Editor’s Note: To help you make the transition from the working world to graduate business school, Bloomberg Businessweek is launching a new series about how to prepare for an MBA program. The series—this is the first installment—will provide tips from experts and business school insiders, including administrators, students, and alumni, about how to do everything from making ends meet without a salary to setting career goals for achieving your dream job after graduation.
Graduate business school applicants put their heart and soul into getting into their dream MBA program. By the time they actually enroll in business school, they are trying to wrap things up at work, reconnect with friends and family, and take a deep breath before heading to campus. Usually this means the soon-to-be student does little to prepare for this major life change.
Going back to school after years in the workforce can be jarring. Just consider a return to sitting through hours of lecture, late-night study sessions, student clubs, and stress-inducing exams. Before preparing for the academic rigor and competitive job search that a top MBA program entails, it helps to consider the practical problems many new students will encounter, from developing a budget sans salary for two years, moving to campus, and settling the family into a new life. Here is an outline of the first steps aspiring MBAs must take when preparing for the practical side of their B-school journey.
FINANCES AND BUDGET
Learning to live like a student on zero salary can be shocking, especially if one waits until the first day of classes. “Start cutting back your life before you quit your job,” says Ann Johnston Scott, director of graduate programs at Georgia Institute of Technology (Georgia Tech Full-Time MBA Profile). “You have to get out of that steak-and-potatoes lifestyle and get back to peanut butter and jelly.”
Indeed, experts recommend adjusting spending habits up to a year before returning to school. Eat out less, cut back on entertainment, quit buying top-of-the-line items, and refrain from using credit cards, suggests Scott. Start socking away any savings for those two years in B-school without a salary.
Next, students have to determine how much money they have for business school and what their expenses will be. “Too many people say, ‘I’ll live off X amount,’ without considering their actual expenses,” says John Ritter, a certified financial planner at Ritter Daniher Financial Advisory in Cincinnati. Instead, students should come up with a total and do their best to use cash rather than credit to cover it. “You might have a lot of debt when you graduate because you can’t control the price of school,” says R.J. Weiss, a certified financial planner at GenYWealth.com, which is based near Chicago. “But you can control your personal debt.”
Add 50 percent, says Ritter, to whatever you think your cash reserve should be to plan for the unexpected. According to business schools, MBA students often overlook aspects of their in-school budget. In the first year, says Scott, most students will have to pay income tax on the jobs they had before enrolling in school. Those who had high-paying gigs might owe Uncle Sam a large sum come spring semester. In the second year, they’ll have to consider the tax implications of internships, graduate assistantships, and any part-time work they do.
Besides taxes, students often forget about travel expenses (and not just those tickets to see Mom and Dad at Thanksgiving). “What sometimes surprises students is that they tend to travel for global experiences and student club treks,” says Gary Fraser, dean of students at New York University’s Stern School of Business (Stern Full-Time MBA Profile). “It’s one thing they don’t always budget for, so we talk about it more at orientation.”
In tandem with squaring away a personal budget, students must also plan for tuition. Scott suggests students apply for federal loans whether they think they need them or not. Waiting until after the deadline to apply is a common mistake students make, she says. Applying beforehand ensures the government will have the case on record and will already be planning to allocate funds to that person. If government subsidies are not enough for students, they should seek fixed-rate loans, as opposed to floating-rate loans, which can have them paying back far more than they anticipate, says Ritter. International students, Scott says, should seek loans with banks in their home countries before leaving for school.
Despite the best of intentions, some students will run out of money during business school. Those who end up relying on “desperation planning,” says Ritter, should avoid debt at all costs by seeking part-time jobs, taking in roommates, moving home, or doing whatever it takes to make ends meet. If all else fails, he says, turn to sources of low-cost credit that one should have secured for emergencies before school started. And if a student must take on debt, Ritter advises building a debt-reduction plan as soon as possible. “The debt has to get paid off before you can start building a nest egg,” he says.
Once students have a budget, they can start looking for a home on or near campus. While most MBA programs offer some form of housing on campus to graduate students, few choose to live like undergrads again. The majority rent apartments or homes near campus. Often the first step in their search is having the school connect them with current students and alumni to discuss the best locations and any available housing about which they know.
At University of Pennsylvania’s Wharton School (Wharton Full-Time MBA Profile), most students live in Center City within four blocks of each other in high-rises or brownstones, says Kembrel Jones, deputy vice-dean of student life at Wharton. Each year the school surveys students about housing and takes photos to create a housing guide for incoming students. Wharton also organizes visits to available housing. In addition, says Jones, the school encourages new students to visit ChatterSource.com, a site just for Philadelphians where students can check on housing availability, buy and sell furniture, and track down used books.
Students with families have more concerns than those on their own. They have to seek out homes that are conveniently located for them, their spouse, and kids. They need to learn about the kinds of child care and schooling available, too. They should ask the business school to help them seek out others with kids, says Scott. Of course, students should make the decision about where to live with their partner, spouse, or family because they, too, will be transitioning into a new life, and comfort makes all the difference.
GETTING YOUR FAMILY SETTLED IN
Housing is not the only concern for MBA students with family. For those entering business school with a spouse, live-in partner, or kids, there are additional responsibilities. Often family members have to sacrifice their previous life in a community to which they had grown accustomed. Now they, too, have to adjust to a new place. Depending on the family member, this could mean finding a new job, starting at a new school, or making new friends.
While including family members in the decision about where to live is a must, there are other ways to bring them into this new world, and the school usually helps. Just about every business school has a club for partners or kids. Often families are invited to events during orientation or welcome week to get to know others in this group. For example, Wharton gives partners a tour of campus and the city, offers counseling services to help them prepare for the grueling schedule their partners will have once school starts, tells them about events in which they can participate, and helps partners of international students with visa issues when possible.
For many spouses and partners, the first obstacle to overcome is finding a job in a new place. While most schools do not offer official advice to job-hunting partners, many help them informally, connecting them with other students and alumni and informing them about various options. In fact, Wharton spends time telling spouses and partners about job opportunities at the university, says Jones, who adds that the business school’s admissions office often hires significant others to read files.
Some partners find creative ways to keep up their careers. At Wharton, some hang on to their old jobs by telecommuting from their new home, while others work in New York City during the week and meet their partners in Philadelphia over the weekend. Others benefit from the new location. “Even though finding a job is always a challenge for partners, we have an advantage because we are in New York, where there’s so much industry,” says NYU’s Fraser. “I’ve seen some continue their career or even advance it.”
Still, the economy can make the job search tougher for partners and spouses. Planning ahead can make a difference. “As soon as your partner is applying to schools, you should be looking at jobs in those cities,” says Scott. “You want as much time as possible to look for a job in this economy.”
Staying connected to the greater community—be it for housing or jobs or anything else that goes on during this transitional period—is the best advice for partners and incoming students, say experts. “It’s daunting coming into school because there’s the unknown,” says Fraser. “If they stay engaged, they end up doing fine and being better for it.”