It has become quite common for people to take a sabbatical to travel the world or to simply take a break from work, for pleasure or studies. Irrespective of the reason, one needs to have enough financial muscle to carry them through the sabbatical.
“While it’s refreshing to take a break from work to pursue other interests, you need to ensure that you have prepared yourself financially so that you can continue meeting your financial obligations. A sabbatical must be planned well in advance to ensure that once there’s no new income you are still able to meet your expenses. In some instances, it may be necessary to make lifestyle adjustments to make the sabbatical possible,” says Eunice Sibiya, Head of Consumer Education at FNB.
Sibiya shares key factors to consider when preparing for a sabbatical:
Living expenses: firstly, you need to ensure that you have saved enough money to cover your living expenses for the duration of your break. This will require great financial discipline to avoid running out of savings before your break ends.
Budget: during this critical time, you will need to have a solid budget plan that will help you track your spending. Without a detailed budget plan, you can easily spend more than you should and this can potentially cause you to run out of your savings quickly.
Debt commitments: before making the final decision of going on a break, you need to consider medium to long-term financial commitments such as vehicle finance and bond repayments. It’s important to ensure that these financial commitments will be met for the full duration of your break to avoid compromising your credit profile.
“The risk with not meeting these obligations is that you may potentially lose your assets or valuables if you fall behind on payments, furthermore, this will also have an impact on your credit score,” says Sibiya.
Emergency fund: this is designed to help cover shortfalls when an unexpected expense occurs such as a medical emergency or a car breaking down. Such expenses can have a huge impact on your finances, therefore it is advisable to create a buffer that will cover unexpected expenses. This will help you avoid tapping into debt should an emergency arise.
“A sabbatical should be planned in advance so that one can save enough money to cover the full duration of the break. Therefore, if you wish to go on a sabbatical you will have to plan diligently to ensure that the break has minimal impact on your finances,” concludes Sibiya.
Issued by FNB