How we afford full-time travel... and actually save money doing it!
We’ve encountered many snide remarks from people… often along the lines of, “oh, I’d travel too if I were rich” or “must be nice to have daddy’s money.”
So, to clear things up, we’re not rich, nor have we had some crazy windfall. BUT, our travel-related expenses basically come out to be free… and then some.
Well, sort of… I’ll explain!
You could argue that it’s a bit of a workaround to truly call the cost of travel free. Of course, it still costs money to travel, but people never seem to consider the savings involved with it… and let me tell you, we save a LOT.
While reading this, keep in mind that we will be using estimated living expenses from California, where we have not lived for many years, but it is where we grew up. An additional disclaimer: The ability to travel as we do is absolutely a privilege. We are fortunate to be from a relatively high-paying area with fairly minimal financial responsibilities/obligations. We just hope that by sharing a bit about what we’re doing, people will have a better understanding of the real cost of long-term travel and we can help someone else save a bit of money while doing something cool too!
Let’s get to it then!
Savings on Accommodations
It’s no secret that the United States has extremely high real estate prices. Whether you’re paying for a mortgage or rent on an apartment, it’s usually cheaper to stay elsewhere… and there are other savings you may not have thought about to be found too!
Rent Savings... Usually on Airbnb
People love to hate on Airbnb, myself included! Don’t get me wrong, it has its flaws, but oftentimes you get SO much more for your money out of them. That’s how we have been able to stay in so many incredible places affordably. Although they may seem expensive upfront, we actually save thousands of dollars using them every year! Many Airbnbs also offer weekly or monthly discounts, which can be up to 60% off!
According to Rentcafe, The average rental price in San Diego is $2,237. Our average monthly Airbnb “rent” is about $2000. This includes ALL of our stays from our chalet in Switzerland to our tiny studio in Japan to our luxury penthouse in Australia.
This alone saves us just over $2,800 per year in “rent.” Although it’s seemingly pretty on-par with what would be our normal rental costs, there are even more savings…
Utilities Savings Through Short Term Rentals
The average cost of basic utilities including electric, water, internet, etc., in San Diego is about $200 per month, or $2400 annually. Our cell phone plan would be an extra $240 on top of that too, bringing us to a total of $2,640 per year!
Airbnbs, hotels, and other accommodations, however, almost never charge you additional money for utilities! We do still own cell phones, buy foreign plans, and occasionally pay for extra internet… but at approximately $600 per year for ur international plans, we’re still coming out about $2,040 ahead.
By living out of Airbnb’s instead of paying rent in our home city, we’ve already saved approximately $4,844 for the year!
Home Office Tax Savings
This one may be a bit touchy for some, but we trust our accountant and haven’t had issues so far. We are independent contractors and when renting our Airbnbs, we almost always try to find somewhere that has a dedicated working space (or somewhere we can dedicate to work) so that we can write off a portion of it as our “home office.” Usually, this is 10-30% of our Airbnb cost; we’ll call it about 20%.
So what does this mean exactly? Approximately a $4,800 deduction on our taxable income. I’m estimating this is about $1,000 yearly tax we would have otherwise paid to Uncle Sam! (Please don’t hate me if I’m off here, I’m not an accountant and using online estimates. Our tax guy knows the specifics…).
However, I won’t be counting this amount as a part of our savings for this article. We would be doing this anywhere, so long as we had jobs that require space at home! Just something to keep in mind if you’re thinking about doing this too!
We Don’t Own Anything!
Adopting a more minimalistic lifestyle can lead to a lot of savings… and minimizing your life into nothing but carry-on bags takes this to extreme. Read on to learn about how giving up a permanent home, car, and other things that aren’t truly necessary can save you big bucks!
No Permanent Residence
If it wasn’t already obvious, we don’t have a permanent residence. Of course, travel when you’re on holiday is going to cost more… you’re on the hook for rent AND accommodations! Having no permanent residence means that we can use that rent money (according to the previously mentioned estimate) towards our stay somewhere else.
