Episode 71: How to Take a Break from Work, Financially

Transcript

By the time this episode airs, releases, I guess I will have been back to work at like a full-time job for a couple of weeks-ish, something like that, if you haven't been following along the whole time.
The beginning of this podcast actually began shortly after I left a long-time role that I had been in.
You know, the reasons I left that role is a whole other story.
But ultimately, if you boil it down, I just wanted a break.
I mean, that's really what it came down to.
You know, the thought of having to kind of grind away full-time from right out of grad school all the way until retirement, it just wasn't where my head was at.
I needed a little bit of time.
And so I took it.
And first of all, I just want to start at the top of this by saying, if you have a chance to do something like that, I can't recommend it enough.
I mean, it really gave a lot, it gave a, particularly after, again, I was in that job at that organization for 15, 16 years.
It gave a time, some time to reflect and realign and maybe reprioritize to a certain extent.
Just take stock and just recharge, you know, a lot of re's, I suppose.
Realign, recharge, reflect.
So if you get a chance to do something like this, I recommend it.
What I wanted to do here, though, was I thought it might be useful to talk through, let's be honest, the biggest barrier to taking a break from work is that it's generally financially either irresponsible or impossible.
If you're not working, you're probably not bringing in money.
If you're not bringing in money, you probably can't pay the bills very easily or do much of anything.
So I thought it might be useful for me to go through how I did this because I essentially went eight or nine months without working.
Now, my initial intention wasn't necessarily to just straight not work for eight or nine months.
Initially, I figured I'd take two or three months to do kind of nothing.
And then I was hoping like a consult, like a part-time consulting or contract gig would land.
And then maybe I could float kind of tread water, so to speak, for a little while with just enough money to kind of pay things.
That's not how things shook out, but all the same, things went fine.
And I wanted to walk through the financials of that.
A lot of this comes down to a piece of advice that we've probably all heard, which is make sure you have X months of living expenses in a savings account somewhere.
And that is the start of all of this.
And I sort of look at my finances in terms of sort of my liquid money and then my purpose-built purpose money.
What I mean by that is that there are certain accounts that certain percentage of my paycheck go into that I never touch.
I don't even really think about it as money that's mine.
And, you know, I've got some college savings for my kid.
I've got some money that goes into a fund for like home repair improvement kind of stuff.
And I don't think about, like, I have money there, but I don't think about it as my money.
What I do think about as my money is sort of my regular checking and savings account.
Part of this is knowing what it will cost you each month to exist.
So, I had figured that out or I'd gotten pretty close.
One of the things you have to do if your plan does just not work for a while is you should really strip out all unnecessary stuff.
So, to the best you can.
Like, so if you've got a bunch of, like, streaming subscriptions sitting around or services you're not really using or whatever, cancel all that stuff because it'll bleed you dry.
Now, I've got a mortgage, I've got a car payment, but I don't have any particular debt.
So, that's the other thing here is that if you're sitting in debt, you know, if you've got 10, 20, 30, whatever, thousand dollars of debt beyond your basically mortgage and car payment, you got to knock that stuff out first because that stuff will also kill you, right?
So, again, the way I went into this was I sort of thought about how much it would cost me to just exist month to month.
Paying for my mortgage, paying for my car, and then just other whatever bills, you know, like heating and electricity and, you know, water and, like, that kind of stuff.
And then I added a little bit, knowing that I would want to, you know, do a few things along the way, socially or whatever, and I came up with a number.
So, by the time I left, I had about, between, in my liquid money, the money that I think about as mine, I had about eight months-ish that I figured I could burn through.
And that would be if no other money came in.
Now, I should mention that the advantage I had here as well was that I was able to hop on my wife's health insurance.
It was terrible health insurance.
You paid out the nose for anything you wanted to do.
But with that said, at least it existed, right?
So, I had the health insurance piece where I didn't have to spend on that month to month.
So, that's a piece that you need to consider as well.
And that's going to vary from person to person.
But, again, about eight months of liquid money.
Now, the other goal to this was to do it without feeling stressed all the time, right?
Because it's really easy if you stop work and you just start stressing and, oh, when's the next paycheck?
But I didn't want to do that.
I needed a minute to, like, again, kind of realign to life.
So, again, I had, you know, eight or so months of liquid money.
But I also knew, and I had certain feelers out there.
Again, like, I was looking for some contract work, maybe 10, 20 hours a week.
So, I had those things.
They never really actually came to fruition.
But I had feelers out there.
So, that kind of felt like, oh, maybe one of these will land.
