Budgeting For Your MBA

While it is important to quickly learn how to manage your time while in your MBA program, most don’t consider another important MBA, Managing Bank Accounts.  It is easy to take your eye off of your personal economics when you get a lump sum check.  If you’re on a student loan budget, lunches out, coffees, etc. start to add up.  There was a noticeable change in spending behavior between mods 1 and 2 and mod 3.  By December of my first year, classmates started going out less and were looking forward to the spring semester check to come through.  I would have felt more comfortable with that check too.  In mods 3 and 4 there was a clear increase in the number of classmates bringing in lunch. That’s not to mean you shouldn’t have lunches, coffees, etc., but you’ll need to keep in mind the tradeoffs and with proper planning, maybe you can have a little bit of both.

Here are some nuggets of wisdom I’ve picked up through my first year.

Separate Bank Accounts: One thing I did to better track my spending was to open up a separate bank checking account.  This student loan funded checking account would be used for academic, living, and career related expenses.  After that the lines blur and you’ll have to determine for yourself what expenses you want to pay out of your student loan checking account vs. pre-school personal checking account.  Another reason I did this was not only for planning my needs for my first year, but understanding what I actually need in my second year.  The more you borrow, the more you pay back with interest.  You might also consider a free money market account through ING, Ally, or other financial institution, but I didn’t bother myself with this as I didn’t feel that the payoff was going to be worth the diligence of moving money around while I was heavily focused on schoolwork.

Meals/Coffee: During my first two mods at Owen, I bought lunch from a local eatery just about every school day, with the exception of course when there was free pizza for a school event.  The $5-10 per lunch doesn’t seem too bad when you’ve got that inflated checking account.  You might even justify it by telling yourself that you’re too busy or too stressed.  But there will also be days when you can’t make it home to cook dinner or don’t want to spend the energy to make yourself dinner and so sometimes it ends up being twice a day.  For myself, I found that making dinner was a good opportunity to get my mind off of schoolwork for a bit, which you need to do regularly.

It is hard to not fall into this pattern, but there are some easy things you can do:

• Make more than one meal at a time.  A pound of pasta is a lot for one sitting, but make it all at once, put the leftovers in tupperware, and have it for dinner or lunch in a day or two.
• Speaking of tupperware, salads are an easy lunch to bring in.  You’ll also want some Tupperware at home to store lettuce and vegetables.  Consider other easy lunches, like soup, that can be heated up and are relatively inexpensive.  Buy fruit and pretzels as side items to a sandwich and if you’re open to it, have a good old peanut butter and jelly.
• Consider store brand products that may offer little difference in quality to branded products.  You may have a more sophisticate palate than I do, but I can’t tell the difference between store brand and branded salt.
• Buy a crock pot.  It’s easy to make a variety of meals and it’s great to come home to a meal that’s ready to eat.
• Buy a coffee maker. I’m not a coffee drinker, but I’m sure $3-6 per Starbucks trip can really add up. If you have to have coffee, try making your own in the morning and/or buy some in the afternoon from the 8:10 Café.

Taxes: This one works both ways.  Since you only worked a partial year prior to entering the MBA program, but you had taxes withheld as though you would earn that compensation for the full year, you should likely see a tax refund.  As you plan out income that you may earn in an internship over the summer between your first and second year, don’t forget that you will have taxes withheld as though you would earn that level of compensation for the full year.

Going Out: Share a cab, walk when able to, and eat dinner and have a drink or two before heading out. Owen can be rigorous in and out of the classroom, don’t forget to take night off every once and awhile or be a designated driver for the evening.

Over the course of this past year, I also developed for myself a personal cash flow statement (Download Personal Cash Flow).  In particular, I wanted to know if there would be any shortfall for the summer as you receive no additional funding over the summer with your final check for the school year coming in January.  You’ll also need to plan for potential additional moving and living expenses for a summer internship between first and second year.  I’ve input some rough numbers on what expenses, starting personal account balance, and starting credit card balance might be, but you should adjust as your own situation dictates.  Hopefully this is easy enough to figure out, but if this approach doesn’t work for you, you can also try Mint.com.  I haven’t tried it yet, but it seems worthy of consideration.