Before you go on any long-term travel journey you should prepare your finances
Financial planning for long-term travel is one of those things you can’t help but tackle head on. You need money to travel.
Many people write about how to earn money to support yourself when traveling. I’ll try to cover this a little later on. But before you rush off onto a plane with your cash you should really have spent a few months physically preparing your finances.
You’ve saved and invested in long-term travel for years. Don’t see it all get sucked up by the giant travel vacum cleaner. Read about what to expect and how to prepare your hard earned cash for long-term travel.
Leaving your job to go long-term traveling
Do prepare for this well in advance. Even if you hate your job with a passion and have imagined your last rebellious day for years: leaving on good terms is a better idea than mooning your boss. Remember if applying for another job abroad you’ll often be asked for a reference from your last employer. This might not happen straight away but a year or two down the road you might be applying for a job overseas where that reference will come in handy.
Do make sure your boss is the first to find out you are leaving and not the last.
Be kind to your boss: Give your employer plenty of notice to prepare for your leaving. Not only will this make you look good but it shows you care about the company. A good “out” is to say you’re planning on long-term volunteering to give back to the world. Who can argue with that?
You might also use the same excuse to get a written reference now, or write-up a draft yourself to speed things up. Many employers today do not give out written references unless a new employer asks for one. Explain this can be problematic in a small rural village in the middle of nowhere land with no electricity.
Basically what you are after is a “Dear Sir or Madam” generic reference to stand by you in future. In two to three years your boss might be gone and having a letter like that will help in gaining employment.
You might also consider collecting up a few more of these reference letters from past employers too.
Vacating your office: Try to avoid using work equipment to research your long-term travels and don’t forget to delete your personal emails, and internet history before you leave – just in case.
I would seriously avoid all manner of things like asking for a raise before you leave, hand in your notice or to help fund your travels.
Avoid rubbing it in with co-workers: Try to avoid bragging to your colleagues about the fact you’ll be away for years traveling the world. A lot can happen in those last few months to both change things, and make life difficult at work.
Does long-term travel effect tax and social benefits at home?
For a start do make sure to pay any outstanding taxes you may owe. If you have any pension funds or make contributions to your social welfare system my advice is to consult a financial advisor for the best advice on how to handle this within your countries system.
You might still have to pay tax: If you are going to be earning money when traveling then there’s a strong chance you’ll need to pay tax on it back home. This is dependent on your country of residence but do read on for other considerations.
Do remember when reading about financial planning online that your own countries tax, welfare and financial system may differ from the advice you are reading
Do find out if you need to contribute to your country of residences state system. Many people who leave their home countries do not realize that by not contributing to the state may mean you will not be able to claim benefits when you return after an extended absence.
This means that if you return home after several years abroad you may not be able to claim state medical benefits, social welfare entitlements or other public funded utilities.
Again, make sure to check a local financial adviser in relation to your home countries laws.
Using investments at home to support your long-term travel overseas
If you have worked hard enough through saving, or got lucky enough, you might have a large pool of cash both to travel and/or invest. Having a financial resource that can provide you with a monthly income whilst traveling is an ideal scenario to be in.
House owner: Renting out your house may both pay for your mortgage or help fund your travels while away. However do take additional costs like housing management, insurance and repairs into account.
Running a business back home: Likewise having a small business at home that provides an ongoing income is another viable option. However again you may have to reinvest money into hiring additional staff and take increased communication fees from abroad into account.
Savings & investments: If you plan on using your savings to fund your travels over a long time you might look into secure term-deposits or stocks or bonds for the funds you will not be immediately using. General banking rates these days are often questionable when it comes to interest on savings so consulting a professional banking or financial planner will help you for your own personal needs.
Preparing your banking for long-term travel abroad
Make sure you have online banking: Online banking may be essential to you unless you have someone at home looking after your expenses and or income. If you are doing it yourself talking with a point of contact at your bank will help tremendously. Get all your codes, passwords and anything else you need to operate your accounts online well in advance to make sure they work.
Be sure to clarify with your bank about the countries you will be traveling in as many log ip addresses and if you show up accessing your account from another country it might create an alert.
Handing your bank account over to someone else: If you are planning on being abroad for years you might want to consider appointing someone to legally take control of your money should anything happen to you. Or open a joint bank account with someone. That way if you get stranded somewhere or incapacitated someone can help you out quickly and without a lot of formalities.
Using Credit / Debit cards abroad
With any form of card you are using overseas companies need to be aware or where you will be traveling to otherwise you might get a cancelled card. PayPal too needs to be aware of these things. Read more about how to deal with PayPal when traveling here.
Also try to remember that buying online may still be cheaper than locally. Think books, clothes, or luxury items. Just watch out for import tax!
Cancelling bills, subscriptions and other fees
If you subscribe to any service that debits your accounts or cards be sure to cancel them well in advance. Many companies are notorious for not cancelling promptly. You may have to talk with a bank or credit card company to ensure these subscriptions have been cancelled. This is much easier to do at home than overseas.
Avoiding banking charges when traveling overseas
With financial planning for long-term travel do take into account the charges levied on you for withdrawing or transferring money overseas. Many banks will charge you to use their service to keep money with them, transfer money from them and then again to exchange money to another currency. While overseas you’ll be using different banks who will again charge you for using their services.
Banking charges can cost you up to USD$10 per transaction. That’s a lot of money just to be able to access your money!
Do some research before leaving. If necessary change banks to a bank that does not levy charges when accessing your account overseas. Try to find the names of the banks your bank has affiliate statues with abroad. Very often these banks will not issue with a charge.
