How to finance a sabbatical
Going away for a year, not worrying where you will be the next month, the next week or even the next day, or spending a whole year pursuing your favourite hobby. Who hasn’t dreamt of it?
Do any of you remember how carefree and easy it seemed to be when we were younger? Going abroad for an exchange or volunteering didn’t get us all flustered.
But once you become a ‘serious’ member of society, you have a decent job, earn money and perhaps have a family this dream seems to fade away und somehow becomes unachievable.
Do not despair, there are ways. None of them are super easy – except you marry a millionaire or came up with an amazing invention that makes you rich.
What I would like to try is to show you different options, although I have to add, that everything that has to do with taxes, laws etc. is based on my knowledge how it can work in Germany. You might want to do the appropriate research for your own country.
So let’s get started.
There is no law in Germany that grants you a sabbatical. Period. But the rule would not be the rule if there weren’t two exceptions. Government employees and civil servants have the right to take a sabbatical for up to one year. For that there will be a fixed amount of money that is being deducted from their salary which then is being paid out during the time they do not work. The deducted amount may vary depending on what you are willing to give up over a longer period of time.
The same system can be used if you are not working in the public sector and have an agreement / contract with your employer. At my school, for example , it is part of your contract that you have the right to take a sabbatical after seven years working there, You could also choose to ask for an extended unpaid holiday but that has a few pitfalls we will look into.
Before you feel overwhelmed by the possibilities that open up to you, sit down grab a coffee, take a good old piece of paper and a pen or pencil and start crunching numbers.
No. 1 Write down how long you would like to take a time out.
No. 2 Start thinking what you would like to do and where.
No. 3 Find out how much it would roughly cost you to do so. The internet is the ultimate source for that
That gives you a rough estimate of how much money you will need to have at your disposal. Divide it now by the number of days you plan to live in joyful bliss. That is the average of money you very likely need every day.
Next step: take a short trip somewhere, even only for three days, better four and see whether the average you came up with is enough to have some spare money every day for emergencies or bigger events, nicer places to stay or that extra concert in Sidney’s Opera house etc.
I personally have an average of 100€ per day for my trip plus roughly 10% as a backup. Having said that I hike most of the time and sleep in my tent, but more about costs later.
Depending on what you want to do and what your personal financial situation is it might be a stretch to get that money together. Because obviously you will have also have to pay for certain things at home while you are gone.
As much as I think the German tax system is a nightmare, here is a ‘trick’ to play it by being clever. In Germany you can save some extra money by earning less. Sounds strange? But it works and is called tax progression.
As soon as cross a specific before taxes salary, you loose quite a bit to income taxes. So earning less by putting more money into your sabbatical account with your employer, very often does not make such a huge difference in your after taxes salary. On the other hand, the money that you receive during your sabbatical might not be as high as your normal salary and you save taxes.
There is a calculator online, that will help you making that decision.
And talking of taxes… Please do not throw money away by thinking you are not getting a tax refund. More often than not you might get some money back. There is a range of apps out there and I am not going to recommend any of them specifically. They are all doing their job. Have a look what seems easiest for you to use.
Saving up for a sabbatical the way I described does take time. and prices might change quickly. More often going up than the other way round. So make sure you keep an eye on it and be flexible. Either shorten the time, perhaps the destination or your way of traveling, if traveling is part of your sabbatical.
Before I talk about how I am financing mine, let’s have a quick look at a paid sabbatical and an unpaid holiday.
In Germany social security and pensions are a big deal. If you are employed health insurance, and social security contributions are automatically being deducted from your salary. So you do not have to bother.
If you take an unpaid holiday, that does not apply and you need to take care of it yourself, at least the health insurance and that is freakingly expensive. If you opt not to pay into your pension during that time, you will miss out on something called “Beitragszeit” which can cost you quite dearly later on. There is the option to pay voluntary contributions. There is a minimum you have to pay but otherwise you are free to choose the amount. It is worth talking to someone in person at the Deutsche Rentenversicherung. Just ask for an appointment.
But even if your sabbatical is paid via your employer, it might make sense to try to chuck some extra money into their direction. Which is possible if you are over 50. (Disclaimer: if you are under 50, nobody can tell what your pension will look like, you might need to think of other options).
So, how am I going to pay for my year long trip of hiking and traveling the world? To be absolutely honest: not with the money I have saved up through the deductions from my salary. I only started saving 3 years ago and with a very little amount every month. That will only barely cover my running expenses here at home. Obviously, I will not give up my apartment. There is no way I will find anything like that again. I am also not renting it out as such, though my partner, who cannot travel with me for such an extensive amount of time, pays half of it.
I am in the luxury situation, that I have something called ‘passive income’. Over a decade ago I bought an apartment here in Berlin, which I am renting out. With substantial renovations a couple of years ago my tax refund was astronomically high and I was able to save up the money, I very likely will need. Also I decided to let go of a retirement scheme that was more of a scam than a scheme (Riester….) which at least got me some decent extra cash. The flights I booked so far are paid from my normal salary and everything I need for my hikes as well. So with a bit of luck I will be able to make ends meet with the money I am planning on spending.
In conclusion financing your sabbatical takes some time and number crunching, perhaps also giving up one or two luxury items while you are saving up for it. But I am sure once you have that goal in front of you and the giddy feeling of anticipation running through your nervous system, you will be able to do without the extra coffee-to-go, or it might be a good idea to use it for letting go of smoking, and perhaps books about your destinations from the library might be a much better entertainment than binge watching a new series on Netflix / Disney/ WOW and whatever streaming service you are using.
Happy planning!
One Year - Five Continents 