How to plan your finances if you are taking a sabbatical


Working as a mid-level engineer, Vikas believes that the lack of a postgraduate qualification from a premier institute is standing in the way of his career progression. To correct this, he has decided to do an MBA program. While Vikas is single, he is servicing a housing loan, invests in mutual funds through SIPs, sends his parents a monthly allowance and takes care of his own expenses. For the past five years, his investments have primarily been in retirement and tax saving instruments. He also has a small corpus in equity funds that he created through SIPs. Vikas wants to know what all must he consider while planning a break from work to study further? What are the key concerns that he must address?

Vikas’s main concern, at this point, should be about funding his education, generating income and managing his expenses. An education loan will be the best way to fund his education instead of dipping into his savings. It will free his investments to generate an income for him in the time that he is not working. He should look for a loan that also covers living expenses.

Vikas will need an income to service the home loan and take care of expenses that the education loan will not cover. His accumulated corpus should be moved out of equity (risky investments) into investments that will give him a steady, defined level of income such as fixed deposits and monthly income plans. He can also look to rent out the house and use the money to meet the EMI obligations to some extent.

Vikas should pay off any credit card outstanding or personal loans so that they don’t drain his limited income. He must condition himself to live on a lower income and can also consider part-time employment, if his study schedule allows it. A little bit of planning and financial discipline should see him through this phase comfortably.