A pay cut, whether big or small, can catch you off guardâand throw your finances into disarray. While a salary cut is different than a layoff, it can leave you feeling just as uncertain.
How do you deal with a pay cut and deal with this uncertainty?
There are strategies to help you navigate both the emotional and financial challenges of this situation. One key element? A budget. Whether you need to create a budget from scratch or adjust the budget you already have, doing so can help you get back on your feet and set yourself up for success.
Hereâs a rundown of budgeting tips to survive a pay cut to keep your finances intact:
Ask your employer for the parameters of the income reduction or salary cut
First, keep in mind that a pay cut typically isnât personal. According to Scott Bishop, an executive vice president of financial planning at a wealth management firm, businesses often cut salaries to preserve their cash reserves while they stabilize their cash flow or weather some larger economic impact, like the coronavirus pandemic.
Secondly, make sure you understand the full scope of the salary cut. Bishop suggests you ask your employer questions like:
What is the amount of pay being cut?
Why is pay being cut?
When will the reduction begin, and how long will it last?
Will any of the following be affected?
Healthcare or insurance costs
Employer-sponsored training or continuing education opportunities
Hours or job responsibilities
What are the long-term plans to improve the companyâs financial situation?
Once youâve painted the full scope of what and why, you can determine how to handle the pay cut.
âFor some people who are big savers, it might not be a big deal,â Bishop says. âBut for some people who live paycheck to paycheck, itâs going to be significant.â
Settle any anxieties that might come with a salary cut
If you are dealing with financial stress, try settling your mind and emotions so you can make decisions with a clear head.
âThe emotional and mental toll can be one of the hardest parts,â says Lindsay Dell Cook, president and founder of Budget Babble LLC, which provides personal finance and small business financial counseling. âIt gets even harder if there are others depending on your income who are also financially stressed.â
When sharing the news with family members who may also be impacted, Cook suggests the following:
Find the right time. Pick a time of day during which everyone will have the highest mental capacity for the conversation. âFor instance, I am a morning person, so if my husband told me at bedtime about a pay cut, I would have a much harder time processing that information,â Cook says.
Frame it as a brainstorming session. Bring ideas of what you can do to handle the pay cut, such as a list of expenses you can cut or a plan for how you can make extra income.
Empathize with the other person. âReduced income is not easy for anyone. Everyone responds to financial anxiety differently,â Cook says.
“If youâre unable to maintain your previous level of saving after a pay cut, try to save at a smaller scale for goals like retirement and your emergency fund.”
Create or adjust your budget to handle a pay cut
Once you understand the salary cut and have informed your family or roommates, itâs time to crunch the numbers. Thatâs the first step to figuring out how to save money after a pay cut.
If you donât have a budget, find a budgeting system that fits your needs. Learning how to effectively budget takes time and practice, so be patient with yourself if youâre new to this. Cook suggests reading up on how to create a budget.
One system to consider is the 50-20-30 budget rule, which has you break your spending into three simple categories. If you prefer the aid of technology when determining how to handle a pay cut, there are many budgeting and spending apps that can help you manage your money.
Whether youâre handling a pay cut by creating a new plan or modifying an existing budget, Bishop suggests taking the following steps:
Add up your income. Combine your new salary with your partnerâs pay, and factor in any additional income streams like from dividends or savings account interest. Tally up the total.
List your expenses. Be sure to include essential expenses (e.g., housing, food, clothing, transportation) and nonessential expenses (e.g., entertainment, takeout, hobbies).
Look through your bank statement online and your past receipts so all expenses are included.
Account for infrequent expenses such as gifts, car maintenance or home repairs.
Track the amount you save. Note any regular savings contributions you make, such as to an emergency fund or retirement account.
Get your partnerâs buy-in. What needs do they have, and what is nonnegotiable in the budget for each of you?
Cut expenses with budgeting tips to survive a pay cut
If youâve crunched the numbers and found that your expenses add up to more than your new income, youâll need to find ways to cut back. Here are some tips on trimming your spending to survive a salary cut:
Cut back on takeout meals and stick to a strict grocery list or food budget, Cook suggests.
