Ask the Readers: Save More or See the World?
Published on - July 3rd, 2009 (Modified on - July 27th, 2009) (by J.D. Roth) I’ve written a lot lately about finding balance. It’s important to save for the future, but how do you balance that with enjoying today? Each of us has to address that question in our own way. A reader named Max wrote to share his own dilemma:
I’ve been working as a web designer since I was 18. I made a few financial mistakes in my early days: leased a car for four years, bought a couple of motorcycles, spent money on Stuff that had no value. I’m 25 now and I’ve owned a condo for four years. I was lucky to buy it really cheap and only have $100,000 mortgage left to pay.
Things have changed in the last two years. I’ve traveled a lot. I’m constantly increasing my knowledge and working on new business ideas. But I don’t have the time to do anything about it because I’m always working…to for pay my condo.
Fortunately, I have no debts other than the condo. I have $5000 in savings. My total expenses are about $1700/month and I make about $2600/month. I made some calculations and I can easily bring my expenses down to $1000/month if I didn’t own the condo.
After working as a web designer for nearly seven years, I’m sick of it. I want out. I want to bartend a couple nights per month and travel the rest of the time. Actually I’d be happy just traveling and doing any kind of work outdoors: bartending by the beach, teaching motorcycle riding classes, gardening, surf instructor…
Would it be wrong to sell my condo (I could get $160,000), take the profits, and go travel the world? Do a few side gigs here and there and enjoy life while I’m still young? I don’t have kids. I’m not married, no girlfriend. No car, no debts other than mortgage. I’ve been wanting to live in Australia, California, Japan. I’m sick of cold winters in Maine.
I’m also scared to just “save money” eternally until I’m too dead to enjoy it. I don’t understand the point of saving my money and working to pay my bills when I can just cash in now, take as much time off as I want, and still get by on a small salary doing work that I really enjoy — outdoors, where the weather is great.
I need advice, and my parents keep telling me to keep my “good” job.
This is an interesting question, one that many GRS readers wrestle with. The good news is that Max is in fairly good shape financially for this stage in his life. He has $5000 cash and $60,000 in equity in his condo. He has no debt. He has no ties.
Based on this, I think there’s a balance to be found. I’m sure many folks would recommend simply finding another job, moving from Maine, and pushing forward with a sedate (but safe) life. And there’s value in that. At the very least, Max should stay away from debt.
But at the same time, I can’t help but remember my friend Sparky. Sparky didn’t have $60,000. His wealth was more like $6000. But when he was Max’s age, he packed up and traveled the world for five months. Sparky loved it.
Because he was not burdened by Stuff, Sparky returned to a financial position similar to the one he’d left. He didn’t have a mortgage or other debt. His core savings and investments were still intact. He lived for five months without an income, it’s true, but he spent exactly what he budgeted, and he had the experience of a lifetime.
Max has an opportunity that may never come again. How many of us at age 40 can simply pack up and travel the world? 
How many wish we could? (I do!) Knowing what I know now, if I were in his position I would sell the condo, put half of the money in savings, and then use the rest to travel on the cheap. I might even take a job in another country and live there for a while.
When I returned to Maine (or to Texas, or wherever), I’d start again from scratch, either as a web designer or as something else entirely. Maybe go to school. I’d use the remaining condo money to jump-start my life, to stay away from debt.
Along the way, I’d read The Razor’s Edge, Vagabonding, and The Art of Non-Conformity.
This advice may be counter to what you’d expect from me. I’m a huge advocate of saving and investing early. But I think Max already has a good start, and he has a chance to pick up something even more valuable than home equity: He has a chance to build life equity.
What would you do in Max’s situation? Would you travel the world, too? Or would you parlay the good financial start into a stronger foundation for the future? What advice can you offer Max?
Programmer photo by evhead. Photo of Japanese garden by One man’s perspective.
This article is about Ask the Readers, Choices, Planning, Savings, Travel
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I 100% agree with you JD.
Traveling and “seeing whats out there” (both the good and bad) gives you a huge amount of perspective on life – and a clear perspective is priceless.
Also, in regards to his career indecision – I think it makes it even more important. You can’t properly choose a new path in life if you don’t exactly know what your passions are. Maybe traveling will help in more ways than anticipated.
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I’m absolitely with #150 getagrip. This kid needs to figure out what is important to him and how he wants his life to work out. He’s not going to get there by picking up a second job and holding on for a year he -might- get there with a few months of soul searching, good books, new people and new experiences. Take the time now! Do it cheaply, but with no constraints like the mortgage.
Now is the time – soul searching works best before dissatisfaction has turned into depression and disallusionment.
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Adventure working!!! Go do Seasonal work over the summer, the kind where you rack up 60 hrs a week (most likely Alaska). Working in Alaska has changed my life forever. Use that money to travel. Rinse and repeat as necessary.
Or travel first then recoup losses with seasonal work.
Traveling is super cheap. You can live it up and blow 3,000 in 3 weeks in Europe. or you and a friend can spend a total of 1,600 in four weeks in Central America.
