Alison Lacey, Director, and Kallie Lam, Associate Director, from accounting and business advisory firm Ecovis Clark Jacobs, have each taken extended leave to have children during their careers as chartered accountants. Here they advise on the tactics that have worked for them and for their clients when planning for a professional sabbatical.
A career hiatus, whether it’s for parental leave, caring for a loved one, full time study or other extended leave, requires a considered financial strategy. Here are our top tips to ease financial stress when taking time out from your career.
1. Create a Budget
Compile a simple budget to show what your incoming and outgoing expenditure will look like without your regular salary. This will allow you to assess your essential versus non-essential spending, and to see when in the year you have large outgoing costs (such as insurances and school fees). Mapping out this information can help you determine where you can trim down expenses, and whether it will be more practical to switch from an annual lump sum payment to smaller, monthly payments, to achieve better control over your cash flow.
2. Adjust your Lifestyle and Spending Patterns in Advance
If possible, start living on a reduced income before embarking on extended leave.
For instance, if you are a two-income household, attempt to live on one wage for a time (the longer the better) to get used to the reduced income. The wage you are not using for day-to-day living can instead be put to good use by building up your savings!
If the sole household income is your own salary, start adjusting your spending habits in advance, to get used to the necessary lifestyle changes that come with a career break. This could mean less restaurant meals, cheaper holidays and generally spending less – or nothing – on non-essential items.
3. Save, Save, Save
Aim to save at least three months’ worth of living expenses before commencing your sabbatical. This will ease the burden during instances of unforeseen expenditure, for example car or household repairs, or larger than expected medical bills. Knowing you have a buffer will provide some peace of mind when adapting to your changed financial situation.
4. Plan Early for Big Expenditures
If you are thinking of refinancing, you will need proof of regular salary payments, so organise any loans prior to your career break, and ensure you will have the funds to cover ongoing repayments when you don’t have your regular salary to rely on. Setting up a dedicated “Leave” fund will assist with paying for big purchases separate to your daily living expenses. For example, if planning parental leave, a separate fund to cover large baby costs will mean you are prepared for both expected and unexpected spending related to the new family addition.
5. Get Advice from Your Bank or Mortgage Broker
If you have an existing home loan, speak with your mortgage broker about reviewing your options, as now may be the time to switch your loan to interest-only, or to shop around for a more favourable interest rate. If you have another type of loan, speak with your bank about your changing financial situation to see if it’s practical to suspend or reduce your payments.
6. Investigate Government Support and Employee Entitlements
Depending on your financial situation and the type of leave you are taking, you may be entitled to government assistance and benefits, so research your options. If you are having a baby, depending on your employee contract and workplace policy, you may also be entitled to paid parental leave from your employer, so find out what the leave entitlements are for your workplace. If your employer doesn’t provide paid paternal leave, be mindful of any other paid leave that you might be able to integrate with your unpaid leave, such as accrued annual leave or long service leave, which will help bolster cash flow.
Everyone’s circumstances will differ, however the above tips will help you to determine how long you can realistically afford to be absent from the workforce.
Apart from the financial considerations, there are other factors to mindful of when taking a break from your career.
1. Provide Sufficient Notice to your Employer
Be aware of required notice periods for your workplace when requesting extended leave, and ensure that everything requested and agreed to is documented in writing. Where possible, give your employer a longer time frame than the time you plan to take. For instance, advising your employer that you will be out of workplace for 12 months’ parental leave, even if you only plan to take nine months, will avoid any surprises if you aren’t ready to return within the original agreed time. Also ensure you provide sufficient notice if you would like to extend your leave, keeping your employer informed of any changes to your original plan.
2. Ensure your Personal Administration is in Order
If you are having children, update your will, your health insurance and any personal insurances, making adjustments to factor in the extra family member. Investigate ongoing government assistance for families or carers, so you can apply for any eligible benefits, including those that you’ll be eligible for after returning to work.
3. Keep up with Professional Updates
Staying connected with the dental profession and changes within the industry will make it easier to adjust to working life when you return. This may involve reading industry magazines and newsletters, listening to podcasts or watching webinars. Depending on the changes which occur during your sabbatical regarding technology, innovation and new standards, be prepared to attend new training courses or brush up on your skills, if not during your break then at least in the lead up to your return to work. Depending on how long you plan to be out of the workforce, you may also need to check the dental industry’s continuing professional development (CPD) requirements following an extended absence from practice, as well as any requirements regarding applying for exemption or deferral of CPD points.
4. Take Care of Yourself
Taking time out from your career is a big adjustment mentally as well as financially. If the reason for the career break is to have a baby or take care of a loved one, this increased mental load can often affect your emotional wellbeing. It’s important to look after yourself so you can effectively take care of others, and mothers groups or carers groups can be a good source of support during this time.
Seeking out others who have taken a career break, and hearing about their experience, can also be useful. Even if the reason for your sabbatical is not baby or carer-related, going from full time or part time work to not being in the workforce at all is a big lifestyle change, and the reduction in your finances can be stressful. Finding out what worked – or didn’t work so well – for others, will help you mentally prepare.
Taking a career break is an important decision requiring organisation and planning, and there are many factors to consider. Following a good financial strategy will help to support your savings goals, and, importantly, assess how long you can sustain a period of absence from work. This also means you’ll be better prepared to navigate the lifestyle changes that come with a professional sabbatical, and be ready to embark on your new circumstances without unnecessary stress.
By Alison Lacey, Director, and Kallie Lam, Associate Director at Ecovis Clark Jacobs.
This article first appeared in the July 2023 issues of the News Bulletin, published by the Australian Dental Association https://www.ada.org.au/Dental-Professionals/Publications/News-Bulletin
DISCLAIMER: This article is designed to provide generic information only and should not be viewed as a recommendation to act or financial advice. Individuals should seek advice from a qualified adviser to ensure their actions are commensurate with their financial needs and requirements. Whilst every effort has been undertaken to ensure accuracy of information at the time of publication, the information contained within the article may have changed prior to and subsequent to the article’s publication.