If you've been in practice and "in production" for ten years or more and you haven't taken a sabbatical, you might want to add one to your long range plans. Today's reader question can help you get started.
My husband and I want to take a sabbatical, to show our sons parts of the world they've never seen, and to visit friends overseas. Since he's self-employed, we're not sure what all we need to do to get ready to go. What do you suggest?
From the standpoint of financial planning, you can think of your sabbatical like a very long vacation with one excetion that I'll get to shortly.
First, set a date, or at least pick a month and year. Next, think about how long you'll be gone, in weeks. Then, decide where you're going.
Next you can budget for the four basic expenses including:
- Travel expense (air, ship, ground transport, car rental
- Room: hotels or other lodging, including gifts to people who host you
- Food & dining
- Entertainment: things that make the sabbatical fun and interesting for everyone in your family
To estimate the cost, you can use sites like TripAdvisor or information provided by your travel agent.
For self-employed doctors, a sabbatical may come with one exceptional expense: the cost of lost earnings and office overhead during your absence. While you won't pay this "expense" directly, it will show up sooner or later in the form of reduced receivables that ultimately reduce your take home pay. This means you'll need to set aside money to cover your cost of living once you return from your trip. For example, if you live on $10,000 per month (after tax) and you're planning a 10-week sabbatical, you should set aside at least $25,000 to cover lost earnings, and maybe more if you have substantial overhead.
Don't put your vacation at risk. Money that you intend to use in the next five years, including your Vacation Fund and your Sabbatical Fund, belongs some place safe like a bank or credit union checking or high-yield savings account.