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 for taking a sabbatical.
Next, decide how long you want to take off. What you do and how long you take to do it will determine the budget you need to free up.
A sabbatical can be a great way of investing in yourself, but only if you make a realistic financial plan first. If you’re wondering whether you can afford a sabbatical, arrange a free, no-strings-attached video meeting with one of our advisers. During this interactive meeting, you and an adviser from the Preferred Banking team will take a close look at your financial situation.
Tip 2: Check your employment contract, CLA and pension
If you’re in paid employment, check what your employment contract or collective labour agreement (CLA) says about your entitlement 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 stops paying pension contributions, you may run the risk of a pension shortfall. To avoid that, you can top up your pension with a tax-friendly 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. You might have already built up some capital from a gift or inheritance, which you can use for your sabbatical.
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.
- Shortfall during sabbatical: € 10,000.
- 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 |
Nadia has a €10,000 shortfall for her sabbatical. She saves €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’re going abroad for an extended period, check your insurance (e.g. health insurance and travel insurance). Get in touch with your health insurance company and ask whether it would be better to keep your health insurance in the Netherlands or take out international health insurance. And decide whether it’s a good idea to extend your travel insurance to include cover for medical costs and worldwide cover.
If you’re travelling abroad for more than 8 months, remember to notify the local council of your departure to avoid incurring a fine. Your departure may affect things like allowances, benefits and your state pension accrual. If your sabbatical results in a pension shortfall, you can always top up your pension yourself.
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?’
Tip 7: Become a digital nomad
If you’re a freelancer and don’t have a big enough buffer to take a sabbatical, or there are other reasons why you can’t go travelling for long, why not work online and become a digital nomad? You simply carry on working while you’re abroad. Remote working from abroad may affect your registration with the Dutch Chamber of Commerce, the local council and the Dutch Tax and Customs Administration, so make sure you look into this carefully.
