Are you a money whiz or a financial statistic in the making.

How do you survive without working? How can you afford to travel for such a long period and no job? Common questions I’m asked on the road.buget1

Traveling without a 9 to 5 J.O.B is not rocket science so don’t think even for a minute that you cannot do the same. What I will tell you that it will take a lot of planning, disciple and a crap load of patience. (Unless you want to end up living under a bridge somewhere half way into your six-month journey).

Long term travel is really not much different than your “normal” day to day living with a few exceptions. You may not have to pay rent/mortgage but you still pay for lodging of some sort. You may not have a regular routine but you find ways to staying busy. You may not have your long term friends or family members close by but you are constantly meeting new people from all over the world from which some will become close friends.

But let’s face it, you are all the most concern about money and how you will manage to get a steady stream of it while being absent from the office for months at a time. Maybe you don’t happen to have several 10’s of thousands of dollars laying around in a bank somewhere waiting to be used up for that long awaited 6 months get-away you have been daydreaming about during office hours behind your desk while you are supposed to be working.

little sketchy man in a rowboat with a big blue piggy bankHere are two simple facts about long-term travel: 1) Money will be needed. 2) You will most likely make a whole lot less of it while on the road. So make a plan and stick with it. And remember “Setting yourself up for a life that most people will never have will most likely require you to do some things that most people will never do.” – Dave Ramsey –

I do not claim to be a financial genius of even a financial advisor of any sort but I do have over 22 years as a licensed Mortgage Broker/ Real Estate Investor. So, I feel I have gained some kind of (at least self-perceived) know-how with some ability to contribute my two cents when it comes to personal finance.

I do strongly advise anyone going into any kind of financial venture to consult a qualified attorney or whatever experts you think might offer better advice than a wandering wannabe financier who rides around on a five thousand dollar vehicle carrying a few bags full of tools, spare motorcycle parts, camping gear and oh yea… a small wardrobe that includes 3 pairs of clean or mostly clean underwear.
Since that last sentence was more like a disclaimer than anything else, please allow me to add the fact that political correctness or diplomacy has never quite made it very high on my list of priorities either. So, let’s cut to the chase and just give you a short list of do’s and don’ts when it comes to financial smarts whether you’re planning to save cash for an extended trip or are looking forward to a new set of dentures before your 65th birthday since most likely those were not included in the Obama Health Care Plan:

Do’s

Do put away at least 10% of your paycheck away before you pay for anything

Having a “nest egg” even if small may prevent an unforeseen “budget glitch” from turning into a splitting headache financial nightmare.

Do stay at home or get roommate

Always remember that the house you live in can take a huge chunk out of your paycheck. No need to rush into a $200,000 debt straight out of college.

Do ask yourself this simple question before buying anythingID-100144148

Is this a want or a need? Nothing wrong with luxury and comfort I’m all for it myself, just make sure you are not buying something now that you are better off delaying for a better (later) time. Perhaps a time in the future when by purchasing that new “toy” won’t set you behind on your financial short or long term goals.

Do seek alternative methods of income producing ventures wisely vs parking your cash in the bank

Finding ways to grow your money is a great part of getting ahead financially but, understand that all business venture come at a risk. Always know the odds you have at winning beforehand as best as possible and be prepared to lose.

Don’ts (Even more Important than the Dos)

Don’t buy a new car and avoid (if possible) financing a used one

The average cost of a new car is 32k and loses 60% of its value in the first 5 years. The average USA resident buys a new car every 4-6 years making that 11 new cars in a lifetime. That would represent a total loss by way of depreciation of approximately $211,200 from age 20 to 75. Add to that cost of insurance, interest, maintenance and repairs and you can easily double that figure.

That would make owning a car twice the cost of owning a house or more, and yet you end up with nothing to show for at the end. You need a set of wheels to get around but you don’t need to follow the “herd”.

DSCF4058Pay cash for a used car, ride a bike or take the bus if you have to.

Don’t buy a house that takes up more than 20% of your gross monthly income

As a real estate professional, I will honestly say that it does not always make sense to buy a house. Especially when you realize that the house you live in is just another expense, not an asset. Owning a house in your younger years will make you a proud young homeowner. But if the mortgage payment is large enough it can also turn you into a young financial slave.

A bank can easily qualify you for a mortgage with total monthly housing expenses of 28% of your gross monthly income or less. That can mean that your monthly housing expense can take over 37% of your hard earned “take home” pay! Has anyone heard of self-imposed urban slavery?! (That would be another topic altogether). I would advise you to stay home (parents’ house) if all possible and pitch in for expenses or rent a reasonable place and get a roommate even if you can do without one.

The average house in the USA increases 3-5 % per year. So, when you factor in the large annual income increases quite typical in the early stage of your career, time may be on your side. By giving yourself time to save up enough cash for a larger down payment you would have greater buying leverage, avoid P.M.I., thus the possibility of having lower monthly housing expenses altogether.1913530_1261699336550_2698011_n

Allowing yourself 3 to 5 years extra before becoming a homeowner would probably be a good idea. You don’t need to rush into a mortgage or perhaps slavery in disguise, while still in your early 20’s or even perhaps your early 30’s.

Don’t use a credit card to buy ANYTHING unless you are certain you can pay off the balance by the end of the month

You have been doing without it for years, you have had 6 months to save for it and you still don’t have the money to pay for it in full. So, what makes you think you will have the cash to pay it off by the end of the month?

If you pay with a credit card chances are you will be making payments which mean you will pay interest. By doing so you might end up spending as much as 80% or more then what the “sale price” shows.

Don’t invest in any business venture based on the fear of urgency

I’m all for business opportunities but if it sounds too good to be true… Do your homework and investigate first. The good opportunity will be waiting when the time is right. Use that time to investigate that “Business of a lifetime”, offered perhaps by your unemployed brother in law.

place5This “for entertainment purposes, only” information is a far cry from the professional financial advice of any kind. But I am willing to bet you a dime that if applied consistently (crazy theory) for a reasonable period of time might get you closer to the life of entertainment you wish for (or perhaps that new set of dentures) sooner, leaving behind the “rat race” also known as the 40/40 plan most people comfortably settle for. Something, although completely acceptable in our society, in my humble opinion is more similar to a form of self-imposed urban slavery of some sort. Just my two cents…

Please leave your comments and suggestions below they are greatly appreciated!

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