During our travels, we would be rich if we had a dollar for every time somebody asked, “How do you do it?” or How can I make money on the road?” or “Nobody can afford to give up everything and travel Australia – can they?”
The truth is, it can be done, and it’s not as difficult as you might think. The hardest thing is making the decision to do it – the rest simply falls into place after that. We do understand that it’s a hard decision, which is why I’ve put together this article on the benefits of travelling, and whether a house in the end is really the asset that most people claim it to be.
Attached (via the link below) is a comprehensive budget for home-owners (or even renters) to download and complete.
[box type=”download”]House v Travel Budget – The Junior Nomads[/box]
After you have filled out the budget in full, if it shows that you still have money leftover and you are saying to yourself “I never have that money left at the end of the week!” then you are lying to yourself regarding the budget – you need to go over it again. It’s vital that you be honest with yourself in order to truly see the outcome.
Using Google, I have done extensive research regarding the average costs associated with the repairs, maintenance and renovations to houses over an average 30-year loan period. These cost are averaged out at 1% of the purchase price per year, averaged out over the 30-year term.
i.e. If the purchase price of a house is $400,00.00, then the costs per year averaged over the 30-year loan (assuming of course that you stay in that house for the full term and don’t ever refinance) is $4,000.00. However, how many people replace bathrooms and kitchens every 10 years or so? There’s approximately $60,000-$80,000 in those two items alone.
When owning a house over a 30-year period:
- How many times do you change curtains, blinds, paint colours, paintings, furniture, floor coverings, gardens and plants, build pools, add sheds, and so on and so on?
- How man times do you change or add to your wardrobe just because you have the room and not because you need to?
- How many tools and toys do you buy just because you need to fill the space and not because you actually have the money or the time to play with them?
When travelling, everything changes:
- You don’t buy a new kitchen and bathroom every 10 years.
- You don’t add a pool or shed.
- Your wardrobe is summer and winter clothes, and no additions as there just isn’t the room to keep extras.
- You don’t buy wall hangings, carpets, mats or new furniture, and you don’t change colours every 12 months.
- You choose where you want to live and for how long, and if you don’t like your neighbours you just pack up and move three doors down.
- You don’t need tools.
- Your only toys are surf boards, surf skis, push bikes, snorkelling gear, swimmers and maybe a football to kick around.
Home vs Travelling Calculations
As you can see, I have formulated a spreadsheet to show the differences in owning a house compared with living life the way we are and being free.
You will notice at the top of the form that I have based this on the cost of an average house at $400,000 and then added the fees, rates, repairs, maintenance and insurance for the house, and calculated the total (including the interest) over the full 30-year term of the loan. As you can see, it comes to $1,066,000. That is what you have spent just on the house in 30 years – it does not include the furniture and other visual changes you make over the years.
I have then increased the value of the property by 2.5 over the 30-year period to give it a value of $1 mil. It doesn’t take Einstein to work out that you have LOST money … But, not only have you lost money, you have stressed throughout that entire period about bills, rates, electricity price increases, what happens if you lose your job, what happens if the interest rates skyrocket (or depending how close you are to your limit already, what if they increase just a tiny per cent), etc.
Below that value are our calculations, showing how you can work for just 15 years out of the next 30 years and still have $1 mil in the bank at the end – and have had the best 30 years of your life!
It’s so easy and anyone can do it.
Traveling costs approximately $22,000 per year. The idea is that you save the $22,000 before you leave (or if you sell your house you might have that much equity leftover from the sale). You then work for one year straight up, or travel for 6 months and then work the remaining 6 months – it really doesn’t matter what order you do it in.
From the figures shown, if you work for one year you should save $78,000 in the first year because you already have in your account the $22,000 for expenses before you leave. The $78,000 is calculated by earning $1,500 per week (for either one or two people, depending on your experiences). Trust me: it is easy to earn $1,500 per week between two people. Remember, this is all savings because you already have the $22,000 for your expenses that year. The next year shows the bank balance drop because you need to take out that year’s $22,000 in expenses. However, in the 3rd year you see the bank balance rise again because you are earning again and only take out your usual $22,000 in expenses. You can see how the calculations show this trend for 30 years.
Remember though: you might find a job you love and stay there for two years and then have two years off. Or, you may find a job you hate and only stay for 3-6 months and leave early, so you would then need to adjust your figures accordingly. If you find the right jobs (and these can be seasonal all over the country), you can actually go back year after year and already know where your income is coming from. Websites such as Workabout Australia help with this.
Now, back to the spreadsheet: as you can see, after 30 years and only working 15 of them while travelling the country for the other 15, you will have saved close to $900,000. If there are salary increases during those years and you also decide to work an extra year, you can easily have $1 mil in the bank at the end of this time.
If you decide not to travel and stay in your own home for 30 years, some people will say that you still have a $1 mil asset – but do you really? That property is only an asset if you sell it. How many retired people own their own home but can’t afford to live in it because rates are to high, or they freeze to death because their electricity bills are too expensive and the water bill has gone through the roof? So after 30 years of working their butts off, paying their taxes, paying rates and insurances, getting sick from stress caused by bills – and maybe even gone through a divorce because of it – they find themselves selling that asset anyway. Which begs the question – what was the point?!
It’s true that they have their $1 mil asset – but they can’t afford to live in it so they are forced to sell. They are 75 years old, their muscles and joints aren’t working like they used to, but they decide to buy a caravan and travel the country – their dream for the last 30 years.
Did you know over 25% of retirees who buy a caravan sell it within 6 months because their body cannot handle the travelling? So they sell their caravan and buy a retirement unit where they live for the next 10 years, don’t (can’t) get out to see Australia, let alone the rest of the world, and that so-called “asset” – which has cost them 30 years of their life and most of their money – has now been and gone.
The Final Scary Fact
If you look back at your budget and see what your total expenses are for the year and calculate that number by 30 years, you may get a shock.
With an average double income and home loan, your expenses come to approximately $105,000 per year. Multiply that by 30 years and you have spent $3,150,000.00 of your hard-earned money … and what do you have to show for it? A $1 million so-called asset. Meanwhile, you have wasted over $2 million dollars on it!
Calculate the $22,000 per year that it costs you to travel multiplied by the 30 years you plan to travel for and it comes to just $660,000 – and at the end of 30 years you have saved $1 million dollars. Not only that, but you have not wasted $2 million dollars of your hard-earned money plus you have travelled the country, worked where you wanted to, saved the money you earned and can still retire with $1 million dollars in the bank. Don’t forget: you have still paid your superannuation while working, so you still have that as well.
These figures have all been calculated in the simplest form possible, and I’m confident I will get plenty of comments and opinions on this post. I’m not saying owning a house is wrong. But after receiving so many questions regarding travelling and the costs and why we have decided to do what we did (and how others “just can’t do it”), I am simply showing that it can be done and you may just be the better for it – not just in terms of your finances, but your happiness as well.
We are living the dream. You know that life is short and time flies – but you are the pilot and you decide on the flight path.