The art of finding money for travel while being under immense debt.
The other day a colleague of mine, a delightful middle aged woman, was shocked to hear that I didn’t own a living room sofa set, a TV or a guest bed.
Instead of spending all your money traveling to all those places, you could buy the basic necessities for comfortable living!
That was her first comment. Then she went on a rant about how “today’s generation” did not know anything about financial management.
And that made me upset. I was upset because I felt sorry that she will never get it!
Debt doesn’t mean you cannot enjoy life
Let me tell you the background story. Last winter while I was walking in downtown Toronto my eyes caught a glimpse of the CN tower peeping behind a tall building. It was one of those simple moments that trigger an emotional reaction and for the first time Toronto felt like it was my home, and a place I wanted to live. Soon after that my partner and I discovered that if we redirected the amount we paid in rent to paying off a mortgage, we could easily own a house. So few months later we bought a house in Toronto’s Parkdale neighbourhood.
Owning a house is a great feeling but it takes lot of work and financial management to keep it going. Every time I look at my financial statement, I see a six digit number in red showing my debt. Coming from a culture where it is very uncommon to have credit cards or debt, this negative bank statement always makes me anxious. Questions – like What if I lose my job? What if the interest rate doubles? What if the roof falls down? – often pop up but I’ve come to the conclusion that it’s merely a psychological response. For an amount slightly more than what we would be paying as rent, now we have a long-term investment in a city that’s growing. With some wise planning, there is no reason for distress at all.
Doing things that make you happy
Before buying, we made a list of priorities and developed a multi-year budget. Since both of us love travelling and exploring outdoors, top on our list was adequate vacation time per year. We also had some other debts and financial commitments. From this exercise, it was clear that we needed a large financial wriggle room each year.
So find the wriggle room
Choosing a house is a frustrating affair that left me wishing I had a rich old relative who just died and left me a fortune. There is always the struggle of having to choose between a house with everything you want for the approved loan amount v/s a house that cost lesser but (obviously) had lesser features. I strongly suggest NOT going for the maximum you can afford (regardless of what bankers or real estate agents tell you) and here’s why:
- Firstly, the maximum limit that the banks give you has lots of inherent risks which many people are not made aware of. The main short term risks being rising interest rates, rising inflation, renovations, insufficient contingency, etc. Long term risks include not providing for factors like real estate fluctuations, income stability, house upgrades, change in the size of family, etc.
- Secondly, the mortgage approval is a bare-bones limit which assumes that you do not have a life outside of your house and your job. People spend thousands of dollars each year on activities such as charity, supporting family, gifts, volunteer work or, as in our case, travel.
…but then the tomatoes got more expensive!
Even with that financial flexibility, you will be perennially short on cash, at least during the initial few years of mortgage. Rising bill payments, increasing prices of groceries or a broken faucet; there is always something (annoying) happening around. Plus you need to have a contingency fund because a mouse will somehow find a plastic water pipe, start chewing it and make your basement drippy. That was last year.
In few months it was clear that we had a choice of (a) investing savings in buying furniture (“for comfortable living” as my colleague commented above), (b) renovating the house to make it more beautiful and spacious, (c) paying down high interest debt and (d) travelling.
We chose a hybrid c+d model.
Travelling is the best way to spend money!
Ofcourse I am biased towards things that I am passionate about! NOW is the right time to travel. I feel like I’m on this constant quest to see more places, meet more people, eat different foods, experience the beauty of nature and take pictures of human genius around the world. I’m not going to discuss the fabulous reasons everyone ought to travel since google is full of articles on that topic.
Not everyone loves travelling. People invest in other activities like hobbies and charities. In short, life is not restricted to a work-and-home model.
Sadly, this is something many people do not get. I hear about Mexico not being safe or India being a disease stricken place, mostly from people who have never stepped outside their comfort zone. I also hear statements like ‘I cannot live without a TV.’ Really?? Sure you can, have you tried it?
Let’s buy a flat-screen TV… but next year.
I told my colleague that we may not have a fully equipped guest room but we do not compromise on hospitality. I told her that a TV wasn’t crucial since I watch everything on the internet or go cycling outside. I don’t have a leather couch but I have a nice backyard to sit in.
She didn’t find any of those answers satisfactory. Man is a social animal and people often do various things to improve one’s social status or make an impression on others. Nothing wrong with that, but showing off or living in an immaculately decorated house ranks very low on our priorities. At the end of the day my mission in life is to be happy. Material possessions may make us happy for a while but once the initial honeymoon period wears off, or there is a newer version in the market, we become unhappy again.
For both of us, travelling is an indispensable part of our lives and we want to travel for a month or two every year. That means taking pay cuts or saving zealously but at the end of the day it makes us content about life. I’m sure some day we’ll have a fully equipped house (between all the travelling, who knows!) but until then we may be living with minimal furniture, …and we are proud of that choice.