Photo by Ryan Finnie

In case you missed my recent ten timely tips newsletter… a special follow-up to career changers using 529 savings to cover back-to-school expenses: computer technology, related equipment and/or related services such as Internet access now count as qualified expenses. i.e. You can use tax-free dollars distributed from 529 plans to pay for these items.  The catch: This feature expires at the end of 2010.  Be sure to review the details and plan your spending accordingly.

Last post, I promised to follow up with one more story on managing the costs of returning to school for graduate study.  In that post, I described some strategies I used to minimize the costs of getting my MBA. One of the points I made was that, although time = money, sometimes the equation shifts, so that time actually equals more than money. And that was certainly true for me when I decided in 2001 to go back to school yet again, this time to pursue CERTIFIED FINANCIAL PLANNER™ certification, which would allow me to make the major career shift I had in mind.

In deciding NOT to work full-time while getting certified, several factors came into play.  First, I was pretty burned out after 4 years of working in the dot-com maelstrom.  Plus, this was a scant 4 years post-MBA, so the struggle of trying to study part-time while working full-time (translation: no life) was still fresh in my mind.  And now that I’d finally found the answer to the question “What do I want to be when I grow up?”, I just wanted to get on with it, frankly, as opposed to dragging it over several years.

A few other factors that enabled this decision:

• While not cheap, the costs of CFP® certification are relatively reasonable compared to other professional programs.
• While I could have kept the actual dollars invested lower by learning the materials via self-study,  I decided it was worth the extra money to pay someone for formal classroom instruction.  As a trained engineer who might tend towards overengineering when left unchecked, I know myself well enough to realize that externally imposed deadlines would be valuable far beyond the outlay of cash required.
• There was another absolutely critical piece that made this work…  At the time (and maybe even now), only colleges 45+ minutes drive from my home even offered this curriculum, and most did so in the traditional “one class per week for a full semester” mode.   Northeastern University, however, was unique in offering what I called crash courses, where the instruction of an entire semester was delivered in 2 full days over 2 full weekends at their more easily accessible suburban campuses.  Although this format was probably targeted at full-time employees who could only attend on weekends, it was also the perfect way for me to fast track my certification, while also avoiding the commuting costs and wasted time (= money!) of driving into Boston every week for probably 2 or 3 years.
• I did some consulting work, using skills from my previous life, but in the new industry.   Not only did this help defray the costs of living and tuition, but it was a major coup in another, perhaps even more important way.  That is because it required me to discuss fee-only financial planning practice models with a variety of experienced members of the National Association of Personal Financial Advisors (NAPFA), to whom I otherwise wouldn’t have had access.   Talk about fast tracking an education!  This work was absolutely integral to helping me understand what my desired career change would take, and how I would want to run my own practice when the time came.  (A big shout-out to Warren Mackensen and the rest of NAPFA for this tremendous opportunity!)

As I look back over this post, I realize it is not so much a tale of controlling costs, as it is of matching the time/money equation to the wanna-be student’s needs and resources.  Something tells me that might be worth a lot more when the final tally is made.

But even going back to school only twice can add up to a whole lot of tuition and book money.  So I thought I’d share how I kept my education costs to a minimum.

The first time I went back was about 8 years after undergrad.  At that point, the only career direction I knew for certain was that I didn’t want to be the engineer my undergrad degree qualified me to be, and I’d already made the shift to engineering manager at a small company in Marlborough, MA.  (Any Viewlogic alum out there??)  I was curious to learn more about management but not sure I’d like it enough to take on the financial risks (i.e. no cash in, lots of cash out) that going back to get an MBA full-time would entail. 

Fortunately, my company offered tuition reimbursement, and Clark University offered classes at a satellite campus only 15 minutes away.  So I went part-time, and found I kept wanting to go back for more.  It was an absolutely ideal arrangement… for the first few years, until I realized that by the time I finished the degree, I would be eligible for Social Security.

In the equation “time = money”, sometimes there comes a point when time equals more than money, and I had reached it.  So I applied to finish full-time, Clark generously offered some scholarship money, and I was out of there — degree in hand — about a year later and not that much poorer.  Honestly, I don’t even remember what the whole thing cost, but I can tell you it wasn’t even 1/10th of what I might have paid if I’d gone full-time and footed the entire bill.  Best of all, I didn’t end up with any student loans that would be sure to dog me long after I’d forgotten how to use the Black-Scholes model.  (Don’t ask.)

The moral(s) of the story:

• If you’re not sure what you want to do when you grow up, find a way to test drive your interests before committing to an expensive education program.
• Look around to see who else might have a stake in you learning.  In my case, my company benefited for several years as I was attending Clark and applying my newfound knowledge (“So that’s what they mean by profit!”) back at the office. 
• Don’t assume schools won’t help an older student.  If you have the characteristics they’re looking for, you might be just get a nice $urprise.

