Do you want to pay off debt while traveling? It might sound like having your cake and eating it, too, but here’s how you can make it possible.
Five years ago, I was 23. I had just graduated with a dual major in Marketing and International Business. I was about to spend 6 months traveling before going to work, had about $35k in student loans, and needed to buy a car. Yikes.
Three years after graduation, I was able to pay off all my debt while traveling to over 20 countries. Here’s how:
In this article, I will cover:
- How I wrapped my head around my debt
- The plans I developed to pay it off
- How I learned to pay off debt while traveling
- How I continue to travel on a budget
Let me start by saying this: my first salary out of school was $36k a year in Rhode Island. I’m not independently wealthy, but I am incredibly disciplined.
6 months out of school, I bought a $13k car and both my car and student loans were gaining interest. So your first question probably is, ‘How the heck did you crush $50k (let’s say $55k including interest) in 3 years with that salary? Here are the building blocks to how:
I made larger than necessary payments:
I was working in sales and received monthly bonuses until I took my first promotion and was on quarterly bonuses thereafter.
With my salary, I made $50 more than the minimum payment on my two major debts.
In practice, my car payment was $197. I paid $250 on autopay each month. My student loan payment was around $300. I paid $350 automatically each month. Then, whenever I received more than my regular paycheck, I put the difference toward my highest-interest loan. My monthly debt payments totaled $600.
That extra $50 per loan would have helped me pay off my car in 4 years instead of 5, and my student loans in about 8 years instead of 10. I also decreased the amount of interest I was paying on the loans by making larger principal contributions. I knew that even if there was a month that I didn’t get to make a big payment toward my debt, I was at least moving towards the ‘debt-free date’ faster than if I were making minimum payments.
I made lump-sum payments to pay off debt while traveling:
I was in sales, so I received bonuses of anywhere from $40 to $700 a month my first year working, and anywhere from $2000 to $3000 per quarter the following year. At first, 100% of every bonus was going to debt payments, but I realized that I also needed to treat myself, so eventually, I changed it to 70% to debt and 30% to things like plane tickets and fun!
The math: $2000/quarter = $8000/year towards debt means an additional $16,000 in my first two years. This brought down the principal from about $55k to about $39k. Remember, I was also making monthly payments that equated to about $7200/year, so the principal balance after year two would have been around $25k.
Tax Return
I was fortunate that I got a pretty sizeable tax return each year. I took 60% for debt payment and 40% for fun and even put a down payment on my first home. I put probably $5k of tax returns to my student loans in that first couple of years, so my balance was then around $20k.
Moving Bonus
I was paid to move to Rhode Island by my company and that helped to put a down payment on my car as well as to throw an extra grand toward my debt. =$24k
What about year 3?
Great question. I took a new job about 2 years after I started working. I repeated the same process as the years previous with applying my tax return and moving bonus to my debt. My tax return was higher that year because I had purchased a home in year 2. I also had a decent year-end bonus, so I started year 3 with about $19k left to pay off.
Here’s Where it Gets Wild
- I took a salary increase and upped the monthly contribution.
- I paid off my car and was making the full $700 monthly payment to just my student loans (snowball method).
- I would look at things that I wanted and could buy, and would then not purchase them and put that amount toward my debt instead.
- Every month, I paid off my credit cards in full. Any money that was leftover would go toward my debt (Called the $0 balance method).
- I was obsessive. One month, I made 12 small transactions into my student loan account IN ADDITION TO my monthly payment. The lowest amount was $12, the highest was about $100.
- To this last point, I was INSANE about my money. I realized in April that I could possibly have my loans paid off by June, which would be 3 years after starting my first job/buying my car, and 3.5 years from graduation.
On June 30, 2018, I put about $1200 from my savings account into my student loans and paid off the final balance. I left myself with less than a couple hundred dollars in savings. This is perhaps one of the proudest moments of my life.
And then I had to start building up my savings again.
Now let’s look at the money I saved:
We can all save money in different ways, and most people have the option to save. Often, we choose not to for the sake of comfort.
- In Rhode Island, I lived outside of town and shared a house with two other people. We had a big backyard, raised chickens, and I got to keep a garden for the first time. I failed, but activities like that kept me from going out and spending a bunch of money.
- I packed my lunch most days. I found ways to get super frugal by using the chickens’ eggs for meals and even sold the eggs to help pay for their food!
- I generally live a frugal lifestyle. I had a small closet, so I didn’t need to fill it with a bunch of stuff. I don’t really shop, and rent books on my kindle. I can’t really pontificate here because it’s just second nature.
- I put at least $40 of each paycheck into a travel fund that I could use to travel at least twice a year
I made my spending work for me rather than against me:
I took out 3 credit cards in my first 3 years out of school: Chase Sapphire Preferred, Southwest, and Delta Amex. I knew that I would spend a bunch of money when I moved out East, so I chose the Chase card for the signup bonus and free first year. I repeated this process with each card and spent as I usually would so that I could get hundreds of dollars in flight rewards. I paid every card in full every month.
Those flight rewards came in handy – which brings us to talking about TRAVEL. How the heck did I manage to pay off debt while traveling to 25 countries in those 3 years?
Let’s talk about travel – it’s expensive!
Yes and no.
A lot of the time, getting somewhere is half the cost of travel, and I nearly eliminated that by using my flight rewards.
It is my goal to visit every country, so I wasn’t really picky about where I went and typically chose wherever the cheapest flights and destinations were, which made it a lot easier.
I also believe that being frugal while traveling enhances the experience by bringing travelers closer to the culture that they are visiting. Read more on that whole concept here.
Travel to me meant staying with friends, meeting people along the way, and doing road trips in foreign countries. I had incredible adventures that I’ve shared on the blog over the years. These adventures decreased the cost significantly.
I also wrote a guide about how I planned vacations that cost less than $1000 including flights.
20 is a lot. What were they?
(Side note: Maximize your PTO) Each of these stories are linked for more details:
I took a road trip over Thanksgiving 2016 where I landed in Budapest and traveled through Slovenia, Croatia, Bosnia and Herzegovina, and Serbia.
I flew into Guatemala City and out of Tegucigalpa for Thanksgiving week 2017
I took a two-week trip between my first and second job and flew round trip to Copenhagen. I visited Sweden as well and flew to Poland while there for a long weekend. In that same three-week gap, I popped up to Montreal with my aunt for my first visit to Canada. Both of those stories are buried here.
Read this for Thanksgiving travel tips
I lived in Florida for year 3 of my debt, so I took long weekend trips to Colombia, the Bahamas, and Belize. I also went to Cuba for a week.
One year, I went to Mexico, Costa Rica, and Nicaragua for a week with a friend.
Additionally, I took a gap in Brazil after college.
I’m at 50 countries now.
Since becoming debt-free, I’ve visited The Netherlands, Belgium, France, Jamaica, Spain, Andorra, Portugal, the Bahamas, Panama, Lebanon, Cyprus, TRNC, Qatar, Malaysia, Singapore, Vietnam, Cambodia, Thailand, and Hong Kong.
And I’m not slowing down any time soon!
Thanks for joining me on the journey to all 196!
Was this explanation helpful? Did I leave any questions unanswered? Let me know below!
*EDIT 4/11/20: I was in a podcast where I discuss how to save money while traveling. Check it out here.*