By this point you may be wondering exactly how does a comfortably middle class family from suburban New Jersey afford a year of travel around the world? Being the frugal, risk averse, penny pinching miser that I am, the answer is, we don’t!! Forget it, we aren’t going, cancel the plans to buy the RV, tell the house painters to leave now, we don’t need painting, scratch the research on around the world airfares. I’m not playing and I’m not paying! OK, now that I got that rant out, the real answer is how can we not afford to do this? Travel is enriching, educational, fun and a truly unique experience. Some things in life are just worth spending on.
Now down to the nitty gritty. It’s not going to be free, but if you plan ahead and get your financial house in order, it can be done. As for how to keep the expenses of the trip manageable, I will defer that to a later post, but where you go, how you plan to get there, and what kind of food and accommodations you choose, will all have a significant impact on how much things cost. For now, I will walk you through how to prepare your finances and deal with your fixed expenses in the best ways to allow for an extended period of travel.
The first order of business is to lower monthly expenses as much as possible. Look at your monthly budget and see what the biggest expenses are. If you are like most Americans, your housing costs, your car payment and your student loan payments, are going to be the heavy hitters. So what can you do to get rid of them? The car payment may be the easiest to deal with. When you are ready for departure you may just be able to sell the car(s) and buy replacement vehicles when you come back. If you rent a home or apartment, it should be equally easy to get rid of this expense once you don’t need a place to live for a an extended period of time. Most landlords are pretty reasonable about early lease termination as long as you give sufficient notice, and if you reach the end of your lease before you are ready to depart, see if you can’t negotiate a “month to month” lease for the remaining time before you go. One tip from people in the know is don’t pay your last month of rent, let the landlord apply the security deposit to that payment instead of trying to keep it and not return it to you. Although I wasn’t even a licensed attorney at the time, my first experience with the court system in New Jersey was when I sued my former landlord to return my security deposit. (I negotiated a reasonable settlement, discretion is often the better part of valor when facing a small claims court trial).
Your mortgage and student loans are a different sort of animal. Short of selling your house and paying off your mortgage (a possibility if you want to go that route), the only thing you can do to cover your mortgage is to rent your house for a enough each month to pay the mortgage payment including taxes and homeowner’s insurance. That’s what we are in the process of doing and I am sure we will give you full report in some future post on the challenges and (hopefully) successes that we have doing just that. As for your student loan payments, I got nuthin! Take it from me as a practicing bankruptcy attorney, you can’t even escape them in bankruptcy. Pretty much your only chance to get out from under your student loans…. is to drop dead. But that’s not the “extended vacation” we are talking about here!
Just a couple last thoughts on student loans and mortgages. Check out refinancing and consolidating to achieve a lower monthly payment. You may even want to consider extending the term of the loan to get the monthly payment down. Normally I would tell anyone who asks to try to pay off debt as quickly as you can. However, when you are trying to keep your monthly expenses as low as possible so you can afford extended travel, considering a 30 or even a 40 year mortgage (if you can find one) instead of a 15 year loan, may not be a bad idea.
Having said all of the above, I’ll step back a bit and note that if you have revolving credit card debt, or outstanding personal loans from your uncle Jack or your local bank, you pretty much have to get them paid off before you can contemplate something like the travel we are talking about here. Loan payments or credit card monthly minimum payments are going to take an untenable bite out of your monthly resources when you are trying to budget for extended travel. Bite the bullet, forgo the daily Mocha Frappuccino and Jets season tickets (come on, they are going to be awful this season anyway) and get your finances in order.
In closing, I will add that saving enough for six months or a year of travel isn’t as impossible as it might sound. Remember when you saved up to buy a house, or your first car, and get back into that mode of setting a goal, putting money aside and remembering what you are after and it can be done.