Quit school or finish, not sure if it makes sense financially

[Pootie22]

Just found this blog 2 weeks ago and have been obsessed, reading thru as many articles as i can and working on my own numbers.

One thing i had been debating with myself was whether to finish school or not, I am 25 years old and have been attending school part time for a while now (because my current job it's virtually impossible to attend full time). Because of my current position my schedule moves around sometimes and it makes it VERY difficult to try to keep a school schedule and so it's been more expensive than it should be simply because i can't efficiently schedule my classes.

Anyway, I've been working with this company since i was 19 years old and am now making 95,000 a year (gross) so i'm starting to wonder if i even need to finish school since i probably don't plan on changing jobs because any other job wouldn't start me anywhere near that amount. I would need at least another 2 years of school at the rate i'm going and it would cost me about 30k-40k out of my pocket (i don't qualify for any government aid) so it's not looking like it's a good option. The primary force driving my desire to finish is almost just the "challenge" or fact that i'm the first in my family to attend, but i don't think financially it makes much sense.

I have not saved a lot of money because i had to put a huge down payment on a house i bought 3 years ago so most of my net worth comes from equity. But i figured with a decent income I think i can be FIRE within 10 years which has made me lean more towards not spending 30k-40k more on education. Here is a bit of my outlook.

$3,000  Cash savings
$5,000  401k savings ( i just opened it this year and next year i will start to contribute Max)
$160,000  Home equity  (house worth about $350,000, outstanding loan is $189,000)
$400 lending club notes

Debt
$8,000 credit card (0% interest intro fee ends April, used it to remodel kitchen)


My biggest "budget buster" has definitely been food/drink budget, according to Mint i'm averaging $740 a month which is ridiculous for 1 person, I go out to bars a lot and eat out 90% of all my meals (and pay almost all the time when me and girlfriend eat out). I figured i can easily cut that to $400 a month for BOTH me and my girlfriend (we live together and will probably get married by next year). Also, to buy my house I had to put a 75k down payment of which my dad loaned me 20K interest free which i will finish paying by June of next year, this was another reason why i wasn't able to save much money.

I have been talking to my gf a lot about this blog and the idea and she loves it. She is also not a big spender, big saver and is ALWAYS looking for coupons and such to try to save a buck, she just recently got a job making 35k a year so now she'll be able to contribute to the savings as well (she has $0 debt, no payments literally nothing). I estimated that by next year (after i finish paying the credit card and paying off my dad) me and her can probably save around $4,000-$4500 a month.

With that in mind, what pros and cons do you guys see to finishing my degree (btw the degree is in Math, i started out with Aerospace Engineering and realized that would take me almost twice as long at this point so i switched to Math hoping to finish sooner). Does it make sense financially to just throw in the towel and save that money and time?

[oldtoyota]

How secure is your job? Take a long, hard look at the revenue and what you see happening there. Where I work, some people in certain areas are losing jobs. Others are not. I am fairly tuned in to this type of info no matter where I work and I am fairly good at predicting what will happen.

What I notice in your post is that the calculations all depend upon you keeping your job at $95K for X number of years. What if you get laid off? You mentioned that you would likely not find another job at that pay rate.

[Exflyboy]

Yes glad you realised engineering is hard... (says this professional engineer..:)..)

Math eh?.. Hmm well i think you are onto something. I doubt that your Math degree will get a job for more than what this one pays. Maybe if your specialised in statistics (but you really need a Masters or PHD to make it pay).. Statisticians are in high demand in process control in industry.. then possibly you could make more.

I hesitate to say quit school because if you lost that job it might be easier to find one in a recession if you had a science degree. Its seems to me that math majors are not that much in demand.. But then I am a little biased..;)

As for eating out spending habit.. WTF dude.. are you mad?.. You think you could cut it to $400 a month?.. I should bloody well hope so! My Wife and I spend about $100 a month and eat out once a week.

Take $650 a month and pay off that CC and then start on the Mortgage... When you own the roof over your head its almost impossible to have it taken away from you. Of course if you quit school you could use that to accelerate your mortgage pay off as well.

I doubled my morgage payments and that meant paying off the 30 year mortgage in 7 years!!!!!

