Is an MBA worth it? I don’t remember reading any negatives in the program pamphlet or hearing anyone admit that spending significant time or money was a mistake…But I can tell you first hand that getting an MBA may not be worth it! Shocker, I know, but getting a degree just because you *think* it might help is not a good strategy.
Millennials are on track to be the most educated generation ever with 34% having at least a bachelors degree. According to the Washington Post, there has also been a “flood” of people running to get advanced degrees:
“From 2000 to 2012, the annual production of master’s degrees jumped 63 percent”
That stat confirms some of my suspicions from my own peer groups. Many feel like they need an MBA to distinguish themselves from the pack. While I love to see people bettering themselves, to determine if an MBA is worth it, we need to look at the motivation behind it.
Why are you considering an MBA?
- Earn more money/Advance your career (this is the goal for the vast majority)
- A necessary step for a Ph.D. program
- The prestige of an advanced degree (There were 2 people in my MBA program that did out of boredom and loved to learn)
I’m guessing the bulk of people who ask “is an MBA worth it” are interested in the first option – they view an MBA as a stepping stone to more money or a promotion.
If we look at an MBA that way, it is an investment.
Investments are supposed to provide returns.
Returns that go above what you paid for them (both in time and money).
Is an MBA Worth it? Maybe…
Here is my “Is an MBA Worth It?” Equation:
Earnings > Cost of MBA
Pretty simple at face value, but lets dig in further
1. Is an MBA Worth It – Cost of an MBA
The average MBA tuition falls between $50,000 – $80,000 for a two-year degree (MBAPrograms.org). You can definitely find some cheaper programs (and some that are far more expensive), but you need to ask yourself:
Can you afford to take on student loan debt right now?
The cost of college has skyrocketed, younger folks are saddled with more student loan debt than they have ever had. If an MBA is going to put you farther in debt than you already are, it might be worth holding off for awhile while you dig yourself out.
Employer Tuition Reimbursement
What’s better than completing an advanced degree? Completing it for FREE!
My graduate degree cost another $20K (before student loan interest charges!) that I could have passed on to my employer with little effort today.
Even if it takes a while longer due to your employers yearly reimbursement restrictions, wait it out and have them pay for as much as possible. The only reason I would expedite and pay out of pocket is if you know future earnings will trump costs in a short time frame.
If your employer offers tuition reimbursement, find a way to use it every year. If you don’t want to commit to getting a complete degree, there are a ton of certifications, “mini” Graduate Degrees or just general skill classes (excel, project management, etc) you can take.
Don’t have a college nearby? No problem. If you have access to the internet you can get an MBA online.
2. Is an MBA Worth It – Can you Earn While You Learn?
Are you planning to work while you get your degree? I sure hope so. If not the “Cost of an MBA” skyrockets due to the below factors:
- No salary – Obvious, I know, but its a significant loss.
- Losing out on compounding raises/salary increases – Those yearly raises and promotions compound on each other just like your investment portfolio
- Experience – We will touch on this a bit later, but don’t underestimate the value of experience in your field.
To make your MBA sting a little less (which ultimately makes an MBA more worthwhile) I strongly recommend that you work, in a career orientated field, while you pursue your degree.
I have some personal experience to add here.
On top of stacking on $20,000 of student loan debt, I was not earning any money why getting my advanced degree. Therefore I was not paying off any of my existing debt and student loans from your undergrad don’t stop accumulating interest just because you decide to keep going to school. The equation was not working in my favor:
No/Limited income to pay down debt + Debt Accumulation + Capitalized Interest = Big Problem Later
That big problem was a thorn in our side for 7 years. It is definitely, 100% without a doubt, the biggest financial mistake I have made.
3. Is an MBA Worth it – Depends on your future earnings potential
Logic says More Education = More Money and thankfully the studies support that. The average salary for a person with a Bachelors in Business Administration is $46,100, get a masters and the average bumps up to $57,700.
The numbers look good, but I wouldn’t take them at face value. You need to do some work on your side to make sure it is going to work out in your favor. Remember we are thinking of an MBA as an investment. For an investment to be worthwhile it needs to earn more than it costs over time. Ask these three questions:
- Does an MBA guarantee you a pay increase? (Common for education careers, less common for corporate world)
- Is an MBA required for the job you want? (hopefully, that job comes with a higher salary)
- Are you eyeing a career change that you are not qualified for with your current degree or experience?
