FOOL'S EYE VIEW
How To Finance A Sabbatical

By Jane Mack (TMFJane)
September 7, 2004

I'm just about to embark on an exercise in practising what I preach - a rather interesting prospect considering I don't always pay attention to myself!

My husband will be starting a six-month sabbatical next week - unpaid - so we're going to have to tighten our belts a bit so that we can get through this period without everything going pear-shaped financially.

It all started at the beginning of the year when he found himself a little overwhelmed with caring for his elderly parents while trying to hold down a full-time job. I wrote about The Real Cost of Caring For Elderly Parents in January when I said:

"My husband's dilemma is that he could do everything a professional carer could and, indeed, he would like to. After all, he's been doing it for the last month and, as he points out, of all the carers they could have traipsing through their door every day, he's the one who would care the most - so why should his parents have to pay a stranger to do it?"

We got in a professional carer, which helped a little, but, sadly, in July my mother-in-law died and my husband has spent the last few weeks regretting that he didn't give up work to spend more time with his mum when he had the chance. He doesn't want to make the same mistake with his father and, besides, 2004 has been so stressful and upsetting for him that, frankly, he badly needs time out to recover.

Fortunately, his employers sympathise, hence the permission to take a sabbatical.

But, considering this decision was only taken on Sunday night (see how quickly your financial circumstances can change?), I've not yet had to chance to work out the firm details of how we're going to handle the money management side so excuse me if I think aloud for a moment:

Stop overpaying the mortgage

For the last 18 months or so we've been overpaying our flexible mortgage to get shot of it more quickly. We could reduce our monthly mortgage payment to its standard level on the basis that we can always increase the payments again at a later date.

An added bonus is that, because of the previous overpayments, we're 'in credit' with the mortgage lender so we have the option of being able to take a payment holiday for the full six months if things get really difficult financially.

Stop saving in cash ISA

At the moment I save the maximum amount permitted into a Mini Cash ISA although I do it by spreading it out over the year (£250 a month). I could stop making those payments for the time being and if, by some good fortune, I find myself in a position to top it up to the full £3,000 before the end of the financial year, I could take that course of action.

In fact, I may even borrow the necessary amount on a 0% credit card to do it because from April 2006, the Chancellor, Gordon Brown is reducing the annual contribution allowance to Cash ISAs to a meagre £1,000. If I don't take advantage of the facility to lock away the current annual £3,000 allowance while I still can, it'll reduce the overall amount I can save tax-free.

As it happens, between us, my husband and I have the equivalent of his annual salary in our Cash ISAs so if we need to raid them, we can. However, once raided, they can't be topped up again because they're from past financial years so this option will be taken only if strictly necessary.

I also contribute the maximum permitted into a Mini Shares ISA but will definitely continue with this payment as it is part of our retirement fund and, to my mind, those savings are untouchable unless the world falls apart.

Stop saving into husband's pension

At the moment my husband contributes to a stakeholder pension fund and, as a temporary measure we could stop those payments and resume them in the future. He's a standard rate taxpayer and gets no contributions from his employers so stopping for six months won't be a huge loss and, besides, we should be able to top it up later. I won't be cutting back on my own pension savings though because it's too good a deal for me to miss out on as I'm a higher rate taxpayer and also benefit from good contributions from my employer. (Thanks, TMF!)

Raid other savings

So far, the potential savings on our outgoings outlined above amount to £525 a month - a decent enough sum but it's not quite enough. So here comes our saving grace! We're lucky (or sensible enough) to have accumulated an emergency fund in an ordinary savings account which amounts to about five months worth of my husband's salary. Hurrah! When we were discussing the prospect of him asking his boss for an unpaid sabbatical he asked how we would be able to afford it. "What on earth do you think our emergency savings are for?" I said.

The fact is, it appears that I practise what I preach more than I thought and we are, therefore, in a position to make this sabbatical work without it having too much of an impact on our finances. In my articles I tend to bang on (rather too much?) about how important it is to save for the future. Get out of debt, save into an emergency fund, save into ISAs and pensions over the long term so you have a decent retirement fund, and get rid of the mortgage as soon as possible. Our future 'downshifting' plans have come a little early albeit on a temporary basis but, amazingly, we have the means to do it. (If I sound mildly surprised, it's because I am!)

During our discussion the other day, my husband asked what he would do with himself for six months. Apart from spending time with his father he wondered if he would otherwise be twiddling his thumbs and getting bored.

So I reminded him that our sitting room desperately needs redecorating, as does our bathroom. He also loves cooking but rarely has the time to experiment so I told him I would be looking forward to some interesting gourmet suppers (within our budget, of course). And, I haven't had the chance to tell him yet but the council rang this morning to say that the allotment we applied for three months ago will be available from the end of September....

Get yourself an Emergency Fund; an ISA, a Pension and see our 25 Quick Money Saving Tips.