LL in the BK

Home, Money, and Life in Brooklyn

What Business School Does and Does Not Teach You

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Business school holds a special place in my heart. However, that doesn’t mean that it didn’t have its shortcomings. Reflecting back, I suppose I was a bit naïve going into business school. There are things that I thought I would learn but didn’t and a few things I have taken away from my two years of schooling that I didn’t necessarily expect.

Things You Don’t Actually Learn in Business School

Personal finance / Money management. Getting an MBA doesn’t mean that you know how to manage your own money or someone else’s. Personal finance isn’t taught as an academic subject, although even the best business school students would benefit from it, since so many of us graduate with substantial amounts of school debt and many of us start careers with significantly larger salaries than our pre-business school jobs. However, we learn few practical skills about how to actually manage this debt and how to properly allocate our increased income following graduation. In fact, I fall into the camp of one of those who struggled to pay my debt for many years, despite finally hitting the coveted 6-figure salary. It turns out that returning to life in NYC with a business degree didn’t make me financially-savvy. I was lucky enough to graduate college without debt and thus was not used to managing it. I didn’t prioritize my debt and that was a mistake. It was a hard lesson to learn and my poor money management in those initial years continues to take a financial toll. Beyond debt management, there are also so many other relevant topics, like income taxes and general strategies on investing, budgeting, and savings that seem to be purposefully omitted from the business school curriculum. Over time, I became significantly more financially savvy, but it’s certainly not attributable to business school. To be fair, is it something I would have paid money to learn in business school? Probably not. And personal finance is definitely not something you need a PhD to teach.

How to start a business. Here’s a story. One of my classmates went to business school knowing that he wanted to start a business. He came from a retail merchandising background and knew he ultimately wanted to sell some kind of tangible product. By the end of our first year, he already had a plan. He casually started to recruit interested folks (including myself) to help out on various tasks so that he could do a trial run over the summer. While the rest of us (mostly) went on to do standard corporate internships, he started making the rounds at various food fairs. By the end of the summer, he had a proven concept and he formally submitted his request for academic leave. He never did finish business school, but he did successfully start a chain of grilled cheese mall kiosks in New England. Does one need business school to learn how to start a business? Not at all. Maybe it’s a fun (albeit expensive) stop along the way, but certainly not a requirement by any means.

Presentation skills. You would think business school would offer a formal class on how to present. Nope. We had an evening elective on communication skills that a few of us opted to take, but I would say no more than 5% of my entire business school class actually attended. Presentation skills were developed informally in certain classes, though – surprisingly, my corporate finance class required us to make frequent presentations on the case studies we analyzed. However, while such classes gave us the opportunity to present, and perhaps to overcome the fear of public speaking, there was no focus on presentation skills improvement. A formal class would have provided critique and development on style, delivery, posture, cadence, etc – things that people don’t get much practice or feedback on in regular day-to-day life.

What Business School Does Teach You

Networking. Networking was pervasive in business school. Again, there was no formal instruction, but through sheer repeated interaction with peers, professors, and various professionals in many different fields and industries, I would say we all saw improvement in our ability to network. I think what we learned, consciously or not, was how to be interesting and more importantly, how to be interested in people. We probably also learned to develop a somewhat thicker skin – not everyone is going to like you or be interested in you. Being snubbed – in varying degrees – happened frequently enough given the number of people we met that it was something many of us got used to and some even tolerant of. My experience has helped me be more comfortable in professional and personal settings where I don’t know people. I don’t like being in that situation, but it’s something I have been exposed to and can emotionally and mentally handle and navigate.

Negotiation. A formal class that I truly found both useful and fun. Sure, it was academic in nature, but the theory was applied in practice. We had a 3-hour negotiation class once a week and each class included a case that we prepped for and then actively negotiated in small groups. It may seem obvious, but I learned that effective negotiation requires preparation, math, and the assessment of alternatives. My most successful negotiation was the one in which I had adequately prepared by mapping out the financial impact of my options, so that I could make changes and decisions as I engaged with my negotiation partner. Negotiation class also taught me that there are few negotiations that are zero-sum and that most can be modified into opportunities where there is mutual gain and value creation – what academics (as originated by Harvard Business School) call integrative bargaining. Formal negotiation training was a highlight of business school for many of us, and the skills I learned continue to be applicable in both personal and professional settings.

Opportunity Cost. Although I understood opportunity cost, it wasn’t until business school that I truly appreciated the impact and consequences of opportunity cost. Opportunity cost is essentially the economic value of what is lost from choosing a specific path. I wholeheartedly chose to go to business school full-time and consequently, I chose not to work. I missed out on two years of salary, growth in my salary, growth in investments I would have made from my salary, and career advancement. On top of that, my choice of business school cost money. At the simplest level, without going into too much math and omitting less quantifiable costs like career advancement, my two years of salary was equivalent to $170k. Coincidentally, business school cost approximately that much, and that excludes any interest associated with that debt, which is substantial. Opportunity cost was a real lesson in business school.

