Budgeting for the return home

| September 21, 2009 | 49 Comments
This entry is part 3 of 3 in the series Funding Your Travel Habit

This post is part of a series of articles focusing on personal finances for a round-the-world trip; however, the savings and budgeting tips herein should be of concern to anybody with an in personal finance! The series comprises the following articles: Constructing a savings plan for your travel fundSaving For a Round-the-World Trip and Budgeting for the return home. Have any budgeting or savings tips that didn’t make the lists herein? Please contact us

Readjusting to life in the ‘real world’ upon your return home from a long time abroad can be a difficult transition. While there are plenty of things to look forward to—your family, your friends—fiscal matters may weigh on your mind. You may face a job search and/or debt (not to mention a strong draw back to the open road). Planning for your return, however, may help you to mitigate some of the concern—and a proper budget will help to sustain you while you readjust.

beachpiggybank1 Budgeting for the return home

How much should one budget for the return home?

So, how much should one budget for the return home? It’s a question often asked and the advice is disparate. Advice on the BootsnAll message boards ranges from none through to use a line of credit to plan accordingly—and all points in between!

You’ve probably heard the rule of thumb about keeping enough money to cover three months of living expenses in your account at all times as an ‘emergency fund’. That’s sage advice, and a good rule of thumb to accomodate a return home from a round-the-world trip.

Kathryn and I are doing just that. Our travel savings is actually a ‘basket’ of funds comprising money for our the trip (50%), funds for our return (30%) and money for expenses relating to our house (20%—if we neither sell nor rent, of course).

But how much money does one truly need? Three months is a good start, but in practice you need to consider your circumstances a little more deeply to arrive at an amount that offers you an appropriate level of comfort and protection. Of course, there is a wide range of suggestions out there for how much should be saved. Ultimately, you have to choose an amount that you’re comfortable with and that fits you particular situation.

To help plan for your return, here are some questions to ask of yourself:

Do you own a home? Do you rent? Is there someone you can shack up with upon your return? Can you suck up your pride for a few months and return home to live with your parents if that option is available to you? According to most financial gurus, your mortgage/rent usually comprises ~30% of your net income. That means a free place to crash instantly raises your income by 30%.

Do you have dependents? How many people rely on your income—directly or indirectly. Of course, the fewer people who depend on your income, the less you can safely get by with.

Upon your return, how long might it take for you to return to work? Do you work in a niche industry? Is your skillset in high demand or regressing towards obsolesence? Do you have specialized skills that are portable across industries, or are your skills so focused that finding the right fit will take a while? Evaluate your ability to market yourself and if you find it lacking, take steps to improve it—perhaps through additional classes or training.

Can you generate an income on your own, ie are your entrepenurial? If you had difficulty finding work upon your return, could you work on contract for a former employer? Do you have skills that could be used to freelance?

How flexible are you? Are you willing to relocate for a job if necessary? Willing to ask, “would you like fries with that?” These considerations are likely to have a significant impact on your return funds and should be factored into the savings equation.

How much credit do you have access to? Of course, covering your return home with credit is not suggested. However, a line of credit could help you in the event of an emergency. Of course, this is not a very good financial strategy, as an emergency is the wrong time to get in debt!

Where to keep ‘funds for your return’

As you build your funds for your return, keep these funds safe and liquid in a high-interest savings account or a money market account. Once you’ve assembled your return fund, you might want to consider adding additional money. Consider a secure place (rather than investing in the stock market). You would do well to consider a Certificate of Deposit (CD) from your bank. A CD is a special type of deposit account with a bank or thrift institution that typically offers a higher rate of interest than a regular savings account.

Let’s face it—now that you are home certainly doesn’t mean that you are going to remain there in perpetuity. Indeed, there’s an additioal benefit to planning for your return—it will enable you to consider leaving on your next round-the-world trip even sooner!

