Hello, everybody. It's Sam from the Financial Samurai podcast. And in this episode, I want to share a breakthrough because for the longest time, I have been wondering why are there so many privileged people out there who are so angry and entitled. Since 2009, when I started Financial Samurai, I've been trying to battle entitlement mentality in my own head and in readers' heads because I truly believed then and I still believe now that if we get rid of entitlement mentality, we'll be happier and wealthier because we will put in the work and we won't expect anything from anybody.

I remember starting work off in banking in New York City and it was a grind. We'd get in at 5.30 a.m., we'd leave at 7.30 p.m. There was no such thing as working less than 40 hours a week or single-digit workdays. And because of my experience, I've taken this attitude to everything I do.

And it's probably not healthy, always grinding and grinding, but I'm trying to give you some background as to why I think entitlement mentality is really dangerous. Because if you come into your job and you expect to go straight to the corner office without putting in your dues, well, you're going to have something coming for you.

You're going to be disappointed, you're going to be angry, you're going to be frustrated. And ultimately, you will be unhappy. In a previous post entitled "Entitlement Mentality is a Sneaky Wealth Destroyer," I wrote that after a three-year COVID pause, student loan interest will resume starting on September 1st, 2023, and payments will be due starting in October, according to the Department of Education.

And as we recently heard, the Supreme Court struck down Biden's plan for eliminating $400 billion of student loan debt. And I know some people are angry. Some more than others. Some are just like, "Well, thank you for the three-year reprieve." Personally, I think I would be thankful for a three-year reprieve, and I would be anxious to start paying back my student debt because it just feels really uncomfortable.

Like my internals just don't feel right if I don't pay someone back ASAP. And if I don't pay someone back at all, that's just a non-starter for me. Not in my culture, not in my family. We always pay back our debts, and we always follow through with what we promise.

So there was this viral tweet that went out from a woman who complained about her student loans. She highlighted her estimated monthly payment amount after the forbearance ends is $1,298.83 a month. And that is a lot, folks. No doubt about it. She writes in her tweet, "Student loans and their interests are a class tax on people with working-class heritage.

It is antithetical to the American Dream." And I had to look up how to pronounce antithetical because I was saying anti-ethical, antithetical, antithetical, I don't know who writes antithetical. "Antithetical." Uh-huh, see? Thank you, Google. So anyway, so I was thinking to myself, "Okay, I understand that. I understand the cost of student loan debt is a lot even though that is what you agreed to pay when you took out those loans." So I was curious to understand what was this person's educational background because having to pay that much, you know, $1,300 a month is a lot.

You probably had to take out $100,000 to $200,000 in student loans. So it looks like, actually, it's true that the Twitter person went to Champlain College, a private university I have never heard of, which costs about $45,000 a year today, which is actually not that bad for a private university, many of which cost about $60,000.

And then she went on to get a writing master's in fine arts from Columbia University, which costs $76,000 a year in tuition and fees alone. And Columbia University is an Ivy League university. So in other words, this person was able to go to two private universities. Don't know whether she also went to a private grade school.

So it means that she probably is wealthier than the average person, the average family at least. And then she decided to study writing, poetry, fine arts, right, which is notoriously a low-paying sector. I've been writing since 2009. I would say it's very hard to support my family on my e-book on how to engineer your layoff, as well as my Wall Street Journal bestseller, Buy This, Not That.

And I got a book deal that was pretty good. But these payments, they are spread out over three to four tranches over two to three years. It is not easy making a living as a writer or teaching writing. It's hard to make money in the arts. So if you're able to attend private universities that cost way more annually than the median household income in the United States after tax, and if you have the opportunity to get a degree in a low-paying field, then clearly it means you are wealthier than average, or you simply have not done your research.

So to then take out student loans and then complain why you have to pay them back doesn't seem very logical. I mean, when I was in high school, you know, I was 16, 17 years old thinking about college. Back then, I knew the cost of college. I just looked it up, right?

And I thought to myself, "Well, I'm going to go attend the College of William & Mary because it's $2,800 a year, and worst-case scenario, I'm going to be able to pay my parents back with a minimum wage job at McDonald's." And then I decided, "Well, I need to study something that hopefully will get me a well-paying job that is somewhat interesting." So I studied economics, and then I minored in Mandarin.