Avoid large discretionary purchases like a car during the duration of your pay cut, Bishop says.
Negotiate with your utility companies or ask if theyâre providing forbearance options, Bankrate suggests. You can also ask your car insurance provider if it has additional savings for customers who are driving less, according to Bankrate.
If you think you might fall behind on rent or mortgage payments as youâre handling a pay cut, both Cook and Bishop agree that early, proactive communication is key. Be honest with your landlord or mortgage company. âDonât wait until youâre past due,â Bishop says.
The same applies for other financial obligations, such as your credit card bill. Youâll likely find those companies are willing to work with you through the rough patch.
Cook also suggests you look into municipal assistance programs as a budgeting tip to survive a pay cut. âMany cities have established rental assistance funds to help taxpayers meet their obligations during the pandemic,â she says.
Continue to save money after a pay cut
As you consider how to cut costs, take time to think about your long-term savings goals and how to save money after a pay cut. By cutting discretionary spending through your new budgetâwhat Bishop calls âcutting the fatââyou may have freed up income to maintain your good saving habits during this time. He says itâs important to do that before slowing down on savings.
If youâre unable to maintain your previous level of saving after a pay cut, Bishop suggests you try to save at a smaller scale for goals like retirement and your emergency fund.
As you work to save money after a pay cut, Cook recommends setting up automatic transfers to your savings account every payday based on the amount youâre able to put towards savings in your new budget.
âIf your savings account is at the same bank as your checking account, you can transfer those funds fairly easily,â she says. âSo the worst-case scenario is that you put too much money in savings and have to bring some back to checking. The hope, however, is that some or all of those funds transferred to savings remain there since that money is no longer in your checking account just waiting to be spent.â
Seek extra income sources after a salary cut
You should explore additional sources of income if you need more cash to cover essential expenses or if youâre looking for ways to save money after a pay cut.
Determine if youâre eligible for benefits based on the reason for your pay cut. Cook recommends applying for unemployment if you think you may qualify. For example, some workers who experienced pay cuts due to the coronavirus pandemic were eligible for unemployment benefits. The details vary by state, so visit your stateâs unemployment insurance program website to learn what benefits may apply to you.
If you or your partner have some extra time on your hands, you can consider bringing in income through a side hustle to help you handle your pay cut. Bishop suggests using free or low-cost online video tutorials to boost your existing skills to make your side hustle more effective.
Cook also recommends getting creative. âAre there things you could sell to make some extra cash?â she says.
If you are unable to find additional sources of income, but you have an emergency fund, consider whether you should dip into that. “Your savings are there for a reason, and sometimes you need to use it,” Cook says. “That is okay.”
Stick to your updated budget to navigate how to handle a pay cut
Making your budget part of your daily routine is a budgeting tip to survive a pay cut, and it will help you save money after a pay cut.
âBuild rewards into your budget, such as ordering out every other week if you successfully saved money after your pay cut.â
âIf youâre checking it daily, there are no surprises,â Cook says. You can do this by logging into your bank account and making sure your spending and expenses align with your digital or written budget document.
âIf you see that your spending is high, your mind will typically start thinking through [future] transactions more thoroughly to vet if those expenses are really necessary,â Cook says.
Donât forget the fun side of accountability: rewards for meeting your goals. Build rewards into your budget, Bishop says, such as ordering out every other week if you successfully saved money after your pay cut.
Lastly, donât try to go it alone. Enlist others in your budgeting journey, Cook suggests. Make up a monthly challenge to cut spending from a specific category in your new budget and ask your partner or a friend to do it with you. For example, see if you and the other participants can go a full month without buying clothes or ordering takeout. Compare notes at the end of the month and see how much youâve saved.
Another idea? Try connecting with a budget-minded community on social media to get inspired.
Take these steps after the salary cut is over
Once youâve handled the pay cut and your regular pay is restored, donât give up on your newfound budgeting discipline. Instead, focus on building up emergency savings before you go back to your normal spending.