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About the Author ()

For nearly ten years now, Daniel of Two Go Round-The-World has explored how travel captures our imagination and engages our deepest emotions. One half of the duo that maintains the widely read Two Go Round-The-World blog, Daniel treats his subjects not only as works of art but also as symbols of the cultural and political forces that inspire them. Check him out on Google+.

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  1. Stephanie says:

    This is a great topic! I really messed this up on my last long-term trip abroad. Managed to return home not only broke, but with $1500 in credit card debt! I got so caught up in traveling and seeing as much as I could that I really didn’t care about the aftermath. Luckily I’m still very young so I didn’t have a mortgage or dependents to worry about, and I found a job very quickly. Still, it wasn’t a great situation to be in and I wouldn’t recommend it.

    This time around I’m setting aside a separate fund for start-up costs when I return. Probably in a CD as you suggested. It’s just the smart thing to do.

    • Daniel says:

      I’ve been there, Stephanie and finished up a 6-month stint through Asia with student loans and a heft credit card balance. That’s why we’re aiming to do things a bit differently this time around!

  2. JoAnna says:

    Daniel ~

    You started this post off by saying: Readjusting to life in the ‘real world’ upon your return home from a long time abroad can be a difficult transition.

    One thing to keep in mind when prepping for this transition isn’t just money, it’s counter culture shock, which may or may not keep you from fitting back into “society” as quickly as you might have hoped. After a year on the road, fitting back into the nice little 8-10-5 box may not be as easy as you think. So while it sounds like the ideal situation to return home and get a job, it’s important to build in a cushion of time that allows you to readjust to a “normal” lifestyle. That will help determine how much money you may need to float you through until you’re ready to return to a non-nomadic lifetstyle.

    • Daniel says:

      Thanks, JoAnna. Ultimately, you have to choose an amount that you’re comfortable with and that fits you particular situation. I agree that it will take time to find work (or to readjust to the idea of work). Another thing that I didn’t really touch on is how difficult an environment one might face attempting to return to employment vis-a-vis the current economic situation. As I’ve been reading, it’s likely that job creation won’t really ramp up for another year or so. Until then it might be a difficult environment to be looking for work. I’ve read on some other personal finance blogs that in these situations its best to try and save a month’s worth of expenses for every percentage point of the jobless rate. Hence, with North America hovering around 9% unemployment, a nine-month cushion of expenses would be warranted. Of course, everybody’s situation is different, however!

  3. Gourmantic says:

    Good topic, Daniel. I don’t think there are easy answers to some of your questions. It depends on circumstances and the individual(s). Certainly makes you plan for the worst when you consider all options.

  4. Anil says:

    I’m a big believer that everyone has skills they can market to make some additional money on the side. Even if it’s tiny amounts planting the seed is the hardest part.

    In my opinion it’s better to take the time and save and don’t use credit at all if possible. A debt payment is a scary thing to return to!

    • Daniel says:

      Same here, Anil — debt is best avoided but hindsight is 20/20! Is it okay to go into debt for a round-the-wrld trip? Is going into debt is worth the impact to one’s personal finances? In my opinion, it’s usually not worth it. By going into debt to travel, you limit your options and surrender control over your money, and in many ways, your future. Debt, in many ways, is the antithesis to travel. Rather than investing in yourself, you’re paying interest to a creditor. When you’re younger (ie under 40) it can cause you to miss out on some substantial long-term rewards, ie independence, earlier retirement, security, et al.

    • Daniel says:

      Agreed, Anil — one thing that the blogging community has really opened my eyes to is the diverse number of ways that exist to supplement your income doing the things that you love to do, ie travel, write, etc.

  5. Lindsey says:

    Another great post. We’re hoping to have about $5,000 when we get home, but I think this is kind of well…hopeful. The last time we took an around the world trip…I ended up with $75 in my bank account. I guess that’s better than some.

    This time, I believe we might just see how things end up. If it looks like we’re getting down to the wire, Blake and I might sign a contract to teach in Asia. Since the job market is not so active in the U.S., we might as well continue our adventure while working abroad. The fact that we are both teachers helps the situation a little as well.

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