Cost-Benefit Analysis on Getting More Qualifications
Investing in more qualifications
Should you go back to school and get that master’s degree or doctorate? Or invest in a course leading to a certification? Are the career advantages worth the time and money to be invested? These are important career advancement questions that we often get asked.
I’m Katherine Akbar, president of YES Career Coaching & Resume Writing Services. In this week’s career advancement video, we’ll share five steps to determining whether investing in a new qualification makes sense for you.
- Step 1. Examine your reasons for seeking the qualification. Do you have a desire to know more, earn more, and/or advance yourself? Those are good reasons. Do you want the qualification just to make you successful in getting a new job? That’s not enough of a reason. After all, in most cases, we can help you get a new job that you want without your having to spend the money and time to get a new qualification. And remember that, unless you go part-time, getting a degree can take years out of your experience total. Experience often counts more than education with U.S. employers.
- Step 2. Research and note the time and money required to complete the qualifications that you are considering. Be sure to factor in all time costs, such as time for applying, commuting, classes, homework, exam preparation, and exam taking. What is the value of your time? You can use the value of your hourly wage, which for our average incoming client is $57. (I calculated this from the annual salary at https://www.calculator.net/salary-calculator.html.) Or you might choose to use a lower number, since the value of your free time might be less than your work time. Then add up all the money costs, such as class fees, exam fees, course materials, transportation costs, etc.
- Step 3. Research and note the expected financial advantages of having the new qualification. If you will be able to get a higher-paying job as a result, how much higher? You can research this on salary.com. Then calculate the financial advantages using an online calculator, like the one at https://www.calcxml.com/do/ins07
- Let’s run through an example. Let’s say you are making $107,500 per year, like our average client when they come to us, and your job title is business development supervisor. You are looking at getting an Master of Business Administration (MBA) degree to increase your earning potential. Using salary.com, you can compare your expected salary based on your years of experience and a bachelor’s degree versus your years of experience and a master’s degree. According to the example I did, the difference was $3331 per year. Now that’s not a lot of money compared with the cost of the degree, which on average is $61,800, not counting the time value cost, which came to 160 hours at $40 per hour for a total of $6400.
- But this degree will make you more money over year, so the total advantage is actually much greater. Using the calculator at CalcXML.com, I enter the current salary, the age (40), and the expected age of retirement (65) for this example client. For annual salary increases, I recommend putting 7.6%, which is the national average, even though if you work with us and get a new job, you can expect a 20% increase on average. Using the 7.6% annual increase number calculates the person’s expected future earnings without the MBA at $7.41 million.
- Now put in the salary rate with the master’s degree. In this case, keeping the other numbers the same, the future earnings come to $7.64 million. That might seem like a small difference, but it’s still about $230,000, which is more than three times the total cost (financial plus time) of the average MBA. (Note: If your employer is willing to pay for some or all of the qualification or you expect to get scholarships, only count the cost you will personally bear. Also note that I am assuming you are going part-time, so there’s no loss of salary during this time.)
- If the qualification you are considering is not a degree, quantifying the benefit may be more difficult, but compare the salary of a job that requires it versus the salary offered of a job that does not require it. Use the midpoint of the salary estimates on Indeed.com or a similar job board.
- Step 4. Notice the feelings you had as you were doing the above calculations. Did you want to learn that the qualification wouldn’t be worth its cost? Or were you pleased and excited to see the difference it would make to your income? That tells you your gut feeling about the choice. After all, there are many intangibles to consider too. Will you feel more proud of yourself with a more prestigious degree? Will the effort be worth the loss of free or family time? Will you enjoy studying this subject? Are you ambitious and wanting to go as far as possible or content with a job that meets your financial needs?
- Step 5. Choose, based on both the numbers and the intangibles, your preferred course of action. There’s no right or wrong answer here. You can get the new qualification even if the numbers don’t suggest that it makes sense for you, like my mom who got a doctorate in her mid-forties, even though she didn’t expect the earnings to make it worthwhile. She loves her new career and has no regrets. (And she is still working part-time, which I’m sure she did not calculate, into her 80s.) Or you can decide not to get the qualification even if financially it would make sense. The sacrifices to your family time or personal time might not be worth it to you, or the thought of being in school again might fill you with dread. Every choice has consequences. Weigh carefully, choose powerfully, and create the life you want.
If you liked this video, please give it a Like and Subscribe so you don’t miss the rest of our Career Advancement series. If you want support on job search or career success, schedule a free Career Success Consultation at YESwriting.com if you’ve never had one. If you have had one, contact your client success manager about Career Advancement Coaching.