5 Strategies to Financially Prepare Yourself for Business School
As an aspiring business school student, you’ve got your sights set on that coveted MBA from one of the best business schools worldwide. Such a diploma can increase your earning potential, help you advance in your career, and broaden your worldview. Of course, graduate school, while a noble endeavor, doesn’t always come cheap. In recognition of financial literacy month, here are five strategies to financially prepare yourself for graduate business school.
1. Make the Most of Your Life as an Undergrad
If you’re in your first or second year of an undergraduate program and you know that a graduate business degree is a goal, you’ll certainly want to research which courses are most important for the business programs you’re considering applying to.
But you should also learn skills outside of your major. For instance, now is the time to brush up on essential finance habits and concepts you can use in everyday life. Establishing good credit and saving up even a small sum of money will be useful when it’s time to get your master’s degree. Many colleges and universities offer free financial literacy programs that cover a wide range of topics, like budgeting, credit and even graduate school funding. Inquire at your registrar’s office to see if your school offers any of these programs.
2. Understand Your Student Loan Options
Certain business schools offer full funding via scholarships, grants, fellowships, or teaching assistant positions, but if your institution doesn’t work that way, financial aid is often available to graduate or professional school students. Depending on what country you're from, you may be able to meet the costs of tuition through government loans. Even those on full scholarships or in areas where higher education is fully paid for can sometimes receive help with living expenses.
Take the time to read the fine print of any financing arrangement you enter. Educational loan obligations represent a growing burden on young graduates, most prominently in the United States but also in other developed economies worldwide, including Japan and Great Britain. Some loans come with provisions allowing for automatic wage garnishment, which could drastically alter your financial prospects for many years to come.
If you can’t secure adequate funding from publicly available resources, you can consider applying for a private student loan. Just be aware: terms will vary from lender to lender, and interest rates for private loans are generally higher.
3. Check Your Credit
Private lending groups are going to pull your credit reports and check a version of your credit score or maybe even multiple different scores. The better your credit, the lower your interest rate should be and conversely, the worse your credit, the more you'll have to pay back. It's therefore vital that you get your scores at an acceptable number before you apply for any private student loans.
Even if you’ll be on a scholarship or have adequate funding, it still pays to have good credit. A good credit score can save you money in interest and fees on everything from a mortgage to a car loan and even cell phone or cable television service.
Depending on your local situation, there may be public registries for credit as well as private credit monitoring enterprises. It's important to get ahold of the reports that these organizations produce so you can verify that the information contained in them is correct or dispute any inaccuracies. Some governments allow people to receive free copies every so often.
Many European countries, like Spain, France, and the Scandinavian nations, tend to only report negative information, which makes it all the more worthwhile to ensure that erroneous items are removed from these records. In the United States, you can pull your credit reports from each major credit reporting agency—Equifax, Experian, and TransUnion—for free every 12 months. And there are plenty of places, including Credit.com, where you can view your credit score for free.
4. Create a Budget
Even if you are working part time while in school, there’s a good chance money will be tight. Therefore, drafting a solid budget is an indispensable step to take. Doing so involves carefully calculating all of your income, tracking expenses, setting goals, and making adjustments as you go along.
Expect to make some deep cuts, too. While there are expenses you’ll certainly have to pay, others are more discretionary in nature. You’ll want to think twice about material purchases, become creative with your entertainment options, and scale down luxurious vacations. The resourcefulness you develop might just stay with you beyond your business degree!
5. Develop a Plan to Pay Off Your Debts
If your budget already has some credit card debt built in or you know you’re going to have a troublesome amount of student loan debt to address after graduation, be proactive. Roll your credit card payments into your budget starting now, and continue some of the budgeting habits you acquired during business school to help pay it down fast. Here’s a helpful hint when it comes to credit card debt: make the minimum payment on all your cards while putting the largest amount you can toward the card with the highest annual percentage rate. This will save you a lot of money later on.
It may be possible to renegotiate the amount you owe your creditors or establish a payment plan. They would rather assist you in discharging your obligations successfully over time than watch as you default, which would leave them out almost the entire sum. There are even firms that will deal with your creditors on your behalf for a reasonable fee.
If you are working part time or between semesters, build up an emergency fund. This will be helpful when it comes time to pay back those student loans. One easy way to save some money involves setting up an automatic rollover from your checking to savings account once a month. Also consider having a certain portion of each paycheck deposited into a high-yield savings account.
Preparing for graduate school can be a bit daunting—especially if you’re in the middle of your business career. However, with a few simple tips to get your finances in order before you dive into your first semester, you’ll be one step closer to graduating without additional stresses.
Jeanine Skowronski is the executive editor of Credit.com. Her work has been featured by The Wall Street Journal, Newsweek, Fox Business, Forbes, CNBC, and various other online publications. Follow her at @JeanineSko.