These days, if you spend any time on most personal finance blogs, one of the author’s main goals in life is spending less money on stuff and more money travelling. Some are even trying to take it to another level, by either making enough money on their blogs to be able to travel all the time, or regaling us with their tales of travel gone past. Look at all the countries they’ve been to. They’ve really experienced life, since they’ve eaten shredded monkey meat in some some obscure part of Turkmenistan.
How before everyone gets upset at my ragging on travelers, I’ll back up a bit. One of my personal goals in 2012 is to travel more. I want to use up all my holidays from work, as well as going on some random weekend road trips. I don’t care if I have to do it by myself, I want to get out and see what this world has to offer. I’ve taken a few big trips over the years, and I don’t regret a single penny spent.
But, not all of you should be focusing on traveling. In fact, for probably a majority of the people reading this, it’s a bad idea. Here’s why:
You Don’t Have The Money
If I had a nickel for every person who went on an exotic holiday and financed it, I’d have enough to fund the sequel to Dude Where’s My Car. All sorts of people drown in debt, feel bad about their financial situation, and then feel like they deserve a holiday to get away from it all. So they hop on a plane and spend a week or two in the sun, coming back to even more debt.
But wait, you say, I’m not one of those people. I don’t have any debt, (except student loans/mortgages) so I can afford to go. Okay, congratulations on that, but have you fully funded your emergency fund? Are you contributing at least 10% of your gross income to retirement accounts? Are you saving for your future goals? If the answer to any of those questions is no, maybe it’s time to reconsider the vacation.
Too many people shoot their future selves in the foot by spending foolishly in their younger years. I’m not saying you should be a homebody who never goes anywhere. I just think you should have the rest of your financial house in order before you start to travel. And whatever you do, don’t finance it.
Buy Assets Instead
Instead of travelling, perhaps that money would be best spent on assets that produce monthly cash flows. You could buy several dividend paying stocks, each of which will spin off income each and every quarter. Or, you could save up and use your extra cash on the down payment on a rental property. Heck, if you’re in the blogging business, you could use your savings to buy another blog and further expand your online empire.
And, if you repeat the process of buying assets enough time, eventually you’ll have enough sideline income to completely fund your travelling habit. Once you get your finances in better shape, traveling will become that much easier to afford.
Or, if you’re sitting on piles of so called ‘good’ debt, perhaps it’d be more prudent to pay down your mortgage or start getting serious about those student loans. Yeah, interest rates are low now, but they won’t be forever. And once you pay those suckers off completely, you get a few hundred bucks a month extra in cash flow, to put wherever you want.
By taking care of your financial house in your 20s, you can open up all sorts of possibilities in your 30s. That vacation you planned because you paid off your student loans is just a little sweeter than a plain old one.
You Should Stay At Work
Many 20-somethings dream of taking an extended time off work to travel the world. Some will actually do it, either taking a sabbatical or actually quitting their jobs. But, is this the best move for their careers?
For some people, staying at work is a much smarter idea. Maybe a promotion comes available right after you leave for the big trip. Or, maybe when you come back, your industry has gone down and jobs are hard to find. No matter what the travel lovers tell you, not every hiring manager is impressed by an around the world trip.
Get Your Financial House In Order First
Here’s what you need to do. Pay off your debts. Fund your retirement accounts. And start buying assets that will be the building blocks towards future wealth. Then, once you’ve put yourself on the right path, feel free to travel. Traveling is pretty cool. Financial independence is even cooler. Get all your financial stuff in order to make that vacation even better. Your future self will thank you. Traveling is really cool.
So, are you a big traveler and if so, do you travel responsibly?
This post was written by Nelson.