Taking an extended leave from your job requires careful financial planning and goals-driven activities. As an adult working member of a family, you might surely have many responsibilities which require a steady flow of monthly income. More often than not, this is the single biggest reason that discourages people from taking an extended career break. But with adequate sabbatical planning, you can enjoy your break to the fullest without worrying about the finances.
How to Plan a Work Sabbatical?
1. Identify the ‘When’ and the ‘Where’
In order to create a ballpark estimate for the cost of your sabbatical, you’ll need to answer some key questions first.
- How long do you want to plan to travel for?
- What countries or regions do you plan on visiting?
The length of time will likely depend on many factors – your comfort, professional schedules, kids’ schedules, etc. For this example, we will assume that you and your partner agree upon three months during the summer so you don’t have to pull your kids out of school.
Once you decide on your three months, it’s time to discuss where you’ll want to be. There is a massive cost difference between spending time in Southeast Asia vs. spending time in Australia or New Zealand. While you don’t need to narrow down exactly what countries you’ll be in (thus leaving yourself the ability to be spontaneous!), it is important to know the regions of the world you want to be visiting and understand the cost differences.
2. Know how much Money you will Need
To start with, try to estimate how much money you will need throughout your work break. While it is not really essential to get into the intricacies, create an estimate of at least the basic expenses depending on what you are planning to do while on a sabbatical. For instance, you might want to study, travel, or start a side business.
To ensure that you are actually able to take the sabbatical leave as long as you had intended to, try to keep the expenses low. Look carefully, and you are sure to find many different ways to reduce your daily expenses considerably. The lower your expenses are, the more financially stable you will be during the sabbatical.
3. Identify your current Lifestyle Costs
Your cash flow is the heartbeat of your family’s finances. Without the awareness of how much you are spending and where money is going, you’re making crucial financial decisions in the dark.
You can start tracking expenses using applications. Using one of the applications doesn’t mean you are putting your family on a strict budget; it simply means you are bringing awareness to how much it costs to live your lifestyle and where your money is going. This allows you to then create a starting point for your projected sabbatical expenses.
4. Prepare in Advance
There can be various reasons for taking a break you want to do a one-year programme in business administration, or travel Asia for six months, or, take care of your child, or to care for an ailing family member. Whatever be the reason or situation, you need to have enough money to cover all the expenses so that you comfortably sail through the time that you are not earning.
If the break will result in a loss of income (in part or full), protect expenses first, so that your lifestyle is not compromised. Keep in mind that there could be increased expenses as a cost of the sabbatical, too.
An earning individual, who has no financial dependants, has to plan only for her own expenses. Those who have dependants—maybe parents, spouse, children—will have to take care of others’ expenses as well. These could be equated monthly payments, rent, a child’s education, and day-to-day needs, among others.
5. Identify the extra costs you will incur during your sabbatical
This step will take the most work and contain the most assumptions. You won’t be right, but you want to have some ballpark estimate as a starting point.
Common expenses will include:
Some of this will be relatively easy to forecast ahead of time flights, lodging, transportation, etc. However, you likely won’t know the food, excursions and shopping costs until you arrive there.
6. Create an Emergency Fund
Next important step in this sabbatical planning guide is having an emergency fund. While your baseline budget will help you manage your day-to-day expenses, you will need an additional rainy-day fund. Once you are on a career break, you will surely realise that there are many things that you failed to consider while planning the sabbatical.
As you will not be earning any salary, unexpected expenses can put a lot of stress on your budget. Your emergency fund can be your saviour in such situations. It is generally recommended that your emergency fund should have enough money to manage your basic expenses for at least 4-6 months. Having this financial cushion will ensure that you enjoy a stress-free sabbatical.
7. Save a lot
Once you have an estimate of how much money you will need, the next step is to start working on your savings skill. You’d really be required to up your savings game for at least a few months before you finally take your sabbatical. Start by first going through your biggest monthly expenses. In most cases, it’d be your loan EMI if any, household expenses, food, and utility bills.
There are many different ways in which you can try and save more money on these expenses. For instance, you can try switching to a different lender for reducing the interest charged on loan and subsequently reducing the monthly EMIs. Similarly, for other expenses too, you could try switching to a different provider or look for cheaper alternatives.
8. Invest in Health Insurance
Many of the employers in India now offer group health insurance to the employees. As you will not be covered under group insurance during the sabbatical, it is wise to purchase an individual health plan for yourself. This will protect you from the high healthcare expenses if at all, you suffer from a medical problem during the career break.
Such expenses can put a significant dent on your sabbatical budget and can also require you to resume work sooner than you intended. So, if you are looking for how to take a sabbatical, make sure that you do consider purchasing health insurance.
Tips for Planning Your Re-Entry
- Know What You Really Want To Do
- Start Networking
- Work on the Resume Gaps
- Use Sabbatical Experience for Boosting Your Resume