I’m not going to include this in any final calculations as “savings” though. I consider it to be rent! Just pointing out that you can save a lot by not double paying.
The average cost of motor insurance for a couple in California is nearly $2,000 per year. This doesn’t even include the annual cost of gasoline, which is between $1,001 and $1,300 for California residents or the cost of vehicle maintenance, which costs about $1,186 on average for a new car. Yep, that means it’s even more if your car is older!
So, not even considering the cost of the vehicle itself or any depreciation… if we each owned one new car and fell within these averages, we could be paying about $5,522 per year. Just to get around!
Ok, we’re not totally free of personal belongings and consumer expenditures, but our entire lives fit into carry-on bags. So, we don’t exactly buy a lot of stuff, and we only replace our belongings as needed! In San Diego, the average household spends over $2,500 per year on apparel alone. We spend closer to $600 (and oftentimes less!) on clothing. That’s at least another $1,900 saved annually.
I say “at least” because people tend to own a LOT more than just apparel. Think about it, most people own home goods, furniture, large electronics, tools, equipment, hobby items, etc., that we have largely opted to forgo. We also only own a very limited amount of personal care items, electronics, supplies, etc. If it doesn’t fit in our carry-on, we don’t own it! There aren’t good averages for these items, so I won’t list them in any final calculations. I imagine we’re saving quite a bit on this though!
We Have No Dependents
Being a parent is EXPENSIVE. Whether you have babies or fur-babies, there are a lot of costs associated with their care… which we have opted to forgo to be able to travel. At least for now!
I love pets, but they’re just not practical travel companions! It is estimated that owning a single cat or dog can cost pet owners between $380-$1,170 annually. This doesn’t take into account any one-time purchases or emergency medical expenses for your furry friend!
On average, American households own 1.6 dogs and 1.8 cats! Again, for simplicity’s sake, we’ll stick with some averages when we calculate our estimated annual savings from a lack of pet ownership to be about $2,410, not including any other type of pet! And yes, I’m including this one because if I was living in one place I know we’d have a zoo.
We all know that kids are expensive. We are happily child-free, at least for the time being! I won’t include this in any final calculations because we still probably would not have kids even if we were living a more settled lifestyle, but it is worth noting that people save a significant amount from opting not to have children.
Nationwide (in the USA), it costs about $233,000 to raise a single child to the age of 17, not including the cost of college. That’s over $13,500 per year! This is also using a report from 2015, so it is surely more now… and even more in California!
The Cost of Healthcare in the United States is Atrocious
Need I say more?
The cost of healthcare back home in the states is completely out of control. We are in generally good health and pay $474 per month total for our “travelers” insurance plan. This does seem like a lot at a total of $5,668 per year, but we have great coverage that even allows us to seek healthcare in the US.
An equivalent plan for healthcare solely in the US would be about $1,200 per month. You could call that $6,300 in savings, but for our calculations, we’ll stick to the state average, which is $430 per month, per person or $10,320 annually. Based on that average: together, we’re still saving $4,652 per year. That’s not to mention other healthcare costs, vision, or dental; which are also significantly cheaper abroad!
Food and Drink is Cheaper Abroad
Ok, this isn’t true for every destination… but for many places, it is! Of course you can adjust the amount you spend on food and drink depending on your lifestyle, but generally The cost of groceries, eating out, tipping, or heading out for a drink is generally much lower abroad.
Restaurants and Groceries Cost Less
One of our biggest living expenses is food! Is it really a surprise that your dollar takes you a lot further in other countries? I did a bit of math so you guys could have a comparison. Based on data from this cost of living calculator, the average we save is about 20% on grocery and 20% on restaurant prices! Keep in mind that this doesn’t even consider the length of time we stay in each place – obviously, we opt to stay in more affordable locations much longer! Also something to consider is that we don’t exactly travel to the absolute cheapest locations or “rough” it. This “average” is primarily made up of major world cities, with heavy weight towards Europe. In some locations you can save 70% or more on food prices. Oh, and tipping isn’t really a thing outside of the states either!’
