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:
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?
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.
Assume the following, even if all the following assumptions don’t apply to you:
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:
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 www.newhollandpublishers.com.
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