Bishop recommends starting with enough savings to cover three to six months of expenses. âIf you spend $3,000 a month, that means you need to have $9,000 to $18,000 saved.â
This might also be the time to revisit your budget and build a more extensive financial plan with a CPA or financial advisor to account for all of your future goals. Bishop says that these can include a target retirement date and lifestyle; your estate planning, such as a will, trust and power of attorney; saving for a childâs college; and purchasing a home.
Bishop says reminding yourself why youâre budgeting and focusing on your financial goals can be similar to motivating yourself to stay physically fit. Goal-based motivation can keep you accountable.
Remember: You can survive a salary cut
Handling a pay cut is never easy, but you can get through this time. While youâre in the thick of it, focus on budgeting tips to survive a pay cut and staying positive. Seek help from others and follow up with your employer to make sure you are aware of any changing details regarding the pay cut.
Most of all, try to keep a long-term outlook. âRemember that it will not always be this way,â Cook says.
If youâre considering whether or not to tap into your savings to handle a pay cut, read on to determine when to use your emergency fund.
The post How to Handle a Pay Cut: Budgeting in Uncertain Times appeared first on Discover Bank – Banking Topics Blog.
Thereâs something weird happening with the real estate markets today. Normally in a recession, demand for rentals goes up while demand for houses goes down. But if thereâs anything 2020 has taught us, itâs that everything is turned on its head right now.
Instead, weâre seeing an interesting trend: despite the ongoing pandemic, home-buying is experiencing higher demand now than they have been since 1999, according to the National Association of Realtorsâ (NAR). If youâve been hoping to buy a home soon, youâre probably already aware of this weird trend, and excited. But is it the same story everywhere? And is a pandemic really the right time to buy?
How the Pandemic is Changing Homeownership
This pandemic is different from any other in history in that many people â especially some of the highest-paid workers â arenât being hit as hard as people who rely on their manual labor for income. This, coupled with an ultra-low mortgage rate environment and a new lifestyle thatâs not fit for a cramped apartment, is creating the perfect storm of high-dollar homebuyers.
âI didnât want to pay someone elseâs mortgage to have three roommates,â says Amy Klegarth, a genomics specialist who recently purchased a home in White Center, a suburb of Seattle where she was formerly renting. âI moved because I could afford to get a house with a large yard here for my goats, Taco and Piper.â
Whether you have goat kids or human kids (or even no kids), youâre not the only one looking for a new home in a roomier locale. According to the NAR report, home sales in suburban areas went up 7% compared to just before the pandemic started. In some markets, itâs not hard to understand why people are moving out.
Where Are People Going?
Apartments are small everywhere, but theyâre not all the same price. For example, homes in cities tend to be 300 square feet smaller than their suburban counterparts. Some of the hottest home-buying markets right now are in areas where nearby rents are already too high, often clustered around tech and finance hubs that attract high-paid workers. After all, if you canât go into the office and all of the normal city attractions are shut down, whatâs the point of paying those high rental costs?
According to a December 2020 Zumper report, the top five most expensive rental markets in the U.S. are San Francisco, New York City, Boston, San Jose, and Oakland. But if youâre ready to buy a home during the pandemic, there are nearby cheaper markets to consider.
If You Rent in San Francisco, San Jose, and Oakland, CA
Alternative home-buying market:San Diego, Sacramento
Average rent: San Francisco, $2,700, San Jose, $2,090; Oakland; $2,000
Average home value (as of writing): San Diego ($675,496) and Sacramento ($370,271)
Estimated mortgage payment with 20% down: San Diego ($2,255) and Sacramento ($1,236)
Big California cities are the quintessential meccas for tech workers, and thatâs often exactly whoâs booking it out of these high-priced areas right now. Gay Cororaton, Director of Housing and Commercial Research for the National Association of Realtors (NAR), offers two suggestions for San Francisco and other similar cities in California.
First, is the San Diego-metro area, which has a lot to offer people who are used to big-city living but donât want the big-city prices. An added bonus: your odds of staying employed as a tech worker might be even higher in this city.
