Chapter 20: Potential Money

Elle Woods: “I don't need back-ups. I'm going to Harvard.”

CULA Advisor: “Well then, you'll need excellent recommendations from your professors.”

Elle Woods: “Okay.”

CULA Advisor: “And a heck of an admissions essay.”

Elle Woods: “Right.”

CULA Advisor: “And at least a 175 on your LSATs.”

Elle Woods: “I once had to judge a tighty-whitey contest for Lambda Kappa Pi. Trust me, I can handle anything.”

– Legally Blonde (2001)

One of the great things about our human capital is that though it is finite, it is not fixed. We can invest in it to enhance our earnings potential (as well as our general well-being). Up to a point. Two of the best investments we can make are health and education.


Investing in health—leading a healthy lifestyle—allows us to work longer if we choose to or need to, with lower medical expenses and greater productivity. Of course, that is true on average, not a guarantee for any one of us. While recommendations seem to change all the time, here is one list of factors that in a large study contributed to a significantly longer lifespan: [50]

  • Diet: Favor vegetables, fruits, nuts, whole grains, healthy fats, and omega-3 fatty acids. Avoid red and processed meats, sugar-sweetened beverages, trans fat, and sodium.

  • Exercise: Thirty minutes of moderate to vigorous activity per day.

  • Weight: Maintain a body mass index (BMI) of 18.5 to 24.9.

  • Smoking: Don't.

  • Alcohol: No more than one drink per day for women or two for men.

Now you have another reason to take care of your health: look at it as a financial investment.


Education is the other big investment you can make in your earnings potential. High school graduates on average earn more than those who don’t graduate. College graduates earn more than high school graduates. Unfortunately, it’s not always just about learning: research suggests that a good part of the bang for your education buck comes from actually graduating. Getting the degree matters. This is known as the “sheepskin effect.” Three years of college don’t get you three quarters of the earnings benefit of a four-year degree.

This all sounds nice in theory, but remember: you are not the average. To repeat what I said in Chapter 8: whether college makes financial sense depends on the degree you pursue. Whether college makes financial sense depends on the degree you pursue. It depends on your age, the income you can expect after graduation, and the earnings you give up while in school.

A traditional college education comes with a big price tag, to say nothing of post-graduate training such as law school or medical school. So as with any big investment, it’s important to remain flexible and check out different options. One of the obvious ways to lower the burden is to consider state colleges with their lower in-state tuition costs.

Then there are grants and scholarships for which you can apply. This can involve some work but can yield thousands of dollars in support.

Unsure about heading off to a four-year program? Consider a two-year community college degree. With good grades, if you decide to continue your college education, transferring to a four-year state school is quite feasible. You can also save a significant chunk because community colleges cost much less compared with spending those first two years at a four-year school.

Tread cautiously with “for profit” colleges. While not uniformly bad, they tend to have low graduation rates and leave students with more debt than not-for-profit schools. Many students have found themselves pushed into expensive loans, and in multiple cases the schools have gone out of business and left students with a pile of debt and no degree.

If you are a stellar student and your family is poor, education can be a breakout opportunity. Going to an elite college may not even be on your radar screen. Don’t dismiss the idea. Many leading private colleges will evaluate your application without considering your finances. (They are “need blind.”) Of those, many provide financial aid packages to meet your full demonstrated financial need. And a subset, including most of the Ivy League schools, promise to do so with grants and scholarships, meaning you can graduate without massive student debt.

At the end of the day, education doesn’t begin or end with a degree: it’s an ongoing process. You gain human capital by accumulating experience, establishing a professional network, and acquiring skills. Some fields, such as computer programming, are more open than others to people without formal degrees if you can demonstrate competence. Others may require specific certifications or exams. After that you learn on the job, from colleagues, or by pursuing additional training. Lots of skills can be learned at very low cost online and require mostly time and commitment.

As the term suggests: you build human capital through human effort.


Government and Regulatory Agencies

College Scorecard

Detailed U.S. Department of Education info on cost of study, loans, and income by school and major


Resource to find scholarships (and info on saving for college and borrowing)

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