Top Tips for How To Start Planning Your Sabbatical

Did you know I took a 60-day leave of absence from work in 2022? As a former HR professional, taking a sabbatical (or leave of absence, I use them synonymously) is becoming more common. Speaking from personal experience, a sabbatical can have an incredible, life-changing impact on your personal and professional development.

Do you dream of taking a break from work? Trust me, it’s more feasible than it feels! Don’t let all-or-nothing thinking prevent you from a life-changing experience.

Today I’m excited to share a guest post from Middleton & Company as they go through the top tips for how to start planning your sabbatical. Whether you are in the dreaming phase or starting to plan, these tips will help you plan for a successful sabbatical!

Introducing Taylor & Kailie From Middleton & Company

Taylor & Kailie are both equal parts self-driven business owners and toddler moms. They own and run Middleton & Company.  And they’ve grown their business to support their love for time spent with family and travel.

Before building Middleton & Company into what it is today, they both took time away earlier in their careers to live abroad.

Looking back, they agree that their time away was one of their most memorable and life-changing experiences! The time they spent disconnected from their “real lives” helped them get to know themselves better, get clearer on their priorities, feed their exploring minds, and refocus their careers on the things that matter most to them.

They now help other driven professionals take a much-needed career break to travel the world and reconnect to what makes them feel alive. What’s their secret weapon? Smart financial planning! 

As Certified Financial Planner™ practitioners, they use their expertise to help their clients use personal finances as a tool to build out their travel-focused dreams! 

They are sharing important financial tips you won’t want to miss if you’re ready to make your sabbatical a reality. 

Know your WHY

Financial planning isn’t just about the numbers. To be able to budget and save strategically for your sabbatical, you need to get clear on a few things first.

The first thing to get clear on is WHY you want to take a sabbatical.

Don’t skip this step. It really lays the foundation of your planning. 

Why is it important to know your why? Because a plan is only as clear as the goal that you’re working towards. The how (i.e. the tools and strategies you use) will be unique to the experience you want to have. There’s no one-size-fits-all sabbatical. You need to know what you’re working towards to guide how to plan for it.

To start, you need to know the deeper reason behind your desire for a career break. 

Before going any further, ask yourself:

• What pain point are you hoping your time away will alleviate?
• Imagine yourself at the end of your sabbatical, what do you hope you did/accomplished during your time off?
• What version of yourself do you want to be at the end of your sabbatical?

Picture your typical day while away

Now that you know why you want to go, picture what your day will look like while you’re gone: 

• Which part of the world are you in?
• Where do you wake up?
• Where do you go to get food? What type of food do you eat? Do you cook or eat out?
• Which means of transportation do you use?
• What is the pace of your day?
• … Add any details that pop up in your head!

Get as vivid as you can with this vision. Use all 5 of your senses to build out your picture. Consider the mental and emotional state you want to feel. Think about who you are with. Think about how you are spending your time. 

Knowing what a typical sabbatical day looks and feels like helps give us a general idea of how much it will cost to live that lifestyle. And for how long.

This can help you build out a weekly or monthly general budget and proposed timeline for your trip.  

The idea here is not to get too fixated on the dollars and cents (since we all know that travel requires a little bit of flexibility). With a general budget, you get a reasonable savings goal, and at the same time, it gives you a way to gauge your spending while you’re abroad. 

Rather than keeping to a strict per diem (which we all agree is no fun), you can instead focus on whether you’re over or under that general number. It can help you decide on the fly if you want to splurge a little, or if you maybe want to scale back for a bit to make your trip last longer.

>> You can now download our free Sabbatical Budget Planning workbook. <<

Save money for when you get back

Not planning for your return is a very common mistake. We get so excited about leaving that we forget that at some point we will come back.

A lot of people save “just enough” to spend during their time abroad and to make sure they can buy the tickets for their return flights home. They can overlook the fact that they’ll also need some money set aside for when they land and adjust back to “real life.” 

