How To Save $100,000 For An MBA Or Other Higher Education

by Mike Holman

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A reader asked me how he can save $100,000 in order to do his MBA. My first thought was “with great difficulty”.  $100 grand is a lot of cash to save even if you make a high salary.

Obviously, to save money you must spend less than you earn and save the difference. Cutting your spending and increasing your income are the two options you have.

I’m not going to get into money saving tips – there are a million…no, perhaps even a billion blogs out there dedicated to that sort of thing already. I will say however, that saving money is 99% motivation. If you are keen to save money for a desired goal and have the financial capacity to do so, then you will do it.

If you need someone to explain obvious money saving strategies like cooking and eating at home is cheaper than eating out, then trust me – that MBA won’t do you a bit of  good. Just keep eating out and enjoy your life.

Increasing your income by working extra hours or from a part-time job is another possibility, but it might not be practical for everyone.

Save or borrow for an MBA?

I think the reader should consider borrowing money to do the MBA.

Most people complete an MBA in order to increase their earning potential. They might spout some other nonsense about their intentions, but they are lying. It’s all about the money!

Assuming an MBA increases your future earnings, waiting to save up for an MBA means that there will be fewer post-MBA higher-earning years.  If you borrow money and complete an MBA now, you can start earning the big MBA salary earlier and there will be more years with the extra income.

For example if the reader is 30 years old and takes 10 years to save up $100,000 to get the MBA, he will be 40 before he starts making big MBA money. Assuming he retires at 65, that gives him 25 years of post-MBA higher salary earnings.

But what if he borrows the money at age 30 and goes the MBA now? If he starts the post-MBA salary bump at age 31, that gives him 34 years where he is earning a higher MBA salary.

That extra nine years of increased earnings adds up – even if the post-MBA salary bump isn’t that large.

If your salary increases after the MBA, that will make the $100,000 loan easier to pay back.

And yes, this argument can also be applied to any post-secondary education which is why it can make a lot of sense for students to borrow in order to complete a degree or other training if it increases their future earning potential.

What if my post-MBA salary doesn’t increase?

If you spend a $100,000 on an MBA and end up going back to your old job – needless, to say you probably wasted your money. Not everyone benefits from an MBA.

It’s important to be able to pay back your MBA student loan, even if your salary doesn’t increase. To do this, you have to look at your current pre-MBA income and determine if that is possible. If not, you might want to consider saving up part of the MBA cost first and then borrow the remainder in order to reduce your risk.

Summary

$100,000 is a lot of money to save and it would take most people a long time.

If you want to invest in post-secondary education (ie MBA) to increase your future earnings, consider borrowing the money you need unless you can come up with the cash in a reasonable amount of time.

Make sure that whatever education you choose has a reasonable chance at a payoff. Even MBAs don’t pay off for everyone.

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{ 8 comments… read them below or add one }

1 Big Cajun Man

And don’t forget that many employers will subsidize these programs if you can get identified as an “up and comer”.

Borrowing $100K to work real hard for 2-3 years, and then return to the same job and salary? Um, yeh….

2 Mike Holman

Good point BCM about getting some money from your current employer. It might lock you in for a while, but if it helps avoid a big loan – might be very worthwhile.

3 Howard

Many Schools offer an MBA at night or you can do it via Distance Learning.
the best way is to Earn and Learn, educating yourself while working.
I can assure you that oi hired many people and if they came in with an MBA attitude, they rarely got a second interview.
I attended six differant schools at night after my undergrad Degree.

4 Howard

A young Man attends a job interview and,on completion, He is told by the company owner that there is an opportunity for him.
“Good” he responds but I/
have to remind you, I do have an M.B.A from Western,”what’s my job”?
The owner responds”You want to be V.P Finance, you can be,or maybe you want to be V.P of Sales and Marketing,?
Titles I’ve got a lot of, Money, I’m a little short.

5 guinness416

Keeping your job and doing the MBA part time is the other strategy, and would be required if your employer is helping fund it – I think UofT even has a “morning” MBA which a colleague of mine did, going in to college at 6 or 7am every day and studying at night. (Of course, there are only 24 hours in a day – she also looked like a zombie most of the time, put on a ton of weight and didn’t have a social life for months at a time, but she figured it was better than going $100k plus interest or whatever in the hole).

6 Mike Holman

Good one Howard. :)

@Guinness – Long time no see! Yeah, most people I know did the MBA part time in one fashion or the other. It’s a pretty tough go – either you do a more intense program and have no life (or sleep) or do part time courses, but that takes several years.

I’ve opted to never, ever do an MBA. :)

7 My Own Advisor

I’m considering doing an MBA at some point, hopefully work will spring for all of it or part of it. I need to finish my current degree first, three more courses to go….

Mark

8 MBA part-timer

Hi all,

I wasn’t at all sure if I should post something on the site. Please only read this, if you are curious about doing an MBA. I have no ambition to try to convince people that think it is a waste of time. I only decided to share my experience with you, as potentially a few people want to do the course, but aren’t sure if they can find the time etc…

I’ve done my first year of 3-yr part-time MBA. My employer sponsors me, which in total fees will be 36 K CAD approx.

For my first yr, project I thought up a new service which I hoped could be commercialized. This was risky as initially, no Customer was requesting it.
I organized 4-5 internal conference calls with potentially interested internal stakeholders. I was determined to make the ‘new service’ a reality (I saw the value and was sure others would too) and after 2 months I was engaged with an existing Customer that was hooked on it.

The resulting sale was > 2 M CAD and led to several add-on sales. Not huge I admit, but this was proof of concept, and a good ROI for first yr fees :-)

As I have a job involving travel, I took the MBA online, and when I took a bus, taxi, flight, had my head stuck in a book. Averaging 2-3 hrs most nights was enough for me to pass first yr.

Win-Win
The benefits for my employer are increased motivation and loyalty.
The personal satisfaction in achieving something like this is difficult to describe. Financially speaking, since starting it, I got a pay hike linked to performance of over 10%.

This is my experience so far.

MBA’s are only worth it, if :
- you are willing to burn the midnight oil
- take chances apply the theory in practice
- be reflective, willing to change and respond to challenges
- don’t give up when you get your first ‘C’ or ‘D’ or someone tells you it’s a waste of time. Make it count for you; the rest is noise to ignore

My reflection is that while the MBA sapped all my spare time/social life for first yr. This was the only real cost. The MBA (so far) earned money for my employer and me. I look back with no regrets and look forward to completing it.

regards,
MBA Part-timer

PS If you read this far, you will enjoy this link… enjoy your journey:
http://www.ted.com/talks/amy_cuddy_your_body_language_shapes_who_you_are.html

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