These days, it seems like almost every one of my 30-something-year-old clients is considering quitting her Silicon Valley job and pursuing her own unique version of #vanlife. I know plenty of older folks who fantasize about hopping on the van wagon, as well. I myself am 40-something, and the whole idea of radically simplifying my family’s lifestyle sure sounds appealing—especially when I’m stuck in traffic driving my kids from school to music lessons or soccer practice.
Whenever anyone sits in my office and talks about stepping out of the rat race and into their dream life, I tell them the same thing I’m about to tell you: Ample planning, patience, and preparation are what truly make dreams come true. Whether you’re looking to downsize or upsize your lifestyle, here are four practical financial steps that can help you set the wheels of your personal progress in motion.
1. Budget your startup costs.
If it’s the #vanlife you crave, there are dozens of blogs that will tell you how much it costs to kit out your home sweet van home. Depending on your mechanical savvy, Yankee ingenuity, and personal vision, you can expect to fork out anywhere from $5,000 to $50,000 to make your pipe dream a reality.
Where will you get that dough? Unless you are a Trustafarian or a dot-commer who just cashed in your stock options, you’ll need to determine your budget, create a monthly savings plan, and stick to it. Like most savings plans, it will no doubt involve making trade-offs between the fancy coffees, electronic devices, or yoga retreats you want right now and the van you want ASAP. The more you can save and economize—your "old faithful" vehicle versus brand-new Mercedes Sprinter—the sooner ASAP will be. This exact same technique can be applied to almost any financial goal you choose to set for yourself, such as starting a business or buying a nonmobile home.
For example, if your dream van home is a 1982 Westfalia that costs approximately $12,000, and you budget $3,000 for modifications, you’ll need to save a total of $15,000 for your "start-up costs." If you can save 10 percent of your $75,000 annual salary ($625 a month) it will take you two years to reach your goal. If you can save 20 percent of that $75,000 salary, you’ll be on the road a lot sooner.
2. Calculate your monthly maintenance costs.
I’m not just talking about the care and feeding of your van’s gas tank and engine, which can average more than $1,000 a month if your rolling home is old enough to be on the National Register of Historic Places. I’m talking about the cost of keeping you, a traveling partner, and canine companion in kibble, clean clothing, and scenic campgrounds, preferably with a wireless hot spot so that you can share photos of the fantastic sunsets your friends, family, and fans are missing.
Multiply your expected monthly maintenance expenses by the number of months you are planning to pursue the van life and add that total to your startup costs and monthly savings plan. Although you’ll probably have a few income-generating ideas up your sleeve before you hit the road, don’t assume you’ll be one of the lucky few who actually makes a living while cruising down the highway.
For example, if you can keep your personal expenses for food and fun to $600 a month, and your van housing/driving costs to $900 a month, you’ll want to save $1,500 x 12 months—or $18,000 for the first year of your van life (That doesn't include any outstanding debts, etc. that you'll have to keep paying on the road. If you have house or loan payments, add them to your cost of living.) That translates to an additional $750 in monthly savings now if you’re planning on leaving in 24 months. Again, if you can save more, you can leave sooner. And if you do land a roaming gig that pays you $24,000 a year, you can afford another year on the road.
3. Expect the unexpected.
Build enough cushion into your budget to handle flat tires, a tetanus shot, and the once-in-a-lifetime opportunity to see your favorite band in a tiny small-town venue.
In my financial planning practice, we tell folks in their twenties and thirties that they should have a minimum of 3 months of emergency cash in a bank account. If your monthly van life budget is $1,500, that means $4,500 would be your emergency savings target. But, once you’re on the road and sticking to that tight budget, remember that an awesome burrito and/or a new wetsuit does not constitute an emergency. A blown-out clutch does.
4. Consider the opportunity costs.
The short-term trade-offs of the van lifestyle are relatively easy to quantify: less money and living space for more time and freedom. But there are long-term trade-offs you’ll also want to consider. Any successful planning process must balance your current financial status with your future goals. Living in the moment is one of the keys to a happy life, but so is financial security.
- What impact will driving away from it all today have on your tomorrow?
- How will your retirement be affected?
- What benefits (health insurance, a 401(k) plan, etc.) will you leave behind?
- How well do your #vanlife goals align with the other goals you’d like to achieve in this lifetime?
- How will you get from where you’ll be in two years to where you want to be 20 years from now if you take this detour?
Asking yourself these questions will help you create a thoughtful exit strategy—doing this before you start your journey can prevent a lot of unnecessary confusion and frustration when you reach the end of your current road.
When you are prioritizing what trade-offs you’re willing to make, two things are non-negotiable in my humble opinion:
1. Health Insurance is a must have, even if it’s just catastrophic coverage, so a medical emergency doesn’t torpedo your financial future.
2. Retirement is going to happen to you one day, even if it’s impossible to imagine yourself at 70. If you can work from the road, you can save from the road, so contribute at least the $5,500 annual max (for someone under 50) to an IRA account.
Don’t let the numbers scare you. Taking these four practical financial steps towards your dream life—be it traveling the open highways of the United States in a Vanagon or starting a successful company in San Francisco and owning homes in New York, London, and Paris—will empower you to keep creating the conditions necessary to realize and sustain those dreams.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations to any individual. All investing involves risk, including possible loss of principal. For your individual planning and investing needs, please see your investment professional.