In our framework post titled “How to Invest as a Bachelor”, the clear first step is finding a way to generate high income. If you can obtain high income in your first year or two the rewards you will reap in a mere five years are phenomenal. With that said here’s a blueprint of sorts to obtaining high income as fast as possible. We will start far back in time when you apply to college and will assume that you wish to work in white collar work rather than blue collar work (again focusing on a topic we know well).
Three Bullets in the Chamber: Many years ago when making a decision on where to go to college an older gentleman gave the following advice:
“As you go through life there are three major decisions that will dramatically shape your future. Yes you can recover from a bad decision but the three turning points are as follows: one turn when you decide to go to college, a second turn with the subject you study and a third and final turn when you sign your first offer letter. If you make all three turns correctly the wind is now blowing at your back. You are firing three times and you better make each bullet count”
This quick piece of advice rings true even today, successful mentors are always full of wisdom so you should certainly find one. With that said lets take a look at each bullet or turning point.
Go To College? Generally this is not always a yes decision. If you’ve worked hard in high school and you’ve gotten good grades on the all mighty SAT and ACT etc. then you likely have a few good options to choose from. We will go ahead and assume you have a few strong options in front of you, the question is how do you decide which university to attend?
The simplest way to figure this out is as follows:
- Calculate the cost of the university
- Calculate the average income upon graduation from the university
- Calculate the long-term income growth rate
- See if the payback period is less than 1 full year
Essentially, if you expect to make $60K a year out of college for your first job which will grow at a rate of ~5-10% on an annual basis… You should not obtain debt higher than ~$36K (assumed aggressive 40% tax rate) when you graduate. This is the rule of thumb, simplified equation below.
(Annual Income * (1+ expected percent raise)) – Expected Cost = Positive
For those that believe “College should be a fun learning experience!”, “I want to major in something I absolutely love!”, “I just want to bang a lot of chicks!” you’ve already lost. The only partial truth in here is doing something you enjoy, certainly if you enjoy building things a career as an architect is going to out pay a career as a modern artist.
With that out of the way we would recommend the following careers if you’re obtaining a four year degree: Finance, Engineering and Consulting.
If none of these appeal to you, that is fine you can still play the same career game by following the rules for choosing a major.
How to Choose a Major? Going with the previous build out, you have a few offers from a few schools and you wont be burdened with hundreds of thousands of dollars of debt. That education is looking much more legitimate at this point.
Similar to quickly deciding if college is worth it here is the decision tree for a major:
- Is the major in demand?
- Does the major pay well out of college?
- Do employers recruit for that held degree?
If you answered yes to all three questions, you’re looking at a great major to choose. Instead of making life harder on yourself, obtain access to the career center, find the majors that interest you and see what careers they walked into.
For example, if you have the choice between majoring in chemistry or in chemical engineering and notice that the average pay differential is in the tens of thousands… It is clear that you should jump into chemical engineering. Alternatively, if you are choosing between mechanical engineering and electrical engineering and realize Facebook recruits electrical engineers… Well again the choice should be clear, you should focus on what matters, the career at Facebook.
Life is unfair. There is no such thing as a perfect or ideal job out of the gate. No matter where you start you’re going to dislike part of the job. If you decide to work on Wall Street you’re not going to be making waves in year one, you’re going to do a whole lot of boring and mundane tasks while working with some insane clients as well. A small price to pay for building a set of niche skills that will be in demand. Which brings us to the third point.
Become an Expert in the Field: So you have made the first two turns correctly, you have correctly moved into the right university and you’re majoring in a subject that employers are fond of. Now what? Now it is time to develop a strong set of skills that few men and women have. Skills that are in demand and difficult to find.
Lets assume you have three offers on the table. All three pay the same $70K + bonus. Congratulations… however… This does not mean all three offers are equal.
Offer one is a generalist role where you will be tasked to work for 4 different groups
Offer two is a niche role where you will only work with X type of transactions
Offer three is an inbetween role where you will only work with 2 different groups
Here is where it becomes difficult. Lets review a key question when you chose your major in the first place. “Choose a major that is in demand” lets adjust this “Choose a career that is in demand”.
You have to take a long and hard look at each option because demand is going to be much more dependent on 1) location, 2) openings and 3) required skills.
Offer one. On a glance this does not look like a smart decision because you are building a wide set of skills that do not allow you to become a person of value within the firm. If you are tasked with work from several superiors none of them have a vested interest in your career. Politics matter. Unless each group you are reporting to resides under the same umbrella the chances you want to jump on this offer is small. Rotational programs can be a kiss of death.
Offer two. On a glance this is an interesting option. It is immediately niche. The catch of course is that you are working with a specific type of transaction. If the transaction will be needed forever and requires tough skills (think sell-side or buy-side M&A) you’re probably in a good spot. However… If the skills needed for the group are limited and easy to learn (think Equity Capital Markets) you should avoid it. Why? Again all skills are not created equal. Always choose the niche group that requires more of you.
Offer three. Here you will only work under two groups. This is not a bad idea and usually means you’re under the same vertical umbrella. You should do your due diligence and look down 2-3 years to see how each candidate progresses. If the results are good, go ahead and make the choice between offer two and this one.
We’re getting towards the end here. You’ve correctly decided on a university, major and career. You’ve got some momentum going, how do you manage to obtain the last few thousand dollars to put you at the $100K mark… well the answer again is in your niche choice.
Leveraging Your Niche: This is actually a great time to explain why we don’t do resume reviews as a business line. The answer is we’ve done hundreds of them in the past on the side. How is this possible? Simply put if you’re in an industry where your skills are needed people will ask you for help and you can help them on your downtime to make a few bucks. It is really that simple.
If you obtain entrance into a career where many hope to enter, they are going to reach out to you and you can simply send a few emails out to explain your services. You won’t get rich. You won’t love the work. But you will develop 1) salesmanship, 2) ability to work with real customers and 3) better understanding of what an employer would look for. An outstanding example for those uninterested in Wall Street is copywriting. If you can become a great copywriter, you will receive referrals and you will have a side business in no time. Boom, you’re making $100K (70K+30K on the side)
Wrapping up, if you follow these guidelines you’ll find yourself in an outstanding position for success. If you have not followed along and took a wrong step you will be playing catch up, no doubt about it, but we will continue with the series and move to Portfolio mix in your twenties shortly.
