6 Simple Steps to. Taking a Year Off EVERY Decade

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Audra Gordon
5 years ago
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1 6 Simple Steps to Taking a Year Off EVERY Decade

2 How does a person even afford a year off from work? It s a question I have heard a LOT during our year long sabbatical. In reality, it isn t complicated, or even very hard. But 99% of people don t see it as a possibility. These simple 6 steps will prove that wrong. Taking a year off, Gap Year, Sabbatical: whatever you want to call it. This is a time to live on your own terms. A year to fulfill YOUR biggest dreams. This short guide will show you a flexible path to take off 1 year out of every year a decade to make progress on the things that matter to you! Montana Money Adventures.com

3 Montana Money Adventures.com Why Take a Year Off Every Decade? First, why not? You can implement these 6 simple steps which will allow you to enjoy this incredible experience EVERY decade! (PS: You don t even have to do all 6 steps!) Retirement is too far away and you want to enjoy some of these adventures sooner. While your parents are young, or kids are still at home. Enjoy it while you are fit and healthy. Your bucket list is long, so why not spread those amazing experiences out over a few different Gap Years. Don t try to cram all your dreams into one year, or put them all off until you re 65. Take your time and enjoy a few each decade. Because you are able do this EVERY decade, you can enjoy the season of life you are in right now.

4 My family enjoying the geysers in Yellowstone on our 6 week road trip during our year off Montana Money Adventures.com

5 6 Steps: You only need to do the first 3 (do all 6, and you won t have to wait 10 years!) Step 1: Dream Step 2: Dream Price List Step 3: Save 10% Step 4: Find Extra Cash Step 5: Pay off Debt Step 6: Keep Expenses Low

6 Step One: Find the Right Focus for this Gap Year Focus on what you want to do on this NEXT sabbatical year, not your entire life s bucket list. Remember you will have 4-5 of these, so dial in to the unique opportunities of the season of life you are in right now. Take some time to dream and brainstorm. World travel solo or with a partner? Complete a physical challenge, like hiking the Pacific Crest Trail, or training for an Ironman? Write a book? Take a family cross country trip? Grow wealth? (Yes, you could use this time to launch a business or build passive income, like a rental property!) Montana Money Adventures.com

7 Constant Motivation Why plan and dream? My plans might change between now and then, right? This will help give you 2 things: 1. You will get excited like really jazzed about these options! That clear vision will help fuel your hard work and efforts to make it a reality. 2. It will help clarify your budget. It will put hard numbers to your large dream, and let you save for those specific expenses in Step 2. Montana Money Adventures.com

8 Step 2: Your Dream List Prices, a la carte Focus on your top 1 or 2 dream contenders. Start researching and planning what each element might cost and add it to your Dream Price List. This will help motivate you to make small changes (Steps 4-6) to save the extra money to fund your dream. Figure out what a daily and monthly rate for your dream adventure would be. For example the extra expense for our 6 week trip with all 7 of us was $2889 or $64 a day. Plus our pop up camper ($4500.) Montana Money Adventures.com

9 Montana Money Adventures.com Example: Your Dream Price List a la carte Around the World Travel 1 international flight: $650 One night in hostel: $25 Museum: $12 Daily rate for 2: $100 (Your total trip cost divided by number of days: i.e. 90 days in Europe total cost $9,000= daily rate $100) Short country to country flight: $125 Cappuccino in Rome: $3 Road Trip with Kids Camper: $6000 One night camping in National Park: $16 Gas for 250 miles: $50 Sight seeing attraction: 4 people x $8=$32 Daily Rate for 4: $125

10 Buy Items from your Dream Price List! I like to pick a variety of price points. As I am able to save extra cash, I can feel like it is going towards a specific purchase. $3 saved might feel meaningless, unless you know it s buying that cappuccino in Rome. As you implement steps 4-6 you can buy items off your Dream Price List with the extra cash you are saving! Each little savings is mentally check marked for a specific item on your list. Now you don t actually pre-buy these items. But you know that as you pull together extra money outside of your 10% savings, it is going to help fund a specific part of your dream. For Example: The $24 you earned watching a friend s kids for 2 hours, just bought you 2 days worth of museums! The $100 a month you saved by finding more affordable housing will buy a full day of your dream adventure every single month! Every little transfer you make into your dream fund serves a specific purpose. Montana Money Adventures.com

11 How Fast do You Want to Escape? Steps 1 and 2 are about the dreaming. 3-6 are the work. You don t have to tackle all of them during the same year! Find 2 or 3 steps each year to make progress. All those gains will help fuel later years. Be warned! As you read through these, you might start to realize you don t need to wait 10 years! Montana Money Adventures.com

12 The Simple Math We will start with the assumption that you earn $55,000 a year. Enter the numbers that fit your circumstances. $55,000 Enter your Gross Household Income. Save 10% in a 401k for retirement. After that, take out taxes: this varies SO much in each situation: input your own numbers $40,000 Figure out your take home pay. Step 3 is to save 10% of this number. This will be the base amount you need to save to take a year off every decade. $32,000 Find your Yearly Spending Number. As you are able to reduce your expenses, you can create a gap between your take home pay and your spending. Montana Money Adventures.com

