How to afford to take a year or so off...

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uncleskeleton
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How to afford to take a year or so off...

Postby uncleskeleton » Mon Aug 27, 2007 2:27 pm

Hello... I've been reading the GRS blog for a while now but I've just registered an account here.

I'm starting to research how my (future) wife and I can take around a year off. For at least half of the time we want to volunteer our services to a developing country and the other half traveling Europe on the cheap... trains, hostels, etc.

As this site is all about money, I'm wondering if anyone can give me insights into how I can save for this year off and, more importantly, what I can do to not get too far behind in my finances when I'm away. I'm 25 now and we're planning on doing this in a few years.

I just started a Roth IRA and I'm forced to put money into a municipal pension plan (that i'll probably get back because I won't be vested before I leave my current job). I'm going to try and push my better half into getting a Roth IRA as well. She just graduated college and is looking for a full-time job.

On the asset side, we'll probably have a car and an apartment full of stuff to store or sell... We're not going to buy any property before we leave. I have about $34000 in savings and she has about $15000. She has maybe $8000 in student loan debt, and that's about all of our debt, although I will probably need to buy a car sometime soon as my old jeep is slowly falling apart in strange ways, but I'll be getting something on the cheap end with good gas mileage.

I'm just scared of coming back from this in my late '20s and having to start over financially... but I know that there are people who can manage to take a year off between college and starting a real job... We're just doing it a little bit later in life.

And I know there's a ton of other things I need to look into... and more things keep popping up the more I think about it. Oh well... Thanks for any insight or ideas anyone might have.

-JB

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morydd
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Postby morydd » Mon Aug 27, 2007 2:37 pm

I'd say, what you're looking to do is very similar to planning for retirement. (For all intents and purposes, you're retiring and then coming back to work later.) So look into some of the planning tools for that.
You'll want to figure out. How much you're going to need to live for that year including your travel and your existing financial obligations, and how much you're going to need to have available to get you started again when you get back. From those numbers you'll be able to figure out how much you're going to need to save between now and then. Divide that up and then look for the combination of income and investments that'll best get you there.
I know there's not much in the way of specifics there, but sometimes it helps to talk out the process.

Best of luck to you, it sounds like a fantastic goal.
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Postby consultantjournal » Mon Aug 27, 2007 3:48 pm

1. Establish an emergency fund.
2. Pay off your debt.
3. Set aside enough money to cover the year you will be away. Flights, food, accommodation, etc.
4. Look for agencies that will pay you a small amount to work for them overseas.

I put myself through university, spent 3 months in Europe after graduation, started a small business, put myself through an MBA, took a year off for maternity leave and am about to take off time for a second maternity leave. That's how I did it. I've also managed to buy a home along the way, but that's not the same as setting aside money to live on.
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pf101
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Postby pf101 » Mon Aug 27, 2007 4:27 pm

Funny you bring that up. I've starting planning for a similar trip myself, though I'm going to do Asia this time since I did Europe last time.

To prepare, I'm listing all of my financial obligations that will continue even when I'm gone for a year. This includes:

- rent for a storage facility (I may sell some stuff but most I will keep as it will cost me more to re-purchase everything than to store it)
- cell phone service. i don't want to lose my number so I will either 1 - upgrade my phone to one that can be used internationally, 2 - cancel my current contract and port my number to a pay as you go plan
- web hosting.

That's pretty much it for ongoing expenses. As an alternative to storing my stuff, i could rent out my furnished apartment but i'm not too keen on letting someone else use my stuff.

so, i'll need enough in my checking account here to cover that which means that since I'm planning on going for 6-9 months I'll need about $1500 to be safe. i'll set everything up for auto-pay.

I'll want another $1500 on hand to re-establish myself once I return.

For trip expenses i've figured this trip will cost around $15k.

So, all told, to check out for this amount of time I'll need about $18-20,000.

I'll just start saving that in a regular cash account and when I get it I'll go. :-)

Your trip will probably be more expensive since traveling in europe, even on the cheap, is at least 2-3 times more expensive than Asia (and that is REALLY traveling on the cheap). For 2 people you probably want to budget about $100/day for Europe unless you have people you can stay with or will focus mostly on eastern Europe. Unless our exchange rate goes it, it might even be more.