âProfessional tech services jobs make up 18% of the total payroll employment, which is actually a higher fraction than San Jose (15.5%) and San Francisco (9.3%),â says Cororaton.
If youâre willing to go inland, you can find even cheaper prices yet in Sacramento. âTech jobs have been growing, and account for 7% of the workforce,â says Cororaton. âStill not as techie as San Jose, San Francisco, or San Diego, but tech jobs are moving there where housing is more affordable. Itâs also just 2 hours away from Lake Tahoe.â
If You Rent in New York, NY
Alternative home-buying market: New Rochelle, Yonkers, Nassau, Newark, Jersey City
Average rent: $2,470
Average home value (as of writing): New Rochelle ($652,995), Yonkers ($549,387), Nassau ($585,741), Newark ($320,303), or Jersey City ($541,271)
Estimated mortgage payment with 20% down: New Rochelle ($2,180), Yonkers ($1,834), Nassau ($1,955), Newark ($1,069), or Jersey City ($1,807)
Living in New York City, it might seem like you donât have any good options. But the good news is you do â lots of them, in fact. They still might be more expensive than the average home price across the U.S., but these alternative markets are still a lot more affordable than within, say, Manhattan.
New Rochelle and Yonkers
Both New Rochelle and Yonkers are about an hourâs drive from the heart of New York City, says Corcoran. If you ride by train, itâs a half hour. Both New Rochelle and Yonkers have been stepping up their appeal in recent years to attract millennials who canât afford city-living anymore (or donât want to be âhouse poorâ), so youâll be in good company.
âNAR ranked Nassau as one of the top places to work from home in the state of New York because it has already a large population of workers in professional and business services and has good broadband access,â says Cororaton. If you have ideas about moving to Nassau youâll need to move quickly. Home sales are up by 60% this year compared to pre-pandemic times.
Newark or Jersey City
If you donât mind moving to a different state (even if it is a neighbor), you can find even lower real estate prices in New Jersey. This might be a good option if you only need to ride back into the city on occasion because while the PATH train is well-developed, itâs a bit longer of a ride, especially if you live further out in New Jersey.
If You Rent in Boston, MA
Alternative home-buying market: Quincy, Framingham, Worcester
Average rent: $2,150
Average home value (as of writing): Quincy ($517,135), Framingham ($460,584), or Worcester ($284,936)
Estimated mortgage payment with 20% down: Quincy ($1,726), Framingham ($1,538), or Worcester ($951)
Boston is another elite coastal market, but unlike New York, thereâs still plenty of space if you head south or even inland. In particular, Quincy and Framingam still offer plenty of deals for new buyers.
If you like your suburbs a bit more on the urban side, consider Quincy. Although itâs technically outside of the city, itâs also not so isolated that youâll feel like youâre missing out on the best parts of Boston-living. Youâll be in good company too, as there are plenty of other folks living here who want to avoid the high real estate prices within Boston itself.
Framingham is undergoing an active revitalization right now in an effort to attract more people to its community. As such, youâll be welcome in this town thatâs only a 30-minute drive from Boston.
âNow, if you can work from home, consider Worcester,â says Cororaton. âItâs an hour away from Boston which is not too bad if you only have to go to the Boston office, say, twice a week.â Worcester (pronounced âwuh-sterâ) is also a great place for a midday break if you work from home, with over 60 city parks to choose from for a stroll.
Average Rent for 1-Bedroom Apartment
Housing Market Options & Avg. Monthly Mortgage*
San Francisco, CASan Jose, CAOakland, CA
San Diego ($2,255) Sacramento ($1,236)
New York, NY
New Rochelle ($2,180) Yonkers ($1,834)Nassau ($1,955)Newark ($1,069)Jersey City ($1,807)
*Average home mortgage estimates based on a 20% down payment.
Should You Buy a House During a Pandemic?
Thereâs no right or wrong answer here, but itâs a good idea to consider your long-term housing needs versus just whatâll get you through the next few months.
