Sabbatical Financial Planning 101: How to Travel and not get into Debt
Sorting out your finances will be the major part of planning for your sabbatical. Preparing well for that reduced income – or no income at all will be crucial for your overall financial future. We all know that sabbaticals can be life-changing. We’ve laid out below a financial plan 101: How to travel and not get into debt:
Rule No. 1 – Still contribute to your Benefits
While you are off – still be prepared to continue contributing to your benefits, including making pension plan contributions. If you are like most people you want to have your cake and eat it too. Most of us wouldn’t want to delay our retirement because we took a break from work. We can all do this but we need to make the extra effort. Do you have a savings or retirement spending goal? Don’t let your sabbatical or time-off interrupt that. If you have a retirement spending goal of say $55,000 a year – stick to it and remain committed to that goal even when you’re planning for a sabbatical.
If you have health insurance – you will need to ensure that you still maintain it and can access it while on a sabbatical.Your health benefits may be reduced while you are on sabbatical leave. Check with your human resources department to determine their policy for providing coverage for medical, dental and vision care during sabbaticals. If you will not receive coverage during your sabbatical, you will need to cover health care expenses out of pocket.
Most employers provide insurance coverage for their employees. This includes life insurance, and long- and short-term disability insurance. This is especially important if you are the primary breadwinner in your family, and the one through whom the coverage is provided. You will need to determine if coverage still applies during sabbaticals, and if not, make alternative arrangements.
Rule No. 2 – Decide how you can plan to sell/lease items to Raise additional funds
The bottom line is that you do want to be prudent and reduce your expenses as much as possible during your sabbatical. If you rent an apartment you may be better off subletting the apartment rather than giving it up entirely and paying for storage.
If you are a homeowner – you can effectively rent out your home to get additional income. Make sure to properly screen tenants and if you can – get a very good property manager to look after it while you’re gone.
Garage Sales: Ever thought of a garage sale to get rid of unwanted items? Now may be the time to do one. You can raise funds for your sabbatical and declutter at a time when you’re going to have to do it anyway.
Crowdfunding: People are crowdfunding EVERYTHING nowadays. I’ve also see a few good crowdfunding campaigns dedicated to raising cash for a sabbatical. Here are a few:
Try a crowdfunding campaign here on Aspire-Canada if you like: http://www.aspire-canada.com/crowdfunding/
If you do decide to do a crowdfunding campaign to pursue your sabbatical please make sure its tied to some awesome benefits for your contributors. This can be done if you will go to volunteer or establish projects related to health, education etc. in countries that need it the most.
Rule No. 3 – Draw up a Budget
After you’ve analysed how much expenses you will have while on sabbatical and thought about you you may be potentially able to raise additional funds to finance it – the next logical step would be to draw up a budget. Don’t do the budget unless you’ve thought about potential income vs. potential expenses.
First off, its important to detail what you will be spending during the sabbatical, as well as ongoing expenses at home. Then you can look for expenses to cut, such as the cost of operating your vehicle. Create a spreadsheet in excel and lay out all expenses and potential revenue in it. Make sure to include all the places and attractions in the budget so you’ve included everything. Feel free to include other intangible benefits in your budget in a comments slot – this will put things into perspective for you. Here are two examples of jotting down places to visit and intangible goals:
Theme based Experiment: Different country/experience every week. (Seven weeks, Budget: $10,000 )
Week 1: Two countries in Central and South America
Week 2: Teaching/ volunteering
Week 3: Family and friends time
Week 4: Thailand- Beach, Detox and yoga
Week 5 and 6: Cambodia, Hong Kong, other Asian destinations
Week 7 : Spiritual Retreat
Global Trotting Experiment: Eight months with one around the world ticket (Budget: $20,000)
60 Days in Africa (Adventure and Volunteering): From Cape Tow to North Africa
Turkey: 15 days around the country highlights
India: Cross country train trip (six weeks)
Mongolia: Living in the desert experience (one week)
Southeast Asia: Visiting Top cities (one month)
Rule No.4 – Plan to stay with Relatives or Friends during parts of your Travel
If family and friends are out of the question – seek out low-cost options. If you’re travelling frequently while you’re on sabbatical you may want to organize to spend some weekends with various family-members and friends. Just plan in advance – you will be surprised how much this can shave off additional costs.
Rule No. 5 – Start Planning your Sabbatical well in advance
Obviously, the earlier you can start planning your sabbatical the better, particularly in terms of finances. The best thing to do is to start planning years before your departure date. During that period try to put away any extra money in a special savings account, and pay down debts, and live more frugally at home. These are the three most important things you can do to make your sabbatical a reality. Start cutting out all extraneous spending like eating out, vacations, and any large purchases that aren’t directly applicable to your sabbatical. Not eating out or buying anything new will get tedious at times, but all you have to do is remind yourself how delicious those south-of-the-border tacos and margaritas are going to taste, and the whole thing becomes more palatable.
Rule No. 6 – Pursue opportunities to work abroad while on Sabbatical
Part time job: Work part time during the break—baby/pet/house sitting, freelancing, upscaling products; the possibilities are limited only by your imagination.
Rule No. 7 – Take Full advantage of any Company perks for your Sabbatical:
In the US Consulting firms like McKinsey and Deloitte are well known for paid sabbaticals. Thoroughly check out all the options for getting company perks for reducing your financial outlay before finalising any plans. In addition more than 20 percent of employers pay their employees to volunteer. U.S. Bank employees can draw up to 16 hours of pay per year for doing things like serving breakfast to the homeless or reading to kids, and this kind of thing is happening at lots of other companies nationwide.Every year, the Society for Human Resource Management surveys employers about the benefits they offer. In 2013, about 20 percent said they give their workers a bank of paid time off specifically for volunteering, up from 15 percent in 2009.
Follow the Sabbatical Financial Planning 101 Guide and go on that well deserved sabbatical. It can change your life. And you will see that your world does not stop, does not fall apart, when you invest in yourself. Even if you decide not to go on a sabbatical now, I hope you still do it in this lifetime. Remember, the trip really begins when you start to plan it. Whether it is on paper or real, enjoy it!