The Blogger Sees The Light at the End of the Tunnel

With 2 weeks left in the MBA program, my year at INSEAD is quickly coming to an end. Not being especially nostalgic, I already have one foot out the door. I’m ready to move on. I booked a flight to leave France early, so I will miss the graduation ceremony that INSEAD chose to convene in a Big Top Circus tent that has been erected in the parking lot. (If the Dean is reading this, please find a more glamorous venue for next year!)

If there’s one realization that I’ve had lately, it’s been how expensive my year has been. When you take your post-INSEAD salary, deduct the cost of rent and loan repayments from your net after-tax income, the numbers can be scary. The luckiest few are those headed to tax-free countries in the Gulf. Those of us who will work in the developed world, will be happy to finish each month with a few dollars in our bank accounts.

A classmate asked me why I felt the need to leave early and start working. “Loss mitigation”, was my answer. I’m keen on changing that negative sign on my personal balance sheet, to a positive sign. Yes some will argue that my INSEAD MBA is a revenue generating asset, blah! blah, blah!, but unfortunately no mortagage bank is willing to securitize it, to help me buy a house. I will need a $40,000 to $80,000 cash downpayment for that.

In a recent Career Services panel, a recruiter from a leading global headhunting firm observed that MBAs are often surprisingly naive about their own personal finances and career development. I’ve gone 9 months without a salary, since my last paycheck in September 2007. High up on my action list are starting work, maximizing my pension contributions for 2008, and repaying my debt. If I had taken my $107,000 USD opportunity cost of coming to INSEAD, and invested it in a global stock index fund earning an average 6% net inflation-adjusted return, I would have saved $822,411.29 at retirement in 35 years from now. This would have translated into a $41,120.56 annual retirement annuity payment, in constant 2007 dollars. I am however optimistic that I can recoup my opportunity cost in after-tax dollars in a short enough time frame to render the present value of my INSEAD investment positive.

But part of that optimism means making smart choices.  Vacation will have to wait until the holidays, next December. Why take one now, when I can earn a full salary while using my vacation time? My year at INSEAD has been one long vacation. A costly, stressful roller coaster, yet a rewarding vacation. And now I am eager to finish my remaining school assignments, get back to the real world, and start using the skills I learned here at INSEAD.

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4 responses to “The Blogger Sees The Light at the End of the Tunnel

  1. I love the annuity calculation, well done. 🙂

    Can I suggest CSR as a topic some day? As the INSEAD grad you should have your view on this. I have been studying this recently, and honestly, the topic makes me believe I am totally unethical – to my belief, CSR is mostly systematic waste of business’ time and resources in pursuit for what is called an economic externality. Would be glad to read your views.

  2. Hey, I feel you. I’m still debating about INSEAD. I will be in the Jan 2009 class. However, the opportunity costs are insane for me. I’m a lawyer in the US, and next year I would lose about $250-270k depending on the bonuses. But from everyone I’ve talked to, you can’t put a price on the experience. Also, living in the Southern part of the US means quick witted, ambitious friends my age are tough to come by.

    BTW, were you joking about INSEAD paying your student loans if you tell everyone it was the greatest 1 year of your life? If it was true, I’d tattoo that to my back.

  3. I’d love to see that post on CSR, as the other commenter suggested. BTW – hope you won’t stop blogging post-grad. Your posts are such a breath of fresh air.

  4. I’m really enjoying reading your well crafted read. It seems as if you spend a great deal of persistence with your weblog. Concerning bookmarked it and i also am longing for reading new article. Keep up to date the favorable work!

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