In 2016, Jamie Clark from Seattle was a software engineer who planned to take a year off to complete a master’s degree in computational linguistics. One year turned into three and a career change into financial planning.
These days, Clark, who uses the pronouns them/them, thinks the experience makes them better advisers, especially since their career hiatus didn’t go as originally planned.
“Part of our job as financial planners is to help people prepare,” says Clark, now a certified financial planner who recently started her own company, Ruby Pebble Financial Planning. “And I want to help people develop that flexibility.”
Career breaks are extended and generally unpaid. Such breaks can be ambitious – giving you time to travel, pursue an education, change careers or start a business. Or, they may be motivated by life events, such as caring for a child, breastfeeding a family member, or coping with illness or burnout.
Whatever the cause, some planning can help you get the most out of your break.
Save and budget diligently
CFP Henry Hoang of Irvine, Calif., doesn’t think most people need detailed budgets, as long as they save enough for their goals. But career breaks are an exception, he says. When your paychecks stop, you’ll want to have enough savings to support yourself. It starts with knowing exactly what you’re spending today and estimating what your spending will be during your break. Some costs may go down, such as travel or childcare costs. But you might 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 of expenses in case it takes longer than expected to land your next job, suggests Hoang. One of Hoang’s friends didn’t do this and ended up raiding his 401(k) to pay the bills.
And speaking of retirement: extended breaks could mean you’ll have to work past normal retirement age or dramatically increase your savings ratio to retire on time. If you plan 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, Hoang says.
Clark saved enough from a well-paying job to cover his living expenses for two years, and was able to extend this to three years after his marriage. Their spouse paid the bills while Clark used the remaining savings to pay tuition and other fees to earn his financial planning degree.
Clark says careful tracking of expenses and thoughtful budgeting not only helped make their savings last, but also alleviated some of Clark’s stress without a paycheck.
“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 strict schedules, but having no plan means you could be wasting that precious time you’ve prepared and saved.
Hoang has another cautionary tale from a client who began her breakup with a strong desire to change careers and spend more time with her young children. His days were quickly filled with parenting duties and he never took the time to explore other jobs, Hoang says. When his savings ran out, he ended up returning to his same field.
“Having a clear idea of what you really want from this career break could make a huge difference to the overall experience,” Hoang says.
The details of your plan will depend on your career break goals, but consider scheduling lunch with a professional colleague every month or so to maintain your network and keep up to date with developments in your field. If you’re considering a career change, set a schedule for completing certain steps, such as meeting with a career counselor and determining what training or certifications you’ll need.
CONSIDER ALTERNATIVES
A prolonged 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 pay. Even if you have savings, you may understandably be hesitant to quit the job you have without another one in sight.
But that doesn’t necessarily mean you’re stuck.
A few employers offer paid sabbaticals, while others offer unpaid leave for workers 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 adopt a child, suffer from a serious medical condition or are caring for a member of your immediate family. such as a child, spouse or parent with a serious medical condition.
Given the tight labor market, your employer may be willing to adjust your workload, transfer you to a position with less responsibility, or reduce your hours. It could free up the time and energy you need to focus on what’s important to you and what you want next in your life.
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This column was provided to The Associated Press by personal finance website NerdWallet. Liz Weston is a NerdWallet columnist, certified financial planner, and author of “Your Credit Score.” Email: lweston@nerdwallet.com. Twitter: @lizweston.
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