Can you plan for a sabbatical with the help of MFs?
Every once in a while, we think of taking a long leave or a sabbatical for one year or so and then resume work. Many even may have imagined what they would do in their sabbatical. But then to fulfil current needs you shrug off these thoughts and get back to work. But have you ever thought that you can plan for a sabbatical with the help of mutual funds? Let’s get into it.
Before even understanding whether MFs can help in taking a sabbatical, let us understand what does sabbatical mean? Sabbatical is a period of leave (paid or unpaid) granted to an employee for study or travel, traditionally one year for every seven years worked. However, in our case sabbatical also means that you also may end giving up job for the period of one year and go for a vacation and rejoin the same company and post or take up a new job altogether.
So, let’s assume that you wish to take leave for the period of one year by giving up your current job after 5 years. This means that you won’t be getting any income for the period of one year. So, at first, you need to consider all your expenses required for the period of one year which is our case would be Rs. 3.6 lakh for one year or Rs. 30,000 per month inflation adjusted. Also, in this period of one year, you wish to go for a world tour which would cost you around Rs. 10 lakh inflation adjusted. As you have given up your job also consider 6 months of expenses till you resume your current job or take up a new job, which comes around Rs. 1.8 lakh inflation adjusted. To sum it up after 5 years to take a sabbatical you would need Rs. 15.4 lakh.
Now even if we assume that you are investing in large-cap equity funds whose average CAGR (Compounded Annual Growth Rate) is 13.32 per cent and assuming it will continue to be constant for the next 5 years. So, to achieve Rs. 15.4 lakh in 5 years you need to do SIP (Systematic Investment Plan) of Rs. 18,400 per month for the next 5 years or on the contrary if you have Rs. 8.24 lakh lumpsum amount then you can invest the same for the period of 5 years to achieve Rs. 15.4 lakh.