When it comes to finding a relationship, or even casual flings, the Pick-up Artist community has nothing on a college degree. Beautiful, educated women want to date handsome, educated men, but there is not enough educated men to go around. Those were the findings in the well written book Dateonomics by Jon Birger. Usually when you see the word ‘economics’ in a book title, the writing is dense and you’ll be doing most of the work to understand it. That’s not the case with Dateonomics. Birger combines research from a variety of fields - economics, sociology, demographics, psychology, and evolutionary biology - into a very fascinating and easy read.
The basic premise of the book is that gender ratios affect the way men and women date. When there are more women than men, men tend to be less committed to a single partner and less likely to marry. When there are more men than women, men are more monogamous and will invest long-term in one partner.
Birger looked at a variety of groups to illustrate this effect. He compared the dating pools in religious groups, cities, and countries, but the biggest pool he looked at was college graduates.
College graduates prefer to date and marry one another. Whether it’s right or wrong, people use education level as a signal of how intelligent, socially adjusted, and employable potential partners are. However, fewer men go to college than women. Women who want to date men with a similar education level find that those men are less committed to the idea of marriage.
Birger has data to back up this claim. Using the U.S. Census Bureau’s American Community Survey from 2012, he found that there are 5.5 million college-educated women in the 22 to 29 age range and only 4.1 million men. That is 4 women for every 3 men.
The women who don’t find a spouse in college find their options get more limited as they get older. Whenever one of the college educated women marries one of the college educated men, suddenly the remaining women are competing with 3 others to get 2 men.
If another woman gets married, that means the woman who is still single will find that there is only 1 man for every 2 women.
(This guy has it made!)
With this lopsided ratio, men are less willing to form a monogamous relationship. Birger interviewed several men and women in cities and colleges that reflect this trend and found similar stories. Even average looking men begin to think they’re studs because women become more competitive over them. The men found the longer they held out for marriage, the better options they had.
This finding is similar to what is found in nature. Male animals in general will become more monogamous and invest in one partner when females are in equal numbers or less than them. They become less monogamous when the ratio is in their favor because it is to their advantage to mate with multiple females to pass on offsprings.
In cities with higher imbalances favoring men, women invest more in gym memberships and the way they dress to attract these men. Birger found countless stories of men (many of whom were socially awkward growing up) who graduated college, moved to these cities, and left their girlfriends because of the sudden attention they received.
The most heartbreaking chapters he wrote were about women in an ultraconservative Jewish community with an abnormally high gender imbalance who were held to absurdly high beauty standards and whose parents must pay a dowry reaching six figures to get them a husband.
The Mormon community isn’t any easier on women. Since men are more likely to leave the religion as they get older, Mormon women who place a preference on finding a ‘Godly’ man find their options get even more difficult. Birger wrote about several Mormon men who found ‘ways around’ waiting until marriage to have sex because their options were so large.
Birger didn’t just talk about how awful men are. Similar to female animals in nature, women become more choosy with their partners when the ratios favor them. Where female animals usually go for stronger and more aggressive partners, women have higher expectations of men’s ability to provide and their height when the ratio favors them.
Birger found an old article from the Los Angeles Times that interviewed a woman in China, where men outnumber women, who said:
“I would rather cry in a BMW than smile on the back of my boyfriend’s bicycle.”
Women expect men to court more, be taller, and show more ambition when the imbalance is in their favor. In these cases, men are more incentivized to become more monogamous and work harder on their careers. Both historically and currently, economic growth tends to be higher in areas where men outnumber women. Credit card debt is also higher for men in these areas.
Birger’s laid out the kind of impact he hoped this book would have on people. He hoped more men would realize that investing in their education would lead to better dating opportunities, which would lead to more available partners for women. He hoped that women and men who prioritize dating would consider whether they really wanted to move to New York or SIlicon Valley.
I think his most noble goal, and where I hope he succeeds, is that young, educated women will get a break from their family and friends over their dating life. He hopes that everyone realizes that yes, there really aren't enough good men out there.
