Friday, January 29, 2010

Enhancing Skills

Have a break and enhance your skills

At the height of last year’s global recession, several executives chose to go back to schools — B-schools, rather — to use the situation to hone their professional skills.

For some, the sabbatical was a forced one because of job losses. But irrespective of the business cycle, taking a gap year for studies would boost your skill sets, and given the options available today, it can be achieved without straining your finances.

Here are a few points you need to bear in mind while devising such a plan.

Take Stock of your current financial position :

Weigh the pay-back

The extent of a savings cushion that you would require would depend on what you do after you finish your course. Do you plan to start out on your own or look for a job? च्In case of the former, the gestation period could be longer. Therefore, ascertain if the cost-benefit analysis झ् expenses incurred vis-ीं-vis future earnings झ् are in you favour,छ explains financial planner Prerana Salaskar-Apte.

If you are planning to pursue studies abroad, the need for this analysis becomes all the more critical.

Evaluate loan prospects

If you plan to enrol for sought-after courses like MBA or law, you may not find it difficult to obtain an education loan. However, this may not be the case if you already have an existing home loan to service.

Under such circumstances, you could look for banks that would agree to take a pro-rata or a second charge on the house as an asset. Alternatively, you could look at borrowing against gold jewellery or investments. However, remember that the repayment tenure for these short-term loans generally does not exceed 12 months.

Get a health cover

For many, a break in service also results in a break in health cover. Buying health insurance for yourself and your family during this period deserves top priority. The group health cover taken by your employer will cease to exist once you quit, which means that you need to have an independent cover in place.

Emergency fund

While a health policy will take care of any health-related emergencies, you need to set aside a corpus for any other exigencies that may arise. A contingency fund should be capable of covering your expenses for at least six months. This amount can be parked in fixed deposits or liquid funds. The corpus could also come in handy if your job prospects get affected due to adverse economic climate like the one witnessed in 2008.

Cover recurring costs

Unexpected expenses apart, you need to make provisions for regular expenses too, which might have to be borne by your family in the absence of your contribution. To avoid such a situation, you could look at arranging for paying your insurance premium or monthly rent before embarking on your study drive.

Provide for loan instalments

If you have availed of a loan, particularly a long-term one like a housing loan, it would call for a careful balancing act. Unless you are sitting on a huge surplus or have the comfort of other sources of income that could go towards the EMIs, it is better to defer your plans to study further. If you have always had definite plans to study, you should avoid taking loans.

Also, if you have dependents, it is advisable to buy term insurance or home loan cover to ensure that they are not left with a long-term liability to discharge in the event of your demise.

Ideally, you should plan a couple of years in advance before you decide to take a study break. This will ensure sufficient time to make requisite provisions by cutting back on expenses to save for outflows during the course of your studies.

Source ET
Author : Preeti Kulkarni

Bought to you by

HRI Foundation
303 Motherland Building
3rd Main 3rd Cross

Read the Previous Posts