Really? Out of work? Starting a new career with little to no income for the near future? Surprisingly, those circumstances could actually work in your favor. Here’s why…

College financial aid is based on the income tax year prior to the year the student enters college, i.e. the “base year”. Colleges will ask for that year’s data when putting together your student’s financial aid award for their freshman year. If it so happens that your income is low that year due to a career-change (or for whatever reason), you may be putting yourself in a more favorable position for need-based financial aid.

If you do the math, you will find that, for most kids, this “base year” begins midway through the junior year.  Translation: If you have a college-bound high schooler who is a junior this year, you have less than 2 1/2 months – until December 31 - to get your financial aid ducks in a row, so to speak.  So set a good example for your kid, a.k.a. prospective college aid recipient, and don’t wait until the last minute to do your homework!

Todd Weaver is a Senior Associate at Strategies for College Inc. who specializes in college admissions counseling and cost management. He writes a blog called College Search Game Plan and can be reached at tweaver@strategiesforcollege.com.

But even if you are 100% sure you have a “can’t fail” idea for a business, actually carrying the whole thing out is scary.  As any retiree will tell you, saying goodbye to the vaunted “steady paycheck” is a big step, and probably especially so in this still uncertain economy. 

Does that mean you shouldn’t do it?  Heck, no.  As the events of the past decade have played out, “employment stability” appears to have evolved into a rather quaint notion, evoking feelings of nostalgia even for many with so-called full-time permanent jobs.  So it could well be that the bigger risk lurks in staying at your current job. 

Risks, risks everywhere.  So what do you do?  Start by reading this:

In the article A top 10 list for all the risk-takers among us, Boston.com’s Scott Kirsner offers up some excellent ideas for mitigating the risks of taking the leap from employed to self-employed.  Check it out before you stop by your boss’ office to say “buh-bye”…

Photo by Sharon Harvell

Could it be that the long-awaited bluer skies are finally returning?  The stock market, holiday spending, and other economic indicators are up. Most welcome of all perhaps, according to the latest report, unemployment is down. 

If you are one of the lucky beneficiaries of this nascent uptick in hiring, congratulations!  Before you get too caught up in the day-to-day demands of full-time employment, check out my thoughts and others’ on how to make the most of your new job – financially speaking — in this article Newly Re-Employed Need To Revisit Financial Goals by CNBC’s Shelly Schwartz. 

Founder of Aspire!, Randi Bussin

Randi has changed careers twice, working in high tech, higher education, and is a serial entrepreneur.  She has an MBA from INSEAD and an MA from Tufts University.

She was recently voted one of 100 Personal Branding Experts to Follow on Twitter in 2010.

Those from the world of software development know that Beta test is the last phase before a product is officially released, and its purpose is to test drive the product under conditions that mimic as much as possible the way it will be used in real life by real customers.  The kinds of testing that come prior to Beta — unit test, Alpha test, etc. — are typically done internally by the company, and they are critical to getting the software to the point where it is even usable by real customers.

BUT it turns out that, no matter how bulletproof the software development team thinks they’ve made the product, there are always important issues uncovered once a Beta version of it gets into customer hands.  When these problems are found in Beta testing, they can be fixed BEFORE the official release when expectations and stakes are not as high as they would be in production use.  Yes, as all software users know, pretty much every piece of software gets out the door with at least some minor bugs remaining, but those that are thoroughly Beta tested are less likely to result in wildly customer-unfriendly behavior such as data loss, repeated crashing, and blue screens of death.

And this is an important lesson for career changers, retirees, and others whose plans include a change in employment compensation: try before you buy.  Or to put it another way, Beta test your post-transition financial plan as much as possible BEFORE you say goodbye to your regular paycheck.  For career changers and software development teams alike, it is easy to get caught up in the excitement of the new, the feeling of having already done so much and come so far, and the desire to just “get’er done”.

When it comes to career change, including retirement, this often shows up as an overly optimistic view of how much it is possible to reduce living expenses, in order to pull off the desired change.   I read a study a while back that suggested most of us can reduce expenses by 10% without a significant hit to lifestyle, but it’s a really good idea to verify that’s true, not to mention sufficient, for you while you still have all your options open.  Here’s how:

1. Download my free Cash Flow Worksheet with before, during, and after columns, as well as hints on categories where career changers are likely to see fluctuations.  First, determine your current income and expenses, which will help you with the next step: making estimates for the “during” and “after” columns.
2. If your post-transition budget doesn’t balance (i.e. more cash flows out than in, and the assets intended to fund this change can’t make up the difference), dig into more detail and identify additional areas where you think you can reduce spending, being as realistic as possible.
3. Now Beta test your plan.  In other words, try now, while you’re still gainfully employed, to spend at the post-transition level to see what “bugs” might be lurking.   While you won’t be able to test every change, e.g. lower commuting costs, you should be able to learn a lot just tracking the categories you can simulate, e.g. spend less eating out.
4. Fix bugs, and retest until the plan is ready for “production use”.

