Here’s how to plan your sabbatical

Danica Nelson always wished she could take a “gap year” right out of college, but it wasn’t financially feasible at the time. So when she started making enough money to live comfortably, she started planning a sabbatical, or what she calls her “freedom leave.”

Nelson, a 31-year-old senior director of product marketing at Shopify and a freelance content creator in Toronto, was also tired and exhausted from climbing the career ladder while simultaneously pursuing a demanding scramble as a podcast host.

“I decided it was time to put my own needs, desires and sanity first. I decided to live with urgency because if not now, then when?” she says.

Nelson, who was then working as a senior director of marketing communications at Telus, took a career break in October 2019 to travel to Thailand, Vietnam, Malaysia, Singapore, Indonesia and the Philippines. His trip was cut short by a month in March 2020 due to growing concerns over the pandemic.

“I spent my time exploring, dining, building my international network and interviewing digital nomads and remote workers who were able to earn a living working from a computer and criss-crossing countries every month,” said said Nelson, who was, and still is, interested in becoming a part-time digital nomad wintering abroad.

Sabbaticals, known as a break or change from routine work, are no longer considered just for academics. Professionals in various fields are now choosing to take extended leaves for personal reasons.

Sabbaticals are becoming so common that in early March, popular professional networking site LinkedIn announced that it was rolling out a career hiatus option for the experience section so members can provide context for any authorized leaves. Drop-down options for the section include Gap Year, Health and Wellness, Pursuing Personal Goals and more.

While some employers now offer sabbaticals as part of their benefits package, many sabbaticals are not employer funded and sometimes employees do not have a job waiting for them when their sabbatical ends. .

This means that those interested in sabbaticals are left with a do-it-yourself planning approach. While the fun part is figuring out what to do with all that extra free time, experts warn against taking the leap before establishing some sort of financial safety net.

“Taking a sabbatical and ending up in a financially horrible place is counterproductive,” said Cindy Marques, co-founder and CEO of MakeCents, a financial coaching firm in Toronto.

“Any kind of growth you’ve made mentally is eradicated once you get stressed out and realize you’re broke or in debt because your decision wasn’t thought through.”

For Marques customers, who are mostly millennials, this financial planning sometimes means reallocating money they once thought was going to be invested in buying a home.

Since many young people now feel left out of the housing market, they are instead thinking about what they can do with some of their savings, she said.

“It usually ends up being something like ‘that dream I had of traveling to Europe for six months is now a reality now that I’m not buying a house,'” she said.

For clients who strongly prioritize travel or anything else that would require time off, she supports switching plans, but advises clients to also use those savings to get a head start on their retirement.

Vanessa Bowen, a chartered professional accountant and financial coach at Mint Worthy Co. Inc. in Mississauga, said those interested in taking a sabbatical should figure out exactly how much money they would need to live on each month and calculate the additional months s they don’t. do not have a scheduled job when their scheduled break is over.

“When I say find out how much you need, I mean to the penny,” Bowen added.

One way to do this for those who don’t yet have a budget is to pull the last three to six months from your bank statements and file each transaction on a spreadsheet or piece of paper. Whenever you see you are at a restaurant, for example, place it in a restaurant category and similarly for other categories, such as rent, mortgage, internet, cell phone, shopping, l groceries, etc.

These calculations should also include the amount that serves as your minimum debt each month, irregular expenses like car maintenance and gifts, and your monthly savings goals for retirement.

“If you’re going to take a sabbatical, that doesn’t mean you’re neglecting long-term or retirement planning,” Bowen advised.

Once you’ve totaled three to six months of spending, divide that number by the number of months you’ve tracked so you know, on average, how much you spend per month and in which categories, she said.

Next, it’s time to decide whether you want to spend your sabbatical continuing your lifestyle or changing it temporarily so you can spend less money.

For those traveling or living elsewhere on their sabbatical, it may be harder to plan expenses until you’re there, so you’ll want to create even more of a buffer, Bowen said.

Once you figure out how much money you need each month, be sure to stick to the plan during your sabbatical, she added.

“It’s so easy to say ‘I have three months’, but if the first month you spend $2,000 more than your budget, then you don’t have three months. Now you have two months,” Bowen said.

Nelson prepared financially for her sabbatical by depositing $1,000 a month into a dedicated savings account a year and a half before she left.

“I already live well below my means, so I didn’t have to make a lot of financial sacrifices to make this trip a reality. I also don’t have any debt apart from my mortgage, so I didn’t feel guilty about using the money to travel,” she said.

To cash in on even more money, however, she rented out her one-bedroom condo for $2,000 a month to cover the mortgage and moved into her mother’s house in Brampton four months before leaving.

When Nelson returned, she went back to live with her mother for eight months to restore her savings account while her tenant continued to rent her place.

“Overall, I estimate I spent around $16,000 Canadian on the trip in total, including flights, accommodation, transportation, food and shopping. I regret nothing. I would and I will do it again when the time is right,” she said.

Nelson said the sabbatical provided many benefits, such as rest and rejuvenation, as well as the time and space to assess what was working and not working in his life.

“This trip was truly a highlight for me and I couldn’t be prouder of myself for making it happen, especially since just days before I returned home the pandemic started and I didn’t couldn’t leave the country for another two years.”

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