This Blogger Quit Her Job to Travel the World for 3 Years. Here's How.
When I was in college, I'd dreamed of traveling and studying abroad, but those programs were so expensive. A semester overseas was maybe $15,000 or $20,000. I realized, "I don't really want study. I want go abroad." At the time, I didn't realize that there were location independent jobs, so I figured I would just not work. Before I did that, I had to get a job and save up for that. I was a newspaper reporter. I lived on my day job income. Of course, I put money into a 401(k) and a Flexible Spending Account (FSA). During evenings and weekends, I would write freelance articles for magazines and I saved 100 percent of that freelance money, after taxes, and by 2008 I'd amassed enough that I could live for three years—assuming that I spent a lot of that time in countries where the dollar exchange rate worked in my favor. It would have probably lasted a year in the U.S. But in Thailand, Laos or Cambodia, it stretched a lot further. I spent about half of that time was in Southeast Asia, and then about half of it in Australia, with little bits elsewhere—six weeks in Europe, and a couple weeks in the Middle East and various other places.
I wanted to broaden my horizons. I was born in Kathmandu, Nepal, and grew up in Cincinnati, Ohio. Throughout my childhood, I went back and forth between those two places. I knew that there was more world out there and I wanted to see it.
When I came back from three years of travel, I had decided that I wanted to be self-employed. Because I had had that experience of freelancing as a side gig back when I was a newspaper reporter, I thought, "Well let's see if I can do this full time." I didn't know how to start. I used the last of my savings to buy a laptop. I had a couple of newspaper contacts but that didn't really pan out to very much. I really started from scratch. In the beginning, I was earning ridiculously low sums for each article but over time it grew.
I started my blog Afford Anything because a lot of my friends were saying, "I'd love to travel, but I can't afford it." And yet, these were friends who lived in much nicer homes than I did. They drove nicer cars, wore nicer clothes, went out to eat more and partied more. My response was, "You can afford it. You just choose not to." If you sit down and think to yourself, "Do I want to do X?" Whether that X is travel or whatever else it might be. "Do I want to do X, or do I want this home and car and clothes?" And if you choose that it's the home and car and clothes, that's awesome! Good for you. You've set your priorities, you know what your decision is. But to say, "I can't afford it," is so dis-empowering and I really wanted to share a much more empowering message around money, that you have these choices and that every dollar you spend is a trade-off.
My number one financial philosophy
"You can afford anything, but not everything." I've seen that theme repeated in my own life, again and again. When I bought my first investment property—that was shortly after we had come back from traveling and so we didn't have much money—we were being very scrappy and lean. And so we bought a triplex and moved into one of the units with roommates and between the rental income that we were getting from our roommates and plus renting out the other two units, we lived "for free," meaning we had no out of pocket housing costs. I put that in air quotes because obviously, there's an opportunity cost that comes from us taking up that space. But you know, we didn't pay any money out of pocket for housing and here we are, my partner Will, he was in his 30s at the time and I was approaching 30 and again, at that age it was fairly abnormal to be living with roommates.
A lot of our friends were saying, "Why don't you act like grownups? Why don't you get a place of your own?" And in an ideal world, if we could afford everything, we probably would've done that. But we realized that we had a choice. We could sort of inflate our lifestyle to the next level, or we could aggressively save and keep buying investment properties and continue to live lean for a few years while we were building our investments. It was that trade-off, we could afford one or the other, but not both. So which is it going to be?
The top thing I look for in any rental investment is...
I use this kind of "back of the envelope" formula that's called the 1 percent rule. It's just simple math that you can do in your head. The gross rental income should be at least 1 percent of the total acquisition price. By acquisition price of a property, I'm referring to the purchase price plus closing costs plus any upfront repairs that you need to do in order to make it move-in worthy. I'm not talking about repairs five years down the road. So let's say, just to use a very basic number, let's say that the acquisition price for a property is $100,000. It needs to rent for at least 1% of that, or $1,000 per month. If the property's $200,000, it should rent for $2,000 a month.
Listen to Farnoosh Torabi's full interview with Mr. and Mrs. 1500 here.
Farnoosh Torabi is a personal finance expert, the author of When She Makes More, and the host of CNBC's Follow the Leader and the award-winning podcast So Money.
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