Just because MBAs may have learned a thing or two about accounting, economics and finance, does not ensure they’ll apply any of it to managing their own finances or careers, says Joel Frisch
Many recent international MBA graduates of Schools in the US and the UK who have stayed to work in these countries and are pondering the next stage of their lives and careers may now be struggling for a personal strategy.
For international MBAs, getting into Business School, earning the degree, winning that high-paying job and securing employer sponsorship all takes focus, energy and resolve. Those attributes can carry them forward to promotions, a home and a family. However, these will require planning, too.
MBAs have studied finance and management; now it’s time to fortify the foundations of their financial house and give their careers a charge. They can start by managing their credit, making their finances work harder for them, leveraging alumni resources and advancing to the next stage with their mentor.
Cutting down debt faster
It makes sense for international MBAs to improve their credit – a backbone to many kinds of markets. Paying down loans on time builds good credit, which opens access to loans, products and living opportunities.
International MBAs working in the US who are looking to qualify for a mortgage to buy a home will have an easier time if they clean up their personal balance sheet by reducing their monthly expenses, including costs on all existing debt. Mortgage lenders look at applicants’ debt-to-income ratio.
One easy way to do this is to refinance international student loans. The move lowers the interest rate, potentially freeing up a couple hundred dollars a month. MBAs should look for providers who will allow them to refinance their student loans without co-signers to ensure that they contribute to their own credit history.
Another way to save is by making bi-monthly payments for student loans – a common tactic used to pay down mortgages faster. By cutting the monthly student loan payment in half and then paying twice each month, borrowers will end up making one extra payment a year. Over time, borrowers will pay off the average student loan two and a half years sooner, while saving roughly $3,000 USD from reduced financing fees.
Finding ways to save a buck, or two
Applying a more strategic approach to pay down student loans is one way for international Business School graduates to save money over time, but it’s also never too late for them to start saving for future goals and retirement more directly. The sooner they get the power of compounded interest working for them, the better.
MBAs can start by setting up automatic allocation of their salary to a corporate or personal savings account, employing an auto-debit approach. This set-it-and-forget-it arrangement allows account holders to put money aside for personal savings, retirement, marriage, children’s college, or other purposes. Many find this automatic deduction easy to stomach, as the act of saving no longer competes with immediate wants and expenses.
In addition, international Business School graduates should take a new approach to their safety net accounts by making their money work harder for them. That means investing that six-months-worth of living expenses in relatively safe accounts that offer higher interest rates than standard savings and checking accounts. Online providers such as Betterment and Wealthfront, among others, offer safety net accounts that double as investment accounts with a conservative outlook. These providers let account holders preserve their principal while still investing in instruments that generate returns above vanilla bank savings and checking accounts, without sacrificing liquidity or having to bear volatility.
International MBA graduates are also encouraged to maximise their contributions to company-sponsored retirement vehicles to get compound interest rates working as early on in their careers as possible. The mathematics show there’s a huge difference between two and five years of compounding; MBAs should not miss out on crucial years that will greatly increase their retirement savings. Additionally, if employers provide any level of matched contributions, grads should always ensure that they are contributing enough to max out the company match as these are technically employer benefits, not to mention ‘free cash’.
Sometimes, general financial organisation can pay dividends. As international MBAs get older and assume more financial commitments, it helps to have a centralised view into the myriad loan, savings, retirement or deposit accounts that can accumulate.
Tools such as Mint, YNAB and Prism, among others, can connect all of their accounts in a way that displays them on one screen, giving them a clearer picture into their finances and helping them stay on top of bill and loan payments. Aggregating everything onto one visual dashboard would be helpful for those international students who’ve worked a few years and have a pension in another country.
Finally, international MBAs in the US and UK should treat their balance sheets more like a business would, by adjusting their credit-card billing cycle to maximise the amount of time between receiving their paychecks and making payments. In doing so they prolong the time their cash stays in their hands while reducing borrowing costs and increasing returns.
Heading back to Business School
Shifting gears, MBAs can also focus on advancing their careers. They can start by leveraging their own B-school alumni programs. Business Schools boast a wealth of faculty and career resources for building connections in many different fields.
International graduates can look to their alumni chapter in their community for networking and business opportunities. Beyond simply connecting with an alumni group, MBAs should seek out subgroups or individual alums in their specific industry and request introductions and coaching; through age, degree and experience, they’ve earned this audience and professional courtesy.
But these relationships remain a two-way street, requiring effort and showing respect. International alumni are expected to stay in contact, and not just when looking for a job. They should share information, ideas and interests with senior alums in an effort to stay top of mind as a senior alums’ first call when opportunities arise.
Showing how to reach the next level
Finally, international Business School graduates would do well to find a mentor and cultivate the relationship. These people can provide the personal gut check that younger professionals who lean too heavily on technology sometimes need. Business is a human endeavour, after all.
At this point in a career, a mentor in a grad’s professional field can better help guide her to reach the next level or challenge. This is because that mentor most likely has trod a similar professional path and thus can pass along valuable wisdom and advice to help advance a stalling career. Many organisations offer mentorship programmes which pair new employees with a mentor who has more experience at the establishment. If this option is not offered, there are helpful online services such as MentorCity, a cloud-based mentor matching service that finds the perfect mentor based on skills, industry, job function, experience, gender, location and language.
International MBAs showed high levels of achievement in gaining acceptance to schools in the US and the UK, earning their degrees and then attaining high-paying jobs. But after they’ve reached these goals, international MBAs still need a plan to navigate the next stage of their lives and careers. Making sure they build sturdy financial foundations and solidify their career trajectories will be significant to the success of whatever long-term aspirations these grads formulate next.
Joel Frisch is Head of Americas at Prodigy Finance
