Tuesday, February 28, 2012

MBAs can ID industry bubbles

MBAs have incredible predictive abilities and on aggregate clearly predicted the 2001 tech bubble pop and the 2008 one in finance.  Now you might this I've drunk the kool-aid of my own six-figure degree here, but I promise you I haven't.  At least not too much.

What I'm talking about instead is the fact that historic data from the recruiting offices of top-5 schools show big spikes in students accepting offers in these industries the year or two preceding the market drop.   Huge numbers of the graduating class of 2000 went west to join tech start ups, way more than in, say, 1998 or 2002 and you can see the same trend for the graduating class of 2007 and finance.

Unfortunately I don't have copies of this data to share with you, but there are a few things you can learn from it.

  1. MBAs are terrible at recognizing bubbles - This is on average and in aggregate, but clearly by taking these jobs the students have failed to recognize that these industries were due for a major market correction.
  2. MBAs are less useful the more there are together - A single business student can be quite rational but once you start pulling more of them into a group the more they tend to agree with each other.  This is particularly evident when something is "hot" or "exciting" because no one wants to miss out.  Fear of missing out is a hallmark of type A personalities and MBAs have it in spades.  The bigger the decision the bigger the effect, causing the group think that goes in to how students decide between job offers here.
So, is there current market information you can derive from my inside track on campus?  It doesn't seem like it this year.  Tech has seen a resurgence along with start ups, consulting and finance hiring is strong, and there's probably a lot more interest in healthcare than there was five years ago.  But nothing seems particularly hot or overheated.  So I think we're just slowly pulling out of the recession and finding some balance again.  But I would keep an eye on tech and healthcare over the next year or two as business schools publicize their careers data.

What do you think - are MBAs headed to an area in droves that seems prime for shorting?

Monday, February 27, 2012

I think I have summer plans

I came out of recruiting pretty lucky - more than one offer all off them good.  My offers were in very different companies and industries.  Which made recruiting harder - less of the prep overlapped so there was more work overall  - and also making my decision.  I wasn't really comparing apples to apples which made my decision more one of self assessment and introspection that prestige, pay or location.  I'm very, very happy and I think I've come to a decision.

I'll be using my summer to take a chance on an industry I never thought I'd work in and a company I never thought I'd work for.  Something that I think might actually be a good fit but is outside my comfort zone and very different from my previous work experience.  I'm excited. I'm taking a risk. And I think that's exactly what your one and only summer in a MBA program is for.  I'm going to learn a lot more about myself and get to stay on a much steeper learning curve during my 10-12 weeks in the industry.  It'll be challenging and I think I'll come out with new skills that will compliment the ones I already have.  Writing it all down, I wonder why the decision seemed so hard. 

Counting my blessings and looking forward to summer.

Tuesday, February 21, 2012

Recruiting thoughts from midway through

Recruiting is still going full steam on campus at the moment with new job postings and seminars, but it's become a more diversified offering.  the first couple months were heavily dominated by banks and management consulting firms, very big companies and the like.  These offerings employ about half of a typical MBA class.  The i-bank and consulting interview process is fast and time consuming.  Back to back to back interviews weren't uncommon and if you made it through that you were in for more of the same at their office in a "super day".  They may have been miserable going through it but that half is now in one of three camps:

1.) They got an offer and accepted it. Good and thankfully common.  The hiring market for internships this year seems to be a-okay, knock on wood.
2.) They got multiple offers and are debating between them.  Very good.
3.) They got no offers are in panic mode.  Very bad but also very rare.

There are a lot more non-profits, healthcare companies, tech startups and more around these days. Many people are looking beyond even that and leveraging their networks and the school's to find niche positions in an industry of interest.  This approach is a lot of work but yields some of the most rewarding and exciting opportunities.  Of course while you're doing it you're totally envious of your consulting friends who have their internship in the bag and are spending their free time having fun but come summer they're the ones who will likely be jealous. 

The light at the end of the tunnel can now be seen and it will be so good when it's all over. 

Monday, February 13, 2012

Best of Money Carnival #142

I'm honored to host the Best of Money Carnival this week.  I had a lot of fun reading through all of the submissions.   Without further ado, here are my picks for this week:

Finally, my favorite post was What Do You Do If You Really Cannot Afford Regular Health Insurance? at My Personal Finance Journey. A great overview of all your options in making a hard decision.

Thank you to everyone who submitted this week!  Next week's carnival will be at Frugal Confessions.

Friday, February 10, 2012

Student loan holders headed to bankruptcy

The LA Times has a brief update on what may become the "student loan crisis" talking about how bankruptcy attorneys are seeing a large increase in the number of potential clients with student loan debt.  Over half of attorneys, according to the article, report increases of greater than 25%.

This is of course inevitable simply because the number of students taking out student loans has increased significantly over time as well.  However what I don't know is how much the increase bankruptcy attorneys are reporting is beyond the expected increase based on the population of people with student loans.  If this is much higher and there is no relief for the student loan debt burden then this could potentially spiral into something much more significant.


Thursday, February 9, 2012

1,000 tacos for you?

For your frugal tip of the day head on over to Flowing Data for a great visualization of how much money you save by quitting cable and hear a great analysis of how he completely replaces his cable experience while still saving enough to buy over 1,000 tacos.

Monday, February 6, 2012

Mailbag post!

