With the limited financing options available to NZ citizens (especially those comme moi who aren't planning to return to work in NZ), I've really had to evaluate my assets in the last weeks to figure out what the best funding cocktail would be for me.
I'm somewhat lucky in that I do own a house which has gone up in value by a good amount in the last couple of years. This means I've been able to use the refinancing option as my main funding source. Mortgage rates have dropped since I last fixed the mortgage so refinancing works in my favour as well, though it does mean I'll have a several thousand dollar break fee to pay.
For the non-finance inclined, how refinancing works is that you move your mortgage over to another bank with different (usually better) interest rates. During the move, as a new contract is being signed with a new bank, you can take out a larger mortgage than your previous one, thereby cashing out some of the equity in the property, assuming your property value has gone up. In this way, people have been able to leverage on their existing property to borrow cash for renovations, travel, buying investments, a second property....or an MBA :)
You don't necessarily have to move banks. You could refinance with the same bank, which in NZ is known as a top up loan. Refinancing with the same bank usually saves you some of the admin costs and hassles, and is definitely a route to be investigated unless the other bank offers a far more attractive deal, or your existing bank denies your request for a top up.
I'd like to share a bit of my naivety here in dealing with banks and mortgages so that "too honest" people like myself get a heads up. I tried to top up my loan with my existing bank, Kiwibank, to avoid break fees initially but my application was denied. Why? Because when you ask your current bank for a top up, they're going to ask you why you need that money. So I told them truthfully it was to pay for school fees. Of course this lead to a further question on whether this was an overseas school or local, which lead to whether I was going to study full time, which lead to whether I was still going to have my job etc. You get the gist.
I was completely honest, but I told them I'd worked out a plan whereby renting out the house would cover all the mortgage payments and my investment dividends would cover maintenance costs like rates. It was perfectly reasonable and considering refinancing the house would still make the total mortgage less than 40% of the market value, it seemed a pretty save investment to me. I mean if I was looking at this loan as an investor, I'd jump on it since the risk is really very low and demand for a house in my area is very very high.
Anyway, enough of my rant.... To cut the long story short, Kiwibank said no and "we don't really do equity cash outs these days". So I've refinanced with ANZ at much better rates through a mortgage broker, taken the break cost hit, but overall ending up being better off. FYI if you're in NZ, Kiwibank doesn't deal with mortgage brokers so you'd need to know how to negotiate better rates with them yourself.
Of course, I'm not relying entirely on the loan. After all, a loan is still something I'd need to pay interest on. So my savings are sadly going to be depleted over the next year to finance my living costs in London....for the first year. The plan after is to use my summer internship to earn most of my second year's living expenses and potentially try and work in a second internship in my second year (something quite plausible I've heard). Rental income from the house and dividend income from investments will pay the mortgage and property maintenance costs in NZ.
So that's my financial plan for self funding my time at LBS. Hopefully it helps give some ideas on how to structure your financial plan. I've done a monthly cash flow forecast for the next 2 years and also have a backup measure for if I don't get a rental income - something I would advise doing. Leave a comment if you have any other ideas to add :)
Sunday, 8 May 2016
Thursday, 5 May 2016
Saving Money Paying MBA Fees in Foreign Currency
Since the value of the NZ Dollar is much lower than the Pound, foreign currency exchange rates and how to pay MBA tuition fees are obviously of much concern. London Business School's tuition fee of £70,800 translates to a whopping $150,000+. The great thing about LBS (and most MBA programs), is that they allow you to pay in installments.
For anyone interested, LBS's fee schedule for the MBA2018 class looks like this:
For those of us borrowing/earning in foreign currency, you start getting obsessed with currency rate fluctuations in the attempt to find the "optimal" time to make the payments by the deadlines. Other than chronically refreshing the exchange rate calculation button to save on the exchange, the good news is that you can also save by using a foreign exchange transfer service instead of going through normal bank transfer channels.
Do note though that there are 2 kinds of forex services. Both offer you far better exchange rates than the banks. However, the one I'm speaking of here is the one that saves you more money - and hey, when you're about to become/are a poor student, every dollar counts!
So the service I'd like to encourage anyone needed to make currency exchanges, especially in large sums, is one whereby they own bank accounts in several different countries so that the transfer when it happens is not an international transfer, but a local transfer. The way it works is you pay the amount in your local currency to their local account (in most cases this bank to bank transfer should be free). Then they transfer the equivalent amount in the foreign currency from their foreign bank account to the foreign bank so the bank to bank transfer is free too. Where they make their money is either in charging a small fee for the transfer and also in the exchange rates as they put a slight markup on wholesale (clearly not as much as the banks do though).
