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" In early 2007, Melanie and Phil Sheridan bought a two-floor, three-bedroom town house in Carlsbad, CA, a beautiful beach town near San Diego. Eight months later, Melanie, 35, lost her job, and the family&amp;#039;s household income shrunk by a third. With a nearly $400,000 mortgage, $47,000 in outstanding student loans, and a $7,000 credit card balance, the couple&amp;#039;s debt-to-earning ratio is now seriously out of whack \u2014 and the Sheridans, like many Americans, are worried about staying afloat. &amp;quot;We try to count our blessings, because there are a lot of people who have it worse than us, who are being forced to sell their house,&amp;quot; says Phil, 36, who works as a project manager for a utilities company. &amp;quot;We&amp;#039;re healthy and happy, and we believe that the economy will eventually turn around.&amp;quot; Though she&amp;#039;s enjoyed being a stay-at-home mom to their son, Tyler, 6, Melanie is eager to earn money and thinks she can parlay her passion for blogging into a viable career as a freelance Internet marketing consultant. Recently, Melanie gave some tips to a friend on how to redesign her company&amp;#039;s website and logo. &amp;quot;I knew what my friend needed to do to grow her business, but I didn&amp;#039;t have the computer skills to actually make it happen for her,&amp;quot; Melanie explains. &amp;quot;Once I go back to school for graphic design, I&amp;#039;ll be able to both consult for online marketing as well as design my ideas \u2014 and get paid for it.&amp;quot;  The Sheridans&amp;#039; financial goal: After being laid off from her marketing job 18 months ago, Melanie launched a blog, www.meladramaticmommy.com, to record her musings about parenting, personal fulfillment, and other matters. Now she dreams of going back to school to study graphic design and start a new career as a Web branding and marketing consultant. But with only one income between them and her unemployment benefits about to run out, Melanie and her husband want to make sure they don&amp;#039;t overextend themselves. Is investing in her continuing education a smart idea \u2014 or too risky for right now? Money dilemma: &amp;quot;We can&amp;#039;t decide if school is worth it.&amp;quot;Money-smart solution: Make an investment in education. Melanie feels certain that taking classes in graphic design will give her a competitive edge as she seeks to launch a business as an online consultant. She&amp;#039;ll be able to market herself as a professional who can not only help clients communicate effectively but also create visually arresting websites and materials for them. &amp;quot;This training would help me stand out from the other people who are looking for work,&amp;quot; she says.  Melanie has found two certificate courses that she could take at nearby schools. Tuition would be approximately $2,200. Add in the cost of a laptop, a graphic design tablet and pen, and design software and textbooks, and Melanie estimates her advanced education will cost about $6,500. But she still owes $47,000 on her undergraduate student loans \u2014 which are currently in full deferment status. &amp;quot;How can I justify going back to school when I&amp;#039;m not even paying off my previous degree?&amp;quot; she asks. Taking on debt in order to go back to school is not an irresponsible move, insists Pam Krueger, finance author and cohost of PBS&amp;#039;s MoneyTrack. &amp;quot;Anything that increases your earning power in the future or becomes an asset down the road, such as education, is actually good debt,&amp;quot; Krueger says. Still, she agrees that given the couple&amp;#039;s current financial situation \u2014 and existing debt \u2014 Melanie needs to remain realistic about pursuing her goal. &amp;quot;It&amp;#039;s important to be clear on why you&amp;#039;re going back to school,&amp;quot; Krueger says. &amp;quot;It can&amp;#039;t just be about personal growth, which is a luxury. It has to be for specific and practical reasons, such as contributing more to the family&amp;#039;s income and turning your passion into a viable business. Krueger wants to see Melanie apply a similarly clear-minded approach to paying off her existing student loans. &amp;quot;Deferring payments and putting off your debt is a bad idea,&amp;quot; Krueger cautions. &amp;quot;Business owners often need to tap into small-business aid or loans to keep going, but no one is going to lend you more money if you&amp;#039;re not even trying to pay down what you currently owe.&amp;quot; Krueger suggests that Melanie start paying a small sum toward her student loans, such as $50, each month: &amp;quot;The amount doesn&amp;#039;t matter as much as proving you&amp;#039;re capable of making and keeping a commitment to pay off your debt.&amp;quot; Krueger also advises Melanie to contact her lender to see if she can renegotiate the terms of her loans.  Once Melanie gets the ball rolling on paying off her past student loans, she can seek financial assistance for her new educational pursuits. Since Phil is in the Navy Reserve, Krueger advises Melanie to check out militarybenefits.com to find out if she qualifies for any financial aid programs aimed at military families. Krueger also suggests that Melanie start researching scholarships specifically targeted at women, mothers, or older students. (Fastweb.com is a good place to start.) Melanie should also speak with the financial aid officers at the schools she is considering to see if they can offer assistance. Money dilemma: &amp;quot;We&amp;#039;ve cut spending as much as we can.