To make calculations easy, we’ll just say we save the average 20% – even though in reality, it’s probably much higher for us. The average San Diegan spends somewhere between $345-$500 per month, per person on food. Alan is tough to feed, so I’m estimating our monthly food budget is $1,000 total in San Diego. Knock off that 20% savings we estimated, and we’re saving at least an additional $2,400 annually.
We also don't really drink...
In San Diego, the average household spends over $1,200 per year on alcohol, according to the Bureau of Labor Statistics. We easily keep that under $100 a year while abroad, maybe even less. We’ll call it $1,100 in annual savings because if we were in San Diego we’d almost certainly be spending many more nights out with friends!
We’re Flexible Travelers
A little flexibility goes a LONG way in terms of travel-related cost savings! We’re briefly going over how being flexible with your time, planned travel route, mode of transit, and lifestyle can save you thousands!
Taking the Cheaper Route
The cost of travel itself dictates many of our adventures. We always have an idea of places we want to visit, but when deciding where to go next we heavily consider the cost of transit. Instead of paying a premium for an “ideal” flight, bus ride, or train route, we take the affordable route and make a journey out of it!
I’ve been able to find flights for as cheap as $13 on Skyscanner!
Trains and buses can be even cheaper and don’t usually charge baggage fees!
Another costly mistake many travelers make is “jet setting”, meaning they hop from one far-flung destination to another. Instead of traveling between distant locations frequently, we try to limit it to a single long-haul and then make smaller jumps, preferably by train or bus, through an area we’re already in. This cuts the cost of travel even further!
You Can Be “Flexible” With Your Accommodations Too
As well as searching for the most affordable flights and routes, we take the cost of accommodations into consideration. If you’re flexible with the amount of time you spend in one place, the season you visit, making last-minute bookings, or taking a risk… there are even more discounts!
When beginning a search, we always keep in mind whether it is the “high” or “low” tourism season. Prices can vary wildly between seasons or if there are any major events happening during your intended stay. If the season checks out, we also check for discounts on extended stays. I mean think about it… you can pay full price for a 2-week stay or get 60% off for a month.
That means it is actually cheaper to stay a month. You can also usually find or negotiate a deal when booking somewhere “last minute” or somewhere newly listed with minimal reviews! Sure it may be a bit more risky, but the potential savings are there!
This isn’t necessarily a huge amount of savings, but it adds up! A single piece of checked luggage is $35+ for most airlines. That means if we each had one checked bag, we would be paying $70 more per flight. We have taken 8 flights since beginning our last round of (pre-covid) travel, so that means we’ve saved around $560 by sticking to carry-on only bags!
We won’t include this in any calculations, but it’s worth pointing out that the cost of traveling with extra bags isn’t exactly an insignificant amount!
The Foreign Earned Income Tax Exclusion (FEIE)
This one is little known – especially by those who haven’t spent a lot of time abroad, but it is HUGE.
Soooo… what is it then?
It’s a little bit complicated, but I’ll try to keep it short. United States citizens and residents are on the hook for paying taxes, pretty much no matter where their income is earned. The FEIE allows expats/travelers who pass a few stringent requirements laid out by the IRS to exclude a specified amount of foreign earned income from their taxable income. This significantly reduces the amount they owe on taxes.
If “digital nomads” live in a foreign country OR spend at least 330 out of the 365 days a year outside of the United States and have no permanent “abode,” they may be able to claim this exemption on their taxes. Just how much is it? For the year 2020, $107,600 per person. (And this number is adjusted annually!) That means a couple working abroad could potentially lower their taxable income by over $215,000, given that they both individually meet the requirements.
That doesn’t get perpetual travelers off the hook for all taxes though. They still may owe some federal taxes, employment/self-employment taxes, and state taxes if their “home” state requires it. For us, we were previously living in a state that does not recognize the FEIE. If you are looking into taking on a “nomadic” lifestyle, you may be from somewhere that does though! Another thing to note is if you do make enough to go over the exemption limit, it does not lower your tax bracket – only your taxable income.
Note: We are not tax professionals. If you’re considering using this, hire someone who is!