In this way you save by getting a) better exchange rates and b) no unknown fees for the transfer aside from the commission/fee that the transfer services is charging you. Another benefit is that you know exactly how much you need to pay and how much your recipient is going to get at the other end without having to "guess" how much extra you might need to transfer in case the fee at the recipient end winds up larger than expected. This is especially important when you're paying bills like MBA tuition fees.
After a fair amount of shopping around, I've signed up for accounts with the following two services. Two because it's always good to have one extra for comparison.
1. Transferwise
These guys have one of the best exchange rates and charge a pretty small fee for the exchange. Plus if you sign up using this link, you'll get a free £15 fee credit. They hold the rate they quote you for 24hrs, which means your quote would not be affected by the second-by-second exchange rate fluctuations. This could be positive or negative depending on how the market is moving. You can cancel the transfer within 24 hours after you book it (before you pay them of course) if you see that the market has moved in your favour so that you can re-book with the better rate. The downside is that Transferwise only deals in limited currencies so you might not be able to use them.
2. NZForex
These guys are good for large sum transfers as they don't charge fees for transactions over a certain value (for NZ this is NZD$10,000). Plus they deal in a wider range of currencies than Transferwise. The rate you get fluctuates based on the current market rate so if you get one that you're happy with don't wait too long to book as it might change within minutes. One of the great services they offer as well is an email or text alert when the exchange rate get to a preferred level you set. This way, you won't miss out on opportunities to save due to better rates. If you sign up using this link, you'll get an NZ$50 i-tunes gift voucher when you make your first transfer.
The best way to make the most of it is to get a quote from both services when you plan to make an exchange. Then pick the cheapest :)
For anyone interested, LBS's fee schedule for the MBA2018 class looks like this:
| Year 1 Commitment fee: £2,000 Reservation fee: £6,000 Installment 1: £13,700 Installment 2: £13,700 |
Year 2 Installment 1: £11,800 Installment 2: £11,800 Installment 3: £11,800 |
For those of us borrowing/earning in foreign currency, you start getting obsessed with currency rate fluctuations in the attempt to find the "optimal" time to make the payments by the deadlines. Other than chronically refreshing the exchange rate calculation button to save on the exchange, the good news is that you can also save by using a foreign exchange transfer service instead of going through normal bank transfer channels.
Do note though that there are 2 kinds of forex services. Both offer you far better exchange rates than the banks. However, the one I'm speaking of here is the one that saves you more money - and hey, when you're about to become/are a poor student, every dollar counts!
So the service I'd like to encourage anyone needed to make currency exchanges, especially in large sums, is one whereby they own bank accounts in several different countries so that the transfer when it happens is not an international transfer, but a local transfer. The way it works is you pay the amount in your local currency to their local account (in most cases this bank to bank transfer should be free). Then they transfer the equivalent amount in the foreign currency from their foreign bank account to the foreign bank so the bank to bank transfer is free too. Where they make their money is either in charging a small fee for the transfer and also in the exchange rates as they put a slight markup on wholesale (clearly not as much as the banks do though).
In this way you save by getting a) better exchange rates and b) no unknown fees for the transfer aside from the commission/fee that the transfer services is charging you. Another benefit is that you know exactly how much you need to pay and how much your recipient is going to get at the other end without having to "guess" how much extra you might need to transfer in case the fee at the recipient end winds up larger than expected. This is especially important when you're paying bills like MBA tuition fees.
After a fair amount of shopping around, I've signed up for accounts with the following two services. Two because it's always good to have one extra for comparison.
1. Transferwise
These guys have one of the best exchange rates and charge a pretty small fee for the exchange. Plus if you sign up using this link, you'll get a free £15 fee credit. They hold the rate they quote you for 24hrs, which means your quote would not be affected by the second-by-second exchange rate fluctuations. This could be positive or negative depending on how the market is moving. You can cancel the transfer within 24 hours after you book it (before you pay them of course) if you see that the market has moved in your favour so that you can re-book with the better rate. The downside is that Transferwise only deals in limited currencies so you might not be able to use them.
