It’s always interesting when I tell people I left my career in Corporate America without any plans except to travel.
Without question, the most common response is:
“Wow! Good for you!!”
However, this is usually followed up with:
“So, what are you going to do for money?”
A lot of people are fascinated to understand the financials behind gambling with my traditional 9-to-5 job given its comfortable and steady paycheck.
I have a lot of thoughts on why so many people struggle with this concept but will save that topic for another post.
Instead, this is part 1 of a series of articles where I share the financial strategies I used to quit my job!
My hope is that these articles will inspire you to rethink some of the financial things in your life now so you can act on them sooner rather than later!
Simple Calculation
I knew I wanted to quit my job to travel and live abroad at some point so I needed assess my financial situation to see how I was going to pay for that.
Historically, I was diligent about having a savings account and investing for retirement.
However, I did not want to rely exclusively on these funds to finance my travel so I was looking for more ways to finance this endeavor.
Basically, the bare minimum amount of money I needed was a function of two things:
- The cost of living
- Time without money coming in
The resulting equation to calculate how much I needed was pretty simple:
Estimated monthly expenses * number of months without a job
Cost of Living Around the World
The internet was a great source of information for the cost of living around the world, so I scoured blogs, podcasts, and YouTube videos with an emphasis on travel, business, and/or lifestyle. My interest was especially in where people were going, why, and how much it typically cost to live there.
Also, I connected with various digital nomads, expats, seasoned travelers, and entrepreneurs who are geo-arbitraging to bootstrap a new business. Listening to their stories and being able to ask them my own question was invaluable. These are the people out there living my dream so it would make sense for me to leverage their wisdom.
When it comes to the cost of living in various places, it’s all over the board.
There are many places in the world where you can live a very high standard of living for around $1k per month. This is one of the reasons why so many people flock to places like Thailand, Indonesia, and countries in South America, just to name a few.
To contrast, the monthly cost of living in New York City is currently estimated at around $5k per month and San Francisco around $5.8k. I pulled these numbers from a great resource I found called Nomad List.
I’m sure it’s no surprise to hear your US dollars go a lot farther living in places like SE Asia for an equivalent (or better) lifestyle than somewhere like New York City or San Francisco in the US.
Can you imagine saving $4k+ every month by swapping life in New York City for one on the beaches of Thailand? That’s $48k savings in just one year! This is geo-arbitrage at its finest!!
Splitting the difference between Thailand and New York City, I estimated my monthly living expenses to be about $3k per month.
The other “benefit” I had was I was not planning to solo travel. Therefore, some of my living expenses would be shared which would save me money.
Time Without Income
Time was the other important factor for determining how much money I needed.
I had to decide how long I wanted to go without a job or any money coming in.
I originally stated dream as: “to be abroad for longer than a vacation which meant at least a month.”
In this case, I knew I under-shot my dream and needed to travel at least six or twelve months. I felt my time away traveling needed to be long enough to make it worth my while of quitting my job.
I also spoke with a couple friends who quit their jobs to travel for a year. One friend was in his mid-20’s and the other friend was in her late 40’s.
They both said taking a year off to travel was an amazing experience and they highly recommended it for me. These were two very smart and successful people so I took their thoughts and opinions to heart.
In the end, I decided to go for at least one year without money coming in.
[This was my target but I was prepared that it could turn out to be more or less than 12 months too. I don’t have a crystal ball…]
The Dollars and Sense
Putting these two numbers together, I needed about $36k to travel and live abroad without an income for one year ($3,000/month * 12 months = $36,000).
With that dollar amount in mind, my next step was to figure out how I was going to get $36k in my savings account!
As the common saying in the business world goes:
There are only two ways to make more money:
- Increase revenues
- Decrease expenses
As you will see below, I did BOTH.
1) Increase Revenues
In order to increase my revenues (aka get more money coming in), I leveraged the heck out of Craigslist, Facebook Marketplace, and consignment shops to sell as much as I could.
I joked (but was actually serious) that pretty much everything I owned was available for sale.
I was able to sell 75% of my household belongings including things like: indoor and outdoor furniture, indoor and outdoor tools, home décor, electronics, dishes, small kitchen appliances & gadgets, clothes, shoes, rugs, etc.
Don’t get me wrong – I appreciated (almost) all the nice things I had. I just wasn’t going to let them get between me and my dreams.
However, my biggest sale came when I let her go…
My Athens Blue Infiniti convertible.
I remember telling someone a few years ago that I couldn’t imagine my life without a convertible but now it had to go. With my new goals in mind, I just didn’t want it anymore.
I sold it within a month.
With ALL sales combined, I increased my savings account by about $15k.
2) Decrease Expenses
My savings increased significantly over the course of a year with a personal finance makeover.
I researched, prepared, and analyzed my monthly budget and spending habits.
Based on this analysis, I identified and reduced or eliminated some living expenses from my monthly budget.
The illustration below is a view of the “before and after” of my personal budget:
Basically, with lifestyle changes and more discipline with how I spent my money, I saved about $2k per month.
Over the course of one year, this amounted to an additional $24k in my savings account.
I would like to share the detailed real life changes I made that support all the savings illustrated above.
However, since this post is already long, I will share all the details and strategies in an upcoming post.
Freedom
In total, I was able to save around $40k:
- $15k from selling my stuff
- $24k by reducing my monthly spending.
After one year, my total savings EXCEEDED my estimated need of $36k.
Once I had at least an extra $36k in savings, I felt financially prepared to quit my job to travel and live abroad for at least a year.
Read this article to see how the story unfolded when I quit my job; it’s pretty interesting…
I know not everyone can ramp up their savings in a year and quit their job.
Therefore, my hope is everyone can learn something from my story and apply it in their life. 🙂
As always, please leave your thoughts or questions in the comments and share if you think others would be interested in this content!
Stay tuned to learn more details, strategies, and real life examples of how I saved $2k each month!!