With the current state of the economy, many people can’t even afford to plan their next vacation, much less risk job security to change careers. Americans everywhere dread talking about retirement because most fear they will never be able to save enough to retire. This grim outlook made me wonder how much money I would need to have for my husband and I to quit working to go on an extended vacation. Below I will explain how much I believe we would need to quit our jobs, and how I arrived at our “magic number.”
What is our magic number and how did I determine the amount?
There are a lot of things I had to take into consideration while calculating how much money we would need on hand to quit our jobs to travel for a year. The most important thing I had to remember is that while we would only be vacationing for a year, we would have expenses the entire time we were unemployed, not just while we were traveling.
After some thought, I realized we would need enough funds to comfortably cover three years of both living and luxury expenses. While that may seem extreme, there is some logic behind that number. The way I see it, we would probably quit our jobs about six months before leaving on our adventures, so I had to budget for that time as well. I also had to budget for our travels, and for the time it would take us to find new jobs once we were ready to re-enter the workforce. Once everything was calculated, I determined that our “magic quit number” was around $250,000.
What would the $250,000 cover?
Here are the numbers I used to determine how much we would need, and what the money would go toward. Each of the individual sums listed below is based on an average expected cost over three years.
Payments – $11,160
Insurance – $3,900
Yearly taxes – $520
Gas (based on $5 a gallon) – $10,140
Home rental payments: $17,532
Food while at home – $6,000
Food while traveling – $7,200
Clothes – $2,700
Communication (mobile phones): $2,520
Premiums – $18,000
Maximum out of pocket expense – $71,400
Retirement contributions: $35,000
Emergency slush fund: $25,000
Travel expenses: $25,000
The remaining $31,928 would be to cover the cost of the accountants and other service providers that would take care of our belongings while we were away.
These numbers may seem unreasonable, but if I’m going to walk away from the financial security my husband and I now enjoy, I would need more than enough to guarantee we would be comfortable throughout our journey.
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