There’s a great new song by the Young Giants called Amerika. It expresses the cynicism a lot of people have about the American Dream. At one point the lyrics say, “It’s a rich kid’s game and it’ll go up with a throw." I can’t say if the game will go up with a throw (or even what that means), but the American Dream is definitely a rich kid’s game.
Last year, Zillow analyzed Federal Reserve data and found that 28% of people 23-34 had their education partially or completely funded by their parents. An even luckier 3% had both their house down payment and college education funded by their parents. Those people will be able to build wealth far quicker than those who needed to finance school with loans.
When this data was released, many bloggers and journalist predicted this would create massive wealth inequality between those with student loans and those without, with the lucky 3% who didn’t need to make a down payment benefitting the most.
Is this true? Does financial assistance for tuition and home purchases make that big of a difference with building wealth?
I decided to look into this because I wanted a dollar amount on the short-term and long-term impact these differences make. It turns out it's difficult to predict. People don't live the same lives and their saving habits, work ethic, and talent are as big of factors as student debt and family background are.
So to make it easier to compare, I decided to show the difference between three people with three identical incomes and lifestyles:
Jane, who has $40k in student loans and no help with a down payment
Tom, who doesn’t have student loans and no help with a down payment
Buck, who doesn’t have student loans and received help with his down payment
In this scenario, all three people earn a healthy midwest salary of $40,000 a year. After taxes and 401k contributions, all three would earn approximately $2,499 a month.
All three want to own a home valued at $132,000, which is the median home price in Missouri. Buck's parents gave him enough to put 20% down, while Jane and Tom will only put the minimum 3.5% down to catch up.
Jane spends half of her money on rent, student loans, and saving money for a down payment. She can only save $281 a month, while her student loans cost $411 a month and rent cost $658. It would take her 16 months to save enough for the minimum down payment on a home (3.5%) the same value as Buck’s.
Tom's budget is not as bad. He can actually save more money than he spends on rent every month. He can save $691 a month. It would take him a mere 6 months to save enough for the minimum down payment on a home valued the same as Buck’s.
Buck has it made. He actually saves a little less cash a month than Tom, but he can immediately spend that money on a vacation, a new Playstation 4, or invest it to make more money in the stock market. That money isn’t obligated to go anywhere.
You might be thinking that this isn’t that big of a deal. Jane will pay off her loans in ten years and still be able to buy a house in a shorter time. You’re right. If they were only concerned with spending their money on whatever, it is only a short-term difference.
People who read my ebook or my blog know that I view things differently. The economics major in me thinks about opportunity cost, or what potential investment returns I lose out when comparing future budgets.
What if Jane, Tom, and Buck were ambitious and prudent financial savers? Let’s say they wanted to invest their extra money in the stock market. What would the difference be?
Here’s a chart comparing the difference at a 5% return of investment:
Here’s a chart comparing the difference at a 8% return on investment:
Tom and Buck leave Jane in the dust. For the first ten years, they're able to take advantage of early compound interest while Jane is unable to save and build wealth outside her home or 401k. In fact, her mortgage and mortgage insurance prevents any further outside savings until she pays off her loans 10 years later.
At 5% ROI, Tom would end up with $300k more than Jane and Buck has $380k more than Jane (and only $80k more than Tom).
At 8% ROI (closer to the S&P 500 historical average), Tom has $700k more than Jane and Buck has a whopping million dollars more than Jane.
It is safe to say that financial assistance with college tuition has a bigger impact than financial assistance with a home downpayment. Higher tuition will undoubtedly lead to more wealth inequality, both in the form of student debt and those who choose not to go at all.
If you need student loans to go to college, don’t let this discourage you. The scenario I ran is comparing the difference in outcomes between college graduates, but doesn’t include the wealth produced by buying a home or your 401k. When you include the value of the home, 401k, and their growth, Jane would be a millionaire. She would still be very well off compared to most Americans.