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To Beth and Kevin M: His actions are not the basis of my statement. My comment with regards to America’s current financial condition is due to the overwhelming number of responses from people who claim to be financially savvy who tell a 25 year old with no money to go travel the world.
If you read his original post, he’s got $5000 in savings and a mortgage. He estimates his equity at $60,000. So add it up, how much money does he have? $5000! He’s still got the mortgage! He hasnt sold the condo! What if he cant get $60k by selling it? If he had $60k cash in hand I’d say sure, go for it, travel for a while, sow your oats, and have fun for a few years, but he’s got $5000.
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We have traveled all of our lives. We are now retired debt free with lots of memories(and local art) to share. I wouldn’t trade my experiences for several million dollars. We did it when we were young and glad we did (and with children for the strangest places).
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I’m in a similar situation, but Max is quiet a bit better off than I. We’re both the same age and make the same, ~$2600/month or $50k/year before taxes, and we both lead jobs which leave us unsatisfied and unfulfilled, desiring something more from life than an 8-5 monotonous grind telling ourselves it’ll all pay off when we’re 65 year old cripples. The only debt I have is ~$20k in student loans, and the only debt Max has is a mortgage, both considered the “good” type of debt to have, but Max has a much higher net worth than I if his Condo will really sell for $60k more than his debt. Still, $5k cash is beans and won’t go far. Personally I decided having a well funded emergency fund @ $26k with $5k on top of that for whatever doesn’t constitute an emergency was wiser than diving into a home purchase, but it looks like Max is kicking my ass in the net worth game, so if he doesn’t get in a severe emergency any time soon, he wins.
Still, for Max I can only see 2 logical courses of action that will give him the opportunity to experience the things he wants.
1. Put your nose to the grindstone a bit longer, cut expenses anywhere you can, build a travel fund, an emergency fund, and a little extra property fund for when your tenants burst your pipes while working out a solid travel plan. Once those are in place, rent your condo out but make sure you have something set up and in writing – get a lawyer if need be – for someone to act as landlord of your property while you are off frolicking in the Amazon. You’ll get a trickle of money from your tenants and when you return, your Condo will still be there and by then the housing market may have rebounded at least a little.
2. If you can’t take it anymore, get the f*ck out. Sell your condo, shove $30k into an account used only for emergencies, like when you fall off a cliff and break your leg climbing the Himalayas or get robbed blind in a 3rd world country and need to buy your way out of jail. Put $20k in account for yippy-kay-aye mother-f*cker expenses, and run it dry enjoying yourself in a moderate amount of style for 6-months to a year, while also getting a trickle of money working odd jobs. Say g’bye to your $5k because a 1-way ticket to Sydney is going to cost you around $2k, and you’re probably wanting to go more places than just Sydney (and eventually return to the states). Split the rest between maxing out a Roth IRA and putting the remainder into a 401k/Roth401k. Oh and make sure to spend some quality time with hot Aussy girl while everyone back in the states is shaking their heads in jealousy dealing with workplace drama and blabbing about how you’re so irresponsible and reckless while they rack up insurmountable debt on “stuff.”
Either way, so long as you avoid touching that emergency fund, when you get back to the states you’ll still be better off than most of your peers, and you’ll have some hella good stories to tell. For me, I’ll keep working my 8-5 grind and then some trying to get to the point Max is now.
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ASW, your comment was ambiguous. If you were meaning to criticize other posters rather than Max, you should have said so
I think the responses would have been quite amusing.
I think people have made a lot of valid points in this discussion, and it’s great to see the various sides of the issue.
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I think most people don’t realize how easy traveling can be. In a few minutes of searching, I found a 1-way ticket to Sydney, NSW from Los Angeles for $591 next Monday. Or Airtreks.com has a ticket from LA / Auckland / Sydney / Tahiti / LA from about $1,500. Get extended stays in the middle, and spend a winter in the southern hemisphere summer… South America would be much cheaper. Peace Corps might even make it free.
And most places are cheaper to live than the US (Europe is often the exception, unless you are really savvy). I lived in Taiwan for 11 years, making $2-3k a month, and saving most of it. With care, you can live many cool places for $10-20 a day. Bungalows used to be $6 a night on the beaches of Thailand for short stays!
If you’ve studied a foreign language, go somewhere that speaks that language, and immerse yourself.
Next, what most people missed is that he is a WEB DESIGNER. If I did that, I’d look for work, maybe through oDesk, or part-time work from the same company. Or design my own money-making site, set up for auto-deposits, and make money while traveling. There are cyber-cafes on the streets of Bangkok to check email and any websites, transfer money, etc.
It’s been a lot harder to make ends meet since returning to the States.
Note: this comment is on the ease of making it work, not on Max’ decision (or anyone else’s) on whether to go.
Tim Ferris’ ’4 Hour Work Week’ has a lot more material on making it overseas and web-based businesses to cover the costs. Also look into ‘International Living’ for places to live and buy real estate cheap. They look at places like Nicaragua, or the Turkish side of Cyprus (Greek island living for half the cost), and so on.
