A mini retirement is the act of leaving your job for an extended time to go on an adventure, fulfill a lifelong dream, or to take a break for other intentional reasons.
The Mini Retirement Mindset
There’s a freedom in making the choice to take an extended pause from your day job. The decision itself invokes inspiration, motivation, and self‐empowerment.
It also motivates us to intensify our efforts at work to maximize earning potential, while minimizing expenses and attachment to luxury possessions; liberating us, if you will, from the status thrust upon us by the mere nature of our job titles.
When the epiphany of living on a sailboat hit me like a ton of bricks back in 2013, it altered my choices on what I wear, where I live, what I drive, how I furnish my home.
It changed everything.
When the goal is to live on a 45’ sailboat and pare your possessions down to barebones
necessities, the type of couch you chill on for the next few years suddenly matters
The dream for everyone, however, is not living on a sailboat and sailing around the
globe. Each of you reading this guide will have different dreams, each with their own
nuances and levels of effect on lifestyle and luxuries.
Simplify Your Life
For many of us, the process of planning, saving, and preparing to fulfill a lifelong
dream will avert our focus from the status‐quo corporate lifestyle that one would
naturally gravitate towards in our current culture. Suddenly we are saying no to
common luxuries; not because we can’t afford them, but because we have a more
exciting and meaningful motivation to NOT indulge.
Go While You're Young
Many people choose a mini retirement over early retirement because it allows them to fulfill a goal much quicker, and in some cases, enables them to live a more moderate (less frugal) lifestyle while saving up for it.
We chose a mini retirement because we are already in our 40s and if we wait another 10 years for early retirement, we may not be able to sail around the world.
We take nothing for granted, including our strength and our health. And while the kids are young enough to get on board (pun intended), we want to show them a different way of life before they get stuck in the rut of American suburbia.
I believe the best way to teach diversity is through immersion into cultures different from our own. Therefore, crossing borders is a priority to us.
We don't have any definite plans for when we return, and are open to possibilities of new careers, launching our own company, or just letting things happen on their own. We have much to learn about ourselves and our future, and not knowing where that takes us is exciting!
“Don’t die without embracing the daring adventure your life was meant to be.”– Steve Pavlina
Step 1 – Choose Your Adventure
If planning a mini retirement sounds like your cup of tea, the first step is deciding what you want to do when you quit your job. This is one of the most exciting aspects of stepping away from a day job. Unlike a Choose Your Own Adventure novel from the 80s, your options are endless.
Go on an extended getaway with friends or family, circumnavigate the globe in a sailboat, or combine your desire to travel with a charitable project abroad. Voluntourism (philanthropic travel) is a growing interest.
A mini retirement affords you the opportunity to test your merit in a creative field. Try your hand at dressmaker, filmmaker, or chocolatier.
Whatever your lifelong dream is, this is a perfect opportunity to fulfill it without the distractions of a career.
Why I Chose Sailing
When I discovered that people lived on sailboats and traveled the world, enjoying remote beaches and luxury views for a fraction of the cost, I was instantly ready to raise anchor and go.
There are several aspects of the lifestyle that reeled me in:
- Cheaper cost of living
- Challenging experiences crossing oceans
- Learning new skills – how to sail, navigate, & provision are just a few
- Visiting remote places
- Teaching our kids science, culture and history first‐hand
- The solitude of an ocean passage
- Experiencing cultures
- Joining the sailing community
- Living “off the grid”
- Harnessing the power of nature’s elements (solar and wind)
- Small carbon footprint
- Opportunities to photograph and film (and time to learn to do both skillfully)
What adventure will you choose?
Calculate the Cost
There are three primary categories to calculate when planning an
extended trip away from work:
- Initial Costs – Includes initial capital outlays required for housing, transportation, equipment, rets, and other one‐time purchases.
- Burn Rate – Think of this as your monthly cost‐of‐living budget.
- Return Cushion – A pool of funds for emergencies and to cover living expenses when you return from your abbreviated retirement and are searching for a new job, or establishing a new business
Initial costs are one‐time expenses you will incur. Housing, equipment, fees, licenses, and other one‐time expenses should be included in this category.
I recommend extensive research into your chosen activity to give you an informed estimate of true costs. For my mini retirement, I was able to find multiple blogs and vlogs describing the experience of other liveaboard sailing families. We visited boat shows to tour boats, and get a feel for our specific needs and comfort levels when voyaging across oceans.
