Choosing between spending money on a BMW or College Degree is a question few people face, but it illustrates an important point. The question asked is Which is a better investment?” Since an investment is commonly understood to be an outlay of money or effort with the expectation of gain or profit, the question is really trying to discover which choice has the better potential for gain or profit. The answer is “It depends.”
Investments normally must increase in value to make a profit. The old adage ‘buy low and sell high’ describes the concept which we all understand. To make money in real estate, you have to sell for a higher price than you bought. In the stock market, unless you resort to complex transactions in options, normally the route to wealth is buying stocks for lower prices than you sell them for later.
A college degree in 2007 can cost between $40,000 and $200,000 depending on the school and curriculum, making the amount of money invested’ nearly equivalent to the cost of a BMW-which is the motivation for the question. Statistics from labor experts show that the lifetime income for an individual can be several hundred thousand dollars more if the individual has a college degree and is able to maintain a career based on that education. Therefore, conventional wisdom shows that spending the money on a college degree will deliver a return on that investment. This is probably true as a whole, but there are individual cases that may result in below average returns. One example is a degree in social work. The cost of the college degree can be relatively high, depending on the school. Salaries for social workers tend to be on the low end of the scale for college graduates, so it isn’t beyond imagination to spend $60,000 for a degree that results in a salary of $25,000 to $30,000 per year. Not a very impressive return!
An automobile is generally considered a commodity that goes down in value for most of its lifespan. A new car typically loses thirty to fifty percent of its purchase price in the first 3 years of its life-even a BMW. As cars age and become classics, they generally experience the opposite effect and increase in value as they age beyond 25 years. For instance, a 1957 Thunderbird, brand new, sold for between $3,000 and $4,500. In 2001, it was not uncommon to see a well preserved 1957 Thunderbirds selling for over $40,000! So, in this case, if you spent $60,000 for a classic BMW once owned by a celebrity (say Harrison Ford or Matt Damon), it is possible that you could turn that investment into $100,000 cash a few years later. That could be a great investment!
So which is the better investment the BMW or the College Degree? The answer lies in getting all the facts surrounding the choice, just as it does with any other investment