If you’re thinking of getting an MBA, THINK AGAIN*!
*Unless you have a trust fund/rich relatives, scholarship, or your company paying for your education, or you’re in finance/consulting (in which case, again, your company should be paying!)
Having been a headhunter for top positions from Analyst to Chief Executive level, I can honestly and sincerely tell you, most companies nowadays don’t care about an MBA degree at all*(exceptions mentioned above). The only degrees/certifications that matter are directly tied to the role at hand for that industry or LEGALLY required to practice. WHICH INCLUDES:
- PHD/Master’s in a specific scientific/technical craft for a scientific, medical, mathematical, quantitative, statistical role, etc.
- MD to function as a Doctor, JD to function as lawyer, RN for nurse, PharmD to function as a pharmacist, etc.
- CPA to be an accountant, CFP for financial advisors, etc.
Before everyone freaks out and decries this post, hear me out. Here is Why an MBA is NOT Worth the Investment. Please do yourself a favor and think twice. Don’t be SOLD!
Most modern higher education programs, especially MBAs, don’t bear the financial fruit people are used to in the past. This is a simple case of supply and demand, further complicated by the internet providing FREE information online. Not only are MBA graduate numbers going through the roof, there is also no guarantee that those graduates are more or less qualified! Reason being that NOTHING compensates for hands-on expertise and likability.
Some candidates highlight the fact that their MBA degree somehow should afford them higher pay or special leadership roles. My clients never accepted that argument because they’d rather take someone with 3 more years of that expertise, and a proven leadership track record than to take someone with a newly-minted degree with less experience! If you’re unlikable or lacking strong interpersonal skills (which the MBA does NOT do an adequate job of teaching), then you can forget about that cushiony 6-figure job, again outside of the exceptions I mentioned at the beginning of this article.
Don’t believe me? Tune into this specific interview I conducted with Josh Doody, author of FEARLESS Salary Negotiation, an experienced hiring manager in a technical field. We talk specifically about the misconceptions of educational credentialing!
If you ask any hiring manager,
Real World Experience + Likability > MBA
Not only that — the cost of acquiring an MBA grossly outstrips the salary gains projected from the acquisition of the degree. On a purely financial level, the return on investment (ROI), simply isn’t there.
Here’s the breakdown why: The cost of your average no-name MBA degree is a minimum of $100k (tuition, books, living cost while you’re not working, rent, food, water, etc.).
Bear in mind, this $100k price tag (or whatever it ends up being…) is POST taxes.
In which case, you’ll need to make at least $200k cumulatively to pay for this cost — assuming your income tax rate is 40%+ (which it will be if you’re to make 100k post-taxes), and that you have minimal expenses and no existing debt obligations. If your job currently pays $75k, you’re only making about $45k or less after taxes. To accumulate $100k, you’d need to work at least 2 years without spending a single cent.
If you factor in your living costs, you may need 5 years to save up enough for your MBA. Since you’re allocating $100k for the degree, you won’t be able to put that money down for a house, an interest bearing stock/mutual fund, nor any other income-producing asset. If you calculate the gains in the real estate market and financial markets savvy investors can obtain, you’re saying “no thanks” to all the potential riches to be made in those arenas while you diligently save for this massive cash outflow.
Opportunity cost is a real thing. If you spend your $100k acquiring a degree, you no longer have that money to allocate towards income-producing assets!
What about debt? Luckily, we have access to easy capital with lower interest rates now. Isn’t that great? HELL NO — you’ll be in another hot mess. Let me explain why:
For those above reasons, (mostly the fact that not a lot of people have $100k cash sitting around), paying cash for an MBA is not an option. So why not take a loan? Certainly, there are plenty of schools, financial institutions, eager to offer debt.
That’s the exact trap of this whole MBA system. Easy debt has landed many an American in hot water whether for a degree or for an over-valued primary residence or fancy new car (all depreciating assets arguably). For every article lauding the benefits of this degree, there are many more reasons to be afraid of this trap. proving that there was no substantial income increase from the achievement of this non-technical degree.
