Is It Okay to Travel with Debt?

That’s a yes and a no to both questions. I’ve actually done both.

You know from our story that we traveled and lived for 5 years with debt.

But, it was good debt based on appreciating assets, and we had tenants paying off the debt via renting. We had a very clear management plan in place and were disciplined in sticking to it.

There’s nothing wrong with traveling with good debt, or even bad, if you have income streams to help you manage it. You have to be honest, otherwise you’ll screw yourself over.

When I first left to go overseas, I was 21 and had just graduated from University. I was impatient and knew I could earn money while I was gone. I did not have a lot of money in savings to leave with. I decided to get a personal loan.

Stupid? Maybe.

Actually, I don’t recommend it, but I don’t regret it either. It started my travel life. And the return on that investment is infinite.

My ROI in growth and opportunity is way more than any stocks or property could match. It made me a better person and completely changed my life direction. Here I am 18 years later still traveling and I’ve created a business around my travel passion.

I had a very strict management plan in place for my personal loan.

I did not over borrow; my interest repayment was low, and the term of my loan small.

I knew once I started working I could pay it off. I had work teaching in the UK pre-arranged on a working holiday visa and I knew what my average wage would be. I’d researched carefully to know how I could afford to live, travel and manage the debt.

Teaching in London
Teaching 4th grade in London, 1997

I also had my parents go as guarantors. Therefore there was no way I was going to mess up. They took a risk to support me and I would never let them down. You have to have that same certainty for yourself. Ensure you might not use this as an backup to allow for sloppiness.

I put enough money aside to cover the repayments for the first 5 months of my travels, which brought me to my first London pay check. I was earning British Pounds, so each month I sent home the balance owing in pounds, which at the time gave me triple the amount in Australian dollars. I paid that debt off super-fast.

I also worked in bars at night in London just to cover myself and to give me play and travel money. If I didn’t have a guaranteed teaching job in London, I wouldn’t have done this. (Yet another benefit to following the working holiday strategy – it gives you more options).

If you don’t have a guaranteed way to repay the loan, I do not recommend this strategy!

You can see the total commitment and discipline you would need if you were to take that path. If you do not want the hassle when you are traveling then please travel debt free. It is a big risk.

I know Americans, in particular, tend to have large student loans. I don’t know what the terms are in regards to paying those down, but the same principles apply.

How can you travel with that debt? What is your management plan? What’s your back up plan if you can’t pay off the debt?

Be honest with yourself, arrange a plan and bring on someone to hold you accountable.

Can I still afford to travel if I own property?

Congratulations on owning property.

There are plenty of people traveling who own property. Property ownership does not have to be a shackle. We traveled for five years successfully with two properties. Again, you have to have a very disciplined management plan in place.

Know your risks and your ability to cover them.

We had tenants in both properties covering the majority of our mortgage. We only had to cover an extra $20 a week, which we could manage. We also had to put aside money for taxes and possible maintenance. We knew we’d be working on our travels so would continue to have that income flowing in.

Consider the following:

  • Can you rent out the property while you are gone?
  • What are the total property costs for the year?
  • How much of that will the rent cover?
  • How much extra do you need to put in each month?
  • Do you have a savings buffer for things that go wrong (maintenance/interest rate rises)?
  • Can you lock in your interest rate?
  • Do you have a great management company to take care of all the rentals, repairs and bills?
  • Is there someone you trust at home who can sign documents on your behalf while you are gone?
  • Can you follow a strategy like house swapping?

Have a smart and strategic plan in place and then celebrate that you can have the most amazing experiences traveling while someone else pays your mortgage? Isn’t that the ultimate?

So you can see, debt doesn’t have to stop you from traveling. You can make it work. But, you must be very disciplined and focused.

(Btw, just in case. You know you’re responsible for all your choices and I am not recommending you get into debt so you can travel. Just showing you how we’ve done things to give you some extra insights. The choice is ultimately yours.)

Here are a few posts to help you learn ways to save and create more money.

Yay. This money thing is so much fun.

Aren’t you just loving money now? Give us a high-five for more money and more choices in our life.

Let’s go travel!

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