*The picture above is from an amazing trip to Aruba my brother and I took in December.
Taking The Leap
In my November monthly update, I mentioned that Whitney and I have been discussing transitioning away from full time employment to take time off and travel internationally. This is something that we have both been very excited about since we have limited experience traveling outside of the United States. As of two days ago, we booked our one way trip to Europe (a little scary) in July to start our journey (which will include the UK, Morocco, and SE Asia). Now that the trip seems somewhat real with the first leg booked, I want to share our plans with you guys. This post will mainly focus on the strategic and financial planning that has gone into this trip, and I’ll write a separate one about the trip itself.
By taking this trip, I will be cementing my semi-retirement starting this year at age 29. For those keeping count, this will be after only 3 years of full time work with a massive 80-90% after tax savings rate and the benefit of a huge bull market. Why am I referring to it as semi-retirement you ask? Our current plan is to continue to work 6 months per year taking travel physical therapy contracts, while traveling both internationally and domestically the other 6 months of the year. We plan to do this for a couple years, depending on how this first one goes in 2018. And then later we may settle down into a more “permanent” home. Or maybe not.
I have to admit that for the past 2.5 years since first finishing PT school, I have been extremely focused on my financial independence number and getting to it as soon as possible, which has occasionally added additional stress to my life. I’ve spent as little as possible (including traveling for work in our fifth wheel camper the past two years), taken minimal time off of work, worked overtime whenever possible, taken part time work to make extra money, made a hefty amount in bank account and credit card sign-up bonuses, and started this blog which is now bringing in some income as well. After so much dedication to working as much as possible and focus on finances, I’m excited about the shift to a more relaxed lifestyle with more built in travel and leisure time!
Taking a Look Back
Working so hard and being so focused on finances may sound crazy to some of you, and sometimes it sounds crazy to me as well, but Whitney and I have also had some amazing experiences since graduation and made sure to not limit ourselves just because of my financial goals. We have taken countless weekend trips all over the east coast, staying in Airbnb’s or using free hotel nights. Some of our favorites have included: New York City; Boston; Bar Harbor, Maine; Newport, Rhode Island; Stowe, Vermont; Quebec City; Montreal; Nashville, TN; Asheville, NC; Greenville, SC; Charleston, SC; and Savannah, GA. We also took a 6 day all-inclusive vacation to Jamaica for free with credit card rewards. Whitney went on some trips with her family, and I just got back from 6 days in Aruba with my brother. The reason I mention all of this is to emphasize that even though Whitney and I have both saved a lot and made huge strides toward financial independence, we have made sure to have fun and explore during this time in our lives.
A big reason for me wanting to no longer work full time all year and transition to semi-retirement now is due to the stress I’ve put on Whitney and myself by always trying to work as many days per year as possible within the IRS guidelines for travelers. We’ve made sure to spend at least 30 days per year at our tax homes and duplicate expenses to ensure that we have everything in order legally, but besides that I’ve pushed us to work nonstop. The times that this is a problem is between assignments when we have only a weekend to pack, hook up the camper, drive to the new location, unhook the camper, unpack, and start our new jobs two days later. If everything goes smoothly then it isn’t a big deal and works out well, which we thought would always be the case for us and was a huge perk with living in the camper compared to having to rent an apartment and get all of that set up like other travelers do. However, we have found out that it rarely goes as smoothly as we expected. Between truck and camper problems, there is almost always something that causes delays which puts us in a bad situation and becomes stressful very quickly. We have been fortunate that our camper/truck problems have never caused us to be late to an assignment, but it has certainly made it stressful and we have cut it very close. From this point on, I’m done with rushing from one contract to the next and have decided that it will be much better for us to have a week off between assignments to account for delays and problems. Money is important, but reducing stress in our lives is invaluable. With all of that said, I’m extremely proud of how hard we’ve worked, the quick moves we’ve made, and the amount we’ve been able to save in this first 2.5 years of being travel physical therapists, so I wouldn’t change anything, even though I have learned along the way.
Looking Toward Our Financial Future
Let’s look at where my finances are now, where I should be in July, and how I’ll be able to afford to transition to semi-retirement. Some of you might think that only working 6 months or less per year after a full time working career of only 3 years is not possible and irresponsible. I don’t blame you for that, but in reality I’m very close to full financial independence right now, so working only half the year is way more than enough to cover all of my expenses. As I mentioned above, I’m currently saving between 80-90% of my after tax income each year. By transitioning to working only 6 months per year, my taxes will decrease significantly. So, even though I’ll be working about half the hours, I’ll still make over half of my normal yearly take home pay! I’m estimating that when working 6 months per year, not only will I be able to cover all of my expenses for the year, but my savings rate will still be around 50-60% due, in part, to a decrease in my taxes!
