If you are keen on going back to college in your 30s, plan your finances better

“The decision to seek an education in my 30s was a tough one. Before I finally sought admission into the executive programme of a top notch b school in India, the thought of not having an income for a year seemed very daunting. There were moments when I feared the financial ramifications of stepping away from the workforce and getting back to education would eclipse the benefits of getting a degree. In retrospect, I can vouch that with an agile financial strategy it is possible to make your education dreams come true without you having to struggle financially.”

Shubham Jain, a 37-year-old finance professional based in Mumbai quit his job to pursue an MBA at the age of 33. Jain, was then working in a reputed MNC and had a 5-year-old son. “Safe to say that I was at a stage in life where the word ‘carefree’ did not exist in my vocabulary. Yes, I had a well-paying job and my family had a comfortable life but there was this itch to grow professionally. At first, I had considered opting for a distance education course because leaving my job for a full time degree was unthinkable. My wife was employed but her income wasn’t sufficient for the entire family to full back on,” narrates Jain.

Jain recalls first mulling over the idea at the age of 30. He spoke to people in his personal and professional networks who had taken the education route in their 30s – a chapter in life where most people find themselves having to shoulder an increase in financial responsibilities. “The biggest takeaway from my conversations with people who had pursued an education in their 30s while juggling family obligations was that with the right planning and investment strategies you could ensure minimum financial disruptions for yourself and your family if you went for an education. It’s easier for people who have had the habit of saving and investing since their 20s,” says Jain.

A higher education at a stage in life when you may have family members dependent on you may require an expansive financial planning exercise. This is because you may have multi-layered financial obligations – investing for your child’s future, retirement, aspirational goals, financial preparations for taking care of ageing parents and paying off EMIs if any. A move to step away from the workforce for a year or two would require you to start managing your money in advance in such a way so that the change in income for the period when you are studying causes minimal disturbance to your goals and duties.

Talking about his experience, Jain says, “The first step towards preparing for this chapter as a family would be to re-evaluate your goals and ascertain whether any changes would help in giving you more room to accommodate the change. Aspirational goals like taking a vacation abroad or purchasing a car should be put on hold. If your spouse has an independent source of income, you should draft strategies to strengthen your emergency fund reserves and continue investments for essential goals like retirement and children’s education. Care should also be taken to prioritise paying off high interest loans at first. Ideally, you should allow yourself 3 years to prepare your finances before you go back to college.”

With respect to accumulating funds for college, Jain suggests, its better to use a mix of your savings and an education loan. “I started investing in equity mutual funds and continued for three years to create a reservoir to cover my education expenses. I did not want to touch my existing savings and investments for this as that would have compromised my family’s financial safety. I was clear that I would use the equity fund investments for the course and take an education loan too if need be. I avoided using a loan to fund the entirety of the course because the EMIs would have been a burden for a prolonged period and would have hampered investments for other goals later on.”

Preeti Zende, co-founder of Apna Dhan Financial Services says, “It may not be an easy decision to go for full time education when in your 30s if your finances are not in great shape. Besides your familial and other obligations, you need to make sure you also have sufficient liquid assets to take care of that period. “

Zende explains, “Make sure you keep enough money to cover monthly expenses for six months along with EMIs if any in liquid funds,arbitrage funds and bank FDs. Ultra short term debt funds can come in handy for keeping money aside for insurance premiums, mandatory annual expenses as well as overheads like children’s education and extracurricular activities. Should you have any extra cash, you can park those in liquid or arbitrage funds and start STPs to equity mutual funds. You can also use money market funds to create a stash for rainy days.”

Action points

• Review your life and health insurance plans and ensure your family members have sufficient coverage before planning to go for an education. You may need to buy a new policy if you have only been covered under your employer’s health plan and are planning to quit your job for attending college.
• Steps should be taken to maintain optimal credit scores and improve them if need be before you opt for a college degree. Good credit scores will help you easily avail education loans if the need arises.

This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.