And the idea was economics was relatable to many fields. I could work in finance, maybe law, technology. I don't know. I was a college student, but it sounded logical because I looked at the income for economics degrees and it seemed reasonable. And I studied Mandarin because I had studied abroad in China in 1997.

My mom is from Taiwan. I lived in Taiwan for four years, and if I got shut out from America for getting a job, then maybe I can go to China or Taiwan and use my Mandarin minor degree as well as my economics degree. This was my thinking, and I think most people are logical and most people are rational long-term.

So I don't believe in the narrative that people for the long-term do dumb, irrational, low ROI things. Maybe I have too much faith in humanity, but this is what I think because I've been trained to think as an economist that everything is rational long-term. And some people figure it out sooner than others, but at the end of the day, we're going to do things that improve our lifestyles, improve our happiness, and we're going to stop doing things that hurt our lifestyles and cause us to be miserable.

Now it would be one thing to complain on Twitter, because we all like to complain on social media sometimes, that student loan debt is expensive and it's an attack on working-class people. And it would be one thing to say that and attend a private university, elite private universities, and work at Columbia University or whatever.

But it would be another thing to do all that and then to follow up your tweet and say, I just finished my library and it's a beautiful looking library and it's a dedicated room to a library. So how many people who live in New York City can afford a dedicated room, office, with massive stacks of books in New York City, but then say, I can't afford to pay my student loan debt or I don't want to pay it.

It's just this conundrum that bothered me so much that I went for a walk and I thought to myself, why do privileged, somewhat wealthy or wealthy people have this entitlement mentality? And then it hit me. Maybe the reason why some don't feel it is fair to pay back what they owe is because they don't fully appreciate the value of what they got.

Think about that. So important. If you don't recognize the full value of a college degree, then you may take it for granted. It's similar to treating your spouse or partner poorly. You take them for granted because you don't recognize and appreciate all that they do day in and day out.

It's like getting a new pair of jeans or a new pair of shoes for free. You know, you'd like it, but you don't appreciate it as much if you had to slave away over a hot stove earning minimum wage for 30 hours. Because if you put in those dues, then you really appreciate what you can buy or what you get for that money that you earned.

Personally, I don't want things just given to me because it takes away the pride and the joy of the struggle to finally achieve that something. It is unbelievable how good it feels to start from nothing or to start from zero and just work your way up to get there.

That is a priceless feeling of joy that I don't want anybody to take away from me. And it's the same thing with my kids. I don't want to just give them something because it takes away that meaning, that purpose, that struggle that we should all go through to appreciate more of what we have.

Nothing is given, everything is earned is a better mentality to have. If you adopt this mentality, then you will approach life from a position of strength. When entitlement mentality takes hold, you might end up doing curious things such as complaining about having to pay back your student loan debt while posting on Twitter how you turned down five job offers, wrote a best-selling book, and built a dedicated library in your New York City apartment.

Entitlement mentality reduces self-awareness, or maybe people who lack self-awareness have a greater sense of entitlement. If you think about all the poverty in the world, the children who are starving, people with disabilities, if you know what's going on, you will reduce your chances of maybe overeating, of maybe taking your lodging for granted, your health for granted, your vision for granted.

All these things we will appreciate more if we are more aware of the suffering and the state of the world around us. Now, I want to conclude this episode by sharing with you how to calculate the value of a college degree because there is a student loan debt issue, two trillion plus, right?

People are graduating college with no jobs or they're underemployed and they have student loan debt and that's a problem. That is difficult. So this is why, one of the reasons why I've been talking for over 10 years about trying to go to an affordable college. Nothing wrong with state school, folks.

Get some scholarships, apply, take the effort. Don't really just focus on prestige and shiny degrees. Be practical in what you study. This is all practical advice. However, if it's too late for you in the sense that you've already graduated college and you have some debt or you're struggling, this calculation of how to value college degree should be very valuable.

So we know that net worth equals assets minus liabilities. We also know the net present value of an asset is equal to its future cash flows discounted by an estimated growth rate. In this case, the future cash flows of a college degree is equal to the college graduates lifetime earnings.

