Can you afford to go back to school?
Yes you can, with a bit of saving and a whole lot of planning
Whether you’re aiming to ditch your current job and do something completely new, or upgrade your skills to climb the workplace ladder, going back to school represents a sizeable investment.
What’s more, says Frank Wiginton, a Toronto chartered financial planner and author of How to Eat an Elephant: Achieving Financial Success One Bite at a Time, if you’ve been in the workplace for a while, you likely have other financial responsibilities — a family, a mortgage and debts that make back-to-school expenditures even harder to manage.
A little pre-planning goes a long way toward ensuring you don’t crash and burn financially on the road to career success. Calculate your expected ROI Business people use Return on Investment (ROI) to assess whether an investment is worth making. The basic idea:
How likely is it that your investment in education is going to help you in the marketplace?
Ask yourself whether there are jobs available in your chosen field and whether you want to put the time and effort into getting the kind of work that makes good use of your freshly minted certificate or degree. If not, then “going back to school is not an investment, it’s a hobby,” says Wiginton. Work around work You may not have to quit your job at all. Universities and colleges have plenty of options from online classes to night school, weekend courses and even multi-day seminars, says Edward Carson, chief business officer for University of Toronto School of Continuing Studies.
“The vast majority of our students remain employed while they’re doing their courses,” he says. Make a plan, Stan You’ll need baseline knowledge about how much money you’re spending and where you’re spending it. Look at all necessary expenses (food, accommodation, transportation) and then figure out which of the remaining discretionary expenses (such as dinners out and golf games) you’re willing to give up.
“It’s from this information that you can make all financial decisions going forward,” says Wiginton. Hop on the bus, Gus It’s a good exercise to try to live on one salary (or whatever cash you’ve projected you’ll have) in the year prior to going back to school. You can bank the additional income for an emergency fund and you will be better prepared to live on less (perhaps by taking the bus instead of driving). Hit up your boss “A fair number of our business students get funding from their company,” says Carson.
He suggests putting out feelers to the human resources department to find out if funding for higher education is available. And if you work for a smaller company with no HR department, turn to your manager or supervisor.
“It’s always worth asking,” he says. Make use of a TFSA You can save $5,500 a year in a tax-free savings account and you won’t pay any tax if you withdraw the funds.
Nor are you obliged to pay those funds back within a defined time period.
Best of all, says Gail Bebee, author of No Hype — The Straight Goods on Investing Your Money, “You don’t lose the contribution room so you can always go back and replace it later.” Become a lifelong learner The federal Lifelong Learning Plan allows you to withdraw up to $20,000 from your RRSPs so that you (or your spouse) can return to school. The catch: only full-time students are eligible and you have to repay the money over 10 years without getting the tax break you’d normally get for an RRSP contribution. Or not! Depending on your circumstances, says Wiginton, you might consider just withdrawing money directly from your RRSP. “My philosophy is that RRSPs are tax-deferral programs that allow you to defer income from a highincome year to a low-income year,” he explains. “If you go back to school and your income drops substantially, that’s a great opportunity do just that.” Be a borrower Eligible full- and part-time postsecondary students in most provinces and territories can get a Canada Student Loan. The best thing about them? Interest doesn’t begin to accumulate as long as you’re in school. When you begin repaying your loan, you can claim a non-refundable tax deduction. If you don’t owe taxes that year — perhaps because you had little income or lots of tax credits — you can use the deduction sometime in the next five years. Apply for a scholarship Don’t assume that just because you’re not 19 anymore the free money has dried up. Canada Student Grants are available for everyone from students with dependants to low- and middle-income Canadians. And websites such as scholarshipscanada.com and studentawards.com have a range of scholarships for all ages.