For example, just about everyone would enjoy some more room in their homes to stretch right now. But if youâre the type of person who prefers a night on the town, you might be miserable in a rural area by the time things get back to normal. But if youâve always dreamed of a big vegetable garden or yard for the family dog, now could be the right time to launch those plans.
Another factor to consider is job security. And remember that even if youâre permanently working from home today â and not everyone has this ability â living further from the city could limit your future opportunities if a job requires you to be on-site in the city.
Finally, consider this: most homes in outlying areas werenât built with the pandemic in mind. For example, â… open floor plans were popular, pre-pandemic,â says Cororaton. âIf the home for sale has an open floor plan, youâd have to imagine how to reconfigure the space and do some remodeling to create that work or school area.â
Here are some other things to look for:
Area for homeschooling
Broadband internet access
Proximity to transport routes
Office for working from home
Is It More Affordable to Buy or Rent?
There arenât any hard-and-fast rules when it comes to whether itâs cheaper to rent or buy. Each of these choices has associated costs. To rent, youâll need to pay for your base rent, pet fees and rent, parking permits, deposits, renters insurance, and more. To buy, youâll have an even bigger list, including property taxes, maintenance and upgrades, HOA fees, homeowners insurance, closing costs, higher utility bills, and on.
Each of these factors has the potential to tip the balance in favor of buying or renting. Thatâs why it makes sense to use a buy vs. rent calculator that can track all of these moving targets and estimate which one is better based on your financial situation and the choices available to you.
In general, though, most experts advise keeping your housing costs to below 30 percent of your take-home pay when setting up your budget. The lower, the better â then, youâll have even more money left over to save for retirement, your kidâs college education, and even to pay your mortgage off early.
The post Popular Housing Markets During the Pandemic appeared first on Good Financial CentsÂ®.
After one of the worst years of our lifetime, the ritual of setting New Yearâs resolutions has taken on new meaning â especially when it comes to our financial lives. The pandemic erased the jobs of millions of Americans and docked the incomes of millions more.
But now is a time for forward thinking.
Instead of lamenting the past, we can apply a few lessons learned to make 2021 a much better year. (The bar is pretty low. We can only go up from here, right?)
1. Revisit Your Career Goals for 2020
Dig up your New Yearâs resolutions from last year. If you didnât commit them to paper (or a Google Doc) try to think back to the before times. You may have had some grandiose goal of landing your dream job or scoring a hefty raise.
Chances are you did not tick all those boxes. But as you sift through that list, look for any goals that can be salvaged. Then carry those goals over to 2021. Some tweaking may be required.
If nothing else, let this exercise provide a little comic relief. (How naive we were last New Year!)
2. Consider a Bridge Job
Bridge jobs can be a tool in helping you achieve a greater goal â even as you make a lateral but temporary career move.
Letâs say you had an epiphany and realized that your dream job is a creative director at a fancy advertising agency. You may not land the director position right off the bat. But you could gun for that junior graphic artist opening then work your way up.
Or, maybe you were in the hospitality industry and are still recovering from a layoff. You may not find the same job immediately. Instead, you could strategically use a seasonal job to fill the income void while you launch a concerted job hunt for a better match for your skills.
Here’s more on how bridge jobs can help you reach your career goals.
3. Optimize Your Resume
If youâre applying to a large company, chances are youâre doing it online and your resume is going to be reviewed by applicant tracking software (ATS) before any human sees it.
Basically, the software is a screener that scans your resume to see if youâre a good match for the position. It does that by matching skills and credentials mentioned in the job listing with your resume.
But if you didnât optimize your resume properly, the ATS may not see you as a qualified candidate â even if you have the background the company is looking for.
The trick is to make sure your resume uses similar phrases and wording from the job listing, aka resume keywords.
The format you choose for your resume is just as important. In certain cases, the standard chronological list of employment may not be the best choice. If youâre looking to change job fields or apply to a position for which you lack experience, career experts recommend using whatâs called a functional resume: one that highlights your transferable skills and how those are a fit for the job you seek.