When I originally decided to buy a sailboat, I estimated a cost of $60,000 to $80,000. After watching multiple sailing vlogs, and adding two small children to our crew list, we concluded that we need a bigger boat. Specifically, we want a 40 to 45 ft. sailing catamaran with air conditioning, solar power, a water maker, a washer/dryer unit, and other perks, which costs anywhere from $300,000 to $350,000 (and upwards).
Could we live without these amenities? Yes. We’ve chosen to add them to our budget and save enough to cover the cost. If you want to get out there faster, choose simpler and cheaper options.
Your burn rate is the monthly cost of living during your mini retirement. The best way to calculate your burn rate is to complete a monthly budget worksheet, using estimated costs based on the research of your chosen lifestyle.
To fully understand the cost of your mini retirement, I recommend doing a lot of research. Connect with others already in that world – Facebook groups are a great tool – and ask about the cost.
While the cost will vary from person-to-person and family-to-family, you may discover there are expenses that you didn't think of. After research, you will have a better idea of what the costs could be, depending on your lifestyle choices.
For example, one thing I've learned is that it costs more to rent a marina slip for a 40′ catamaran than it does for a 30′ monohull. Its also easier to find slips that fit a 30′ monohull.
This type of consideration is a factor that affects practicality when sailing certain waters, and is just one example of what I've learned in my extensive research over the past several years.
Overestimating costs is not a big deal, but underestimating costs could cause your mini retirement to come to a premature end.
A return cushion is a buffer of cash to keep you out of the poor house when you return from your adventure and start searching for a job or launching a new company. It will give you wiggle room on the timing of your return, and give you peace of mind so you can enjoy your trip with one less worry.
A 6 month emergency fund is recommended as a minimum. This should be based on your cost of living when you return, not your current cost of living.
The Ultimate Personal Finance Binder is a complete set of financial worksheets to get you to the next level in managing your money. Included in the binder:
- Monthly Checklist
- Household Ledger
- Actual to Budget Summary
- Net Worth
- Debt Tracker
- Savings Tracker
- Mindful Assessment
- Bonus: Financial Goals worksheet
Create a Timeline
The next step to prepare for your mini retirement is to create a timeline to help you decide how quickly you need to save up. Your timeline will include key dates pertaining to your plans.
Some dates will be related to your financial goals. Other dates may tie to events in the lives of family members, like kids going off to college, or parents transitioning into a full‐time care.
Your timeline may also be peppered with deadlines for attaining skills, certifications, conferences, classes, tutorials, and other skill requirements for your chosen adventure.
I recommend creating financial goals. Savings targets will keep the anticipation high.
Your timeline may change, and that's okay. There may be setbacks or unexpected roadblocks. Keep working towards your goal, and update your plans based on what life throws your way.
Save Your Money
To save up enough money to afford your mini retirement, you need a savings strategy.
Creating and then following a solid savings strategy is the key to reaching your goals.
Refer back to the previous section – how much do you need to save? The amount you need to save and the amount of time you have to save it will dictate your savings targets.
With that being said, if its not within your means to save the amount you need to, adjustments will need to be made to your plan, income, timeline, or your cost of living.
ANALYZE SPENDING HABITS
The first step to drafting a comprehensive savings plan is to understand your current spending needs and habits.
First, you will pull financial transactions from your bank accounts and credit card accounts over the last several months. Export them into a spreadsheet and categorize using general spending buckets.
For a detailed walkthrough on how to complete this task quickly, refer to How to Analyze Spending Habits Using Pivot Tables.
Here is a list of expense categories you can start with and adapt to your needs:
- Debt Payments
- Home Goods
- Clothing & Shoes
Subtotal your monthly expenses by category. Are there areas where you are spending more than you expected? Look for easy wins where you can save money fast.
BUILD A BUDGET
Use your spending analysis as a baseline to build your budget. For an easy spreadsheet using a bi-weekly budget, or one based on pay days instead of months, check out my Ultimate Payday Budget Excel template here for free:
This workbook provides a detailed tab for budget & actuals per pay period, a summary tab that seamlessly provides you a view of your budget by year, and a tab with instructions.