Even if the 1.0 version of your spending plan is perfectly achievable, it sometimes takes a while to make a downward shift in spending.  This Beta test strategy not only gives you that time, it has the added bonus of further padding your nest egg, er, goat pen, should a little extra cash come in handy.  And doesn’t it always??

Randi has changed careers twice, working in high tech, higher education, and is a serial entrepreneur.  She has an MBA from INSEAD and an MA from Tufts University.

She was recently voted one of 100 Personal Branding Experts to Follow on Twitter in 2010.

First, readers of the blog have probably heard me say it before: I believe that people need to adopt entirely different money management strategies in order to be successful when they make the leap from full-time employee to self-employed.  (See related posts.) But to my knowledge, the Freelance Finance system explained in The Money Book is the first complete personal finance system for “people with not-so-regular jobs”. So I’m thrilled to have a one-stop-shop resource I can recommend to my self-employed clients.

I’m also pleased to have played a small part in the project coming to fruition, and to be quoted in the book (see page 196!) When Joe contacted me about a year ago during the research phase of the book, I was more than willing to share what I’d learned, both as a self-employed and a financial planner, if — I must confess — a tad mystified by the monkey metaphor. (Read the book! Or check out the March 2010 edition of The New Means News, coming soon.)

Finally, it’s especially gratifying to have been involved in a project that made Liz Pulliam Weston’s list of 5 Money Books That are Worth Every Penny in her recent MSN article. I’ve been following — and continually impressed by — Liz since she spoke on credit reporting at the NH Jump$tart MoneySmarts Teacher conference a few years back. Congratulations to Joseph D’Agnese and Denise Kiernan on having earned such high praise for their work shedding light on this topic, which grows increasingly important as the ranks of independent workers expand.

This is exactly the kind of financial planning I recommend prospective career changers do before making a transition. Doing an analysis like this is even more important if your transition is likely to result in a lower annual income for life, as for the woman profiled in the article and the client I discussed in this recent post (4th bullet).

That’s because:

1. it can determine the viability of the proposed change with much less risk than a “jump and grow wings on the way down” strategy;
2. it can pinpoint any gaps (e.g. here, the need to earn $12,000 a year and increase portfolio diversification) and opportunities (here, a Roth IRA conversion) ahead of time.

Having this information and acting on it — making the most of her money through this time of change — could well mean the difference between a career change that sticks and an unwelcome return to the salt mines.

In my article Survival Skills: Man vs. Wild Economy in last month’s NEW MEANS News, I discuss how cash is the water that enables an unwitting participant in a wild economy to survive.  For those in or perilously close to the land of the laid-off, the case for cash cannot be overstated.  Without reserved cash (water) to get you through a dry spell when access to a fresh supply is cut off, the system starts to break down, and things start to get ugly, in a hurry.

So if you do one and only one thing to thing to survive the wild economy, my recommendation would be this: calculate how much money you’d need to cover living expenses through a period of unemployment, and pull out all the stops to fill up your Emergency Fund with that amount. 

• How to calculate?  Use the New Means Cash Flow Questionnaire, mint.com, Quicken, MS Money, or pad/pencil to figure out what you need to pay the bills each month.  (Don’t forget those paid annually or semi-annually like real estate tax.)
• How long?  Research how long it’s been taking others in similar situations to find new work.  Check both online and locally, perhaps via job search networking groups such as Network for Work.
• How to save?  Read the Survival Skills article for ideas on how to scrape together cash, even if you think you’ve exhausted all the possibilities. 
• How to invest it?  Put this money in the safest, most stable vehicle you can find: a savings or money market account, maybe a portion in a CD, preferably all FDIC-insured.  Yes, it will earn a paltry return, but making a killing is not its job.  Being around if and when you need it is.

Then, once back in a safer, more predictable environment, you can put this precious ingredient (cash/water) to more interesting use – as a key component of Pink Slip Lemonade.