An epidemic has hit America's top MBA programs. At Harvard Business School, it's called FOMO: fear of missing out. Symptoms include a chronic inability to turn down invitations to any party, dinner, or junket attended by anyone who might be a valuable addition to one's network—no matter the cost.
With their incomes about to get a big boost at graduation, many students are spending far more than absolutely necessary, in part on luxuries like leisure travel and in part on networking events. Nobody wants to quibble over the costs when they're partying with folks who may advance their career. Says Mike Altman, a student at the University of California at Los Angeles' Anderson School of Management: "It isn't worth coming off as cheap or petty when you're building a network for life."
At top B-schools, where high-rolling investment bankers set the pace, those extras add up. Harvard suggests MBAs budget $23,784 a year for room and board, but Harvard grads responding to a BusinessWeek survey last year estimated their annual living expenses at $37,000, with more than 40 reporting $80,000 or more.
Columbia Business School, where some MBA grads reported spending as much as $85,000 a year, recommends that students budget about $2,080 a month for room and board. But student Aakash Nijhawan says most people he knows end up spending at least that much on housing alone, to live in the trendier precincts of Manhattan, such as Tribeca or SoHo, in an apartment "that's not the size of a shoebox."
The B-school set doesn't stint when it comes to travel, either. There's the winter "learning experience" in China, spring break in the Caribbean, and weekend jaunts to Vegas or Vail. The wine-tasting trip to Napa, sponsored by the University of Chicago Wine Club, and the celebrity-spotting excursion to Cannes, offered by UCLA's Entertainment Management Assn., are not to be missed. And who could turn down an invite from a University of Chicago club to break bread with the Sage of Omaha himself, Warren Buffett?
For Nijhawan, who will return to investment banking at graduation, that's a no-brainer. "When you work in banking, you're working really hard, and sometimes vacations get canceled," he says. That's how he rationalized spending $5,000 for a student trip to India and about $1,500 for spring break in Hawaii—quite a bit more than the $3,900 a year Columbia recommends students budget for "personal expenses" including travel and clothing.
When he graduates in May, Nijhawan hopes to spend the summer in Greece and the Bahamas before starting his new job at Citigroup (C). With the money he stands to make there—the median starting salary for Columbia grads in his field is $125,000—he's not worried about paying back his loans. In fact, with what he managed to save before B-school, he probably could have paid for it all in cash. Still, he wasn't ready to give up the high life. "I wanted to live more comfortably," he says, "and I budgeted accordingly." While he gave up the Brooks Brothers shopping sprees and $300 dinners, he kept his spacious 1,200-square-foot apartment in Hoboken, N.J., and his stylish BMW 325i.
UCLA's Altman, a onetime member of the U.S. national rowing team, considers himself "a bit of a cheapskate." Even so, Altman eventually realized that with the $40,000 he was spending each year on tuition, it made no sense to pinch pennies. "I made such a huge financial commitment," he says. "I need to get as much out of this as I can."
By Kerry Miller