Money Matters – How to Manage your Money when Taking a Career Break
Yvonne Goodwin (DipPFS) of Independent Financial Advisers, Pearson Jones helps to cure the financial headaches of going on a career break.
How to fund it?Budgeting may be boring but it’s at the heart of financial planning. It’s simply about taking your income and outgoings and identifying where you can make savings. Try using the budgeting tool on www.moneysavingexpert.com then follow the tips highlighted for making savings on your utility bills, telephone and internet, insurance premiums. When deciding where to go and what to do, consider how far your budget will go in different countries, especially if you’re planning to travel. Africa, Asia and South America, for example, may be expensive to reach, but cheap when you get there. Check out www.cheapflights.co.uk, www.skyscanner.net or www.travelsupermarket.com to get an idea of flight costs and www.lonelyplanet.com/worldguide for the cost of living around the world.
Make sure you’re earning a good rate of interest on any savings - www.moneyfacts.co.uk has the best up-to-date rates and see a reputable mortgage adviser to check you’re paying the least amount of interest on your home.
Now look at your timescale and how much money you need to work out how much you’ll need to save. If it isn’t enough, other options include raising a loan or even dusting off a pension plan but be very careful as these may affect your retirement plans.
MortgageWhat are you going to do about your house while you are away? If you’re going to keep it then renting it out may mean tenants could cover the mortgage and bills – but remember rent is taxable income. You must tell your mortgage company and it’s worth considering going through a letting agent who can deal with any problems while you’re away. If your mortgage adviser knows that you intend to take a career break then terms can be negotiated in advance with an amenable mortgage lender. You may also be able to have a mortgage payment holiday. If you decide to leave your house empty, your mortgage lender and insurance company still need to know about it.
TaxThis may or may not be an issue depending on how long your career break is going to be and whether you are employed or self-employed. Individual income tax allowance in the UK is £5,035 (2006/7). If you work abroad and don’t earn money in the UK, you may be due for a rebate. Leaving mid-tax year and returning after the start of the next may help. A financial adviser will be able to tell you about this. The Inland Revenue site www.inlandrevenue.gov.uk/cnr has information on the basics.
Existing policies
You may be able to take a pension payment holiday, to stop or lower your pension while you’re gone. For any existing policies, such as life assurance, critical illness cover and disability protection, check the policy wording in case cover is excluded in certain countries or whether a career break might invalidate it. You may need to change insurers.
Other key questions may be:
- who will watch your investments whilst you are away?
- is your will written/up to date?
- do you really want to leave handling your finances to your family?
- and more importantly would they thank you for it if you did?
A new ‘Wealth Management’ service from Pearson Jones, covers all these financial aspects and more, including access to your ‘team’ while you’re away. Pearson Jones is fully authorised and regulated by the Financial Services Authority (FSA) to fulfil all these various functions and handle client monies – something that many other advisers choose not to do.
Call Yvonne Goodwin on 0113 2280900, email yvonne.goodwin@pearson-jones.co.uk, or visit www.pearson-jones.co.uk
