TomorrowMakers

Childcare, study, household responsibilities - you may take a career break for various reasons. But are you financially ready for it?

Want to take a career break? Here's how to plan your finances

While India ranks a dismal 120th among 130 countries in women’s participation in the workforce, more and more Indian women have become career-oriented in recent times.

However, women may decide to take a break from their career to fulfil their family responsibilities, study etc. If you too are thinking of taking a career break, ask yourself this question – are you financially ready for it? If not, then you could find yourself in financially troubled waters.   

So here are few things to take care of before you take that career-break:

1. Create an emergency fund
While you are on a career break, you may realise that you didn’t account for some things like inflation. An emergency fund proves to be your saviour in such situations. Moreover, as you won’t have a source of income, it’ll become difficult for you to handle an emergency. Hence, your priority should be to create a contingency fund. A good contingency fund should equal six times your present monthly income.

2. Start investing

Investing is a way to ensure that you have a source of income while you are on a career break. These investments also ensure that you don’t end up spending all your savings during the break. You can invest in a Systematic Investment Plan (SIP) of a mutual fund. SIPs are affordable and a disciplined way of investing. On the other hand, interest on Monthly Income Plans (MIPs) gives you a steady income. Here, you invest a lump sum and, you get interest on it every month, quarter, half-year or year.

 

When you take a break, you can convert the SIP to a Systematic Withdrawal Plan (SWP). SWPs will give you regular payouts at different intervals. You can choose the frequency of these payouts. Thus, SWPs provide the much-needed source of income during your break.

3. Pay off your debts

Debts are an avoidable stress on your income and savings. When you are on a career break, you won’t have the income that you received as an employee. In this case, paying off loans strains your finances even more. So, try not carry forward your debts into your sabbatical and pay off your loans and liabilities.

4. Buy insurance

While you may not like to think that the worse can happen, it’s always advisable to be prepared for it. A life and a health insurance plan come to your rescue in such times. These critical times can throw you off your stable financial position, especially when you are on a career break. A life insurance plan pays a lump sum benefit in case of premature death, and a health insurance plan ensures that you get a cashless and quality treatment in case of medical emergency. So, invest in a good insurance plan before you take a sabbatical.

Now, that you are all prepped for your career break, you should also try and cut down on some lifestyle expenses like shopping, eating out, vacationing etc.

So, go ahead and take that career break while not putting your finances in the backseat. Plan your finances and remain financially independent even on a sabbatical.

 

How I did it

Praveen Nair
Retiree

Ever since I retired, I have looked forward to the festive season with added zeal. It is the buzz that I need once in a year in my laidback post-retirement life. I like to celebrate the occasion, get the house painted or renovated, buy gifts for my dear ones or go on a vacation. These things… Read more

Swati Mehra

A couple of years ago I was over the moon after landing my first job. I celebrated regally during the festive season that ensued, only to land in a financial soup for the next few months. With gargantuan credit card bills and barely any cash left, I had no other option but to default the payment… Read more

Rohansh Pathak

It is highly unlikely that all the expenses made during the festive season were worth making in the first place. This is the time of the year when unavoidable expenses are bound to upset your budget plans, and you can do little about it. However, I have made it a point to have a look at the… Read more

Rahila Khan
Homemaker

I am a single mother of one. I lost my husband just 5 years into my marriage. Life has been a struggle for me, but I have managed it and today I have no complaints. 

I was a young widow with a 3 year old son when my husband passed away due to a heart attack. My parents were my rock… Read more

MOST RECENT