Have you ever thought of a break rather than say long break from your 9 to 5 job routine? There are several people who ponder to take a long break from their daily job routine, for many things like going for a long vacation, for pursuing any business specialty, for taking care of your kids in their initial years, or for taking any educational qualification, reasons can be many, and your break duration may vary from 3 months to 3 years. Well, that’s a long duration.
If you have ever thought of this, the very first question that strikes your mind would be “How will I carry my expenses during this period?”, and if the alone the bread-winner of your family then this question matters the most.
A career-break, say for long-duration like for 3 months to 3 years, needs proper planning especially when it comes to your finances. When you plan for a long break, before that you need to evaluate some important parameters like, how much longer you are going on a break, how much potential expenses you have, what will be the source of fund during the break and adequate insurance covers (medical and life) for you and your family.
When you plan for a break, before that get strong financial planning prepared and get yourself financially fit before going for a break, this helps you to feel more comfortable about taking the final call.
Now the question is how we can plan our finances in a perfect way before taking a break from our job. Well, if you are also confused, regarding the same then read below, how to get yourself financially fit before taking a long break from your job.
Estimate Your Expenses
This is the very first and the most important step to planning your finances, before your break from the job. It became easier to plan our finances when we already know about our expenses. At the time you are calculating your expenses kindly consider the following:
- Do you pay any fixed expenses like rent or EMI?
- Do you have any kind of debt?
- To minimize the expenses during your break do you have to bring any kind of changes in your lifestyle.
- Will you be working as a freelancer or doing a part-time job during your break?
- What will be extra expenses occurring for your break, like if you are taking a break for higher education, then how much your tuition fee and living expenses would be adding to your finance or if you are planning a vacation then how much your travel expenses would be adding to your finance?
Once you are done with the calculation of your expenses, now its time to decide how to cover these expenses during your break.
Making Right investments
Okay so you are done with your expenses calculations, now here are some smart investment strategies through which you can cater your different expenses during your break:
1. If you are planning for a break within three years, it would be best if you start a monthly SIP, in a low-duration Debt fund that does not comprise any lock-in periods. Returns from debt funds would be better along with the facility of high liquidity, that you won’t be getting from Fixed Deposits and Recurring Deposits, also SIP (Systematic Investment Plan) would not make any pressure on your pocket, rather it will help you save money systematically every month.
If you have a long time, say a minimum of 5 years to your break, then best will be if you invest through monthly SIP in Hybrid Mutual funds.
2. People get the lump-sum amount several times, during their work, in various forms like referral or performance bonus, returns from past investments and quarterly incentives. This lump-sum can also be a part of your investment when you plan your finances for the break. You can use your bonus to repay your debt before you go for a break and can also invest the remaining part in low-duration debt mutual funds.
3. If the duration of your long break is 1 or more years, then you can use your mutual fund corpus as a monthly income to cater to your monthly expenses. For that, you can pause your long-term SIP, during your break and start withdrawing a monthly income through an SWP (systematic withdrawal plan) from your investment corpus.
Emergency Fund Is Must Include.
Uncertain events and uncertain expenses are something that can never be scheduled, neither give time to prepare, so it's always best, to be prepared for emergencies, and to cater to your emergencies, always have an emergency fund available to you. An emergency Fund is a savior during emergencies that you haven’t planned for and cannot be covered by either your insurance or your investment for the break. If you don’t have an emergency fund, start investing for it along with your investment for the break, you can invest in Liquid fund for your emergencies.
Be Insured, be secured!
It’s always good to be prepared for the worst. Buying term and health policies are highly recommended before taking a break from your job. Policies like health insurance give medical covers for your treatments, and Life insurance gives cover to your loved ones after your demise.
Make sure, before taking a break from your job, you have insurances such as life insurance, term insurance, and health insurance, having these insurances or even some of it, can make you relaxed, during your break.
Well, a break from the daily routine, is necessary for everyone, and everyone wants to take it, but only some of us, end taking it. If you are willing to take a break from your 9 to 5 routine, planning your finances and investing for the break becomes a necessity. It is necessary to make someone stand to earn for you during your break, so why not let your investment in mutual fund work for you!
You can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).