Going Back to School: Evaluating Financial Tradeoffs

So much of our financial lives are a result of decisions we make and how they either directly or indirectly impact our finances. Sometimes our hand is forced into making a financial move, but often we come to crossroads. We can choose which path we want to take and factoring money into the equation is a necessary part of that. Here are some things to consider when you’re calculating tradeoffs.


The first step of evaluating which choice you should make is to identify all of the alternative available. Actually take the time to sit down and list out your options. For instance, if you are considering going back to school so that you can pursue a new career that you think you would enjoy more, your options might look something like this:

(A) Stay in current job

(B) Find new job without a new degree

(C) Go back to school to pursue new career

For option A, you probably have pretty good idea what the outcome would look like, but for the latter two options, some research might be needed to decide what’s right for you.


This is where estimating the costs and rewards of your alternatives come in handy. Write each options at the top of it’s own individual sheet of paper. Then fold that paper vertically into two columns. Title the first column “Costs” and the second column as “Rewards”. Then you can start to list out what you would have to expend to make that alternative happen and what you would get back in return. Continuing with our prior example, the identifiable costs of going back to school may be the costs of tuition, books, living expenses, interest on student loans, etc. In addition you will be giving up time and the earnings that you would have made if you had spent that time working in your current job or in a different job that didn’t require a new degree. What would you have done with those earnings had you not chosen this option? List that under costs as well because those are the sacrifices or opportunity costs you would make with this alternative.

On the other side of things, your rewards should include things like your increased earning potential and what you would do with that additional money. Make sure your research includes full estimates of what you would need to pay out and what you expect you would be able to earn in return. If you’re struggling to estimate these costs a financial professional might be able to help.


One thing you should avoid including in your calculation of financial tradeoffs are sunk costs. Sunk cost are essentially costs you have already paid regardless of whether you choose that alternative or not. For instance, if you already paid for a Bachelor’s degree in accounting, but want to go back for nursing school, the cost of your accounting degree shouldn’t be factored into the cost of your alternatives because it is essentially the same for all alternatives and that past cost shouldn’t continue to influence your future. However, there is a big exception here. If you are still paying money towards those costs (i.e. still making student loan payments) you should include this in your costs for each alternative. You need to make sure it’s factored in because you want to be able to prove out that the benefits and rewards will outweigh the costs. If you fail to factor in money you still owe, you could end up taking on more debt or risk than your finances can support.


Now that you have a good understanding of the finances behind your decision making, it’s time to factor in the human element. It would be great if we could just run the numbers, see which one makes more financial sense and move forward with that alternative, but that doesn’t always set us up for success. Here’s where you really have to do some soul searching and think about what the next 5, 10, 30 years might look like with each alternative. If you stay in your current job will you always be unfulfilled and miserable? If you switch to a new career will the satisfaction from that job be enough to outweigh the financial costs? Often this is the hardest part to understand because you can’t always predict how your life will be or feel in one year let alone 30. If you can, reach out to others that have made the decision you are considering making and collect as much advice as possible.


Life can change quickly, so don’t feel like any path is permanent. If things aren’t working out the way you expected, it’s never too late to make a change. Evaluate your options frequently to determine if they are still the right ones for you today. There is no shame in changing your mind.

Written By: Lindsay Dell Cook

Lindsay Dell Cook is a CPA, finance writer, and founder of Budget Babble. She lives in Philadelphia with her uber supportive husband and adorable daughter. When she's not working, she enjoys spending time with her family, taking their lovable mutt for walks, or reading a good book while buried under a pile of cats.