Can I Afford a Career Break?

[Papa bear]

I've been burned out and stressed at work recently and have been bouncing around the idea of a career break with my wife. I would be looking at somewhere around 6 months of time off or more (would not be a sabbatical through work) and I would need to resign from my current job.

I don't anticipate having any issues getting back into a new position after a break, as my current organization could consider me back for rehire (most likely a new position, less responsibility and stress but less pay), work contract positions short term, or join a competing firm after a non-compete.

What would I do? I have many different projects around the house and on my rental properties that I would work on, including building an addition, remodel kitchens/bathrooms, etc. This break would allow me to do this mostly by myself and reduce costs greatly. I would very much enjoy doing the projects and these could be seen as value added for my sweat equity in increased rents or equity on my primary residence.

Downsides: Going back to work after a break, my salary would be greatly reduced for a period of time (work in a heavy commission based environment) and I would have to work my tale off when I get back to work. This would be a downside going back into any work situation.

Current expenses: 4000/month
Current Salary 80k, Wife Salary 60k
Rental NET income: 1500/month
Cash: 85k
Taxable Investments: 70k
Retirement Accounts: 210k
Debt: Only mortgages on 3 properties, but those are reflected in the expenses and rental net income.

Questions: Financially, I think I would be good to make the move, but is it worth it? I'm 30, wife is 27, and we have been doing a great job with savings. Would this be a big hit on the growth? Should I keep plugging away? Will I ever want to return to work? Buy another rental before the break?

 

[eridanus]

Yeah, it's a big hit financially because you'll not only be earning nothing but you'll also be spending down your savings (ignoring the sweat equity projects).

The benefit to your health is well worth it, however (it was for me, anyway). I caught up on my sleep, explored my city, read a lot of books, and traveled all over from Alaska to South America. More succinctly, I remembered who I am.

If you take an unpaid leave of, say, a month, that's obviously better financially but sometimes a month just isn't long enough.

 

[Sarah in SC]

I highly recommend you doing whatever it takes to make the sabbatical a reality. As someone who has benefited from several such breaks (and my DH is on one now) there is no better way to reframe your goals and priorities.

And having seen people of every range of economic resources take sabbaticals, I think if you really want to make it happen, you will figure out how to make the money work, probably by a drastic reduction in expenses. I like that you are spending the time doing sweat equity on your properties--that will be a great way to clear your head.

 

[daylatedollarshort]

What was missing to me is what is your net worth and what are the mortgages / values on your three properties? You have 1.5K a month net in rental income. We had a $15K foundation issue one year on our house. If that happened on one of your three properties could that off set / wipe out almost all of your rental income for the year?

What is your asset allocation between your liquid investments and real estate?

 

[pb4uski]

It looks to me like you would be treading water financially for the period of your sabbatical - IOW your wife's take home pay and net income on the rental would roughly cover your living expenses and you would get a benefit of sweat equity on your rentals and a much needed break so it seems viable to me.

Have you also considered just a direct move to the newer position with less responsibility and pay without a break in service? or a short leave of absence and then returning in the newer position with less responsibility and pay? or part-time work for a few months to get a break and just maintain your current commission base but don't bust tail to grow it? or just moving to another job?

 

[Bestwifeever]

Well, since you asked

I don't think you can do it from a financial standpoint. Your sweat equity is not going to bring in a penny more income and likely will not really increase the value of the properties very much down the road--you still have to buy all the materials for remodeling kitchens and baths, which will come out of your savings, right? You also have a lot of things you want to accomplish in six months, meaning burnout on those tasks or worse, not getting them done before you go back to work. And your savings will probably take a hit during this time off (or you will feel deprived, making your time off not enjoyable).

I second a month's leave of absence during which time you would NOT be doing those remodeling things but rather recharging. Or, why not look for a completely different job now if you are unhappy with what you are doing? Or go back to school? Have you worked for this company for all of your professional career?

And you are a relative newlywed, right? Is your wife on board with your plans?

You said in an earlier thread that you want to be retired by the time you are 40, managing your rental properties. Would that still be possible with extended time off and less income and savings if/when you return to work?

So there is the devil's advocate side of the argument

 

[Walt34]

Well, since you asked.

I think you're nuts to even think about quitting unless you're very, very certain you can get another job when needed. And if they decide they don't want you back after all, what is "Plan B" and "Plan C"?

Looking around for another job before quitting may be a better choice. Where are you going, why, what do you think will be different when you get there? Why do you think this transition will improve your life?

You want to move away from something that you don't like and that's perfectly understandable. But be certain that what you are moving to will be better.

 

[Papa bear]

To answer a few questions, to start, yes my wife is supportive. She would really enjoy me at home chugging away at the house. However, once I get all the numbers figured out and she takes a look, we'll see how she reacts =). I'm the one who is more nervous financially and so I just started to really dig into expenses, net worth, etc. The numbers I had above were "back of napkin" best estimates and I'm working on getting something much more accurate.

For properties:
Primary Residence: Value 230k, mortgage 170k (PITI 1400/month)
Rental1: Value 90k, mortgage 30k (rent 1400, putting 100% to pay off, will be mortgage free in 2 years) Net 0/month
Rental2: Value 230k, mortgage 160k (rent 3000, PITI 1200 + 300 sinking fund ) Net 1500
***Note – any rental expenses/repairs over the past years are already built into the 4k/month estimate monthly expenses.
Total Value: 550k, Mortgage 360k = Net 190k

Cash and equiv - 155k (45/55 equities/cash)
R/E equity - 190k
Retirement Accts - 210k (95/5 equities/bond)

@bestwifeever
I agree with the income piece and spending from savings. I really enjoy the hands on construction piece, so 6 months would be great =). Not planning on more education and this is a second job in a completely different field than where I started. As for the getting to FIRE by 40, I do think this could put a dent in that plan. It would really depend on where I end up after a break.

@pb4uski
I’ve been thinking of areas to move to at my current company as well. This break in service was one of the more extreme options and definitely the one that has the most excitement, but risk and anxiety. I do think a big source of my stress comes from the company that I’m working with, though.

@Walt34
Been thinking about the option of moving on to something new, getting an offer, and building in a short break between. Not sure if I would get the time I want – but I do have a non-compete to deal with that could put a snag in this plan.

So as I expected, I have kind of a mixed bag of responses. If there is a “guarantee” of some sort of work after the break, it sounds like it might be something I could/should do. If there is no “guarantee”, then either I’m SOL, or take a big risk.

 

[Onward]

Sorry, but taking a "break," as you call it, would be extremely unproductive, even unpatriotic. After all, studies show 80% of Americans are satisfied in their careers and derive a real sense of purpose from them.

So get back in there and bring up those sales numbers, mkay?

 

[daylatedollarshort]

If you had lower fixed expenses and less debt, I would do it. Lots of families live on one or two incomes totaling $60K or less. But personally I would be nervous living on one $60K income with your expenses and three properties with three mortgages the sizes you have listed.

You might want to ask your question on the bigger pocket forums since they are all real estate oriented and RE is a big part of your financial picture.

 

[pb4uski]

Sorry, but taking a "break," as you call it, would be extremely unproductive, even unpatriotic. After all, studies show 80% of Americans are satisfied in their careers and derive a real sense of purpose from them.

So get back in there and bring up those sales numbers, mkay?

Papa bear, does your boss post here too?