If you’re one of the many retirees or soon-to-be retirees dreaming of a long-term travel adventure, there are some major changes you need to consider before packing up the camper van and driving straight into the nomadic lifestyle.
Planning ahead of time can make a massive impact on how much you enjoy your travels, so it’s crucial to get on top of things, especially when it comes to your finances.
When shifting over to a nomadic lifestyle, don’t leave any part of your financial strategy to chance. Gerry Incollingo, a Managing Partner of LCI Partners, says the biggest thing for retirees to keep in mind is their budget since this will determine how you’ll be able to live your new life on the road.
“Know what you can afford week to week and try to stay under that figure. If you have money left over at the end of the week, save it,” Incollingo said. He also recommends looking for deals wherever you go.
“If you know you need groceries, fuel and accommodation, shop around to find the best price because over time it could save you a lot of pennies,” he said.
He also notes that if you plan to travel in a caravan or a motor home, investing or purchasing a sturdy vehicle that is less likely to break down is absolutely necessary.
“If you buy one that is on its last legs, you may spend more money trying to keep it on the road than you would have if you brought a better quality product,” Incollingo explained.
Another thing grey nomads need to keep in mind is much fuel your transportation is guzzling. With petrol prices skyrocketing Incollingo says it’s a good idea to look for a more economical vehicle for your travels and if you come across cheap fuel, fill up.
“You don’t want to be stuck paying the maximum on it,” he said.
If you’re still contemplating the cost of living on the road but are anxious about your finances, there’s no need to worry as Bounce Financial finance advisor Ben Brett says, living on the road really can be as cheap or as expensive as you want it to be, but suggests making sure you’re aware things are going to go wrong and to make sure you have the money set aside to address such problems.
“For some Grey Nomads, their biggest costs may relate to eating out or entertainment costs. If you have particular costs you want to manage, it can be helpful to have a separate bank account where you pay yourself an allowance each week. That way, you can comfortably spend from that account and if it runs out, you reduce your spending,” he said.
“On the flip side, if you have weeks where you don’t spend as much, the money can accrue in that account in preparation for a week where you may have higher costs.”
While becoming a grey nomad for the first time and managing your money can be daunting, Brett explains that transitioning from a weekly income to pulling money from a big pot of savings is challenging, you may run the risk of pulling too much out too early and run out of money in retirement. But on the flip side, you run the risk that you’ll be too conservative and not spend enough.
“The most successful retirees have a planned drawdown from their superannuation or investments. They draw an amount similar to a wage and assign money to different areas of their life,” he said.
“They review their plan regularly and adjust their investment and drawdown to suit their lifestyle and what is happening in the broader investment market.”
Planning a trip around Australia is both exciting and likely time-consuming. But not having a plan for what you’ll do each step of the way can negatively impact your financial strategy.
Brett says understanding how long you intend to travel and what you’ll do when you get back will help you to make more informed decisions about what to do with your house and how your age pension may be affected.
He also states that now is also a great time to review how much money you have saved for retirement and how long you anticipate it will last.
“Too often I see retirees drawing too little from their investments for fear it will run out. You’ve worked your whole life so now is the time to understand how much you can spend and put that money to good use,” Brett said.
Finally, Brett recommends that when developing your plan to live on the road, it might be a good idea to give yourself the flexibility to change your mind. The idea of travelling full-time and the practical realities can be very different so you want to ensure that you don’t back yourself into a corner financially speaking.
If you’re thinking about travelling permanently but haven’t had much experience with long trips, maybe consider holding off on selling your house so you can change your mind later.
“The joy of retirement is you have the freedom to do whatever you want. This will change at different points in your retirement journey and that is a great thing,” he said.