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Is An MBA A Big Waste Of Time And Money?

Updated: 01/05/2023 by Financial Samurai 148 Comments

UC Berkeley Haas School of Business MBA - Is An MBA A Big Waste Of Time And Money?

Are you wondering: Is an MBA a big waste of time and money? With the cost of MBA tuition going way up and missing out on two years worth of work, getting an MBA is more expensive than ever before.

I got my MBA from UC Berkeley in 2006, but I did so part-time over a three-year period. As a result, I didn’t miss out on income or career progression.

But the three years it took to get my MBA was damn hard! In retrospect, I think getting an MBA was worth it. My employer paid for 80% of the tuition, I learned some new things, and made some friends.

However, if I went full-time to get my MBA, I’m not so sure. Six years after I got my MBA part-time, I decided to leave Corporate America for good. Therefore, the return on my MBA by going full-time would have been uncomfortably low to spend so much money and time.

Let’s discuss whether getting an MBA is worth the money and time.

Is An MBA A Big Waste Of Time And Money?

During the summer of 2014, Personal Capital, a fintech company that offers everyone free financial tools to manage and optimize their wealthy, had the luxury of hosting three MBA interns in the marketing department where I consult part-time.

One was actually a Harvard JD/MBA, which is darn impressive because she has to get into both schools separately. The other two were from Stanford. They did a great job brainstorming and executing fantastic ideas.

In addition to our summer MBA interns, our head of business development (Stanford), our head of client engagement (Stanford), our digital marketing executive (Michigan), our CMO (Cornell), and our CEO (Harvard) also have MBAs. 

Then there’s me, a Berkeley MBA grad. In other words, the marketing department is a majority MBAs. But having an MBA isn’t a requirement for joining. Relevant experience is much more important.

Most MBA graduates will probably say that an MBA is money and time well spent. It’s kind of like spending big bucks on a fancy dinner. To justify the extravagant expense, of course you’re going to tell yourself and all your friends, how incredibly amazing the dinner was. But we all know that spending $250 per person at Jean Georges isn’t worth 100X more than a tasty In N’ Out cheeseburger for $2.5.

For similar reasons why going to private university without a scholarship is probably not the best use of your money unless you have plenty of it, getting an MBA is also becoming a tougher choice today.

For those of you with MBAs, be forewarned. This is not a cuddly, feel-good post on why getting an MBA is a no-brainer. There are a lot of hard truths from what I witnessed as a manager who consistently interviewed MBAs during multiple bull and bear markets. I’m also providing the perspective as an MBA eight years after graduating. Readers trust me to speak candidly, so that is what I will do. 

Should You Get An MBA?

Here are some realities about getting an MBA and whether getting one is a big waste of money or not.

1) Many MBAs couldn’t survive downturns. 

There’s a perception that MBAs are highly qualified individuals with tremendous amounts of interpersonal, leadership, and managerial skills. Sure, many MBAs are well-rounded individuals with plenty of charisma. However, there is a reason why MBA applications surge during recessions.

Employees get laid off left and right during recessions, global pandemics, and competitive difficulties. Going to graduate school is the logical safe haven step many laid off employees take. During the 2000-2003 and 2008-2010 meltdown, business school applications rose by 20-40% a year.

Of course not everybody who gets laid off is a poor performer. They are usually just at the bottom 10-20% of the heap. Employers can’t lay everybody off. In other cases, there might be a complete department shutdown, a company bankruptcy, or a merger where those who are not politically connected lose. There’s no fault in that.

For those employers hiring MBAs two or three years after a recession, ask them about about why they left their previous employer because chances are, they really didn’t have a choice.

Those who were able to survive and get promoted during difficult times might be the true performers. And perhaps the most amazing candidates are those who gave it all up during a bull market to go back to school. I realize that this section may offend a lot of MBAs who went to school during recession times, but we can’t deny the statistical data.

2) One big intense vacation.

If you’re a 20-something year old and still finding your “purpose” in life, then getting an MBA is a great way to explore new things. An MBA is like one amazing two-year vacation filled with networking events, group projects, morality training, traveling and hobnobbing with many well-to-do foreign students.

Some students utilize their MBA experience to the maximum. They start companies, work multiple internships, and build incredible personal networks that will help them in the future. Other MBA students use their time to unwind and ponder the meaning of life.

Recharging is healthy for the mind, but being out of the work force could leave you quite rusty given technology is changing so quickly. As an employer, be prepared to question the candidate on practical matters.

3) You don’t learn or remember very many hard skills. 

Unlike going to trade school, you can’t really do something specific with your MBA degree. An MBA gives you very broad knowledge in finance, marketing, communications, leadership, economics, organizational behavior, and more. You learn to be a well-rounded person who should be able to socialize better with more of the population.