And to understand this calculation, you must also believe a college degree is a valuable asset. Millions of people are willing to dedicate four to six years of their lives and hundreds of thousands of dollars to get a college degree. Therefore, of course, a college degree is an asset because rationally, you wouldn't do something if you didn't think there was a return.

So a college degree is an asset. It's an investment. To start, the first way to calculate the value of a college degree is to calculate the cost of a college degree plus a conservative rate of return on the money you would have made if you didn't go to college, and to assume that the cost of college increases every single year.

So in my post, I highlight Boston University, an expensive private university, that for 2024 costs $86,363. And then I bump that up by 5% a year and for a full four year total cost of $372,259. That's a lot of money, right folks? And if you assume a 5% annual investment return, had you invested the money instead, the total cost of college for four years is about $534,000.

Half a million dollars, folks. So choose wisely where you want to go to school. You were willing to pay that much money to attend Boston University because you believe it's going to give you a greater return in terms of your earnings power going forward. If you didn't believe, you wouldn't pay that price.

Or you would still go to that college if you got free money in terms of grants and scholarships. Or you'd have gone to a different university because we are all rational actors. This is a fundamental variable that we must accept. So let's say you graduate Boston University with debt of $120,000, right?

A lot. That's a lot. So your net worth is actually equal to $534,000, which is the value of your college degree, minus $120,000, which means a positive net worth of $414,000. Not bad, right? And I know some of you guys are thinking, "Well, you're crazy. You're not worth $414,000 if you pay the full price to attend Boston University." But am I really crazy?

Am I really crazy when we pay 40x revenue for stocks like Nvidia, we pay 100 times earnings multiples for nascent companies that pay no dividends? Why do we do that? We do that because we expect the future earnings to be discounted back and worth something to shareholders now. We expect growth, right?

So when you graduate college, we expect you to grow into a worker who earns more and more over time. And the longer you work, the greater the value of your investment and your assets, right? Because if your investment continues to spit out income for a million years, of course it's going to be worth more than an investment that spits out income for only 10 years.

So what are the implications of the cost method of valuing a college degree? Well, here are some. The more you pay for college, the greater your net worth. So hooray for those of you who spend tons and tons of money on a college education. I don't recommend it, but this is a different way of thinking because you're building that asset.

Wealthier families who can afford to pay more for college end up having college graduates with higher net worths based on this formula. Students who reduce the cost of college by getting grants or scholarships are able to quote "free ride" and benefit from the full value of a college degree.

Why? Because employers don't pay candidates less because candidates paid less for college. They just pay the market rate. And then finally, overall, private university graduates are wealthier than public university and community college graduates. You look at the study on the makeup of household income earners who attend Harvard University.

Something like 15.3% of the students have household incomes that are in the top 1%. Now that is not a good reflection of society. That's very imbalanced. And we know this. We know that private universities attract wealthier families because wealthier families can pay higher tuition rates. All right. The second way to calculate the value of a college degree is to estimate the lifetime earnings of the graduate.

According to Georgetown University's Center on Education and the Workforce, it estimates the lifetime earnings of a bachelor's degree holder is about $2.3 million. Therefore, we can assume the value of a college degree is worth about $2.3 million. So suddenly paying the outrageous sum of $372,000 to attend four years at expensive Boston University doesn't sound that bad because that is a relatively good rate of return.

Unfortunately, in order to earn the $2.3 million, you'll have to work until the assumed age. And we're talking 40 years of work post-college, which is about $57,000 a year. So if you truncate your work, if you join the FIRE movement that I helped start and talk about in 2009, the value of your college education diminishes.

And if you decide to work longer, let's say until you're 80 years old, as some doctors mention, well, the value of your college degree increases. However, given it takes 40 years to earn $2.3 million in the study, it is not fair to use the estimated lifetime earnings of a college graduate to calculate a college's value.

Because it's due to the expected real investment returns, we should discount the value of $2.3 million to come up with the value in today's dollars, right? Because we all know that if inflation is going at 1,000% a year in 10 years, the value of your dollar is going to be worth almost nothing.

So little. But if inflation was worth only 1%, well, the value of your dollar is worth more today. Now, the third way to value a college degree is basically to calculate its net present value of future cash flows. And I know I'm going to lose some of you in this.

