Week 2: What are the biggest financial choices I will face at school?

Week 2: May 11, 2024

What are the biggest financial choices I will face at school?

Andrea,

My classmate stared at the piece of paper in disbelief. "A one-page application gets me a $100,000 loan, and my only collateral is my brain?!" Over the years, students have questioned whether they should go on school trips, feeling pressure as peers planned 8-10 adventures to different places around the world. Others worried about whether projected costs of their MBA were accurate.

There are few parts of the MBA experience that are more mind-boggling than the process of financing your degree. Unlike the MBA application experience that is generally standard for everybody, the financial aid application experience is defined by factors like your socioeconomic background, nationality, and employment status. This week, we've asked past and current students about the financial choices they faced at school to help you navigate your own unique situations.

A special thanks to Eryn Schultz of HER Personal Finance for her expertise and input this week! She helps people find time to take ACTION on their money (like finally rolling over your 401K or refinancing your student loans). Also, thanks to Aron Weingard of Weingard Wealth Management of Raymond James for his input.

Please note: our most important recommendation this week is to consult a financial professional to make sure you get a plan consistent with your unique circumstances.*

The 100 Week Sprint team

*Given the importance of this topic, we wanted to remind you that any and all decisions about your personal finances should be reviewed with a financial professional. The advice provided through the 100 Week Sprint is general advice only. It has been prepared without taking into account your specific objectives, financial situation, or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation, and needs.

To-do's this week

Got 5 minutes? Check out "in case of emergency" (ICE) templates. Pick one. Got 5 more minutes? Have a quick read about life/disability insurance.

Got 30 minutes? If you are planning to take loans to finance your MBA, check your credit score. 1 in 4 credit reports has an error. There are many ways to do that free of charge, including AnnualCreditReport.com. See more details in the email.

Got an hour? Figure out if & how much you need to borrow. What is your school’s actual cost of attendance and how much financial aid did you receive? What do you need to borrow each year? Every school should have this information online (search here) and in your award letter. There are great loan repayment calculators online where you can enter all of your expected loan costs and to calculate your estimated repayment.

What do you wish you had known?

The importance of creating a budget

When we asked MBA students what they wish they had known during the process of financing their degree, the first thing they mentioned was the value of creating a budget. There are several great templates available, or you could take the time to set up something more formal through Credit Karma, or YNAB. Students highly recommended being realistic when you establish your first budget. Don't be too conservative in your financial planning (this is a once-in-a-lifetime opportunity – see below); however, once your budget is set, TRACK TO IT! Set yourself a budget appointment each month, giving yourself an hour to identify where you've been spending money. It's surprising how much money can be spent at happy hour, on Uber instead of the subway, or even on student group memberships. Recent discussions with graduating students suggest schools can underestimate budgets from 15% to 35%.

The value of investing fully in key experiences

While it is tempting to focus your budget on the basics, remember that the MBA experience is a unique moment in your life offering unique opportunities. Spending thousands of dollars on a ski trip may seem like a splurge when going into debt for school, but it may be worth it if it helps you build lifelong relationships with classmates. So take a deep breath, make the most of opportunities, and have faith in yourself. In your budget, allocate funds for enough experiences without causing financial discomfort. You can always add/delete experiences later on as you get more comfortable with your new lifestyle, and get more information on the timing and compensation related to your internships and other income opportunities at school.

Consider whether every cash outlay is an investment or an expense

During school, I realized social circles were first established around where people live; living quarters were as much an investment as an expense. While you can Uber almost anywhere, the location, size of your living quarters, and living arrangements (i.e. roommates) can pay off in a variety of ways. Choosing a neighborhood where the school socializes can cut down on cab fare and transit time, leaving more time for other priorities. Finding a place with a unique feature (rooftop patio, large rooms/spaces) can make it easier to host others with a home field advantage in building relationships. Remember to consider these "payoffs" when budgeting and prioritizing your cash outlays.

Scholarship opportunities

It can be worth a few hours to scan opportunities (such as these from MPOWER Financing) to see if there is a scholarship that fits your circumstance. The dollars per hour payoff of this time investment could be much more than your current job. In some cases, you become eligible for a scholarship in your second year. Set a reminder to check them out.

Formalize family loans to make expectations clear

Some students report being grateful to family and friends for making loans available. Several suggested investigating LoanBack to formalize the arrangement. It will help clarify exactly what the expectations are AND under what circumstances those loans may become due early.

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