You are only going to have to start over if you spend what you already have. however, if you continue to save for retirement (at least the basics of matching 401k and Roths) and then save separately for this you should be fine.

The biggest things might be your jobs...it depends on what you do. I took a year off when i was 27 and changed fields when i came back so it wasn't a problem.

As far as volunteering goes, many times you have to pay them to volunteer so be aware of that.

Just do your research, run your numbers, come up with a budget and start saving.

This is a good thing you're planning on doing. I think everyone should take some time off whether they think they can or not.

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Postby jdroth » Mon Aug 27, 2007 4:43 pm

I don't have time for a lengthy reply, but I wanted to let you know I'm finishing a review of <i>The 4-Hour Workweek</i>, which deals extensively with this subject. Even if you don't agree with all of the author's methods (and premises), there are a lot of ideas here that you can draw upon while preparing for a sabbatical.

The review should be up Tuesday morning. I'm just finishing it now.

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Postby dariaclone » Mon Aug 27, 2007 4:57 pm

I've been planning this trip for years, but never had the guts to go. Mostly its the career aspect that is the source of my hesitation. That said, in my planning for the trip, I've gone through most of the analysis that PF101 explained.

My piece of advice would be to consider skipping Europe. As PF101 said, it will be a lot more expensive. In addition, my thoughts are that is pretty easy to get to Europe for week-long and month-long trips at other points in life. Some places in Africa will take a week to get to. So take the opportunity to get as far away as possible. Perhaps an option would be to volunteer first, then see what your budget and desires are after that.

Also, I try to avoid flying while travelling-trains and buses are cheaper, you see more scenery and meet more locals.

Finally, here's a good forum for helping you sort out details--you can post itinerarie and budgets and get feedback from people who've been there: http://boards.bootsnall.com/eve/forums/ ... /209091657

Go for it and keep us posted. I'll live vicariously through your trip!

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Postby Ryuns » Mon Aug 27, 2007 5:00 pm

Great topic.

It sounds like you're doing well financially. I didn't see in the OP when you were planning to do this. Diligent saving between now and then could go far, adding to what you already have + interest. (Although it's admittedly difficult to beat inflation + taxes on short term savings).

It is scary to start working, then stop and try to pick where you left off. Definitely keep it touch with everyone you know while you're away, via email or whatever. That's the best way to get plugged into a job when you get back.

Volunteering is a great idea. If you happen to decide against it for whatever reason, you can get a working visa (it sounds like you're young enough), and make a bit of scratch while in Europe.

Mandy: How do you plan to handle taxes while you're abroad?

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Postby pf101 » Mon Aug 27, 2007 5:06 pm

dariaclone wrote:Finally, here's a good forum for helping you sort out details--you can post itinerarie and budgets and get feedback from people who've been there: http://boards.bootsnall.com/eve/forums/ ... /209091657


Yes, this is a good forum. Another one I like is Lonely Planet Thorn Tree forum. I've learned a lot there since I started researching my asia trip.

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Postby dariaclone » Mon Aug 27, 2007 5:39 pm

dariaclone wrote:
Finally, here's a good forum for helping you sort out details--you can post itinerarie and budgets and get feedback from people who've been there: http://boards.bootsnall.com/eve/forums/ ... /209091657

Yes, this is a good forum. Another one I like is Lonely Planet Thorn Tree forum. I've learned a lot there since I started researching my asia trip.


Oops. Thanks for emphasizing my spelling error :-)

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Postby pf101 » Mon Aug 27, 2007 6:10 pm

dariaclone wrote:
dariaclone wrote:
Finally, here's a good forum for helping you sort out details--you can post itinerarie and budgets and get feedback from people who've been there: http://boards.bootsnall.com/eve/forums/ ... /209091657

Yes, this is a good forum. Another one I like is Lonely Planet Thorn Tree forum. I've learned a lot there since I started researching my asia trip.


Oops. Thanks for emphasizing my spelling error :-)


:o I didn't even notice. :-)

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Postby pf101 » Mon Aug 27, 2007 6:15 pm

Ryuns wrote:Volunteering is a great idea. If you happen to decide against it for whatever reason, you can get a working visa (it sounds like you're young enough), and make a bit of scratch while in Europe.

Mandy: How do you plan to handle taxes while you're abroad?