Now, if you’re any good at math, you’ve probably already figured out that this all happened more than a decade ago.  Since then, college costs have gotten exponentially higher as purse strings at companies and colleges have gotten tighter.   But I know from talking to friends, family, clients, and our “go to” college planning expert Todd Weaver that opportunities to get smarter for less still exist.  With costs as forbidding as they are today, it’s likely to be worth your while to do a little digging to find them. 

(Next up:  Student prophecy II, The Sequel — Back to school again, this time to learn what a financial planner needs to know.)

Photo by wohnai

So you’ve probably heard plenty about using 529 plans to save for your kids’ college costs, but what about you? If your desired career change requires a return to school, you can open and fund a 529 to get a tax break when paying for your own “qualified education expenses at an eligible educational institution.” (Click here for important details on what that IRS-speak means.)

Not 100% certain you’ll go back to school? That’s where the ability to change the 529 plan beneficiary comes in handy.  If you fund a 529 and then end up not needing some or all of it, you can switch the beneficiary to one of your kids or another qualified family member (see IRS definition) without income tax consequences.

Conversely, as suggested by the definition of “qualified family member,” if your child is the beneficiary of a 529 plan containing assets he or she won’t use, you could change the beneficiary of that plan to yourself and use it toward your own education.    But why wait?

College planning expert Todd Weaver of Strategies for College, Inc., points out that there may even be instances where you would want to use your child’s 529 plan for your education, even before he hits college and starts using it.  One example would be a case where a return to school puts the parent in a position to change to a career with significantly higher salary, thereby making the kid’s college bills — by the time they are due — much more manageable. 

(Caution!  While there are no income tax implications associated with a qualified 529 beneficiary change, such a change could trigger gift tax implications, if the amount transferred is high enough.  This article explains how that works. Note that, since the article was written in 2005, the annual gift tax exclusion has gone from $11,000 to $13,000 in 2009.)

Photo by Nic's events

If your career change requires you to go back to school right around the time another member of your family is also headed off to college, timing it such that you’re both in school at the same time might increase your financial aid eligibility. 

For example, in an earlier post this month, I linked to an article about a dad who, after many years producing TV ads, wants to become a physician’s assistant — a career change requiring him to complete a 2-year degree program.  While his kids are still preschoolers, if one or both of them happened to be approaching college age, he might find that syncing up his return to school could make education costs more affordable.   

No doubt, having a primary breadwinner out of the work force at the same time kids are in college is a daunting prospect for many families, out of the question for others.  But with the way recent economic events have been affecting job prospects, it might not be as unlikely a scenario as an initial glance would suggest.  In fact, with the job market so unstable, it might end up being the best course of action for some.

Still, if you take this path, know that while the strategy described here absolutely can work, getting it right can be a tricky proposition, according to my conversations with college planning expert Todd Weaver of Strategies for College, Inc.  That’s because financial aid eligibility is determined on a “per institution” basis, and some are more flexible than others.  In particular:

• Many colleges only factor a student into the financial aid equation if he or she is pursuing a degree-based or certificate-granting program.
• Some insist that the student be attending on at least a part-time basis, typically 6 credit hours per semester.  (i.e. One class a semester usually doesn’t cut it.)
• Some require “in room” instruction, whereas others will also consider online programs.
• “For profit” schools may be less generous with scholarships, and lean more toward student loans.

Todd also confirmed my suspicion that, if you save up enough cash to support yourself during time out of work, that might work against your financial aid eligibility, as would applying so late in the college admission process that financial aid awards have mostly already been used up.  BUT nothing is carved in stone, and you might be surprised at what you’re eligible for.  So what to do, if this opportunity looks like it might apply to you?

• Visit the Expected Family Contribution (EFC) calculator on the Strategies for College site to run the numbers and gain some insight into how your family’s financial aid situation might play out for a few “What if” scenarios.
• Always, always, always submit the Free Application for Federal Student Aid (FAFSA), even if you are convinced you are ineligible.  As we’ve seen too often in the last year, circumstances can change dramatically in the blink of an eye.
• Plan far enough in advance so that you meet the financial aid deadlines with plenty of time to spare.

Or if you’ve been considering a change to a career in the government or nonprofit sectors, also check out the Public Service Loan Forgiveness program, which offers relief on federal student loans to people who work in a wide range of “public service” jobs.

Have you ever heard the phrase, “you can plan all you want, then life happens?” That’s exactly what happened to my family in the past year as I made the transition away from “W-2” payroll to self employment.
I am entering my second full year (fifth if you count my part-time “ramp up”) of my career as an independent college counselor. While my wife and I planned to use one of Sherrill’s phrases, “Break Away without going broke,” the reality is that even the best laid plans can come undone in the blink of a recession!

