Updated: Jan 20
In our conversations with people who have taken sabbaticals, the most common issue we often hear about is ‘Towards the end of my sabbatical, I was struggling to pay my bills.’
Taking a sabbatical can really open up your perspective and give you much needed life experience. But needless to say, it can also be extremely stressful if you don’t plan for your finances in advance. Very few organizations in India allow for fully or partially paid sabbaticals. In most instances, employees don’t get paid at all. This makes financial planning a crucial item to be checked off the list before one decides to take a break.
Among the people we spoke to, while some had thought about finances and saved up for their time off, most had underestimated their expenses.
“I was a senior manager at Paytm till a couple of months back. I live in a rented place in Bombay with friends. It was only after I left that I got to know the price of onions. It sounds trivial but I had never truly realized that all the expenses add up to so much. I have had to reduce going out with friends. I think before buying a cup of coffee at Starbucks. All this is very new to me. I thought I had my finances sorted to not have to worry about changing my lifestyle. But now I’m not so sure.”, says Rohit
How do you plan your finances in a way that you can focus on your personal growth instead of worrying about money? We have put together some steps you can take to do just that!
1. Estimate how much money you need in your account before you can pull the plug
Take a look at your bank statement to identify these three types of expenses -
a. Unavoidable expenses - These are expenses that will stay constant. For example rent, EMI, food provisions, medicines etc.
b. Good to have expenses - Discretionary expenses that bring you joy - shopping, eating out, meeting friends, travel etc.
c. Rainy day expenses - Expenses in the event of medical emergencies, family needs etc.
You will not be able to cut down on a. and c. Ask yourself how much of your discretionary spend are you willing to cut down on? Do you wish to have the same lifestyle or are open to cut down on the frills? This will help you arrive at a figure of monthly expenses. Make sure you account for enough buffer amount for unforeseen events. Are you okay with exhausting your savings? If not, how much money would you like to have in your savings by the end of your break? Then, depending on what you plan to do, there will be additional sabbatical related expenses.
Here’s a simple calculation to arrive at how much you will want to put aside for your sabbatical -
(Monthly expenses X no. of months you expect to be on sabbatical)
+ additional sabbatical related expenses
- amount of money you would like to have in savings at the end of your sabbatical
2. Make a financial plan
Now that you know how much money you need, the next step is to plan how to generate that corpus. A simple solution is to keep the paycheck coming till you have saved enough. But this is not the only way. Identifying other sources of income is a great way to ease the pressure. Which one of your skills can you monetize? There are freelance gigs you can pick up or consult part-time on projects. There are websites like Freelancer and Upwork you can sign up on through which you will find paid projects.
3. Network extensively
The importance of this cannot be overrated. Reach out to people in your network to talk about you sabbatical and how you plan to spend it. Networking is the best way to get paid gigs. And chances are, they will be able to give you ideas that will save you money e.g. connecting you to a friend they have in a place you plan to visit so you can stay with them. Talking to people also creates a psychological commitment. The more people you speak with, the less likely you will be to back out of your plans.
4. Save money
This sounds obvious. But many people, especially the younger lot, struggle with saving money. If you are one of those, a simple hack is to create another account and transfer a fixed sum of money from your salary every month. Let’s call this account ‘Do not touch’. Make it a point to spend only out of your salary account.
We hope you will find these tips helpful and have the smooth stress-free sabbatical you deserve. If you have any other suggestions to add to the list, please tell us!