Debt can often stand in the way of adventure. Any money put towards servicing debt can’t be put towards funding an adventure or investing for long-term goals. So when first tackling the financial aspects of making adventure possible, start by managing, reducing, or eliminating your debt.
Consumer Debt (Credit Cards, Vehicle Loans, etc.)
With high interest rates and the ability to spend more than you have, credit card debt is a very dangerous financial obstacle to long-term adventure travel.
Making the minimum payments may keep the problem out of sight, but that only benefits the credit card company, not you.
It doesn’t matter whether you’re planning to leave on your adventures now or many years down the road, get rid of credit card debt. The interest rates can be crippling, and you run the risk of getting even deeper in the hole the longer you hang on to the card.
This site offers some tips for managing and reducing consumer debt, but you’ll be better off if we point you to the leading publisher on the topic, Dave Ramsey.
I’ve long followed (most) of the financial philosophy of Dave Ramsey. If you have troubles and questions with debt, Dave Ramsey is the man.
Dave’s over-the-air guidance and website helped us establish some rock solid financial foundations for our family, and we recommend his baby steps and debt snowball approach to knocking out consumer debt and putting protection in place to stay out of debt.
Without building the basic financial foundation, which includes getting out of debt and establishing emergency funds to help keep you out of debt, funding an adventure lifestyle will be difficult. It’s not impossible, as there are many adventurers exploring on shoestring budgets, but strong finances are required for the Adventure Possible lifestyle we lead and that we describe on this site. In addition to accomplishing adventure, we aim to highly achieve in business, wealth building, and philanthropy, so avoiding the constraints of consumer debt and establishing a solid foundation upon which we can financially flourish are critical to our goals across adventure, business, and philanthropy.
Depending on your situation, your consumer debt may seem so burdensome you can’t think of a way out from underneath it. Don’t be discouraged, Dave’s site has many examples of everyday folks overcoming mountains of debt.
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Home Ownership and Mortgages Could Help or Hurt Adventure Travel
Owning a home with a mortgage can seem like a huge roadblock to your goals when you’re striving for a long term adventure.
Mortgages are often a person’s highest living expense, and if you had to service mortgage debt while traveling and making very little money, you’re likely to burn through your adventure travel kitty in a hurry.
When evaluating what to do with a home with a mortgage, most adventurers will need to consider selling their home or renting their home.
Selling Your Home Option
If you want complete freedom from your mortgage, sell your property and pay off your debt. Completely eliminating mortgage debt is not difficult in theory, though it proves complicated in practice, involving buyers, agents, attorneys, and emotions.
Since our goal at Adventure Possible is to break away temporarily, for about a year, and then return home, selling may not make sense. If you don’t plan to return to the home you leave, then perhaps sell to remove the financial or mental burden. For us, we do plan to return home, and so we have to evaluate renting the home if we can’t cover the mortgage and expenses while we travel.
Renting Your Home Option
As one of the initial steps, determine what to charge for rent, which is easy to do because the market sets the rental prices. Check comparable rentals in the area to determine how much you can expect to get for your house on a monthly basis. You can do this on your own, or there are realtors who specialize in rental markets.
Let’s hope that rental income covers your monthly expenses, including mortgage, insurance, taxes, and other expenses.
In the best cases, the rent you charge will actually put additional money in your pocket, helping further slow the adventure travel burn rate.
Plan for property management costs and aim to cover those in the rent as well. You’ll almost certainly need someone to manage the property while you’re out, to handle required visits, manage tenants, or even oversee the placement of new tenants.
The cheapest (but not necessarily best) option for property management will be a friend or family member that you can pay a small fee to help you take care of landlord tasks. The more expensive option will be a full-fledged property management company, which can charge up to 10% of monthly rent but remove much of the hassle and perhaps make up for their cost by ensuring your tenant gets placed, serviced, and charged appropriately.
If the monthly rent income doesn’t exceed the expenses, then determine if you can cover the gap with cash while you travel or if you should look for ways to further reduce expenses, perhaps going with a cheaper property management option, finding lower insurance premiums, or refinancing your mortgage to realize lower monthly payments.
If you can’t practically reduce costs, then determine what the gap between revenue and expenses means for your budget and goals.
For example, if you owe $1,000 / month for mortgage, insurance, and taxes and can only rent for $850 / month. You’ll have to decide if the $150 deficit plus property management expenses are acceptable in your budget, as you’ll be covering this gap out of your own pocket, potentially from the money you had set aside for traveling.
Beware that by renting your home, you’re still taking on risk that could jack up your adventure travel plans. Just having someone pay the mortgage does not mean your expenses are covered.
As a property owner / landlord, you’ll have financial responsibilities for big ticket items that break in the house, such as HVAC, water heaters, and roofs.
If you pursue the route to rent your home, plan to have a solid stash of money set aside before you travel to cover unexpected repairs.
If the market won’t support a price that’s high enough to cover your expenses or to an acceptable level so that you can cover the gap out of pocket, or if being a landlord simply doesn’t interest you, then consider selling your home.
Still have questions about what to do with your home? Check out this article for a detailed analysis of whether you Should You Sell or Rent Your Home When Traveling Long Term?
Cars and Car Payments for Adventure Travelers
If you don’t already own your vehicle outright and you’re planning to travel on an extended adventure without your car, then your best action is likely to sell or return whatever vehicle you’re driving before you leave.
Cars generally depreciate in value, and as long as it’s sitting, you’re losing money whether the car is paid for or not. In addition, a car sitting idle for many months or a year will start to decay in various ways, leading to maintenance or repairs when you return home.
If you have a lease, look into early return and lease-transfer options.
If you have a loan, work to pay off the debt. This may involve selling the car and settling the difference with the bank.
You may end up spending some cash to get rid of your car debt, but get rid of it before your travel. When you get back, avoid getting back into debt for a car. We’re big fans of driving old cars and driving them until the wheels fall off, and it’s one trait that’s helped us over the years put more money into savings and investments.
If you’re in the planning stages of an adventure, squirreling away money in an adventure travel kitty, a car taking money out of your budget each month can drag down your progress.
Ditch the car debt and get a low-cost beater, paid for in cash, that can get you through to your adventure departure date.
One more thing. If your adventure includes a car, such as our did when towing an RV across America, then it’s often advantageous to buy the adventure car in cash or own it outright. Don’t take a car payment on the road with you, especially if your income will drop when you travel. Freeing yourself of the financial, emotional, or mental burden of the debt will make for a better adventure experience.
Still uncertain about selling your car? Check out this article detailing 6 Reasons to Sell Your Car Before an Adventure.
Student Debt May Be A Part of Adventure Life
An often unavoidable consequence of the US education system, student loans can be a huge burden. However, managing student loan debt payments can be part of the plan, allowing you to embark on adventure without having to completely wipe away the debt.
With student loans, typically monthly payments stay consistent. You can plan for and continue to pay them as you travel.
This will mean that you either need to save more before you travel, reduce spending on other things while you travel, or find ways to make money and travel so that you can service the debt and fund adventure travels at the same time.
What’s Next? Step 3.
If you’ve got your debt well managed and your credit card consumer debt down to $0, then the next step is to Analyze Your Current Household Spending. before we get on to creating a budget, savings plan, and exit strategy.
What’s Before? Check Step 1.
Revisit the first step in the process, determining your adventure.