Just over a month ago, I wrote about how Becky and I were considering a radical change to our current lifestyle. The potential plan includes quitting our jobs, selling most of our possessions, and hitting the road in what we are currently referring to as our “Gap Year”. Fast forward to now and we’re more excited than ever to actually put the plan into place and we have already started making moves so everything can go smoothly.
A big change like this has a lot of moving parts, but we are giving ourselves a few more months for it to all come together before we hit the road. Most of the “planning” has been around the logistics of starting the trip and less around the actual trip itself. It’s probably not surprising, but going from two fully employed individuals that own a house to traveling around the country without jobs comes with a lot of decisions to make!
So far, we haven’t ran into anything too tedious, but I do want to lay out our current thoughts on some of the bigger items. I’ll try to cover what we plan to do with our house, our stuff, and more as we transition into our temporary nomad lifestyle.
First, When Are We Starting Our Gap Year?
So far, the reaction to our grand plan of taking a year off has been met with overwhelming positivity with most people saying they wish they could join us or do something similar. Thanks for all of the awesome comments on the last post!
Becky has already gotten off to a good start by quitting her job not too long ago! It’s funny to hear everyone’s reaction to that news. Our closer friends usually respond with a “Congratulations!” and a high five because they know we’ll be fine, but others are a little more grim and possibly worried for us as they just can’t imagine not working and getting that steady paycheck.
Anyway, our current plan is to start the adventure early next year. We already have several trips and plans through the end of the year including a trip to another Hyatt all-inclusive Mexico property the first week of February, so it would be tough to shift those around if we tried to start sooner. Plus, the way my pay is structured means I usually get a “bonus” in the form of stock vesting every six months or so and this will allow me to cash one more of those out before we take off.
All of that lines up with us officially starting the trip in mid-February, but we haven’t picked an exact date yet. That gives us ~4 months to make some big decisions and put them into action such as what to do with our house:
Sell Our House or Rent it Out?
One thing that makes picking up and leaving a little tricky is the fact that we currently own a townhouse. We purchased it just over 3 years ago when we decided continuing to rent in our current location just didn’t make sense financially. This was before discovering FI and really optimizing our finances, so we were really just focused on what the mortgage payment would be compared to our current rent. Luckily, it turned out to be one of the greatest “accidental” investments we’ve ever made!
So should we sell and lock in all of those appreciation gains, or rent it out and continue to benefit from the growth of Seattle? First, let’s add a little bit of context.
Despite only being able to put down 10% and having to pay PMI, our monthly payment was still ~$500/month cheaper than the place we were renting our first year in Seattle. Thanks to the appreciation of pretty much all property in the greater Seattle area, we were able to remove PMI as a part of refinancing a year later that also locked in a lower interest rate. This brought our monthly payment to a very reasonable amount even before we optimized a little further by removing escrow from our mortgage.
All of that to say our mortgage is very reasonable for the area it’s in, which is why we’re pretty strongly leaning towards renting it out.
The reason is two-fold:
- Renting guarantees we will be able to move back to Seattle if we choose, regardless of what local prices do
- I’m very bullish on the Seattle real estate market and I think it will continue to appreciate ahead of inflation
I really don’t like to speculate with investments and would much rather buy the average like we do with index funds for our entire investment portfolio, but a part of me just can’t see the Seattle housing market slowing down anytime soon.
Would I buy our house at it’s current price in order to use it as a rental? Absolutely not, the numbers just aren’t very good. But given that we already own it, the rent (even with a property manager) should more than cover the mortgage and any necessary repairs, and we don’t want to get priced out of Seattle in the future, renting seems to make the most sense for us.
This will most likely involve getting a property manager just to keep it simple for ourselves as we travel across the country, but I still need to do a bit more research before committing either way. If you are currently working with a great property manager in Seattle, be sure to let me know!
What About All of Our Stuff?
Deciding to rent out the house is one major decision made, but what about all of the stuff that currently fills it up?
Given that we’ll be listing it as a 3-bedroom house and it’s currently furnished with only one proper bedroom, renting the place out furnished doesn’t seem to make much sense. But we also don’t want to keep most of our furniture by paying for a large storage unit!
Our current plan is to Sell, Sell, Sell pretty much everything we own between now and the start of the trip. I’ve been aspiring to lead a more minimalist lifestyle for a while and Becky has (with some hesitation) entertained the idea, so this will be the perfect chance to put it into action and essentially “start fresh”.