My original goal was to work full time for 5 years as a travel PT to reach FI. Over time my savings rate has increased and I’ve decreased expenses, which has caused my FI goal to get progressively closer to the present. (And as you can see from our Plan for the Next Four Years that we wrote in May 2016, our actual travel PT plans have changed a lot from then to now). I noted in my post from June 2017 that when I updated my financial independence number based on a more realistic expectation of my future expenses, my FI date jumped much closer. In my original projection from about two years ago, I was on track to reach full financial independence (based on increased future expenses) by September 2020 at age 31. As of writing this on 1/7/2018, my projection to reach 25x my predicted future expenses is April 2019 at age 30. In addition to gradually reducing expenses, making more realistic projections regarding future expenses, and increasing income, I have benefited greatly from the bull market that has persisted since I first began investing which has pushed my FIRE date closer and closer. Based on my current expenses, I am getting very close to financial independence already, but since my expenses will increase in the future with children, I am basing all of my projections on that. As I’ve mentioned in posts in the past, my goal has always been based on the “4% rule” which means I’ll need 25x my future anticipated expenses to consider myself financially independent. With this in mind, below I’ll list where I am now, and where I’ll be in July when we embark on our trip based on my projections.
- 20.17x current expenses
- 16.81x future anticipated expenses
Prior to leaving for Europe:
- 25.17x current expenses
- 20.97x future anticipated expenses
There are a few things between now and July that, in addition to my normal savings rate, will boost my net worth. The first is a decent sized tax return (around $2,500) from 2017, due to maxing out my 401k and traditional IRA this past year. The second is my HealthyWage weight loss competition that will end in April. Each month I’ve been making $500 payments toward my bet and haven’t been including that money in my net worth. That means that assuming I win my bet, my net worth will jump by about $5,000 in April, even though $4,000 of that will have been my own money that I bet with. The third thing is that we plan to sell our truck and fifth wheel camper before we embark on our trip, in order to avoid additional costs to store them, personal property taxes, and registration/inspection. I don’t currently include my half of these assets in my net worth calculations, so depending on how much we are able to sell them for, I should get a big bump in my net worth there.
Being at a projected 25.17x my current expenses in July is what has really given me the confidence to make semi-retirement a reality. I’m anticipating that since the majority of our trip will be in southeast Asia and most of our flights will be free with airline miles, my expenses while traveling will actually be very close, even possibly less, than my current expenses. This means that I could potentially spend the second half of 2018 outside of the country while living on 4% of my net worth! While out of the country, I plan to spend extra time working on and growing the blog. In 2017, income from the blog (including referral bonuses from helping some of you get started with travel therapy) covered about half of my yearly expenses! In addition to those travel therapy referral bonuses, the other income came from affiliate and referral links from things that I use such as: MedBridge, HealthyWage, and credit card referral links that I’ve shared in various posts. That is without having any ads on the site, which is something I’m considering implementing in the future. I really appreciate all of you that have supported the blog financially! I’m conservatively planning for income from the blog to cover 25-50% of my expenses in 2018 and also planning to make some additional money with more bank account and credit card sign-up bonuses throughout the year. I’m fairly confident that, if I can keep my spending in check, I’ll come back in December with a higher net worth than I left with in July, which would be amazing after a 5+ month trip. My goal is to spend $6,000 or less in the 5-6 months that we will be out of the country, but I can afford to be a little lenient there if needed.
I have certainly spent a lot of time strategically planning out my finances in general and in regards to this trip. I have encouraged Whitney to do the same, but at this time she doesn’t have a formal financial plan or budget like mine. She is considering tracking her expenses for 2018 more closely in order to better see her financial picture. But in general she has been able to save a significant amount of her income as well and will be in a good position to take the second half of 2018 off of working. With the way that we have planned out the trip, we will definitely be saving a lot through the use of credit card rewards and AirBnBs, as well as generally the low cost of living in SE Asia which will make up the majority of our trip. Overall we are very excited for this next phase, and we are very pleased with the flexibility in our work/travel lives that travel physical therapy, our savings rates, and our financial choices have allowed us.
⇒⇒⇒ CLICK HERE to check out the next post (part 2)⇐⇐⇐ to see the specifics of our trip!