In part one of this series, we explored Taking The Leap into a life on the road: starting a journal, defining your goals, and quitting your job. Now, it’s time to figure out just how much money you need to become a vagabond. (Of course in reality, you’ll have figured this vital part of the puzzle out before taking the leap. But for the purposes of this series, it is important to first define what your travels will look like in order to determine how much money you require).
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A big question that I’ve heard so many times is: What is that magic number? How much money needs to be in your bank account for long term traveling before you can take off and make it happen? Is it a thousand dollars? Ten thousand? Or as much as six or (my gosh) seven figures?
Hmm. Well ”¦ gee.
This is not an easy number to set, since there are a plethora of factors to consider. So let’s start with a few of those factors.
What Accommodations Do You Prefer (or Will You Put up With)?
Sure, we’d all prefer to stay at a four-star hotel. Or maybe not. Hotels are terribly impersonal ways of traveling, and if you are going solo they won’t do you a lick of good if you want to meet like-minded long-term travelers.
A friend of mine once said that he likes a little place called the “Likealottacomfort Inn”. For him, the idea of staying where we did in Hawaii is more like torture than an adventure.
Obviously, the less expensive the accommodations, the lower your “magic number” for taking off can be.
For my boyfriend and I in our vagabondish travels, our commitment to long-term travel and stretching our dollar means making some sacrifices in living comfort at times. We have been known to share a kitchen and bathroom with four other people, with no living room to speak of. For some this would be unacceptable.
We chose to look on the bright side: we didn’t pay for accommodation, utilities, high-speed wireless internet, and some of our food. (We did, however, have to work part-time in exchange for this living arrangement; something I’ll touch upon in a future article).
Vagabonds, Indian Beach © Peter Fristedt
What Type of Traveler Are You?
Do you want to simply travel and enjoy what the world has to offer? Or would you like to plant roots wherever you go and spend some serious time in each location, exploring beyond what the average tourist sees?
If you really want to stretch your travel dollar and keep the “magic number” low, then you may need to consider working in trade for your accommodation. The digs won’t always be terrific and you may need to share some space with roomies, but you’ll only have to work part-time and you’ll save on the single biggest expense of traveling: accommodation.
Here’s a resource to help you find ways to travel rent-free if you think you may fit into this category.
Where Do You Want to Travel?
The cost of living in Asia and South America is much less than it is in Europe and North America. Your magic number will depend largely on where you would like to travel (and the degree to which you want to do the touristy tours and packages).
Will You Be Earning Money on the Road?
Stay tuned for the specifics of earning money while traveling in a future article. For now suffice it to say that whether or not you will be earning money on the road drastically affects how much money you need to get started with your travels.
Calculating Your Magic Number
There is a fine art to calculating the magic number you need to manage your finances as a vagabond. Here are some factors to take into account. Record them in your travel journal and insert the figures you feel are appropriate. In a later issue of this series, we will get more specific about the cost of living on the road and how to keep expenses low.
Flights
Always, always — always, leave more than enough money in your “magic number” account to hop on a plane at a moment’s notice to go home. If you have a return ticket, then you will likely be able to move the flight up in a pinch by paying an administrative change fee and flying stand-by. But you may not want to count on it. Better safe than sorry.
Accommodation
Depending on where you plan to travel, this number will vary. Allow a little more than what you think you’ll need, and you can’t go wrong.
Food
Inevitably this expense will be more than you think it is. From dining out spontaneously with another group of travelers for drinks, to not being able to resist some exotic street food, to being horrified at the price of groceries or that comfort food you are craving in a faraway locale — expect to spend more than you think you’ll need.
Excursions
Even if you are traveling frugally, you’ll want to take a trip or two once you’re there. This is hard to plan for financially, but if you have any excursions or tours you expect to do, certainly allow specifically for them.
Transportation
In some places like Australia, it is common to buy a car, and have the seller repurchase it from you when you leave the country. In other places, you may need to rent a car if even for a short time. When you can, take the frugal (and environmentally friendly) route by choosing to ride by bus or train. You’ll see more, experience local culture, and extend your travel dollars that much more.
Remember to include extra provisions for taking a late-night taxi from the airport when you arrive, or other unexpected extras.
© Naked Confession
How to Invest your “Magic Number” Money
This is a short-term investment, and once you are on the road, you will need fairly easy access to it as you travel. However, this doesn’t mean the money should be sitting in your bank account. There are a number of problems with using a bank account as your “magic number savings account”:
- The money is too accessible, and during the saving stages you are more likely to spend it.
- Once on the road, if you get robbed your thief can access this money all too easily with your bank card and pin code.
- The rate of interest paid by bank accounts is absolutely pitiful.
Instead, choose a high-interest savings account and dedicate it solely to your trip. You can find these accounts at institutions like ING Direct, credit unions, and even your bank if you look carefully. Here are the general parameters you are looking for:
- Interest rates around 3-5%/year (at the time of this article being written)
- Guaranteed savings
- Relatively easy access to your money — online preferably. You should be able to transfer money without penalty to and from this account within 24-48 hours.
Sadly, there is no golden rule for how much money you need to become a vagabond or travel long term. As you can see, there are many factors involved, and your personal comfort level in knowing you have enough is not to be underestimated.
Stay tuned for more tips on what it takes to become a vagabond, including the practical logistics of getting ready, earning money on the road, and the cost of living a vagabond’s life.