The essential guide to planning a grown-up gap year
Travelling the world is a cherished dream for many, but saving, budgeting and planning for a long trip can be a daunting task. Nonetheless, determined travellers of all ages and stages manage to hit the road every year without breaking the bank, thanks to clever use of existing resources.
Some people will give up their jobs to go travelling, while others will take off in the aftermath of a redundancy. However, the Chartered Institute of Professional Development says three in 10 employers in the UK offer career breaks and sabbaticals, often unpaid, that give travellers the security of their job back at the end of their trip. Sabbatical policies vary from company to company. Check whether contractual benefits will continue to apply and whether your continuity of service record will be maintained.
Plan your finances
Paul Stewart, a financial planner at Stadden Forbes, says those planning long-term travel need to consider not just the cost of the trip, but the fact that they will have a year without income. “We show clients what they need to save but also the impact on other financial goals such as their retirement planning,” he says.
A year on the road will usually mean a year without pension saving by either you or your employer, so when possible, try to increase your savings in the years leading up to your trip. As long as the period of no income or saving is factored into your long-term plans, there shouldn’t be a problem.
Set a realistic budget
The cost of a year out will vary according to your destination and travelling style. The Rough Guide estimates that travelling in India can be accomplished on as little as £9 a day, but other popular destinations, such as New Zealand and the US, are more expensive propositions, where minimum budgets of £35 and £46 a day respectively are needed (see info graphic, which you can click to enlarge, below).
Note that these are rock-bottom costs. Those accustomed to an en-suite bathroom, for example, will need to budget more generously. Also these budgets won’t cover the occasional splurge. “Your daily budget will cover your basic everyday expenses, but it won’t be enough for more expensive items. You need a separate allowance for flights and activities,” advises Erin McNeaney, a long-term traveller who writes the blog Never Ending Voyage.
Travellers can choose to buy flights as they go or purchase a round the world ticket. This may offer cheaper travel if you want to cover a number of destinations. However, it will limit your flexibility, and you will need to pay the cost of this ticket upfront. Round the world ticket terms and conditions will vary, depending on the airline. A travel expert, such as Trailfinders, will be able to help you choose the best option. To give you some idea of the cost of a ticket, a ticket taking in India, Vietnam, Singapore, Australia, the Cook Islands and Los Angeles would cost from £1,680 in economy.
Be sure to budget for unexpected costs. The price of visas can mount up if you visit many countries, particularly if you are travelling as a family, as there is seldom a discount
Recommended vaccinations and malaria tablets are rarely available on the NHS. The yellow fever vaccination required by many countries costs £70 at the London Travel Clinic, while enough Malarone (anti-malarial) tablets for a three-week trip to a malarial area costs £96 from Boots.
Maximise your assets
One way to ensure you don’t dip into your savings too much on the road is to use assets that are sitting idle at home. Many people rent out their homes while they’re away and use the cash to fund their trip. Writer Maddie Grigg, currently taking a year out in Corfu, discovered that renting out her Dorset home more than covers her costs in Greece.
“We found a company that would give top exchange rates and no transfer charge costs because we were transferring the rental income from our UK house every month into our Greek bank account,” she says.
Remember, if you’re renting your home out, you are likely to face additional costs, such as furniture storage (if renting unfurnished), management charges and landlord insurance. You’ll also have to pay tax on your rental income, and some mortgage lenders will raise your interest rate if you rent your residence.
While your home is likely to be your biggest asset, you could also consider selling your car to raise money. Decluttering your home and selling unwanted items could also help you raise cash.
Get the right insurance
“Most single-trip and annual multi-trip insurance policies are unlikely to be suitable for your journey,” says Alex Edwards, travel insurance spokesperson at Gocompare.com. “This is because most policies will limit the number of consecutive days abroad you are covered for, normally to about 31 days.”
There are two main insurance options for those looking to take an extended trip: long-stay travel insurance and dedicated backpacker/gap year insurance.
Since many travellers now take a great deal of expensive technology on their journeys, it is important to check the baggage cover on backpacker policies, as it can be quite low.
Older travellers in particular need to ensure they have declared all existing medical conditions on their application to ensure they are covered, says Kevin Pratt, an insurance expert at MoneySuperMarket. He also suggests that travellers check whether returning to the UK during their trip will invalidate their insurance and whether their policy covers working or volunteering while abroad.
