In this episode of ThimbleberryU, Amy Walls and Jag delve into the intricacies of preparing for a six-month break between jobs. Amy's insights shed light on assessing financial situations, emphasizing the importance of building a solid foundation based on savings, investments, debts, and monthly expenses.
We cover the financial considerations of taking a six-month break. Amy's practical approach navigates the complexities of maintaining financial stability during a career transition. The discussion also delves into the intricate balance between staying for vested equity and pursuing a career break.
Benefits, equity, and health insurance are dissected as critical components of career transitions. Amy and JAG explore the nuances of leaving a current job, considering the impact on benefits, equity compensation, and insurance premiums. The hosts examine the financial implications and practical aspects of these decisions.
Non-financial aspects are also explored, including the potential impact of resume gaps and the significance of planned time usage during a break. The hosts delve into the long-term considerations of career breaks and sabbaticals, inviting listeners to approach these decisions thoughtfully. Keep in mind, you'll likely spend more every week and month when you're not working!
As always, It's important to place an emphasis on the significance of intentional decision-making tailored to individual circumstances.
For more information contact Amy Walls and her staff at 503-610-6510 or click here Thimbleberry Financial.
[music]
Jag: Welcome back to ThimbleberryU. I'm John Jag A. Joined us always by Amy Walls from Thimbleberry Financial. Amy, always good to be with you.
Amy Walls: Jag, great to be talking with you.
Jag: Today we're discussing how to navigate the exciting but often challenging world of career transitions in the tech industry. I know you work with so many tech clients and this is something that happens a fair amount. Let's dive right in. Our topic today is how to successfully prepare for a career transition in a six-month break. First question, all about preparedness. What are the first things someone thinking through this should consider?
Amy: We hear this more and more from our clients. You know, Jag, we've talked before about sabbaticals.
Jag: Yes.
Amy: Planning to have the six-month sabbatical in between jobs. I think this topic is more about not having a lot of planning ahead of time and saying, "I'm done. I need a break. How do I make this work?" One is, looking way ahead, and this one's having a little less runway on time. Three main questions I think are, number one, what's the current state of your finances?
Jag: Sure.
Amy: What's your foundation you're coming into this from? Number two, playing off of that, can you afford a six-month break?
Jag: Right.
Amy: That may not just be based on the amount of money in your bank account, there's other things to consider in that. The third question I'd say is, how would leaving your current job affect your benefits and your equity? Meaning equity compensation.
Jag: Sure.
Amy: Since we're thinking about our tech clients here. Follow-ups to that might be, are you willing to give that up? If you're not, is there a point at which you would be willing to give that up?
Jag: By point you mean point in time, point in frustration with the current job, what do you mean there?
Amy: Yes. [laughter] Both play a role, right? Point in time, I think is the first one, so we can try to look ahead and have a point in time, and be more thoughtful and intentional about this. As time goes on and if frustration continues to build, I think that point where the frustration is big enough that waiting for X amount of money and equity compensation may not feel right any longer.
Jag: Yes. How do you strike that balance? Let's talk about these. Anyone making a big financial decision should have an idea of their financial situation. Talk to us about what specifically someone is looking for in answering that question of what's the current state of your finances.
Amy: Fair question. It's taking stock of everything, and it's doing it without judgment, without assumptions as to what things will be. It's the current state. This sounds easier than it is for many people because it's easy to not like something in your financial situation. We can say health, whatever the case may be. Instead of sitting with that piece to jump and try to edit, both that's going to be different because of X, Y, and Z. How much money is in the bank in savings accounts? How much is in your investments and what kinds of accounts are they in? That's going to play a big role because if we're talking about a six-month break, and you're 35 years old, well, your retirement accounts aren't going to help you in this.
Jag: Right.
Amy: What does your debt look like? Do you have debt at higher interest rates? Are you someone who has student loans that are about to come back on track to be paid? You're not thinking about that you haven't been paying those. What are your monthly expenses? This means, what are your current monthly expenses, not, what are your monthly expenses after you've tried to shrink them down. [laughs] That you justify taking the six months off. It's essentially a very real, reality-based snapshot of now.
Jag: Got it. It's facts, it's not want.
Amy: Exactly.
