Today, I welcome Erik, a 25-year-old guy who blogs at The Mastermind Within. In this post, he will share with you his college experience, why he picked the major he did, and how it’s helping his pursuit of financial independence. Enjoy!
When I was in high school, I didn’t realize I wanted to be financially free by the time I was 35. I didn’t realize I was going to try different entrepreneurial ventures and house hack for 2.5 years. There were many reasons why I picked my major in college, that were not for financial reasons.
But I would be lying to you if I didn’t look at the average salary that various majors get coming out of college: Liberal Arts majors only make $30-40k on average out of college, and Science and Engineering students make $55-65k on average out of college. Every decision we make in the present affects our future. Luckily, I looked at the statistics and made a great decision to major in a quantitative discipline.
In this post, I will be discussing why I picked mathematics as my major in college and how it’s helping my pursuit of financial independence.
Why I Picked Mathematics for my Major in College
I love to problem solve and create things. I love to see the connections between objects that may not have an obvious relationship. Something about numbers and following a step-by-step problem-solving process just clicks with me.
My senior year of high school, I took AP Calculus BC and fell in love with it. I really enjoyed every bit of it – especially the time series expansion of a function – where the majority of my classmates struggled with the concepts. I studied and studied and earned a 5 on the AP test, and was able to skip over the first 2 courses in college.
When I was looking at colleges, I knew I wanted to do something in mathematics and engineering. I really enjoyed my math and physics courses in high school. I started out in engineering because I knew engineers get paid a lot and can live very nice lives with their paychecks. Well, what I didn’t realize is Physics at the college level is very difficult, and multivariable calculus is very interesting. I switched to mathematics because I loved it, but also figured I would be able to make a great income with my skills and education.
[GE: I am quite the opposite here. I disliked (actually hated) multivariable calculus, but I did enjoy Physics in college. When I finally took an electrical engineering course that made real-life sense of multivariable calculus, did the concepts finally click.]
Earning is the First Step to Pursuing Financial Independence
If your goal is financial independence, increasing your income is crucial to your success. If you want to draw down your savings at 4% a year, and want to live a life where you are spending $80,000 a year, you will need a nest egg of $2,000,000. To get to the 2 million dollar nest egg, you will need to earn, save, and invest to get there.
[GE: I love hearing the earn, save, invest strategy. It is so popular in fact, that one of my favorite blogs named his blog using this as an acronym – ESI Money.]
If I’m making $50,000 a year and saving $15,000 of it, it will take me many, many more years to reach a $2,000,000 nest egg than if I’m making $100,000 and saving $30,000.
Going back to my days in high school and early college, I was right in picking a major that helped me grow as a person and help me build my analytical abilities.
Finding a Job with a Math Major
Since I was able to pass over the first two calculus classes, this put me on the fast track to graduating. I came in as a sophomore because of my credits and was set to graduate in 3 years. As a 20-year-old math major, with little to no applied knowledge, I knew I needed to get some more education.
I applied and was successful in getting into a Master’s of Financial Math program to further my education. At the same time, I wanted to test the job market. I was working as a bookkeeper at a hotel and restaurant management company making $16 an hour. At the very least, maybe I could increase my wage to $20-25 an hour and gain some additional skills.
[GE: Wow, $16/hour as a bookkeeper is impressive… I wish I would have found that job my first year at college!]
When I was interviewing, I was a little bit disappointed. Many of the jobs for a mathematics undergrad paid in the $40-45k range and were not all that interesting. Looking back, a computer science degree may have been the way to go, but I didn’t go with that.
I continued to work as a bookkeeper and started the Master’s program. A year later, I started interviewing again and successfully secured an offer at a highly reputable financial firm. My starting pay? $63,000 salary and an 8% bonus ($5k). In just two years of additional school, I’d increased my income by $20,000. I’d say that worked out to my advantage.
Congrats, You Got a Job. Now what?
In this post, we have gone through my thought process on selecting a major, my path through college and graduate school, and how I increased my income through additional education. This still leaves 3 years of my story untold – and these 3 years are arguably the most interesting years of my life J
After starting my job, I started contributing to my 401k and paying down my student loan. I had $8,000 on my student loan and wanted to get rid of it.
But then, in a whirlwind of a week, I decided to buy a house and rent out 3 of the rooms to my friends. I was going to be a landlord. Just by buying this house, I would be decreasing my housing expense to $170 a month, and increasing my income by $1650 a month!
This was all possible because I had a higher income at my day job. If I had been making only $40,000 a year, there is no way I would have been approved for a mortgage on the house I ended up buying. Because I wouldn’t have been able to get approved for the mortgage, I wouldn’t have increased my income an additional $15,000 a year through my roommates and friends paying me rent.
Successes which Resulted from Having a High Income out of College
Over the past 27 months, I’ve made just over $39,000 in rental income from my friends and roommates. I’ve paid off my student loans, and also bought a car and paid that off. Now, I’m focusing on increasing my investments.
At 25 years old, I have $30,000 in retirement accounts, $15,000 in a taxable account, roughly $70,000 in equity in my house. In the coming few years, I want to utilize my earnings to continue to put away a good amount of money to work for me.
But here’s the best part: I’m going to be able to do all of this because I’ve been able to increase my salary at work as well. In the past 3 years, I’ve increased my salary $25,000 by providing value to my employer and showing I’m a valuable member of the firm.
My Tips for You
If you are a parent with kids reading this, or you are a high schooler thinking about which major you want to pursue in college, make sure to think about the potential earnings associated with the education.
[GE: Couldn’t agree more here, Erik. Teaching young adults about the different career options and their earning potential for each career is a major improvement we can make at the high school level.]
It’s important to pursue an education and a job which we will love doing. A person who loves their work will never work a day in their lives. That being said, if you are going to invest four years of your life, and pay $10s of thousands of dollars in an education, then it’s important to get some return on that investment.
Now that I’m 25, I’m able to enjoy my time and pursue different endeavors because of my past decisions. I don’t have the stress of different loan payments because I’m earning a good salary, and I’m growing my nest egg.
When deciding on a major, there are two points which are necessary. Make sure that you will:
- Enjoy the content of the educational material
- Have some potential for relatively high earning in the future.
If you satisfy both of these points, I know you (or your children) will be financially successful coming out of school.
Readers: when you picked your major, did you look at the future earning potential? Are you going to influence your future children’s decisions?