How I Prepared Financially to Take a Year Off

Hello hello and welcome to another Saving with Sofi blog post!

As you know I left my job and life in California to travel the world for one year! With this announcement I’ve received many comments on my instagram saying something along the lines of “you’re going to go broke” or “you won’t have anything when you return”.

So I wanted to write a dedicated blog post talking about all the ways I prepared financially for this crazy adventure! As someone who is incredibly risk adverse I wouldn’t have taken this trip if I didn’t feel prepared financially; this trip was contingent on me hitting these 4 money goals. Keep in mind everyone is different and these are just the things that gave me, personally, peace of mind.

Before jumping into it, don’t forget I have a FREE resource library with some spreadsheets and printables up for grabs! Additionally, check out my spreadsheet shop The Budget Empire to grab your copy of my Ultimate Wealth Planner!

Table of Contents

Saving 30k to Travel:

First and foremost, if I’m traveling for a year, I need to pay for that travel. I saved 30k to spend on my travels!

There have been a lot of opinions about if 30k is enough for one year of travel. Half the people say it will only last me 3 months while the other half say I could travel for a year on 10k!

I chose $30k based on research and conversations with other travelers who had spent a year abroad. From my research I found most travelers spent between $15,000 and $22,000 for an entire year. Most of this research quoted numbers of people who had traveled prior to 2020 and the pandemic, so I wanted to bump the number up to account for inflation and increased prices.

Additionally, I am traveling COMFORTABLY.

I think this trip could be done for less however because of my elected travel style (and some of my travel destinations) I know it will be more expensive. I’m not staying at hostels, I’m eating out almost everyday, I’m taking flights instead of 12 hour buses, etc.

I also don’t plan on spending the entire $30k. But, I wanted to build in a nice buffer for unexpected costs and for peace of mind.

It has been kind of shocking to see how many people think the money won’t last because $30k is a lot of money! Plenty! Follow me on instagram to see how much I’ve spent so far!

Fully Funded Emergency Fund:

Regardless of quitting your job to travel or not, everyone should have an emergency fund!

An emergency fund is an amount of money you save as a safety net for when shit hits the fan. Meaning if you lose your job and have to buy food and pay rent, you are protected. I like thinking about an emergency fund as a “fuck you” fund. It means you are not reliant on your job or anyone else.

With an emergency fund you should be able to maintain your current lifestyle even though you don’t have any income, for 6 month. Now, there are some differing opinions about how much money you should keep in an emergency fund however being risk adverse, I opt for 6 entire months worth of expenses.

This means you can pay rent, go out to eat, pay your student loans everything you would normally spend on, for an entire 6 months, without an income.

If you’re not sure how much money that is, I’d start by tracking your expenses to see what you spend every month. Don’t forget to include reoccurring payments that might not be paid monthly. For example, credit card annual fees or car insurance payments!

Ideally this amount of money should be kept in a high yield savings account! This money should not be invested! The market goes up and down regularly, the last thing you want to be worried about is having less money than you expected because of the market.

My personal emergency fund.

Although I saved 30k to travel and built in a buffer there, I still need an emergency fund.

This emergency fund is designed as a buffer cushion for if something happens and I need a last minute flight back home. Additionally, when I come back and don’t have a job I can live comfortably with no income, while paying rent in California for an entire 6 months with this money.

It is not only to get my out of trouble while traveling (if needed) but to make sure I can reintegrate back into normal life without worrying about money.

Maxing out my tax-advantage retirement accounts.

Tax advantage accounts are exactly what you would think they are.

These are investment accounts that give you, you guessed it, a tax advantage! They typically provide you with either a tax deferral or tax exemption.

Tax deferral: Also known as “pre-tax” accounts, these investment accounts let you not pay taxes now or you get a tax deduction on the money contributed.

Tax exemption: Also known as “after-tax” accounts, have you pay taxes now but then you don’t pay any taxes when you withdraw this money in retirement. It gets to grow tax free.

