Once you’ve made the decision to take a career break, the next thing is gathering the cash to be able to do it. And that’s no easy task. Even if you are planning to work on a gap year or career break, you will still need savings to keep you going, pay for a deposit on somewhere to live, as well as cover any bills you might have back home during the time you are away.
How Much Will You Need?
Ex Independent Financial Advisor Clare Turner Marshall of www.clareturnermarshall.com is a money coach and speaker who helps people solve their issues around money. Clare suggests breaking it down into three step process:
"Calculate your budget - then add 15% for emergency and unplanned expenses."
The first step here is to think about how long you are going for exactly and plan what you want to do while you are away. Be very realistic with your budget, detail all of what you want to do as in activity, and then look at travel and accommodation costs. Look overall at this costing and then add 15% for emergency and unplanned expenses.
If you own your own home, you need to think about what will you do with this and how will you pay for it?
Ask yourself if you will rent the property or leave it empty? If you rent then need to budget for setting that up, either personally or with an agent. Either way it will involve some fees. An agent here may be a much better idea as they can deal with any issues on your behalf. Also you can get insurance for non-payment of rent and if you are reliant on the rental to pay your mortgage this will be key.
Then you need to consider the ongoing bills for either you or the tenant. If you are leaving the property empty, then all bills will still need to be paid, albeit at a lower level for things such as utilities. Also if this is the case, having someone to check the property on a regular basis will be a good idea too.
Adding all of these costs together will show you what it will cost you to take the time out. Remember if you are working abroad, factor in fluctuating exchange rates and also any income that will be received to pay towards expenses. If you are going to work and rent the property these figures need to be factored in the overall plan.
How can I do it? Now that you have a cost overall, you need to work out when you want to go and then basically divide the total figure by the number of months you have before you intend on leaving. Then again add about 5% to this annual figure. This will allow for inflation, as things will increase in price before you leave, so don’t leave yourself short.
Saving The Money
First things first. Set up a separate interest bearing account just for your career break stash so that you can chart your progress. If you are serious about going, you will need to change your lifestyle to help you amass those savings. Clare suggests:
- Cancel non-essential monthly costs, which could include Sky, mobile contract (switch to pay as you go instead), Gym membership (download workout videos from YouTube or go running or cycling)
- Reduce your travel expenses by car pooling for work, and walking more places to save fuel and maintenance costs on your car. Or just sell you car now!
- Limit social events out and invite friends to your home
- Cut out expensive habits like your daily coffee or lunch out, instead make your own. This alone can save nearly £2000 per annum
- Look at any lending you have and ask is it on the best rate, or can things be restructured to save money there? As you will be saving a lump sum, could you switch to an Offset Mortgage?
Other money saving ideas include:
- Do your weekly shop online and stopping when you reached your budget. If you need more essentials you’ll just have to take those jaffa cakes out of the shopping basket
- Visit comparison websites to see if it is worth switching energy suppliers
- Give up smoking and drinking
- Borrow books, DVD and video games from your friends or use the local library
- Stop buying clothes and just use the ones you have
- Make presents (cookies or cupcakes anyone?) rather than buying expensive shop made gifts
Ask For Support
Tell your friends and family what you are doing and why you can’t spend like you used to. Set yourself a challenge to save a certain amount per month and ask for ideas and suggestions from the people around you.
Making The Money
Saving will only go so far, however. You may find that you will need to be creative about making extra money if you are to reach your target figure.
- Could you do a second job on a casual basis? Bar work and waiting jobs are easy to find options that are also sociable - helpful if you don’t like to feel like you are missing out on your social life. Other ideas could include setting up your own gardening, babysitting or cleaning business, or even taking a dreaded telesales position. If you’re good at it, it can be a great way to earn money fast
- If you earn commission in your current job, can you set new targets for yourself to earn more money?
- Do you have things lying around the house that could go on eBay, or perhaps you could gather them all together for a car boot sale?
- Could you join a Network Marketing Company such as Avon and recruit other reps? You’ll earn commission on what they bring in and this can be an excellent way to keep income flowing while you are away
- Can you use your skills to freelance? There are plenty of sites out there like People Per Hour (http://www.peopleperhour.com/) where you could use your day job skills to make some money on the side
"Brainstorm 50 ways you can make more money..."
Take some time (perhaps with friends), to brainstorm 50 ways you can make more money. It’s amazing what you come up with when you put your mind to it, and even if your mates aren’t coming with you, they might be inspired to make some money for adventures of their own.
However, do be realistic. Killing or exhausting yourself in the process is not going to be conducive to a fun career break. And getting the sack because you haven’t been concentrating on your day job might mean you’ll be taking a career break sooner than you thought. Do be sensible and just delay your plans if you need longer to save.
Where To Be Cautious
Whilst you might be tempted to take out a loan to fund your time away, Clare suggests approaching this with caution: “It could be worth looking at this, however it would be a strategic decision. You need to look closely at your whole financial situation in detail and then make a decision. The main thing to consider is also how will you pay the loan whilst you are on the career break?”
She is also suggests that you make a list of everything that could go wrong (from illness to not being able to rent the house out). Clare reminds us, “Contingency planning is part of this process. As I said earlier if you have a mortgage to pay and you are renting your property, what happens if the tenant does not pay? This must be considered.”
Renting Out Your Property
This is a highly personal decision. Clare’s advice to is rent out your property with an agent and also get them to manage it. She adds, “This is an area that needs to be planned well in advance. An example is that you decide to take 6 months out in two months time. Your property does not get rented for 4 months and it is on a 6-month lease. This means that you have nowhere to live for 2 months when you get back. Plan, plan, plan is the key in this area.”
Do look at the figures, however. When James and Rose Parnell rented out their London home they found the process very traumatic. They had to throw out a lot of things they now regret, and spent a lot of time and money getting energy certificates, fire safety approved furniture and cleaning the house from top to bottom. And, in the end, after agency fees, incidentals that they had to pay for over the year, and tax, they felt that they had barely made any money.
Living on a Budget
"Try the 30-day task of writing down every penny you spend so you can really see where you are spending."
One good thing about saving is that you will get used to living on a budget, which will be vital on your career break. Clare suggests that you find “a BIG reason WHY you are doing all of this. If the Why is powerful enough, then you will achieve your goal. I would suggest my 30-day task of writing down every penny you spend so you can really see where you are spending. This will also highlight even more where you can save money in general. Plan your budget carefully and STICK to it. There is nothing worse that being somewhere on the planet you have never been, and not having the money to experience something that you really want. Plan for every eventuality and research as much as you can. Google will tell you everything you need to know!”
But it’s not only the career break itself you should save for. It also makes sense that you have a cushion of savings to fall back on when you get home, especially if you don’t have a job to go back to it's essential that you put this somewhere you really cannot access while you are away as it might be all too tempting to use it up on something you think you really cannot do without at the time.
As Clare says,“When you have been away from your normal life for any period of time it is always a challenge to get back into life as it was. Having a contingency for this takes any potential stress out of the situation and gives you a clear mind to start again when you return.”