Tuesday, June 28, 2011

Is Your Education Worth The Money?

I just noticed that an MBA from a leading UK University, done at a leading Malaysian College, will set you back by about Rm80,000 in fees.

Upon noticing this, the first thing I did was to find out how much Rm80,000 will become after 30 years if you leave it untouched in an investment that returns 10% a year (10% a year is not hard to get; not touching it may be more of a challenge).

Rm80,000, left untouched in an investment at a compound interest of 10% per annum, will become close to Rm1.5 million after 30 years.

Now, will that MBA really make you that extra million in your lifetime? It makes us wonder.

Of course, if your boss tells you that your salary will immediately increase by Rm5,000 the moment you get that MBA, then that is a different story. But if you are going for it based on some vague notion that it should increase your market price; then it is just a dream based on hope. You would probably be better off using that Rm80,000 to buy a flat which you can rent out. At least it will immediately put Rm400-500 in your pocket each month.

I have nothing against education, and neither am I suggesting that the MBA is over-priced if you calculate the pricing based on the costs involved in providing that course. The question is, will it give you the returns you want? Is it worth it?

First of all, most people who go after MBAs go after it in the pursuit of a better salary. Rarely do people enroll in MBAs for educational purposes alone.

So if it’s money and NOT academic indulgence that you are after, we need to calculate the returns.

The problem is that too many of us make automatic connections between education and money. The problem with many educated people who complain of being under-paid is that they believe they deserve a good salary based on their educational qualifications alone.

Education in itself does not grant us anything. In the end, we still need to take the necessary actions. The pursuit of wealth requires direct actions like:-

~Talking to your boss about a pay rise.
~Arriving at a deal with management regarding how you are going to increase your productivity in exchange for more money.
~Starting a business and cracking your head regarding how to get sales.
~Taking up a part-time job.

All the above will probably yield more results than the indirect action of going for further studies in the hope that the additional qualifications will bring you a better-paying job. But of course, if you talk to your boss and he says the only way he is going to give you a raise is if you get more qualifications, then you should do it. But going for it without a proper vision of exactly how it will bring you more money may cause you to end up with less money than you started out with.

It is a decision which requires very careful planning. You cannot make the automatic assumption than higher qualifications = more $$$.

Our society and economy are getting more and more decentralized. Now everything is outsourced and a lot of work is contracted out to freelancers. There is no longer such a thing where your qualifications bring you into a company and the employer takes care of you for the rest of your working life after that.

It’s just like if you like a girl; being pleasant-looking and well-off is not enough. You still need to actually initiate some action to go after her. If she rejects you at first, then you need to get creative in your actions. You can’t just come back to her in two months and say “hey, my salary has now increased by Rm2,000 and I have just plastic-surguried my nose, so you should want me now”. Not that the extra Rm2,000 doesn’t help. It does. But by itself it is not enough. You have to find out exactly what each girl wants on a case-by-case basis, and then custom-make an approach. It is the same with getting more money. You can’t just say that “I have an MBA, so you should hire me for at least Rm8,000 a month”. The MBA helps, but it is not enough in itself.

And you may even find that in many circumstances, it is not required at all. Maybe that girl doesn’t care for an extra Rm2,000 per month. She just wishes you wouldn’t pick your nose in public. Maybe people will hire you for Rm8,000 a month if you are willing to smile more at the workplace – no MBA required. It is true that the job-market places a lot of emphasis on paper qualifications; but the job market isn’t the only place where money can be found.

The point is, we should not just go get an education just because we think it ‘should’ give us a better salary. We should first have a plan on how exactly an education is going to fit into our money-making plan, then find the most cost-effective option.

And it becomes worse if you get a loan to finance an education. This is where you need to be even more careful. If you borrow Rm80,000 to be repaid over five years at an interest rate of 9%, it is going to cost you something like Rm1,700 a month.

The process of making a living has become very DIY. Do-It-Yourself. Use your smarts and resourcefulness. You may have noticed that nowadays, even if you want to buy a plane ticket, it’s DIY. Key in your name yourself. Choose the seat you want yourself. Choose your meals yourself. Print out the bloody ticket yourself. Want more money? Help yourself. No one is going to say “Wow you have an MBA! Come work for me and I’ll give you 10k a month”.

So before you get any sort of education, think carefully. Think what exactly it is you are getting. A lot of ‘real’ education; such as learning more about the world, about current affairs, about history, about geography and the arts – these can be found on the Internet. Your formal education is to help you make money, not learn more about the world. So it must be cost-effective.

It was different in the past because the only way knowledge can be gained was if you attended college.; which was why a premium was placed on tertiary education. Nowadays, you can even learn how to make a bomb just by searching the Internet. Therefore your formal training must be very specific in helping you generate an income. No one will buy the argument that your general degree makes you more ‘enlightened’ than others.

Nowadays, Money is a more scarce resource than Knowledge. Knowledge is all over the place, available for free.

So be wise when exchanging money for knowledge.


Andrew Chua
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