Author: Don Obrien

Financial awareness helps women gain edge when they restart after career break

Smita Prakash (name changed) decided to take a career break after 14 years of working. A sudden onslaught of familial and caregiving responsibilities along with a sense of exhaustion and dissatisfaction at the way her career had panned out made led her to the decision of taking a sabbatical. That was the easy part.

The real troubles started when Prakash made up her mind to re-enter the workforce. Given that her desire to take a break had stemmed from unhappiness with her career trajectory, Prakash didn’t want to take up any job that came her way and was determined to take up something only if she felt it matched with what she was looking for and her skillsets and experience level. “When women decide to make a comeback after taking a break, the wait for the right job can be a very frustrating experience. What I learnt from this episode is that establishing a certain degree of financial preparedness before you opt for a sabbatical can make the process easier and also be a source of support in myriad ways,” she narrates.

Prakash is now happily employed at an MNC and says that she is fortunate to have landed a job for which she feels she is the right fit for her. She says, “The break gave me an opportunity to dedicate time to upskill myself. And I could do that comfortably because I had the requisite financial buffer – I didn’t have to ask for monetary support from anyone when I decided to study more. Although I have been blessed with a supportive husband who values my career but in India, a woman wanting to study after a certain age is bound to be subjected to raised eyebrows and some snide comments. Also, the autonomy gets diluted when your upskilling is being financed by someone else.”

Women in India take sabbaticals from work for a host of reasons, the most common ones being pregnancy, childbirth or to fulfill caregiving duties for sick family members or aging parents. According to a survey conducted in 2019 by Avtar Group, an organization which works to promote diversity and workplace inclusion in India, majority of respondents (69%) anticipate a pay cut on re-entry due to motherhood wage penalty. The survey also revealed that for women, insufficient support at home, gender stereotyping, lack of network and skill gap to be the biggest reasons that hindered their re-entry.

‘My finances were in good shape. I could outsource childcare duties’

Alisha Singh (name changed) recalls working till the last day of her pregnancy and being sanguine of being able to return to work after her baby would be six months old. Fate had other plans and the new mom says she had the toughest eight months of her life after childbirth because her baby’s health consistently remained a matter of concern.

“From the ninth month, my daughter’s health improved significantly and two months later I was pretty confident that it was a good time to enter the workforce again. However, my mother-in-law and my husband were not happy with the idea. We all had been through such a harrowing time because of my baby’s illness that it was hard for her to accept my return to work. But, I was determined because I had received the green signal from doctors and I also knew that the longer I waited, the harder it would be for me to place my foot in the door,” Sinha explains.

Finally, Sinha found a solution – she hired an experienced nanny so that she could entrust childcare responsibilities to her when she stepped out to work. She says, “It was my sister who gave me this idea. She suggested that I should hire a nanny by myself and pay her with my own savings instead of relying on my husband and mother-in-law to take up some responsibilities given that they were reluctant to accept my decision to start working again. My sister had done something similar when she jad to take a break to look after her in-laws. Thankfully I had followed a strict budget and had invested diligently in mutual funds all through my pregnancy and that gave me the leverage to outsource childcare duties.”

The pandemic has also served as a harsh reminder of the disproportionate burden of household chores and familial responsibilities that women have to carry. In such circumstances when the help rendered by domestic workers became inaccessible, many women have had an extremely difficult time juggling work and domestic obligations. For women who have been trying to relaunch their career after a break, this meant they were left with no time at all either to upskill themselves or dedicate time to networking for job applications.

Emergency funds can provide the necessary buffer to women in such periods when uncertainty reigns supreme and the job search period gets protracted. Sinha says, “It is not prudent to liquidate your investments at the drop of a hat because that makes you lose out on the benefit of compounding. An emergency fund can help you easily sail through phases when you are running slightly short of cash. It can even be used for your occasional indulgences that you may have been used to when you were employed.”

Embracing the Mutual Fund Boon

Besides this, mutual fund investments can be a boon for women who are looking to take a break from work. They generate higher returns than many traditional investment avenues, do not pose storage and security problems which is the case with gold (it is common for many women in India to rely too heavily on gold for financial security) and allow investors tremendous legroom in terms of choosing their risk levels, investment modes (SIP or lumpsum) or asset classes.

Mutual funds have also earned greater significance in a changed investment landscape in the post-pandemic world. There is heightened awareness about spending judiciously, following a budget discipline and investing in assets that are tailor-made for one’s goals and risk appetites instead of blindly pumping money in traditional asset classes especially fixed income ones. The financial troubles that thousands had to weather due to the pandemic has made investors realise that the right investment avenues have to be handpicked and the one-size-fits-all approach is redundant today.

Prakash says, “The day I thought of taking a sabbatical, I started following a dedicated investment plan for building a solid buffer before that. I started investing in a mix of equities and debt funds in the beginning and gradually, as I inched closer to the day when I had planned to quit my job I moved more assets from equities to debt. This helped me create a reservoir that was more than enough for me to comfortably spend the next two years in sabbatical and even upskill myself. What’s more, I reinvested what was left in that corpus in mutual funds after I found a job again.”

Anant Ladha, founder of Invest Aaj for Kal explains, “In the world of investments, the most important thing is consistency and the best way to start a consistent investment journey is through SIPs. Consistency helps in compounding and compounding is super powerful in the long term: for example, a 10% growth in 25 years doesn’t amount to 250%, but it makes you 985%. You earn 735% extra purely because of the power of compounding. Small investments over time helps build capital and it can be vital if someone wants to restart their professional life. Taking a career break and restarting involves risk, but if you there is financially stable, it can give you much-needed comfort. Also, for women to be financially prepared for career breaks, they should not only focus on assets but also on liabilities. Our focus should be on asset building and once that is on track, our risk taking ability automatically increases.”

Key takeaways

• Speak to a financial advisor if you feel daunted by the financial repercussions of taking a career break.

• Maintain a healthy credit score before entering the sabbatical phase so that if the need arises for you avail loans, you can do that easily.

• Emergency funds can provide the necessary buffer to women in such periods when uncertainty reigns supreme and the job search period gets protracted.

• Mutual funds have also earned greater significance in a changed investment landscape in the post-pandemic world.

Disclaimer: This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.

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Oliver Bolt

Oliver Bolt

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