Hello everybody, it's Sam from Financial Samurai, and in this episode I want to talk about the median income earned by Ivy League graduates and what they all do or what most of them do after graduating. I am a parent of a six-year-old and a three-year-old, so I am fascinated with the topic of college right now.

It seems so far away, but it's really not. 12 years and then my son goes off. Maybe if he does go, right? And I've already calculated worst-case scenario $3,000 for four years based on an inflation rate of about 5% a year based on all-in cost of a four-year private university of about $350,000 a year in 2023.

The math doesn't lie. It sounds crazy, but hey that's why we save and invest for the future as well. So in true Financial Samurai fashion, I'm trying to figure out whether the means justify the ends and the ends is I guess status, prestige, but really objectively income and what they do because I want to figure out whether I need to push my kids hard over the next 12 to 15 years or let them have fun in grade school.

Enjoy life, you know be like maybe the typical American parent, not the typical Asian parent or the European parent who just pushes their kids in education so hard. So what's the point of it all? The point of it all is to earn enough to live a comfortable life and do what you enjoy doing, doing what you want that provides meaning and purpose.

This is what the fire movement is all about. We've got one life to live. We might as well make the most of it. So here is the data according to the Department of Education scorecard. Former Ivy League attendees who received federal aid earn a median of about 90,500 a decade after starting school or getting that aid.

So that could be anywhere from six years to eight years after graduation, which would put them at around age 28 to 30 years old. Does 90,500 sound like an impressive income to you as a 28 to 30, 31 year old? It's okay. It's not bad, but it's not blowing my socks off.

I thought it would be higher because an Ivy League school is a top 20 school and there's around 4,000 universities in the country. So that's like what top three, 0.375% top half percent. So if you go to a top half a percent school, you would think logically, well, I expect a top 1% income for my age group, not a top 25% income, which is what 9,500 is.

Based on data from professors Guvenan, Kaplan, and Song from 2014 and me inflation adjusting this data, a top 1% income for the 27 to 31 year old age group is about $222,000 today in 2023. And for the 32 to 36 year old age group, it's about $274,000. And if we talk about overall top 1% income threshold, that's about $500,000 and up.

And if we talk about top 0.1% income earners by age, we're talking in the 27 to 31 year age group, closer to about $350,000. And then overall a top 0.1% income, the minimum threshold is a million dollars. So the gap is huge compared to the median income earned by Ivy League graduates who have federal student loans.

If you want to know which Ivy League University pays the most 10 years after attendance, then the number one is University of Pennsylvania with a median earnings of $103,246 with an average annual cost of $25,046. Number two is Princeton University, $95,689, average annual cost $9,836. That's some pretty darn good financial aid.

Number three, Dartmouth at $91,627, average annual cost $32,410. That's way more expensive than Princeton. Number four, Cornell, $91,176, median earnings 10 years after attendance, average annual cost $37,000, even more expensive. Columbia University, surprisingly only at $89,871, average annual cost $89,823, and I say surprising because it's in New York City.

Then there's Yale. Harvard is at $84,918, average annual cost of $13,872. And then finally the bottom, Brown University, $78,943 of median earnings 10 years after attendance, and then average annual cost of $29,544. So just eyeballing this list, I would think, hmm, going to Harvard, only $1,872, or Yale at $15,000, or better yet, Princeton at only $9,836?

Sounds like the best deal to me. Just be aware that the median earnings numbers are for students who took out federal student aid. So students and families who were able to pay for college without the need for federal financial aid were not included and probably earn a greater median income 5, 10, 15 years out because, well, they're wealthier and wealthier people have more connections, and that's just the way life is in society.

I was feeling a little bit unsatisfied with the data by the college scorecard from the Department of Education. $90,500, 10 years after attending, just doesn't sound high enough for me or my kids to push so hard to try to get into a school that rejects 95% of its applicants.

I just start thinking about, wow, we could just really relax over the next 12 to 15 years while the kids are in grade school. We can travel, we can just enjoy life to the max, instead of feeling all stressed out about creating a "WonderKid" kind of resume that cures cancer and eradicates malaria in, you know, Western Africa.

It's just so, it just seems mind-boggling what kids need to do nowadays to get into a top school. So I looked further and I found more information from US News and World Report and PayScale that paints a clearer picture about pay differences. They say early career, which means three years of work experience, the median pay in 2022 was $86,025 for Ivy League graduates.