All the best

Frank

[Frankies Girl]

While I do believe in education and advancing yourself, the college degree is strictly at this point a matter of pride in my opinion. If it was me, I would still try to finish and get that piece of paper, but it would not be at the cost of paying off my debts and getting financially independent. I would do the classes when I could, but graduating within any set time frame would not be important. And I wouldn't think any less of a person that was financially independent that didn't have a college degree; I know many smart and accomplished people that don't have one, so I could see just dropping the pursuit indefinitely.

You're in an excellent position with your salary and age to hit FIRE in a decent time frame.

The big thing right now - reduce your spending on silly things (LEARN TO COOK AT HOME!! You should be below $250 even spending on some eating out and really expensive groceries...  that's insane to be over $700), and paying off that credit card should be your priority. Up your 401K contribution ASAP, take a good look at other avenues of investment accounts (Traditional/Roth IRAs, taxable accounts) and really start working at paying yourself first.

Having that much money locked into equity in your house (especially doing an expensive remodel) isn't going to help you much unless you sell that house and downsize to something more reasonable and affordable, so don't count that equity too highly in the grand scheme of things. It may count in your net worth, but it doesn't help at all unless you can get the money back out, and keep in mind that you're going to be paying higher taxes, insurance and upkeep for the more expensive house... so I'd take a good hard look at that as well. If you lost your job, then that really expensive house is at best trapping a huge portion of your money and at worst going to be lost due to being unable to afford it...

[Pootie22]

In terms of job security i'm not very concerned, since i started working here the company has continued to grow almost non-stop (even through 2008 when i started). I actually got the job because i know the owner of the company very well (i tutored his kids in math for 5 years til they went off to college). On top of that I would say I am probably one of the most valuable employees and would probably be one of the last to go if shit hit the fan. It's a mid-size transportation/logistics company (around 100-120 employees)

frankh, the math degree is focus on statistics. $100 a month for both of you? now that is some serious badassity! My alcohol/bar amounted to almost twice that on average :-/   definitely going to be making some big changes next year though. I am extremely excited to start this journey and so is the future wifey.

[Pootie22]

Having that much money locked into equity in your house (especially doing an expensive remodel) isn't going to help you much unless you sell that house and downsize to something more reasonable and affordable, so don't count that equity too highly in the grand scheme of things. It may count in your net worth, but it doesn't help at all unless you can get the money back out, and keep in mind that you're going to be paying higher taxes, insurance and upkeep for the more expensive house... so I'd take a good hard look at that as well. If you lost your job, then that really expensive house is at best trapping a huge portion of your money and at worst going to be lost due to being unable to afford it...

Yes that's another thing that i'm unsure about, whether i should sell and invest that money while i rent maybe? But i live and work in So Cal (Long Beach) and prices aren't that cheap, in fact i got my current house for a ROCK BOTTOM price of 255k only because it was early 2011 and the house needed a bit of work (kitchen remodel was a gut job, down to the studs) so that added a ton of value at very little cost (i did almost all the work). I feel that if i sell now, yes i make a huge profit, but i can't find a house even the same size (it's only 850 sq ft) and location for under 300k

I guess the question is, would i be better off starting with $150-160k to invest while i rent or better to start off with what i have now (~8,000) and keep my house/mortgage

[Exflyboy]

Yup.. we spend less than $25 when we go out for Mexican on our Friday night night date..:)

As your GF is now the future Wifey you don't need to spend so much impressing her do you?... Now impress her with how badass you can be..:)

As to the Mortgage (I see the conflicting advice above), I would agree that paying it off is probably not the absolute best in terms of generating wealth.. I.e on average you can earn more in an ETF.

BUT... Your house is much more than an investment.. its the roof over your head. I understand your not worried about job security but at 52 I have lived through a few boom and bust cycles and lets just say things are a lot less secure than you might imagine.

If you own that roof your financial needs if the bottom fell out of everything (ala 1929) are negligible. You got somehwere to live... Makes it a very secure situation.

Frank

[Exflyboy]

Oh.. and can you imagine what that last payment feels like?

Orgasmic!!!!..........:)

[TrulyStashin]

I'd keep the house and the mortgage.  In Long Beach, there's no way you'd find anything less expensive than what you're in and you'll get a better return on an ETF than you will paying off the house.

Scrub your budget for savings and plow everything into debt.  Figure out how soon you can get all debt (except the mortgage) PIF and set a goal.   If your company has a 401k with a match, contribute just enough to get the matching money.  Once the debt is paid off, max out all retirement/ HSA's and invest as much of your income as you possibly can.