13 Step 3: Save an Extra 10% of Your Net Income Let s say you already save 10% of your income into a 401k. All you need to do is start saving another 10% of your net income into a Roth IRA (if you don t qualify, you can use another investment option) So on your $40,000 take home pay, $4,000 will go into a Roth (which will fund the year off.) This 3rd step is basic math, 10% for 10 years will give you 100% of your after tax salary for your year off. Plus a nice surprise! Montana Money Adventures.com

14 Montana Money Adventures.com Why Save to a Roth IRA? 5 years after you open the account, you will be able to pull out those contributions without penalty. Your growth will stay in the accounts and continue to grow. All that growth we are going to count AS your contribution during your sabbatical year.

Montana Money Adventures.com Growth in the Roth In our $55,000 income example, you would save an extra $4,000 a year for 10 years, giving you $71,000 by the start of your sabbatical.

15 Montana Money Adventures.com Growth in the Roth In our $55,000 income example, you would save an extra $4,000 a year for 10 years, giving you $71,000 by the start of your sabbatical. You can pull out $40,000 to cover your living expenses during your year off. But in this example, our living expenses were only $32,000! So you already have a nice $8000 cushion for extra adventures. PLUS you have an extra $12,581 in growth in the account! More than enough to cover a missed year of contributions.

16 What if the Stock Market Crashes? You have 2 options 1. Wait 2 or 3 years till it recovers. If your gap year plan is flexible, keep working during those low years and pushing cash into those discounted investments. 2. If your gap year is time sensitive, and can t be put on hold for a few years, then know that up-front. 2 years before, you can pull 50% of your contributions out. Then 1 year before, pull the other 50% out and put them in a stable high interest savings account. Keywords: If your plan is very time sensitive, pay attention to key words in the news. Things like: Bubble, impending crash, high p/e ratio, frothy, or over priced. If you are 5 years out, you should be fine, but 1-3 years away I would hold more cash. Only the greedy or overly optimistic are shocked when the markets go down.

17 But I CAN T Save an Extra 10%!! I can barely save 10% for retirement. I m already maxed out. I m living paycheck to paycheck! Oh, have no fear. I have got you covered! We still have 3 more steps to go, and these next steps are going to make Step 3 MUCH easier. They will help lower your expenses and increase your income. Montana Money Adventures.com

Step 4: Create Extra Income There are 3 types of extra income and each can help fund your 10% savings, provide extra money for a more expensive Gap year, or accelerate your time frame. Do 1 or all 3.

18 Step 4: Create Extra Income There are 3 types of extra income and each can help fund your 10% savings, provide extra money for a more expensive Gap year, or accelerate your time frame. Do 1 or all 3. But consider investing the time to develop each option. Passive Income and an Enjoyable Side Hustle might take a few years to create, but the investment of time will be worth it! Passive Income Takes a lot of upfront work to set up Extra Cash Any extra money you can throw at your goal. Enjoyable Side Hustle A side job or hobby that brings in extra money. You would continue during your Gap year. Then money flows in each month without much extra effort on your part It is a one time or temporary source of extra income. It is flexible and fits nicely into your life. You find the work enjoyable. Generally takes less than 10 hours a week.

19 Montana Money Adventures.com Examples of 3 Types of Extra Income Passive Income Extra Cash Rental property, hands off business, Vacation rentals Digital products: Etsy graphic design, music or book royalties, YouTube videos, tutorials, PDF printables Tax returns, gifts, cash back bonuses (or save miles for a trip!), job bonuses, overtime, side jobs, AirBNB room rentals, tips, babysitting, pet sitting: SO many options. Enjoyable Side Hustle Graphic design, editing, freelance writing, jewelry making, profitable hobby, niche website, consulting, public speaking: there are 100 s of options!

20 How to Incorporate Extra Income This extra income will help 1. Fund your 10% if you can t afford to yet: Step 3 2. Pay down any consumer debt: Step 5 3. Buy items off your Wish List: Step 2 All three will help get you to your goal faster! But you don t have do all three right away. Pick one to focus on. Think about passive income or an enjoyable side hustle you could develop in the next 2-5 years. What skill could you learn in the next 3 years, that you could earn $100-$500 from? Could you buy a rental in the next 5 years that creates $300 a month in passive income? That almost covers your 10% each year, plus adds income during a year off!

21 Montana Money Adventures.com Passive Income/Enjoyable Side Hustle Goal: $100-$500 a month If your base living expenses are $32,000 a year and you are able to save $4,000 a year. Here is how adding passive income speeds up your timeline! $100 Passive Income $100x 12months x 6 years= $7,200 $4,000 yearly savings x 6 years =$24,000 Combined with $1200 of passive income still coming in during your year off = $32,400 Just $100 a month shaves 4 years off your goal! $500 Passive Income $500x 12mths x 3 years= $18,000 $4,000 yr savings x 3 yrs= $12,000 Combine that with the $6,000 of passive income still coming in during your year off = $36,000 Just $500 in passive income and you can afford to take a year off every 3 years!

