For Toronto-based accountant Sonia Datta, the first signs of burnout began to crop up in early 2020. “I was just working all the time, doing everything possible to keep the company afloat – I was so exhausted,” said Ms. Datta, whose senior role in the financial department at Arctic Kingdom, a company specializing in tours to the North, went into high gear during the COVID-19 pandemic.
“I made a decision that I would take a year off after COVID, so I budgeted and saved $35,000 for about 13 months,” said Ms. Datta. “I didn’t expect that seven months into my break the mortgage rates would rise that much – it went up like 60 per cent.”
While recent studies from LinkedIn suggest that 62 per cent of employees are following in Ms. Datta’s footsteps by taking a career break, a lack of proper budgeting and contingency planning will make the time off anything but restful.
“If you need $3,000 a month to stay afloat, and you want to take six months off, $18,000 is the bare minimum,” says Jonathan Lazeo, a Vancouver-based certified financial planner at Freedom 55 Financial. “But it’s also important to have a contingency savings plan on top of that as well – about three to six months’ worth.”
Ms. Datta, who began her career break last October, was ultimately able to bear the brunt of variable rate mortgage hikes during her time off by boosting her sample budget numbers at the planning stage. “I tried to save an emergency fund for anything unexpected – car repairs, vet costs for my dog, anything. I still have enough for the next five months,” said Ms. Datta, who’s been focusing on health and wellness during her career break.
When Vancouver-based Keith Swarnadhipathi took a break from his role as a relationship manager with Royal Bank of Canada RY-T +0.07% increase, it wasn’t because of burnout. But after nine years in the work force and a friend’s sudden death, he felt an urgent need to shift gears. “I opened my eyes to the fact that you can work and you can earn money, but one thing you won’t get back is time,” said Mr. Swarnadhipathi, who travelled with his wife through Southeast Asia and volunteered in Sri Lanka.
“It [took] about a year and a half for us to get all our ducks in a row before we took the break,” said Mr. Swarnadhipathi. The couple dedicated the time to saving roughly 40 per cent of their combined income in preparation for a 12-month professional pause. In the end, they pooled $28,000 and pulled from a registered retirement savings plan for a shared total budget of roughly $40,000.
But planning for a career break goes beyond savings. It’s also about optimizing taxes. “We specifically said we need to take a full year off – not start in the middle of the year and into another middle of the year, but actually take a full tax year off,” said Mr. Swarnadhipathi. “So we front-loaded our RRSPs as much as possible so that this year when we take them out, it’s like zero income, so our taxes on that RRSP withdrawal is low to none.”
For those seeking a travel-oriented career break, getting savvy with credit-card points can be game-changing. “We got Aeroplan credit cards about two years before and we both put a lot of money onto those so we racked up points,” says Sydney Weinstock, who took a year-long career break to travel with her partner. “We got our tickets to India for about $200 in total versus $1,000 each.”
Additionally, a smooth transition in and out of a career break means doubling down on debt repayment while easing on investments, suggested Mr. Lazeo at Freedom 55 Financial. “It’d be very wise to be debt free before taking a break,” he said. “Keeping those credit cards and lines of credit open for when you take the time off just makes it good as a backup for unforeseen emergencies – investments might need to be put on hold for a bit.”
For those on the fence about taking a career break, Ms. Datta said go for it but be realistic. “If [you] have no debt and have a way to plan out your finances, definitely do it,” she said. “But if someone has anxiety at the thought of quitting their job, they need to make sure they have that plan in place to alleviate stress.”
PERSONAL FINANCE COLUMNIST
The Globe and Mail, June 7, 2023