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Tata Capital > Blog > Wealth Services > Taking A Career Break? Here’s How to Plan Your Finances

Wealth Services

Taking A Career Break? Here’s How to Plan Your Finances

Taking A Career Break? Here’s How to Plan Your Finances

At times, individuals may feel the need to hit pause to their professional lives. The reasons for this could be anything such as requiring a break from the hectic schedule, caring for ageing parents, upskilling with a new professional course, or even simply taking time off to raise a newborn.

Regardless of why you need a break from work, a significant aspect of this decision is how it will impact your financial stability. After all, taking a career break will disrupt your steady income and require financial planning.

In this article, we discuss how you can plan your finances for a career break so that your sabbatical leave doesn’t end up hurting your financial stability. Let’s dive in.

1. Analyse your Existing Financial Situation

The first step in your financial plan for a career break requires you to assess your current financial stability. For this, collect all your financial statements and documents, such as retirement account information, bank statements, bills, asset documents, etc. Examine these and calculate your expenses, income, savings, and outstanding debts to understand your financial health.

After this, analyse how a disruption in income will affect your financial stability. Be sure to consider your future financial requirements as well, such as schooling for children, buying a car for convenience, travelling, etc. If you have a partner, be sure to discuss how you’ll manage your savings and expenses during your career break with them as well.

2. Plan Your Budget

Creating a budget for your career break helps you stay in control of your finances. To plan this, ascertain your fixed as well as variable monthly expenses. Try to reduce your expenses and increase how much you save. While you won’t be able to reduce fixed expenses such as EMIs, rent, insurance premiums, etc., variable expenses such as dinning out, buying clothes, etc., can be reduced.

Once you have a workable budget, all you need to do is stick to it.

3. Create a Contingency Fund

While we don’t know what the future holds, we can plan for it to ensure it doesn’t destabilise our financial position.  The key to this is to create an emergency fund. This can help you meet any sudden expenses, such as house repairs, medical bills, etc., without affecting your monthly budget.

Further, make sure this fund is easily accessible should you require it. Keep a part of it in the bank, and the rest can be invested in liquid debt investments such as overnight funds and liquid funds.

4. Consider Applying for Freelance Work

You might find finding time for freelance work challenging at the beginning of your career break, especially if you’ve taken one to care for ageing parents or a newborn. But, once you fall into a schedule, you can consider finding time to take up flexible projects that allow you to earn money while on your career break.

5. Consider Investing Your Money

Lastly, consider investing a portion of your savings in real estate, stocks, mutual funds and other investment vehicles. Be sure to analyse your risk appetite, financial goals, liquidity requirement, etc., to make an informed investment decision.

6. Plan for Passive Income

Since your primary income stream will be paused, setting up a passive income source can help you sustain financial stability. Consider dividend-generating investments, rental income, or interest from fixed-income instruments to support your expenses during the break.

To Sum Up

In short, your financial plan for a career break requires you to assess your existing financial situation, analyse your fixed expenses and plan your budget, create an emergency fund, consider freelance work and explore investing your money to make it grow while you take a break from work.

If you’re looking for a reliable and trustworthy platform to help you manage and grow your wealth while you take your career break, consider Tata Capital Wealth. We offer a bespoke bouquet of investment, protection and financial services to help you plan and achieve your financial dreams without financial stress.

To learn more about our offerings, visit the Tata Capital Wealth website today!

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