Whenever people find out we’ve been traveling full-time for a few years, they always want to know how we afford it. People seem to be more interested in this than in our actual travels.
Before I dive in, I can’t ignore the fact that we’re from a rich, developed country with a strong currency and passport. I wish I could say anyone can achieve this lifestyle, but that’s probably not true. So, I’m mostly writing this for those of you who have access to a stable currency and visa-free entry to many parts of the world.
The basic premise is that we earn in dollars and spend in a cheaper currency.
Lower Cost of Living Abroad
Long term travel costs less than you might think. Because we have total flexibility, we can avail ourselves of cheap flights and long-stay discounts on Airbnb. Weekly discounts often give you the 7th night free and a monthly can be 30-40% off. We also alternate between expensive countries like Australia and cheap countries like Serbia to even out our expenses.
What we’ve found is that the cost of living in most countries is significantly lower than in our home city of Boston. We end up spending less on all our expenses combined than we would on rent or a mortgage at home, while maintaining a comparable standard of living.
What kind of standard of living is that? Not lavish but not too budget either. We book one-bedroom apartments on Airbnb, occasionally a studio or hotel room for short stays, mostly fly economy, go out to eat a few times a week, work out at the gym, go to movies, and visit tourist attractions. We also carry global medical coverage and visit the dentist routinely. Occasionally we take a guided tour but usually we travel independently and rent our own car.
It’s really quite similar to the life we had in Boston, minus the office. In lieu of going to work, we spend an extraordinary amount of time exploring new places on foot, grocery shopping, and cooking.
Numbeo’s cost of living comparison between Boston and Budapest, for example:
Three Buckets of Income
We have three buckets of income: stocks, rental property, and an Airbnb. We currently live off our Airbnb income, but if any one bucket takes a hit, we can dip into the other two. It’s nice to have some diversity.
These income streams didn’t appear overnight. Before setting off to travel, we spent the better part of a decade working, saving, and investing. I worked 11 hour days and half a day on Saturday for seven years, saving about 80% of my after-tax income. Aaron has always worked for himself, mostly in real estate and e-commerce. We both lived below our means and invested the rest, which we continue to do.
Just as important as saving, investing is key to creating a lasting income stream. Prevailing wisdom recommends index funds for their broad stock market exposure and low fees. We own a blend of VTI, VOO, VIG, and VGT, as well as actively managed stocks.
In terms of real estate, our rental properties with mortgages don’t generate much free cash flow, but the return on investment can be higher than stocks. It’s just captured in equity pay down and growth, to be recaptured when we sell. The smaller properties we own outright produce lower but very steady income. Our Airbnb generates the highest return and free cash flow, but it’s also a lot of work. Sometimes it feels like a full-time job!
In a Nutshell
We pay for our travels by managing our properties remotely and living pretty cheaply by benefiting from geo-arbitrage. We are almost always on-call and sometimes have to put out fires in the most random places, like on the side of a volcano, but on the bright side, we can work for ourselves anywhere in the world as long as there’s wifi or a Google Fi connection, and we’re often blessed with many days in a row where we can focus solely on travel.