Taking a sabbatical from work is more common than you may think. There can be several reasons why a person chooses to take a sabbatical from work, ranging from pursuing higher studies to engage in humanitarian works and from health-based reasons to starting a business. However, it is crucial that you plan your sabbatical financially in advance to avoid monetary issues later on that can land you in troubled waters. Here are a few tips to help you prepare financially for a sabbatical from work.
Brainstorm
Share your plan to take a sabbatical with your colleagues, friends, and partners. The concerns and queries they share with you would help you develop a framework on which you can base your game plan going ahead. You need to be free of financial worries during your sabbatical period in order to have an enriching experience. Do know that taking a sabbatical would put many of your long-term plans like buying a house, marriage, starting a family, and more, off the track. Such plans would be delayed, and you should be well-aware of it before committing to a sabbatical.
Creating a Budget
You need to make a budget for your monthly expenses and take into account essentials like groceries, utility bills, travel, and even entertainment. Once you have the baseline budget, you can multiply it by the period of your sabbatical, and you would have the amount you would need before you go for a sabbatical. You are taking leave for a reason, and you do not want to divert your focus during this time to worry about household expenses and other petty expenses. Also, trying to live off credit card or loan during this period is not a good idea as it would put tremendous financial pressure on you once you get back to work. In fact, it is suggested that you add around twenty percent extra of your baseline budget as a buffer in case of any unexpected expenses like car repair, urgent travel, or anything else. Also, if you are already running EMIs and planning a sabbatical, it should be accounted for before you leave your steady paying job for a sabbatical.
Start Saving As Soon As You Can
When you create a budget for yourself, you will know if you are short of money. If it is not enough, you need to find an alternative way to make up for that difference. You can seek a bank loan or scholarship to help you cover for the cost of the higher studies. If you still do not see a way out, it is best to postpone the sabbatical for a couple of years so that you can save enough for it. When you start your sabbatical, you can transfer debt mutual funds to your savings every month. However, make sure to limit your withdrawals as you do not want to overspend. Start investing in the top-performing mutual fund for more returns and a smooth retirement.
Create an Emergency Fund
You need to have an emergency fund to help you cover at least six months of your expenses during the sabbatical period. Thus, it is essential that you start investing your money in schemes that you can easily liquidate. You do not want any medical emergency to get you into problems.
Pay Your Debts
Before you quit your job, make sure that you repay any loan that you might have. If you do not pay them beforehand, you will have to think about the EMIs, and it will put an additional burden on you. You can ask your parents or your partner to share the expenses for some time.
Commit to it
You need to prepare yourself for it and cannot go back on your commitment. Once you start, make sure you see it through. There might be some hiccups, but you should be ready to face it. Always have another plan if what you plan does not work out. Ask your employer if you have the option to join work once the sabbatical gets over.
It is best to have your finances in place before you plan to take a break from work. You do not want to put pressure on you and the people around you just because you did not prepare for it. Using the above tips will ensure that you are able to utilize your sabbatical in a way that will help your career in the future.