Travel Finances

NedRN · Jul 29, 2014

Congrats! You are ahead of 95% of all Americans in the financial discipline department. You are also going traveling for the right reasons, but you will definitely be able to save money with your discipline.

As a personal anecdote and despite being a most frugal person, after 3 years of being a staff nurse in the south at $15 an hour, I only had enough saved up to buy an already elderly Subaru station wagon (a rare non-four-wheel-drive) to start traveling with only a couple hundred dollars left to my name. I went from something like a five percent savings rate to 80 percent savings rate. While I had previous careers with high savings rates (which is how I was able to afford nursing school without working), this was absolutely life changing as a nurse. I had no idea how big the difference would be. I suspect it will be the same for you, but you will have much more fun if you ignore money for a few years and go for fun. That is what I did for the first four years of travel, but now that I give money much more weight, it is not quite the same fun.

So you are starting traveling right with a good financial reserve should something happen your first assignment or two. Despite that, there is other financial planning that you are best off considering now before you burn any bridges. That is whether to travel as an itinerant, or maintain a tax home to take full advantage of the rather large tax benefits available to travelers. This is too large a topic to discuss fully in a few posts so I would recommend you take advantage of the available free and comprehensive information online at PanTravelers and TravelTax.

A brief description though: The IRS allows businesses and individuals to deduct expenses when working away from home. If you picture a standard business trip, a company will pay for an employee's flight, ground transport, hotel, and even meals with no taxable consequences to the employee. It is all considered an expense on the employer's side, so they have no tax consequences either (or very minimal ones). Fair enough, right? The IRS also tries to reduce paperwork burdens on both them and employers so it turns out that they allow, within limits, "reimbursements" of expenses based on GSA guidelines without requiring receipts, just proof of business purpose.

The travel nurse industry discovered that they could use this to raise the effective net income of a travel nurse by 10 to 20 percent without any cost. This allowed the pioneers to pay more to travelers and thus gain a competitive advantage. This had its ups and downs (there is a really cool description of the history of "Tax Advantage" in the "History of Travel Nursing" on PanTravelers), but has now reached a point where the IRS has effectively mandated that all agencies must pay this way if they provide paid housing.

For most full-time travelers, so-called Tax Advantage (which was the original marketing name and still the most common) adds about $10,000 of net bankable income annually. But there is a catch: to be legitimately working away from home and eligible for business deductions (or reimbursements), you have to have a home. Almost invariably, a home comes with costs, rent or mortgage, or even just property taxes. Depending on how you arrange to have a place to return to, the costs could exceed the benefits. Then you may choose to be itinerant (without a tax home) and come out better.

But you are in a fairly unique place to figure out how to establish a legitimate tax home and minimize the cost. For example, you could have roommates who pay a large share for the benefit of having the place largely to themselves most of the year. Everything I've said here is a large generalization as you will see from the tens of thousands of words published on the mentioned sites on just this topic, but hopefully you have a sense of how important this kind of financial planning is to you right now. It is much harder to establish a tax home after you've started traveling. Do at least a couple of hours of reading and if you have any specific questions after that, I'd be happy to attempt an answer.

By the way, you bear an uncanny resemblance to Harry Potter!