About a year ago there came a point in my career when I had to ask myself, how can I help secure job advancement and a stable financial future in today’s economy? I already earned an undergraduate degree from a private university and had the student loan payments to prove it. Pursuing my MBA came across as an obvious choice, but evaluating the way I spent my free time and the monetary investment was really the deciding factor in my decision.
All decisions come with a cost; forgone prospects, possibilities put aside, and money lost, all constitute an important part of defining opportunity costs. The concept of measuring these benefits gained or lost can be applied to each and every choice made. Acquiring a MBA is no different; however, the actual cost relies on the individual interpretation and whether alternatives are available. Opportunity cost must take on measurable, tangible characteristics in order to fully evaluate. Forfeiting further education is much more costly than the out-of-pocket expense, when all other costs are considered.
The subjective nature of opportunity costs makes it difficult for all individuals to calculate the exact same costs forgone. Each individual places different costs on alternatives. Including alternative activities carries no direct cost, however, who is to say that it carries no monetary value. After all, there are vacations to take, time to relax, and memories to be made, but there is no way to put a price tag on all these items. Even sticking to a monetary cost system, which depicts only foreseeable events, is open to interpretation. For this example, we will examine a more direct approach to evaluating the opportunity cost of completing MBA courses.
At first glance, the costs of MBA classes can be quite deterring. Classes range from $1,300 to $3,000 each, depending on your choice of school. Regardless of the time range over which these classes are taken, let’s say the total cost of tuition is $40,000. This doesn’t include books, the laptop requirement, or any other supplies necessary. Based on my experience, about $1200 should cover all of these expenses over the time frame in which you attend school. Let’s also assume that most people can’t afford to be a full-time student, so there is no salary loss while in attendance. Sure this may take longer, but for most, that circumstance is uncontrollable. In the end, the calculated total is approximately $41,200 to acquire your MBA.
The cost can’t just be left at that, as there is a reason behind furthering your education; boosting one’s possible job opportunities. Typically, jobs that require an MBA degree will pay more, approximately 30%-40% more as shown by numerous studies. An average salary of $50,000 could turn into $67,500 and increase as more experience is gained. Gaining $17,500 on an increasing scale over the course of a lifetime, is a significant benefit although only an estimate. For our purpose, we will look at the 5-year pay off; $17,500 plus a 7% increase every year. Even if a 7% raise was given on the original $50,000 salary, the potential earnings stand at $100,637.90. Doing a quick comparison, $42,200 vs. $100,637.90, leaves us at a grand total of $58,437.90.
Of course there are other factors that come into play because, as I stated earlier, opportunity cost is dependent on interpretations. Nowhere does it say that opportunity cost must be measured in money, in fact, there is no measurement specified. Whether this is obvious or not, people make pros and cons lists all the time, which is essentially interpreting opportunity cost. Staying in on a Friday night to write a paper versus going out with your friends has no monetary value, however, the internal value may be higher to an individual for that experience. An individual with a family typically would value free (family) time more than a single, unattached individual. However, today’s society pushes higher education and sets new standards for employment. There is a trend towards furthering education, even for those who have been in the workforce or quite some time.
Is it possible for an individual to survive without an MBA in the business world these days? Absolutely, however, unemployment has led more of the population back to school than ever before; the unemployed are making themselves more marketable. One must ask, how can I retain my value within an organization without learning new-age concepts? In addition, the economy is awful and not looking at improvement any time soon. Providing for a family, paying monthly bills, even buying groceries on a weekly basis is becoming a challenge for some people. While spending time writing papers and studying for tests is less time with your family and partaking in enjoyable activities, without financial stability and the added competitive edge, you may have trouble affording that free time.
In the end, time is money, whether it’s spending money or earning money. Everything we do, everything we want is dependent on how much we earn. Any research can show you the monetary benefits of your MBA, just as building a pros and cons list will subjectively tell anyone that free time is more enjoyable. Once true monetary value of each activity is added to that list, it’s impossible to cover the fact that the quality of free time will be more enjoyable when financial stability is achieved.