It's kind of confusing. But let me give it a go. All right. NPV, net present value, equals all future cash flows over some holding period discounted back to the present using a rate of return. Discounting if you think about it is merely the inverse of growing. So in this calculation, let's assume a discount rate of 5%.

You can also think about it as the rate of return on your investment, right? You've got the cost of college, $372,000. You've got the variable of 40 years, because that is the period of time the college graduate will work. You've got earnings of $56,700 a year, and the total value of the earnings over 40 years of $2.3 million.

So if you input these figures in an NPV calculator, just check it out in the post or go online, you get about $600,000. Therefore, for this Boston University graduate who paid full freight, the value of their college degree is equal to about $600,000. And this includes the person's cost, initial outlay of paying $372,000.

And what one commenter pointed out very smartly is that you should take the calculation a step further by subtracting the NPV of a high school degree from the NPV of a college degree, because the idea is high school is generally free for all if you want, and going to college is a choice.

So you want to think about what is the incremental return on your earnings if you go to college. So the bottom line here is that any of you listeners who went to college can now increase your net worth, because your college degree is an asset. It's valuable. It should go in the asset column.

Using the cost plus methodology to valuing college degrees, I personally will be able to add $122,000 to my net worth if I want to. The College of William & Mary cost about $44,000 for four years from 1995 to 1999 when I attended. And then UC Berkeley's Haas School of Business cost $78,000 over three years when I attended from 2003 to 2006.

I went part-time. So all in, $122,000. Not bad. And maybe I should increase the worth of my college degree even further because my income grew in banking over 13 years, and I retired with about a $3 million net worth. So clearly, it's not worth $122,000. If I ascribe all of my earnings power to college, then the value of the college degree is higher.

But you can't ascribe all your earnings power to college, right? Because over time, you grow, you learn, maybe you become entrepreneurial, or you read things like personal finance books, right? Buy this, not that. Or you watch something on TV, or you take other classes. And that also helps improve your earnings power.

Well, hopefully it should. And there's one final point. Good news for college degree holders. We all like to complain about the cost of college. Ridiculous. Going higher faster than the rate of CPI every single year. How can this be when everything is free online? Well, the good thing is if you already have a college degree, then the value of your college degree also increases every single year, thanks to cost inflation.

And this helps boost our net worth. Every year we're getting richer thanks to our college degree. You know, it only cost me $44,000 to go to William & Mary for four years back when I did. But now I'm just looking at it. It costs $270,000 all in for an out-of-state student today.

And why can't I assign the value of an out-of-state student's cost? It's the same degree. So essentially I've earned a 6x return on my investment over 24 years later. And that's a healthy 12% compound annual return. And I know some of you guys are thinking, "Man, Sam, you're crazy for thinking this way." But again, what is an asset?

What is an investment worth? But what we say it's worth and what kind of income it produces for us over time. Alright, folks, thanks for listening. I hope this episode has helped explain why some people have entitlement mentality. And I think it's because they simply don't understand the full value of what they get for what they're paying.

So I guess maybe educators are right. Education is the key to a happier life, to more wealth, and more freedom. And if you want to have an easy way to keep boosting your net worth, keep reading books. Every book you finish adds to your net worth by at least the cost of the book and at most how much more wealth you can build because of the book.

Some books, like my book, Buy This, Not That, at financialsamurai.com/buy-this-not-that, will give you actionable advice that will make you more money. That could make you far wealthier than the average person over time. But you gotta read it and you gotta take action. So do not discount the value of your education, your college degree, and do not discount the value of continuing education.

I hope you appreciate this episode. I hope you appreciate all the posts and all the newsletters I've written over the years. And I'm going to continue writing because I think we should all be learning. Thanks so much everyone for listening. Please share, subscribe, and rate the podcast. I'm trying to get to over 500 reviews by the end of the year.

Let's see if we can make this happen. It's really a great motivator for me to keep on recording. It's been a lot of fun, folks, and I appreciate your listening. Don't forget to subscribe to my free weekly newsletter at financialsamurai.com/news. Everything is written based off first-hand experience so you don't miss a thing.

And also, don't forget to check out the show notes for the related links. Thanks so much everyone.