I get a fair amount of reader mail for this little ol' blog all things considered.  I try to write back to everyone who asks a question though I'm not always that prompt.  I thought I'd share with you a question from a reader looking at an executive MBA, my reply, and see if you had any other advice from him.  Without further ado, here's the letter I received from "Justin":


I am considering beginning an application process at some of the top executive MBA programs, and would love to hear more about how you've managed to attend a top business school with no loans or debt.  A little bit more about me, I am a working professional in the IT industry.  I have 6 years of work experience and am working toward my MS in Business Intelligence.  I should finish this degree in spring next year (2013).

I have taken pre-assessments with some universities, where both have said that despite having less than the median amount of work experience (10 years), that I still have a relatively strong candidacy, and should submit applications for Fall 2013 if I choose to apply.  Though I am only 30 years old, I'm hoping that my technical ability, advanced degree, and work ethic will carry me through.  If there is a way I can attend a top EMBA school while not pulling out loans, I am extremely interested in learning about this.  I am very surprised that you were able to absorb this, and would love to learn more about your story.

 I should also state that I'm considering an EMBA because I want to be able to finish the degree while not taking significant time off of work (such as full time), or spending many years pursuing the degree itself.  Also, I have no interest in career changing, and I would be willing to sign a sponsorship which would require me to stay at my company if I were to get support in pursuing this degree.  I have started researching proposals to submit to my management to this effect.  Though my company has a reimbursement policy, I'm hoping I could negotiate some special circumstance.

Thanks for reading,


Hi Justin,

I'm in a slightly different situation, pursuing a full time traditional MBA.  Coming in I didn't have sponsorship as an option.  However, part of the reason I think I'll be able to graduate without debt is that my school offered me a solid amount of need-based grants.  I got very lucky.  My understanding is that there is less non-loan financial aid for exec ed participants and nearly no scholarships.  So your employer is probably your best bet.

However, here's what I can give as advice to you:

How much does the EMBA overlap with your business intelligence degree?  Before you commit a lot of cash to this make sure that the degrees are appreciably different (I don't know) and that adding the MBA will actually have a positive impact on your finances through job opportunities or raises with your current employer.  An MBA doesn't necessarily make financial or career sense, especially if you already have a business degree nearly in the bag.

Looking for employer sponsorship is a great move.  It can take a huge financial burden off your shoulders.  See if anyone else at your office has done it and ask for their advice on getting approval.  However, if your employer is not interested I'd seriously consider the previous point because it's potentially an indication that they may not value the degree and you'd be putting your own money on the line. 

If you decide to go forward with the MBA, my advice to you would be to start living as if you had to
make tuition payments now. (How are you paying for your current Masters program?  Can you ramp that up?) Both to get used to the lower standard of living and to sock away every penny you can before you get there so you have a buffer (or pay down credit card debt if any).  The advantage, as you note, to an EMBA is that you still have income coming in while you're in school.  So you have cash flow to pay your living expenses, but it's even better if you can stretch that to cover some or all of the tuition as well.

Make sure to take full advantage of the tax benefits of any tuition you pay.  Lifetime learning credit or deducting the whole MBA if you're "carrying on business" can reduce your tax burden and give you
more cash to avoid student loans with.  The IRS has fairly readable documentation on this and now would be the time to review their website to see what you can do with any 2011 expenses.

See if your state offers tax credits or deductions for 529 contributions.  You can then use the 529 to pay for tuition.  You'll need to do the math to see if this is a better option than deducting the tuition expenses since you can't double count them.

Consider distance or weekend programs if the NYC metro area doesn't work out.  I think even Harvard is offering one at this point and it will allow you to continue working and potentially have more flexibility with your work schedule.

No Debt MBA

 I'm hardly an expert here.  Anyone else have solid advice for our friend or want to correct my points?

Sunday, February 5, 2012

Things to look out for when getting a credit card with a bad credit rating

The following is a sponsored post.

Life can be tough without a credit card, as having one is often a requirement for doing things like booking travel arrangements, renting cars and shopping online. But for consumers with bad credit ratings, the process of applying for a credit card can be fraught with financial peril, and unsavoury credit card companies may try to exploit consumers in this compromised position. This can make it near impossible for even the most fiscally responsible consumer to build their credit or even own a credit card. If you have a bad credit rating and are looking for a new credit card, here are some of things you should look out for.

Sneaky or exorbitant fees 
Credit card companies may try to charge you a wide variety of fees, especially if you have bad credit. Credit card companies can charge an annual and monthly fee, fees for requesting credit limit increases, even fees just for accepting your application and setting up your account. Combined, these fees may leave you little to nothing of your credit limit to spend on actual purchases, leaving you better off had you not applied for the card in the first place.

Credit card marketing scams
Be especially wary of credit card companies that offer "easy" or "guaranteed" credit. These are usually fraudulent or illegal as no one can guarantee credit; legitimate credit providers will always check your credit report before deciding whether to give you a card. These companies will usually try to charge you high fees, oftentimes before you accept or even apply for the card. One especially sneaky way that they might try to charge you is by getting you to call a '900' number; these numbers are not toll-free and can cost anywhere from $2 to $50 or more.

Short grace periods
The grace period for a credit card is the amount of time that you have to pay off charges without having to pay interest on it. Look out for cards that offer grace periods shorter than a month; these cards will accrue interest even if you pay off your balance at the end of every billing cycle. A card without a grace period will accrue interest the moment you make a purchase.

High interest rates
Though having a poor credit rating will usually mean higher interest rates, you should still shop around to make sure that you are getting the best interest rate possible. Unsolicited credit card offers will often have higher interest rates than credit cards which you find through your own research. Also look out for credit cards with low introductory interest rates, as the rates may increase substantially when the introductory period ends or you make a late payment.

Having a bad credit rating does not mean you can never have a credit card. With careful research, you can find a card that can help you build credit for a better tomorrow.