Author Topic: MBA Financing  (Read 5250 times)

Frugal_NYC

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MBA Financing
« on: June 03, 2014, 10:49:22 AM »
Hello All, I have a lot of respect for this community so I am coming here for advice...

I have begun the process of looking into an MBA.  I purchased study books for the GMAT (used off Craigslist in mustachian fashion) and want to consider methods of financing the degree before I get too deep into the studying process.

My Info:
- Just turned 24 years old
- Live in New York, NY.....share an apartment with 3 friends...my portion is $988/mo
- Work in Finance for a major media company making $65K base salary with potential for small bonus @ year end

- I have zero debt currently, my undergraduate degree from a major university was financed equally by scholarships and the generosity of my parents

Breakdown of $
Approx $16K liquid cash
$29K in brokerage account
$13.5K in Roth IRA
$14.5K in 401(K)
Have a used car with around $3K KBB value I will sell also

I believe I in pretty good shape for someone my age.  I am highly motivated/focused at work, having increased my salary from $47.5K less than two years ago to $65K in about 17 months.

My company has a lot of resources and I have access to great visibility here, I believe an MBA from a great school would set me on a great career path.  Basically, I have zero concerns about the payback of the degree over time.

I have calculated that degree from my choice school would cost around $130K including books etc.  As someone who has never had debt, I am wondering what portion of my savings I can be comfortable with using to finance the degree?  I don't for see any other major expenses and I save over $1K a month currently.

***Forgot to mention, I will plan to work during the duration of school and have hope to get $5K max per year from my job for schooling

Thanks for the help!



« Last Edit: June 03, 2014, 11:01:17 AM by Frugal_NYC »

krishnamba

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Re: MBA Financing
« Reply #1 on: June 03, 2014, 10:58:51 AM »
Go part time at NYU or Columbia and have company pay for it.

Working plus MBA will have better payback.

Try no more than 2 classes a semester. Have an outlook of 4-5 years to complete MBA and no personal life.

Gimesalot

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Re: MBA Financing
« Reply #2 on: June 03, 2014, 11:47:12 AM »
Have you looked at Western Governor's University?  I found out about it on another thread in this forum.  It is a flat fee, around $3500 for 6 months of self-paced learning.  It is accredited, and has a lot of good reviews for both undergraduate and graduate programs. 

If you want to be at the $130k school, I would use most of your liquid cash and the money from the car.  I would keep contributing to the 401k and the IRA.  Also, you may want to think about your tax situation, and how you can make the most of your education deductions.

phred

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Re: MBA Financing
« Reply #3 on: June 03, 2014, 12:16:41 PM »
Aren't most MBA candidates company sponsored?  Have you talked with your employer about them paying for the program?  If they pay for your program if you agree to a pay cut, you'll still be money ahead

rugorak

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Re: MBA Financing
« Reply #4 on: June 03, 2014, 12:26:42 PM »
Another option, get a job in higher ed and then take advantage of free classes. I am doing that right now. I pay for books out of pocket and that is it. I believe the Mad Fientist is also doing that.

mxt0133

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Re: MBA Financing
« Reply #5 on: June 03, 2014, 12:43:55 PM »
My advice for you would be to know exactly what you will be doing after you get your MBA.  I know a lot of people with MBAs that are basically in the same position before they started.  If you know what you want to do before you start you can tailor your classes, internships, ect.  Also consider full-time vs part-time, if you want to go into Wall Street you will most likely need to go full-time to get into any associate program.

Talk to as many people in the industry you want to get into for guidance and advice before you start.

Montross

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Re: MBA Financing
« Reply #6 on: June 03, 2014, 01:16:28 PM »
I finished my MBA about a year ago.  Though I hadn't yet stumbled onto MMM at the time, I knew I didn't want to wipe out all the savings (and then some) I had accumulated over 5 years of working. 

The big thing that saved me the most money was going to a university that gave me half-credit for already having an undergrad in business - so it was only 2 semesters instead of 4.  It cut my tuition and other expenses in half, and the fact that I was done in 8 months cut my opportunity cost by more than half.  You mention you're in Finance, so I'm guessing this might apply to you as well.  I got my MBA from a Canadian school, so I'm not sure what U.S. schools offer such a program.  But if any top-tier school in your area does offer such a program, I'd highly recommend it, especially if you plan on continuing to work for the same company (less need for a summer position).

Also make sure to take the time to apply for all the scholarships and financial assistance you can find.  It can be surprisingly easy to get a few thousand bucks here and there just for a few hours of your time.

rmendpara

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Re: MBA Financing
« Reply #7 on: June 03, 2014, 01:55:07 PM »
Hello All, I have a lot of respect for this community so I am coming here for advice...

I have begun the process of looking into an MBA.  I purchased study books for the GMAT (used off Craigslist in mustachian fashion) and want to consider methods of financing the degree before I get too deep into the studying process.

My Info:
- Just turned 24 years old
- Live in New York, NY.....share an apartment with 3 friends...my portion is $988/mo
- Work in Finance for a major media company making $65K base salary with potential for small bonus @ year end

- I have zero debt currently, my undergraduate degree from a major university was financed equally by scholarships and the generosity of my parents

Breakdown of $
Approx $16K liquid cash
$29K in brokerage account
$13.5K in Roth IRA
$14.5K in 401(K)
Have a used car with around $3K KBB value I will sell also

I believe I in pretty good shape for someone my age.  I am highly motivated/focused at work, having increased my salary from $47.5K less than two years ago to $65K in about 17 months.

My company has a lot of resources and I have access to great visibility here, I believe an MBA from a great school would set me on a great career path.  Basically, I have zero concerns about the payback of the degree over time.