If the answer is “No” to all three, I would say an MBA is not worth it for you right now (from a monetary perspective). The cost and effort aren’t going to pay off.
Ideally, you could compare future earnings vs the cost of the degree and make this equation pretty simple. Unfortunately, it isn’t always that easy in the corporate world.
4. Is an MBA Worth it – Needs to be Paired with Experience
Degrees get you in the door, experience sets you apart.
If an advanced degree is a requirement for the job you want, everyone that applies has one. It is not a differentiator, therefore it will not guarantee you the job. Basically, if you are banking on an MBA and nothing else, it’s not worth your time.
I made the mistake of getting my MBA right after I completed my undergrad without any career-relevant experience. Thankfully it opened a few doors due to the specificity of my undergrad degree, but it definitely didn’t impress potential employers beyond entry-level work without experience.
My MBA Story
I completed my undergrad degree in 2009, which was
not a great a terrible time to enter the workforce. Particularly with a degree in Construction Management. Employers were more likely to lay someone off than hire a recent college grad. I had one job offer and I was not interested in doing manual labor for a few years after graduation before actually getting to “use” my degree.
So there I was one week before graduation, $65,000 in debt, sitting in my rented college house that had multiple beer pong tables, trying to decide what to do next.
I had two big factors weighing on my mind.
Waiting for my wife
I might be one of the only people that can say love weighed into my decision to pursue a masters degree. Mrs. AE was 2 years behind me in school and we had already been dating for a few years. We were pretty confident we were going to get married one day (That worked out!).
If I wasn’t going to keep going to school, I was going to move 3.5 hours away from her to save money (parents house). We had spent one summer apart already and I didn’t want to go through that again.
Lack of Intriguing Job Offers
Partially self-inflicted and compounded by the job market, I didn’t have any hot job prospects. I could have done more networking while attending school, but it was too late to change that. My only realistic opportunity was to work for a concrete company doing manual labor the majority of the time. I didn’t go to school to jackhammer concrete and pour concrete after all.
Since I had been accepted to grad school, didn’t want to leave my future wife in another state and was too good to work manual labor I decided to go straight back to school full-time. I decided to pursue an MBA, hoping to open up some additional job opportunities that my undergraduate degree didn’t prepare me for.
Mistakes I Made Getting My MBA
They are plentiful and go against a lot of the advice I give above
- Didn’t work in a career orientation field while I got my degree which increased the cost due to lost salary
- No employer means no tuition reimbursement (More student loans…)
- Wasn’t able to leverage my degree into more money or a better starting position without relevant experience
What I did “Right” when getting my MBA
I did a lot of things wrong, but thankfully I did a few things right when getting my MBA
- Completed in 1.5 years – Since I wasn’t working I was able to treat my MBA as a full-time job and completed it in 3 semesters. Doing so saved a bit of money as I didn’t have to pay for anything over “full-time” credits.
- Participation – I got more out of participating in group projects, discussions and networking with older MBA students that had real-world experience than most of the lectures. It’s not a huge part of the curriculum but don’t overlook the value of your classmates.
- Opened doors – I got a job that I was not qualified for with my undergrad (Business world vs Construction world)
- 3.6 GPA – Not a huge deal, but it’s nice to see that I wasn’t a slacker when I list it on a resume
Take Away – Is an MBA worth it?
Short answer, an MBA can be worth it. To give yourself a better chance of making it a valuable investment do these things:
- Find a program on the lower side of the average MBA cost.
- Work in a relevant field while you get your degree (Experience matters!)
- Get your employer to pay for the degree through tuition reimbursement
- Make sure an MBA opens the door to more money or an opportunity you previously weren’t qualified for
For me, the jury is still out, if I am able to leverage my education down the line I would still say it is a success. If I don’t, I still got an extra 1.5 years of college life with my future wife and I actually enjoyed most of the classes. Hopefully, I can leverage my MBA when I switch jobs at some point now that I have career-relevant experience and cash in. Would be nice to get some dividends on that $20,000 student loan “investment”
Do you have a graduate degree? Were you able to leverage it into a new opportunity or higher salary? What do you think of my 3 recommendations for someone thinking about pursuing higher education? Is an MBA Worth It?