What's the FEIE Worth Then?
Obviously, we’re not going to put all of our private financial information on a public blog. So, as an example, let’s say we make the average salary for San Diegans, which according to this website is about $76,000. Together we would be pulling in $152,000 every year; not unheard of for two people with degrees!
So if we made the average salary in San Diego, we would be saving approximately $18,469 per year on federal income tax!
(Note: What we used to calculate this is obviously simplified and doesn’t include everything… and again, I’m not an accountant! If you are considering doing this for yourself, hire a professional like we did!)
So.... How Much Do We Actually Save by Traveling Then?
To determine our savings by living as “expats,” we have to take a look at what we actually spend compared to what we would be spending living in San Diego. I found all of these numbers by determining our average monthly expenses during months traveled and comparing them to the average cost of living in San Diego. Of course, this example does not reflect our actual income nor does it include every bit of savings or expenses in either scenario. It is based on estimates. Again, these are estimates/averages that we are using as an example.
Also keep in mind that our average travel expenses are based on all of our pre-covid travels. When beginning this lifestyle, we were unsure if we would be able to continue traveling and we made a point of visiting relatively expensive major world cities and traveling frequently. You can absolutely cut down on the cost of travel even further, especially when you do it at a slower pace and off the beaten path!
The Final Comparison of Living Expenses
Approximate Annual Living Expenses Abroad/Traveling
- Accommodations/”Rent”: $24,000
- Bills/Utilities (cell phone, extra internet): $600
- Food: $9,600
- Drink: $100
- Health Insurance: $5,668
- Transportation (ridesharing, taxi, local transit, etc.): $1,000
- Travel Expenses (including flights, distance trains/bus): $7,075
- Car Ownership: $0
- Pet ownership: $0
- Apparel Expenses: $600
Estimated Total Expat Living Expenses: $48,643
Estimated FEIE Tax Savings: -$18,469
Approximate Annual Living Expenses in Our Previous Residence (San Diego)
- Rent: $26,844
- Bills/Utilities (cell phone, extra internet): $2,640
- Food: $12,000
- Drink: $1,200
- Health Insurance: $10,320
- Transportation (Ridesharing, taxi, local train, etc.): $0 (assuming we never use uber here!)
- Travel Expenses: $0 (also assuming we never travel)
- Car Ownership: $5,522
- Pet Ownership: $2,410
- Apparel Expenses: $2,500
Estimated Total Living Expenses: $48,643
Estimated FEIE Tax Savings: $0
That’s a Lot of Savings!
So, based on these numbers, we would actually be saving over $33,000 per year by traveling compared to the average cost of living in San Diego! Even if you didn’t include the tax breaks, we would still be saving over $14,000. That’s a lot of money.
And before anyone goes bashing us for being “unrealistic,” I know living expenses can be greatly altered by your lifestyle. To re-assure you, I did not cherry pick in these calculations, but only used our own averages in comparison to the averages of the average resident in San Diego.
That said, spending approximately $15,000 per year, per person to live and travel the world doesn’t exactly sound crazy!
(I mean I was scraping by, living paycheck to paycheck on about $13,000 per year while in college – accounting for inflation! Crazy we can do this for just a tad more!)
That’s How We Do It!
Despite some common misconceptions, many travelers are not absolutely loaded multi-millionaires or trust-fund babies that blow $10,000+ a month jet-setting (although admittedly, that would be nice!). We’re just your average young couple who loves to travel, but enjoys living frugally too!
Of course, this is, as I have stated, a rough estimate to show you how we actually save money by traveling. This also isn’t necessarily a comprehensive list of every single way that someone can save while on the road (…uh, yeah, we’re total dummies for not owning credit cards and getting rewards for our first several years on the road!). This is just me sharing how we make it happen!
Hope you enjoyed reading this long-winded cost/savings analysis!
Let us know if you plan on using any of these tips! 🙂
One last note: This was written in 2020 and reflects our situation at the time. It also uses averages and estimates that were available that year. It has probably changed a bit since. 🙂