One of the questions we get a lot during our adult gap year is how we manage our money while we travel. Here, I will cover a few of the basic principles we follow that ensure we stay out of financial trouble, keep our funds secure and have access to our money during your gap year. Some of you reading this will find that these principles are not only applicable to travel but, I believe they are universal and are beneficial to everyone.
1. Have an Emergency Fund Before Starting Your Adult Gap Year
It goes without saying that this is vital for anyone’s financial plan. We lean towards having 6 months available especially since we may need additional time to settle in when we return home from our travels. Suppose we need an emergency flight home or suddenly become seriously ill, then we would depend on this emergency fund. Not the most fun thing to talk about but necessary.
2. Don’t Spend Money You Don’t Have
After paying off all of our debt, we committed to no longer spending money we don’t have. It is simple but can be very difficult to handle at times and it is one of the reasons we don’t suggest having credit cards unless you can commit to this principle. This allows us to set a financial goal based on the amount of money we needed to travel without going into debt. There is no better freedom than having no debt payments. (Five stars – would highly recommend LOL) Simple put – live within your means.
3. You Need More Than One Bank Account for Your Adult Gap Year
At a minimum, I suggest having three bank accounts. This may seem excessive especially if you don’t have a ton of money but, it’s important to remember that the banks are like any other product or service. You need different accounts for different purposes. Here is a quick breakdown:
- Bank account 1: Emergency Fund. Thie one we went over earlier and there isn’t much to breakdown here. You want your emergency fund in a place that is separate from your basic spending. Bonus points if it’not easily accessible (i.e. requires a trip to the bank or some type of online transfer). You do however want it to be easily available so I would suggest a bigger naming institution (high savings rate, money market, etc.)
Note: Sometimes not having this emergency fund easily accessible can be uncomfortable but typically the bigger the emergency the longer you would be able to get the money. For example, you will have more time to get the money together to buy a new car if your current one is starting to fail than if you need new a new pair of sneakers for a couple of hundred dollars. One can be an emergency, the other is not.
- Bank account 2: Normal expenses and spending. This account is the one for automated payments (for things like streaming services, phone bills, car insurance, etc.) or paying off credit card monthly statements. Remember, we are talking about paying off the entire amount every month.
- Bank account 3: ATM withdrawals while abroad and secondary to 2nd bank account. We use the Charles Schwab Debit card because it returns all of our ATM fees regardless of where we are. It also serves as another bank to use for payments and spending if needed. Sometimes when traveling, your bank may freeze your accounts for suspected or actual fraud. Having this account allows you to continue with your journey while settling fraudulent activity. Another possibility is just simply losing your main spending card. The point here is to use this account as a backup.
4. Traveling Slow can Save You Money
Let’s face it, you can’t see everything in the entire world. Even if you travel to every county, you wouldn’t see every city or town. With that in mind, it’s important to have an idea of the general areas you would like to visit.
The reason is that transportation, more than accommodations and daily spending, will often be the most expensive aspect of your journey. Often, the plane ticket cost to various locations can cost the same if not more than the rest of the trip expenses combined (especially as a couple). Imagine taking a flight every week – it adds up!
Traveling slower has its rewards. You can often get discounts for longer stays at AirBnBs. You spend less money on things like toiletries when you can buy in bulk vs travel size. Most importantly, you get familiar with the city, neighborhood, and the people you are visiting. Consider adding extra days while planning.
5. Consider all of Insurance Needs to Make Sure You are Covered
Insurance is always a tricky topic. You need some but you don’t want to overpay for too much. We highly suggest thinking about what you need to have covered rather than throwing all insurance by the wayside. We’ve heard our share of horror stories where travel insurance could’ve helped dramatically. Here are things to consider when thinking about what insurance you’ll need.
- How will you be taking your Gap year? Are you doing a leave of absence or resigning? During a leave of absence (aka sabbatical), a company may allow you to keep your medical benefits. If so, it may be worth considering a leave of absence.
- Travel insurance is not the same as health insurance. Travel insurance covers incidentals and injuries while on the road as well as transport home if necessary. Health insurance is the insurance that most people already use. It covers things like preventative care, doctor visits, and emergency care in your home country.
Pro tip: Read the fine print. Our travel insurance only covers accidents on scooters (a common occurrence in Southeast Asia) if you have a motorcycle license. Pay attention to these details.
- Review the benefits of your credit cards. Some of the cards we carry have travel insurance when you book using your card. Be sure to use all that’s available to you before purchasing anything else.
- If you travel with expensive equipment, consider covering them as a rider in addition to your current renters or home insurance policy. Our travel insurance only covers items up to $500. Our cameras and laptops far exceed those prices. We had to add these items to our renters’ insurance policy for less than $15 a month.
Thanks for checking out our favorite money tips! We hope this helps you on your financial journey and your gap year planning. Let us know your favorite tips below. If you have questions, leave a comment and we’ll do our best to answer.
One more thing: if you enjoyed this post, please share it!