While taking a significant amount of time off from work may sound like a luxury to most, experts say the right kind of financial planning could help you take that plunge
The very prospect of taking a few weeks off from work can send the most organised person into a calendar-juggling, task-delegating tailspin, let alone chucking up a steady job and regular income to travel the world, pursue their dream project or study. Yet, as downright insane as it may sound, a growing number of people are opting to quit their jobs or take career breaks with paid or unpaid leave to pursue their interests.
Early this year, professional networking site LinkedIn introduced “career breaks”–a new feature on the LinkedIn profile–to make it easier for candidates and recruiters to have open conversations around the skills and experiences amassed from the traditional workplace. Whether it was taken for full-time parenting, bereavement, caregiving, a gap year, layoff or other life needs or experiences, the feature gave users an opportunity to share the information.
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While taking a sabbatical may still sound like a luxury to most, experts say that the right amount of financial planning could help you take that plunge. Image: Pexels
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A growing number of people are opting to quit their jobs or take career breaks with paid or unpaid leave to pursue their interests
In her blog post about this feature, Camilla Han-He, LinkedIn’s senior product manager, said it was time to rewrite the narrative on career breaks. While the possibility of embarking on a career break has long been overshadowed by stigma, the sentiment around it is changing for the better. According to a global survey to understand how people and hirers perceived career breaks, 46 per cent of hiring managers believed that candidates with career breaks were an untapped talent pool. Moreover, there were benefits associated with taking one. Fifty-three per cent of people said they were better at their job after taking a career break. Sixty-nine per cent of people said taking a career break helped them to gain perspective and figure out what they really wanted from life and 68 per cent said taking a break positively impacted their wellbeing. For employers too, the pay-off was noticeable, as 50 per cent of hiring managers believed people returning from a break had often gained valuable soft skills. “In many cases, it’s the off-your-resume experience that truly gets to the heart of your passions, gifts and strengths,” she says. The survey, conducted by Censuswide for LinkedIn, covered 22,995 workers and 7,047 hiring managers globally.
While this may still sound like a luxury to most, experts say that the right amount of financial planning could help you take that plunge.
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The earlier you start saving, the better off you are
Put a number on it
Decoding your finances correctly is the first step towards understanding how much it’s actually going to cost you to take that career break. One way to approach this, say experts, is to go over 12-months’ worth of bank and credit card statements. This will give you a fair idea of how much money you are bringing in each month after deductions and where that money is going in terms of expenses. Account for every expense, right down to the last rupee. While it may seem like a tedious exercise, it will give you a clear picture of what you’re spending on each month. It will also throw up some surprising insights, allowing you to identify which expenses are essential (rent, groceries, health, transport, utilities) and which are discretionary (travel, entertainment, eating out, shopping). Evaluate if any of these numbers are going to change significantly when you take that time off from work. For instance, if you live in a city that is very warm or very cold, you may find that your utility bills are much higher as you spend more time at home. On the other hand, there may be a drop in your transport expenses. “It is critical to assess each of your elements of expenses carefully to figure out if they will go up or down as a result of this break,” says Vishal Dhawan, CEO and founder, Plan Ahead Wealth Advisors, a Mumbai-based SEBI-licensed, registered investment advisory firm. “As far as each of the costs are concerned, apply an inflation cost of approximately 6-8 per cent to that number. Prices will rise due to inflation, so you do need to factor that in,” he advises.
Start saving
Once you have arrived at that golden number, you can start working towards it. The earlier you start saving, the better off you are. Financial experts recommend setting up an auto-debit system–the money is ferreted away before you have had a chance to spend it. Even if you can’t afford to save much initially, it is better to start with something rather than nothing. Another way to reach that goal sooner is to invest the money wisely, experts say.