When you're FIRE, in 10 years, you can go back to school full time and enjoy it.  The credits you've earned to date will still be there, waiting for you.   I went to law school at 40.  My best friend went back for her BA two years ago, when she was 42 (and resurrected community college credits earned when Reagan was president).   If you wait until you're FIRE, you'll be older and free from the need to schedule around your job.   Going to school as an older student is an awesome experience.  I really appreciated learning stuff and was not distracted (unlike when I earned my BA as a youngster).

[Frankies Girl]

Having that much money locked into equity in your house (especially doing an expensive remodel) isn't going to help you much unless you sell that house and downsize to something more reasonable and affordable, so don't count that equity too highly in the grand scheme of things. It may count in your net worth, but it doesn't help at all unless you can get the money back out, and keep in mind that you're going to be paying higher taxes, insurance and upkeep for the more expensive house... so I'd take a good hard look at that as well. If you lost your job, then that really expensive house is at best trapping a huge portion of your money and at worst going to be lost due to being unable to afford it...

Yes that's another thing that i'm unsure about, whether i should sell and invest that money while i rent maybe? But i live and work in So Cal (Long Beach) and prices aren't that cheap, in fact i got my current house for a ROCK BOTTOM price of 255k only because it was early 2011 and the house needed a bit of work (kitchen remodel was a gut job, down to the studs) so that added a ton of value at very little cost (i did almost all the work). I feel that if i sell now, yes i make a huge profit, but i can't find a house even the same size (it's only 850 sq ft) and location for under 300k

I guess the question is, would i be better off starting with $150-160k to invest while i rent or better to start off with what i have now (~8,000) and keep my house/mortgage

Oh, So Cal... land of insane home prices. But that does change what I said. You are kind of stuck with really expensive housing costs for anything that isn't a cardboard box under the freeway, so if it was me in the same position, I'd not be too eager to pay off the mortgage super fast and just concentrate on killing the debt, and then funding your investments and retirement accounts.

[goodlife]

I would not quit school. You do make valid points about the company you work for and everything. However, a degree in math, especially with a statistics focus can be very valuable down the road in my opinion. Yes, maybe you will stay at your current job for the next 10 years, but there is no guarantee of that. Bad stuff happens and I think having a degree will make you a much more marketable candidate. On top of that, you are very young. Maybe in 5 years from now you will hate your job for whatever reason and having a degree will give you a lot more options to move to something else that is similarly paid or higher. My advice would be not to quit (2 years is not that long of a time) but rather focus on minimizing your expenses.

Also, since you say you have such a good relationship with your company, do they know that you are doing this degree? Can you talk to them about it and aks for a bit more flexibility so that you can schedule your classes a bit more efficiently? You have been with the company for a really long time and seem to have a great relationship with them, I would hope they would be more accommodative. In addition, does your school accept transfer credit for online classes? I have looked into this before and online classes are often much cheaper. Maybe investigate how many transfer credits they allow, then take those math classes online wherever it is cheapest. That way you can finish faster because you can schedule a lot more classes and at flexible times and you could save some money. Alternatively, is there an attendance requirement for your classes? If there isn't, then just skip classes whenever you need to, you sound pretty smart, I am sure you can teach yourself and that way you could schedule more classes and finish faster.

[Pootie22]

I would not quit school. You do make valid points about the company you work for and everything. However, a degree in math, especially with a statistics focus can be very valuable down the road in my opinion. Yes, maybe you will stay at your current job for the next 10 years, but there is no guarantee of that. Bad stuff happens and I think having a degree will make you a much more marketable candidate. On top of that, you are very young. Maybe in 5 years from now you will hate your job for whatever reason and having a degree will give you a lot more options to move to something else that is similarly paid or higher. My advice would be not to quit (2 years is not that long of a time) but rather focus on minimizing your expenses.

Also, since you say you have such a good relationship with your company, do they know that you are doing this degree? Can you talk to them about it and aks for a bit more flexibility so that you can schedule your classes a bit more efficiently? You have been with the company for a really long time and seem to have a great relationship with them, I would hope they would be more accommodative. In addition, does your school accept transfer credit for online classes? I have looked into this before and online classes are often much cheaper. Maybe investigate how many transfer credits they allow, then take those math classes online wherever it is cheapest. That way you can finish faster because you can schedule a lot more classes and at flexible times and you could save some money. Alternatively, is there an attendance requirement for your classes? If there isn't, then just skip classes whenever you need to, you sound pretty smart, I am sure you can teach yourself and that way you could schedule more classes and finish faster.