Also keep in mind that I’m comparing three people with the exact same income and budgets. I don’t include the impact of raises, career choices, healthcare, or spending habits. What if Buck decided to quit working and become a professional crocheter? What if Jane went to school for engineering while Tom went to school for restaurant management? What if Tom was a lazy d-bag who got fired after a few weeks on the job?
Anyone who had a 401k in 2000 or a home in 2008 knows that investment bubbles are scary. You hardly see them coming and even if you were the more rational person during the periods of irrational optimism, you are still affected. A lot of people will draw comparisons between what they saw then and what they see now in an attempt to predict the next bubble. Some speculate that college degrees, and more specifically, college degrees funded by student loans, are the next great investment bubble. Are they right?
Despite our reputation, I think millennials will be known as the generation that learned to make the tough compromises. We went out into the world as it was crumbling. The Great Recession was the closest thing we will ever see to a depression and its effects still linger. We find ourselves with higher student debt, fewer job opportunities, and less than ideal living choices. In order to live within our means, we make tough compromises.
There were a lot of careers I wanted to do before I made the decision to go to college. I considered becoming a financial advisor, financial analyst, and a business analyst, but there wasn’t any I was more crazy about than the Foreign Service and no career goal impacted my life more than that one. That career goal helped me pick both my major and my school.
During my first economics class I ever took, one of the best instructors I ever had in college pulled me and a few other bright students to encourage us to major in economics.
Being a product of the Great Recession, I liked learning about economics a lot but I still wasn’t quite sold until he said: “If you’re not wanting some bland desk job, you can major in economics and join the Foreign Service as an Economics Officer. You can travel the world, learn new languages, and do work involving what you learn with this degree.”
That was the best sales pitch I ever got in my life. I learned that my career interests could overlap with my academic interests.
One Sentence Summary The three best liberal arts degrees for post-college career opportunities are math, physics, and economics.
Explanation When it comes to their college major, most intellectually curious people (my kind of readers) want a balance between higher paying job opportunities and interesting coursework. You might find business strategies and principles interesting, but you are not interested in a business degree whatsoever. The same might apply to engineering. You really want to enjoy the fun, liberal arts courses. (I did too!)
To strike the best balance between a job opportunities after college and interesting coursework, I suggest majoring in math, physics, or economics.
One Sentence Summary I think of college as an investment, but others could argue it is insurance.
Explanation Many of the products you see stocked at a grocery or c-store are not stocked and ordered by the owners or the employees of that store. Usually there are vendors and delivery drivers who do that for them. Coca-Cola, Pepsi, Anheuser-Busch, and Philip-Morris all pay people who go into these stores, count inventory, and place orders for their products instead of relying on the store to do it.
These jobs often pay pretty well and usually require a college degree, but sometimes they can be subject to swings in the economy. I knew a guy who worked at Philip-Morris doing that kind of work and he lost his job when the Great Recession started.
He found himself working at a c-store afterwards. He went from making $70,000 a year to about $35,000. That’s a pretty big drop.
Even though he was in a management position at the store, it didn’t require a college degree. I guarantee you though his college degree helped him beat out someone else. So even when he lost his cushy job, he was able to find another during a recession and was easily able to go back to a better one after a year.
So that begs the question: is there another benefit to a college degree besides just earning more money?
The basic premise of my ebook Should I Go to College? is that a college degree is an investment and that you should try to maximize the returns from it. Some people might make a different argument.
Maybe college is not an investment, but insurance!
According to the Bureau of Labor & Statistics, the unemployment rate for a degree holding individual at the end of 2015 is 2.5%. That is pretty low compared to the unemployment rate for people without any college. They’re sitting at 5.6%!
Now you might be thinking, ‘so what?! Many of those chumps are working in jobs that don’t require degrees at all!’ And that’s my point!
Imagine if you are a hiring manager for a position that doesn’t require a college degree. You interviewed ten different candidates and only two have the kind of experience and social skills you were looking for, but only one has a college degree. Who would you pick?