Jag: Okay. Second question that you asked was, can you afford a six-month break? How do you come to that decision?
Amy: Once you've got that reality-based snapshot, it becomes a little easier to figure that out. Here's what I want to say about figuring this out, is taking a break can be rejuvenating, but it's essential that you ensure you have the right financial cushion before doing it to support yourself. Because putting yourself under financial stress as a way of rejuvenating yourself from other stress is counterproductive.
Jag: It seems so obvious, but I'm glad you said that because that's an important point. If you're taking a mental break, but you're stressing over your finances, you've negated any benefit.
Amy: Exactly. You may have stuck yourself in a worse situation that now you're panicking. First thing, is your cash reserve big enough? Now, what do I mean by big enough? Is it big enough to cover your expenses? You have X amount of cash, your monthly expenses currently are Y. You're taking six months off, Y times six. Is your cash reserve big enough and more than that?
If you're not going to have money coming in, you're going to have to continue to pay those bills, and you don't know exactly when you're going to get a new job. You're anticipating you'll start something at six months, but, hey tech listeners, you're in tech. We all know about the layoffs, we all know that it doesn't always go to plan. Planning for an extra cushion in those six months, I think is really important.
Now, maybe you don't have enough sitting in the bank accounts, but do you have other liquid assets, such as in a brokerage account, or do you have RSUs that are going to be vesting, restricted stock units, over the next couple of months before you do quit your job? If that's enough, can that replenish your cash or add to your cash so that you do now have a big enough cushion to support you during these six months?
A couple other things, one big thing that I do think gets important to also consider is what are you going to be doing during those six months? It's really easy to say, "I just want six months to hang out at home and garden and such," but as someone who recently took a sabbatical, I tried to spend outside of illness, unexpected illness, my whole time at the Oregon coast. Well, that added up.
Jag: That cost money.
Amy: It did. Just being realistic about what you're going to be doing. For me, just in one month, I wanted to be at the coast, I wanted to be at the lake, I wanted to do some projects around the house. All of those things essentially were going to cause me to spend in ways I don't normally spend.
Jag: The time you normally spending at work, you're now spending on doing all the things, as they say.
Amy: Exactly.
Jag: All right. You also mentioned up top, Amy, how will leaving your current job affect your benefits and equity? Are you willing to give that up? If not now, is there a point at what you're willing? Talk to us about what goes into that decision.
Amy: Yes, the amount of equity compensation that vests in a year for our tech clients, or anyone who has equity compensation, is going to be different this year than it was last year and different than it's going to be next year.
Jag: Sure.
Amy: It may vest on a monthly basis or a quarterly basis or once a year. If we're sitting here in October and I have $200,000 of RSUs vesting in the upcoming April. Am I comfortable waiting until after they vest in April to make the switch in order to capture that money? Or am I so eager to go and be done that I'm willing to give up that $200,000?
Jag: Sure.
Amy: Does that feel different if it's now December instead of October and I only have four months to wait? Or does that feel different if it's now June? I just had $200,000 vest. I'm looking ahead and saying, "There's 10 months until my next $175,000 or $225,000?" It completely depends.
Jag: I was waiting for that line. It does depend.
Amy: Yes. It also plays a role. If your equity compensation-- Really hear RSUs are the easy example, if they're vesting quarterly? Well, based on the stock you have coming up, is there a point that-- Yes, I feel okay about leaving. I'm going to leave all that other equity on the table, but I think this becomes the line where I feel that I've gotten what I need to and in balancing my need for a break with moving on. This is small potatoes compared to the equity compensation question, but it's an important one to ask. That is, how will your health insurance premiums be handled?
Jag: Oh, for sure.
Amy: We could have addressed this probably up with, "Can you afford a six-month break?" "Are you going to sign up for Cobra, which premiums typically are going to be higher than that which you pay through your employer?"
Jag: I don't know anybody that's been on Cobra that didn't have sticker shock.
Amy: Exactly. Or, are you going to go through the exchange, and what do those premiums look like?
Jag: Sure.
Amy: What does that also look like if you need to start over with a new deductible for the year?
Jag: Very true.
Amy: Depending on what your health history is. I think all of those things are important things to consider. We could also throw in there life insurance. If you do have health issues and your insurance may or may not be portable, what that's going to look like for you. It's definitely something to consider if you've got health issues.
