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Try a sabbatical to enrich your life |
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| Create a
financial road map
Finances are one the biggest roadblocks to taking
a sabbatical. It is unthinkable for some to take a year -- or even a month --
off without pay and, most times, benefits. But with careful planning, it may be
more likely than you think.
Track spending: This is
the critical first step to ensure you have a proper reserve, says
Jacquette Timmons, president and CEO of Sterling Investment Management
in New York City.
"Before you even contemplate the notion of taking
an unpaid sabbatical, you've got to look at how you actually spend
your money. If you track
it, and you do that for a couple of months before you plan to do
this, you will have a really good sense of what your expenses are
going to be."
Savvy saving: Timmons
says it's best to save at least six months' worth of living expenses
before starting longer sabbaticals, maybe more if you don't plan
to return to your job.
"If you are going back to your previous employment,
that's a little better scenario than if after you've gone on your
sabbatical then you are looking for employment. Because then you
really don't have a way of gauging how long it will truly take
you to get a new job and replace that income," Timmons says.
If your sabbatical involves a stipend, you won't need to save as much. Either way, stick to the percentage or dollar amount that makes sense for you, set it aside, and then pay your current bills with what is left over. Create a separate savings account and automatically debit your allotment to make it easier. "The whole idea is that you want to take the sabbatical, but you don't want to have an interruption in your lifestyle," Timmons says.
Ditch debt, control spending: Credit card debt is another force to contend with. It's best to eliminate it or pay it off as much as possible ahead of leaving, says Timmons. The goal is to pay credit card debt off and keep it off. Credit cards are a fact of life, but Timmons recommends using them during sabbatical only if you are in the position to pay them off in full at the end of each month. That can be tough on a limited or nonexistent salary, but pays off at the end when you start playing financial catch-up.
Keep investing
When you say goodbye to work, most likely investments, such as company-sponsored
401(k) plans, go bye-bye, too. Timmons suggests looking at investing
as a line-item expense when creating your savings plan. If that's
not affordable, socking a little away in a high-interest, no-fee
savings account, such as with ING Direct, WT Direct or HSBC, can
also be an inexpensive alternative. Fortunately, if you are unable
to invest during sabbatical, you can catch up on lost time if you
aren't too close to retirement, she says. One word of caution: Never
use tax-deferred funds, such as 401(k), 403(b) or regular Roth IRAs,
to supplement your sabbatical. All have tax consequences.
Re-entry
When the sabbatical ends, Timmons says to focus on replenishing your resources. She recommends getting back to saving 10 percent to 20 percent of your total income, paying off any credit card debt and starting to invest again.
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