Every year thousands of working women grapple with the idea of whether or not to opt for a career break to raise children, pursue higher education or share family responsibilities. Whatever your reasons may be, a career break can mean financial fallout or a slowdown in finances. If you want to maintain a healthy financial profile throughout your career break, then plan finances accordingly. With so many financial products available online like FDs and mutual funds, managing and saving for those career breaks shouldn’t be tough.
There is obviously some upside and downside to career breaks. While a career break can be liberating, financially you might land in deep water. If you are contemplating stepping away from your career, ask yourself an important question – Are you financially ready for it? If not here’s an area you need to work on, before you take that career break.
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Carefully planning funds like sketching out expenses in advance and saving wisely during working years, ensures you do not face a financial crisis in the midst of a career break. If you are contemplating a sabbatical or quitting a job due to childbirth, secure emergency funds well in advance. Start saving at least 2 years prior to actually taking the break. This ensures you have money for urgent needs. Invest in fixed deposits before contemplating riskier assets.
An emergency fund is an account where you set aside some money to cover unexpected expenses. Having money set aside for emergencies, helps avoid borrowing. It will help you stay afloat during career breaks and use funds without having to rely on credit cards or loans during emergencies. You must prioritize creating an emergency fund, and have at least 6 months of living expenses, if you are married. You can withdraw any time, without having to worry on paying a heavy penalty. Invest in liquid schemes and FDs for an emergency fund.
Investing in mutual funds ensures you have enough income, while you are enjoying your break. You can invest in mutual funds via systematic investment plans (SIPs), which is an economical and disciplined way of investing money. This is a disciplined way of investing and you get the compounding benefit of return on return if you stay invested for the long-term.
You can also consider POMIS or post office monthly income schemes. These are schemes of the Indian postal service where you invest a considerable sum of money and earn monthly interest. These deposits help your money grow over a period of time, at an interest rate of 7.7% a year. After a lock-in of a year, you can withdraw from POMIS with a 1-2% penalty.
A career break cannot be sustained with debt. If you have an education loan or personal loan, consider paying them off during your working years. Debt will create stress and hindrance during your breaks. When you don’t have the option of receiving regular income as an employee, debt will strain finances. Pay off loans before opting for a career break.
A health or a life insurance policy can be a great savior in times of need. You should never consider a sabbatical to be free of hospitalization or life risk. Therefore it is always advisable to prepare for the worst. A health insurance policy will come to the rescue in case of a major health issue. These complex situations can throw you in a fix, especially during a career break. A health insurance policy ensures cashless and quality treatment in case of a health emergency. A life insurance plan provides a lump sum to nominees on death of the policy holder within the tenure of the plan.
Childbirth: it is one of the key reasons why woman opt for a career break. Start investing in fixed deposits to create sufficient reserves. Also consider availing health insurance to ensure cashless and quality treatment during childbirth.
Wedding: Marriage involves a lot of investment and it is wise to start saving at least 2-3 years prior to it. If you can afford to take some risk, start investing in diversified equity mutual funds and stocks. This will ensure long term capital gain.
Family responsibilities: you might opt for a career break if you have to take care of an elderly family member or in case of a disability due to minor accident or illness. In such a scenario, you may invest in some low risk mutual funds like balanced funds to ensure risk free returns.
Career breaks are a fantastic way to allow you to take some time out of office and carry out responsibilities or pursue personal goals. Now that you are financially prepped up for a career break, consider cutting down on lifestyle expenses like frequent shopping and eating out. This will also help finances sustain for a longer time and help you remain financially independent during the break. A career break can be a boon when you don’t put your finances in the backseat.
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