In fact, your sabbatical doesn’t end when you return. The end of the sabbatical is actually when you return to work and start earning an income again. So, some questions to consider: 

• Are you planning on working right away or do you want to take a few weeks/months to get back into your routine?
• Will you already have a job lined up or will you need to start applying for new jobs?
• Will you have extra expenses that will come with moving back? (deposit for new rent or down payment for a new home, buying a new car, new professional wardrobe, stocking your kitchen with the everyday staples, etc.) 

We get it, it’s less exciting to plan for the “after trip,” but believe us, it gives you more peace of mind both during your trip and your return home to know you’ve got a security blanket waiting for you!

Give your future self a gift, and include 1 to 3 months of living expenses for your return home in your saving plan.

View your sabbatical goal within the larger context

We like to see sabbaticals as an intentional part of your life and your career. It takes time to plan for a year (or two!) when you won’t earn any income.

But true financial planning is about looking at all your goals and dreams from a big-picture perspective and figuring out how to prioritize and strategize each goal in relation to all the others.

Knowing that you want to take a sabbatical over the next 5 years can help make some of your other life decisions a bit easier too. 

For example:

• Do you really want to buy a house right now? Maybe it’s best to wait for your return, or maybe it will be a good source of income while you’re away?
• What about that brand-new TV with amazing surround sound you’ve been considering buying? Should you buy it now, or wait? What happens to it when you’re gone?
• So you want a dog? What will you do with the pup while you’re gone – bring it with, or will you need to find a temporary foster parent?

What about saving for your kid’s college fund or retirement? How can you do that and save for your sabbatical? Visualizing your different short-term, mid-term, and long-term goals on a timeline can help you decide which savings and investment accounts you’re adding to and drawing from at different stages in life so that each piece has its place in the bigger puzzle. 

The good news is that there really are no right or wrong answers here. There are just trade offs. Our job as financial planners is to help you identify which actions have the biggest impact and to help you make informed decisions along the way. 

Don’t forget about your annual savings & strategies

Your sabbatical goal doesn’t generally happen in a vacuum. You typically have other competing goals you’re working towards simultaneously. 

You don’t have to pause all your financial strategies just because you’re away. In fact, it might be the time to really implement some tax-efficient saving strategies that aren’t available to you in your “normal life” due to income phaseouts or eligibility requirements.

So it might make sense to set aside extra savings that you can use to implement your annual savings/strategies while you’re on sabbatical. 

For example, do you plan on working at all during the year that you’ll be away? If so, will you be eligible to make a Roth contribution?

Or if you’re not working and you have a really low-income year, maybe you might want to consider pulling income forward through Roth conversions or exercising or selling some vested RSUs and paying the associated taxes out of your savings.

The strategies above are really great tax-efficient ways that help the future you, while you’re also taking care of the present you.

It’s also important to be intentional about the timing of your sabbatical. Do you want your year-off to be in line with the calendar year (January through December), or maybe it’s worth considering a rolling year to take advantage of two tax years. There are advantages and disadvantages to both, so understanding the impact that changes to employee benefits, bonuses and profit-sharing, bridging tax years and higher vs. lower income may have on your long-term plan could help you be really strategic about when you decide to leave (or come back).

Choose the right travel savings accounts

Some saving accounts have specific distribution rules and penalties to be aware of before you set out on your savings plan.

Although general financial planning advice would say that it’s best to max out your 401(k) first to take advantage of the tax-deferred growth, this advice assumes that you will follow the traditional career path of working, retiring, and then withdrawing from your investment accounts.

If your plan is to deviate in any way from this traditional career path, your savings strategy may (and probably should) look a bit different too.

Why? Well, to start, a 401(k) or Traditional IRA has a 10% early withdrawal penalty if you take distributions before age 59 ½. Some have provisions about age 55 and separation from service, but even then, you have to make sure you meet all the eligibility requirements to avoid penalty. Even a Roth IRA has a 5-year clock that you have to be aware of! 

