Financing: Take what you can get.

Well, it is finally done. The paperwork for the line of credit that Queen's will pay the interest on during and for 12 months after completing the program is on the way. Queen's is covering tuition plus fifteen thousand dollars. I tried to get more, but to no avail. That is as high as the bank is willing to loan on this particular "product". I also had to have a co-signer since I have zero assets.

Nothing reminds you how poor you are like asking the bank for money.

We provided a detailed breakdown of the years expenses to the banker. After reviewing it, the picture the banker painted for me of my financial situation upon graduation was pretty bleak. I got pretty depressed about the whole thing and was almost ready to pull the plug and cut my losses at that point. I had to sit down and crunch some numbers. I also took yet another look at what prospects might be available after graduation for employment. If I manage to find a job that pays well while I'm in school and I can start right after graduation I might be okay.

As if that isn't worrisome enough, the finances I have set up won't be enough to cover my expenses for the whole year, but I figure with the little bit I can save, a good tax return, and taking what little I have in RRSPs out through the "lifelong learning program" I can make it to September. Maybe December if things really stretch. At that point I will have to look for an additional line of credit for the final four to six months. I feel like I'm calling "all in" with a pair of tens pre-flop and I haven't even reached the final table.

I really need some sort of entrance scholarship, but I don't know if that is going to happen. From my conversations with the students during my interview it sounded like scholarships were few and far between. Still, I can hope!

I'm also going to apply for another scholarship I found, but I'm not writing about the details here until after I have found out if I get that one or not. I don't want extra competition.

(This deadline has come and gone. It was the Engineers Canada-TD Meloche Monnex scholarship for professional engineers in Canada returning to school to study a subject other than engineering. There is also a scholarship for professional engineers in Canada returning to school to study engineering futher.)

I've even started to "pay the stupid tax." By that I mean purchase lottery tickets. If I ever needed a small financial windfall, now is the time, but I have a better chance of getting hit by lightning.

It is unnerving to be setting out on this kind of venture with two thirds of your financing in place. Everyone keeps telling me that, "this is a great opportunity," but who really knows? It's not them climbing out on the thinnest tree limb hoping it doesn't break. Is "the fruit sweeter further out on the limb?"

For now I will take the tuition plus fifteen thousand that is on the table and hope for some kind of scholarship to help, while continuing to look for other ways to make this work. I'm either incredibly brave or incredibly stupid. The only difference between the two is the result. Time will tell since I'm jumping in with both feet.

Financing: Line of credit paperwork submitted.

Submitted the required paper work for the line of credit that Queen's is willing to cover the interest on for the duration of the program and the 12 months following completion of the program.

Now I just need to assess my additional expenses and request a second line of credit.

This is going to be pricey. I am again reminded that most people use this kind of money to put a decent down payment on a house. I just have to keep reminding myself this is worth it. After all, I did crunch all the numbers.

Contemplation: Is An MBA Worth It?

(Addition: Just found an interesting article on "Is an MBA worth it" from the Globe and Mail in March 2008 and thought I would edit this post to include a link to this site.)

Is an MBA degree worth it? After lost wages and tuition does this opportunity payout? Would you be better off just sticking to your current position for the next decade?

The majority of us will work to earn a our living. In today's society you could be working a long time. Although I am attempting to quantify the monetary advantages of an MBA, I cannot even begin to assess the emotional, intellectual, and social rewards of an MBA. Can you really put a price on enjoying your employment? If you are like me then you had to suffer through countless student summer positions that redefined boredom and uselessness firsthand. Perhaps you had a position that tried your patience to the point of driving you to the brink of insanity? If you have, then I'm sure you can agree that finding enjoyable employment is PRICELESS. I believe an MBA will help me with this, but it may not do that for everyone.

With that stated, let's continue with the analysis of this opportunity.

To test the value of an MBA I assembled a few scenarios. All of these involve certain assumptions, which anyone can criticize, but as they were used in all cases I would argue much of the error caused by incorrect assumptions cancels out.

To provide a sufficient time scale I chose to look at 10 years. All of the scenarios started with 1 year of employment at my current position. After that they explore a variety of paths. I then compared them to the base case of staying at my current position. All cases assumed an 8% pay increase every year, but it doesn't matter as the affect is irrelevant as I explain further down.

• Scenario A: Base case. Do not return to school. Work at your current job with steady pay increases every year.
• Scenario B: Work in previous position for 1 year, return to school, enter new industry at a slightly lower salary, but receive a 50% one-time increase after 3 years in after gaining experience. (Note: This increase would either come from changing organizations or being recognized for your new expertise within your current organization)
• Scenario C: Work in previous position for 1 year, return to school, enter previous industry at same salary with potential to enter management position, but never get the chance.
• Scenario D: Work in previous position for 1 year, return to school, enter previous industry at a higher salary with potential to enter management position.
• Scenario E: Work in previous position for 1 year, return to school, enter previous industry at a higher salary with potential to enter management position and extra compensation
• Scenario F: Work in previous position for 1 year, return to school, enter previous industry with a much higher salary with potential to enter management position and extra compensation

The specifics of these scenarios are interesting, but the detail is too heavy for this venue.

Results:

• Scenario A: 1.00 times base case since this is the base case
• Scenario B: 1.09 times base case
• Scenario C: 0.87 times base case (the only case that was worse than not taking an MBA)
• Scenario D: 1.34 times base case
• Scenario E: 1.34 times base case
• Scenario F: 1.68 times base case

For specific values I looked at my current position and where I could reasonably be in 10 years if I didn't go back for an MBA. Fortunately for me I have my professional association's salary surveys to consult (APEGGA Salary Survey Page) (2006 Results). For post MBA positions I checked various Canadian business schools placement statistics. All the MBA information I found was similar to what is posted at Queen's. (Site with stats) (2007 Results)(2006 Results). All of the results were discounted to today's dollars. If possible, I would recommend all people contemplating an MBA to complete a similar exercise so you can really see the effect.

I ran sensitivities on the influence of discount rates and inflation rates of salary. The discount rate had no effect. The inflation rate of salary directly affected the magnitude of the difference between the cases, but the cases always ranked the same.

The only scenario that didn't workout for the better was the case where I returned to my previous employment position and nothing changed. Even taking a pay cut to switch industries was beneficial provided you are able to see a large, one-time increase in your salary after 3 years.

In other words, don't take an MBA and go back to doing the exact same thing you were doing before.

None of these scenarios considered the substantially rewarding situation of starting a business that becomes incredibly successful or catching that one-in-a-million opportunity that is out there if people are really willing to dig for it. Those opportunities would be much more rewarding. Perhaps a senior management position?

In conclusion, financially an MBA is worth it. You should easily be able to get the MBA to payout. The magnitude of financial benefit is a directly proportional to what you do afterwards. How much and when? Well, that lies squarely on your shoulders.

Other related links with in my blog:

• The Choice: Why go back for an MBA?
• Contemplation: Who Should Do An MBA?
• Plethora of Programs: Which one to choose?
• Decisions: US or Non-US MBA?
• Decisions: Which Canadian MBA Programs to Apply To?
• Contemplation: Is the MBA worth it?