I see your point about remaining marketable and keeping my options open in case shit happens, i feel like that was one of the reasons why i continued going to school over the last 2 years. I remember thinking that even when i finished i probably would remain at my job because of the pay so the degree was just a safety net. But reading this blog, working out all the numbers and seeing that it is VERY REALISTIC for me to retire in 8-10 years, the "fear" of not being marketable or not having a degree in the future is becoming more negligible. This is why i have such a hard time with this decision, if someone told me i could retire in 5 years then I know for sure I wouldn't continue, if someone told me there was no way i was retiring in the next 20 years then for sure i would finish school.

[OptimusFrugal]

There are many ways to look at this.  If you had your degree today, what would you do?   Would you go get a job that used your new skill?
I battled attention deficit disorder for six years of college to complete an degree in Aero Engineering because I had a burning desire to design things. The non engineering classes I wasn't interested were painful.  The aero classes were amazing. That degree taught me the basics of critical thinking and how to use the scientific method to figure out almost anything I wanted to know and solve any problem I came across.  I think Bill Gates said that the more education you have the better frame work you have for thinking about anything.
Two years will go by if you are in school or not.

If you really like where you work, figure out what you should learn to grow into a better position in that company.
If it's math, great.  Many companies pay for your schooling completely if it applies to your future there.

[stevewisc]

Great setup - congrats.

Maybe 'pretend' to go to school now and set aside that cash in a separate account.  If your career prospects change take the two years off to finish your degree. 

Or as you get more of a stache set aside if something happens with the career you could use some to start a business as well. 
 

[Melody]

To me, MMM is about freedom and IMHO not finishing your degree reduces your freedom.

Unless you are very close to FI (<3 years or so), I would complete the degree. The situation you have experienced is common in the software industry: take talented youngster without qualifications and get them working for you - you've now created a very loyal employee who will not leave even if their role/job pays more elsewhere, or they no longer enjoy their role, because leaving means a huge pay cut.

I know two people in your situation. One started working on his degree  after his role became more and more sales focused and less technical. He didn't really enjoy the sales side of things. He is still there, and still studying but now is at a basic FI level. He will keep working there until it annoys him too much, then he will go to full time uni. He's less concerned about money because he's already FI (although more of a Jacob from ERE FI than a MMM FI), but having a fun job is important for him. Even though he is FI he wouldn't dream of retiring, however his next job will likely be a fun job, that will involve a 30% cut. (The fun job needs the degree).

Another one stopped studying when his GF fell pregnant, it then became vital to climb the corporate ladder as fast as possible, as his wage was barely enough to support one let alone 3. He stopped studying/living pulled out all stops and worked 12 hour days and got promoted within a year. He's never finished his degree and is now stuck at this job as his family depends on a certain level of income he could not get anywhere else. He still likes the job, but not having the degree is now impacting him (you can only go to a certain level within this business before you need post grad qualifications.) He also gets less respect from some of his staff he manages as a result, because while his knowledge in his immediate area is amazing, he doesn't have the breadth of knowledge his staff (with degree+postgrad) have, that is sometimes needed in the job. He also has put himself in a postion where he has to keep working harder than anyone to maintain his job (the business has had two rounds of redundancies in the last few years, and if he were to be retrenched it would be disaster for his family.)

However, while I think you should finish the degree I think you can find a cheaper way of doing it. Can you approach your job for study support? This is common for management employees in loads of companies. Can you find a cheaper way to study? There is a thread on MMM about doing exams to get credits, doing community college to get credits etc. Can you pick a cheaper university (University of Texas is pretty cheap and respected) and study via correspondence.

[Snowboard junkie]

I would advise that you stay in school since it increases your options and ability to weather the unexpected, and potentially opens doors in the future.

With the numbers you have presented, you should be able to work, attend school, and still save a decent amount.

All things being equal, keeping the house and mortgage seems to work out better than renting with those numbers.

[ch12]

Keep limping through your degree.

Your job is secure and at a growing company. That's excellent.

The lesson that all of us learned during the recession is that 1) companies don't last forever and 2) job security is a thing of the past. Even though you are in a comfortable spot right now (making a LOT of money), you have no guarantee that you will feel the same way in 2 years.

