NPV of a Career

Aaron Rockwell – Magic Staff +1 Writer

I was going to write an article on sunk cost, but the moment it became no fun, I abandoned it.

Instead, let’s take a look at our lives and how much this year is worth in terms of: how long you might have left to live, and how much money you can possibly make in your lifetime.

Income Conclusions:

First off, sorry that this analysis is American-centric, it was the most robust and comfortable data set for me to analyze.

This graph shows the average household income of an American family (according to the U.S. Census Bureau). This whole article is a little wonky because I’m not sure if head of house and household income are separated by the census bureau. That data all points to being about $20k too high for an individual:

Line Fit For Das Tor
Data Courtesy:

Deriving the equation for age to money looked like inverse parabola; the equation came out to be:

y = -59.547x2 + 5696.4x – 39685

Anscombe's Quartet Courtesy:
Anscombe’s Quartet Courtesy:

Excel has the cool ability to fit lines to its scatter plots and then push out the equation. Very easy way to create lines of best fit that do not fall under the Anscombe’s quartet mistake. (I’ve been wanting to custom make a shirt with this on it for awhile.)

So if you want to know what the average income for your age group is, plug your age into the x’s into the formula (y = -59.547x2 + 5696.4x – 39685). According to our best-fit line, an American makes the most money at 48 years old ($96,545.91 that year). This is an unfair graph because all current Thunderbirds have Bachelor Degrees, and will soon be entering into the world as masters of our craft.

Data Courtesy:
Data Courtesy:

Here is what different levels of education can do for earning potential.

Average Annual Salary Expected Earnings from the Mean
The Mean  $79,263.00 100%
No diploma  $38,678.00 49%
High school graduate  $57,526.00 73%
Some college, no degree  $67,816.00 86%
Associate degree  $77,148.00 97%
Bachelor’s degree  $108,940.00 137%
Master’s degree  $125,084.00 158%
Doctorate degree  $152,536.00 192%
Professional degree  $188,176.00 237%

When will I be too old to pursue a Doctorate or Professional Degree (monetarily speaking)?

The breakeven point is at 47 years for a doctorate and 63 years old for a professional degree.

 What is the Net Present Value of my life?

For the first fifty years of our life, we have a pretty low probability of dying, but as we age, we become part of a select few who have had the opportunity to have experienced it all. Here is a graphical representation of an actuary table:

Data Courtesy:
Data Courtesy:

This all seems very morbid, and I apologize, but it was important in calculating the mean monetary value future earnings potential. Calculating the difference between expected life expectancy and future earning creates a discrepancy of about 22%. Essentially, don’t plan on making $7 million in your lifetime, plan on about $6 million. Also, enjoy school while you can.

Fun Facts:

For someone in their 20s-30s, the chance of dying in a given year is around .0011% (1 in 91,000) and so that equates to the chance of dying on any given day to about 1 in 33 million.

All of this boils down to this: a person with a master’s at 28 years old can expect an average lifetime earning at around $6 million.