Not bad. Compared to $58,643 for those who graduated from other universities. That's a 47% pay difference, which is significant. By mid-career, which is defined as 20 years of work experience, median pay in 2022 was $161,888 for Ivy League graduates, compared to only $101,777 for those from other institutions. So a $60,111 a year difference in gross annual pay, that's 59%.

That's, that's very significant. I think that's massive. So now I'm thinking to myself, "Okay, $161,888 when the kids are around 40 to 42 years old. Hmm, don't have to worry about them." And then, if they marry a fellow Ivy League graduate, then that's $123,000 a year. And voila! They hit that magical $300,000 household income figure that I've written about that might be required to live a relatively middle to upper middle class lifestyle in a big expensive city if you have a couple children.

Just look at the tax rates, look at the budget line items. The numbers don't lie. Given this is a financial podcast, I think one of the conclusions to make if you were to attend an Ivy League school or a school that's similar, similarly expensive and similarly ranked, then your goal is to increase your return on investment by working as long as possible post-graduation.

This means forsaking, for example, the FIRE movement, which talks about retiring as soon as possible so you can do something else or kick back and relax or take care of your family. The longer you work, the greater the earnings gap compared to non-Ivy League graduates. And it seems to me that it just takes time for, I guess, hard work, intelligence, top grade scores, whatever it is, to start breaking away from the pack.

You know, I think talent, hard work, kind of rises to the top. It's easier to rise to the top if you give it enough time. But in the beginning, you know, if you land that job at XYZ company, they're all gonna pay their graduates the same. And then over time, if you outperform, then you will get paid commensurately.

And maybe over three decades, if you really outperform, then you can become a C-level executive and make mega millions way beyond the average or median worker. But you know, lasting 20 years or 30 years in a profession is hard. Personally, I could only last 13 years in banking before I was burned out.

Sure, I could probably have grinded for another five years to make it 18 years until my 40th birthday. But you know, I was working 60 hours a week, lots of pressure, a lot of illnesses, sciatica, chronic back pain, allergies, plantar fasciitis, TMJ, all these chronic illnesses that have now disappeared a while ago, about six months after I left my day job in 2012.

They were just crushing me. And so for the health and maybe for my life expectancy, it was important that I leave to find something else to do. When we first start working, we all think, "Wow, I love this job." Well, maybe a lot of us think that. "I love this job.

I can do this for my entire career." And then 10 years of doing the same thing, hmm, you might change your mind. And then 20 years after doing the same thing, well, I most certainly believe you would want to do something new. Now that we know what the median earnings is for Ivy League graduates three years, ten years, twenty years out of college are, we got to understand, what do they do for work?

Can you guess what industries they go into? I can guess, but I didn't realize these industries were so dominant. Because if you think about it, think about the high school applications and the essays you write about changing the world, helping humanity, volunteering. It doesn't talk a lot about making a lot of money, right?

It talks about making society better and being a good citizen and a good person while having top grades and standardized test scores, which looks like are going away more and more. So what does the data show? Well, based on data for Harvard's class of 2022, roughly 57% go into finance, consulting, or technology.

In other words, the majority of Harvard graduates chase money, status, and prestige, which is quite different from what they wrote in their college application essays. So this is careerism. Careerism, as they talk about, where it's a guaranteed higher return on the investment they made going to college for four years and the price they pay for college.

All right, well, to get specific, 53% of respondents will begin consulting jobs. We're talking about the likes of McKinsey, Bain, BCG. 18% will go to finance jobs. We're talking about Goldman Sachs, Morgan Stanley, JPMorgan Chase, and 17% will go to technology jobs, such as Google, Facebook, and Apple. Beyond the big three sectors, 9% will pursue academia or research.

All right, right on. That's great. 6% engineering. 6% health. 4% arts and entertainment. All right. 4% public service. And 3% government or politics. If you go over to the show notes and click over to my post, you'll see this great graph by where Harvard graduates go by sector. And all the way to the right, tiny little bar charts, you see law, interestingly, only at around 1.6%.

Education at 0.4% and then sports 0.3%. Going into professional sports is not a surprise, but how few Harvard graduates go into law is a surprise. Maybe that's because it's they go to law school and that's that's not included. But whatever the case may be, it doesn't seem like big law is very popular.

Whereas I would say 15-20 years ago, I thought going into big law was very popular. You get paid $15,000 after law school, but then you got to go to law school, right, for three years and that costs big bucks. I do see a couple other categories quite interesting and that's entrepreneurship.

About 2.4% go into entrepreneurship. Good for them. I love that field. And then about 2.1% go into publishing and media. I also love that field. But the data sure highlights how the security and high pay of consulting, finance, and technology are what the vast majority of Harvard graduates are interested in.