4. Jazz Up Your LinkedIn Profile
LinkedIn can be a powerful, free tool for job seekers. If you signed up but let your profile languish without posting a headshot or work history, carve out a little time to jazz it up. Because that time can really pay off.
You can spruce up your LinkedIn profile in as little as 30 minutes. Hereâs what you should do:
Customize your URL.
Choose a professional photo.
Craft a killer headline.
Write a recruiter-drawing summary.
Ask for recommendations from colleagues.
The professional social media site is especially useful when youâre researching a new employer. You can search for people who have worked for the company (past and present) to get a sense of its work culture. (Donât be afraid to ask directly!) And if youâre invited to an interview, you can easily look up your interviewer(s).
During the pandemic, LinkedIn implemented a photo banner that you can add to your profile picture to let employers know youâre actively looking for work. For a more discreet approach, in the setting menu, you can toggle an âopen to workâ feature that only recruiters can see.
And thatâs just scratching the surface.
5. Prepare for Virtual Job Recruitment
Virtual recruitment is the new normal. Even before the pandemic, online job fairs and interviews were steadily gaining popularity.
By attending fairs and interviewing virtually, you can connect with people you may never have otherwise had the opportunity to. It may sound a bit daunting at first, but weâve all been collectively thrown into this remote environment at the same time. Hiring managers and recruiters may be working out the technical kinks themselves and are more likely to be forgiving.
Having strong remote-interviewing skills can be an easy way to set yourself apart. This quick interview advice can go a long way:
Adjust your lighting. If possible, include multiple light sources from different angles to eliminate any harsh shadows.
If you wear makeup, consider applying a little extra because it doesnât show well on camera.
Position your web cam at eye level. (No one wants to see up your nose.) Stack a few books under your laptop if needed.
Have an interesting prop behind you. A bookshelf, plant or painting could work wonders.
Hereâs what else you should do to prepare for virtual career fairs and interviews.
6. Brush Up on Your Interviewing Skills
Even if you feel like a rockstar interviewer, you probably donât know for sure unless youâve watched a video of yourself during an interview (unlikely) or conducted a mock interview with a friend or family member (also doubtful). Having someone else critique your body language and provide honest feedback will help you address quirks you didnât even know you had.
Itâs good to make your mock interview experience as close to the real thing as possible. During the pandemic, that likely means a video call. Have the gracious soul youâve convinced to assist you make note of technical aspects like lighting as well as the substantive things like how you answer questions and react under pressure.
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If youâre one of the millions of Americans who have slipped into long-term unemployment during the pandemic, that adds another layer to your interview you should prepare for: questions about your employment gap. You will likely be asked about your time out of work directly and possibly even in an accusatory manner. Have an honest, straightforward response ready and highlight any professional developments or new skills youâve honed in the meantime.
7. Get Comfortable Negotiating
Your 2021 career goals arenât likely to happen without a bit of legwork. Many career-related goals (raises, new jobs, better hours) boil down to one major thing: negotiation.
For most folks, negotiating can stir up some uncomfortable feelings. Those feelings are the first (and probably biggest) roadblock to getting what you want.
Once youâve committed yourself to having those difficult conversations, do your homework. If your negotiation is income-related, research salary ranges for your position. Peg yourself on that scale based on your location, skills and experience.
Mentally set three numbers: a reserve point (the lowest number youâll accept), a target point (the salary you want) and an anchor point (the first number to come up during the conversation). Use these numbers to create a game plan.
No matter the type of negotiation, itâs important to practice (maybe that same friend from your mock interview is available?) and to keep your composure. Stay calm, respectful and flexible and youâll be ticking off those goals in no time.
Use these five steps to get the raise you deserve. Get what youâre worth by negotiating your starting salary.
8. Use a Side Gig Intentionally
Gig work can be a blessing or a curse depending on how you put it to use.
Blessing: extra income to help you meet a personal goal, like paying off debt or honing new skills that further your career. Curse: a seemingly never-ending grind and critical means of income from which there is no escape.