While we have a few items that hold some sentimental value, the vast majority of what fills our house is just stuff we’re mostly indifferent about. We’ve already started decluttering a few rooms and closets and marking items to either be sold or donated and that process will continue until there isn’t much left.
We obviously don’t want to sleep on the floor for the next few months, so some bigger furniture items like the bed will have to wait, but the plan is to sell as much as we can before starting our trip.
Ideally, we’ll be able to fit everything we care about into two piles:
- Things we will take with us on the trip
- Things we don’t want to take, but still want to keep for when we eventually return
That first category will have to fit into a couple large suitcases (or so) out of necessity because we plan to make most of the trip in our Mazda 3 hatchback, but we’re hoping that 2nd group can also be reduced down to something that can fit in a small closet. For those keepsakes we don’t want to give up, we’ll probably try to find a small, cheap storage unit somewhere in Seattle to keep it safe while we’re away.
Getting rid of most of our possessions will be tough, but hopefully very relaxing at the same time. More stuff seems to translate to more stress for numerous reasons, but we’re going to put that to the test.
How Are We Paying for Everything During the Trip?
Credit cards of course! That probably sounds dangerous if you don’t know us, but we maximize signup bonuses by frequently signing up for new cards. Don’t worry, everything is paid off in full each month and we have yet to pay a dime of interest.
More seriously, as we’ll both be without a job during the trip (at least that’s the plan), figuring out how we’re going to pay for food, gas, lodging, and everything else is kind of an important part of the whole equation. Luckily, it’s one part that we’re not too worried about thanks to the savings we’ve built up on the path to FI.
While we’re certainly not financially independent yet, we have been able to amass several years worth of expenses that currently sit in investments that should continue to grow over time. A lot of those savings are retirement accounts that would require a couple extra steps to access at this point in our lives, but we also have some money in a regular brokerage account that we could pull out if necessary.
The tricky part is that we currently have a very aggressive investment strategy because of our age and FI timeline (100% stocks), so relying on that to pull money out in the very short term would be a very risky bet. For that reason, I see two potential options (with a spectrum between them):
- Dial down our asset allocation to include a significant portion of bonds to reduce volatility (and long-term returns)
- Build up a cash buffer to fund the gap year
Both options have their pros and cons, but we’re currently leaning towards option #2: Build up a cash buffer. We’re not planning to live off our investments forever at this point and the gap year is meant to be a temporary break from full time work, not our early retirement. For that reason, I’d much rather leave those long-term investments alone and invested aggressively while we just build up a decent amount of cash that should carry us through the year.
Plus, this has the added benefit of “forcing” us back into the grind (even though our job situation could end up far different than the present) once this buffer starts to dwindle. We honestly have no idea how much this trip will cost us and whether or not it will be more or less expensive than our current level of annual spending, but I like the idea of starting with a semi-fixed amount and making it last as long as we choose to let it. This “year” could end up lasting us anywhere from 8-18 months and beyond, but we’ll figure all of that out on the road. 😉
The majority of this cash buffer will be in a 1%+ savings account at any given time, but it will still be painful to have that much cash slowly losing value to inflation. But who knows, maybe the market will tank in the next 12 months and holding cash would have been the best option anyway! As always, trying to predict the market is futile.
Either way, instead of trying to adjust our investment strategy in the short term to allow for us funding spending out of it, we plan to leave the current investments alone, build up a year or so’s worth of expenses in cash, and spend from that pile during the trip.
This is definitely something we can adjust on the fly if necessary, but I’d love to hear your thoughts on how you would handle the financial side of a trip like this.
And There’s So Much More!
I’ll end the post here, but there’s still a lot more to figure out before we can even start the trip. Health insurance, our dog, and mail are a few big ones that we at least have half-baked ideas on at this point.
Honestly, I think the trip itself will be one of the easiest parts to plan and execute. We don’t want it to be too structured, so aside from a few must-stops in the first couple months of the trip, we’re trying to leave our options open and slow travel at our own pace. Staying longer in places that we just haven’t gotten enough of and moving quickly through places that we just aren’t enjoying seems like the best strategy. Instead of trying to see “everything”, we’re choosing to just relax, take it slow, and find our own adventure.
Have you found any major gaps in our plan so far? I’d love to hear your thoughts, particularly on how you might handle a year of no earning in the middle of the path to FI.
As always, thanks for reading!