Extended time from work does not have to wait until retirement. Your career break may be aspirational, or it may be prompted by life events. Whatever the purpose, careful planning before taking a break can help make it more successful and fulfilling. Start by reviewing your finances and getting your career break budget in order. Next, create a rough schedule for how you’ll fill your time. And if you don’t think you can swing a career break, look at options such as job responsibilities or time shifts.
In 2016, Jamie Clark of Seattle was a software engineer who planned to take a year off work to finish a master’s degree in computational linguistics. A year turns into three and career changes to financial planning.
These days, the clerks, who use the pronouns they/them, believe that experience makes them better advisors – especially since their career breaks didn’t turn out as originally planned.
“Part of our job as financial planners is to help people prepare,” said Clark, now a certified financial planner who recently launched her own firm, Ruby Pebble Financial Planning. “And I want to help people build that flexibility.”
Career breaks are extended and usually unpaid extended periods of work leave. Such breaks can be ambitious — giving you time to travel, get a degree, change careers or start a business. Or, they may be prompted by life events, such as caring for a child, caring for a family member, or dealing with an illness or burn.
Whatever the reason, some planning can help you make the most of your break.
Save and budget diligently
CFP Henry Huang of Irvine, Calif., doesn’t believe most people need a detailed budget, as long as they’re saving enough for their goals. But career breaks are an exception, he said. When your paycheck stops, you’ll want to save enough to sustain you. It starts with knowing exactly what you are spending today and estimating what your expenses will be during your break. Some expenses may be reduced, such as transportation or childcare. But you may also have new costs, including higher health insurance premiums, if your current coverage is employer-subsidized.
Once you’ve calculated how much you need to save, consider adding a fudge factor equal to two or three months’ worth of expenses if it takes longer than expected to land your next job, suggests Huang. One of Hwang’s friends didn’t, and wound up raiding his 401(k) to pay the bills.
And speaking of retirement: Extended breaks may mean you have to work past normal retirement age or significantly increase your savings rate to retire on time. If you’re planning to take more than two years off, use a retirement calculator or consult with a financial planner to see how that might affect your retirement plans, Hwang says.
Clark had saved enough to cover two years of living expenses from a high-paying job and was able to stretch it to three years after marriage. Their wife paid the bill as Clark used the remaining savings to pay tuition and other expenses to get their financial planning credentials.
Clark says that careful tracking of expenses and thoughtful budgeting not only helps make their savings last longer, but it also alleviates some of the stress of living without a paycheck for Clark.
“There are always surprises, but it’s good to try to minimize them, or at least minimize the impact on your finances,” Clark says.
Make a plan for your time
You may think you need a break from your tight schedule, but not having a plan means you’re wasting precious time you’ve prepared and saved for.
Hwang has another cautionary tale from a client who began her hiatus with a strong desire to change careers and spend more time with her young children. Her days quickly became filled with parenting responsibilities, and she never had time to explore other jobs, Hwang said. When his savings ran out, he returned to his same field.
“Having clarity about what you really want from this career break can make a tremendous difference in the overall experience,” says Hwang.
The details of your plan will depend on your career break goals, but consider scheduling a monthly lunch with a professional colleague to maintain your network and keep abreast of developments in your field. If you’re considering a career change, create a timeline for when you’ll complete certain steps, such as meeting with a career counselor and determining what education or certification you’ll need.
An extended career break may not be possible. You may have too much debt, too many bills or too many people depending on you to go months or years without a paycheck. Even if you have savings, you may be understandably wary of giving up your job without putting someone else on the line.
But that doesn’t mean you’re stuck.
Some employers offer paid leave, while others offer unpaid leave for those who need a break. You may be eligible for up to 12 weeks of unpaid, job-protected leave under the federal Family and Medical Leave Act if you have a newborn, adopt or foster a child, have a serious health problem or are caring for an immediate family member such as a child. , serious health condition of spouse or parent.
Given a tight labor market, your employer may be willing to adjust your workload, transfer you to a job with less responsibility, or reduce your hours. This can free up the time and energy you need to focus on what’s important to you—and what you want next in life
This column was provided to The Associated Press by personal finance website NerdWallet. Liz Weston is a columnist for NerdWallet, a certified financial planner and author of “Your Credit Score.” Email: [email protected] Twitter: @lizweston.