Can You Afford to Take a Career Break? How to Work Out What You'd Actually Need
Whether it's packing up the family for a road trip around Australia, taking time off to focus on postgraduate study, or just recharging the batteries with a few months on a Greek island somewhere, some version of a mid-career sabbatical is on the agenda for a lot of the people we work with.
It usually comes up almost in passing. And then, generally in the same conversation, the doubts arrive.
What happens to the mortgage? How much cash would we actually need? Would we have to sell investments to pull it off? And the big one, the one that stops most people, what if it takes a lot longer than expected to find work again afterwards?
That's the point where a career break stops being a daydream and turns into a financial planning question. Which is good news, because financial planning questions have answers.
Working out whether you can afford a career break comes down to four numbers. What you'll spend each month while you're not working, what income you'll have coming in over that period, the gap between those two, and how many months you have between now and then to save that gap. On top of that you add whatever lump sum the break itself needs, like airfares or a caravan, and a buffer for the stretch afterwards before new income starts. That last one is usually where the estimate falls short.
This article is based on episode Financial Autonomy podcast, Can You Afford to Take a Career Break Without Derailing Your Finances? You can listen below:
How do you work out if you can afford a career break?
In a financial sense, a sabbatical is an income and expense problem.
Your income drops, often to zero, so the number you need first isn't your salary. It's what you actually spend each month. And if you don't already know that number, sorry, but that's the first job and there's no way around it. Annoying, I know. But we’ve made the job easier with our budget planner tool that you can access here.
Once you've got that, you need a second version of it for the break itself. For some people the number falls, because there’s no commuting, no bought lunches and life generally gets a bit simpler. For anyone with travel plans, it goes the other way, sometimes considerably. Towing a caravan around the country for six months is not a cheap way to live. Everyone lands somewhere different, and it's that second number you want, because that's the one you'll be living on.
How much money do you need for a career break?
More than you'd need for the months you're away. This is where most estimates come up short. The living costs are the obvious bit. Your revised monthly figure, multiplied by the number of months off. Then there's whatever lump sum the break itself requires, which might be airfares, a caravan, tuition fees or travel insurance. Those sit outside the monthly budget and in my experience they get costed late, if at all.
Then there's the buffer, and this is the one I push hardest on. If you've resigned, or you're a contractor whose engagement has wrapped up, there's no job sitting there waiting for you at the end. So you need enough money to cover the search as well as the break.
When we model this with clients we'll take whatever period someone expects the search to take, and double it. Think three months, plan for six. It's a dull line in a spreadsheet and it's usually the difference between a break that ends well and one that ends in a scramble.
Worth remembering too that a lot of costs don't pause while you're off. The mortgage keeps going, and so do the insurance premiums, council rates, school fees and car registration. Coming back has its own price tag as well, whether that's a laptop or the professional registrations you let lapse while you were away. Add all of that up, subtract whatever income you'll have during the break, and what's left is the gap you need to fund.
How can I fund a career break?
There are a few different ways. Leave does a lot of the work for people who have it. Long service leave is worth checking properly, because each state and territory sets its own rules, and seven years of continuous service is a common threshold.
Annual leave goes on top. Plenty of people don't have that option at all, though. It's not uncommon for us to see someone finish up in a role with no leave accumulated behind them, particularly contract workers, and the sabbatical simply becomes the gap between one engagement and the next.
After leave, it's generally cash savings, and for anyone with a mortgage, the offset account or redraw. That's easily the most common approach we see, and it's one of the practical arguments for keeping a decent balance in your offset when you know a big expense is coming.
If you've built up an investment portfolio outside super, some platforms will let you set up a regular withdrawal plan. Compared with simply taking the dividends, that has two advantages. The payments come monthly, whereas dividends and distributions usually arrive quarterly or half-yearly. And the amount stays the same each time, which makes running a household a good deal easier, because dividends jump around.
Selling investments down to fund a break brings tax and timing questions along with it, and that's a conversation worth having before anything gets sold.
