In my previous post, I had written about my career break and a few questions that come to mind about taking one.
I am now going to talk about an important question: how do you manage your finances- but the article is not limited to finances because I believe there are some other issues you might deal with as money depletes in your account.
The truth is, it is hard and worrisome to keep spending from your savings and see your checking account balance go down to zero without any incoming funds.
But there a ways to minimize the impact and not lose hope about the future.
Firstly, let us assume one scenario where you are not able to hold any part-time jobs( which was true in my case).
A few tips to stay afloat:
- Shelter: In my case, my spouse was paying for rent. Wait, you might stop reading this because I have a fall-back option and dismiss anything I am about to say. But, if you are like me, you would want to do your part and also have some sense of independence and what I am about to say might still be useful. If you are single, consider moving in with your family. I am assuming you have no mortgage. If you do, then think about renting it out but I don’t advise extended career breaks with a mortgage.
- Keep at least 1 year of savings to get by. I know the general recommendation is 3–6 months, but in general, even the worst situations in life I see get better after a year, and you will be in a much better place to start afresh. So, yes, 1 year is the minimum if you ask me. I could have paid the rent and taken care of other expenses even if I didn’t have a fallback option because I had saved up as much.
- There will be days when you think you might not have a good life and have other anxieties related to not having money. While it is normal, remember that it is not permanent. So, ride the wave but do not get depressed.
- Remember that you have gotten this far in life successfully and you definitely have at least 1 skill that can be monetized anytime.
- Now comes the actual budgeting.
- Yes, no more expensive vacations and eating out as I used to( there are tons of low-cost entertainment options I found. You just need to look a little bit harder)
- No more gadgets or car upgrades. I was on the cheapest insurance plan — My car was an add-on to my spouse’s car and so I got better rates than pay-per-mile insurance.
- You will find it harder to think about spending on yourself and would be more mindful of spending for friends when you go out together. It’s good to have a budget for spending on yourself- even if it is little. It helps your mental health. As for spending on friends, I think you will get an opportunity at a different time, so that can wait.
- I canceled all unwanted subscriptions — I used to start and stop Coursera courses, pay for software or an app that I use- time or a spa treatment, or tickets to a game. All those things are best avoided.
- Although this is not exactly personal finance, the best advice is to keep learning something — either a new spoken language or a new programming language, or one thing that can help you monetize in the future. Find 20 minutes a day. I focused on brushing up my data science skills one time and got the long overdue tableau certification that I needed. They all helped the next time I started working
- Be mindful of what you eat because expenses due to health problems can pile up. Many research studies show that various diseases are caused by unhealthy eating. It is best to keep your insurance active although I know a lot of people do not. I think it is safer to be on a plan even though it costs money.
- Save electricity. This is something I normally have trouble with as I need the heat on most of the time. But there are many ways to be efficient about spending money on electricity.
- I picked a cheaper internet plan and a cheaper phone plan.
- Spending on dry cleaning clothes and self-care activities like haircuts was reduced by more than 75%.
10. I didn’t save or invest anything new. I ensured I didn’t take out money from my existing investments.
My guideline would be to have at least 1000 dollars per month to have for personal expenses at the time of this writing.
Towards the end of my break, I started preparing for interviews again and then got back to work. I have found that the best approach when you return to work is to think of yourself as the person before the break — and start working right away. At most, the first week will be difficult as you are trying to get into a routine but look forward to your job like you have always wanted to do it and love doing it and not because you need the money.
Because money may come and go- but your attitude is what helps you get back on track no matter what the external circumstances are.Good luck!