Sounds a little dramatic, sure. But the pandemic has really underscored this dichotomy. As millions of jobs have vanished, gig work â especially app-based services â has become a safety net. The work is fairly straightforward, entry-level and can be started in days.
Left uncheck, though, the gig you planned to do on Saturday evenings can slowly creep into Sundays. Then Mondays. Before you know it, most of your income is coming from a smattering of gig apps that have no real job security or benefits.
To avoid this scenario, set attainable financial or career goals, meet those goals and then get out. In other words, your side gig needs an exit plan.
Adam Hardy is a staff writer at The Penny Hoarder. He covers the gig economy, remote work and other unique ways to make money. Read his âlatest articles here, or say hi on Twitter @hardyjournalism.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Deia Schlosberg had been working as an environmental educator, teaching students about issues concerning conservation and sustainability. While she loved teaching, she wanted to reach people on a larger scale about the importance of protecting the environment. So she decided to follow her dream of becoming a filmmakerâa dream that would require her to return to school for a graduate degree. She had no idea at the time that it would lead to becoming an award-winning documentarian.
While Schlosberg’s choice may have paid off, learning how to pay for grad school as a working adult can be a challenge. There are various benefits to getting an advanced degree: You can learn more, you can earn more, you can further advance in your current job or prepare for a career change. However, you might also find yourself stressed by the expense and resulting debt of it all, especially if you have kids, a home or other financial commitments. So a big question on your mind could be, “How much should I save for grad school?”
Below are some lessons on how to financially prepare for grad school to help you determine if and when you should go back to school. If you haven’t yet decided if graduate school is right for you, see section 1 for tips on how to decide. If you already know you want to go back to school, skip to section 2.
1. Decide if going back to school is right for you
Getting an advanced degree may seem like a ticket to success, but depending on your chosen area of study, the outcome may vary. For Schlosberg, it was a bit of a risk. It can be difficult to get a break in the film industry, and going to grad school could mean carrying around debt for a long time. Is this the type of outcome you would be willing to accept?
According to Emma Johnson, best-selling author, career consultant and founder of Wealthysinglemommy.com, there are a few things you can do to help you decide whether or not going back to school is right for you:
Do your homework. When considering how to pay for grad school as a working adult, research your degree options and the jobs to which they might lead. Compare cost and compatibilityâfor instance, will classes for the program align with your work schedule? Once you’ve determined what kind of occupation you may pursue after grad school, search online for information about that occupation’s average earnings.
Solidify your goals. You may find clarity in writing out your goals for going back to school. Some benefits are tangible, like earning more money, building a professional network and gaining skills. Others might be less tangible, such as finding personal fulfillment. Once you know your goals, it will be easier to determine if a graduate degree makes personal and professional sense.
“Your savings should not only depend on tuition but also what the degree isâi.e., how easy it will be to repay once you are working in the desired field.”
Give your degree program a test run. Consider taking classes that relate to the degree you are interested in getting in grad school. These classes can give you a taste of the subject matter you’ll be studying and help you meet people involved in the field. Also, if prerequisites are required for your advanced degree, they often cost less online or at a community college, which is important to remember when thinking about how to prepare your finances before grad school. Make sure the course credits will be accepted at the graduate school you plan to attend.
Take a hands-on approach. To level up in your existing career or find out what it’s like in a new field before making the change, get some work-related experience first. For instance, to learn more about moving up in your own field, get out and meet those higher level professionals by attending conferences and networking events. The same tactic applies if you want to change careers.
2. Know how much you need to save
How to pay for grad school as a working adult can be complicated, but you’ve decided you’re ready for it. Plus, hitting the books at a time when saving for retirement or your child’s education could be at the forefront makes the task of how to prepare your finances before grad school even more critical.
Figuring out how much to save for grad school begins with determining the cost of attendance. Here are a couple ways to do that, according to Johnson:
Do the research. Once you have found a school and degree that you like, visit the school’s web site. Some schools may provide the cost of tuition, fees and estimated costs for books, supplies and transportation. Costs can vary tremendously, depending on various factors: whether you attend full or part time, whether you attend a public or private school, whether you are an in-state or out-of-state resident and the time it takes to get your degree.