Even if you are the greatest student in your class, you’ll probably end up only retaining a maximum of 20% of what you’ve learned in school. And if you don’t constantly review your case studies and text books, you’ll probably forget 90%+ of everything after a couple years.

Post business school jobs have pretty specific responsibilities. It’s highly likely most of what an MBA learns or remembers will not apply to the specific job function. However, soft skills such as communications, strategic thinking, and leadership will always be there.

Just be careful not to hire too many thinkers, and not enough doers. Ideas are useless unless acted upon.

During a pandemic, you lose out on a lot of the in-person interaction. As a result, at the margin, getting an MBA during a pandemic isn’t as rewarding.

4) An MBA is incredibly expensive.

Whether you attend a public business school or a private business school, expect to pay between $50,000 – $100,000 in tuition alone. But the real opportunity cost is the salary you forgo and the two years of career experience you lose.

If you are in banking, two years is an eternity because it generally takes three years to get promoted to the next level e.g. three years as an Associate before you can be considered for VP, three years as a VP before you can be considered for Director, and three-to-four years as a Director before you can be considered for Managing Director.

If you truly do not like what you are doing, and find no other way to get in a field that you think you’ll enjoy, get an MBA. You still have to go through the rounds of interviews to land a coveted job, don’t forget. Just know that getting an MBA could easily set you back three to five years worth of savings as you pay instead of earn.

MBA Oversupply - Is An MBA A Big Waste Of Time And Money?

5) There is a glut of MBAs. 

Whenever there’s increased supply, prices go down. Marina Murray, associate director of research at the Graduate Management Admission Council (GMAC), estimates there are at least 250,000 students enrolled in MBA programs annually, and some 100,000 MBA degrees are awarded per year, representing at least 66 percent of all graduate business degrees conferred in the US. Universities are now conferring 74 percent more business degrees than they did in the 2000-2001 school year.

From the chart above, it sure looks like the red student loan debt line is about to surpass the gold income line. Imagine getting an MBA and deciding not to work after five years due to family or whatever reason. Such is the making of a financially poor scenario. If you are going to get your MBA, promise to at least work for 10 years after graduation.

The Benefits Of Getting An MBA

So far I’ve described a pretty weak value proposition for getting an MBA. But the reality is that companies are hiring MBAs quite steadily during good times and bad times.

For example, in 2022, 92 percent of the MBA graduating class enjoyed full-time employment upon graduation. It’s almost as if getting an MBA makes you somewhat recession-proof. Here are five other benefits of getting an MBA below.

1) Getting into specific industries.

I’ve argued that there’s no need to go to private school to get a good job and get paid. But if you want to go into specific fields like private equity and certain money management funds, an MBA from a specific set of schools is all but mandatory.

One money management firm down in San Diego requires all their research analysts and portfolio managers to have MBAs and CFAs, for example. VC and PE firms are very incestuous in who they hire from particular business schools.

2) Potentially massive pay.

Every other week I play tennis with a friend who so happens to be the #2 guy at a large private equity shop in San Francisco. I teach his high school daughter tennis during the off season for fun and coaching experience.

I asked him whether it was true that fresh MBA grads with previous work experience get hired on for $400,000+ a year, and he said, “it’s in the ballpark.” $400,000 is an absolutely incredible amount of money for a 28-31 year old to make. Even more incredible is that his or her salary will likely rise to well over $1 million within the next five to ten years.

Below are some investment banking salary + bonuses. Not bad income post MBA for Associates and above! Just know that many MBAs working in banking, big law, and strategy consulting are quite miserable. First-year investment banking analysts now have base salaries of $110,000 and up in 2023.

Investment banking compensation

Just don’t do what this private equity associate is doing and giving up a $600,000 compensation to go back to business school. Completely illogical since he wants to return to the industry!

3) Gain more purpose in life.

In an incredible Gallup poll survey, 70% of employees revealed they were “not engaged” or “actively disengaged” at work. That is a travesty! Can you imagine going through your entire 40 year working career not really enjoying or caring what you do?

Getting an MBA allows you two years to find something you think will provide more happiness and meaning in your life. Perhaps this ability to find more purpose is an MBA’s greatest gift given an MBA gives you the knowledge and tools necessary to switch careers.

4) Gain more confidence.

There are certain ages that allow people to feel more confident. Age 30 was a big one for me. When I was in my 20s, I felt somewhat like a faker for sharing my thoughts on Asian politics, economics, and stock markets with clients. But after I turned 30, I quit feeling like a novice, and started believing I had just as much credibility as anybody.

I also just graduated from business school at age 29, which further gave me confidence in the workplace. If you believe in yourself, you will more than likely go much farther in your career than if you lack confidence.

Related: The Secret To Your Success: 10 Years Of Experience

5) A more senior alumni network.