I'll probably have a friend do them for me since I won't want to lug everything with me to do them myself. I'll probably forward my mail to my mom so she can get any necessary tax forms.

That was a good question though. I hadn't thought of that. The last time I was living over seas at tax time I was in one spot so I was getting all of my mail.

Regarding the OP working in Europe, from my experience that would be virtually impossible for him to do legally, assuming he's a US citizen. The EU isn't a fan in general of giving US citizens working visas unless you have company sponsoring you. Now, doing some work under the table could be possible...usually in a bar or at a hostel.

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Postby plonkee » Tue Aug 28, 2007 2:10 am

If you have an Irish born grandparent, you can apply for Irish citizenship and work anywhere in the EU. If you have a British born grandparent, you can apply for a British ancestry visa and work in the UK. Otherwise all the work in Europe progammes that I know of require you to be a college student / just graduated.

I usually allow £1K per month, plus £1K overall for travelling experiences in developed countries. So for 6 months in Europe, thats £7K or $14K at the current exchange rate.

I too would just set a target and then go when you've saved up enough money.

On most websites for graduate school in the US, they suggest that you need at least $1500 to start with - that's assuming that you can find a job straight away, so I reckon you need at least that much money available to you when you come back.
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Postby tinyhands » Tue Aug 28, 2007 8:43 am

Some interesting expat tax questions and answers here --
http://www.expatplanner.com/Tax_questions.htm

And opportunities abroad --
http://www.mbaswithoutborders.com/
Read my 'fiscal fitness' financial disclosures <a href="http://www.getrichslowly.org/forum/viewtopic.php?t=176">here</a>.

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Postby uncleskeleton » Tue Aug 28, 2007 9:40 am

plonkee wrote:If you have an Irish born grandparent, you can apply for Irish citizenship and work anywhere in the EU. If you have a British born grandparent, you can apply for a British ancestry visa and work in the UK. Otherwise all the work in Europe progammes that I know of require you to be a college student / just graduated.


My fiancee's grandmother was born in Ireland and left when she was 21 or so. We just took a trip there last may and went to the family's old farm and met long lost uncles (and uncovered family secrets)... Would I be eligible for a work visa in the EU, or just her? We'll be married by the time we leave.

Also, thank you to everyone for your responses. Everything is becoming a lot less abstract in my mind. I think we're going to look for volunteer work in Africa and probably try to find an organization to sponsor us at least for safety if not financially, but we're barely scratching the surface there right now.

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Postby 144mph » Tue Aug 28, 2007 9:42 am

+1 for skipping Europe.

Sorry to be a negative voice, but I think maybe there are some other factors to consider.

First off, you're losing one of your most effective years of saving by postponing things. It really goes completely against the whole frugality ideal to quit a job and go on a vacation where you are hemorrhaging money. Instead of staying in your current position, contributing your max to long term savings, you're cashing out a year on your future to enjoy life right now.

The idea of picking up a work visa or a job is really far fetched. The chances that you'll be in one place long enough for an employer to hire you and pay you a rate where you can quickly load up on spending cash to continue your trip is a very optimistic.

Europe is considerably more expensive than the states and that could spell disaster for the trip. Would you be okay with cutting your trip short if necessary? The hostels I've stayed at aren't really a whole lot cheaper than the budget inns in the US and they're not exactly full of amenities though some are better than others. Sure, you could go completely hobo style and hop on boxcars and trains and sleep under the stars, but I took it from your post that you were wanting to do this thing above-board and with some semblence of modern life.

Trains and public transport aren't very cheap either and if you book the flight well in advance, places like Easyjet and Ryanair have great rates. However, they usually limit the number of bags and weight you can carry, so for a backpacker, this may not be viable.

If it were me and I was dead-set on taking time off to see the world, I'd do what PF101 is doing and either see Asia (mainly China and India) or South America (ala Motorcycle Diaries).


However....I've heard about other couples who have done the same thing or similar and I have no doubt that this would be an experience you wouldn't trade for anything. Everybody says that when you're young is the time to go because places are different now than they will be and you're experiencing them in a different way than you would be able to in 15-20 years.

I'm trying to see as much of Europe as I can while I'm here and so far each place has been a very cool little adventure. I can only imagine how neat it would be to string them all together in a big journey.

Huge kudos for planning this thing out well in advance!


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