Planning Financing for Your Career Break

Last Updated Nov 27, 2007 12:45 PM EST

A career break can be expensive, and money may well be the biggest impediment to following through with your plans. For example:

  • How will you pay for living expenses during your break?
  • Will you need a loan to afford retraining or travel costs?
  • Will you need to take another job to bring in more money?
  • Will your standard of living have to drop for a while?

These questions can seem overwhelming. In fact, they may even halt your plans completely. However, while money is a major consideration, with some careful planning and self-discipline, financing can be relatively simple to manage.

What You Need to KnowDo I have enough savings to cover the unexpected?

Even if you've planned accurately for the basic costs of the career break, you should also set some funds aside to cover unexpected events? For example, what would you do if one a dependent is sick or is injured? Would you be able to cope if your mortgage or rental payments go up? If possible, try to keep roughly three months' salary in the bank as a contingency fund. That way, you'll have more peace of mind and be able to enjoy your new experience without the fear that your funds could run out in an emergency.

What to DoInvestigate Sources of Financing

While some organizations may help you fund your new venture (especially if it will benefit the company in the long run), if you are taking your career break primarily for personal reasons and you know the company won't give you any financial aid, you'll need to explore some other options. For example:

  • Grants. If you are taking a break to study, you'll find that some may have offer grants to eligible students. If you've already selected the course or training you want to do, get in touch with the training provider or school to see what is available. (Also remember that some courses—particularly online ones—are inexpensive or even free. Explore the resources in your community or use the Internet, making sure to check the small print in course specifications to see if you can cut your learning costs.)
  • Benefits. Could you qualify for unemployment benefits?
  • Loans. Loans are another option to think about—the Internet is a great resource for finding out more. Be sure to check repayment rates before signing any loan agreements.

If you own property, you could release some equity to finance your plans. You could, for example, take out a home equity loan or refinance your mortgage. Get in touch with your lender and talk through your options.

Look into Ways of Earning Extra Income

Extra income is always a bonus when you can't rely on your normal paycheck. Thinking creatively may help you find all sorts of ways of bringing in money; here are just a few suggestions to start you off.

  • Use your house. If your career break plans mean that you'll be away from home for more than few months, you have four options: asking a friend or acquaintance to housesit; leaving the property empty; finding a tenant via an agency or on your own; registering with a home exchange agency. The latter two options are the most useful, as they'll make your empty house work for you!
  • Renting. If you haven't done this before, you may feel a little tentative about having strangers living in your house, but thousands of people every year benefit from this option. Doing all the setup work yourself by advertising online, in a local newspaper, or just by word of mouth will bring in most money, but you can outsource the work to an agency tool. For a percentage of the income, they will applicants, collect rent, and deal with any problems that crop up while you're away. If you do find a tenant yourself, be sure to check references thoroughly.
  • Exchanging homes. If your career break involves travel, you could swap your home (and sometimes your car too) with a family in the city or country that you want to visit. A house swap cuts accommodation costs and will also take you off the tourist trail and into neighborhoods where the local population lives—a great bonus if you're keen to learn a new language. The two main requirements are that you be willing to spend at least a few weeks in one place, and that you have a home that is in good condition and a desirable location. Most exchanges are arranged six months or more in advance for up to a month at a time (usually in the summer), and an Internet search will supply details of thousands of home exchange agencies that can match up compatible swappers. The great advantage of a home swap is that this is not a commercial transaction, so the costs are relatively low. That said, you should ask prospective tenants to supply references from their current employer, bank, and previous landlord or other people they have exchanged with so that you can rest easy while you're away.
  • Find sponsors. There are many ways to raise money from your local community, friends, and family. Some of them include writing to targeted companies asking for sponsorship; holding raffles and auctions; throwing theme parties; selling off surplus possessions at a flea market or yard sale; running marathons or organizing sponsored swims. Almost anything you can think of goes, in terms of sponsorship—as long as you bear two important points in mind: first, it's much easier to raise $5,000 in small donations from lots of people than to persuade one organization or individual to part with the whole amount. More is better, in this instance, so make sure you have plenty of different ideas. And, if you're trying to reach a particular target, remember to include the cost of what you are doing in the amount you need to raise. There's no point in spending $100 on advertising a car wash, if you're only going to raise $50!
  • Work part-time. As millions of students will testify, taking on casual or part-time work can be an invaluable way of financing the activities that you really want to concentrate on. Try investigating your local supermarkets for night-shift work, or see whether cafes or restaurants in your area need extra bar staff. In these days of "24/7," there are always work opportunities, especially during night or weekend hours, leaving you free to pursue your career break dream for the rest of the time.
Cut Down on Spending

