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Aug 5, 2021

How to Plan Financially for a Mental Health Leave

By Sarah Li Cain

Build savings, tap leave benefits, and consider short-term disability.

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Working hard to advance your career can be great, but not if it comes at the cost of your mental health. 

That’s why, for many, hearing the recent news that tennis champion Naomi Osaka and gold-medal Olympic gymnast Simone Biles withdrew from their respective sporting competitions this summer may be a reason to pause and consider their own states of mind. And it’s possible the news will open up more conversations for those who want, and need, to take time off to tend to their mental health. 

Whether it’s generalized anxiety, depression, or burnout, mental health challenges cost the global economy approximately $1 trillion each year in lost productivity, according to recent research by medical journal The Lancet. What’s more, Covid-19 has compounded psychological challenges for many since 2020, and led to more financial challenges, as people grapple with fear, anxiety, emotional distress related to illness, bereavement, loss of income, not to mention loneliness and social isolation, the journal reports.

Personally, I know what this looks like. I suffered an intense period of burnout back in 2019, and I didn’t work for a month. Not only did I spend more on counseling in the months after trying to scramble to create some semblance of a work life balance, I spent more during those weeks off on items including takeout and babysitters for my son. Luckily, I was able to afford those expenses thanks to my emergency fund

In hindsight, I saw the burnout coming and wish I had taken proactive steps to take time off, instead of being forced to. If you’re in a similar situation and want to take time off, here are some ways you can make it work financially.

Budgeting for mental health

Whether you’ll receive partial pay or need to take unpaid leave, you should budget for time off. it’s likely you’ll be living on a reduced income, which may require you to adjust how you allocate your money. Ideally, you should also have a rainy day fund in place, which you may have to tap to pay for unexpected expenses. 

If you’re planning to take time off a few months from now, you should consider setting aside money for a larger rainy day fund. It could help you avoid spending on personal loans or credit cards, which can get you into debt.

You’ll also want to look at which parts of your budget you can temporarily cut out or reduce when tending to your mental health. Consider looking into benefits your employer or health insurance may provide, such as free counselling sessions under your Employee Assistance Program (EAP). These are confidential, short-term counseling sessions for employees that may also include referrals and follow-up services for personal or work-related problems. There are also non-profit programs that can offer reduced fees for counseling, such as the Open Path Psychotherapy Collective.

Negotiating with your employer

For your next step, consider talking to your employer. Aside from filing for short term disability insurance (more on this later), it’s a good idea to start the dialogue early when it comes to taking time off. 

Rich Jones, host of the podcast Paychecks & Balances, says that mental health and career are hot topics currently, so companies may be more flexible than ever. It could be a great time to speak to your supervisor or human resources department.  And in case you’re scared to start a conversation, Jones suggests thinking about yourself as a valuable company asset.

“Companies don’t want to lose top talent because they didn’t give them the space needed,” he says. “Be thoughtful about why you’re requesting the break, how it will help you and the potential coverage plan for when you’re away.”

Jones also suggests familiarizing yourself with company benefits, including any policies for leave. If not, try to come up with a plan and then approach the right people. You should be open to what happens and how to respond, though you may be pleasantly surprised at what happens.

Filing for short-term disability or FMLA 

There are several options when it comes to filing a short-term disability claim, though specifics will depend on the laws in your state, and your employer’s policy. Short-term disability can offer you income protection by replacing part of your paycheck if you are injured or if you become too sick to work.  You may want to consult an attorney specializing in these matters to see where you stand.

In general, you may be able to file for short-term disability through your employer if you’re diagnosed with a mental condition, which stems from workplace stress. This diagnosis needs to come from a medical professional. And you may be able to take several months of leave, and in some instances may receive up to 80% of your gross income if your employer provides short term disability benefits.  

You may also be able to apply for leave under the Family and Medical Leave Act (FMLA), which allows covered employees to take time off for specified family and medical reasons. However, you’ll only receive up to 12 weeks off and it’s usually unpaid. Your job is protected during your MLA leave, and after your 3 months is up, your company must put you back in the same job or an equivalent, with equivalent benefits and conditions of employment.  Whereas with short-term disability, you may not be protected. However,  employers with 15 or more workers must offer to make reasonable accommodations for employees with disabilities.

Using Your FSA or HSA Funds

Your health savings account (HSA) or flexible spending account (FSA) are tax-favored accounts that can help you pay for various health care expenses, which can include your mental health. Since many mental health needs aren’t covered under a typical health insurance plan, you’ll probably need to pay out of pocket for them. An HSA or FSA account may let you pay for qualified medical expenses related to mental health.You may be able to save money since these accounts are funded with pre-tax dollars. 

Reaching out

Don’t forget to ask friends and family if you know you’ll need support. It might feel overwhelming to deal with mental health concerns or worry about whether your job will be there if you take time off. Your health should be your top priority.

“It’s better to take the leave than to let your performance slip,” Jones says. “You could get a low job performance rating and find yourself fighting an uphill battle.”

Remember the Stash Way

At Stash, we recommend following the Stash Way. It’s our philosophy for financial wellness, which includes budgeting, creating emergency savings, and investing on a regular basis, as well as protecting your loved ones and assets with insurance. Stash also offers goal-setting tools such as Partitions, which can help you set money aside in an emergency fund that can support you through a leave of absence.

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Written by

Sarah Li Cain

Sarah Li Cain is a finance and real estate writer and a candidate for the Accredited Financial Counselor© designation. She’s written for CNBC, the Financial Planning Association, and other publications.


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