He says: “There’s no reason why the adventure of a gap year should be the preserve of the young. It’s good to see older people taking the opportunity to see the world on a longer holiday. But insurance is essential, whatever your age, and it’s crucial to get a policy that provides the cover you need in terms of destination, length of trip and the activities you’ll be undertaking. If things change while you are away, make sure you tell the insurer so your insurance remains relevant.”
Use the right money on the road
Thanks to technological advances, it is easy to bank, and even manage your investments, while you are travelling. ATMs are available in almost every country. Most long-term travellers no longer use travellers’ cheques but instead rely on withdrawing money on credit or debit cards.
Ms McNeaney says: “Before you leave, apply for a bank account or credit card that doesn’t charge international fees, as they can really add up. We use the fee-free Halifax Clarity credit card and pay it off as soon as we make a withdrawal to avoid interest fees.”
She adds: “I recommend taking at least two debit cards and one credit card in case one gets stolen or eaten by an ATM – it’s difficult to get a replacement when you are travelling. Take along a few hundred dollars in cash for emergencies.”
Mr Pratt suggests applying for a specific credit card that is good for travel. But he warns: “You should avoid withdrawing cash from a foreign ATM on any credit card. You will almost always have to pay a cash withdrawal fee.” He also suggests carrying a pre-paid card. You can load this up with cash that you can then withdraw. “Look for a card with no fees or low fees,” he says.
The best cards to take on your travels
|Card||Type of card||Fees/interest rate||Benefits||Watch to watch out for|
|Creation Financial Services Everyday card||Credit card||12.9 APR. No monthly fees||No exchange rate fees, charges for spending abroad or ATM fees||No fees for cash, but you'll start incurring interest immediately on withdrawals|
|MBNA Everyday Plus card||Creditcar||7.4 APR. No monthly fees||No exchange rate fees, charges for spending abroad or ATM fees||No fees for cash, but you'll start incurring interest, immediatly on withdrawals|
|Metro Bank current account||Debit card||No monthly fees||Free transactions and ATM withdrawals in mainland Europe||Outside Europe transactions incur a 1.9% fee and ATM withdrawals cost £1|
|Revolut prepaid card||Prepaid card||No monthly/ sign-up fees||No fees on transactions or first £500 of ATM withdrawals each month. Load currency in pounds, euros or dollars||You'll be charged a 2% ATM fee on withdrawals over £500 each month. Account is opened by app, and you'll neeed to request the free debit card|
Source: Moneywise analysis, 11 July 2016
Before you go
Ensure you tell your bank you are going away, leave an address for it to send correspondence to and set up a Royal Mail redirect to a trusted UK-based friend. Provide your bank and credit card provider with a contact number in case anything goes wrong, and check before you go whether your card is likely to expire while you are away.
Those who manage their own investments and pensions online can continue to log in while abroad using free wifi access or data roaming bundles.
“If you advise yourself, you need to keep a regular eye on markets, so make sure you have online access to do this,” says wealth manager Philippa Gee. “If you have an adviser, unless they work on a discretionary basis, they will need to contact you to gain your approval before making any changes, so it is essential to give them an email address where you can be contacted.”
There are no rules against taking your children out of the UK education system to travel. Under UK law, all children must be educated, but the education does not need to happen in a school.
Families who travel with their children must inform their local authority and school that they want to ‘electively home educate’ their children for the duration of the trip, You need to be aware that the school has no obligation to keep your child’s school place open for when you return. If you want your children to return to the state system, you must reapply for a place on your return.
Be aware that if you simply take your kids out of school for a holiday with no educational plan in place, you may be fined.
Plan for your return
Getting yourself back on your feet financially when you get back is an important task.
Patrick Connolly at financial adviser Chase de Vere says: “When you are back working and your income is once again, hopefully, higher than your expenditure, you should take steps to replenish your cash savings and see what you can do to make up any shortfalls there may now be in your longer-term planning.”
Ms Gee suggests that, if you’ve planned wisely, you may even have become more employable during your time away.
She says: “If there is a way of using the travelling to boost the power of your CV, this would be worthwhile. This could involve setting up some work experience with particular companies in your [job] sector that you could capitalise on when you return. Travelling can help take the blinkers off and see the bigger picture in terms of your industry.”
The difference between two currencies; specifically how much one currency is worth relative to each other. For example, if £1 is worth $1.50, converting sterling to US dollars, the exchange rate is 1.5. Converting dollars to sterling at those levels, the exchange rate is 0.66, so $1 is worth 66p. There are a wide variety of factors that influence the exchange rate, such as a country’s interest rates, inflation, and the state of politics and the economy in that country.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.