How do you save for a career break?
I'm sure you'll have no trouble with the maths, but for instance, say the numbers land on a $20,000 shortfall and the break is ten months away. That's $2,000 a month between now and then. Which is either doable or it isn't. And if it isn't, the honest options are a later start date, a shorter break, a cheaper version of the break, or finding the money somewhere else. Pushing the plans back isn't a failure, it's just the arithmetic talking.
Where you park the savings in the meantime depends mostly on how far off the break is. Money needed inside three years is generally held as cash, because a market fall in month eight of a ten month savings plan leaves you no time to recover.
If the sabbatical is three or more years away, investing the savings is something that can reasonably be explored. Just bear in mind that investment values move in both directions, and the level of risk has to suit the person doing the investing.
Not sure whether your current strategy leaves room for something like this at all? See how Wealth Builder works.
When is the best time of year to take a career break?
For tax purposes, a 12-month break starting in January will generally work out better than one starting in July.
Not for the weather. Here's the reasoning:
The tax-free threshold is $18,200 per person per financial year (ATO), and it resets on 1 July. You either use it in a given year or you don't.
So picture twelve months off taken from July through to June. That's one financial year with almost no income in it, sitting between two years of full earnings. The threshold in that middle year goes largely to waste, and you pay full tax on either side of it.
Now take the same twelve months from January to December. You earn for six months of one financial year and six months of the next. That's two years of reduced income instead of one, so the threshold is doing some work in both of them.
Most people choose their dates for life reasons, and fair enough. School terms, or whenever the contract happens to finish. But where the timing is genuinely open, this is worth a look, and worth running past your accountant before anything gets locked in, because individual circumstances change the answer.
What happens to your super during a career break?
It stops the contributions, and it's easy enough to work out what that's worth. Super guarantee has been 12% of ordinary time earnings since 1 July 2025. So a year away from a $120,000 salary is roughly $14,400 of contributions not made, before you count whatever those contributions might have earned over the following twenty or thirty years.
Whether that's enough to change anything is the real question, and it's the piece we actually model for clients. Sometimes a break does mean working a bit longer than previously planned. Often it doesn't, and in my experience the people drawn to this sort of career break tend to be the ones planning to work later into life anyway. There's pretty much two distinct camps on this. There's the retire as early as possible crowd, and there's the long career with breaks along the way crowd. You guys know I'm very much in the second of those, though both have their attractions and neither one is wrong.
Should you take a career break before retirement?
The traditional model is head down, bum up until your mid-sixties, and then relax and enjoy life.
I've argued plenty of times that this is a flawed model. It's too dependent on your health holding out, which none of us gets to guarantee, and it's too limiting in time span, because it crams every big experience into one window right at the end. White water rafting down the Franklin, or trekking in Nepal, simply might not be feasible in your seventies.
Meanwhile working lives keep getting longer. Forty years plus is not at all uncommon now. Taking some longer breaks across that journey can help you avoid burnout, replenish your motivation, and give you the chance to step back and see whether the path you're on is still the one you want to be on. Sabbaticals, career breaks, mini retirements, whatever you want to call them, this idea of a three month plus break mid career is only going to gain more traction.
Which is really an argument for building wealth in a way that hands you choices during your working life, as well as at the end of it.
How to Build Passive Income So You Can Retire Earlier
Want to build wealth that gives you options before retirement?
If you haven't already got a sabbatical in mind, it might be worth rolling the idea around over the next few days and having a think about how you could make it work. And if you have got one in mind, hopefully the above helps with the financial piece of it. You've just got to sort out who's looking after the pets. A career break is really a question about whether your overall strategy has room in it for the life you want along the way. Our Wealth Builder program is built for people in their 30s and 40s who want one clear strategy across investing, debt, super and the lifestyle they'd like their money to support. That includes modelling the trade-offs of something like a career break, so the decision gets made with numbers attached.
This article is for educational purposes only and does not take into account your individual circumstances. If you would like tailored advice, we can help you work through the numbers properly.