So when we help clients build out a savings strategy, we look at all the account types available to them to come up with a year-over-year accumulation and decumulation plan. 

Some of our favorite account types to explore as savings options when you are planning to take a sabbatical include: 

• Employer Stock Purchase Plans (ESPPs)
• Equity compensation plans (RSUS, ISOs, etc)
• Taxable Investment Accounts (Brokerage Accounts)
• Deferred Compensation Plans (457 accounts)
• And arguably even Health Savings Accounts (HSAs)

Each individual savings strategy should be built around your specific tax and employment situation. There is no one recipe that will work for everyone.

As financial planners, this is where we spend a good portion of time working with our clients during the planning phase of their sabbatical. We try to build flexibility and diversification into the plan, not only in terms of underlying investments, but also account tax treatment.

Set up access to your money while you’re away

Have you ever gone to an ATM in a foreign country and had your card spit back out at you because you forgot to set a travel notice? Yeah, us too. We’ve all been there.

Access to your savings while abroad, especially if you plan to be away for an extended period, is super important and oftentimes overlooked as part of the pre-planning. 

Some items that we include in our sabbatical planning checklist are: 

• Consider the flow of your accounts. How will you get money out, and from which accounts? Make sure you have links set up between the accounts you plan to use before you leave so that you have flexibility to move funds around while abroad.
• You may also want to lock certain accounts and/or freeze your credit so that no fraudulent activity can happen while you’re disconnected.
• Add travel notices to all the cards you plan to use, and add alert notifications to make sure you know if your card gets compromised.
• Consider whether you want to grant someone you trust with Power of Attorney authority on some or all of your accounts. 
• Make sure you have a physical mailing address somewhere in the US. Sometimes accounts can become restricted if mail is returned as undeliverable. So make sure you have a plan in place so that your mail can be delivered and opened. Plus, you don’t want to miss a jury summons by accident either! 
• Research international fees on your credit cards or ATM cards. You might find out that your current bank isn’t offering the best rate for international travel – a 3% fee for international transactions might not seem like a lot for a two-week vacation but imagine that 3% on every transaction for a full year! 

Consider different forms of currency

Cash isn’t the only way you can pay for expenses abroad.

Credit card points, hotel points, airline miles, rewards, trading services, or volunteering in exchange for food and board are all different ways that you can cover your costs while away. 

Get creative! Need a place to start? Check out our Travel Hacking Guide here.

Plan for your legacy

We know, legacy planning is generally not top of mind when you’re planning the trip of your lifetime, but it is a  big part of the planning process. 

As you’re looking at all the different pieces that make up your current financial picture, use it as an opportunity to practice thinking about what you would leave behind, and what would you want to have happen with it. 

What do you have that makes up your net worth? What financial accounts do you have, what property do you own, what are some of your high-value belongings? Take the time to inventory your stuff. 

Don’t have beneficiary designations on your accounts? Maybe it’s time to add them. 

Don’t have a will or an advanced healthcare directive? Maybe it’s time to get those documents drafted. 

Make sure you have all the important documents signed, dated, and notarized if necessary so that you can board that plane with peace of mind.

We know finances can be scary and a bit off-putting – people tell us all the time. But at Middleton & Company, we view money as a tool to help you achieve what you want out of life. Understanding how you earn it, where it’s going, and what you can do to control it gives you power and choice. It doesn’t have to be so scary. In fact, it can be quite exciting! It’s time to make your financial plan work toward your dream life. 

Thank you to Taylor and Kailie for these top tips for how to start planning your sabbatical! If you have questions or need help as you dream or plan for a sabbatical, please reach out to Middleton & Company.

To make your dream a reality, check out my guide on how to request your sabbatical! Curious WHY you would want to take a sabbatical? I answer this question here.

I’d love to hear what questions you have about sabbatical planning. Or, if you have taken a sabbatical, what are your tops tips for those thinking of taking one?

Tell me in the comments!

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