At some point, every one of us has daydreamed about quitting our job to do something different. Maybe it’s to pursue a personal project, spend more time with your kids or simply take a career breather. For many, 2020 offered plenty of time to think about priorities and what we want out of life. And out of this period of reflection, some people have become more comfortable with the idea of hitting pause professionally.
The thought of taking a career break can be both exciting and scary at the same time. Because as liberating as the idea might be, fears and doubts can hold us back from actually going through with it. What if I take a break and never find a job again? What if taking a break hurts my promotion or earning potential later down the road? Or what if I come to regret this decision?
We don’t need to go down the full spiral of “what ifs” to make this point: Leaving a job is often a big decision that requires mulling over. But even if you’re mentally ready to make this transition, you also have to ask yourself if you’re financially ready.
Proper financial preparation is essential and can mean the difference between enjoying your career break and being constantly stressed out by it (which defeats the whole point of a hiatus!). So let’s go over a few questions you’ll want to check off before calling it quits.
Before making any decisions, you want to be absolutely sure that quitting your job is the best answer to what you’re looking for. Is it about wanting to pursue a long-neglected passion project? To become a stay-at-home parent? Or to recover from burnout?
No matter what your personal reasons are – consider asking yourself if there are other ways to do these things without having to quit your job.
Giving yourself some time to think things through could save you from making a rash decision.
For example, could you negotiate for a more flexible work arrangement or even cut back on some hours? If it’s about needing a real rest, could you take an extended vacation without having to officially leave your company? Giving yourself some time to think things through could save you from making a rash decision.
If you’re married (or in a serious relationship), you may want to discuss this career break with your significant other. After all, your decision will likely impact the both of you. You may even have to lean on your partner not only for moral but also financial support (more on this later).
Perhaps one of the scariest things about taking a career break is the loss of income. If you decide that leaving your job makes the most sense, one thing you’ll want to do before quitting is figure out your budget – the one you’ll live on during your time off.
Putting together a budget can help give you a general sense of how much you’ll need to have for your career break. (If you’ve never created a budget, don’t worry. Marcus has a few articles on the topic like this one: “How to Make a Budget That Works for You.”)
Remember, a career break means that there could also be a “break” in your usual flow of income.
Remember, a career break means that there could also be a “break” in your usual flow of income. You may have little or no money coming in during this period, depending on your personal situation. For instance, if you’re married and your spouse is working, you’ll be going from living on two incomes to one. So one thing to talk about with your spouse is whether you can maintain your current lifestyle on that one income. And if not, what kind of adjustments would you need to make, and are you willing to do so?
You could start by taking a look at your current budget. What are the essential expenses you’ll have to maintain? This may include rent (or mortgage if you own), utilities, groceries, debt payments and insurance. Health insurance is something you’ll want to sort out sooner rather than later, especially if you need to shop for your own policy. If your spouse has coverage from work, see if you could be added to their health care plan.
Next, figure out the discretionary items you could cut back on to help lower your expenses while you’re not working (dining out, travel, subscriptions, etc.). And don’t forget about factoring in any potential savings from not having to work – like child care or transportation costs.
With a budget in mind, you can begin to see how far your savings could potentially take you. This brings us to the next question on our list.
Once you know how much you’ll need each month, it’s time to check in on your savings account(s). Because unless you have an alternative stream of income, this is most likely the pot of money you’ll be dipping into to help fund your career break.
You may be wondering how much savings is “enough.” The answer will be different for each household because it largely depends on the length of your break, your spending and whether you have another source of income to count on (like your partner’s). This is why figuring out your budget is a key step. Crunching the numbers could also help you see when you can realistically leave your job. Will you need to work a little longer to get your finances in shape?
Generally, the longer your break, the more money you may need to save. Ideally, you should have enough saved to cover all your expenses for the full duration of your break. But we don’t live in an ideal world and if your savings aren’t where they need to be, check out our article “Set a Savings Goal and Reach It in 5 Steps” for some tips.
Now, if you’re thinking about dipping into your emergency fund or retirement account(s) for a cash assist, you might want to tread carefully. Here are some things to keep mind:
This question may seem odd at first because isn’t the whole point of taking a career break…not to work?
But for those leaving their full-time jobs to pursue their personal interests (photography, writing, social media stardom, etc.), there might be opportunities to parlay those pursuits into a side hustle through a “gig” or contract work.
Generally speaking, this kind of job arrangement could offer more flexibility in terms of where and when you work. So while you’ll be “working,” chances are you could get to be your own boss. (And that can make all the difference.)
Now, the point of a side hustle isn’t necessarily to strike it rich (kudos, if you do!). But it can provide a stream of income – even if it’s a modest one – to help with your cash flow during your hiatus. Because if you have some money coming in, you may not need to tap into your savings as often. This could help you stretch those dollars.
Who hasn’t thought about quitting their jobs in a dramatic flourish? While the scene might play out well in your head, it isn’t something you want to do at the spur of the moment. A big decision like this deserves careful thought.
If taking a career break makes the most sense for you, it’s important to plan ahead as much as possible. Being financially prepared to make your exit could help make this transition a less stressful one. (We say “less” because big life changes are going to be stressful no matter what.)
Also, as you make your preparations, you may want to talk to those who have done this before. What was it like for them? What were the challenges or surprises they faced? If nothing else, talking with others who have been in the same boat can help you see that you don’t have to go through this transition alone.
This article is for informational purposes only and is not a substitute for individualized professional advice. Individuals should consult their own tax advisor for matters specific to their own taxes and nothing communicated to you herein should be considered tax advice. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of Goldman Sachs Bank USA, Goldman Sachs Group, Inc. or any of their affiliates, subsidiaries or division. Goldman Sachs Bank USA does not provide any financial, economic, legal, accounting, tax or other recommendation in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA or any its affiliates. Neither Goldman Sachs Bank USA nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.
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