Take a study break, boost your career

Vivek (CA ) (2368 Points)

13 June 2011  

Take a study break, boost your career

From the day Pankaj Makkar, a chartered accountant, picked up his first job in 2003, he began saving for an education fund. While most people would have splurged their salaries on luxuries, Makkar meticulously saved 20% of his annual income towards one goal-an MBA from an Ivy League college. Makkar knew that he required not just the mental strength to get into a reputed business school, but also the financial rigour. By 2007, when he joined the Harvard Business School , he had saved20 lakh. "I had to make sure that I had adequate funding as the course fee was $80,000 a year," says Makkar. It wasn't easy as he cut down on all discretionary expenses and eschewed every luxury, including a backpacking trip to Europe. Two years before he joined the course, he increased his savings to 40% of his annual income. But Makkar believes all the sacrifices were worth the effort. The salary he currently draws as MD, Bertelsmann India, an international media and services enterprise is four times his previous earning of24 lakh a year.

Like Makkar, many professionals choose to step out of the boardroom after a few years to study further. "It's a trend that's on the rise, with a lot of middle and senior executives opting to take a career sabbatical to pursue higher studies . This adds value to one's profile and pays off within 5-6 years," says Shiv Aggarwal, CEO of HR consulting firm, ABC Consultants . Leading HR consultancy firms ascribe the trend to "Indians wanting to invest more in themselves".

One of the primary reasons that has led to a surge in numbers is that the top management institutes in India, such as the Indian Institutes of Management and the Indian School of Business (ISB), now offer executive one-year MBA programmes. The advantages for professionals is that they do not have to take a long break from their jobs and, because the tenure is less, they have to pay less for the daily expenses. However, in some cases, the fee for the programme is likely to be the same as for a two-year course.

"Over the past 4-5 years, there has been a 20-25% increase in the number of people taking a break from their careers to pursue an MBA. In fact, those who have this degree from an institute in India choose to get another one from abroad sometimes," says Arjun Srivastava, head, consumer practice, Egon Zehnder, an executive search firm.

Agrees VK Menon, senior director, careers, admissions and financial aid at ISB, who sees a 15-20% increase in applicants annually. "Globally, all MBA programmes insist on a 2-3 years work experience. This trend has now come to India as well," he says.

When should you take a sabbatical?

The stage of your career determines the tenure of your sabbatical. "Usually, people opt for a break at three stages-after three years, 7-8 years or 10-12 years. Those in the first category opt for MBA programmes, while those in the last group opt for short-term courses. This is because they hold responsible positions and cannot be away from their work for long periods," says Natasha Chopra, co-founder and director of The Chopras, an overseas educational consultancy.

Sanjay Gupta, global head, HR, EXL Service , says that people with many years of experience usually choose an advanced six-month executive programme. "While the most popular group is the one that includes people who have worked for about three years, people in their mid-careers are also taking the plunge now." People also pursue a course after 7-10 years of working if they want to switch careers.

Before you opt for a sabbatical, ensure that you really need one and have the wherewithal to take it. The break should help you enhance your career prospects. If you want to switch to a different industry, research on the options and career path that you would like to take. Meet people in the field to understand the skills you need to acquire and then choose the course. "If possible, interact with some of the alumni of the institute you have chosen. You will know where they are working and this will help you understand the institutions that come for placement. Enquire about the average salary as well as the range within which most offers came," says PV Subramanyam, financial trainer, Iris.

Remember, that while you are studying, you are unlikely to receive your regular salary. So, consider all your financial commitments before you take the plunge. Can you afford to give up a regular income? Do you have any family commitments which may hinder your sabbatical? Can your spouse and children also give up their commitments? Is it possible to pursue a short-term diploma, a part-time or a weekend course rather than joining a full-time one?

Saurabh Sood, 34, who is currently studying for his post-graduate degree in construction management from Loughborough University in the UK, after working for 13 years as an architect, considered all the ramifications before joining the course. Yet, he has his doubts. "The transition period was difficult for me. I was leaving a stable job for this course, though I know it will be beneficial later. I still have mixed feelings about whether I made the right decision and what I could be earning if I had continued working," he rues.

Manish Arora, on the other hand, was very clear about his career goal. The 29-year-old has a post-graduate degree in public health from Columbia University, US, and till recently, had been heading strategy and operations at Fortis Hospital in Noida. He has left this job as he will be joining Yale this year to pursue an MBA. "I want to be well-versed in different functions of healthcare and this switch will help me understand it better from a financial aspect," he says.


How to build an education corpus

An advantage of taking a career sabbatical is that as you have been working for a few years, you will be able to build a corpus to fund higher studies. This means that the amount of loan you need to take will be smaller, which, in turn, means that you will not be burdened financially when you need to pay the EMIs. Of course, to build a sizeable corpus, you will have to lead an austere life and sacrifice luxuries, or even some necessities. "I cancelled all holiday trips for three years, so that I could save more," recounts Makkar. It's not just leisurely expenses he put a stop to. His investment strategy underwent a change too. "I put off investing in real estate. Instead, I put my money in fixed deposits so that it would grow, yet be secure," he adds.

Sood's austerity measures included cutting down on weekend trips and social outings as well as avoiding buying expensive toys for his 10-year-old son. He also gave up on his plans to buy a house as he did not want to block his money in an illiquid asset and also knew it would be impossible to shoulder a home loan.

If your career path includes a sabbatical, you need to begin preparing 2-3 years before taking it. Once you decide on a course, you will have to chalk out a financial plan and determine how you will save for the corpus. The first step is to open a separate savings account for your education fund. "You can put your savings in a liquid fund, which will allow you to withdraw the money any time," says Subramanyam. While building the corpus, take into account living expenses as well as save a little more for an emergency fund.

Arora had already planned that 40% of the $70,000 fee would be sourced from his family's income, 40% from a loan and 20% from his earnings. "I became more cautious in my spending habits. To save money, I reduced the frequency of my social outings and avoided making expensive personal purchases, such as not giving in to the urge to buy an LCD TV," he says. Makkar says, "My classmates took 80-90% debt for the course. However, like most Indians, I was averse to taking a high debt. My strategy was to fund 30% of the fee from personal savings. Later, I also received a 30% scholarship from Harvard and, for the balance, I took a loan."

"Ideally, one should not take any loan, but this can be difficult in cases where the fee is very high. You must ensure that you fund at least 50% of the corpus yourself and the rest through a loan. This is because if there is a downturn by the time you finish the course, you may not get a job easily or find one at an undesirable salary. In such a case, the high EMI could hurt you financially," advises Subramanyam.

Some institutes help students through scholarships or by providing loans at low interest rates. At ISB, where the fee is about20 lakh, students can avail of the collateral-free loans, which are availed of by 60-70% of the students.

Other factors to consider

Once you get through a course, you will need to plan for other things, such as a place to stay. "If you are studying abroad, it's better to stay in the university campus. Though this tends to be 10-15% more expensive than the accommodation outside, you won't be hassled by mundane things, such as electricity, gas and plumbing. You will also save on the transportation cost," says Chopra.

An important factor to consider is medical insurance. As you will no longer be eligible for your employer's medical cover, ensure that you buy a higher coverage. This is also why you must have a contingency fund. Medical insurance becomes more critical abroad due to the high cost of hospitalisation there. "If you've taken an education loan, you probably also have a gaurantor or a collateral. So, it's essential that you buy a term insurance plan. In case anything happens to you, at least your family should not be strained financially while repaying the education loan," says Subramanyam.

With Namrata Dadwal