But because of my non-liquid money, the other stuff I was talking about, you know, the other accounts that I don't think about as mine, I also knew in the back of my head that if I burned through all eight or nine months of liquid money that I had, that I was okay with spending.
If I really got in a pinch, I could fall back on that other money if I really had to.
Didn't want to.
Goal was not to.
I didn't end up doing it.
But that peace of mind of knowing that I also had built other money up that I could lean on if I really needed to, that gives you that.
It gave me that, like, I was able to sleep at night, right?
So, again, this didn't occur overnight.
This is something that I was able to do because for, you know, several years leading up to it, I had managed my finances pretty well.
But where I had significant liquid savings, I had significant money in a few accounts in the background where I knew, oh, you know, if something major went wrong with the house, there's some money sitting aside for that.
If, you know, there was a couple other accounts, again, a couple other accounts like some college savings stuff where I knew that, you know, that money would be there.
And I didn't have to start worrying about that today because I had worried about it already.
So, I was able to kind of leave and stop bringing in income for a little while with a clear conscience.
So, that would be my advice is if you think, well, it's just good practice in general.
But if you're doing well with your finances, you probably have a few accounts going where all of your money is not just going back out the door.
Where there's some accounts in the background that just sit there and you get in the mindset of it's not even my money.
It's money I'm not even allowed to touch.
And then also building the liquid savings, which, you know, should just grow over time.
But if you ever get fired or you ever leave your job, that's the time you can, like, dip into that money.
So, again, I left with a pretty clear, like, I was okay.
I knew that I was not going to be destitute.
Now, there is, and again, car payment, house payment, but no other debt.
So, these are, like, the concrete pieces of advice.
Spend some period of time building both your liquid fund and other funds in the background, kind of your safety net.
Reduce any unnecessary expenses and you can't have a bunch of debt sitting over you if you want to do this.
Now, with all that said, downsides, there were a couple, right?
So, first of all, despite what I talked about in terms of trying to set myself up so that I wasn't stressed all the time, the stress did come eventually, right?
Because I was really banking on, you know, three months into this, I'll probably be able to find some 10-hour-a-week, 20-hour-a-week work and just kind of float and stop dipping into my liquid savings as well.
That didn't come to fruition.
So, you know, after I, it kind of became clear that that wasn't really clicking, I did start to get a little twitchy and that's when I started more seriously applying to full-time roles.
But, of course, applying to full-time roles is also a process and takes some period of time to get through.
So, there was a certain amount of background stress.
Again, I knew that there was no situation in which I was going to, like, lose my house or lose my car or couldn't pay a bill or I was going to have to dip into debt.
Like, there was no situation that that was going to happen.
Not unless this went on for a much more elongated period of time.
But there was just, you know, again, certain funding that I didn't want to tap into.
So, that was, that stress did start to settle in maybe four or five months in.
The other thing to think about is you're kind of treading water, right?
You're draining your liquid savings in this scenario.
But that's not the only cost.
The other cost is that because you no longer have income flowing in, those background accounts that I had been contributing to,
again, the college savings, the house fund stuff, those kind of things, those also were no longer being contributed to.
So, it's not just the cost of what you're draining.
It's the cost of what you're not adding and not progressing as well.
So, it's just something to keep in mind.
Like, really try to think about what the total cost of taking this time off is.
I also had to turn down a few things, you know, I didn't, there were like vacation opportunities that I didn't take, that I would have taken if I was working.
I didn't take them because I didn't want to spend the extra money on top of what I was already draining.
So, just the total cost is something to think about.
That make sure you're thinking about the hidden costs of taking time off, not just the how much am I spending per month, but the how much am I also not contributing back.
Now, just to close this out, to be fully transparent, I did kind of luck out too because toward the end or maybe two-thirds of the way through this whole thing,
I landed kind of a decent-sized contract as well, which is pretty much going to serve as a way to replenish a good chunk of the money that I drained from my liquid savings.
So, when I look at this, when I look back on this two years from now, the real cost will have been some fraction of that liquid savings that I burned through plus the non-contribution to some of these background funds.
So, it's not quite as, in the long run, I will not have ended up draining as much as it looks like I have at this point.
So, that's a good thing.
So, there is some luck there.
But even if that hadn't happened, I still would have made it out of this okay.
So, anyway, I just wanted to go through that.
I thought it might be useful to someone out there.
Again, if you ever have an opportunity to do something like this, I say take it.
It was an excellent way to kind of realign, do some personal projects, and just kind of almost get a new lease on things.