22 Our Passive Income Math The Yearly Expenses for our family of 7 during our year off will be about $33,000. That includes the $3,800 of vacationing (a 6 week road trip.) It also includes about $3,500 of giving. And a bathroom remodel. The passive income from our rentals is about $1000 a month. If we only saved $4,000 a year while working (Step: 3) plus our rental income (Step: 4) we could afford to take a year off every 18 months! ($4,000x1.5yrs=$6,000 plus $1000 mth x 1.5 years =$18,000 plus the $1,000 a month during our 12 months off ($12,000) all together = $36,000 Enough to add an extra 6 week trip for a total of 12 weeks of travel a year!

23 Step 5: Pay off Consumer Debt Credit card debt, car loans, student loans, medical bills, etc If it s not gone yet, we want it ALL gone. This will help you in 2 ways! 1. It will free up more cash to fund your 10% or Wish List once the debt is paid off. 2. It will lower your monthly expenses during your Gap year. If you spend $3400 with your car payment, once your $400 car payment is gone, your monthly spending will only be $3000. That $400 can help fund your 10% savings or buy items off your wish list. You can use your side hustle/passive income from Step 4 to smash this debt faster! Montana Money Adventures.com

24 Montana Money Adventures.com Step 6: Keep the Monthly Expenses Low Fixed Expenses Flexible Expenses Fun Expenses Mortgage-property tax or rent Utilities: water, electric, home maintenance Entertainment, eating out, renting movies, music, books Cell phones, internet, Insurance (Car, life, dental, health, renters, home owners, pet) Groceries, Gas, Car repair Clothes, hobbies, fun activates Gym memberships, subscriptions Gifts, giving, vacations Any non essential items

25 Low Monthly Expenses Help in 3 Ways 1. Low fixed expenses provide flexibility. When things go wrong, or other goals need money, low monthly expenses will save your budget. 2. It lowers your base living expenses. It s much easier to replace a base expense of $32k vs. $64k 3. They provide margin in your budget to save even faster. Every month you reap that benefit! We paid cash for our house. It s a modest home, but every month we don t have $800 of principal and interest to cover. If we are working, we can invest that money. If we are on sabbatical, we don t have to save an extra $9600 for the year off. Every bill you lower helps! Start with the big 3: Homes, Cars, and Food. It takes time to go through item by item to find adjustments that work for you. Look at one line item a month. By the end of the 10 years, you will have found 120 ways to do things just as well, if not better, for less money! It s SO worth it! The homemade pizza I ate last night was AMAZING. And it cost $6 to make, not $22 to buy. Montana Money Adventures.com

26 So Why Not You? People think it s crazy we are able to take a year off. I think it s crazy more people don t take a year off EVERY decade! You don t even have to do all 6 steps. But with every step in the right direction you will build momentum. I ve included a free bonus list for you! The first step is to start brainstorming what that year could mean for you. So I have created a bonus list of ideas. This week take some time and brainstorm your own list. Then narrow it down to your top 5 options. At Montana Money Adventures, I am there to help you every step of the way! Hopefully these 6 easy steps will get your feet started on the path to increased financial freedom, more adventure and seeing your biggest dreams come to fruition! Montana Money Adventures.com

27 Adventures Around the world trip Hike Appalachian trail Road trip Visit every national park 3 month sailing trip Train for an Ultra Marathon Spend your 50th birthday in Paris Move with your family to Barcelona and learn Spanish Learn travel photography History tour of sites Take a class abroad Mountain climbing 12 marathons in 12 months See 25 European Christmas markets Fish in Alaska for a season Learn to surf in Hawaii Bonus Item: Find your top 5 this week! Career Transition Start a new business Go back to school Write a book Speaking-book-product tour Volunteer overseas Art project: release CD, music tour Develop an app Make hobby profitable: i.e. baking, jewelry making, writing Intern for an organization Build a platform: blog, podcast Design a product Start a non-profit organization Buy and rehab rentals Launch Esty brand Film a documentary Family-Personal Travel to visit old friends Take a trip with each adult child Adopt-foster Become a mentor Build Habitat for Humanity homes Explore hobbies Start a community garden Build a home Tackle major home renovation Take community college classes Travel for kids development: art, music, sports, acting Restore classic car, boat, bike, art Personal Retreat or Trek Learn German Write down/document family stories and history

Financial Needs Analysis Questionnaire (the involvement of ALL decision makers are required for an accurate assessment) Date: Time:

Financial Needs Analysis Questionnaire (the involvement of ALL decision makers are required for an accurate assessment) Date: Time: Primary: D.O.B. Spouse / Partner: D.O.B. Address Primary s Cell phone: Home Phone: Spouse / Partner Cell phone: Primary s e-mail Spouse / Partner s e-mail Height Weight Any form of tobacco use? Height