Staying financially stable during a mid-career break is a common concern. If you’re planning on taking a career break and are worried about managing your money before, during, and after the break, continue reading to understand the steps that might help you develop spending discipline.
Before The Break:
Here are the things you can do before the break:
- Assess Your Financial Situation
Before beginning your mid-career break, it’s vital to assess and understand where you stand regarding finances. Take into account your total assets, including cash and savings. Once you’ve determined the sum, subtract the amount you need to pay towards your credit cards, mortgages, and personal loans.
Since you’ll not be earning any money during your career break, at least not from your work, assessing your current financial situation will help you understand how you can control your spending. Besides the cash at hand and your savings, you can also determine the worth of assets you can sell to cater to your debts and basic needs should the need arise.
- Figure Out Your Monthly Expenses
Do you know exactly how much you spend in a month? If yes, you’re a step ahead towards knowing how much you might need for the career break. However, if the answer is no or not sure, you might need to begin doing the math before planning for your midlife gap year.
Calculating your monthly expenditure is easy. All you need is to peruse your bank and credit card statements to understand how you spend your money. Once you’ve determined how much goes into what, begin cutting down unnecessary spending to lower your monthly budget. The aim is to concentrate on necessary spending while doing away with the unnecessary to save some extra dollars.
Failure to carefully calculate your monthly expenditure will result in you taking a career break without knowing how much you need for it. Reviewing previous expenditures for the last three to six months is advisable for a clear picture of your monthly expenses.
- Save, Save, Save
Now that you know your current financial situation and have figured out your monthly expenditure, the next step is to save as much as possible. Most of your savings will likely come from cutting down expenses. After you’ve figured out the amount you can save per month, it’ll be easier to figure out how many months of saving you need before taking a break.
- Plan Your Expenses Based on Categories
Housing, health, food, insurance, and education are among the most critical expenses that require funding before taking a career break. You don’t want your child’s education to be interfered with just because your career isn’t generating a monthly income, nor do you want them to starve. That said, setting a budget for every vital category is vital. Once you’ve set up a budget for each category, try to reduce the entire budget by 10 to 20% to lower the amount you need for the break.
During The Break
Your success in money management during the break will depend on whether you’re sticking to the above-discussed tips. For example, before the break, you figured out your monthly expenses and concluded what you should spend each month during the break. If you fail to stick to the plan and spend a little bit more, you’re more likely to hurt your financial state, especially if you don’t have any income. That said, here are steps you need to take to manage your finances during a career break:
- Stick to the Budget
Ensure to stick to the initial budget you set aside before taking the break. Remember, you might not receive any income, and overspending might only mean subtracting from what you’ve saved. Keep in mind that if you break your discipline on spending, you might have a challenging career break as far as finances are concerned.
- Live Simple
What does living simply mean? It doesn’t necessarily mean doing away with everything that can make life enjoyable. It means finding a balance and spending on necessary things that make you happy without overspending. You can still live simply and still eat out once in a while. All you need is to avoid going overboard with anything.
After The Break
Once the break is over, it’s more likely that you’ve spent most of your savings. Now, the only thing that should be your concern is saving and spending less to get back on your feet financially. Continue living as simply and within a budget as if you’re still on a break until you’ve recovered financially. Failure to which you might be working and spending without saving.
A mid-career break might mean no income for the entire break. With that in mind, it’s essential to determine how much you need for the break, create a budget, and start saving. Once you’re on a break, spend responsibly until you resume work and you’re back on your feet financially.