MBAs are a very cliquey group of people. There’s something about giving up two years of pay and all the bonding events that make MBAs gravitate towards taking care of other MBAs. Remember, we like to justify our sacrifice, even if the sacrifice might not be worth it.

As more MBAs get older and more senior in the work force, it could become more of a detriment to employees who don’t have an MBA. If you are planning to join a firm full of MBAs, then it’s best you get one beforehand or part-time.

On the flip side, watch out for senior management who do not have MBAs. They will likely have an equally opposite bias where they believe an MBA is not worth it given they got to where they are without one.

An MBA Is Nice To Have

educational attainment in america

Getting an MBA is great, however, everything gets diluted over time.

Just like how a dollar in the future is worth less than a dollar today, the MBA degree will probably be worth less in the future as well due to the increasing supply. Given it’s becoming more commonplace to receive an MBA in certain industries, those without MBAs will become more and more of an outlier.

To put things in perspective, only about 35% of Americans hold bachelor’s degrees, and only 12% hold master’s degrees. Therefore, we still have a long way to go before we get to a majority of Americans holding college degrees.

That said, it’s evident that it’s becoming harder for Americans to get positions that may have only required a high school or undergraduate degree in the past.

One of the biggest ironies about getting an MBA is that an MBA is most useful for entrepreneurs. An entrepreneur needs to utilize almost everything she or he has learned in business school to get ahead e.g. marketing, finance, pricing, financial accounting, communications, etc.

At the same time, many successful entrepreneurs don’t have MBAs. You will likely learn for more from running a business than you will by sitting in a classroom.

I’ve reflected on my years of running an online business since 2009 if you’re interested in learning more. People earn a lot more money online than you think. In retrospect, it was good to get my MBA because I was able to implement most of what I learned by running a business.

Go To A Top 25 MBA School

Unless you go to a Top 25 school, it’s going to be difficult justifying getting an MBA, unless your main purpose is to change industries and find more meaning to a profession.

Before attending a full-time business school, see if there are part-time MBA programs in your vicinity and attend an info session. US News & World Report rank UC Berkeley, Chicago, Northwestern, NYU, and UCLA in the top 5 for 2021-2022.

Student loans can crush your dreams and happiness. Make sure you run a cost / benefit analysis before you send in your deposit. Make yourself a promise to work for at least 10 years after graduation to get a decent return on your investment. Otherwise, there’s always the strategy of finding a wealthy spouse while in school!

I know this post comes across as quite critical of the degree. I just want those who are about to give up two years of salary and work experience to really think things through before attending. Chances are high you will have an absolutely fantastic time attending business school. It’s one of those experiences that appreciates over time.

The MBA is more than anything, a career passport stamp that provides employers and clients some confidence in your abilities. Whether you have an MBA or not, it’s up to you to prove your value. Don’t be like one of those Harvard graduates who ends up being a nobody!

US News & World Report MBA Rankings 2018 - 2019
US News & World Report MBA Rankings

Manage Your Money With Personal Capital

Whether you plan to get your MBA or not, it’s important to keep track of your finances to build great wealth over time. Sign up with Personal Capital, a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize.

Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances and waste a whole bunch of time. Now, I can just log into Personal Capital to see how my stock accounts are doing and how my net worth is progressing. I can also see how much I’m spending every month.

The best tool is their Portfolio Fee Analyzer which runs your investment portfolio through its software to see what you are paying. I found out I was paying $1,700 a year in portfolio fees I had no idea I was paying! Next, link up your investment accounts and run them through their amazing Retirement Planning Calculator to see whether you’re on track.

There is no better financial tool online that has helped me more to achieve financial freedom. It only takes a minute to sign up.

Retirement Planning Calculator
How do your results pan out? Click to run your numbers!

Related post: Should I Get A Ph.D?

For more personal finance content, join 55,000+ others and subscribe to my free weekly newsletter. I’ve been writing about living the lifestyle you want with the money you have since 2009.

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Filed Under: Career & Employment

Author Bio: I started Financial Samurai in 2009 to help people achieve financial freedom sooner. Financial Samurai is now one of the largest independently run personal finance sites with about one million visitors a month.

I spent 13 years working at Goldman Sachs and Credit Suisse. In 1999, I earned my BA from William & Mary and in 2006, I received my MBA from UC Berkeley.

In 2012, I left banking after negotiating a severance package worth over five years of living expenses. Today, I enjoy being a stay-at-home dad to two young children, playing tennis, and writing.

Order a hardcopy of my new WSJ bestselling book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. Not only will you build more wealth by reading my book, you’ll also make better choices when faced with some of life’s biggest decisions.