Approximately five years ago I made the conscious decision to plan my escape from Corporate America in order to return to a prior career which I loved: college and financial guidance. I truly enjoyed working with students and their families when I was part of a financial aid office at a private university twelve years ago. Like many other career changers, I felt the “pull” to get back to a more meaningful (to me) career after the events of September 2001 and after spending more than enough time behind a computer, on the phone all day long.

With family and the new career located in New England, my wife and I made the move from Philadelphia to Boston with one child in tow and another on the way. We had planned on saving money for another 18 months after relocating to Boston. That timetable was going to allow us to make our way through the expected start-up phase of little to no income. Then to our delight, we soon discovered that our household was going to increase 50%, with twins! While this event might have delayed others, we continued to press for meeting our self-imposed deadline so that I could make the career switch on target.

While my wife and I both lived frugally we knew that when the eventual separation from my “day job” came along, we might not enjoy our current income stream for a year or two. To plan for the career change we fully funded:

• 401k’s
• Roth IRA’s
• Coverdale accounts for our first 2 children
• Set up a home equity line of credit for emergencies
• Funded our cash reserves to cover nine months of living expenses

I began my new career on schedule and fortunately, was able to be a stay-at-home dad for a few months before the launch. Little did we know that a month before my wife was to end her maternity leave and return to her part-time remote work situation, her job would be relocated back to headquarters. In order to keep the position, she was informed she would have to move. Well, that didn’t fit the plan at all!  Talk about a BUMP in the road!

I’m blessed to have a supportive wife and family that are helping with the career transition that is now beginning to show some fruit from the labor of the past year. Some of the many ways that my family of six is coping with the career change include:

• My amazing wife and her ability to care for the four children and allow me to put the time and effort into my work. (She’ll be starting the job search for herself soon so that’ll be another interesting twist to deal with…)
• Keeping a vigilant eye on the cost cutting and savings on the home front
• Continuing to talk about my career with anyone I meet – because you never know who they may know! What “location, location, location” does for real estate, “network, network, network” does for the career change!
• Working with a great team of colleagues who have been wonderful mentors, advocates, and friends throughout this process

What’s kept me going most of all, however, have been the happy clients who continues to validate that I made the right choice in moving to a career where I know I am making people’s lives less stressful and making a meaningful difference for them.

So I’ve enlisted the help of  Todd Weaver of Strategies for College, Inc. as our “go to” college planning expert for the month.  If this name sounds familiar, it’s because he guest blogged just last week in this post about how parents can request a financial aid review from their kid’s college if their financial situation changes (e.g. pink slip.)

Watch this space this month for more from Todd and me on financial planning for career changers with “back to school” goals.  As a extra bonus, Todd will be sharing his own career change story with us later this week.  In the meantime, this article from Money magazine, Can you afford a career switch? How a family will pay for Dad to go back to school, has some good ideas to get you started.

Being on the receiving end of the news that — along with much of the company — I’d been laid off, going from essential contributor to essentially expendable in a matter of minutes, was a gigantic, world-view-shifting wake-up call.  Well, OK, I’d been inching towards an escape from my position, company, industry… for quite a while, but somehow I always imagined the timing would be up to me. Ha, sweet kid!

At first, I was none too pleased to be among “the chosen,” but over time, I began to see this as one of my lucky days.  Frankly, were it not for being shoved, I don’t know how long it would have taken me to muster the courage to jump off this particular cliff. Not usually one to “jump and grow wings on the way down,” I am thankful for the nudge.

The other thing that allows me to be grateful is that, on some level, I had been preparing myself for a shift for quite some time.  In fact, it would be fair to say that, before I even finished my Electrical Engineering undergrad degree, I already wanted to do something else.  Problem was: I didn’t know what the something was.

In a classic case of not seeing my own nose in front of me, it turns out that “something” must have been financial planner all along.  And I now know that because (consciously or no) I had already been doing many of the things that a financial planner would recommend to a prospective career changer:

• Spend beneath your means
• Avoid “bad” debt
• Save money from raises & bonuses
• Take advantage of employee benefits
• Invest Escape Fund (i.e. money for the transition) conservatively

There was also plenty I woulda, coulda, shoulda done, but didn’t. For starters:

• Review insurance coverage, especially health insurance
• Research career options
• Get a home equity line of credit

As Pink Slip Lemonade month continues, look for details on these and other ideas for prepping yourself for a period — voluntary or otherwise – of earning less, as well as Parts II & III on what to do in the immediate aftermath of layoff, then later once your transition is complete.  Happy Trails!