&amp;quot;Money-smart solution: Lower your interest rates. Going from two incomes to one can create a serious cash crunch, and Melanie and Phil have been slashing costs wherever possible: They cut back on Tyler&amp;#039;s after-school program, they put the kibosh on expensive meals out, and Melanie has nixed trips to Barnes &amp;amp;amp; Noble in favor of the library and exchanging books with her mother. But money is still tight \u2014 and promises to be even more so once Melanie&amp;#039;s unemployment checks stop coming. &amp;quot;We&amp;#039;ve had to cut back so much,&amp;quot; Melanie says. &amp;quot;It makes it even harder to justify enrolling in classes when we can&amp;#039;t put money into our savings account anymore.&amp;quot; Krueger suggests that the Sheridans shift their focus from penny-pinching and start looking for bigger ways to uncover cash in their budget; this will make paying for Melanie&amp;#039;s education less daunting. &amp;quot;I hear you two fretting that you should give up cable, but that will free up $60 a month, tops, and having it is something that makes you both happy,&amp;quot; says Krueger. &amp;quot;Meanwhile, your home loan rate is 6.8 percent, while at this very moment, other people are getting rates as low as 4.5 percent and lenders everywhere are working with people who want to reduce their payments.&amp;quot; By refinancing their mortgage interest rate to 5.5 percent, the Sheridans would lower their monthly expenses by $300, which could be seed money for Melanie&amp;#039;s continuing-education fund. Another way Melanie and Phil can free up money is by rejiggering their $7,000 credit card debt. Currently, the couple pays a 12.9 percent interest rate on their sole card, but &amp;quot;with your relationship with a military credit union and good credit history, you should be able to find a zero-percent deal for 6 months and a rate of 5.9 percent or so for the long run,&amp;quot; Krueger says. Once Melanie and Phil free up extra money by lowering both their mortgage and credit card rates, they should apply some of that savings \u2014 along with half of Phil&amp;#039;s annual bonus, which is generally around $7,000 \u2014 toward paying down their credit card. &amp;quot;Taking control of your debt will help you feel more comfortable about taking on the new expense of Melanie&amp;#039;s classes,&amp;quot; says Krueger. Money dilemma: &amp;quot;We don&amp;#039;t really have any savings.&amp;quot;Money-smart solution: Create a cash cushion to prepare for unexpected expenses. Between Melanie and Phil&amp;#039;s IRAs, 401(k)s, and pension plans, the Sheridans have about $57,000 saved toward retirement \u2014 a nice nest egg they can tap into three decades down the road. But given that the couple is barely able to cover their basic expenses, it&amp;#039;s the present that worries Melanie and Phil. How can they feel more secure day-to-day? &amp;quot;It&amp;#039;s essential that you create a cash cushion you can use when you need to pay for an unexpected bill or extra class,&amp;quot; says Krueger, who advises the couple to plunk the remaining half of Phil&amp;#039;s 2009 bonus into their savings account, which contains only $3,300 at the moment. Krueger also suggests that the couple close their 12-month CD once it matures, instead of renewing it, and add that cash to their regular savings account. &amp;quot;There&amp;#039;s no point in having an emergency fund you can&amp;#039;t touch, especially if it&amp;#039;s hardly building any interest,&amp;quot; Krueger says. &amp;quot;Every family should aim for a cushion of at least six months of living expenses and keep it available in a standard savings account. You may not necessarily grow this money through interest, but you will sleep better at night knowing you have it available.&amp;quot;  If the Sheridans aim for pumping up their savings while paying down their debt, Melanie and Phil will feel better about investing in their future and building Melanie&amp;#039;s business. &amp;quot;It&amp;#039;s going to take a little while, maybe even five years, to see the benefits of building your business,&amp;quot; says Krueger. &amp;quot;But I know you&amp;#039;re going to succeed because you have the right attitude: You have a clear vision of your dream. And that&amp;#039;s what makes a successful entrepreneur.&amp;quot; THE COUPLE&amp;#039;S REACTION:  Melanie: &amp;quot;To save on my expenses and have money for classes, I&amp;#039;ve been designing fliers for a day spa in exchange for free beauty treatments. I also plan to have a garage sale to make some cash for my education fund. And I&amp;#039;ve gotten brochures from the schools I&amp;#039;m interested in and plan to set up meetings with their financial aid officers.&amp;quot; Phil: &amp;quot;Following Pam&amp;#039;s advice, we moved our credit debt to a zero-interest card, used my bonus to pay off a chunk of it, and are actually on target to pay it off within the year. Unfortunately, we weren&amp;#039;t able to refinance our mortgage, but we have managed to sock away $5,000 in our savings account, thanks to my bonus. It feels nice having a bit of a cushion, and I&amp;#039;m a lot less stressed about money. My feeling now is, If this degree is something Melanie needs to do for her career, she should definitely do it. We can handle it.&amp;quot; Financial expert Pam Krueger is the executive producer, cohost, and creator of PBS&amp;#039;s MoneyTrack. Visit her at moneytrack.org.  Do you need a money makeover? Email us at redbook@hearst.com (subject: Money Makeover). 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