The True Cost of Long-Term Travel: More than You Think

By Tim Tonelli

Bookstores and the blogosphere have been inundated for the last fifteen years or so with stories of individuals, couples, and even families with children, that have sold the Honda, said adios to family and friends, and left for a roady that will extend for many months or even years and cross the earth.

I have to admit, my wife and I have been more than a little intrigued at the idea of taking an early-gray gap year, walking away from the grind of the day job, and doing our traveling while we can still climb the steps of Machu Pichu, enjoy some beach time in the Maldives, and survive food poisoning in Jakarta.

When you read the annals of folks who have just completed or are still on such a trip, and you debate whether you should join the pathfinders, the first question that any reasonable person is going to ask is, “Well, how much will it cost?”

Slow Travel

Slow travel has to be far more affordable than the typical 10-day American vacation where we fly to a foreign land, stay at an over-priced hotel in close proximity to our excursions, and cram as many must-sees as we can into limited hours.

The authors of the books and online posts are always generous and willing to disclose their expenditures. And almost all of those that have made long-term treks argue that they can live on the road for less than they were living on in the U.S.

If you consider the costs of rent and car payments and insurance and food in most American cities, then there is no arguing that they are correct, provided you are traveling on a budget and not staying at high-end hotels and dining at pricey eateries. And when you add in how much you are paying in income tax, you will be telling friends, “Hey, I can’t afford not to travel.”

After doing some research and comparisons it looks as though an individual can travel the world for one year for as little as $20,000 (on a tight budget) with costs moving closer to $50,000 if you are traveling as a couple and/or adding in some creature comforts. Of course, this is a huge generalization, and expenses will be as varied as the travelers.

The True Costs of the Trek

On the surface, it seems accurate that traveling the world on a budget can be less expensive than day-to-day life in an average American city. But as I started doing the math, I realized that the explorers were coming up far short when considering the true cost of their trek. Calculating an accurate cost of extended travel is far more complicated than just adding the price of the trip and your lost salary and then subtracting what you might save on rent.

So, what are the true costs of long-term travel? I sat down with a finance professional, who also happens to be my spouse and travel partner, and we tried to come up with all of the factors a person needs to consider. Of course, not all factors apply to every individual. The good news is that there are also some savings in walking away from your 9-to-5 and we will add those back in.

Let’s dig a little deeper into the line items where only accountants usually wallow. This assumes you are not borrowing money to pay for your trip. Also, please note – disclaimer; disclaimer – this is for fun and entertainment and very rough estimating only and the author is not responsible if you have to call your grandmother from Nepal and ask her to wire money because you haven’t eaten in three days.

COSTS

The estimated total cost of trip

Loss of income (take-home only)

Long-term salary loss (reduction in pay when back in the workforce)

Loss of company 401k contributions

Loss of compound interest on savings and investments over a lifetime

Mortgage, rent, and property taxes you are still paying back home, if any

Loss on real estate equity (if you sold a home to travel)

Storage unit back home

Replacing items you sold when you return home (furniture, appliances, etc.)

Global health insurance

Trip insurance, if needed

Luggage, clothing and shoes specific to trip

Global cell phone plan, internet hotspots, etc.

Entertainment, books, and electronics

SAVINGS AND EARNINGS

Rent

Rent earned (are you renting out a home you own?)

Childcare

Transportation, car payments, insurance, etc. you are no longer paying

Education (are you taking time off from school?)

Items you sold off before leaving (furniture, appliances, etc.)

Food and dining back home (now lumped under your travel expenses)

Health insurance (old cost)

Clothing, dry cleaning (old costs)

Cell phone (former plan)

Entertainment (former)

The money you are saving on future travel

WASH  (costs and earnings that will not change whether you are on the road or not. These can all be calculated as zero.)

Passive income

Taxes on former wages (not really a gain)

Student loans

Other loans

You may argue that you are young or that I am missing the point of long-term travel if I am going to become so mired in the details. But if you are not worried about how much this thing is going to cost you in the future, you should be. Your future financial security should be a huge consideration and it’s hard to calculate.

Your salary is going to suffer for years after your return since few us can return to a job making what we did when we walked away, not to mention future promotions being delayed. And can you afford to miss savings and 401k contributions? Albert Einstein called compound interest the eighth wonder of the world.

Your missed contributions will be significant over a lifetime. Let’s say you skip putting $5,000 into retirement and your employer matches another $5000. That will add up as a loss of $40,000 over the next thirty years, and that is a conservative estimate. If you sell your home, can you afford to miss out on real estate equity and could you return to a market you have been priced out of?

There certainly are financial positives. You will be paying for your own travels rather than another trip to Disney World for your landlord. And who wouldn’t want to spend their entertainment budget on a night out in Copenhagen rather than watching whiny millionaires flop around a baseball diamond or a hardwood floor?

Then there’s the big one – and this will be difficult to calculate – but aren’t you going to save a ton of money on future travel? Let’s say you’ve always wanted to see India. A typical two-week vacation from the U.S. would be spendy but you just knocked it out at a fraction of the cost and likely got to spend more time there. And multiply that by all the other world stops you just checked off the list.

Let’s look at a few examples. These are based on U.S. national averages for salaries, taxes, and expenses with variations noted:

If we plug in a couple that has a combined net salary of $120,000 and is renting an apartment in the suburbs of Chicago, and they spend $38,000 out-of-pocket for one year on the road, the adventure will cost them roughly $102,000 in the long run.

Let’s take a single traveler that lives in Southern California who earns $72,000 at her day job and will be renting out a condo she owns at a slight profit while she is on the road. She decides she is going to take a budget trip, staying in hostels when available and carefully watching her spending. A trip where she spends $22,000 will end up costing her $64,000.

And what about a couple whose children are grown and they are willing to delay their retirement by a few years to travel now? They are earning $160,000 as a couple but have less time to recover their losses when they return home. They are not going to sleep in yurts or eat street tacos and have budgeted $50,000 for the trip. The sabbatical will end up costing them around $156,000.

I’m not saying that you shouldn’t walk down the hall and tell your H.R. department that their services are no longer required, but I do think it would be prudent to know what kind of financial hit you are truly going to take over a lifetime before you log onto Kayak.

But then, hey, there is also that final question you have to ask yourself: what is the cost of not going?

Tim Tonelli is a cartographer from Highlands Ranch, Colorado.