would have almost $713K
In 30 years: (4 years investing 1K + 26 years investing 1.5K) you would have about $1.72M
In 50 years: (4 years investing 1K + 46 years investing 1.5K) you would have about $8.05M
Only after something around 9 years (5 years after finishing the course) it would make sense to choose the path where you take the course.
But, remember that I said that after taking the course the guy would expand his life cost in $1.5K per month?
What if the guy kept the same life cost? If he sacrifices the present comfort to invest 1.5K$ more per month, it would make such a difference?
Let’s see:
In 3 years: you would have around $40K
In 5 years: you would have around $90.5K
In 10 years: you would have a bit more than $310K
In 20 years: you would have about $1.07M
In 30 years: you would have about $2.64M
In 50 years: you would have about $12.4M
In this scenario, it would be worth to take the course in 8 years (just 4 year after finishing the course).
A 1-year difference, which is a lot. Time is the most valuable asset and many people insist on selling it.
Answering the question: Which is more valuable, Invest in stocks or knowledge?
In the short-term knowledge may not return you nothing financially speaking. However, in the medium/long-term it’s essential to make your money grow faster
And investing (not only in stocks, but overall) by itself doesn’t make any money but also accelerate the process to became rich.
And there’s something else we can also learn from this video: it’s useless to have a greater income if you spend it instead of investing it. And this is something most people do…
When someone gets a promotion or a better job, most people immediately think about what they want to buy instead of think on how to start investing. With this, more they could invest and much faster they could build their snowball of investments.
Pay yourself first in investments and then spend what is left.
0 Comments