Planning a career break? Here are important financial aspects that you should take note of

A career break can be financially daunting if not planned well ahead of time since one's regular income stops for the time being. So, here are six steps for you to "plan" for the same.

In today's times, people are no longer bogged down by the societal pressure to stay in a job. There is increased free will as people are open to the idea of taking a career break to simply rejuvenate or to find their calling. It has also become a norm for individuals to take short breaks to pursue a course of studies which could potentially upskill them and make them more competent. 

However, in some cases, the career break could also be forced as part of the organisation's downsizing effort. Many people lost their jobs during the current pandemic. For many, a career break may not be an easy situation due to their financial responsibilities. You must plan your finances thoroughly before you embark on such a career break. 

Here are the top 6 aspects to consider before opting for your career break to make it smooth financially:

1. Research enough to justify your decision
 

If you are making a conscious decision to take a break to upskill or transition to another career path, make sure you have done enough research. The research need not constantly be sifting through publicly available information. You may have to dig deeper and understand if your choice will make sense even after a few years. 

Ideally, it is better to approach a trusted mentor who has enough knowledge about the situation and will guide you in good faith. While discussing with a trusted person, it is essential to layout the current financial situation and responsibilities to gain comprehensive advice. It may also offer you insights when you communicate with others. 

Project your finances for the duration of the break and ascertain that you will be able to continue your current lifestyle and manage your financial goals without financial anxiety. Extrapolate it on excel to check the maths behind this! You will have to evaluate other possible options of carrying out the desired plan by continuing to work part-time or as a consultant to ensure that the financial stress does not get to you.

Suppose the career break is forced due to management decisions. In that case, you will have to research how to fruitfully utilise the time and parallelly look for jobs that complement your experience and qualification. The entire recruitment process takes time, and hence, you need to ensure that you do not delay the search for a job. 

2. Hold at least six months of living expenses in your bank account
 

A savings bank account should typically hold at least six months of living expenses to ensure that you are appropriately covered during these tough times. The choice of savings account is also important; choosing a plan which offers the flexibility of withdrawal without any maximum limitation, one that offers competent interest rates, and a zero-balance or a low minimum balance savings account will be suitable during these times. 

IDFC FIRST Bank has a range of Savings Account balances suitable for various individuals. The features of their Savings Account products are available for public consumption on their website; you may read through them carefully and align them with a savings account that is most suitable for your needs and situation. IDFC FIRST Bank Savings Accounts are specifically curated for individual needs, and depending on the type of income, the stability of your job, and other needs, you may choose one that fits you best.

3. Reduce fixed expenses to bear minimum
 

If you are on a career break either out of choice or due to force, it is best to reduce your fixed expenses to a bare minimum. This includes analysing your monthly subscriptions, such as Netflix and other OTT, wifi and telephone bill plans, current outstanding EMI's, if any, rent payable, other mandatory expenses that you need to pay such as school fees, medicines, etc. You may have to cut down on your lifestyle spending and allocate funds to only those aspects which form a part of your needs. 

Budgeting your spending is a healthy practice, its pertinence increases in the event of a career break with no income. This will help one to carefully reduce expenses and stay within the intended budget, which is crucial during a period when there is no cash inflow. 

There are many mobile applications that can help you budget your expenses for free. If there are fixed costs that you can eliminate, you should reduce them considerably. This will help ease your financial situation; it is not prudent to dip into your investments or savings, which are earmarked for other financial goals. Dipping into your investments will result in your inability to meet your financial goals. 

4. Have a life cover AND a health cover
 

Having a life cover is always important; even during your non-earning period, a life cover is important. The life cover should not only cover household expenses but should also cover financial goals and outstanding liabilities (if any). You must continue to act in the best interest of your loved ones during the career break. 

In all probability, your employer would have taken care of your health coverage until you were employed. You will not be covered under the policy once you are on a career break; during such times, you still need to have health coverage to ensure that any medical emergency does not financially strain you. If you have dependents, then avail of a family floater to ensure that they are also covered. 

5. Make your money work for you

Choosing the right savings plan is important; you should always have at least six months of household expenses in your bank account. 

Savings accounts at IDFC FIRST Bank can provide an interest rate up to 5% p.a, which is high compared to other banks' savings accounts. The Savings Account from IDFC FIRST Bank also offers monthly compounding of interest rate; this facilitates earning higher interest over the long term.

6. Resort to freelancing, consultancy options

Having a backup income is important. If you have been forced out of your job, then you should immediately start looking for freelance opportunities or consultancy opportunities. In these types of gigs, the onboarding happens at a faster pace as compared to a full-fledged permanent job. 

Hopefully, this note helps you plan financial aspects adequately for a career break. There could be multiple reasons for opting for a career break, but it's always wise to know the financial implications before opting for the same so that you are not unaware of the situation. To avoid financial crisis become IDFC First Bank's referral partner which help you with your side income.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.