Not everyoneâs career path is a 40+ year marathon working full time until you can finally come up for air in your golden years.
Sometimes you need a little break along the way.
Taking time away from the workforce â whether itâs to travel, take care of loved ones, learn a new skill or whatever â can be a beneficial thing. But money â or the lack thereof â is what stops many people from even considering it.
With some significant planning and budgeting, however, itâs possible to make your career break dreams a reality. Here are five steps you should take when budgeting for a career break.
5 Steps for Career Break Budgeting
1. Think About What Your Career Break Will Look Like
People take career breaks for a number of reasons. Take some time to reflect on why you are planning time away from the workforce and what you intend to do.
When thinking about what your new day-to-day will look like, try to get as detailed as possible. Hone in on aspects that will affect you financially.
How long will your break last? When would you like it to start? Will you be staying at home or traveling the world? What adventures would you like to experience?
While itâs nice to dream about your best life ever, youâve got to be practical too. Ranking what you want to do with your newfound free time will be helpful if you have to cut your list down to fit what you can afford.
2. Explore What Your Costs Will Be During Your Break
After youâve fantasized what your work break will look like, itâs time to focus on the numbers. Youâve got to know what your expenses will be in order to determine whether your plans are realistic.
If you donât already budget your income and track your expenses, nowâs the time to start. Your budget will give you a good idea of how much you spend on essentials and where you can cut costs as you save up for leave.
Research all the additional costs you expect to incur during your break. If youâre taking extended parental leave after the birth of a child, youâll be dealing with a ton of new baby-related expenses. If youâre taking time off to travel, youâve got to pay for transportation and lodging.
The length of your break will also be a big factor here. Obviously, the longer youâre away from the workforce, the more money youâll need saved up.
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3. Set Up a Sinking Fund to Cover Expenses on Your Break
If you havenât heard the term âsinking fund,â thatâs just personal-finance speak for a stash of savings that you regularly contribute to over time to break up a big expense.
Once youâve estimated the overall expenses for your leave, divide that by how many months you have left to come up with your target monthly savings goal.
Switch to a bare-bones budget or try these other ways to save money fast so you can free up cash to add to your sinking fund.
If you already have existing savings you want to use to fund your career break, that will cut down on how much youâll need to put aside each month â just make sure you donât touch your emergency fund!
Your emergency savings should only be used on an actual emergency â like if you get into a car accident or Fido needs to be rushed to the pet hospital. Being away from work wonât make you immune to emergencies, so do not plan to use your emergency fund to tide you through your break.
In fact, before you focus on building up your sinking fund, you ought to have adequate savings in an emergency fund first.
4. Explore Opportunities to Make Money On Your Break
If youâre able to make money while youâre away from work, youâll be less financially burdened. You wonât have to save up as much or worry about burning through your entire savings.
The first income stream you should explore is your current job. Taking a career break doesnât necessarily mean calling it quits where you work now.
Depending on what type of leave youâre taking, your job may be protected and you might be able to continue collecting your salary â or a percentage of your current pay.
The Family and Medical Leave Act (FMLA) provides eligible workers with up to 12 weeks of leave after the birth or adoption of a child, to deal with a serious health condition or to care for an ill or injured family member. While this type of leave is unpaid, youâll continue to be covered under their workplace health insurance plan and there may be the possibility of coupling this leave with short-term disability pay.
President Joe Bidenâs proposed coronavirus stimulus package includes extending the expired paid time off policies for sick workers and those needing to care for family members due to COVID-19.
Find out if your employer offers any other paid leave programs â whether thatâs parental leave, unlimited PTO or sabbaticals. According to the Society for Human Resource Managementâs 2019 Employee Benefits Survey, 27% of employers offered paid parental leave, 6% offered unlimited paid leave and 5% offered a paid sabbatical program.
Another 11% of employers surveyed offered an unpaid sabbatical program. While unpaid leave isnât as ideal as paid leave, it gives you peace of mind that youâll have a job to come back to after your break.
Other options to make money during your leave include picking up a side gig, bringing in passive income, renting out rooms (or your entire place) on Airbnb or selling your belongings.
If you need to pick up a little work while youâre on a career break, just make sure it doesnât conflict with the reason you needed to take leave in the first place.
5. Develop a Re-Entry Plan
You need to plan for all aspects of your career break â including your transition back to the workforce.
Your budget needs to not only cover your expenses while youâre backpacking through Europe or nursing your elderly mother back to health. Youâve got to add a cushion for that period at the end where youâre actively seeking your next gig.
While data from the U.S. Bureau of Labor Statistics shows the average length of unemployment is about 23 weeks, how long itâll take you to find new work will vary depending on your industry and the position youâre seeking.
Plan to keep up with contacts in your field and engage in relevant volunteer work or continued education while youâre away to improve your chances of quickly finding a new job.
If your savings run low toward the end of your leave, donât brush off finding a bridge job â a temporary role to help you pay the bills while you search for better opportunities.
A resume gap isnât the kiss of death it used to be. You can even craft a way to include side gigs on your resume.
A career break should provide you with freedom to pursue something outside of your typical work life. You donât want that freedom to drag you deeper into debt or put you in a worse financial position if you can avoid it.
Do your best to budget for more time than youâll need so you can enjoy your career break stress free.
Nicole Dow is a senior writer at The Penny Hoarder.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.