In today’s fast-paced world, it’s becoming increasingly common for people to take a break from their careers to focus on other areas of their lives. Before you wave goodbye to your job, it’s important to consider how this decision will impact you and take steps to reduce the impact.
Why take a career break?
There are several reasons why you may choose to take a career break:
- Family responsibilities: to care for family, especially in the early years of parenthood or during illness or caregiving.
- Personal health and well-being: to focus on health, long or short-term illness or well-being.
- Pursuing studies: pursue higher education or acquire new skills.
- Relocation or travel: to relocate to a different place or the opportunity for extended travel experiences.
- Career change or sabbatical: to explore other opportunities, transition to a new field, or take a sabbatical to recharge and re-evaluate career goals.
Impacts of a career break
Even a short career break can have a significant impact on your life. These may include:
- Financial impact: career breaks mean a reduced or complete loss of income. This can affect financial stability, requiring budget adjustments and careful financial planning.
- Career progression delay: an individual’s career progression may be delayed, as they may miss out on promotions, raises, and opportunities for skill development.
- Reduced network and industry connections: maintaining a professional network can be challenging, which could limit access to job opportunities and industry insights.
There may be longer-term impacts if you’re out of the workforce for an extended period. Extended career breaks may result in:
- Skill development: skill gaps or outdated knowledge. In rapidly evolving industries, this can make it challenging to catch up.
- Retirement savings: the loss of income and contributions to superannuation can lead to lower savings and a delayed retirement age.
- Confidence and professional identity: taking a career break, especially if unplanned or extended, may impact an individual’s confidence and professional identity.
While numerous potential impacts exist, many people successfully navigate these challenges and find ways to re-establish themselves professionally. Planning, continuing education, networking, and maintaining industry connections will help mitigate some of these effects.
How to minimise financial strain during a career break
The impact on cashflow is often front-of-mind for people considering a career break, and for good reason. However, careful planning across these key areas will help minimise the financial effects.
Budgeting & saving
- Save money in advance of your career break. The more you can save, the better your financial cushion will be.
- Create a detailed budget that shows your current expenses and identifies areas where you can cut back.
- Build up your emergency fund to help cover unexpected expenses.
Debt management
- Minimise or eliminate high-interest debt, such as credit card debt, before your career break.
- Consider consolidating or refinancing loans to lower interest rates to reduce monthly payments. Consider the loan type (e.g., principal and interest, or interest only) and the appropriateness of an offset account.
Return-to-work plan
- Develop a plan for re-entering the workforce, including job search strategies, networking efforts, and skill development.
- Explore part-time or freelance opportunities during your break to maintain some income and keep your skills sharp.
Career breaks can offer invaluable opportunities for personal and professional development. But, without sound financial management, they can also pose significant challenges.
Before you make any decisions, talk to your financial adviser to ensure there aren’t any hidden financial consequences you haven’t planned for.
The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.
