Getting sabbatical ready
MOST OF US WOULD LIKE TO TAKE A BREAK FROM OUR ROUTINE JOB TO EXPLORE AND PURSUE OUT OTHER INTERESTS. HERE WE GIVE A ROUTE MAP FOR PREPARING YOURSELVES FOR A SABBATICAL
For Indian millennials, taking sabbaticals from work isn’t uncommon.A sabbatical is an extended, unpaid leave from work. It can span from a few months to a few years. It’s taken for reasons as diverse as raising a child, wanting to travel the world, volunteering at a charity, pursuing higher education, or just wanting to decompress by stepping away from the rat race. In essence, a sabbatical allows you to pursue a life goal that you otherwise can’t achieve while working full-time. Whatever may be your reason, it’s essential that you get your finances in order before going on a sabbatical. After all, you’re unlikely to earn your living wage during the break. Here are a few things to keep in mind.
PLAN, PLAN, PLAN
This cannot be overemphasised: if your plan is to walk away from a job that provides regular income which pays for all your needs and wants, you must have an income replacement plan. During the sabbatical, you should not depend on your family and friends for cash. You should support yourself with your own funds. Therefore, before you kickstart your sabbatical, ensure you have funds to pay for your regular needs such as rent, groceries, and utilities. You must also set aside money for your pursuit, be it travel, or child-raising or higher education.The calculations must be done in advance, and a bank loan can be taken to finance any short-falls. If you have a working spouse, the planning process may go a lot smoother for you.
PREPARE SABBATICAL FUND
Your sabbatical fund needs to be money you have specifically allocated in its pursuit. For example, try not to dip into your provident fund because that’s money for your retirement. A sabbatical is a goal, and each goal should be funded independently of other financial goals.
Therefore, assess the time left before the sabbatical, and use the appropriate investment tool to create your fund. For example, if your break is less than a year away, use a bank recurring deposit to save every month, and avoid using instruments unsuited to such a goal. For instance, equity funds or endowment plans may not help you achieve a nearterm goal.
PLAN TO PAY EMIS
At no point in your sabbatical planning should you consider not paying your EMIs or other debts. If you will have debt going into the sabbatical, you broadly have two options. One – settle your debts while you still have an income before the sabbatical. Or, two –ensure enough savings before the sabbatical so that you can continue paying your EMIs in a timely manner. You can’t skip your EMIs and you can’t wish your loan away. Failure in paying your dues in a timely manner will reflect as a black mark on your credit history, making future borrowings very difficult.
INSURE YOURSELF
If your sabbatical involves quitting your job, you’ll also be exiting your employer-provided health insurance coverage. This puts you at several risks during the sabbatical. During the break, if you were hospitalized without coverage,your savings would be drained in days. Therefore, ensure you have purchased your own health insurance well before the break starts. Doing so would also ensure that various waiting periods associated with new health policies are over before your break starts.
PLAN FOR EMERGENCIES
It may be hard to imagine so, but a lot could go wrong during your sabbatical. A natural calamity could devastate your home, you could get robbed in a foreign country, or a dependent parent may require urgent surgery. You can’t prepare for every calamity on earth. But you ought to at least visualize and plan for expected risks. Insurance – for health, life, vehicle, travel, and home – should cover a large part of your risks. For those not covered by insurance, you’ll need an emergency fund. This fund is different from your sabbatical fund and therefore should be prepared separately. Every person should have at least 3-6 months’ worth their current income (or more, if necessary) locked in a fixed deposit.
POST-SABBATICAL PERIOD
It’s good to have your job awaiting you after the sabbatical. If you don’t, you’ll need to plan for the post-sabbatical period. You may go a few weeks or months before you find your next job. Ensure your savings are enough to cover you not just the sabbatical but also the period between the end of the break to the start of your new job. You’ll also need to consider upskilling to be competent in an ever-changing job market. Sabbaticals can do you a lot of good, help you attain life goals, and rejuvenate you. With financial planning, you can ensure your break goes hassle-free.