Combining Finances

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When my husband and I got married, we talked through our personal finances and our philosophy around managing money. Money is such a contentious topic and can be the cause of marital problems – it was something I wanted to avoid, because I had witnessed first-hand the impact it can have on relationships, including my own parents. I was open and honest about my less-than-stellar record of saving money. However, I was also motivated to make a big change, because I knew that our marriage could only work if we were aligned in our approach to money.

One of the first things we tackled was how we would be managing our money. While dating, our personal finances were distinctly separate. We each had our own banking accounts and credit cards. We would sometimes treat each other for meals, and sometimes we would split. There was no real hard line for how each one of us spent our money. When we became engaged, we decided we would combine our finances, while also maintaining some independence. We set up joint savings and checking accounts and applied for a common credit card. We agreed on a set amount we would each send to our joint accounts every month, which we automated for every two weeks. All of our common expenses, including mortgage payments, utilities, and other bills, were paid out of our common checking account. We often used our shared credit card for food and entertainment costs. Broadly speaking, we generally contribute an equal amount to our joint accounts.

Anything outside of those common funds are personal – my husband and I continue to maintain separate savings and checking accounts, along with personal credit cards. We individually cover our own personal expenses, including lunches, clothing, and our school loan payments. If we need to make a large purchase, we talk to each other about it, although most of our large purchases are family expenses that we generally pay for from our joint account. I sometimes use my personal card for shared items, but I’m not too fussed about it – I don’t want to fall victim to nickel-and-dime accounting.

We also separately contribute to our own investment and retirement accounts. While we have made some joint investments in the past, those have been minimal, primarily because my job actually limits me from making single-stock purchases. To be honest, I don’t inquire about my husband’s personal finances much, nor does he with mine. It’s not because we don’t care or that it’s none of the other’s business; it’s more that we were individuals before we were married, and perhaps maintaining a bit of financial independence is like maintaining a sense of self. Ultimately, our lives are fully intertwined and we share nearly everything, but having a little bit of self-sufficiency, especially from a financial perspective, doesn’t hurt anyone.

Thoughts?

Photo: Steven Wu Photography

Our Big (But Temporary) Move to Houston!

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I wrote about how I finally started turbo-charging my school loan repayment in 2014, after 4 years of making no progress. As I had mentioned, this happened after taking a real and very necessary look at how I managed my money and spending, driven by a finance deep-dive with my now husband. A series of events enabled me to finally make headway, and that included one of the biggest changes in our lives.

At the end of September 2014, literally weeks after we got married, I moved from my hometown of Brooklyn, New York to Houston, Texas.

The move was the culmination of nearly a year’s worth of job-hunting, in which I made the jump from an internal business management role at the bank to a client-facing corporate banking role. In doing so, I took a demotion in terms of title and salary, but I knew it was only going to be a very temporary monetary setback. The trajectory of my new career path was steep and I would be getting regular salary increases annually and would benefit from significantly larger bonuses. It was the nature of the work. I went from a steady 9-6 job to one that was highly unpredictable and deal-driven environment that would demand 55-60 hour work weeks. But the workaholic in me relished this type of environment. And within a few short months, my total compensation (salary + bonus) exceeded that of my previous role.

Along with the salary boon, I was living in a state that had no state income taxes. It was not something I fully appreciated until I moved – by eliminating NYC taxes and state taxes, I calculated that I effectively saw an 11% increase in my take-home pay. My expenses in Houston were also substantially lower. I had some initial upfront expenses, including purchasing a used car and putting a down-payment on a 1-bedroom apartment, but generally speaking, everything was just cheaper, from buying groceries to dining out and entertainment. I honestly could have paid less than for my apartment, but I found the $1,390 a month rent to be reasonable given it was in a luxury mid-rise building located in the Museum District, only 15 minutes away from the office, and included access to pools, gyms, and shared grilling and common areas, all of which I used frequently.

And given the move to Houston, I had to do something about my little studio apartment in Brooklyn. Coops are restrictive in terms of subletting, so as to eliminate investors from buying and renting out their apartments and devaluing the overall property. My apartment complex’s sublet policy allowed me to rent out my apartment only if it had served as my primary residence for the last 3 years. I could then rent out my apartment for 4 years, whereupon it would have to be my primary residence again for another 3 years before I could re-sublet. That limitation wasn’t a big issue for me, though, as I had just made the 3-year cutoff point and could at least sublet the apartment for the time being.

I enlisted a high school friend of mine who was a real estate agent to help me list the apartment. Within 2-weeks, we had found an eligible candidate. After going through the board approval process himself (a complete chore, and another reason why coops are not good investment properties), he moved in. Excluding my fixed costs – monthly mortgage and maintenance fees – I still pocketed $500 in profit a month.

My decision to move, while predicated solely on making a career switch, ended up being a financial boost in so many ways. I was following a more lucrative career path, I no longer had to pay city and state taxes, I generally enjoyed a lower cost of living but not a lower standard of living, and I was making money by renting my apartment.

With these changes, I felt like I was no longer always strapped for cash. I found myself in a much stronger financial position and was finally able to start to make material progress towards reducing my school debt. In the two short years that I lived and worked in Houston, I ended up paying down over $50k of debt. Up until the point I moved to Houston, I had barely paid down $5k. I can’t say I planned for that outcome, but making the decision to relocate to Houston stands as one of the best financial moves I have made in my life.