I don’t claim to be a financial guru – not even close. I won’t even claim this post will have any information that might be helpful to you in planning your own family adventure. What I will claim is that what I write here is totally honest and is how we managed to travel for three years with our children. What you do with this information is up to you.
Now that I have that out of the way… One of the most common questions we get is the big “F” one – how did we handle it financially? How did we manage to spend three years on the road not working?
To understand our situation, you need to understand a few things:
- John and I are both old foagies who have worked many years and always saved for retirement; we’re not young 20-somethings at the beginning of our careers. Because we worked overseas, our retirement savings was just a normal savings account – not a special tax shelter that we can’t access. If you’ve worked in the USA, your situation is most likely different.
- We live cheaply. Our basic day-to-day expenses on the road were around $1500/month. We also allotted another $500/month for other expenses – we didn’t spend that for months on end, then something would come up and we’d spend 5 months’ worth in a week.
Just as life evolves and changes so, too, did our plan. I’ll take this step by step so you can see the decisions we made throughout the past few years – maybe something in there will be more helpful to you than a general overview.
2008: Well before we took off, we contacted property management firms and asked them about renting out our house. They all felt we could rent it for $1400/month. Of course, we would have to pay the manager fees, taxes, insurance, and repairs – but even so we figured we could clear $1000/month. Halfway there with just the house.
Remember that the big economic collapse of 2008 hadn’t happened yet, so we were getting 5% interest on our retirement savings. We figured we could easily survive on the rent from the house and the interest on our savings, so we hit the road.
And then the collapse hit. We were a mere four months into our journey.
Interest rates plummeted, but our savings were locked in CD’s at the higher interest rate – for a while. Many people lost their homes because they couldn’t pay the mortgage; they couldn’t pay a high rent either, so our house rented for just under $1000 rather than the $1400 we had counted on. We tightened our belts and continued on.
All was well for the first 1.5 years on the road. The rent on the house was a steady source of income and our retirement savings were locked in at a higher interest rate. We didn’t have as much money coming in as we had planned, but it was OK – we dipped into our savings a bit, but not too much. It was a sustainable level of spending.
Late 2009: Our CDs came due and that was a problem. A BIG problem. I had heard about the low interest rates, but was woefully unprepared for what I saw when I logged on to reinvest our savings. 0.5% *gulp* The interest we would get on our entire life savings wouldn’t be enough to pay for ten days of travel.
This… well, this was a problem.
By that point our website was generating a few hundred dollars a month in ads, but we knew we were heading into more expensive countries so our budget would need to be higher. Should we call it off and head back home? But how could we take the dream away from the boys when they had come so far? We vowed to continue on, even if it meant dipping into savings even more.
Early 2010: I started thinking about some words I had heard throughout the years: “Make your money work for you.” Hmmm… how could we possibly do that when interest rates were so low? The only income we had coming in was the rent on our house and a bit from our website. Upping the income from our website would have demanded enormous amounts of time we didn’t have. I could try to write more articles about our journey, but that would be a lot of time too. What about rent?? Could we somehow do something in that arena?
I contacted our property manager and threw out the idea of buying another house as an investment – housing prices were the lowest they had been in years. We did a bit of research… had our property manager head out with a realtor friend of hers… they found a beautiful house for a great price that had been foreclosed upon… and we bought it sight unseen. It was rented before we even owned it.
With two houses being rented out, our cash flow improved significantly. We were basically back to where we had been before with the higher interest rates – taking small amounts out of our savings each month at a sustainable level. We could manage that for a long time.
Late 2010: One thing led to another and I got an email in my inbox one day. “We found an awesome house at an incredible price. If you want it, it’ll go fast – fill out these forms and get them back to me ASAP.” We filled out the forms and faxed them in. A month later, we owned another house, and the balance in our retirement savings account was very low.
Spring 2011: That leads me to right here, right now. At this point, we have three houses that are rented out. Our property manager has found wonderful tenants for each of them; they pay their rent on time and are taking great care of the property. The income from the houses is enough to live on – although frugally. If any big repairs come in, we will have to take that out of savings.
When we arrived into Boise we faced yet another dilemma – where do WE live? We could kick the tenants out of one of the houses, but we felt badly doing that – they had made them their homes. Besides that, if we lived in one of them, we wouldn’t get the rent and would have to find jobs in order to make ends meet.
One day our property manager happened to mention in conversation about a house in the area that had sold in 2006 for $169,000. It had been foreclosed upon and just sold for $50K. Wow! We had never even entertained the thought of buying another house, but if we could find a killer deal like that…
Long story short – we are in the process of buying a house now for $47,000. It’s fairly small and the bathroom will need to be gutted and rebuilt, but it’ll be perfect for us. And we can afford it with the last bits of our savings. With any luck, we’ll be in the house soon.
Were our decisions wise? I have no idea, but at this point in time they seem to be working for us. Time will tell if we made the right decisions.
What I do know is that we managed to travel for three years and had the time of our lives. We learned more than we could have dreamed and enjoyed our time together as a family. Those experiences were well worth every penny we put in to them.
UPDATE April, 2014. Three years after completion of our journey: Buying the houses still appears to have been the right decision. Three are rented out; we live in the fourth. The rent from the three houses pays for about 60% of our living costs, and we have started a couple small businesses to cover the rest.
Cash flow would be a problem if something major happened to one of our houses because all of our money is tied up in the houses themselves. We are crossing our fingers and hoping for the best, knowing that if we needed to sell a house we could do so.
Here are some other posts related to making the decision to travel you might enjoy:
How can you live your dream?
Family travel: A life changing event
Regrets about long term family travel?
How do we pay for our extended family travels?
How much does an extended family trip cost?
Here is a detailed breakdown of our expenses.
7 Truths of location independence
Other bloggers are a valuable source of information. Here are posts from other bloggers about how they finance long term travel that may help give you a better idea of creative options. I’ll add more as I find them.
Wandermom: How much does a family RTW trip cost?
Livin on the Road: Why and how we came to be a traveling family
The Dropout Diaries: Funding a dropout
Around the World is Easy Ways: Turning our travel dreams into a reality
Break Out of Bushwick: Prioritizing, taking life by the balls and making my travel dreams come true
Worldschool Adventures: Decide. Commit
Raising Miro: Inspired Dreams, Inspiring Travel
Mojito Mother: How to dream big
The Creative Homestead How to take a sabbatical without going broke