#1. No substantial statistics on exactly how much MBAs make more than non-MBAs.
Even if there were, it doesn’t 100% apply to your life, because life is a risk — nothing is GUARANTEED. If you couldn’t find a job with your Bachelor’s degree, what makes you think an MBA is going to magically solve your problems? Getting a job is not about credentials, it’s about personality, understanding the job search system, and interviewing correctly. An MBA does not teach you any of those skills. Plus, more people than EVER possess this degree.
FOOD FOR THOUGHT: Most of the information taught within an MBA program is EASILY searchable for FREE and accessible to the public via the INTERNET. How is an MBA grad more attractive than someone who has been gaining real world experience and has already been studying and implementing these free resources in the real world? (Hint: they’re not!)
#2. AGAIN TAXES will screw you over even while you’re REPAYING the loans. Wait, don’t I get a nice tax write off?!
Despite these hard financial facts, let’s say you proceed to now take out the loan for $100k to complete your degree for the next 2–3 years. Once you graduate, you’ll need to pay back this loan with POST-TAX dollars. Again, you’ll have to earn almost $2 for each $1 of debt you’re paying back (income tax 101, federal + state + city). Sure, there’s a tax write-off on your interest portion of your loan, but as you come closer to paying off your debt, that interest percentage will dwindle, and those tax write-offs are minimal for the last few years of paying off your student loans. Add in any remaining student debt from your undergraduate degree, and you can say goodbye to actual earned income!
Furthermore, the more debt you have, the less NEW credit you can have access to. Forget about that beautiful house you want to buy, if you’re already carrying $100k worth of debt, you can’t get more mortgage than XYZ amount so you’ll have to deduct $100k from that amount of debt available to you. The interest on your existing student loan, while you can write it off — it’s still extra money that you’re liable to pay back! By no means, is it free or compensated by the write-off.
#3. What if you’re actively working and your MBA is a part-time commitment?
The costs are still astronomically high, and you won’t qualify for financial support if you’re making a decent salary — Double whammy! You have to pay full price, especially if you’re doing well. Not to mention the stress and emotional toll an extra degree takes on you while juggling a career. Is that quantifiable? Certainly. The decrease in quality of life, and time spent with friends/family is something you’ll also have to factor.
#4. Lastly, there is absolutely no guarantee you’ll be automatically hired for a higher-paying job just because “MBA” gets tacked onto your name.
You still need to impress potential employers, network, and job search like everyone else. If your MBA program doesn’t have a strong career department, your $100k investment will quickly lose even more ground the longer you stayed unemployed. No recruiter/hiring manager is excited by someone who has a fancy degree but not enough real life experience that is relevant to the specific job role at hand.
It is not a future employer’s job to pay for your investment for yourself. If they choose to hire you, it doesn’t mean they have to offer you 6-figures because you have student loans and bills to pay. They will pay fair market value for someone with your experience, which will be dictated by what other offers you have in the pipeline and who else is available to do the job.
If the # of workers > the # of jobs, you’re really going to be in trouble.
Supply and demand still reigns supreme. Market forces will be what they are.
TIP: In certain industries, mostly consulting and finance, MBAs are important to your value. However, in those roles, your company will most likely pay for your to obtain this degree, so why pay for it yourself when some of your peers are having this cost accounted for by their employers?
WARNING: If you’re in transition, an MBA especially needs to be deeply thought out. You’re really treading some dangerous waters.
Have you truly tried to transition without an MBA? My personal thought is $100k sure is a lot to gamble for any type of future payout whether it’s a higher-paying job, or successfully transitioning to another industry. I would personally try to get a job without necessarily having to fork over $100k of my own hard-earned money.
This opinion is just my two cents; I hope this helps in your decision-making process!