“Invest in yourself” has become a rallying cry for millennials and gen z. Search the phrase and you’ll find articles telling you to travel more, set goals, build relationships, meditate, and get outside. We have taken the idea and applied it to virtually anything that may make us happier. While “investments” in these things may be worthy, in this post I’m going to narrow the focus to explore investments of money and/or time to create a higher income in the future.

Your future income is an asset

The income you will earn over the course of your career is an asset, and for those of us early in our careers, it’s the biggest asset we have. We don’t typically think of our income this way, but using this framework clarifies a lot of the career decisions we have to make in our lifetime. Do I get a graduate degree? Is the more expensive college worth the extra cost? Should I start a business?

When you consider the value of decades worth of future income, the relatively small stock market portfolio starts to seem less important. Many of us spend too much time worrying about how our stocks are doing and not enough time investing in our earning potential. Time spent following the latest meme-stock craze or the price of Bitcoin would be better spent learning skills to increase your value in the workplace.

According to the Bureau of Labor Statistics, the median annual income for an individual with a bachelor’s degree is $67,860 while the median for an individual with a master’s degree is $80,340. So a master’s degree adds ~$12,500/year on average to an individual’s annual income. The cost for that master’s degree varies widely depending on the area of study and institution, but the average is around $20,000/year.

Example

Let’s use those statistics as a guide for an example. Let’s say you can get a graduate degree for $50,000, and that degree will increase your annual salary by $10,000/year for your remaining 25 years in the workforce. The extra $10,000 you earn each year is invested in the market earning 7%/year. We’re assuming you still work while getting the graduate degree, otherwise, the loss of income would need to be added as a cost. Alternatively, you could pass on the graduate degree and invest your $50,000, which also earns 7%/year.

After 25 years, the extra $10,000/year you earned and invested turns into $632,490. If you opted against the graduate degree and invested the $50,000, your investment turned into $271,372; less than half of the graduate degree return. In fact, it only takes 7 years for the graduate degree portfolio to overtake the other portfolio.

Strategic investments pay off

Graduate degrees are the most obvious investment you can make to increase your income potential, but they are not the only option. An investment in yourself might be a coding bootcamp to jumpstart a career switch, an industry conference to learn and network, or a sales coach to increase your close rate.

Like any investment, if you make enough of them, you will have some big winners and some duds. Not every investment is going to pay off, which is why diversification is important. And it goes without saying that there are more important factors in job selection than the salary. Increasing your income in a job you don’t enjoy in the first place is not going to have a good payoff. But making several investments in your earning potential with a good cost/benefit tradeoff will increase the likelihood of a good outcome, and as we’ve seen, it doesn’t take a big increase in income if you’re early in your career to make an investment in yourself worth it.