Friday, July 19, 2013

Quit My Job, Go Back to School?

"Work sucks, maybe I should go back to school."

Take out that "maybe" and that's what you'll hear me mumbling to myself every day. If you're curious, the other 99% of the time is filled with "I f___ing hate this place".

I Want to Quit
Quitting one's job is something that many people would like to do. I am one of them. Don't get me wrong, there are people who are actually satisfied with their jobs. And then there are the people like me who would relish the opportunity to quit and never go back -- most likely by way of an attention grabbing spectacle. The reasons for enduring the pain are numerous. Mine include food, money, money, more money, and not really knowing what I'd rather do.

Back to School?
For those who do know what they'd like to do or would like to explore their interests, returning to school is one possibility. This option is also popular for those happy in their professional lives and would like to enhance their credentials to get further ahead or just increase their knowledge. Regardless, quitting or taking a leave of absence from work is something that is done.

I have seriously considered and researched the possibility of quitting my job and going back to school full-time numerous times over the past year or two. One scenario involves doing a bachelor of arts to explore my interests and maybe open some doors. Another involves attending a full-time graduate program -- there just aren't that many program options for part-time students.

So, what's held me back?

Not being a professional money or finances person, I don't know the correct and proper terms. Opportunity cost, simple payback, present value, return on investment? What I do know is that the reasons I haven't quit my job yet don't go away just because I quit my job and go back to school.

Every school program that I would love to do involves at least a one year absence from work. During this time, the best I could hope for is a low-wage job or a graduate student stipend -- roughly $25,000 per year for the programs I'm interested in.

Let's Do Some Math
A full-time bachelor's program in my area is roughly $6,000 per year. A master's degree, the ones I've looked at, can be around the same price if it's research based.  Best case scenario, I live at home with mommy and daddy who feed me and tuck me in at night. A two year program would mean a cost of $12,000 in total, and a four year program would mean $24,000.

The good news is that a graduate program may pay a student for research and teach assistant work. From the schools I've checked out, the base amount may be about $20,000 to $25,000 with bonuses for awards and whatnot.

Assuming that a student doesn't get a scholarship, spends virtually nothing, lives at home, and also manages a part-time job at minimum wage (~$10/hour) working an 8-hour shift a week ($320/month) in addition to some form of work or stipend at $25,000 per year:

Money Out
$6,000 per year (tuition)
$500 per year(books)
$1,000 per year (spending) -- really low-balling
Total = $7,500 / year

Money In
$25,000 per year ("Stipend" / Research and Teaching Assistant)*
$3,840 per year (Part-time Job)*
Total = $28,840 / year

Money In - Money Out = $28,840/year - $7,500/year = $21,340/year

*Let's assume for non-graduate students that he or she is able to find a part-time job that pays $25,000 per year plus the extra $3,840.

Came out ahead?
So, it may be possible to come out ahead $21,340/year while going to school full-time. This would assume that because the income is so low and that tuition credits may be available, taxes would be close to nil. Good news, right?

Great news -- if you quit a job that was paying minimum wage or less. At $10/hour, 8 hours per day, 5 days a week, 52 weeks a year, that would mean $20,800 per year. You would actually come out ahead by going to school and working part-time then.

Opportunity Costs
Assuming that a person made the national (Canada) average after-tax income for a single person, that would mean quitting a $26,000 per year job (after-tax = net). Ignoring professional development and raises at an existing job, that would still mean a loss of $26,000 - $21,340 = $4,660.

This is an annual amount, so the longer one attends school, the more exaggerated the loss becomes. After four years, that's a loss of $18,640 after ignoring the time-value of money. If a job were to be found right after finishing school that paid an extra $9,320 (net) more than $26,000 (net) annually, then a break-even situation would be met after only two years.

Can't live at home, must move away, more expensive program..
Unfortunately, not everyone can live at home, get fed, and be tucked in my mommy and daddy. They might not be able to find magical "stipends" either. And not everyone wants to do a cheap local program. There are Master of Business Administration programs in my city that cost at least $50,000 over about two years. As far as I know, they are also course based, so they don't pay students for research and teaching. Law school is three years in my area for about $10,000 to $20,000 per year -- yes, I've thought about it.

Add an extra $19,000 per year in tuition, remove the $25,000 per year in stipends, add in living expenses like room and board, add the income not earned, and suddenly, the cost of going back to school increases dramatically. Let's also hope that you don't make much more than minimum wage.

The goal is usually to score a high-paying job right out of school after obtaining such an expensive credential, but it's not as clear cut anymore. It may take years to break even or see any return on such an investment (i.e. come out ahead). Remember that part about how I'm not a finance professional? Ya, I probably missed some important numbers that may make the situation even worse -- maybe they make it better.

If you're curious (continuing with the sample values above):

Money Out
$25,000 per year (tuition)
$500 per year(books)
$1,000 per year (spending) -- really low-balling
$8,500 per year (rent and food)
$4,660 per year (lost income)
Total = $39,660 / year

Money In
$3,840 per year (Part-time Job)*
Total = $3,840 / year

Money In - Money Out = $3,840/year - $39,660/year = -$35,820/year

So now then?
One of my major hang-ups right is that I don't know if any degree will give me a magical raise that will make all of it worth it. I've got a bachelor's and a master's already that haven't exactly made me rich yet. Is another one really going to help? More importantly, is another degree really guaranteed to make me happier?

Tough choices ahead... FML.

Money Saving: Saving on Expenses Over the Year
Money Saving: Ways of the Cheap
Moving Away for College: Furniture and Dumpster Diving