After you complete your budget, make sure the amount you calculated to save will enable you to meet your timing goals. Make adjustments where needed.
TRACK YOUR RESULTS
The next vital step is to track your actual saving results and compare to your budget. If you're using my Excel workbook, there's already a space to do that every pay period on the detailed tab.
If you find yourself struggling to change old habits, here are a few tips and tricks you can follow:
- Create a set of guidelines to follow to help you stay on track. Self-imposed restrictions like eating out only once a week, choosing free activities on weekends for entertainment, and canceling vacations until launch date are a few examples of how you can create boundaries to keep you on track with your plan. The restrictions will be easy to commit to knowing that your goal isn’t decades away.
- Give yourself a weekly allowance of “spending money”. When the money is gone, stop splurging.
- Plan and prep meals weekly. Pick a designated day for meal prep. Decide what the menu will be. Have all your groceries ready to go.
- Track your expenses relentlessly. Daily, if necessary. Use my Household Ledger worksheet (included as part of the Ultimate Personal Finance Binder).
- Embrace minimalism: a way of life that means living with things you really need. It means removing anything that distracts you from living with intentionality and freedom.
Credit Card Debt
If you have any high interest or credit card debt, paying it off before you start saving is paramount. Credit card debt will suck away any interest you make on your savings, and then some.
Don't fool yourself – you haven't really saved any money if you have non-collateralized debts on the books. Get those paid off ASAP, and then start on your savings plan.
Put Your Savings to Work
Most banks that offer a high yield savings account are online banks. They can afford to pay the interest because they don’t have the brick and mortar costs of traditional banks with buildings, rent, and on-site personnel.
My husband and I keep all of our extra cash, as well as emergency funds, in an Ally Bank savings account.
While savings rates were more lucrative in the past, as of April 2021, Ally savings accounts are only paying .5% annual interest. Rates typically fluctuate with Fed rates, and should increase in the future.
While .5% seems low, a typical savings account pays much less at an average national rate of .05%.
Ally is not the only bank with high yield savings accounts. A simple Google search will yield a myriad of options. And maybe rates will increase over time, back to where they were before the Covid-19 pandemic (around 2%).
While we keep some cash in Ally, most of our money is transferred to investment accounts. There are several types of investments that you can consider on a shorter timeline.
First, consider how many years you plan to save up before taking your mini retirement. Based on that number, you can make better decisions about how to invest your savings. If its more than 5 years, there are some great options that may not provide liquidity under a 5 year timeframe.
Let's go over some liquid investment options.
Certificates of Deposit (CDs)
A certificate of deposit is a type of savings account that traditionally offered a higher interest rate in exchange for restricting access to the funds for a specific period of time. One-year and five-year accounts are the most common offerings, but other time frames are offered as well.
In addition to the time restrictions placed on funds deposited in to CDs, the other major difference is the amount: CDs are often offered in increments of $1,000, $5,000, and even $20,000 for “jumbo” accounts.
As of April 2021, most CD rates are hovering around the same rates as high yield savings accounts. Ally’s own CDs are offered at .55% versus .50% offered on their savings accounts. For this reason, it currently makes no sense to tie your money up in a restricted account when you can earn practically the same interest in an account that doesn’t place time restrictions on withdrawals.
Chart 1.0 shows the fluctuation in Ally CD rates over the past decade. Like savings accounts, CD rates fluctuate with Fed rates.
Chart 1 Source: https://personalfinancedata.com/
The stock market isn't always the best place to put your money for short-term investments, but sometimes it can be. The stock market has basically been in a bull run since March of 2009, with the exception of a one-month time out during the pandemic in March/April 2020.
What does that mean? It means you could buy a simple index fund that performs with the market and make money for any given year over the past decade. But it doesn't guarantee that a bull market will last forever.
It also doesn't guarantee an increase in value for any given month (hello March 2020!). So for less than a one year timeframe, I strongly caution you on stock investments unless you are experienced in the stock market.
If you are a risk taker and are willing to risk more to make more, the stock market could be a good option for you. To keep it simple, you can focus on ETFs (exchange-traded funds) that follow market performance.
One example is $MGC – Vanguard Mega Cap Index Fund ETF. This fund increased in value over 50% in the past 1 year (as of April 2021).
