156R | Coming Back From A Gap Year

Coming Back From A Gap Year
ChooseFI has partnered with CardRatings for our coverage of credit card products. ChooseFI and CardRatings may receive a commission from card issuers. This post may contain affiliate links. ChooseFI may earn a commission when our links are used to sign up for a service or make a purchase, at no cost to you. Thank you for supporting ChooseFI by using our links! Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. See our disclosures for more info.

A gap year might seem unthinkable for some but Noah and Becky share exactly how they navigated their gap year. Plus, Brad and Jonathan discuss emergency funds and your risk tolerance.

Grab Our Year-End Tax Checklist

We created a tax checklist to help ensure that you are ready for tax time! Grab that here.

Start With A Goal

Earlier this week, Rob Berger joined the podcast to share his journey. After drifting into a career as a top law partner, the life he had built was no longer fulfilling. Not even a gold club that cost $70,000 to join brought him happiness. So he decided to make a change.

At this point, he decided that his goal was to become financially free. Although becoming debt-free was a part of that journey, it was not the ultimate goal. The ultimate goal of financial freedom guided his personal finances choices in the future.

When you look at every decision through that prism, it really does change every aspect of decision making. 

As you start to move forward, keep your end goal in mind.

The key is that you take action on these ideas, that you turn intention into action.

At the end of the day, you have to do something. Go through the process of questioning everything that you would never consider changing. A few might include moving to a new city, selling your car, or dropping cable. Give it a try, you might be surprised by your ability to adapt.

You can check out the full episode with Rob Berger here.

Risk Tolerance

Rob brought up an interesting point about risk tolerance. As you build a bigger portfolio and surpass your FI number, there may be no reason to continue a high-risk investment strategy. Instead, you may want to rebalance your portfolio for less risk. And that is completely okay!

Keeping your portfolio invested at 100% equities will not give you a badge of honor. The key is to find the best answer to suit your own risk tolerance.

However, pulling money out of the market should not mean parking it in a checking account. At the very least, you should be taking advantage of a high yield savings account. For example, CIT Bank offers a high yield savings account with 1.85% APY if you put in a minimum investment of $100 and continue to save $100 each month.

Consider different options to fund emergencies that match your needs and your risk tolerance.

CIT Bank The CIT Savings Builder account offers a great interest rate. Just maintain a balance of 25,000 or make a monthly deposit of $100. CIT Bank Full Disclosure: We earn a commission if you click this link at no additional cost to you. Last Updated: 04/29/2019

Taking A Gap Year

Noah and Becky recently returned from a gap year.

Before taking the gap year, both Noah and Becky were unhappy in their jobs. Noah works in the tech industry and Becky is a nurse. Although they weren’t FI, they were ready for a change. So they took a year off and traveled around the country. They were able to visit many parts of the country and see part of Canada.

They have successfully transitioned back into new jobs after taking a year off to travel.

Logistics Of A Gap Year

The gap year started with a lot of logistics planning. First, they had a townhouse in Seattle that they decided to rent out with a property manager. They sold most of their belongings. Finally, Becky’s sister offered to watch their dog for an entire year. After those basics had been thought out, they needed to work through several other problems.

Paying For The Trip

Their first priority was to pay for the trip without sacrificing their long term FI plans. Although they had a large amount of savings, they did not want to compromise their financial future for this trip.

In order to fund the trip, they started to slow down their investments. They built up liquid savings to fund a year of living expenses. They weren’t sure how long this would last on the road, but it ended up funding their entire year with room to spare. In Seattle, they were spending around $60,000 a year. But they only spent $43,000 on the road. Now that they’ve moved to Silicon Valley, their annual expenses have increased to around $90,000.

While on the trip, their biggest expenses were food, car maintenance, and a Carribean cruise. As far as hotels, they spent over 230 nights in hotels but spent 1.5 million hotel points that they had earned via credit card rewards earlier. Additionally, they had family and friends to stay with along the way.

Related: Travel Rewards FAQ’s 

Healthcare

Another big concern for a year on the road was their healthcare coverage. They timed quitting their jobs for the end of the year. This made it easy to join a healthcare plan through the Healthcare Marketplace.

Based on the fact that they were not working for the year, they were able to control their income. They decided to do a Roth conversion in their road trip year to create an income that would keep them above the minimum threshold for Medicare. But they made sure to stay below a certain income in order to qualify for the maximum amount of subsidies. With the subsidies, they only paid around $10/month for their healthcare premium. However, they did not have to use their plans for the entire year.

Related: Planning For Healthcare In Early Retirement

How To Transition Back Into The Job World

The final concern was retransitioning back into the workforce. For Noah and Becky, they weren’t concerned about finding a job because they both work in high demand fields.

When they were ready to get back into the workforce, they planned out a two month transition period. They stayed in an Airbnb in Colorado to start searching for jobs.

Noah landed a job first. In his case, he felt like it was an overall net positive step for his career. In different job interviews, he would bring up the gap year first. Generally, he got responses ranging from neutral to positive.

For Becky, the transition back was a little bit more difficult. She had to work as a contract nurse at a hospital in a demanding job. But after a few months, she found a clinic job that suited her needs better.

Lessons Learned

After months of travel, Becky and Noah learned that they can be happy pretty much anywhere.

You don’t change as people regardless of where you are.

Now, instead of making a beeline for FI, they are trying to enjoy the journey more.

You can learn more about Noah and Becky in their first appearance on the show.

How To Connect

If you want to find out more about Becky and Noah’s gap year, then check out their blog, Money Metagame. Or follow them on Instagram @ moneymetagame

Related Episodes:

ChooseFI has partnered with CardRatings for our coverage of credit card products. ChooseFI and CardRatings may receive a commission from card issuers. This post may contain affiliate links. ChooseFI may earn a commission when our links are used to sign up for a service or make a purchase, at no cost to you. Thank you for supporting ChooseFI by using our links! Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. See our disclosures for more info.

Share on facebook
Facebook
Share on google
Google+
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on pinterest
Pinterest

Comment Disclaimer: Responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

2 thoughts on “156R | Coming Back From A Gap Year”

  1. They call themselves FI because they are not bold enough to embrace FIRE as a whole but do use the term fire once and a while. They should pay royalties to say that now. They want to create their own movement while FIRE movement is much bigger thing. It seems like they are embarrassed of saying the word retirement.

  2. A note on vocabulary — in a few separate episodes I’ve heard “Fat FIRE” referred to as meaning having >25x expenses saved up. I’m pretty sure the most common meaning is related to spending levels, not amount saved. That is, Fat FIRE means achieving FIRE with a spending level higher than the average American family. Relevant since most FIRE discussion assumes lower than average spending (and subsequent low taxes, etc, a la Mr Money Mustache). Compare also with “Lean FIRE”, spending very very little (a la ERE). Quick check on FatFIRE subreddit and article by Physician on Fire confirm. Keep up the good work guys!

Leave a Comment