Determine your budget. Once you have a handle on the school-related costs, build a spreadsheet that accounts for these costs and projects monthly income and living expenses. Working through a savings plan beforehand can help you financially prepare for grad school by showing just how much you’ll need to budget for monthly on tuition plus living expenses. Once you determine these factors, you’ll get a better idea of what you need to save up.
Create a savings buffer. After you determine your monthly costs, pad that number. “Your savings should not only depend on tuition but also what the degree isâi.e., how easy it will be to repay once you are working in the desired field,” Schlosberg says. She saved a little more than she estimated, giving herself an extra cushion to cover some of the potential risk to her finances.
“You may have to downscale your career and current lifestyle to go back to school, which may be a worthwhile investment of time and resources.”
3. Allow yourself a flexible timeline
One key factor in planning the timeline for earning your graduate degree: Don’t be in a rush. If you need to, create the time to save. It may not be necessary to go back to school full time or finish on a particular schedule, Johnson says. She mentions these possible paths to earning your degree when planning how to pay for grad school as a working adult:
Consider a side hustle. One option is to go to school full time and take on a side hustle. You may not make as much as you did as a full-time employee, but the income can complement your savings. It may also allow you to concentrate more on your degree and finish faster.
Attend part time. Go to school part time (nights and weekends) while working. It will take longer, but it will also minimize your debt, which could be better in the long run.
Take it slowly. Only sign up for a class or twoâwhatever you can affordâand continue to work. This part-time “lite” approach may take even longer, but could help you avoid overextending yourself financially or sliding into debt.
Take online classes. Consider online programs that could lower the cost of tuition and allow you to continue working full time.
4. Take advantage of potential cost-saving benefits
So you’ve done your research on how much you need to save while determining how to prepare your finances before grad school. But there are ways to potentially cut or eliminate some of those costs. What comes next are some solutions that may help pay your grad school bills:
Consider loans, financial aid and scholarships. “I took out some student loans for living expenses, but I tried to pay off my tuition as I went by working through school,” Schlosberg says. Graduate students may also be eligible for different types of scholarships and grants, which is aid that does not need to be paid back. Depending on your area of study, scholarships and grants can also be obtained through federal and state organizations, private foundations, public companies and professional organizations.
Ask your employer to pay the tuition. One way to financially prepare for grad school is to talk to your manager or human resources representative to find out if your current employer would help pay for, or fully fund, your degree through tuition reimbursement. This is most likely if you plan to move up the ladder and use your new skills on behalf of the company.
Take advantage of in-state tuition. Some people move to the same state as their desired school to try to get a break on tuition. “I moved to Montana and worked a couple jobs for a year before applying so I could get in-state tuition,” says Schlosberg. Whether you are already a resident or you move to a new state, be sure to determine how long you need to be a resident to qualify for in-state tuition at your desired university.
Cut back on discretionary expenses. Seemingly small things like adjusting your lifestyle to lower your monthly costs, which could mean fewer lattes and dinners out, might go a long way in resolving how to prepare your finances before grad school. “You may have to downscale your career and current lifestyle to go back to school, which may be a worthwhile investment of time and resources,” Johnson says.
Financially prepare for grad school and get a new start
Answering the question of how to pay for grad school as a working adult requires significant research and preparation, but some say it’s worth it, including Schlosberg. It not only gave her a whole new start, but a wealth of knowledge going forward to nurture her future endeavors. “Getting a graduate degree gave me the confidence to jump into a new career. I met an amazing network of people,” Schlosberg says.
But an advanced degree may not be a necessity. While it could look impressive on a resume, for many employers, a master’s degree is not a requirement. “Whatever you do, don’t go back to school just for the sake of getting a degree,” Johnson says. When thinking about how to financially prepare for graduate school, make sure it fits into your financial picture and that you’re able to âweigh your sacrifices against future gains,” she says.
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