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Learning a new skill amid COVID-19: A cost-benefit analysis

Since the spread of COVID-19 forced most of us to stay at home, distinguishing what’s essential from the “nice-to-haves” in our budget has never been more important. 

Whereas something like toilet paper may be a no-brainer, however, our personal development and growth might look suspiciously like luxury items. 

You’ve no doubt heard the suggestions that this is an ideal time to learn a new skill. It’s been suggested or highlighted as an opportunity everywhere from the BBC to Fast Company and even Psychology Today.

The range of options to learn from the comfort of your living room has never been greater. Countless institutions have either moved programs online that weren’t available before, are offering free options, or both. There are even specialty virtual schools, like the Pandemic University founded by an Edmonton writer that connect prospective students with top authors. 

Unless you have a lot of kids to supervise or an unusually high workload, the thinking goes, there’s no excuse not to take those steps to those skills and gain the expertise you’ve long thought about. 

Except there is still one excuse, and it’s a reasonable one: Will the investment of money — or even just time — be worth it in the end? 

Some before-and-after earnings stats

Recent research into MBAs and similar business courses, for example, suggests you’d better consider the impact on your personal finances long before you use COVID-19 as a catalyst for continued education. 

According to the working paper published by the U.S. National Bureau of Economic Research, those hoping higher education will lead to a big financial payoff may be in for a surprise. The research examines individuals’ earnings before and after attending graduate school, then extrapolates their pre-graduate school earnings to estimate what those workers would have earned had they not gone for an advanced degree. 

While those who go on to medical school full-time would earn an average of 42 per cent more over the course of their lifetime, for instance, the difference for engineers who go for their master’s was only six per cent. A master’s in arts? You can actually expect a 12 per cent drop in earnings once you look at tuition costs and the loss of regular income for two years while studying, according to the data. 

Skill set upgrades come in all shapes and sizes

What the working paper doesn’t recognize, of course, is that there are myriad paths to pursue lifelong learning beyond a traditional master’s degree. 

There are plenty of courses where you can learn everything from bookkeeping to data science on evenings and weekends. You can learn complex programming languages or disciplines like user experience design through short-term bootcamps. Workshops to cover executive coaching and product management are everywhere. And even popular certification courses, like the PMP certification, or online marketing courses, are available from your kitchen table. 

Like all research, the study is also unable to reflect the unique characteristics of your educational background, your current job, your current salary and your aspirations. You can use such data to inform your thinking, but not to determine your ultimate decision. 

Here are a few standard economic calculations that you could tweak to enhance your cost-benefit analysis in a way that will make sense, not only during COVID-19, but even as your life changes once we’re all able to roam freely again: 

  1. Opportunity Cost

If you spend money on a course, what won’t you be spending it on? Obviously, you need enough money to meet your basic needs like food, accommodation and your monthly bills. 

Beyond that, though, what repairs on your house or car might get put off if you were to take a course? What part of your entertainment budget might need to be adjusted to help pay for learning a new skill? 

Bear in mind that you don’t have to treat opportunity costs as a negative. What money might you be wasting on things you don’t need that could be funnelled into learning something that boosts your self-esteem as well as your career prospects? 

The same goes with “soft” opportunity costs like time. You might not be taking time off work but you’ll be spending some number of hours studying. You might not be as available to your friends for a while, but you might also make new contacts that turn into equally strong relationships. 

  1. Debt To Income Ratio

Even if a course is offered for “free,” there could be debts acquired in terms of materials you have to purchase in order to take the course or to complete course projects. If you see continuing education as a stepping stone to a promotion or a new, more lucrative career, you’ll want to consider how quickly you can pay back your investment. 

This where setting clear and actual goals that align to learning a skill can help. Instead of seeing the learning of a new skill as a goal on its own, what do you really want to do afterwards? What kind of timeline is achievable? 

What other debts might accrue along the way? If the course helps you earn a particular accreditation or certification, will you need to renew it, and if so, how often? 

If you’ve already applied for a mortgage, you probably already know a lot about which percentages place you into a low-risk versus a high-risk category. (A debt-to-income ratio of 43 percent is typically the highest ratio a borrower can have while still qualifying for a mortgage.) If the goals associated with learning a new skill can be quantified, you should be able to do something similar in determining whether taking a course puts you at risk in any way. 

  1. Lifetime Value (LTV)

In the finance industry, LTV usually stands for loan-to-value, or the ratio of a loan to the value of an asset you’ve purchased. The technology industry, on the other hand, uses the same acronym to talk about the lifetime value of a customer, long after they’ve decided to become one. 

If you sign up for a streaming music service, for instance, the first payment of your monthly subscription is obviously of value to the streaming music provider. If you keep on listening for months or years, however, your value (and the cost associated with losing you as a customer) goes way up. 

Lots of companies look at the lifetime value of customers as a key data point, but we seldom use it as consumers to think about the investments we make in ourselves. 

Will learning a new skill make you more engaged in your current job, for instance? Will you be more motivated and productive? Will your confidence reach a point where you will take on new challenges, try for a job at another company that might once have seemed off-limits? 

Perhaps most critically, will learning a new skill now improve your ability to continuously learn and stay marketable in your career? These seem like intangible qualities, but they represent potential long-term value that deserves consideration. 

The last thing to remember is that you don’t have to conduct a cost-benefit analysis out of thin air, or on your own. Many course providers have already gone through these kinds of exercises that take a wide variety of student scenarios into account. Talk to them — as well as any instructors or alumni you can — to help provide additional information that lets you build the strongest business case for upgrading your skills possible.