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How to prepare for taking a career break

By Liz Weston | NerdWallet

Back in 2016, Jamie Clark of Seattle was a software engineer who planned to take a year off of work to finish a master’s degree in computational linguistics. One year turned into three and a career change into financial planning.

Nowadays, Clark, who uses they/them pronouns, believes the experience makes them a better advisor — particularly since their career break didn’t turn out as originally planned.

“Part of our job as financial planners is to help people be prepared,” says Clark, now a certified financial planner who recently launched their own firm, Ruby Pebble Financial Planning. “And I want to help people build that flexibility.”

Careerbreaksareextendedandusuallyunpaid stretches of time off work. Such breaks can be aspirational — giving you time to travel, pursue a degree, change careers or launch a business. Or, they can be prompted by life events, such as caring for a child, nursing a family member or dealing with an illness or burnout.

Whatever the cause, some planning can help you make the most of your break.

Save and budget diligently

CFPHenryHoangofIrvine,California,doesn’t believe most people need detailed budgets, as long as they’re saving adequately for their goals. But career breaks are an exception, he says. When your paychecks stop, you’ll want to have enough savings to sustain you. That starts with knowing precisely what you’re spending today and estimating what your expenses will be during your break. Some costs might decline, such as commuting or child care. But you also might have new costs, including higher health insurance premiums if your current coverage is employersubsidized.

Once you calculate how much you need to save, consider adding a fudge factor equal to two or three months’ worth of expenses in case it takes longer than expected to land your next job, Hoang suggests. One of Hoang’s friends didn’t do that, and wound up raiding his 401(k) to pay the bills.

And speaking of retirement: Extended breaks could mean you’ll need to work past normal retirement age or increase your savings rate significantly to retire on time. If you’re planning to take more than two years off, use a retirement calculator or consult a financial planner to see how that might affect your plans to retire, Hoang says.

Clark saved enough from a high-paying job to cover living expenses for two years, and was able to stretch that to three years after getting married. Their spouse paid the bills as Clark used remaining savings to pay tuition and other costs to get their financial planning credential.

Clark says that careful tracking of expenses and thoughtful budgeting not only helped make their savings last, but it also alleviated some of the stress of Clark being without a paycheck.

“There are always surprises, but it’s good to try and minimize them, or at least minimize impact on your finances,” Clark says.

Make a plan for your time

You may feel you need a break from strict schedules, but having no plan means you could waste this precious time you prepared and saved for.

Hoang has another cautionary tale from a client who startedhisbreakwithastrongdesiretochange careers and spend more time with his young children. His days quickly filled up with parenting duties, and he never made time to explore other jobs, Hoang says. When his savings ran out, he ended up going back into his same field.

“Having clarity on what you really want out of this career break could make a tremendous difference in experience overall,” Hoang says.

The details of your plan will depend on your career break goals, but consider scheduling lunch with a professional colleague every month or so to maintain your network and stay abreast of developments in your field. If you’re considering a career change, make a timeline for when you’ll accomplish certain steps, such as meeting with a career counselor and determiningwhateducationorcertificationsyou’ll need.

Building credit important for stay-at-home spouses

Spouses share a lot, but no matter your relationship status, your credit score belongs to you and you alone. Even if you’re 100% supported financially by your spouse or partner, establishing and building your own credit score is essential.

It can benefit you both as you navigate financial decisions together. But should you divorce or your spouse pass away, having good or excellent credit can help you as you begin to make financial decisions on your own.

Besides, maintaining some money independence can keep youbothonequalfootingin your relationship.

“A household’s financial dependence on one income earner can foster unhealthy relationship control dynamics,” said Katherine Fox, a certified financialplanner,founderand advisor at Sunnybranch Wealth in Portland, Oregon, in an email. “Stay-at-home spouses who take steps to protect their credit score and financial literacy are doing their part to maintain a healthy money attitude and dynamic within their relationship.”

Your credit score equally important

Any time you and your spouse apply for a joint loan, like a mortgage, both of your credit scores get evaluated by the lender. Lenders may use the person’s score that falls on the lower end to determine your eligibility. Ideally, even the lowest score between you both is still in good shape because this can affect what loan terms, like interest rates, you’d qualify for together. A lower credit credit reports.

“At the very least, stay-athome spouses should be a joint account holder or added to their partner’s credit card to help them build and maintain their own credit score,” Fox says.

Be sure to also pay other household bills on time, including utility bills and rent payments. In some cases, those are also reported to credit bureaus.

How you can affect each other’s credit scores

Though you each have your own credit scores, your money habitscanhelporhurteach other, particularly when you have joint loans or share credit cards.

Asacreditcardauthorized user, you’re at the mercy of the primary cardholder’s behaviors. If your spouse makes late payments, that can negatively impact your credit. You’ll want to set a budget with each other, becausewhenmorethanone person uses the same card, it’s that much easier to overspend. Becoming an authorized user is an exercise in trust and communication.

Where you live can also be a factor in how you can each affect each other. According to Fox, in community property states, you’re generally not responsible for any debts your spouse took on before you got married, but you’re responsible for each other’s debts after marriage. But in non-community property states, you only share responsibility for joint accounts and debts.

By Sara Rathner | NerdWallet

score can make borrowing money more expensive.

Your credit score also comes into play when you apply for a credit card in your own name, which you can do even if you don’t earn an income. So long as you’re 21 or older, you can includeyourspouse’sincome on the card application.

Moreover, unexpectedly becoming single again is the most difficult reason non working spouses need to build their credit.

“Having a solid foundation will help you if you end up alone and need capital to get started,” says Brittany Davis, a Memphis, Tennessee-based accredited financialcounselorwhoisan associatefinancialplannerfor Brunch & Budget, a registered investment advisor. “I know some people are leery of credit and debt, but there are so many things credit can be used for.”

Davis likens credit access to insurance — it’s something that’s good to have, whether or not you need it at the moment.

Build credit without an income

Besides applying for your own credit card using your spouse’s income in your application, there are other ways to build your credit.

You can become an authorized user on your spouse’s credit card. They’d be responsible for makingpayments,butifthey payontimeeachmonthand you both avoid charging more than 30% of the credit limit, over time this can build your credit score. Applying for loans under both of your names, like an auto loan or mortgage, can also be helpful as on-time payments will be reflected on both of your