By Nick Rothacher
WGU Scholarship Program Manager
The next time you see someone who works in the financial services sector, ask them how the market is performing and where you should put your next investment. My guess is that 10 times out of 10 they are going to tell you to put your money into stocks, bonds, or real estate.
But there may be another investment option they hadn’t considered.
The truth is that the best investment, often, is an investment in you. One way to evaluate an investment decision is to compare the ROI.
Return on investment: “A performance measure to evaluate the efficiency of an investment.”
In other words, how long does it take to get your money back and start making a profit? I bought a small investment property about 10 years ago. Let’s compare this to one of my recent WGU students who finished her bachelor’s degree in Accounting and was hired by a commercial real estate company, making approximately $10,000 more per year than her previous job.
Nick from Utah:
- Gain from investment ($15,000 appreciation and $100/month rental income) = approx. $27,000
- Cost of investment ($15,000 down payment and $5,000 in repairs) = approx. $20,000
- ROI = (Gain-Cost)/Cost = ($27,000-$20,000)/$20,000 = 35%
Mary Anna from Georgia:
- Gain from investment (salary increased $10,000 but no measurable gains yet) = $0
- Cost of investment (4 terms of tuition @ $3,000 per term) = $12,000
- ROI = ($0-$12,000)/$12,000 = What appears to be a negative ROI…for now…
But I’ve had the property for 10 years and Mary Anna just got her new job. Let’s see if my investment is still the winner 10 years from now, assuming Mary Anna’s earnings stay the same (which is unlikely because she will probably be awarded additional raises).
Nick from Utah
- Gain from investment (assuming similar appreciation of another $15,000 and $100/month rental income) = $27,000 + $27,000 = $54,000 total
- Cost of investment (original $20,000 in costs plus another $5,000 in repairs) = $25,000
- ROI = ($54,000-$25,000)/$25,000 = 116% over 20 years, or 5.8% annualized return.
Mary Anna from GA
- ROI = ($100,000-$12,000)/$12,000 = 733% over 10 years, or 73.3% annualized return.
Now this is just an estimate, but you can see the huge returns a degree can have on your life. It took me more than 17 years to recoup my investment costs and Mary Anna got her money back 1.2 years after she accepted her new position! So go make the best investment out there – the investment in YOU!
Western Governors University offers online bachelor’s degree programs in accounting, marketing, sales, IT, business administration, and HR. Online master’s degree programs include the MBA, MBA in IT Management, MBA in Healthcare Management, and M.S. in Management and Leadership. Scholarships are available now to help you lower your cost (and increase your ROI), so apply today.