With world travel largely shut down with coronavirus, this is a great time to consider items like financial planning if you have dreams of long-term travel. Financial planning is not very sexy to most people, but the last thing you want to be stressing over when traveling full-time is money. In my book, A Life Redesigned, I look at financial planning in detail, but to help get you thinking about this let me convey these thoughts.
My Father, who was a blue-collar, maintenance worker in a factory retired from full-time work at the age of fifty-two. An amazing feat - especially considering my Mom devoted herself to raising the family and running a daycare in the village where we lived. I never asked them who gave them financial advice, or for that matter who was making their investment decisions, but whoever set them up on their retirement plan did a great job of matching their financial means and their retirement expectations. Three decades later, they were still financially on track when Mom passed shortly after their sixtieth wedding anniversary. With a modest net worth, they had enjoyed an extended retirement, which involved overseas travel, many road trips around the United Kingdom, and much time pursuing gardening and other hobbies. The significance of seeing my parents retire at such an early age, with such limited means, was not lost on me. I grew up trying to embrace the same values they had – work hard, take your opportunities, don’t spend what you don’t have, don’t live beyond your means, and save money for the future. I wanted to achieve what they had done – retire and travel early.
The key to successful long-term travel is a sound financial base, and I recommend you spend considerable time developing a sustainable plan. With this in place, you can set appropriate travel expectations, so you don’t have a nasty surprise halfway down the road when funds start to run out. Even if you do find your spending more than expected, if you have a plan, you will have the tools at hand to identify the problem quickly and adapt accordingly. In our case, it’s accurate to say my wife and I have been examining our finances for a number of years. We considered multiple travel approaches before finally settling on our current travel strategy. Even now, I cannot say with total confidence we’ve selected the ideal method for our family, but you need to start somewhere, or you’ll never start at all!
When planning a period of extended travel, you need to ask yourself questions like, “Do you have sufficient funds in place to support your expected lifestyle?” If you don’t or, worse still, you don’t know, your future is going to be uncertain. It’s incredible to me from the forum boards I participate in that so many people consider going down this path when it’s clear they’re in no financial position to do so! I understand they want to do it. Most of us, I’m sure, would prefer to travel than work. But wanting to travel and being able to do it are two entirely different things. You are putting your family’s future in jeopardy if everything goes pear-shaped!
Housesitting is a Great Way to Save Money on Accommodation
A big part of financial planning is determining how much you will spend on the road. Undeniably, if you can’t anticipate how much your expenditure will be, you won’t know how long your allocated travel funds will last or how much you will need to earn along the way. There are simple ways to come up with a good estimate, and the first item to look at is your current household spending – this should be readily available by examining your banking and credit card history. Download information from each of your financial institutions and combine it on a spreadsheet or run a spending report if you use financial software. Many banks and credit card companies now realize the benefit of this information to their customers and make it readily available in an easy-to-understand format.
Your current household spending says a lot about your family and its spending expectations. If you live frugally, then you’ll likely maintain this style of living while traveling. If you’re happier splashing the cash, then it’s probably safe to assume that this will continue unless you are willing to make significant changes to your habits! Use your current household spending as a baseline and modify it to account for additional expenditures and savings you are likely to realize when traveling. The next place to learn about expenditures is from the experiences of others doing similar travel. There are hundreds of people blogging about their travel experiences, and many discuss their spending. You can examine their spending habits to determine what applies to you. Even if you’re traveling in a different manner, certain aspects of their budget will still be pertinent – for example, the cost of food, attractions, and parks would be similar for a family RVing compared to the same family using Airbnb.
Having considered your projected expenditures, the next thing to examine is the funding side of the puzzle. Estimate how much you think you’ll earn (net) while traveling, subtract your projected expenses, and you’ll know how much you’ll need to use from savings or other travel funds.
The higher your ongoing income is, the better your financial situation will be. It’s never too early to start thinking about the income piece. The sooner you begin, the higher chance you’ll have of optimizing your income streams during your travels. You may need to start planning years ahead if this income is coming from sources other than earnings since some funding schemes take considerable time to put in place. For example, we weren’t happy depending on the stock market’s whims for our investments, so we decided to redirect most of our investments toward real estate. Buying and renting residential properties can provide a solid and predictable income stream, but it is also time-consuming. It took us eight years to build our current rental portfolio. Now, these holdings provide more than half of our required annual travel expenditure.
Seek advice from as many professionals as possible, including tax advisors, financial advisors, CPAs, investment specialists, and insurance brokers. If you don’t have a good team in place, ask family and friends for recommendations. Of course, not all of these are going to be a good fit, but if you start the selection process early enough, then you can weed out those with which you’re uncomfortable. Financial decisions can have implications that span decades, so start as early as possible.
The majority of these thoughts have been extracted from my book, ‘A Life Redesigned.’ This book goes into the topic of financial planning in considerably more detail and will give you the tools necessary for a successful extended travel adventure. No matter where you are in the world, don’t waste this wonderful opportunity you have during coronavirus lockdown to get a jump start on the financial planning required for your extended travel adventure.
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