Many people in western societies could live more efficiently and cheaply if they made the effort, and when both before and during your career break, you'll need to make the effort. Only you know exactly where you money goes and what your commitments are, of course, but there are some general, simple steps that everyone can take. They can have a remarkable effect on your spending. For example:

  • Find the best rates. How does your mortgage rate compare with the best on offer? How about your life, car, and home insurance? Credit card rate? And your phone, Internet, utility, and cable or satellite providers—do you use them purely out of habit, or because they offer the best value for your money? Most of us don't want to take the time or energy to think about what we spend on essential bills, but you could probably save hundreds (if not thousands) a year simply by switching to alternative suppliers.
  • Investigate resructuring any debts. If you have large outstanding debts, particularly on credit cards or other expensive loans, get them under control as quickly as you can. If you have more than one credit card, say, and you're making large payments on each every month, why not consolidate them into one personal loan? This would enable you to change your repayments so that they're at a more affordable level. The interest charged will depend on the amount you need to borrow, but be sure to read the fine print so you don't get into something with unfavorable repayment terms. There are many Web sites that can help you to find the best rates on personal loans.
  • Defer payments. Whether you're saving for your first home, your children's college fund, retirement, or other investments in your future, it may not be disastrous if you take six-months off from making payments, as long as you remember to restart them when you're earning again. Are there any other expenses that you can defer for a while?

Many mortgage and other lenders offer payment holidays as part of their agreement with you. Would it be possible to defer some of your larger expenditures during your career break until you are back at work? Remember that this will only help if you make certain that you restart the payments once you are earning again.

Get Your Budget in Line with Your Income

Working out a budget is pretty straightforward. You simply have to calculate all your unavoidable expenses—food, housing, transportation costs, and other regular bills—to work out the minimum amount of money that you need to live on. That's the easy part. The hard part is sticking to it!

When your income drops, you just have to be disciplined or rack up debts you'll struggle to pay off. If you're struggling to curb your spending, every time you're tempted to buy something you know you shouldn't, figure out what you won't be able to do as a consequence. For example, let's say you're spending your career break traveling through South America. If you spend $150 on a pair of jeans, that's a day rafting on the Amazon that you've missed! If you view your spending in these terms, it'll be easier to miss out on your "essential" manicure or to resist the "bargain" DVD player.

Don't Jeopardize Your Financial Future

Planning a career break is incredibly exciting and exhilarating, but take care that you don't get so carried away with it all that you neglect possible future consequences. It's extremely important to do your research and make sure that you protect your long-term financial wellbeing. A career break can damage your pension and other benefits (such as a medical plan or sick leave), particularly if you are a teacher or work for the government, but you need to know the consequences of your break, regardless of what industry you work in. Check that your break won't affect your continuous service record, too.

What to AvoidYou Don't Make a Plan

The last thing you want is to come back from your career break and realize that you've missed essential payments or run up large debts during that time. You must about through your income and expenses for the period of time that you plan to be away, making the necessary plans and arrangements before you leave. Then, when that period is over, you can move back smoothly into your regular life, or stride forward with confidence into a new adventure at the end of it.

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