Managing your finances on a sabbatical year

Managing your finances on a sabbatical year

Bianca Havas, whose family moved to Granada, Spain for a year in 2013, discusses how she and her family managed their money during their time there.

My family and I recently fulfilled a long-held dream to spend a year in Spain. It meant packing up our established life in Australia and fitting all the pieces of the puzzle together to create a new life in Granada, Spain.

One of the areas where we had to be very organised was managing our finances. My husband was able to take long-service leave at half pay for almost nine months, then he worked remotely from Spain. I took a year’s leave without pay and we rented out our Sydney home – that money covered our mortgage as well as our rent in Granada. Rent in Spain is very affordable compared to Sydney.

Since we were earning money in Australia but living and spending it in Spain, we had to find the best way to transfer our cash. We knew that international bank transfers were costly and time-consuming, so we researched alternatives. Our solution was a credit card and separate debit card that incurred no international currency conversion or transaction fees. We used the credit card for most of our purchases while the debit card allowed us to withdraw any amount from any ATM machine without incurring fees. We paid our credit card bill in full on a monthly basis to avoid paying interest and we ensured the separate debit account always had sufficient funds to be able to withdraw cash whenever we needed it.

There were a few transactions in Spain that required us to have a local Spanish bank account – such as direct debit payments for the children’s school costs and lunches – so we opened a local bank account for those purposes. As foreigners, we had to jump through a few additional hoops to open the account, but once we accomplished that we deposited one large sum of money into the account and progressively used the funds throughout the year.

Another interesting facet of our financial preparations was that we had to pay tax on the rental income of our Sydney home. Luckily, because our annual income was less than half of what it usually was, the tax on the rent was nominal.

One obvious financial element we didn’t take into account was the fluctuating value of the Australian dollar during our time away. We had based our entire budget on the value of the dollar at the time of departure, which happened to be unprecedentedly strong. Halfway through the year, the dollar dropped in value by 15% and subsequently gouged a hole in our budget. I recommend doing some contingency budgeting, which we unfortunately hadn’t done.