Financial literacy is the key to a life of nomadism

Jan 18, 2020
You'll need to have your finances in check before venturing off on the road. Source: Getty

A lot of people begin considering the nomad life when a whole bunch of circumstances hit them at the same time. This is the perfect storm of influences that take you into a life of nomadism.

Not all of the reasons we outline below apply to everyone, but here are the more common elements of the perfect nomad storm:

  • Work life has finished: You’ve reached retirement and superannuation or the pension now kicks in. You’ve been retrenched or ‘phased out’ and you’ve gotten a big payout. You’ve lost your job for some other reason, and you’re at that age where you’re ‘unemployable’. You’ve sold your business, or you’ve given it to your children, and you’ve come to a point where you feel that the rest of your life can be one long holiday
  • The house is paid off or, it seems, will never be paid off. Or you’ve been renting and you’re wondering whether or not to renew the lease
  • The children are all grown up, even that thirty-something kid who never looked as if he was going to leave has finally landed on his feet and moved out
  • You’ve been sitting on all sorts of adventure dreams for decades and now, finally you have the time and the means to make them happen.

But the decision of whether or not to go nomad hinges, like most things, on the bottom line. Is this actually affordable? Will it work, first and foremost, financially?

Financial planning and financial literacy

In principle, financial planning is simply the relationship between income and outgoings. And while this might seem simple there are traps for the unwary, so it pays (literally) to be financially literate.

You can define financial literacy as the ability to make informed choices about money, in particular how you can manage your personal finances in an efficient manner. In other words, when you have financial literacy you know how to use money without wasting it. If you’re really good, you know how to use money to make money.

Half of all Australians (and we can assume half of everyone who lives in a country with a developed economy) struggle with financial literacy. This isn’t just a made-up statistic, it comes from the HILDA study (Household, Income and Labour Dynamics in Australia), which the University of Melbourne has been conducting since 2001. In 2019 they asked their 17,500 participants the following questions.

1. Suppose you put $100 into a no-fee savings account, with a guaranteed interest rate of 2 per cent per year. You don’t make any further payments into this account and you don’t withdraw any money. How much would be in the account at the end of the first year, once the interest payment is made?

2. Imagine now that the interest rate on your savings account was 1 per cent per year and in inflation was 2 per cent per year. After one year, would you be able to buy more than today, exactly the same as today, or less than today with the money in this account?

3. Do you think that the following statement is true or false? Buying shares in a single company usually provides a safer return than buying shares in a number of different companies.

4. Again, please tell me whether you think the following statement is true or false? An investment with a high return is likely to be high risk.

5. Suppose that by the year 2020 your income has doubled, but the prices of all of the things you buy have also doubled. In 2020, will you be able to buy more than today, exactly the same as today, or less than today with your income?

The good news is that the survey discovered that the grey nomad demographic was likely to get all five answers correct, but if you didn’t, don’t despair. It just means you have some work to do. Even if you did get all five answers correct, don’t get too smug, you probably still have some work to do.

Why is this talk about finance important? Because grey nomads can’t afford to be financially illiterate. When you run out of money, you run out of options.

Basic questions you need to ask

Assume the following, even if all the following assumptions don’t apply to you:

  • You will be going nomad full time
  • You have to buy all of your equipment, including your rig
  • Your income will be whatever it is from superannuation, your pension or other assets and not supplemented by additional work
  • Your expenses will be based entirely on the nomad lifestyle
  • Any assets that you do have, such as investment properties, are paying for themselves and need no further contribution from you
  • What is the yearly household income?
  • How much money do you have on hand now?
  • How much money will there be left over after all the equipment is paid for?
  • What will the running costs of everything be? This includes petrol and all other vehicular expenses which might even include water and electricity
  • What will the maintenance costs of everything be? And by ‘maintenance of everything’ we mean everything, including maintaining you
  • What are your shelter expenses? Sure, you’ll have your RV or equivalent, but what if you want to stay at campsites, or even, now and then, in a hotel?
  • What are your food and clothing expenses?
  • What are your basic cleaning, grooming and medical expenses?
  • What are your pet expenses?
  • What about entertainment expenses? Not everything is free and even a quick beer at an outback pub is an entertainment expense
  • How much money is there in the emergency kitty?
  • What about insurance and roadside assistance memberships?

If you’ve ever applied for a home loan, you’ll note that the questions on the application for the loan are basically the same as those above. This is because the decision to go nomad shouldn’t be taken lightly or casually and the basic assumption that you can’t live beyond your means is the same. If you’ve never thought about your finances this deeply before, we suggest that you start doing so now.

Remember that there are basically three types of costs:

  1. Asset costs. These are the costs of your equipment, everything from you rig and t-out to a teaspoon sitting in a drawer.
  2. Fixed costs. These are the costs that have to be paid no matter what, like motor vehicle registration and insurance.
  3. Variable costs. These are costs that have some give in them, depending on what you do. For example, you might end up with lower electricity costs if your rig has solar panels installed. You might save on gas costs if you do a lot of campfire cooking.

Obviously, you won’t be able to answer all those questions immediately, because the answers will depend on information you might not have or decisions that you haven’t made … yet. But whatever you do, you can’t avoid these questions and still hope that you can successfully redesign your life to be a successful nomad.

This is an edited excerpt from The Grey Nomad’s Ultimate Guide to Australia. For more details, visit

Stories that matter
Emails delivered daily
Sign up