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Don’t give up the condo!!!
Find a way to keep paying it off while you take off and travel … then you will have your adventure and you will return to an asset.
I travelled for the whole of my 20′s and I do not regret a minute of it … But starting from nothing when I returned was hard … and if I had a condo to return to then life would be really sweet!
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Do all what you want before you get married w/kids
hmmm ….mid life crisis at 25
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My opinion:
[1] Spending another year working to make plans on where you’re going to go, what you’re going to do, get immunizations, visas, etc. and save up some more money.
[2] Rent out the condo. Have someone else pay the majority of the condo while you’re globe trotting. This way you’ll have something to come back to. Yeah, mortgage is a pain, but at least your rent is going somewhere more beneficial than to the landlord.
[3] Have a blast
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Four years ago the housing market was at it’s peak so the condo you bought was the most expensive it’s been in a long time. Now we are at the bottom of the market and I doubt that you will be able to get $160,000 for it. I don’t mean to be pessimistic but could you even get $105,000 for it? At best maybe you could get $130,000 for it. After real estate commission (5% +/-) you would receive $23.5K cash. Still plenty to travel with.
Even if I only had $10k that might be enough to start a new life with, get jobs along the way and have fun!
I would put the condo on the market and see what sort of traffic you get on it. You can always take it off the market with no harm done (well, not much harm done). Then you can decide based on offers you get whether to travel or stay put. If you are able to get some money for it then great, go do what you want.
One piece of advice would be to get jobs that build experience and do things that will add value to your skill set.
I’m also in the same boat with you about a career. I am a .net programmer, hate it but I love making 90K / year. I’m 34 and looking at other options. It’s hard to make a career change.
Brandon
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Real estate values are very much local in nature. In the Philadelphia, PA region where I live, values in many areas have continued to rise or, at worst, level off.
Example – my townhouse (which I just sold last month, so I’m not simply hoping/speculating here) sold for about $30k more than it would have 3 years ago.
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What a great post! I have a buddy who married a girl and “found out” after getting engaged that she was LOADED (I mean to the point of not having to work). Being a history buff, he wants to travel now and see much of Europe and the Colosseum, while she is the stay at home type who wants to save everything until they are 50. Max is in a good spot to have no dependants and be able to call the shots, that’s for sure!
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Oooh, this is a fun one! With a little planning and forethought, there’s no reason you can’t have it all. Go, Max, go!
Allow me to share my perspective from both sides of your dilemma:
I was 30 when I decided I wanted to earn financial freedom and retire at age 40. I made a plan, worked hard, saved and learned how to invest. My husband and I did everything “right”.
Then at age 35, wanderlust hit me… HARD. I found myself asking the same questions you are.
By then we had a pretty cushy savings account, but not enough to retire early on. Problem was, five more years of keeping our noses pressed to the grindstone to complete our financial plan felt unbearable.
This is when I realized that my plan had a fatal flaw — I was putting off my dreams and desires for “someday when”. I had witnessed my friend’s accidental death, so I knew better than to wait for “someday”.
So at 35, we balanced both sides of the dilemma (save more money / see the world) by doing both!
I created a new financial plan, one that included 8 to 12 weeks of travel each year. This meant we had to scale back on our consumptive lifestyle to compensate but since we’ve never been into STUFF, this didn’t bother us. We learned to put our money (and time) towards what we value most. When year 40 arrived, we had less money stashed for early retirement than originally planned, but what we gained via travel was worth it. Extremely worth it.
Year 40, we sold our home and many of our belongings, put our business up for sale, and drafted itineraries for a ’round-the-country life on wheels (with international excursions peppered throughout). Whoohoo! We were as free as birds! And still young enough to take life by the balls!
But life doesn’t always go according to plan. Right before we took off for our nomadic life, my mom was diagnosed with a life-threatening illness. At age 59, she had zero retirement savings and no one to fall back on but us. We spent two-and-a-half painful years in and out of hospitals with her before she died. Needless to say, our “someday when” vagabond plan vaporized.
Today, at age 45, we still travel a lot — now with a 4-yr old daughter. And every August when our rental home lease comes up for renewal, we discuss whether we’re ready to be a nomadic family. But I’ll be completely honest — a nomadic lifestyle with a kid seems, well, trickier than without. We’ll do it when the time feels right — now we need to consider our daughter’s needs and desires as well as our own.
So Max, I say do both. Do it now before life gets “complicated”. Sell your home, put the proceeds into savings, and work around the world. Aim to earn enough to cover your reduced living expenses. You don’t want to work much while you are traveling? Fine! Work part-time and live within your means. There are tons of resources available to help you do so.
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That’s easy, just do what makes you happy.
If I were in that kind of financial position, I’d take a two week vacation to someplace nice once at least once year. Who knows you might also find someone to love (if you haven’t already) in the process and go on adventures with you’re new companion.
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