Jag: Earlier, Amy, you said this is more short-term than long-term. You find yourself in this situation, but ideally, how far in advance should someone be looking at a decision like this?
Amy: Interesting question. I think my best answer, so that I don't say it depends, is it can be person-specific.
Jag: I'm going to get one of those dog shock collars, Amy. Every time you say it depends, I'm going to push the button or a swear jar, you're going to throw a dollar every time you say it depends.
Amy: [laughs] Fair enough. I say, actually quite a bit and we almost started charging my son for words he was using. That were words I used.
Jag: Oh, that's not even fair. Oh no, that's not right.
Amy: We didn't, and we just corrected him for a little bit and he stopped. It made me realize how much I use those same words. Anyway, the answer to your question, person specific, it's obviously going to be better to look at this earlier than later.
Jag: Of course.
Amy: The impact of timing really depends on the decisions and outcomes of the three questions that we just talked about. If we look at the question of can you afford this after you've taken stock, some people are going to be able to say, "Yes, no problem. I can jump on this and do this whenever I want." For those folks that aren't ready for the six-month break, this might cause them to say, "I still need to do this, but I do have to prepare and their timeline is longer." In a sense it's going to be variable based on what situation they're in that is causing the need or desire to take the six-month break as well as what their current financial situation is.
Jag: Okay. As we wrap up, Amy, what other factors should someone consider when looking at this?
Amy: I think there's both additional non-financial and financial considerations. The non-financial ultimately can become financial, but what is a gap in your resume going to mean in your job search? Are you in a position where that's a bad thing or it's just fine? Additionally, how will that time be used? Some of that comes down to being able to answer that question of why do you have that gap and what did you do with that time to help you become better.
Financial. Let's go if you've decided to do it. Take the six-month break. I think it's important to consider, and we alluded to this, but what is your budget for those six months and your spending plan? We talked about the reality of needing to take stock without rose-colored glasses on. Now, what is this budget and spending plan for the six months incorporating your regular expenses, but incorporating the other things?
The healthcare, the fun that's going to look very different for someone who thinks I'm going to go spend five months of this in the woods camping or someone who's going to fly halfway around the world to volunteer in a foreign country and also wants to take things or contribute physical goods. Versus someone wanting to tackle hands-on projects at home. I think getting clear on that is really important and we hadn't called that out.
Another thing financially that could be worth looking at is this need for a break, a one-time situation or is it really likely to be an ongoing situation? Shifting from this came up to I really need to be planning for sabbaticals every three to five years.
Jag: Okay. Got it.
Amy: What happens if the new job you're planning to get in six months? You're going to take a break before starting that job search doesn't happen when you anticipate. What's your contingency plan?
Jag: On the flip side of that, you get a new job at six months and you hate it and you can't stay.
Amy: Exactly. Did you spend down everything and leave yourself without a good solid financial foundation? Then last one had tied into that is, how are you going to get back on track? Obviously, if you're taking six months off between jobs, you're going to spend some money. Your cash accounts aren't going to end up in the end at the same spot they were when you started. What is your plan beforehand to get back on track with rebuilding cash and adding to your savings once you do have the new job?
Jag: Got it.
Amy: That shouldn't be an afterthought is what I want to get to. We want to be intentional the whole way through the process.
Jag: Absolutely. These are things that are customized for each person. Everybody's situation is different and that's why sometimes it's great to talk to a professional, get some counsel on a decision like this. Amy, if one of our listeners wants to come find you and your team at Thimbleberry Financial, how do they do it?
Amy: They can find us online at thimbleberryfinancial.com or by giving us a call at 503-610-6510.
Jag: Lots of food for thought today. As always, Amy, we'll talk again soon.
Amy: Sound great, Jag. Talk to you then.
Jag: Securities offered through registered representatives of Cambridge Investment Research Inc., a Broker/Dealer member of FINRA/SIPC. Advisory Services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Thimbleberry Financial are not affiliated. Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research, Inc., a Broker/Dealer, member of FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc., A Registered Investment Advisor. Cambridge and Thimbleberry Financial are not affiliated.
[00:16:05] [END OF AUDIO]