Do the Jeff Bezos regret minimization framework here. I'd get your degree and then tuck away your sheepskin in a corner to molder. You build it before you need it - if ever you ARE on the job market again, then you can use it. It's better to get it while you are in a stable position than the scramble when you are unemployed.

[Everything in Moderation]

Is your job physically demanding?  What is something happened to your health?  Would you have something to fall back on?  Is this a job you can do at an older age? 

A college degree is a nice insurance policy if something happened to you. 

[2Birds1Stone]

@Pootie22, I think you should finish the degree now ;)

[Pootie22]

@Pootie22, I think you should finish the degree now ;)

HOLY COW! I completely forgot about this post! Thanks for the reminder.  I'm guessing you found it after reading my post on the 2022 cohort?

It's crazy to reflect on everything I was thinking back then and even crazier that most of it went according to plan lol

I ended up quitting school so that I could invest that money in real estate and stock market, turned out to be a great move.

I sold that house for a huge profit and bought a multi unit building

I married the girlfriend. She's totally on board and ready to FIRE!

I stayed at the same company, it kept growing and paid me more and more money every year which helped me invest more and more

Food/drink budget did not budge, actually averaged $800-$850 with the exception of 2020 which was $650 (cause you know why haha). Considering income as increase substantially (especially for the wife), I'd say this isn't too bad.  We don't spend very much on other things.

My estimate of 10 years from November 2013 would have put me in 2023, looks like I'll beat that by about 18 months or so! Thanks to crazy real estate and stock market returns.

All this being said, it's unlikely that I will ever finish the degree. I certainly have no desire at this point and an endless to-do list for when I retire.  Maybe if I found free classes...maybe...though I'm more interested in learning skills like welding at this point.

Oh, So Cal... land of insane home prices. But that does change what I said. You are kind of stuck with really expensive housing costs for anything that isn't a cardboard box under the freeway, so if it was me in the same position, I'd not be too eager to pay off the mortgage super fast and just concentrate on killing the debt, and then funding your investments and retirement accounts.

If you thought 2013 prices were insane
2021 - "Hold my beer" haha

[2Birds1Stone]

@Pootie22, haha figured you would get a kick out of it. I did go down this rabbit hole after your post in the 2022 cohort thread :)

[Beach_Stache]

Have you asked about any tuition reimbursement from your company?  A lot of companies offer tuition reimbursement, and I realize this is a smaller company that sounds like just started around 10 years ago or so, so they may not have a tuition reimbursement program, but I'm willing to bet that if you ask the big boss that even if there is nothing written, they may offer you a perk to finish your school.  You are locked into this company and with no degree if you ever got a bad boss or the CEO wanted to sell the company then you'd be at the mercy of another employer, so I would hedge your bets and continue on w/your degree.  I'm willing to bet that if you're in good graces w/the boss that he'll do something for you, even if it's not a published tuition reimbursement program, if you are valued then he'll probably at least think about it.  Then in the future if you decide you want to try something else you are able to move on.  I always tell myself that I'm 1 bad boss away from having a terrible work environment.  I'm lucky that I've had good bosses, but I've seen people who were totally happy 1 day and then a new boss came in and they are totally miserable the next day.  Being FI and having job options are 2 ways out of that misery.

[Pootie22]

Have you asked about any tuition reimbursement from your company?  A lot of companies offer tuition reimbursement, and I realize this is a smaller company that sounds like just started around 10 years ago or so, so they may not have a tuition reimbursement program, but I'm willing to bet that if you ask the big boss that even if there is nothing written, they may offer you a perk to finish your school.  You are locked into this company and with no degree if you ever got a bad boss or the CEO wanted to sell the company then you'd be at the mercy of another employer, so I would hedge your bets and continue on w/your degree.  I'm willing to bet that if you're in good graces w/the boss that he'll do something for you, even if it's not a published tuition reimbursement program, if you are valued then he'll probably at least think about it.  Then in the future if you decide you want to try something else you are able to move on.  I always tell myself that I'm 1 bad boss away from having a terrible work environment.  I'm lucky that I've had good bosses, but I've seen people who were totally happy 1 day and then a new boss came in and they are totally miserable the next day.  Being FI and having job options are 2 ways out of that misery.

Well I'm planning on FIRE'ing in February so probably too late for that lol (original post was from 2013).  I've been pretty lucky to have a good boss all this time, this makes it a bit harder to pull the trigger on FIRE.