Budgeting for London Living Costs

When thinking about funding, I've found that it's easy to forget though that aside from the huge fee for tuition alone, there's 2 years worth of living costs to work into calculations as well.

So how much do you really need to live in London? I've been doing a fair amount of research to estimate this, after speaking to friends who live in London, LBS alumni and current LBS students. Obviously this is highly dependent upon your lifestyle and what you plan to prioritise with a limited budget. I'm just going to share here what I've gathered so far.

Speaking to alumni, something like £300-350 per week is a pretty reasonable budget as living costs. I thought this sounded quite good so I've been using this as the basis for my living cost budget.

Of this budget, the bulk of it would naturally go towards rent. Especially since I plan to live close to school (which everyone advises is a good idea at least for the first year). I did some research on rentals and you can get a room in a 2-3 bedroom apartment in St John's Wood, Marylebone and Maida Vale (suburbs near LBS) for £230 per week, all bills inclusive. I've thus made this my max price for looking for accommodation.

I've heard from friends that food in London is cheap - if you cook it yourself. Basically what this means is that groceries are cheap, but eating out isn't (expect £15-20 at an average restaurant). Friends have said that groceries are cheaper in London than in Singapore. For instance, you could get 3 whole chickens for £7 (though that is a lot of food for one). I'm not sure if I'll find time to cook properly much, but putting together sandwiches and the occasional cooked meal for lunch is doable. Mind you, I'm not a very big eater so I'd say my food budget tends to be on the leaner side. Current students have also mentioned that every now and then corporates sponsor a reception or event with drinks and nibbles i.e. free food that helps cut down on costs ;) I've also heard that it's not unusual that some students attend these events solely for the free food...so you do what you gotta do.

Entertainment is extremely varied depending on how social you are and how much alcohol you're looking to consume. Despite having worked in the alcohol industry, I'm a very light drinker so I'm not expecting to have very high entertainment costs.

Summary of my expected general weekly budget

• Rent in shared apartment - £170-190
• Bills - £40-50
• Transport (should be low if you live close to school) - £10
• Food - £40
• Entertainment (depends on how much you party/drink and I don't drink much) - £40-50

Self Funding the MBA

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 :)

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:

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 :)

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

1. It's only 3 months till I move to London
2. I need to sort how I'm going to fund my MBA 
3. I've only got 3 months of cash inflow left

And in case anyone is wondering, no I still don't have a scholarship.  :( I am hoping though that May will bring forth some good news when LBS does its second round of scholarship reviews for Round 1-3 admits. That said, I really can't afford to count on it.

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....

Scholarship Results for London Business School

So apparently scholarship announcements have been going out over the last 2 weeks since LBS handed out acceptance offers. Not having heard from them, I thought I'd better confirm this on the slim chance that maybe I didn't hear from them because they were a little slower this year.

Unfortunately, that wasn't the case. I was told though that while majority of the scholarships had been given out to other recipients, there was another round of scholarship announcements in May, when all offered candidates from Rounds 1 through 3 will be considered once again. I also learnt that as a student on a full-time MBA in the UK you are allowed to work 20 hours per week in term time (realistically feasible from terms two or three onwards) and full-time in vacation periods.

I must say it is quite disappointing to not have received a scholarship because the numbers after you convert British pounds to required NZ dollars do not look very palatable! I have been looking at currency forecasts though and the British pound is predicted to go down in value over the next few months so fingers crossed there.