I have calculated that degree from my choice school would cost around $130K including books etc.  As someone who has never had debt, I am wondering what portion of my savings I can be comfortable with using to finance the degree?  I don't for see any other major expenses and I save over $1K a month currently.

***Forgot to mention, I will plan to work during the duration of school and have hope to get $5K max per year from my job for schooling

Thanks for the help!

I'm also in a similar boat. Purchased the Manhattan GMAT review and will start studying in mid-June. I'm planning to take it for the first time in mid-Aug, a solid 2 months, depending on how studying goes. I would like to do my best, since I want to go to the highest ranked school I can get into (within reason, of course).

Few points:
- I would buy a new(er) review course. If you score even 10 points higher, it may be helpful in the grand scheme of your career. Saving $500 on a sub-par review won't help you. This assumes you got something out of date and not one of the better review courses... Regardless, how much you study is more important than which course you use.
- You don't have a ton of accessible money (16k cash and 29k brokerage). I wouldn't deplete the cash below 10k, and you could liquidate the 29k brokerage if you want, but it's probably sub-optimal considering you'll have to pay capital gain taxes.
- If you are at the NYU/Columbia level, I wouldn't worry about the debt too much. You're working, so living costs will at least be covered, and part of your tuition/fees as well.
- I imagine you could take out full loans, and start making payments even while they are deferred (or even if they aren't deferred, just start paying anyway).
- Assuming you get $5k/yr from employer tuition assistance, and you keep working, you could probably graduate with <$100k in loans AND be in a much better negotiating position for promotions/better experience.

IMO, a good MBA is worthwhile assuming you want a career that pays commensurately to the cost of the program (both in the short-term and in long-term optionality).

General advice I've heard before suggests you should make more than your total student debt in gross income your first yr working (so >$100k salary after graduation assuming you have $100k loans outstanding upon graduation). You won't be rolling in the dough, especially in NYC, but it will likely put you on a solid path to continue developing your career.

To your question about paying:

- I would keep the brokerage account in full, and also keep at least $15k in cash. Since you now save ~$1k/mo, you should be able to save up another ~$15k by fall 2015 and ~$30k by fall 2016 (depending on when you decide to enroll).

Great that you have no debt right now. Keep up the solid progress, and good luck preparing for the GMAT!

Mrs. Frugalwoods

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Re: MBA Financing
« Reply #8 on: June 03, 2014, 06:11:19 PM »
Another option, get a job in higher ed and then take advantage of free classes. I am doing that right now. I pay for books out of pocket and that is it. I believe the Mad Fientist is also doing that.

+1!!! I worked full-time at a university while completing my master's degree. This is, in my opinion, the absolute best deal as far as higher education is concerned. I was able to take a full class load for free and, since my job was on campus, I had no commute from work to school.

My weekday schedule was grueling (work 9am-5pm, class 5:30pm-either 8pm or 11pm), but, I got my MA in 2 years while working in my field. So, I came out with no gap in my resume, not a dime in debt, and my MA from a prestigious private university (which I would NEVER have paid for!).

An important note: undergraduate education benefits are not taxable as income, but graduate school is taxable. Although I had to pay the tax for my degree, it was a nominal percentage of the full cost of my degree.

rugorak

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Re: MBA Financing
« Reply #9 on: June 05, 2014, 02:19:04 PM »
An important note: undergraduate education benefits are not taxable as income, but graduate school is taxable. Although I had to pay the tax for my degree, it was a nominal percentage of the full cost of my degree.
The specifics are vague but there are ways that graduate school can be a benefit that is not taxable. Just check with your employer as they would know for sure whether their deal is or isn't. Like most things in the tax code there are "loopholes".
 http://www.irs.gov/publications/p970/ch12.html

But agreed whether or not you have to pay taxes on it the deal is still worth it. Same with books etc.

blackomen

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Re: MBA Financing
« Reply #10 on: June 05, 2014, 10:02:45 PM »
Also work in Finance here..  I don't plan on getting an MBA and will try to get CFA in lieu of it (hopefully I pass level 3 this Saturday and get it over with.)

It depends what area of Finance you're in..  if you're in Asset Management, and you're very disciplined, you should consider this route.  It'll cost you maybe $5000 at most (that is if you fail a few times and/or use 3rd party prep material.)

MikePolo4

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Re: MBA Financing
« Reply #11 on: June 06, 2014, 08:19:47 AM »
Quote
The specifics are vague but there are ways that graduate school can be a benefit that is not taxable. Just check with your employer as they would know for sure whether their deal is or isn't. Like most things in the tax code there are "loopholes".
 http://www.irs.gov/publications/p970/ch12.html

I will be starting my MBA this fall and my employer will be paying for a small portion of it. According to my company, as long as I am able to get my manager to confirm that the MBA will help me in my current position at the company, the benefits will not be taxed.

frugaliknowit

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Re: MBA Financing
« Reply #12 on: June 06, 2014, 10:06:49 AM »
Don't borrow money for the MBA.  Find an employer that will sponsor you, otherwise do NOT do it!

sheepstache

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Re: MBA Financing
« Reply #13 on: June 06, 2014, 10:15:45 AM »
Stupid question, probably, but you talk about this setting you on a great career path when this is a forum about ER.  What is your ER timeframe if you just continue at your current education level?

The education and the opportunities it open up may be worth it to you in a non-monetary sense, but I thought I'd just question the obvious assumption that you would want a huge boost in income.  Generally the delayed gratification of grad school is worth it because you intend to have a full-length career at the new, higher payscale, but that may not work out if you're planning on a short career.