Before I get started, I just want to thank Jon for giving me the opportunity to invade his awesome blog, it really means a lot to me! – AB

Some financial decisions are simple – like should you save money for retirement? Should you go deeply into debt to buy a shiny new car? Should you buy groceries for the week or spend every last dollar on a vacation? – Decisions like these ones are pretty easy, especially if you’re a regular reader of any personal finance blogs.

The Question

Where the decisions become a little more complicated (at least for me) are in the “life changing” category. My wife and I recently found ourselves facing one of these decisions when she applied for and was accepted into a PhD program (I love Mrs AB – but she’s definitely a little crazy for even considering this!). This program is full time and would require her to quit her job and devote most of the next 3 years to this program…yikes! How do you go about making a decision like that? Where is the manual? What chapter does Dave Ramsey answer this question in?

The Finances

These are all legitimate questions, and ones that we asked ourselves over and over. The first piece we looked at was the financial aspect – would it even make sense? Mrs AB’s current salary is just over $47k – we’ll round it down just to keep it easy. The PhD program lasts approximately three years, so in that time we will lose out on $141k of her salary, and that’s assuming she never gets a raise. In addition to her salary, we both have our healthcare through her employer (which is SOOOO cheap) and she gets some pretty good retirement benefits too. When Mrs AB and I were looking at the numbers, we ignored these factors, so we’ll ignore them here too – but I wanted you all to be aware of them.

Mrs AB would like to be a professor when she graduates, which should come with a salary of approximately $65k . You could definitely debate this number, but I think it’s close to the right ballpark. If you assume that her income would have increased at 2% / year (she’s on the high side for her field) and her new job will increase at 3% / year (higher education isn’t known for increasing their salaries at a huge rate), then in 5 years (2 years after she completes her PhD), we will be approximately $112k worse off. But, if you keep going and look at year 11 (8 years after her PhD) then we are actually $6k better off making the choice for Mrs AB going back to school. After 20 years, we’re at over $272k better off – so the decision keeps getting better!

I know you’re probably thinking that these numbers I just gave you are pretty meaningless. And you’re right – because there’s almost zero chance that things are going to happen exactly the way we’ve modeled them. What’s important is that we’ve taken time to look through the financial side of the equation to say – “we know that it’s going to take over 10 years to financially payoff, but will it be worth it?”. I’m a big believer that if the payoff doesn’t occur in the first few years, then it’s not worth considering due to the uncertainty that time introduces.

The Potential

In this case, Mrs AB and I focused more on our goals and dreams for the future. With this discussion, we went through my desire to leave my well compensated but low reward job, my desire for financial independence and early retirement, along with Mrs AB’s long-held desire to become a professor. As it turns out, these goals are aligned.

If Mrs AB were a professor, she would be bringing in more of the household income and we would be less dependent on my job. With that, I could slowly transition into something more fulfilling and move away from work solely as a tool to make money. Another great piece of the puzzle – vacations! Mrs AB would have more time off (she only gets 10 days of vacation right now) during school and once she’s a professor for us to get out and see what the world has to offer. Of course, the first three years would be tough with our reduced income – but it should improve after that.

The Decision

If you’ve been reading my blog, then you probably know which decision we’ve made. The “final” decision was made when we bought a house to be near Mrs AB’s school. At the end of the day, we decided that we will be fine living off one income (plus Mrs AB’s various part time jobs), and that the next three years will be an investment in the future. Mrs AB isn’t entering this PhD program because she can’t find a job or because she doesn’t know what to do next. She has been out in the workforce and decided that in order for her to make the biggest difference, this is the best next step. As her husband – I fully support this decision – from both a personal AND financial standpoint!

The End

Aspiring Blogger (AB for short) is a consultant living in North Texas with his wife and two dogs. AB blogs about life, money, and more at AspiringBlogger.com and is working hard to fulfill his dreams of financial independence, location independence, and contentment.