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Should you get a Masters Degree? The short answer is: it depends.
This isn't the sort of question where sweeping generalizations can be made. I can't say “Everyone must have an advanced degree!” or, the opposite, “Universities are evil and you may as well light your money on fire!”
The fact of the matter is there are lots of reasons why it might be a good idea for you, and plenty of reasons you may want to reconsider. The right answer is going to depend on your individual circumstances. So, instead of “settling it once and for all,” I'll tell you about my choice and experience in getting an MBA, whether I'd do it again, and the various questions worth considering to help you make the choice. This is from the perspective of an American, but many of these points will apply elsewhere.
Quick aside: I was incredibly blessed to be born into a country and situation that allowed me to flourish and even consider pursuing an MBA as an option. These blessings don't diminish the role of the hard work it takes to get into and complete a Master's program, but they're often all too easy to overlook. I could expound on this at length, but let me leave it at the following:
- Not everyone will be in a position to make this sort of choice in the first place and it's important to recognize that.
- It's worth taking the time to be grateful for the people, events, and opportunities that got us to where we are.
I completed my MBA between 2012 and 2015 by taking night & weekend classes while continuing to work my full time job. This typically meant getting home after 10:30 pm a couple nights a week after a full day of work. It was a lot of work, but I learned a lot, met some great people, and am generally happy with the experience. It was also a lot of money, which arguably could have been put to other, maybe better uses.
For me, an MBA had always been on the radar as an achievement that I wanted to accomplish. I didn't necessarily need it for my career, but I had this vague impression that it would help and would be worth undertaking. I also just really like geeking out about numbers and business, so there was that appeal. So, back in 2010 I started a drawn out process of studying for and taking the GMAT exam and then reviewing and applying to business schools.
I made the choice to go with a part-time program so that I'd continue to advance in my job and earn an income, rather than taking two years with no salary. This meant forgoing some of the top schools and sticking with what was available in and around my city. These days, we're seeing more and more schools offering fully online programs, but personally I'm not convinced that's the way to go. However, that's not to say it couldn't be the right choice for you.
Since graduation, I've had discussions with a number of people wondering if they should take the plunge themselves. Whether it's an MBA specifically or a post-grad degree in some other field, I always caution them to question their assumptions and really analyze what options are available. That's led me to the following questions:
Questions to consider when deciding
“Why do you want to do this?”
A good question for any major life decision.
With education in our culture, there's a tendency to default to the belief that more is always better. Earning an extra degree can also feel like a necessity; another box to check on the list of “things to do” along with “marriage”, “house”, “baby”, etc.
This certainly depends on your social circle, but I've known people that feel they should “go back to school”, just because society has been telling them to. In 2009 and 2010, law schools especially were flooded with applicants in their early 20's who saw it as a better option than dealing with the tough job market. Unfortunately, many of them ended up buried under large loan debts with few prospects for legal work because suddenly the supply of new lawyers was peaking.
You might be trying to learn new skills or information to help in your career, or you may just be looking for the “Master” title that it confers, or you may have some totally different reason. In any case, knowing what you're trying to get out of the experience will help you in answering some of the following questions.
So, all I'm suggesting here is that if you find yourself interested in a Master's degree, you should look deeply into why you want it in the first place. As I mentioned, my own rationale wasn't very strong and if I had given it some deeper thought, I might have reconsidered.
“Is it going to directly improve your career or income?”
This ties in directly with the prior question. Most people pursuing graduate degrees are doing so to either change careers or improve their prospects in their current career. This can be a pretty clear and valid answer to the first question.
Especially for some science-related or government positions, having an advanced degree can be a strict requirement to even be considered for the job. In these cases, the answers is going to be pretty clear.
For others, though, like myself and the future lawyers mentioned above, the answer is a little bit more vague and this is where I think many people get into trouble.
It's easy to justify to yourself that a degree will make you more desirable for hiring, but I usually caution friends against this feeling unless there's more concrete proof. For example, if your company requires it for a promotion or it's the standard for an industry that you want to move into. If there isn't a clear requirement, it may be worth negotiating up-front with an employer or potential employer. Maybe you can move into a position immediately and later pursue a degree, hopefully even with them paying for it!