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Comments

  1. John says

    October 5, 2021 at 3:21 pm

    Hi Sam,

    I’m currently a 27yo in hospital IT with a 64K a year salary and have a BA in economics. My net worth is around 40k and is mostly in stocks/bonds. The stress is low but the income potential seems low as well. I’ve been thinking about an MBA for sometime now to get my income and net worth up and potentially using that to switch career paths to finance. I don’t want to work forever and at my current income it seems inevitable with a 11% saving rate and a spouse. However I know that finance can be stressful, long hours etc.. is there a specialty in finance that you would recommend that is both low stress and has high upside? I believe in one of your articles you mentioned venture capital being a little less stressful.

    Reply
  2. Jaeson says

    February 24, 2021 at 5:27 pm

    I think it really depends. I now not having an MBA has massively hurt my job chances. I’ve been repeatedly passed over and looked at like a weirdo and had people asking about my major in college and “what does that mean?” “why did you study that?” — I have a graduate level social sciences degree but many MANY years now of business work experience. I’ve hit a ceiling and feel getting an MBA is the only way to have some form of job choice (vs taking whatever I can get) at this point. I even had some lady literally look me up and down (like a dog) and my resume (also like a dog) and say “I don’t think you want to work for us” despite being in business attire. Like.. um ok– ><.

    I think if a person has the money to go to one- and doesn't get crazy (like not over 40k) it can probably be worth it. I've saved my money so will have zero student debt when I get out. Would it be nice to just get a 100k job somewhere? Sure– but if you've hit a ceiling of being auto-disqualified for not having "a business major or background" then well you have to do something. I live in an expensive city, so anything under 80k a year does not cut it at all.

    Reply
  3. RJ says

    April 10, 2018 at 10:14 am

    Hi Sam I graduated in 2008 with my MBA, my Bachelors is in Social Work, I am 57 years old now and my confidence is very low. I am told I my age will be a factor of not getting a job using my , MBA, I have 20 years of experience in Social Work, every time I look for a job with my MBA companies wants 2 to 3 years experience. I have no experience in Business, I do have years of management experience in the Social Work experience.I am afraid that is not enough I do not know where to turn I have to pay back all the student loans I took out to go to grad school I do not have a job using my MBA so I can get a higher salary to pay back my student loans. I was told I should try management jobs with a social work agency since my experience is in social work I am tired of social work.I am beginning feel to I should have never went to Business school.

    Reply
    • Clare says

      August 30, 2019 at 5:41 am

      I am a social worker. Have you considered working as a nursing home administrator or a director of admissions? It’s a great way to learn the long term care industry which is also related to the health care industry. Or have you thought about managing social worker? We are notorious for not wanting to be managers. Social workers need good managers.

      Reply
  4. James says

    December 11, 2017 at 8:09 am

    Whether your MBA is from Harvard or not, it’s worthless.

    Reply
  5. No Name No Shame says

    May 18, 2017 at 11:39 pm

    Hey Sam,

    I am literally in the throngs of this issue as I am trying to figure out whether or not to make the leap to a top tier or not. I’m in a top Cybersecurity program and doing very well. Even before graduating it provided a 200% ROI and I’m close to making 6 figures before graduation. Although, the problem is that my uGPA from a UMCP at the #1 Criminology & Criminal Justice program (at the time) fell short (sub3.0) due to “life” kicking me in the balls. I have been able to get into a BIG 4 and work for them for some time as well. I want to know if you think that attempting to apply to a top 25 program would be advised, since I’m experienced. I’d need to make over my current salary to make it a wise investment (+2-300k). Do you think it’s worth a shot?

    Reply
  6. confuscience says

    February 12, 2017 at 10:29 am

    Hi,

    I have been following your blogs for a while and they have had a huge positive impact in instilling a sense of financial discipline in me. Thank you!

    I have been considering doing an MBA so that I can move out and explore other roles. I am a PhD and as a result I have responsibilities for very specific projects in my industry.

    Doing an MBA would deplete a part of my savings and I will fall short of your recommendation of the net worth for an above avg person.

    Is MBA worth the money? What factors do I take into account before deciding one way or the other?

    Thanks!

    Reply
  7. Rob says

    December 13, 2016 at 1:58 pm

    My experience with a MBA:

    Pre-MBA Annual Comp Target: $70,000
    4 Years Post MBA Annual Comp Target: $275,000 (in the south, where cost of living is very low)

    I’d note three things with this:
    1) I went to one of the weekend programs so I didn’t give up a salary
    2) I went to a T10 program. After a lot of research, I realized the marginal cost of a top program was worth it
    3) I got work to pay for the whole thing, including extra days off after a year and a half of lobbying

    I think MBAs are worth it for people that are smart, already doing fairly well in a corporate environment, want to fast forward their corporate career in short order, and are willing to take on some risks (eg: I moved out of Operations and into FP&A during the program, and then moved to more general Finance and IR couple years out)

    Reply
    • Mabry says

      June 17, 2019 at 6:39 am

      Which program did you attend?

      Reply
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