A recent Fed survey highlighted that 40 percent of Americans can’t cover an unexpected $400 emergency.
At my previous school, I co-taught a course on financial literacy and found that it’s usually bad financial habits that keep people destitute. Unnecessary expenditures of gym memberships, FOMO inspired extravagant living, and a daily Starbucks keeps even established professionals living paycheck to paycheck. My secret? Invest regularly and live frugally.
How are we able to save and travel for a year? Here is our planning timeline going back 4 years:
4 Years Out: A Long Way Out
- Start incrementally saving for your trip fund. Money talks and you’ll need an ample trip budget to travel for a year depending on your level of comfort, destinations and activities. For our family, working at an International School in South Korea gave us a nice pension that we’d get when we left, so we invested in our own retirement plans on the side and then would use the pension payout for the bulk of our trip budget.
- Learn about travel credit cards. We’ve saved thousands in flights and hotel accommodation with our Chase Sapphire Reserve and Hilton Aspire AMEX card. There are many cards on the market and most offer signing bonuses too. CSR comes with a priority pass which means lounge access and money saved while eating at the airport.
3 Years Out: Getting Closer
- Start an emergency Fund. Open up a high yield savings account in an online bank such as Ally or Synchrony which have the best savings rates and are FDIC insured. I built up my emergency fund at Synchrony over 3 years which we could fall back on as a cushion if we ran out of money near the end.
- Open a travel credit card. If you used the previous year to learn about a travel credit card, use this year to jump in feet first! Rack up purchases and points and hold them for the next two years so you can use points to book flights and tickets early in your trip.
2 Years Out: Near Horizon
- Choose budget friendly destinations. South East Asia, South Asia and South America are all pretty cheap. We found some really affordable destinations in Eastern Europe as well. However, this is coming from a guy who just bought an $11,000 two week cruise through Antarctica for next January. Sometimes, you just have to live a little.
- Start preparing your belongings. If you have a house or apartment, start looking for renters or property management companies. If you plan to use a storage facility (like we are) look into costs. We Mari-Kondo’ed our apartment and whittled down our belongings into 15 square meters which would cost $1,000 to store for a year in Korea until we got new jobs. Shipping costs would vary depending on destination but our hiring school would pick up that tab.
1 Year Out: Coming Up Fast!
- Start booking tickets. We leveraged tools like Skyscanner, Google Flights and Hopper to find cheap tickets and bought our one way tickets in October for blast off in June.
- Book and pay for accommodation. We booked a lot of our eastern European accommodation through AirBnB which allowed us to pay up front and save on costs of meal preparation.
- Reserve accommodation you can’t afford. Although we had booked a lot of flights between Europe, Africa and the Middle East, we were coming up short for money to pay for hotels in Morocco, and we didn’t want to miss out on the beautiful Riad stays. We used ‘Booking.com’ and were able to make many reservations with free cancellation.
- Book travel with rewards. After we bought some of our more expensive tickets for the first 2 months, we had to buy some expensive legs down to Africa. Here is where our credit card points came in handy as you often need to book reward travel 6-8 months in advance.
6 Months Out: One Foot On the Platform
- Purchase travel insurance. Extend your current plan or shop around. We used ‘World Nomads’ that gave us coverage in all the countries we wanted to visit.
- Switch to ‘Google Fi’. Use this worldwide cellular provider for unlimited calling and 1 GB of data for $10.
We are leaving soon with the first 7 months booked and largely paid for. After our pension is wired back to our bank account, I’ll transfer the whole balance into my Synchrony bank high yield savings account and set up a bi-weekly reoccurring transfer of our trip budget to our regular bank account. This will give us access to cash and the ability to pay off credit cards (and reap credit cards rewards) through an income stream.