Throughout May, Nathalie dives into money management for travelers in five parts. Which credit card is best? Can a regular ol’ traveler invest her money? Is it possible to earn and adventure at the same time? Nathalie has your most burning questions covered, so you can put those money worries aside and prioritize what truly makes you happy: travel.
So now that you know why you’re saving money, and where to put it during your travels, how do you get to the point of actually leaving for that adventure?
You could stick it out in your 9-to-5 job and wait for your two weeks of vacation every year, or… you could opt for slightly more unorthodox (but way more fun) methods of funding your perpetual travels!
Remote Active Income
This is what most people think about when they imagine travelling for the rest of their lives. The premise is basically that you still work for a living, but you have the advantage of being location-independent — your job travels with you.
In the Internet age, this is increasingly more common, which is a beautiful thing. Consider this: The entire staff of Wanderful is location-independent!
So how do you keep working but become location-independent?
Option #1: Ask your existing company to work remotely.
Depending on the company you work for (and especially the field in which you work), this can be easier or more difficult. Something that we often forget is that no matter the circumstance, there is nothing lost in asking!
If you’re granted a more flexible option, explore all the possibilities. You could work remotely but check in physically once a month. Or you could take a pay cut in exchange for exponentially more vacation time. In this case, think about your cost of living in a foreign country and how much lower that might be than your regular cost of living — it could be worth the pay cut, depending on the increased number of vacation weeks.
If the company you work for doesn’t accept remote work, you could look for another company and stipulate that remote work be a part of any offer, or move on to Option #2.
Option #2: Work for yourself.
In 2016 the “gig” culture is very much alive. There are more consultants, freelancers, and contract employees then there have ever been, and this number will only continue to increase.
If you work in a field where work is easily done with a computer and an Internet connection, you’re golden. Fields that are easy to freelance in include a wide range:
- Administrative work
- And so much more
Working as a freelancer allows you the advantage of choosing your work and truly being independent in terms of the amount of work you do and when you do it.
Fast advice: Keep in mind that you likely won’t have benefits and will have to be far more disciplined in keeping track of your money, since paychecks won’t necessarily roll in on a regular basis.
So far, remote work sounds like an ideal situation, doesn’t it? So much freedom!
There exists an even better option with even more freedom: passive income. Passive income is precisely what it sounds like: Money comes in, and yet you don’t have to work for it. And, no, this option isn’t only for those with massive inheritances. This is for anyone, including you.
Passive income is derived through investing. The most common investment vehicles are in the stock market and real estate, so these are the two I’m going to talk about.
Option #1: Invest in real estate.
Between the two options, investing in real estate is the least “passive” of the passive-income methods, simply because there are more actions you need to take upfront — think: buying the actual real estate.
However, after the purchase of either a rental house, duplex, or small apartment building, you can theoretically choose to do as little work as you want. The tenant(s) cover the costs of your mortgage, taxes, and maintenance and, if you’ve done your calculations correctly, should provide you with extra income after every month.
What makes this great for travelers? You can hire a building manager to pick up rent and take care of any emergencies while you’re away on your fabulous adventures.
Option #2: Invest in the stock market.
This is the most passive of the passive-income methods and, contrary to popular belief, doesn’t require much know-how other than basic math and, occasionally, strong nerves.
Unless you’re a regular day-trader who has the time to research and study the market consistently, buying individual stocks will not only be a waste of time, but you’re more likely to lose money than make any.
Instead, park your investment money in low-fee mutual funds or exchange-traded funds (ETFs). You can access your investment accounts anywhere in the world with an Internet connection, rebalance or recontribute as needed…and that’s pretty much it! This ensures a solid return that you’ll be able to live on.
I could get into the nitty-gritty details of stock market investments, but my financial idol, Mr. Money Mustache, tells it so much better. In his post he goes through the basics of what index funds are in general and how to get started on your own without paying someone else to invest for you. After all, isn’t the entire point of this to keep as much of your money as possible and let that money grow to fund your international explorations?
No matter your investing style and type, there are three things to remember:
- The best time to start investing is yesterday. The second best is today.
- You can be an extremist when it comes to saving, but always try to stay middle-of-the-road with your investment strategy. It isn’t a game — your future traveling self depends on this, so don’t try to beat the market; just keep pace with it.
- If perpetual travel is what you’re looking for, investing won’t be a choice; it will be a necessity. Inflation costs you money with every passing year if you park your money in a checking account. Investing allows you to both protect yourself from inflation and surpass the rates over time. Think about it this way: Every dollar you invest makes you money without you having to do anything. Over time, think about how much extra travelling time each invested dollar can buy you…
A little extra: Credit card hacking for travel rewards
Your investments are generating money by themselves, or you’re working remotely, and life is great.
You want a little more?
Credit card hacking is a method of free or almost-free travel that many people are now trying.
After doing your own research and finding the glorious multitude of credit cards available to you, you might notice that most have some rather exciting sign-up bonuses. Since it’s fun to get your bonus when you sign up for one card, there are some who collect these sign-up bonuses, but while it looks super fun, it’s not for everyone.
The basis of the practice involves signing up for multiple cards, one after the other, hitting the minimum spending limit to get the sign-up bonus, and then either closing the card or simply not using it. After looking through the sign-up bonuses, you’ve probably realized that this can be a useful technique in gathering thousands of dollars per year in travel rewards, but it only works if:
- You are able to control your spending and only buy what you would buy anyway,
- You have an impeccable credit score, and
- You aren’t planning on applying for any big loans, such as a mortgage, anytime in the near to mid-future.
I’ll explain: Every time you apply for a credit card, the provider is going to do a “hard pull” on your credit report, which is simply an inquiry of your credit report to check your credit worthiness. Every time your credit report is subjected to a hard pull, your credit score goes down. While it will come up eventually (after several years of timely payments and such), having a damaged credit score can greatly hurt you in the short-term.
If you have no new mortgage, mortgage renegotiation, or any other credit inquiries coming in the next few years, then, by all means, credit hack away. Just remember, every time you apply for a new card, your credit score will be going down, so with each new card you’ll have a higher likelihood of not getting approved.
This isn’t a game I’ve wanted to enter, considering I have a mortgage at the moment, but it’s an idea I’ve toyed with for the future.
While credit card hacking isn’t for me right now, investing is, and has been since the moment I realized that I can place my money somewhere where it will generate more money for me while I do nothing. This simple principle of compounding interest has driven me to put almost all of my net worth into the stock market and real estate. After all, if I can be surfing in Costa Rica or exploring the northern Canadian tundra and know that I am making money at that exact moment, frankly, that’s pretty awesome.
Did you miss Part 1? Read it here!
Wondering which credit card is the best choice? Learn what works for you!
Nathalie was raised by two immigrant scientists who taught her, from a young age, the value of a dollar and, most importantly, how to align her spending with her values above all else. She has always been fascinated by personal finance, and her deep love of the outdoors and simple living has led her to be a naturally frugal adult. Her parents taught her both the beauty of compounding interest and the importance of living below her means. As such, she is her own financial advisor, re-balancing her portfolio every quarter and investing in real estate in her home city — all on her modest budget.