Because tax-advantage accounts are pretty amazing, they limit how much money you can contribute to each account per year. I obviously didn’t want to miss out on paying less taxes so maxing out all of my tax-advantage accounts was one of my priorities.

For me these two accounts were my Roth IRA and my Traditional 401k. You are allowed to contribute $6,000 dollars into a Roth IRA and $20,500 into a Traditional 401k per year. I was able to do this for 2022 and hopefully upon returning I can prioritize and make sure this gets maxed out in 2023 as well; making it so I didn’t miss a year.

Hitting my investment goals! Aka CoastFIRE.

Last but not least I needed to hit my investment goals! “Investment goals” sounds kind of broad and I didn’t want to set some random number as my goal, so instead, I set my sights on Coast FIRE.

You might be familiar with the F.I.R.E Movement (financial independence, retire early) however Coast FIRE is a slight spin off from that. Coast FIRE means you have enough money in your retirement investment accounts that without additional contributions your net worth will grow enough to support you in retirement.

Basically this means I have enough money invested that I can retire at 60 years old without saving any more money! Thanks to the power of compound interest and market gains, my current investments will grow enough over the next 33 years to support me (with my current spending) if I were to retire at age 60.

I just want to caveat this by saying this number is kind of arbitrary. I calculated this number based on my current spending, however that can easily change. For example if you buy a house, have kids or change your spending habits your CoastFIRE number changes and will require a new calculation.

I’m obviously going to keep saving money once I have an income again but for now, hitting this number was enough to give me peace of mind that I wasn’t completely screwing myself by living this dream!

“You can only do this because you’re an influencer”

I have received some very angry messages expressing how “only you can do this because you’re an influencer”, “normal people can’t do this” “you’re still making money so it doesn’t count”. So I wanted to address those comments.

I made the decision to take a year off when I had less than 150 followers (no I did not leave off a zero there hahah). The decision was completely separate from any social media related possible earnings. I added a little timeline of my salary, my followers and my decision to take this trip below, for anyone interested!

June 2017 – Graduated, got my first job earning $16 an hour
October 2018 – Switched jobs, pay bump to $63,000 a year, moved to the bay area, started taking saving seriously
August 2019 – Got a raise to $72,500 a year.
January 2020 – Had my fully funded emergency fund!
March 2020 – Started saving for what I thought would be a down payment – turned into this trip
August 2020 – Got a raise to $78,500 a year.
April 2021 – Decided to create Saving with Sofi
June 2021 – Saving with Sofi launched, hit net worth of $100k!
August 2021 – Got a raise to $95,000 a year AND moved back home (aka saved hella money not paying rent)
October 2021 – Made the decision to take a year off.
November 2021 – Hit my first 150 followers for Saving with Sofi.
February 2022 – Got a raise to $99,000 a year, hit my 30k saving goal for this trip, hit 1000 followers for Saving with Sofi
April – Hit Cost Fire!
May – Maxed out my tax-advantage accounts, left my job, hit 5000 followers in Saving with Sofi, left for my year off!

Hopefully this timeline helps show that Saving with Sofi as an income generator had nothing to do with this decision. I was fully expecting to not earn (and save) any money for the entire year. Saving with Sofi has grown significantly however I haven’t yet taken on any sponsors so the money I make from it is minimal for now ;), I earn anywhere between $150-$500 a month currently.

Final Thoughts

It feels kind of crazy saying that I’m a risk adverse person and then doing a trip like this. However, if nothing else, life has shown me you can’t control everything.

A lot of people think “I’ll travel later” or “I’ll do that in retirement” but we so often take our youth and our health for granted. Not to be morbid, but not all of us will make it to retirement.

I found I would always regret not taking this trip if I waited and then for some reason wasn’t able to do it later on in life.

Well what do you think? Did I prepare enough? How would you have prepared financially?