Now, I don't know if they're interested exactly in doing those things, but they are interested in the money part of it because these fields pay the most. We're talking $120,000 to $200,000 right out of college all in. Really comfortable living for a 23 year old. But I think this is where there's kind of dissatisfaction five, ten, fifteen years out if you keep on doing these jobs.

Because again, if you look at what the students were thinking about doing in high school and what they were studying in college, because these are liberal arts colleges, you study humanities, also sciences, engineering, you study everything. But if the concentration is almost 60% into consulting, finance, and technology, then there will be plenty of students who didn't foresee these sectors as careers, as what they plan to do for their one and only life.

And so you'll see that. I saw that myself. I mean, first personally, I studied economics because I liked economics and I wanted to do something with stocks, equities, investment banking, because I traded stocks in college. I thought it was fascinating. But even after 13 years, I was like, this is no longer fascinating.

It's actually really hard work and there must be something else to life than just trying to make money from the stock market or trying to make hedge funds and institutional money managers money so they can perform well for their clients. I mean, it's fine, but it's not like, oh, life passion to make more money.

Nah, I don't think so at all. You got to make enough money to feel secure, to cover your basic living expenses, to be able to take some vacations every now and then. But helping people, doing something purposeful, receiving positive feedback from people is what really will move you and make you feel alive.

The one thing that keeps me going like Popeye's spinach, recording and writing on Financial Samurai is really nice reader and listener feedback. I got this email from Arjun out of the blue. He said, Sam, been reading your Buy This, Not That book. It's phenomenal. Love your clear writing, data-driven approach.

I've written pages of notes. Just wanted to send a note to share my gratitude. Your work has made such a difference in my life. My deepest appreciation. Thank you from a fan. You know, I felt amazing after reading that. I got at 746 a.m. on Monday, April 24th. Thank you, Arjun.

Thank you for taking the time to reach out. That means a lot. And now I've got energy for the next week to record, to write, to respond to comments, to respond to emails. This type of feedback feels great, way better than when I was working in finance where I would get positive feedback maybe once a year, but it was really more like what have you done for me lately?

Come on, work harder, do this and that. So please, if you want to feel great about what you do, find something you love to do. Find what the world needs. Find what you're good at and find what you can be paid for. This inner section of these four things is called the Ikigai.

We talked about it before. Ikigai will help drive you towards a more fulfilling life. You may be one of the fortunate few who after 20 years loves to continue to do consulting, finance and technology. After 20 years, you will certainly be paid handsomely and keep on doing that. That's awesome that you love to do what you love to do.

And if you have time on the side to do other things, hobbies, help the community, go for that as well. And for those of you who are in these occupations you don't truly enjoy, that you don't feel, you know, tugs at your heart every single day or every single week, well, figure out how much money is enough for you to then walk away.

Calculate that net worth target amount. Calculate that passive income investment amount. And once you get there, okay, take a step back and see is that enough? Maybe work one more year because one more year will give you more time to plan to take that leap of faith. But then do take that leap of faith because worst case if things don't turn out like you had imagined, you can always go back to work in two or three years.

In conclusion, making 90,500 ten years out to 161,000 20 years out is a very comfortable middle-class lifestyle. Maybe upper middle class and it's probably gonna go higher given inflation. But it's not enough to stress so hard about killing yourself in grade school to get the best scores possible, test scores and grades to get into one of these colleges, which has way too much demand to accept more than 3 to 7 percent of its applicants.

There are plenty of other great universities. You would call them, I don't know, Ivy League adjacent. There's probably top 50 schools that, top of 75 schools, 100 schools that'll enable you to get that career that you want. So don't put all your eggs in one basket. Don't think not getting to a top university is the end-all be-all.

I'm an example of one of them. My wife is an example one of them. Yeah, William & Mary is a top 50 school. It's a public school, but it gave us as much opportunity as we could have hoped for, we could have imagined. Once you get your foot in the door, it's what you do that matters.

It's your network. It's your relationships. It's your outperformance. It's your work ethic. I'm hearing my kids singing right now in the hallway. So I think it's time to go and take them to school. Thanks so much everyone for listening. If you like this podcast, I'd appreciate a positive review.

Please subscribe to my free weekly newsletter at FinancialSamurai.com/news and pick up a copy of my best-selling book, Buy This, Not That, How to Spend Your Way to Wealth and Freedom at FinancialSamurai.com/btnt. Take care.