The impact of your education on your (future) net worth

April 20, 2018 No comments exist

Joseph Reinke, CFA, CEO of FitBUX

We came across an article titled "The net worth of college graduates with student debt is truly depressing" and started scratching our  heads. Read on to see why...

1- "Americans age 25 to 34 with college degrees and student debt have a median net wealth of negative $1,900 according to a report analyzing 2016 Federal Reserve data released Thursday by Young Invincibles, a young adult advocacy group. That’s a drop of $9,000 from 2013, YI’s analysis found."

That's not good.

2-"It’s hard to say exactly why the median net worth of young adults with college degrees dropped during this period, but Allison speculates that one reason may be that in 2016, student debt accounted for a larger share of overall debt for these young people than it did in 2013."

That's not good.

3- "Unlike other types of debt, such as a mortgage, student loans don’t come with an asset that could apply on the other side of the net wealth equation."


What the author is suggesting is that student debt (and by association, education) is not a factor in the broader framework of wealth creation. 

The problem with this analysis is that it doesn't take into account a key type of asset, especially for recent graduates: Their Human Capital

The Importance of Human Capital

Human Capital is defined as the abilities and skills of any individual, especially those acquired through investment in education and training, which enhance potential income while also decreasing the risk to potential income.

One of the challenges of human capital is that it is an intangible asset and it's also hard to put an actual value on it, just like a brand or intellectual property (patents, technology, etc) when one is valuing a business. As such this highly valuable asset is ignored completely by most in personal finance.

The FitBUX Perspective

That's where we come in. FitBUX's entire approach is anchored on our ability to create one's entire picture, taking into account not just financial debt and assets, but also these highly valuable Human Capital assets. 

We make this entire financial picture easy to comprehend with the FitBUX Score, which up levels our approach with an easy-to-understand score. With our online tools, you can now run specific scenarios before making a decision: How should you repay your student loans? Do you extend your student loans to 25 years and/or repay them aggressively? Do you pursue loan forgiveness options? FitBUX Score variations highlight the potential impact of a given decision on your overall net worth, today and in the future.

So this $1,900 is only the visible part of a more complex picture. In reality your net worth is higher than you think.

Next Steps

To get an understanding of your true net worth, simply create your FitBUX Profile and get your FitBUX Score. You can then set up a call with a FitBUX Coach to get further insights into your situation and identify the optimal student loan repayment strategy. This is a free service from FitBUX. Always.


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