From a wide-eyed graduate to a working professional, I never thought I would take a career break. The path of working till retirement seems so natural to me that taking a career break has never crossed my mind. That was until Covid-19. The pandemic changed the way we work and impacted our lives in more ways than one, and suddenly, taking a career break seems like the most logical decision.
A career break is different from a sabbatical leave. A sabbatical leave means you are allowed to take an extended leave (may or may not be paid), while you are still employed by your company. A career break is not. A career break means you are no longer employed by any company. A career break means you do not have a job to go back to when you are ready. A career break means you are no longer receiving any income for an extended period. A career break is scary.
I struggled with the decision to take a career break. The lingering question in my mind was – Can I afford to take a career break in Singapore? Ultimately, after a long period of deliberation, and hours of working on the finances, I decided to take the leap. I decided to take a career break in Singapore. This is how I financially prepare to ensure that I can afford to take a career break in Singapore.
Set a timeframe and purpose
Before I decided to take my career break, I toyed with the idea of sabbatical leave. However, after careful consideration, mainly the length of my break, I decided to opt for taking a career break.
Usually, most companies in Singapore allow 1 month up to 1 year of sabbatical leave. If you are looking for a longer break, it may not work for you. Similarly, if you do not intend to return to the same company after your break, a sabbatical leave may also not work for you.
Before you decide to take the plunge, do have a rough idea of what you intend to do during your break. It is alright if you intend to just rest at home and do nothing. This is important because if you have quit with a purpose, such as traveling, further studies, or starting a business, you would need funds to do so, and you would need to budget for them as well.
Set aside funds for household/regular expenses
I have been regularly tracking my household expenses since I started work. If you have not started yet, I strongly encourage you to do so, as you will have a clearer picture of what you have been spending, whether any expenses are unnecessary and whether you are spending more than what you are earning.
I decided to take a career break for an extended period. so I needed to make sure that I could afford this career break. I had an estimate of the length of break I intended to take, and I made sure that I budgeted for the household expenses that I would be expecting to spend for the period. Some examples of these expenses include – electricity and water, mobile phone plans, monthly subscriptions, and insurance.
Set aside funds for daily expenses
Daily expense funds are different from household expense funds. Household expense funds refer to bills and payments to services that you use. Daily expense funds cover the day-to-day costs such as – food, transport, and groceries.
Personally, I budgeted for my daily expense funds based on when I was still working. However, after taking a career break, I observed a drop in my daily expenses. I supposed it could be due to eating outside a lot lesser (office lunches, bubble tea fixes, and coffee tea breaks) and cooking a lot more at home instead.
This is a lifestyle choice and you may or may not end up spending the same/less/more than what you used to do back when you were working. As such, plan wisely, and adjust accordingly during the career break.
Plan for big purchases
If you had big purchases such as a car or home purchase prior to your career break, don’t forget about them as well. This is especially important for those who are using CPF to finance their home loan. Once you take a career break, you are without an income. This includes both cash and CPF. If you have emptied out your CPF ordinary account (OA) to pay for your downpayment or are fully financing your home loan with CPF, this is where you will start to feel the pinch.
Monthly installments from HDB home loans are still pretty fixed as the interest rate has not changed for many years. However, if you are servicing a bank loan, you could face higher home loan interest, depending on the interest package you sign up.
If you have sufficient CPF OA balance to finance the installments during your career break, great job. If you have not, it is time to explore alternative arrangements such as paying via cash, topping up your CPF during the length of your career break, or even exploring refinancing for your home loan.
Plan for emergencies
Emergencies are called emergencies because no one knows what will happen. Even though they may or may not happen, if you are looking to take a career break, you should consider the scenario whereby there are circumstances whereby you need a large amount of money immediately. This mainly includes healthcare crises, emergency home repairs, and urgent purchases.
Health crises can be somewhat planned for with the relevant healthcare insurance. Take the time to review your existing healthcare plans and ensure that your healthcare plans have adequate coverage to cover you during your career break.
Budget some fun money
It’s a career break. Of course, you should plan for some rainbows and sunshine. After all the hard planning to make sure that the household and your expenses are taken care of, you can definitely plan for some fun money if you have some cash left. After all, a career break is meant to be relaxing and rewarding, and it’s definitely alright to budget in some fun activities that you have been looking forward to doing.
Summary
Taking a career break is deemed as a career suicide in the past. However, with recent turn of events (namely Covid), career breaks are a lot more accepted amongst employers. That said, a career break can be expensive as you no longer have an income, while your bills and expenses continue to get piled up.
If you are more financially prudent, the above are some financial budgets that can be catered for before you take the final plunge. Of course, some of you out there are more YOLO and prefer to quit now and plan later. The above would serve as a great guide as to what you could be expected to spend during your career break.
This is not an encouragement to take a career break, rather, this is a budgeting exercise I did before I take my career break and I hope it helps someone out there understand their financial situation better. All the best!
2024 update – it’s been a year since I took a career break! Check out our 2023 financial review here!
Last Updated: 11 Nov 2023