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Emergencies emanating from sudden expenses in these areas can set you back financially and can even push you into debt. Image: Pexels
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Even on sabbatical, it is a good idea to continue networking so it is easier to touch base with contacts when you are ready to jump back into the game. Image: Pexels
“When you’re saving for a sabbatical, it may be tempting to look at investments in equity as you may have more time to follow the stock market and trade or look up the internet for some short-term, big-gain, investment ideas. However, this is the time to avoid falling into this trap,” says Dhawan. He recommends using more dependable avenues such as fixed deposits and debt mutual funds to park your money. Avoid investing in schemes with long lock-in periods, which could affect liquidity. If you invest in mutual funds, you could consider opting for a Systematic Withdrawal Plan (SWP) facility. With this, a fixed amount can be withdrawn from mutual fund investments on a fixed date every month. This can be used in lieu of a monthly income during the sabbatical.
Get insurance
When planning a sabbatical from work, it is important to ensure that you and your family are protected against risk. This could be in the form of health insurance, general insurance and life insurance. Emergencies emanating from sudden expenses in these areas can set you back financially and can even push you into debt. Moreover, it's prudent to have these in place, as you are likely to lose the coverage offered by your employer when you take a career break. Buy independent health insurance and term cover. According to experts, this should ideally be done while you are still employed as it can get difficult to get term coverage when you have no income.
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When planning a sabbatical from work, it is important to ensure that you and your family are protected against risk. Image: Pexels
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Be clear about what you want to achieve during your break–do you want to travel the world? Take some time off to raise your family? Image: Pexels
Think things through
Once you have decided to take a sabbatical, have the discipline and determination to see it through. Be clear about what you want to achieve during your break–do you want to travel the world? Take some time off to raise your family? Work on a social cause close to your heart, or study more to upgrade your skills and qualifications? Whatever it is, have a schedule in place to meet those goals and plan your sabbatical well. You don’t want to waste that precious time away from work, trying to figure out your life.
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Decoding your finances correctly is the first step towards understanding how much it’s actually going to cost you to take that career break. Image: Pexels
Avoid that spending trap
When you’re planning for a long sabbatical, it may involve saving for a fair amount of time. So one quick beach holiday or getting a pair of those gorgeous earrings may seem like the perfect treat before you take a career break and clamp down on expenses, but avoid falling into that spend trap. “You have to be mindful and avoid any off-the-cuff decisions,” says Dhawan. “Most people think it’s okay to indulge in that holiday or big-ticket purchase because they have a job and a steady income at the time. Unfortunately, this could set you back substantially from your end goal, which is to save,” he says. However, it doesn’t make sense to clamp down on all your expenses either. Any lifestyle change has to be sustainable. “If you scrimp too much, there may be a moment when you may not be able to adjust to that lifestyle change and rebound. Even if that lifestyle change is critical to your savings, ensure that you ease into it gradually. This way, the change is likely to be sustainable.” says Dhawan.
Make sure everyone is on board
Make sure your family or loved ones are on board with your plan. It’s important for them to understand why you are doing, what you are doing, and if there are going to be an impact on their current lifestyle. “If you don’t have their support, chances are that there will be pressure to go back to work quicker than anticipated because you didn’t get everyone’s buy-in earlier,” warns Dhawan.
Plan your comeback
If you intend to go back to work after your sabbatical, have a conversation with your employer. Focus on how the sabbatical will help you grow and benefit the company as well. Pitching it as an opportunity to understand international markets, improve your skill set, or help the company save costs, could help you land their support. A number of companies are happy to encourage their employees with paid or unpaid leave as they go on sabbaticals to improve their health, look after their family, improve their skill set or pursue a dream project. Give your employer plenty of notice and line up the ducks to ensure a smooth handover, so they are not left scrambling when you take a break. Even on sabbatical, it is a good idea to continue networking so it is easier to touch base with contacts when you are ready to jump back into the game. Go over all the skills you may have gained during the sabbatical and add them to your resume. Whether it was doing an online course, generating an alternative income or going back to college, use that experience to boost your resume.
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