The graduate! It doesn’t even matter if it is logical. It’s human nature.
What do you think? Is insurance against being unemployed worth $40,000?
One Sentence Summary Community college offers better value for your lower level coursework.
Further Reading My ebook goes into further detail about how your money invested today can make a huge impact on your future.
Explanation My first university class I took was called Intro to Computers. It was a class that was suppose to teach students how to use Excel, create PowerPoint presentations, and create a website. The professor failed on all three fronts.
The professor told us on our first day of class that he was tenured. He said that his exams were based on our homework which covered those three points. He also said that his lectures had NOTHING TO DO WITH WHAT OUR EXAMS COVERED.
Instead, they would cover issues he cared about: debating the science behind global warming, libertarianism, and other political issues he felt our generation was misinformed on.
He would also have a pop quiz at the end of these three hour lectures that would ask us questions like “What is your favorite color?” These would be 20% of our grade.
This was right after I took a history course at a community college. That instructor was Yale educated and did not require attendance. He said he knew some people had lives that might interfere with coming to class and would not penalize people for missing. He spoke everyday from memory about the topic we signed up to learn - American history. To this day, I don’t think I had a history course done as well as that one.
The community college courses was $600 cheaper and far better.
In my ebook, I discuss how the college degree is more valuable than the total sum of your classes. It really doesn’t matter how many of your courses you took at the university level compared to the community college level, so long as you graduate with a university degree.
That is why I strongly recommend going to a community college for all your basic courses: math, history, philosophy, etc.
They are simply better for the following reasons:
they offer cheaper courses
it costs less money to drop it if your instructor is not performing well
their instructors are often better at teaching
you will never pay to have a TA teach you
their courses are at more convenient times (especially if you want to work full-time as long as possible)
My community college courses typically cost me closer to $300 while my university ones cost me closer to $950 (including the fees). That is a big difference when you take several of them!
It also makes a difference if your instructor is lousy at their job or you need to drop for personal reasons. Many universities and community colleges keep a portion of your tuition if you drop whether it is because of their poor quality or not. If you need to drop, it is nice if you could minimize this cost.
The value is also better at a community college. I never had a TA teach me at a community college and my instructors were on average better at teaching. Many of them taught during the day at a high school or were retired teachers.
The biggest and most important one for me was the convenient times they offered them. I was a full-time employee and I never had trouble finding a course I needed at a convenient time. That was a big problem with my university. I actually had to quit my full-time job a little sooner than expected because my university never offered evening courses.
What do you guys think? Anyone who is currently taking classes agree or disagree? Please comment below!
One Sentence Summary Indecisiveness can cost you money, so wait a few years to go to college if you're not totally sure what you want to do.
I always write advice I would tell my kids. The advice I give often goes against the grain of what most parents, especially those from upper-middle class backgrounds, would tell their children. Those type of parents hate what I recommend, which is:
If you are not totally ready to commit to a college major and a career direction - wait a couple of years to go to college!
There are many reasons for this, but the biggest one is that you waste time and money when you go for one major and then change direction halfway through.
Most parents don’t tell their kids that. They’re worried you will get a job at McDonald’s, get a girl (or yourself) pregnant, and then never finish college. That is why they will often give advice like, ‘just get to a university! It doesn’t matter if you have a plan now!’
That kind of advice will probably cost you or them money. By the time I graduated, I ended up taking a whole semester’s worth of courses that I didn’t need because I transferred between universities and degree programs far too many times. That was 15 hours total! That is an average of $950 per course, equaling $4,450!
Now you might be saying big deal! That amount of money over four years is not that much, but people who read my ebook Should I Go To College? will know the opportunity cost of not investing that money would equal $31,328 by the time I retire!
So I lost at least $30k by just transferring schools. I didn’t even changed majors. I simply went from a business economics degree to a liberal arts economics degree from a university in Texas to one in Kansas. In addition to the added coursework, I needed to pay the cost of moving, skipping a semester to get settled in, and other transaction costs.
