Finance: Impact of gap years on your finances

PHUKET: As the Phuket Gazette‘s managing editor is imminently departing on his possibly crazy adventure to wherever the dice will take him, I thought it might be a good time to discuss gap years and how they tie in to your long-term financial well-being.

There are two main types of gap years. The first is either before, or immediately following a university degree, and the other is mid-career and typically known as a sabbatical.

Gap years during university studies are very common in Europe, but not so much in America. In fact, even though I did take gap years myself, travelling around the United States and living out of campsites and a converted van, it is not something that is encouraged. Typically, the fast-paced American culture views time off for traveling simply as a waste of time. I obviously disagree, for reasons I will list later on.

Taking a sabbatical mid-career is a little trickier from a financial perspective if you already have many fixed overhead costs in life. Obviously most of these tend to arrive with marriage and children, but taking a gap year and bringing the family along is something I intend to do myself in the future. I consider it one of the best investments in my children’s education that I will make. So how do these gap years fit into life planning and affect our overall financial trajectory in life?

From a purely mathematical perspective, it would appear on the surface that a gap year is usually a total financial loss. Very rarely does anyone work above and beyond what is needed to finance the trip, if they even work at all. Many live off of savings during this period. So there’s not only opportunity costs associated with losing your income during the period, there is also often a chunk of savings wiped out in the process. The benefits mathematically are very difficult to quantify, so it appears on the surface to be a loser.

However, the benefits often come over the long term. For myself, a benefit of travelling the US during university made me more mature and ready to settle down when I got back into studying. This allowed me to graduate at the top of my class. I also developed a love of travel and a desire to explore, which led to me taking some of my most successful risks in life.

My second gap year came when I was burning out from trading. Initially I intended to spend a year in Thailand, teaching mainly to get a visa and earn pocket change, before going to do my MBA and switch into a different side of business back in the US. Well, that was eleven years ago.

I did leave for my MBA after a year, but I came straight back here and never left Thailand again.

My entire life here, with a wife and children, is the result of a gap year. How can you put a price tag on your entire life working out beyond your dreams?

It may be that my experience leaves me slightly biased about the value of gap years, but anybody will gain from meeting new people, experiencing new cultures, overcoming adversities, reflecting on life and making personal changes. In the long run I don’t think anyone has ever regretted a gap year unless they experienced some kind of crisis. Financially speaking, I have never come across anybody who said “If only I hadn’t taken that gap year, my retirement would be so much better”.

David Mayes MBA resides in Phuket and provides wealth management services to expatriates around the globe, focusing on UK pension transfers. He can be reached at david.m@faramond.com or 085-335 8573. Faramond UK is regulated by the FCA and provides advice on pensions and taxation.

— David Mayes