2. NZForex
These guys are good for large sum transfers as they don't charge fees for transactions over a certain value (for NZ this is NZD$10,000). Plus they deal in a wider range of currencies than Transferwise. The rate you get fluctuates based on the current market rate so if you get one that you're happy with don't wait too long to book as it might change within minutes. One of the great services they offer as well is an email or text alert when the exchange rate get to a preferred level you set. This way, you won't miss out on opportunities to save due to better rates. If you sign up using this link, you'll get an NZ$50 i-tunes gift voucher when you make your first transfer.
The best way to make the most of it is to get a quote from both services when you plan to make an exchange. Then pick the cheapest :)
Monday, 11 April 2016
Why Pay to do an MBA - Quora FAQ 1
Since the start of the year I've been pretty active on Quora, mostly doling out advice on the GMAT and MBA prep based on my own experiences. It has been interesting seeing what questions Quora throws me, but most of the questions do end up being pretty similar. Thus I thought it might be useful to whoever stumbles upon my blog to pop some of my answers to these frequently asked questions on this blog.
Question: Why pay to do an MBA?
Some variations:
Of course, an MBA doesn't automatically make you successful. It merely provides you with the opportunity. What you do with the opportunities, the network and the experiences is then entirely up to you.
Question: Why pay to do an MBA?
Some variations:
- What's the point of doing an MBA?
- Is an MBA necessary or can I study the skills on my own?
- Is it worth paying to attend a top MBA school or getting one from a cheaper school?
My thoughts...
The value of an MBA isn't its educational course content. I'm not saying that course content isn't important. It's just that the knowledge from the course material are easily obtained from outside the program itself. There are tons of textbooks and cheaper courses out there on finance, accounting, operations management, marketing, management etc.
So why take on more debt to do an MBA? Why pay top prices for a top school when it would be much cheaper to do one at a much lower ranked school?
For those of us who decide on going down the MBA route and pay top dollar, it's not just the educational business skills we're after. It's usually because we're also after a combination of the following:
- Ability to leverage the brand name of the school
Prospective employers or customers don't really know you as a person, but they know top schools. Since we inherently subconsciously rely on pre-conceptions to interact with new people, their initial perception of you will be based on what they think of your CV. Top MBA programs are notoriously hard to get accepted into and getting admitted is an achievement on its own. As such, having an MBA from a top school on your CV automatically makes potential employers perceive you as a "quality" candidate before they meet you. This in turn has subconscious effects on how they interact with you so you're more likely to start off on a positive foot when meeting them
It also means you could potentially command a higher paycheck. After all one doesn't expect an MBA grad from a top school to come cheap. - Opportunities to interact with recruiters from top organisations who come to you
Attracting the notice of highly desirable firms like McKinsley, BCG, Goldman Sachs etc. isn't easy. They're also very selective about where and how they do their recruiting. Granted, you could manage to network your way in, but it's certainly easier when they are coming to you at your school and you are presented with opportunities to have coffee chats with them. These firms rely on the rigor of the MBA application process to shortlist the thousands of applications that are coming in - Opportunities to interact with top executives from top companiesTop business schools have cultivated relationships with top global companies for years. Plus it's highly likely that their alumni can be found amongst the top execs anyway. This means they are able to help students get an audience with key executives by organising various events e.g. guest speakers and conferences. Let's face it, top executives in huge global companies aren't exactly the easiest people to reach and their time is extremely precious.
- Career switchingMany senior positions seek "previous experience".This makes changing industries or job functions not easy unless you're willing to start from the bottom. The MBA program is therefore a shortcut for career-switchers to jump to the middle, thanks in part to the ability to leverage on the school name and in part to the rigor of the course.
- Instant access to a large network of successful people who are more likely to assist you with whatever you needTop MBA programs admit people who have a very high potential of being successful. The alumni network is therefore a goldmine of useful connections. You'd get far better response and assistance cold-calling an alumnus and saying that you're from the same school than an otherwise complete stranger.
- Other experiences
There are many other experiences that you get to have with doing an MBA that would be more challenging to obtain on your own. For instance seeing a problem from different perspectives due to the widely varied backgrounds of your classmates; learning to work with multiple Type A personalities on different projects; learning about different cultures through first-hand interactions; career treks....the list goes on
Basically, what you're ultimately paying for is the network, opportunities and experiences that would be difficult to obtain on your own. T
he value of the MBA program really lies in the people and not the content itself. In the end it comes down to what you want out of the MBA. Is it just business knowledge, or more.Of course, an MBA doesn't automatically make you successful. It merely provides you with the opportunity. What you do with the opportunities, the network and the experiences is then entirely up to you.
