GMAT/MBA

[valueinvesting101]

Students studying in NYC can and do get internships even after summer. There are few earning opportunities available at school as well. But yes it is expensive and more costs are rising much faster than inflation.

 

So you are going to do it, better do it sooner than later.

[thepupil]

Cost of living is a sunk cost that needs to be paid in either situation. Same goes for networking events and trips, something he should be doing anyways, probably more so in your alternative where he networks without the MBA. Plus that 100k figure is pretax. Plus living expenses are not really that high anywhere outside of NY, even in cities where "top schools" exist. The area around Booth is pretty affordable, same goes for Kellogg and Wharton just off the top of my head.

 

I didn't include cost of living in the cost.

 

If you want to think about the foregone comp after tax terms then you have to also consider that it cost more than $140K in terms of what you have to make to pay for the tuition and fees.

 

Let's just take a hypothetical high income type (the types of professions that go to b-school) who lives off his salary and saves his bonus of $50-$100K  ($30-$55K after tax). This person starts at $0 of net worth and in two years of earnings saves $60-$110K. For someone who doesn't make as much, this number may be smaller.

 

If that person spends that time in b-school, starting at net worth of 0 will then borrow $140K for tuition and fees + 2 yrs living expenses (let's just say $30K / year which is like super low, my buddy at columbia spends $2300 / month on his  studio alone), then that's $200K in the hole  versus $60-$100K in the bank for total difference in net worth of $260-$300K after the end of year two. We'll throw in $20K of internship money to get to $240-$280K.

 

How much money pre-tax would our hypothetical person  then have to make to get to where you otherwise would be at the end of year two? Using $240K it would be $340K - $430K pretax depending on tax rate, I used 30-45%. Like I said, for many it still may be worth it (particularly if parents or a paternalistic corporation are paying the tuition).

 

 

[rb]

How much money pre-tax would our hypothetical person  then have to make to get to where you otherwise would be at the end of year two? Using $240K it would be $340K - $430K pretax depending on tax rate, I used 30-45%. Like I said, for many it still may be worth it (particularly if parents or a paternalistic corporation are paying the tuition).

I don't think Plantair knows how quickly money evaporates in an MBA program. But per your suggestion, if someone else covers your expenses then by all means go and do it. It'll be a lot of fun. I had a couple of those guys and gals in my program. It was much easier for them.

[Palantir]

Your buddy in Columbia needs to get a roommate.

[SharperDingaan]

I did my MBA, after I had done my professional designations. I did it on-line at a Canadian university, went the thesis route, & already had 10 years of experience in finance at the time I applied. My GMAT score was so old it had expired, & one of my references suggested that I should pass because he didn't think the MBA had anything to teach me. It took 27 months from start to finish, on top of a full-time job. Net of scholarships the total cost was <30K Cdn, inclusive of tuition & opportunity costs.

 

I applied to 5 schools & got accepted at each of them, with real experience substituted for GMAT. Ultimately I haggled, & went with the school that gave me the most credits for my accounting & investment designations. In most classes I was the guy with the most experience, & one of the greater contributors; the quid pro-quo was that I was also the guy who got the scholarships.

 

The MBA itself is just a filter, it is how you use it afterwards that counts. I didn't really earn more than I had before; but it made it easier to get the next job, & pretty much assured me a good floor income no mater what - ie: a permanent hedge. It also broadened my thinking, & opened the door to a DBA later in life.

 

The main strategic advantage of an on-line MBA is that it is global - & it does not have to originate in your country. 2 of my 5 acceptances were from solid schools in the UK and Switzerland. To a North American operating in a globalized environment, being familiar with those different business cultures can be extremely valuable.

 

Ivy league schools charge a lot because they are good at marketing, & act as debutante balls. Mommy & daddy are not just educating Johnny & Suzy, they are also hedging their bets by attempting to marry them off to the future movers & shakers. The problem is that after a while, the collective gene pool gets a little hillbilly ie: The British Royal Family prior to Dianna.

 

For most folks, the more mature they seemed to be when they made the decision; the better it worked out.

Grab the decision by the balls, & SQUEEZE!

 

SD

 

[jay21]

Thanks for the additional comments. I am thinking that the cost is higher than I would have imagined due to my living expenses probably being higher than my current living expenses (more travel, drinks/dinner, wardrobe upgrade etc.) but the incremental increase still doesn't outweigh the positive NPV.

 

Assume $500k outlay. If my year 1 pretax incremental comp is above $50k and that grows over time it's above a 10% ROI on an investment that I could fund with debt cheaper than that. I know there are risks obviously just as in everything but the math means on average it's a good investment.

 

I am not sure I want to turn this into a "What's the ROI of an MBA?" thread. I think the math shows it's pretty decent investment on average. Yes, there are cases where it's a horrible investment and some where it's great. Based on some other comments here it may not be optimal, but it's definitely profitable imo.

[jay21]

Update: did well on the GMAT and have been filling out applications. Biggest component left is essays, which is still a big component. Trying to show that I know the school well, that I will take advantage of their programs, and that I have a vision for the future. Those elements all seemed to be stressed in everything I read (and also common sense?).

 

Any other advice? (Might be tough to give advice unless you worked in admissions too I guess)

[rb]

Think, talk about, or imply things about Leadership and you leading. All the B schools today are on a leadership kick.

[jay21]

Going to Columbia next year. Thanks everyone.

[peter1234]

Going to Columbia next year. Thanks everyone.

Congratulations!

[Gamecock-YT]

Going to Columbia next year. Thanks everyone.

 

Congrats, best of luck!

[SharperDingaan]

Congratulations.

 

SD

[abitofvalue]

Congratulations.  well done. 

 

Remember to share your idea here before its featured in Graham & Doddsville. ;D ;) ;)

[feynmanresearch]

Congratulations!