“Is there a way around needing to pay for it?”
In the USA this is hugely important.
Here's a quick article showing just how rapidly tuition prices are rising–way faster than inflation and most other spending categories. This, of course will vary by location and university. I've seen plenty of Master's degrees costing in the $80,000 to $100,000 range and mine wasn't too far behind. I know lawyers with over $200,000 in student loan debt.
Fortunately, many employers are willing to cover all or part of the cost if it means you'll be gaining knowledge and a degree that makes you more valuable. My own company was willing to pay up to $5,000 per year towards tuition. A number of my classmates got the entire degree covered.
So, if you are looking to go back for a Master's degree, look for ways to get the cost covered by someone else. If your employer doesn't already offer it, maybe you can negotiate for them to make an exception. If they won't, maybe you can convince a new employer to roll it into your benefits as a new hire. And if that fails, there are always plenty of scholarships and other options out there (see Noah and Becky for an example). You just have to do your due diligence and see what's possible.
As one final example, my school would have covered the tuition if I did full-time instead of part-time. I ultimately didn't go that route because it was more valuable to keep my job and progress in my career, but it was a great option. Generally, you can help yourself find these options by doing well on standardized tests (for scholarships) and being good at your job (so employers will want to help you).
“Would it be worth it even if you have to cover the whole cost yourself?”
If you're not in a position to cover the cost, it's good to give some real thought to the value you're getting for your investment. Maybe you'll earn enough money from your new position or career that you'll more than cover the cost of tuition. Maybe you'll be reaping enough non-monetary rewards (prestige, knowledge, experiences, etc.) that you're fine with committing the money to it. In either case, it's worth it to take the time for a sober assessment of the value you're getting for your money.
There're also two major paths you can take if you are going to have to cover all or most of the tuition yourself:
- Pay for it yourself
- Take out loans
Neither option is necessarily best, but I can tell you personally I love the feeling of avoiding debt whenever possible. I worked for five years saving up the money that went to my tuition before getting my MBA. Your timetable or situation may not allow that sort of process, but it's worth considering if possible. I was glad I did it.
“Are there other ways to get the benefit?”
Tim Ferriss described in Tools of Titans how he decided that instead of getting an MBA, he would commit a portion of the money he'd need for tuition to instead test out his ideas in the real world. The theory was that he could get the same or better results in terms of knowledge gained by experimenting and experiencing business opportunities first-hand instead of in the classroom. Ultimately, he ended up succeeding in the venture and earning a return much faster than if he had gone back to school first.
You may not want to follow that exact process, but the example illustrates that going to a university for an advanced degree is most likely not the only way you could get the benefits you're after. Maybe you're trying to earn a promotion or a raise and could get there faster by taking on new responsibilities at work and proving yourself. Maybe you want to learn new material, but could access the same content through free programs like Khan Academy or simply hitting your local library.
Research and give some thought to alternatives so you can make an informed decision and know that you're making the best choice for you and not just doing what seems like the only option.
So, would I do it again?
Yeah, I think so.
From a purely financial standpoint, since I'm pursuing FI, it might have been better to just stick the money into VTSAX and let it ride. That said, it certainly wasn't a purely financial decision. I very much enjoyed most of the content we covered, the challenge of it, and meeting a bunch of new friends. It also felt pretty darn good to accomplish a major goal that I had held for years.
Plus, it's possible I never would have even discovered FI if not for my MBA! It was a class on corporate valuation that reignited my interest in investing which then led me down the path to dividend investing blogs and then Mr. Money Mustache. Thanks to that one event, my life is now on a vastly different trajectory than it might otherwise have been. Certainly not an expected outcome of grad school, but a huge impact nonetheless.
One thing I was able to take advantage of was paying for tuition with credit cards. This led to thousands of dollars in free travel rewards and is definitely something I'd recommend if it's an option for you.
Want more from Aardvark Advisor? Check out The Wealth Building Triangle.