Monday, 4 April 2016
MBA Funding Options for NZ & Australian Citizens
3 months have gone by in a flash and I can't believe it's April already! This means that
In the last months of investigating various financing options, I have come to a conclusion that NZ and Australian citizens who reside in NZ or Australia have some of the most limited funding options. If you're from NZ or Australia and thinking of applying to London Business School (or another UK MBA program) in future, I'd advise planning to work in the UK in the 3 years preceding. Why? Because then at least you'll be eligible for certain loans and scholarships that are open to UK residents who are internationals.
If like me, you didn't know, didn't plan that far ahead, aren't rich and don't have a scholarship, well you're pretty screwed...your funding options are limited to the following:
So those are all the options I've managed to find. Unfortunately compared to other developed countries, NZ and Australian citizens have a bit of the short straw when it comes to scholarships and loans, and local bank loans aren't ideal. :( If anyone knows otherwise, I'm all ears!
Now to figure out my funding cocktail....
- It's only 3 months till I move to London
- I need to sort how I'm going to fund my MBA
- I've only got 3 months of cash inflow left
In the last months of investigating various financing options, I have come to a conclusion that NZ and Australian citizens who reside in NZ or Australia have some of the most limited funding options. If you're from NZ or Australia and thinking of applying to London Business School (or another UK MBA program) in future, I'd advise planning to work in the UK in the 3 years preceding. Why? Because then at least you'll be eligible for certain loans and scholarships that are open to UK residents who are internationals.
If like me, you didn't know, didn't plan that far ahead, aren't rich and don't have a scholarship, well you're pretty screwed...your funding options are limited to the following:
- Prodigy Finance loan - which is extremely unlikely to cover all of your fees and definitely not your living expenses. APR interest rates vary depending on circumstance but is around 8.34% for LBS
- There might be 1 or 2 government scholarships e.g. Chevening that require you returning to Australia/NZ after graduation (Note that LBS MBA applicants are ineligible for Chevening Scholarships but other UK 1 year MBA programs meet the criteria) - not an option if you don't plan to be returning for awhile
- Personal loans from the bank - hard to borrow much and once you convert this to GBP, it's not much. APR is also really high
- Credit card - not advisable due to very high interest rates. Also for visa applications, funding from credit cards is not considered a valid funding option.
- Refinancing property - a good option if you own property, especially since mortgage interest rates (currently) are much lower than personal loans and you can borrow a large sum potentially covering both fees and living expenses...just don't disclose that you're quitting your job to study and will no longer have any income for the next 2 years...
- Savings
- Financial help from friends and family
- Company sponsorship - Might be a bit tough to get this one if you're off on a full-time 2 year MBA program
So those are all the options I've managed to find. Unfortunately compared to other developed countries, NZ and Australian citizens have a bit of the short straw when it comes to scholarships and loans, and local bank loans aren't ideal. :( If anyone knows otherwise, I'm all ears!
Now to figure out my funding cocktail....
Wednesday, 30 March 2016
Seeing More of NZ - Easter Trip to Cape Reinga
So it struck me that with only a few months left in NZ, I've not played in my own backyard enough. How did it happen that in the last decade, I've not made time to fully appreciate the natural wonders here? As such, I planned a camping trip (or some would say "glamping" since the camp grounds had hot showers) up North to Pukenui and Cape Reinga which I've always wanted to see but never got round to.
I'm so glad I did! The views were simply amazing and reminded me of what I'll be missing when I leave. Below are some of the highlights from my trip :)
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| Earth meets sky at 90 Mile Beach low tide |
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| Sand dunes beside grassy hills at Cape Reinga |
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| Sunset sky at Cape Reinga |
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| Stunning sunset at Cape Reinga - in the center you can see the waves from the clash of the Tasman Sea & Pacific Ocean |
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| Cape Reinga lighthouse |
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| Henderson Bay - quite a popular surfers beach |
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| Matai Bay is very round so you can see waves at its mouth where the water collides |
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| You can fish off these rocks at Matai Bay |
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| Shipwreck Bay |
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| Low tide at Shipwreck Bay - Panorama |
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| River at Spirits Bay - up ahead is a stunning shell beach |
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