Thinking of taking a sabbatical? Living without a regular income for an extended period of time will take some budgeting and sacrifice. Here are some tips to help finance your sabbatical, so you can enjoy the time off without worrying about a dwindling bank account.
A person spends on average 90,000 hours at work over their lifetime. For some, like Patricia and her husband, that can be a few thousand too many. After feeling some career burnout, the couple decided to leave it all behind and travel throughout Asia. “I knew it didn’t do any good to complain,” says Patricia. “I needed to do something, so we decided to go travelling.”
- In the U.S., 28 per cent of small businesses allow their employees to take sabbaticals for six months or more. (The Families and Work Institute, 2014)
Academia has long proclaimed the benefits of a sabbatical. Now some notable companies offer career breaks for their employees to pursue personal goals, or just to refresh. “A career sabbatical can be great for your body, mind and spirit,” says Mike Josey, Estate Planning Advisor, Wealth Advisory Services at TD Wealth. “It can be a great opportunity to reconnect with yourself or your career.” Josey reveals that his dream sabbatical involves travelling to France to learn the language and work in a winery. Everyone has their dream, and even if your company doesn’t have an official sabbatical policy, here are some ways to plan for some time away from your job and become a better you.
What is a Sabbatical?
Sabbaticals are not just for academics anymore. The term “sabbatical” actually is derived from the term “Sabbath” which meant a time of rest and rejuvenation. Today’s sabbatical generally involves a plan to fulfill a goal, build a skill or do research. Your goal can be business-oriented, like starting your own company — or personal, like travelling the world, as long as your time off will serve to enrich your life.
- 19 of the “100 Best Workplaces” offer paid sabbaticals. (Forbes, 2017)
If you’ve decided that a sabbatical is right for you, make your dream a reality. Set a date and put your plan in motion. Start to envision what it is you want to accomplish or experience. Working towards a specific plan will make it harder to shy away from when obstacles are thrown in your way.
Saving Up for a Sunny Day
Let’s face facts. It’s no secret that taking a sabbatical means that you will likely have to adjust your finances. You might not have a regular income or any income at all. If it’s just for a month, then creating a little slush fund will probably do, but a longer break might take some scrimping and saving. So where do you start? Getting rid of debt is a good place to start, and avoid adding any more. “While on your break, it might become tough to pay off credit cards or lines of credit,” says Josey. “You’ll want to really reduce your fixed expenses, and debt is a fixed expense.” Consider downsizing and eliminating some of the luxuries you have now, like forgo your daily premium latte, major renovations, and find little ways to sacrifice and create a sustainable budget. Although it might be tough, just remember the larger goal will give you much more fulfillment.
- Six per cent of U.S. companies offer paid sabbaticals. (Society for Human Resource Management, 2014)
Once you decide how much you need to live on, start finding ways to fund your break. If your company doesn’t have a formal program, start putting aside a percentage of every pay cheque. “Be smart about those savings,” says Josey. “This isn’t the time to put that money in investments that generally come with a higher degree of risk. Stick with a high-interest savings account within a Tax-Free Savings Account. That will protect your money and help build your savings, while keeping as much of it as possible away from taxation.” During your break, you can perhaps create a passive income stream like renting out a property (particularly if you are spending some time travelling), or utilizing interest from investments and taking dividends from stocks. You can also plan to work part-time during your sabbatical and create income around jobs you have to do anyway. Walking a few extra dogs, or freelance work can also be a possibility. “Whatever you do,” says Josey, “make sure you like doing it.”
You’ll need a cushion for emergencies. “You can’t ignore risk management during your time off,” warns Josey. “Plan for possible injuries or disability, or even a worst case scenario. Some term life insurance might be a wise purchase.” Ensure you have medical insurance in place whether you are travelling or staying home.
Giving Up Your Day Job
Maybe your dream sabbatical involves setting up your own company, so having a job when you return isn’t a part of the plan. If your company has a formal program in place, then your position may be safe, and you’ll reintegrate into your job. But if you don’t have a formal program, you’ll have to figure out how to bring it up with your boss, and hope that your company will support your initiative.
Patricia has since returned to work, and says that if you want to return to your current job after you leave, make sure your company values you highly. Your best bargaining chip could be the retention of your talent. While you might be tempted to complain about burnout and preach the benefits of coming back refreshed, focus on tangible benefits to both you and your employer. Maybe it will help your company cut costs, or give you a chance to acquire skills that will make you better in your job.
Costs of Travelling for a Year
Round The World Airline Ticket: $3,000-$5,000 (Economy, Star Alliance)
Lodging: $50/night average= $18,250
Food: $20/day average= $7,300
Activities: $10/day average= $3,650
Medical Insurance: $675/six months (TD Insurance, maximum time that one can be insured while out of country)
However, Patricia felt unfulfilled in her work so quitting her job before taking a break was the right decision for her. “Most people thought I was crazy to give up a staff job with a pension and benefits, and suggested I take a break,” discloses Patricia. “But, I knew I wouldn’t want to go back. I needed to make this leap and trust that something would come up upon my return.” If you have similar feelings, then put a plan in motion to change employment when you return. “Update your resume before you leave so that your duties and accomplishments are fresh in your mind,” says Josey. Putting your career break on your resume can demonstrate initiative, especially if you are using the time to acquire new skills.
If you decide to take a sabbatical, it can be a life-changing experience. “I don’t exactly know how I’ve changed,” says Patricia, “but I know that I have. I’ve been to some incredible places, have seen some amazing sights and have done more in the last four months than I have in the last four years.” As Josey says, some planning can help ensure that you make the most of your time, and reduce any stress around finances or job insecurity.