Wade Shepard from Vagabond Journey recommends:
The key to not paying high banking charges when traveling is to, simply put, not use a bank that charges big international withdrawal fees. Before setting off to travel internationally, shop around for the bank with the best deal for international transactions and move your money. I pay a 1% VISA transaction fee on international ATM withdrawals, and my bank takes none of this. If you’re bank is going to charge you for accessing your own money, it may be time to look for a new one. If you’re from the USA be sure to check out brokerage firms like Charles Schwab and Fidelity, as they have some excellent banking plans for international travelers, and also look into some of the smaller credit unions.
Banking overseas when traveling
Open a foreign bank account: It’s not easy. But it’s possible. If you stop traveling in a country abroad for any length of time you might want to consider opening a bank account there. Either to deposit money earned in said country or perhaps transfer money into it and avoid international ATM fees.
In many cases you’ll need to satisfy the bank abroad that you are either a resident, working, or have viable funds before being considered. Again this will all change from country to country. And you probably will be asked for anything from utility bills to driving licenses to passports and certain amount of money to open the account.
Understand not all banks work the same way: Issues to look out for are quite literally getting to grips with a whole new banking system and rules. In Nepal for example you can earn up to 9% interest on your savings. But, you can only withdraw so much every year. Also beware than opening a bank account in a foreign country without being a resident may leave you with little ground to stand on should any issue arise.
Benefits of opening a bank account overseas are to avoid international charges, deposit locally earned money, pay local bills show a proof of local earnings and if you plan to live overseas in said country a way to start your savings securely.
Additional financial advice from Earl from Wandering Earl
“Don’t rely on one method when it comes to money. You should carry some cash (US dollars or Euros), have a credit card and at least one debit/ATM card. Even if you notify your bank of your travel plans, there will undoubtedly be a time when your bank blocks your account or your ATM card won’t work or your credit card isn’t accepted. Having a little cash on hand as a backup plan is always a good idea in case such a situation arises.”
Financial planning for long-term travel includes saving & budgets
Budget your yearly expenses: Again this goes a little beyond what this article is meant to cover. However in financial planning for your long-term travel journey you should draw up a yearly budget of your known expenses. These would include things like health insurance, bank charges, taxes, etcetera.
Keep saving: If you do plan or are earning money while long-term travel you should, just like any non-travel based job, be considering using part of your earnings for your future. This includes savings, pension plans or investments, etcetera.
All the above should be given consideration before leaving on your journey as they are a lot easier to set up before you go rather than when you are already traveling.
Get an education before long-term travel
Don’t skip over this bit: A good college education in this day and age will often make it easier to make a living both after and before long-term travel. You will often read me writing about “travel is the best education you can get”, which is true. However that does not mean everyone else will think the same, nor does it provide ultimate proof that you are skilled in one particular area that requires specific competence.
Get a certified education before traveling then go out and get a real education in the world
At some stage during long-term travel you will need to earn money. Possibly even get a job overseas. The only way this will remotely happen in this day and age without working illegally is by showing you have a college/university degree.
With a degree you can fully open up the gates to being financially independent when long-term traveling.
“Travel itself is an education. But if you want a formal or accredited one, why not enroll in a school or university abroad? It’s the best way to kill two birds with one stone!”
Should you pay off a student loan before long-term travel abroad?
Yes. Unless you have some form of income whilst traveling that will pay off the loan for you. And, unless you have a specific load agreement that will suspend repayments if you are not earning.
Chose your loans carefully: Some student loans can be suspended if you go volunteering with qualified agencies. Some of these volunteer agencies will give you a remittance at the end that can go towards paying off your loan.
You could also take a job overseas teaching English and try to payback your loan that way.
What’s really important is to note in paying off student loans vs travel is “life”.
Free from study, the world awaits and so too does responsibility.
Getting a financial bailout should not be an option: It’s easy to get caught up in travel and put debt repayments in the back of ones mind. Then when the cash dries up look to parents or another loan for a bailout and face years if not decades paying every one back.
Personally, I would settle all debt before long-term traveling. With only having a volunteer / job guarantee payout that would end the dept as an exception.
Then again, one could always argue that volunteering / working overseas is not strictly “traveling”. But, it is a frequently asked question here.
Study abroad option
Again this is going a little beyond the scope of this article. However if you do not have a college education and want to travel you may want to consider studying for a degree overseas. While visas, nationalities and money may stand in your way the benefits might be that a degree overseas is cheaper than back home. Learning a new language and culture. Starting a career in another country.
It’s a topic onto itself but one that’s worth noting in regards to financial planning.
Earning income when traveling long-term
Pay your taxes: This article is specifically about preparing your finances before long-term traveling and not about how to earn money overseas. However in planning do be aware that if earning overseas you may be liable to pay tax back home or at least must contribute to social welfare systems. Let alone within the country you now reside in.
I have met people who traveled a long time and went home only to find they owed money (tax) due to not filing a form to state they were unemployed after leaving their last job
Take advantage of the system: At the same time you might also be able to avail of tax breaks due to reduced income, or added expenditure. Claiming tax back based on what you are earning in terms of expenses.
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A final note about Long-term travel financial planning
Each country has different laws, taxes and banking systems. It’s not possible to realistically cover them all here. I would however advise you to start preparing your finances at least one year before you begin traveling.
- Give plenty of notice when leaving your job and try to get a reference letter
- Find out if you need to contribute to taxes or the state of your home country before you leave
- Find a bank and/or credit card company that will not charge you for overseas transactions
- Make sure your bank knows you are traveling and that you have a point of contact
- Cancel all your direct debits payments, subscriptions and other charges at least six month before leaving
- Create an online account and a separate account for overseas earnings
Have you encountered some other tips for preparing your finances before going long-term traveling?
Long-term travel planning is not something many people have written in-depth about from beginning to end. I’ve been long-term traveling for over 7+ years. And I’ve been long-term travel planning for most of my life. Read more of my articles on long-term travel