Simply put - there is a big cost to changing direction.
And young people are far more prone to change course on a whim than most. There’s nothing wrong with admitting this. Our age often dictates certain characteristics that if we acknowledge, we can plan around. I still do this today, which is why I refuse to have kids until I’m in my thirties. I know I am not ready to handle the responsibilities of being a father.
The truth is that when you’re fresh outta high school, you sometimes run into problems. You can usually overcome these problems on your own, even if you have to call one of your parents and complain about it first.
Sometimes though you just simply run away from your problems. Which is why a lot of students simply go home after their first semester of college. It is pretty sad how often this happens.
That is why I suggest when you first turn 18, you move out of your parents house, get an apartment with a roommate or by yourself, and simply work full-time somewhere. Figure out who you are and don’t waste money and time if you’re not ready to commit.
Do this even if your parents offer to subsidize your college education. Just ask them to wait a year for you to figure out for sure what you want to do with your life.
Once you do arrive to a university, you will be shocked at how much more mature you are than your fellow students and how much more prepared you will be to handle the workload.
One Sentence Summary 5% return on investment is the best guess I have for the stock market over the next 40 years.
Further Reading Read my ebook to see how this concept applies to your decision about college.
Explanation In my ebook, Should I Go to College?, I say the money you invest in your college tuition should have a higher expected return on investment (ROI) than the next best and safe investment, which I say is the stock market. This is mostly an intellectual exercise to get you to think about the value college should have to you, but I personally would have invested the money I saved into the stock market had I not gone to college. You are free to do the same if you are comfortable enough.
The expected rate of return I use for the stock market in my ebook is 5% (adjusted for inflation). Where did I get this number?
It is impossible to predict your investment returns in the stock market, just like it is to predict your future career earnings after college. The best thing you can do is approximate based on what data you have.
When it comes to my expected rate of return with the stock market, I use a mixture of historical trends and Jack Bogle’s (a famous and influential money manager) method.
According to Investopedia, the average historical rate of return for the S&P 500 is 7% when adjusted for inflation. I think of that as my reasonable best case scenario.
Jack Bogle’s method is a bit different. He relies on past performance, but does so using more specific measures such as:
Don’t worry. I’m going to explain what all of those are.
In my ebook, I explain that a dividend is a portion of the profits that companies pay you if you own their stock. So a dividend yield is merely:
Earnings growth is based on historical trends. This one is subject to debate, but many people would say a safe expectation is that company earnings for the overall American economy will grow 6%. Inflation is usually expected to be 2-3%, so that makes actual earnings growth to be 3-4%.
P/E ratio means price-to-earnings ratio. This shows how much money you have to invest in a stock in order to get a certain amount of earnings.
P/E is the most common formula used to value companies because of its simplicity. The lower the P/E, the more ‘bang for your buck’ you get when you invest in a stock. (Before you go out buying stocks with P/E’s of 1 or 2, read up more why it can be a misleading formula).
How does Jack Bogle, one of the most respected and honest men in the finance industry, use these variables to estimate his returns?
Using this very simple formula:
In this video interview here, he expects the overall stock market to have earnings growth to be 5% and dividends yields which are about 2% to create a 7% investment return. He expects P/E for the overall stock market to return to its long term average of 15. That is a 3% drop.
So his overall expected return prior to inflation would be 4% annually. Now the typically safe inflation rate to expect is 2-3%, so that means his expected return could be 1-2% every year.
That’s not too good. That means if you invested a $100, you would have $101 to $102 a year from now.
Now this is just his estimated return for the next decade. If you take this formula and use it over 40 years, you get a far better number.
For the P/E to return to it’s normal number of 15, it would take 0.63% off of our yearly returns over the next 40 years (which is my expected retirement date).
So 2% dividends, 3-4% earnings growth (after inflation), and taking off .63% to adjust the P/E.
Return = 2% + 3% or 4% -.63%
Your expected return would be between 4.37% and 5.37%. For a nice round even number, I just go with 5%.