# Education Sabbatical after 10 yrs work Experience : Economics Lesson

Its always difficult choice to go for education after 10 yrs work on field.
What are the opportunity Costs ? (Must read in conclusion part )

Its  not Only your 1 year Salary + 1 year fees:
suppose In India after 10 yrs you have constant above avg growth in IT sector then what would be hierarchial growth to next level in IT

• 1-4yrs  yrs  programmer/software Engineer (avg sal India Euro 400 or 30,000 INR)
• 4-6yrs  Sr software Engineer ( 550 euro pm or 40,000 INR)
• 6-8yrs Team Lead ( 800 euro pm or 60,000 INR)
• 8-9 yrs  Project Lead / Architect ( Euro 1200 pm or 90,000 INR)
• 9-10 yrs  Project manager/ Technical Manager/ Sr Architect. ( 1600 Euro pm or INR 120,000 )
• 10-12+ yrs  Solution Architect (….)

Cost of now Earning what you were Earning depends on level/ yrs of experience you were having.
So your cost will include : Opportunity cost of forgone Work @ 10 yrs it would be around 23,000 Euro + Real cost which you are incurring now (24,000 euro)= 47,000 Euro
Now What can you think of after spending 2 yrs on learning what would be your next company salary ? (position would not matter)
Senario A:let us suppose you go back to same level of 23,000 euro per annum.

Senario B:or due to your experience and new learning extra knowledge you get suppose 40,000 Euro per annum.
Senario A payback period:
Loan return possibility:
(23,000 Earning – tax @20% (suppose avg although slab are different))- Expenses(avg 600 pm) – Emergency,insurance other Expenses.
= (23,000- 4,600 ) – (600 X 12= 7,200) – (1,200)
=10,000 euro (per year)

Amount to need to return to Zero  (Avg pay back period is 5 yrs)
47,000 Euro + interest(10% per year)=
year 1 = 47,000+ 4,700  – 10,000 (max you can return) = 41,700.
year 2 = 41,700 +4170 – 11,000 = 34,870
year 3= 34,870 + 3487 – 12,000= 26,357
year 4= 26,357 + 2700- 15,000= 14,057
year 5= 14,057 + 1500- 15,000= 0
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So @10% interest and hike of  8% hike every year after 5 yrs you are back to same level.
Suppose you go back to third world like Inida ( income tax slab is 30% not 20% )
and rate of interest is 15% not 10%.
23,000 Euro – tax @ 30% – Expenses.
23,000- 6900 – 6000= 10,100
This senario:
year 1 : 47,000 + 7050 – 10,100= 43,950.
year 2: 43,950 + 6592 – 12,000=38,542.50

year 3: (1+0.15) X 38,542.50- 12,000= 32,323

year 4: 32,323 X 1.15 – 15000 = 22,172
year 5: 25498 – 15,000 = 10,498.
year 6: 12,078 – 12,078 – 0

Here avg time required back to zero would be 6 yrs.

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Senario 3 @ if your Education gives you hike to next level salary @ 45,000 after tax it would be 30,000 @ 12% and rest 50% = 3600+7500= 11,100

Return of Loan amt available: Income – tax – Expenditure
= 45,000 – 11,100 – 7,200 = 25,000.
year 1 : 47,000 X 1.15 – 25000 +7,200= 35250.
year 2: 41687 (year1 X 1.15)- 25,000+7,200 = 23887.
year 3 :(year2 X 1.15)=27470 -25000=2470.

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Actually Education benefits company and the country where you work more than you see accumulation of taxes over the years:

Calculations: In addition to income tax, 22% tax on spending you have done.

last scenario best case you are back to zero but company got better labour country got Income tax: 11,000 X 3.2 = 35,200 as taxes. (All taxes goes into benefit of local economy)
+
Tax on spending @22.5%= 0.225 X (7,200 X 3.2) = Euro 5184.

Total Tax amount paid to government after 3.2 yrs of work= 40,384.
What you have in pocket after 3.2 yrs  of spending and working hard= Zero.
So after 3.2 yrs of work + 1.5 yrs Education: practically you will start Earning.
Only 4.7 yrs after.

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