We Advocate Living Above Your Means….WHAT???
One of the things we teach others to do is Live Above Your Means. It is a strategy that has worked incredibly well for us over the past decade plus. Whoa you say! Doesn’t everybody tell me not to do that? Follow me closely here because there’s a big distinction between the maxed out, debt laden lifestyles so popular today and what we are describing here: There is a huge difference between Living Above Your Means and living beyond your means. So let’s start there because this is muy importante. Living beyond your means is simply using loans and credit cards to acquire bad consumer debt in the quest to buy things you can’t afford. Typically this includes cars, homes, boats, clothes, parties, etc. Our latest debt crisis and resulting massive recession was based on way too many people buying real estate (and other things) they could never afford. And yes, this is very bad.
Living Above Your Means is using strategies to stay debt free but live a lifestyle that is far greater than what your actual monthly out of pocket spend could purchase. Using “Live Above Your Means” strategies, we have been able to:
- spend several summers along the Mediterranean coasts of Spain, France and Italy
- travel all over the South Pacific scuba diving in numerous world class destinations
- dine in several Michelin starred restaurants
- climb mountains in Nepal, Tibet and Africa
- spend months in several National Parks in the US
Stay in 5 Star resorts all over the world (some costing over $1000 per night) including:
- Chilling in the 7 room penthouse suite of the Hotel Intercontinental in Panama City numerous times
- Luxuriating at Vatulele Resort in Fiji in a 1500 square foot villa
- Hanging at the Monte Carlo Grand (where we had room service on our balcony with an ocean view)
- Having a private butler and swimming pool IN our suite Jade Mountain Resort on St Lucia
- Residing at the San Clemente Palace, a private island off Venice
- Renting Villa Kanti, a private villa in Bali, Indonesia
While we were having all these adventures and traveling the world, we never had a household income over $100K per year and in some cases we both were making as little as $200 per week. At first glance, you wouldn’t think it is possible to live a Robb Report lifestyle on such little income without getting buried in consumer debt. But you can, and this is how we’ve done it.
Live Above Your Means Strategy #1: Find an Adventure Travel Job
The only thing better than having amazing adventures all over the world and living the good life for next to nothing is to have someone else pay you to do it. Two decades ago when we sought out our first adventure travel jobs, this was our main goal. It made sense to us because we were both dying to get out and travel the world but neither of us had any money to do it. We felt stuck and at first saw no way to do the traveling we wanted because we couldn’t even afford a plane ticket. Money is one of the top two shackles that hold people back from living a more adventurous life and traveling more. Finding an adventure travel job helped us both break this shackle for the first time and that was a HUGE step for each of us.
My first adventure travel job paid me $400 a month. That’s right … per month. But it included room and board, drinks (a necessity for a 22 year old male) and my office was one of the top beaches on the entire Caribbean because I was a sailing and windsurfing instructor. I was in heaven.
It is important that when looking for an Adventure Travel Job that you find one that includes room and board or that the salary and/or stipend is large enough to offset living expenses. This applies whether you are a divemaster on Grand Cayman Island, a tour director in Italy or an accountant working for a big 4 accounting firm in Hong Kong or Singapore. That way you make sure your adventure travel job doesn’t put you in the hole financially.
There are three different tiers of adventure travel jobs:
Tier 1: Will work for experience and for the experience. Being a bartender at a resort in the Caribbean or working in a number of positions at a resort in the national parks are a classic Tier 1 jobs. You don’t need much experience to land these jobs and they don’t pay particularly well – although there are exceptions (my first job wasn’t one of them). The idea here is that you are having the time of your life and gaining valuable experience. Employers know this which is why the pay usually isn’t great. Quite often these are seasonal or annual jobs with a fixed contract length.
Tier 2: Populated with people who have a more advanced skill set or have been doing a Tier 1 job for a couple of seasons. You may have started as a bellhop or maid at a hotel in the national parks and now you are a front desk manager. This still isn’t going to be your career but you will probably spend a couple of years/seasons doing it.
Tier 3: Adventure Travel Job professional. You’ve decided that this is going to be your professional career whether you are a tour director, CPA working in Hong Kong or new product developer for a cruise line. This is typically a year around, full time position with professional level pay and benefits. As such, these positions require experience and a solid CV.
Because your Adventure Travel Job “includes” your travel and often involves the activities you love to do, you aren’t out of pocket for either of these things. Often, when we look at income, we focus on the top line (the gross amount I earn) versus focusing on what I am keeping (net in my brokerage account after all expenses and taxes). That is one of the reasons why so many people make “good” money but can’t figure out why they still run a personal deficit every month. One of the reasons is that they spend a lot of after tax dollars to do what you get to do for free and/or tax free with an adventure travel job. It also means that when you work an adventure travel job, you can have the opportunity to save a very large percentage of your income and this really adds up – especially when you consider that the average national savings rate (after expenses and taxes) in the US is only 4%.
Income: 100,000 Savings Rate: 4% Yearly Personal Savings $4000
Income: 20,000 Savings Rate: 25% Yearly Personal Savings $5000
This example is completely realistic and based on personal experience. Despite having an excellent paying corporate job out of college, the only times I’ve ever been able to grow my brokerage account was using the above strategy.
But here’s the caveat: I also knew a girl that spent half her paycheck every month on bikinis (she had over 100). I also knew a guy that left the resort after his contract was finished with nothing in his pockets and still owing a gargantuan bar tab. So what you choose to do with the money you save is up to you. If you spend like a drunken sailor on shore leave, you’re in the hole no matter what you do.
Live Above Your Means Strategy #2: Have a Lifestyle Business that Aligns with Your Passion
[disclaimer: I am not a financial consultant or CPA. You should consult with a tax professional before employing any of the advice found here; yada, yada, yada]
Scuba diving is our greatest passion, something we know a lot about and something we wanted to spend a lot of our time doing. So in 1998, we formed Global Diving Adventures, an S corporation, for the purpose of taking guests around the world to the top scuba diving destinations. Of course, this meant that we would be going around the world to the top scuba diving destinations as it’s employees in the role of expedition leader and dive instructor.
Global Diving Adventures (GDA) is a real, money making business and this is important. The IRS, understandable so, frowns upon business endeavors invented simply to skirt taxes rather than to actually make money. With that said, the key idea of a lifestyle business is that it pays pre tax dollars to do what you would normally pay after tax dollars to do. Here’s an example:
Even if we didn’t run GDA, we would want to go on scuba diving adventures all over the world and this would cost a lot of after tax money. With GDA, we identify the top scuba diving destinations in the world and then set up a commercial trip to that destination. GDA pays for us to go on these trips in the role of expedition leaders and dive instructors and we work our asses off. But, we’re scuba diving in some amazing places which beats working behind a desk any day of the week.
In addition, many things associated with our passion of scuba diving are paid for with pre tax dollars by GDA because they are part of our legitimate business operations: These include our scuba diving equipment, underwater photographic and video equipment and certain office expenses. Without GDA, these items would cut a large, after tax hole in our pockets.
Work is Work
The biggest trade off you make using these strategies is that you ARE working and this is an important distinction. A lot of people think, “well how hard can it be when you are working in paradise” and the answer is – just as hard as anywhere else. Work is work and when it’s hard it doesn’t matter where it is. Don’t confuse work with true vacation. What you get with the above strategies is an amazing office with some fantastic benefits. But it’s not vacation. If you are expecting a vacation, you won’t last very long. I see this all the time and wanted to give you a heads up.
But once you are done with work or even during your lunch break, paradise is on your doorstep and the view out the office window can be awesome.
So, where do YOU want to go?
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