After earning my bachelor’s degree in Finance, I never thought I would go back for a master’s degree
Angela Gaddie
FridayJul 23 at 11:25pm
After earning my bachelor’s degree in Finance, I never thought I would go back for a master’s degree. School gives me a lot of anxiety and requires a lot of time and attention that I was so happy to get rid of back in 2010 when I graduated. After I had been at my job for a few years, one of my coworkers took advantage of the tuition reimbursement which was $7,500 per year. At that time, I highly considered it, but decided against it because I wanted to finish my MBA quickly and would have to come out of pocket several thousand dollars on top of paperwork that I found confusing. Fast forward to 2020 during the pandemic, I attended a Business Resource Group call and learned that our tuition reimbursement program was no longer a reimbursement. The company now pays upfront for all education costs and whatever the company doesn’t pick up, the University does! With the extra time on my hands during lockdown and a simpler way to finance it, I couldn’t refuse the offer and I am so happy with my decision to do this.
That being said, the pursuit of my degree is already paying off. In an earlier class, we completed a Personal Development Plan in which we determined a goal and wrote out steps on how we were going to get there. My goal was to be a leader of leaders which was a step up from my current role at the time – people leader (individual contributors). I used my Personal Development Plan in my application packet and presented it to the hiring managers along with a detailed visual of my progress thus far in the MBA program. When I was offered the position, it was my experience and networking that ultimately earned the job but some of the managers did come back and tell me that the fact that I was pursuing higher education was another determining factor. Therefore, I can correlate my recent raise to the investment in school.
According to Lopez (2021), the average cost for a 2 year graduate degree is $38,268 and the average starting salary for a person with a graduate degree is $115,000. My classes at Arizona State University Global Campus are approximately $2,500 each including tuition, course digital material, and tax. With 12 classes, that amounts to $30,000. Although my education is financed by my company and the university, for the purpose of this assignment I can assume the financial responsibility and determine its value based on the future excess in salary that it would return.
For this most recent promotion, I was granted a raise of $24,000 annually. I would like to retire at age 62, which means I have 27 more years in the workforce. I also plan to earn another promotion after 5 years that will hopefully earn me additional income, but for simplicity I will assume that I will hold this current position for the remainder of my employment. It is easy to tell the answer already that the MBA is worth it because it would take a little over one year for the $24,000 annual salary raise to make up for $30,000 investment in school. In fact, it will take just 16 months to break even. Over 27 years, the additional income amounts to 27 x 24,000 = $648,000.
Something else I can look at is the opportunity cost of the tuition cost of $30,000. The opportunity cost is investing that money instead of using it for school. Currently, my investments (401k and mutual funds) are earning an average of 15% annually. I will use the equation for a future value of a single amount.
FV = PV(1 + i)n
FV = Future value
PV = Present value
i = Interest value
n = Number of periods
FV = Future value
PV = $30,000
i = 15%
n = 27
FV = $1,306,057
The difference between the 27 years of raises and the final amount of my investments is $1,306,057 – $648,000 = $658,057. At first glance, it seems that the choice would be to invest rather than pay for an education but remember that the money from the raise is earned starting now, whereas the investment money would only be $1,306,057 if I left the money in the account until I was 62 (and assume interest rates remained constant). I would prefer to have the money now, even if it is less in in the long run so that I may enjoy what is left of my youth, pay for college for my daughter, and live somewhat comfortably over the next 27 years.
Lopez, R. (2021, July 23). How Much Does Online MBA Cost? Retrieved July 23, 2021, from Affordable Colleges Online website: https://www.affordablecollegesonline.org/degrees/mba-programs/online-mba-cost/#:~:text=The%20Graduate%20Management%20Admissions%20Council%20reports%20that%20MBA
Answer preview to after earning my bachelor’s degree in Finance, I never thought I would go back for a master’s degree
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