Top 6 tips for taking a sabbatical
Whether you want to go travelling, spend more time with family and friends or go back to university, there are plenty of reasons why you might want to take some time off. But how do you go about arranging a sabbatical? And how will it affect your finances? We’ll give you some valuable pointers right here.
Tip 1: Make a clear plan
Without wanting to state the obvious, you need to start with a clear plan. What do you want to do with your sabbatical? Maybe you want to finally go on that round-the-world trip with your partner, take some time out to work on your personal development or spend some more time with your family? There are plenty of reasons to take a sabbatical, so make sure you’re clear on what they are. Next, decide how long you want to take. What you do and how long you take to do it will determine the budget you need to free up.
Tip 2: Check your employment contract, CLA and pension
If you’re in paid employment, check what your employment contract or collective labour agreement says about whether you are entitled to a sabbatical and whether any part of it is paid.
Also look into how it will affect your pension contributions, as they might be suspended for the duration of your sabbatical.
If your employer won’t continue to pay your pension contributions and you want to avoid a pension shortfall, a bank savings account (annuity) is a tax-efficient way of topping up your pension. To find out more about this, read Topping up your pension with an annuity.
Tip 3: Set money aside ahead of time
How much money do you need to cover the time you’re away? Start with how much you think you need for your sabbatical depending on what you’ll be doing, see what you’ve already built up and think about how much more you can set aside each month. The calculation example below will give you an idea.
Example: Nadia is 33 and works at a marketing agency
Nadia wants to take 6-month sabbatical. She wants to go on a trip around the world for five months and then work on her personal development by taking a course from home for a further month. Nadia expects she’ll need €20,000 (including living expenses).
Her employer allows her to take unpaid leave and her pension contributions will be suspended during her sabbatical. Nadia wants to keep making payments towards her pension, so she doesn’t end up with a shortfall in the future.
Nadia's financial picture
- Gross income: € 100,000 per year
- Pension contributions during employment: € 20.000 per year.
- During sabbatical: € 10,000 needed to cover shortfall.
- Total savings: € 22,000
- Nadia saves every month: € 1,000
- Monthly mortgage on her home: € 1,500 per month
- Nadia can let her home out for: € 2,000 per month
| Costs during sabbatical | Expenses |
|---|---|
| Travel, course and living expenses | € 20,000 |
| Pension shortfall: deposit to a bank savings account | € 10,000 |
| Recurring fixed costs: € 500 per month x 6 months | € 3,000 |
| Net mortgage payment: € 1,500 per month x 6 months | € 9,000 |
| Total costs | € 42,000 |
| Capital to live on during sabbatical | Income |
|---|---|
| Savings | € 22,000 |
| Rental income: € 2,000 per month x 5 months | € 10,000 |
| Total assets | € 32,000 |
Her total deficit is € 10,000 (€ 42,000 - € 32,000). Nadia can save € 1,000 per month. This means that she only needs to save for just under a year (€ 10,000/€ 1,000 = 10 months) before she can take her sabbatical.
Tip 4: Check your insurance and entitlements
If you are going abroad for an extended period, check your insurance (e.g. health insurance and travel insurance). It’s also worth checking whether you need to deregister with your local council during this period. This may affect things like allowances, benefits and your state pension accrual.
Tip 5: Discuss your plan with your employer in good time
The longer you’ll be away for, the bigger the impact this will have on your employer. So, while you might be entitled to take a sabbatical, it’s still important to talk to your employer about what you’ve got planned. What options are available to you? What obligations will you still have? Your employer will have to work out who will cover for you while you’re away. Of course, it’s also important to plan your return to the company. But remember: a good employer won’t see a sabbatical as just an inconvenience to them. Your time away should provide you with new energy, inspiration and broader experiences, something which your employer can benefit from.
Tip 6: Rent out your own property
Renting out your home while you’re gone is a great way to top up your income or cover your rent or mortgage costs. But do first check whether your local council, homeowners’ association and mortgage provider have rules on this. To find out more, see ‘Renting out your home: what are the legal and tax implications?’.
