Certain incidents provoke one to take a career break. It could be for personal reasons like- raising a family, spending more time with kids or simply a career shift. It is not uncommon to pause your career. While this may be the right thing to do, it may impact your finances.
Career breaks are one of the popular reasons individuals end up with limited savings. They don’t have enough savings for retirement or pension plans. It also affects the everyday living requirements. Thus, analysing and stabilising finances is important before the career break. The blog lists some tips that may help prepare finances before announcing the break.
6 strategies to navigate through the career break smoothly
According to LinkedIn reports, “around 62% of individuals take a break at some point in their careers.” Additionally, over 35% would like to take one in the future. Thus, one may have different reasons to opt for it. However, planning your finances is critical. A strong financial cover will help you regain stability after resuming your career. Here are some tips that may help you achieve a rigid financial setup:
1) Seek promotion before leaving
Identify your current position at work before quitting. Identify the progression possibilities as a salaried person. Getting the promotion before going on the career break is ideal. It helps you save more towards the goal. You can also save some money for emergency funds.
It keeps you going within the tough financial scenario. Additionally, getting a promotion means you won’t start from scratch. Instead, search for a job with a new role and responsibilities. It automatically increases the chances of higher pay.
2) Juggle through your finances
Understanding where you stand financially is important before the break. Gather all your financial documents- bank statements, bills, retirement accounts and credit cards. Calculate your current income, spending and savings. Afterwards, analyse the consequences of the career break on your financials. Check how you will deal with increased expenses or emergencies. Sometimes, calculations fail, and one faces a cash crisis.
As an unemployed with just a part-time job, you can’t save enough. However, you can bridge the need with benefit loans from a direct lender nearby. It is a facility for unemployed people leveraging government benefits. You can use it to cover the emergencies. Provide a part-time income proof to qualify.
Thus, one must analyse savings before approaching career break. If you believe you can manage within the current savings, relax. Otherwise, seek ways to boost savings and reduce expenses.
3) Create an emergency fund
It is one of the best ways to maximise your savings before quitting your career. However, start saving before 6 months from the career break. You must have at least 6 months of savings (minimum) to counter the non-earning mode. An emergency fund is a short-term savings account that provides interest benefits. You must save a fixed amount every month/ week for 6 months. You can also set up direct debits from your salaried bank account. It provides you with more money after maturity.
However, you cannot touch it until 6 months. Otherwise, you pay a penalty. The sum you get afterwards caters to the unemployment phase without worries. You can dedicate an income portion that does not impact your budget.
4) Create a pre-break budget
If you have made up your mind to take a career break, budget for it. Yes, just re-analysing the finances would not help. You need to re-budget as well. It may mean saving more than the previous setting. Save at least 40% more than the previous one. You lack the regular income to finance your needs. Thus, you must budget separately for 3 months’ rent, utilities, groceries, and other expenses.
Additionally, save some towards the debt clearance. It is for individuals on mortgage or car loans. If not full, you must make minimal payments. It reduces the interest intensity and financial burden. It is better than dealing with whopping debt later. If you don’t want to lose the property, save some.
Begin saving at least 9 months before the career break. Set up different accounts for each goal. Eliminate useless expenses and dedicate maximum towards such goals. You can easily save enough to continue payments until the career break. Alternatively, contact your loan provider and seek better solutions to halt the payments.
If the mortgage payments on variable rates increase, don’t worry. Identify the best ways to finance the additional amount as repayment. You may get loans for fair credit scores to settle the payment. It is for individuals who have not lost much credit after a career break. You can use it to finance or bridge the need. However, you need a guarantor to get one in unemployment.
5) Consider a health insurance cover
A prolonged period of unemployment leads to stress and anxiety issues. It affects your health in some way or another. It is regardless of the purpose you took it for. Therefore, having verified health insurance is a must. Invest in one before choosing a career break.
It will help you cover serious health care costs like- accidental treatment, surgeries, or long-time hospitalisation. Your savings may not prove enough to beat the economic challenges. Treatments and surgeries are expensive.
Thus, identify the best healthcare coverage by analysing the benefits. Check whether they align with the health issues you have. If yes, start paying the premium and continue the cover for around a year or two. Later, you can use the insurance money after maturity. You cannot predict the health uncertainties, but you can plan the coverage.
6) Explore part-time work to get going
Insurance, emergency funds and budgeting may help you. However, you cannot underestimate the importance of income. It must follow you. Identify the part-time jobs and apply. Find one that meets your needs and interests.
It will help you finance the small cash shortcomings. Identify the time you can dedicate apart from concentrating on your career goals. It’s great to do a 4-hour job. It will help you streamline finances and meet your lifestyle needs.
Bottom line
A career break is a well-improvised decision. Explore the pros and cons of your decision from the financial perspective. Work on the aspects that may go wrong. It may affect your usual lifestyle needs and liabilities. Plan and budget before announcing a career break. Saving enough for emergencies, debts, and usual needs helps you concentrate better.