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Ask Dave

Round The World In $180,000

Emily and her husband want to take their four children on a round-the-world trip. They're going to need $180,000. Where do they place this in the plan, and how do they plan for it?

QUESTION: Emily in Chicago and her husband want to take their four children on a round-the-world trip. They’re going to need $180,000 to do it. Where do they place this in the plan, and how do they plan for it? Dave loves this idea and explains exactly how to do it.

ANSWER: Great question, great goal, and a lot of fun. Having done some of those kinds of things—not taking a whole year’s worth, but taking some very nice trips with our entire family now that the kids are grown—I’ll tell you I think it’s a great goal. I think it’s something to aim at. I will also tell you that it’s something we had kind of talked about back at your stage, and by the time it got there, how it looked changed and what we did changed, so be open to that. Let the thing morph as the world changes and you guys change.

Your questions are: How do we do this, where does it go in our plan, and where do we put the money? I would make sure you’ve gotten your necessities covered first, and really, our Baby Steps—with the exception of paying off the house—are really up there in necessities. You’ve definitely got to be out of debt. You’ve definitely got to have the emergency fund in place. You’ve definitely got to be saving for retirement, because you don’t have to travel the world, but you do have to be ready for retirement. One’s a necessity, and the other is a luxury.

What normally happens is over the next 10 to 15 years, you’re going to hit so many of your wealth-building goals because you’re setting goals and because you’re aiming at them and asking for advice and those kinds of things, that you’re probably not going to end up actually having a travel account. You’re probably going to look over, see you have $300,000 in an account, and decide to take $180,000 out to do your trip. It may end up being that way.

You can throw any other found money beyond retirement and college toward wealth-building, and if you want to name your wealth-building “Travel Account,” I’m okay with that. It’s your account. It’s okay to put this in front of paying off the mortgage, but you might do some of each, fifty-fifty or something. We know that you’re not going to live your life linearly, meaning that that amount you could project for 14 years but it’s never going to happen. It’s either going to get better or worse. It’ll never be exactly the same for 14 years. There’s no chance. So take that and use it as your projection, and throw some percentage at the house and some percentage at the travel account. Run some numbers the different ways.

As far as the account itself to put it in, I like good growth stock mutual funds. If you want a lesser risk one, you could go with a growth and income mutual fund when you’re dealing with something where you’ve got longer than a five-year track record. I’m investing in good mutual funds with a long-term perspective because I don’t think God lives in Washington.