Another strategy is to focus on stocks that pay dividends. A popular fund that focuses on dividends is $SCHD – Schwab US Dividend Equity ETF. This fund is held by major hedge funds and is made up of several popular blue chip stocks.
These are not trade recommendations, but examples of different types of strategies and funds to get you started with your own research.
The nice thing about stocks or ETFs is their liquidity. Within 3-5 days you can liquidate your positions and transfer your cash back to your bank account, ready to invest in your grand adventure.
Bonds, Notes & Bills
Corporate bonds and notes are issued by companies that want to raise capital. A bond is a promise to repay an amount loaned—with an additional specified interest rate within a specified period of time.
A corporate note is simply a short term loan agreement between a lending source and a company.
The primary difference between notes and bonds is that bonds are always regulated as securities, while notes are not necessarily considered securities. Bonds are typically for longer-term issues, while notes can have a maturity date of less than a year to several years.
A Treasury note has a maturity between 1 and 10 years. A Treasury bond has a maturity of more than 10 years. Short-term Treasuries with maturities of less than one year are known as Treasury bills.
Bonds and notes are issued by the government entities such as the US Treasury department and municipalities, and also by public and private companies.
There are various ways to access bonds, notes, and bills. Brokerage platforms are a good place to start. On the TD Ameritrade website, for example, there is an area dedicated to Fixed-Income New Issues.
Real Estate Crowdfunding
Real estate has long history of profitability, and is considered by some to be the investment of choice for the rich.
“Roughly 90 percent of millionaires—yes, 9 out of 10—created their wealth through real estate,” says Kurt M. Westfield, managing partner of WC Companies in Tampa, Florida. “Not stocks. Not gold. Not baseball cards or other seasonal or whimsical investment vehicles.”
One of the barriers into the real estate market is the amount of capital required to purchase a rental property. This is where real estate crowdfunding comes in.
What if you want to invest in real estate, but you only have $5,000 to commit instead of $100,000? By using crowdfunding platforms like Fundrise, Cadence, or Crowdstreet, you can invest your $5,000 in real estate without the hassle of ownership of a property. The tradeoff, however, is that you have little control over decisions made with your money.
Real estate crowdfunding works the same way as many other crowdfunding ventures: Investors pool their money to fund a project in the hopes that there will be a future profit.
Real estate crowdfunding offers an easy way to invest smaller amounts of funds and potentially receive an exciting return. But it’s important to keep in mind that investing in real estate is inherently risky. Crowdfunding is still a new concept without a historical record of returns.
Peer-to-peer (P2P) lending provides a platform for individuals to obtain loans directly from other individuals, cutting out financial institutions as middlemen. Popular platforms include Prosper, Peerform, Upstart, and StreetShares. Lenders who invest in loans on the platform can typically choose between loan terms of three or five years.
When you invest on some P2P platforms such as Prosper, all of your cash is not tied up for the term of the investment. The money will trickle back into your account as principal and interest payments are made by borrowers, and you can withdraw it at-will.
The important thing to remember when saving up alot of money is put it to work somehow. You don't want to let it sit idle when you could be generating more savings by investing it.
Also, always be aware of your target mini retirement launch date, and make sure your investments are ready to cash out when you need to use the money.
The Bottom Line
If a mini retirement is your dream, you can achieve it by staying motivated and following your plan. At times, though, staying motivated is not easy to do.
Life is full of challenges, pandemics, and unexpected financial speedbumps. Don’t allow setbacks to derail you from your goals. There are three primary ways I’ve been able to stay motivated on my goal of sailing away:
1. Dream Boards & Other Visuals
Creating a visual representation of your dream is inspiring and motivating. When you create a dream board, a cool thing happens. You are putting yourself in that place, doing that thing, enjoying that lifestyle.
I start with a piece of white foam core board from the craft store. Then I clip images that represent my dream out of sailing magazines, and glue them onto my board. I’ve also used paper map clippings, decorative papers, and pieces of net to create my collage.
After that, I find words that inspire me and print them or find them in magazines and cut them out. I glue the words over the pictures, creating a visual message that I can look at every day to remind me what I'm saving up for.
I’ve made multiple dream boards over the years. The exercise of creating the dream board is as beneficial as making it into inspirational wall decor.
2. Playing with Numbers
There is nothing I enjoy more than crunching numbers. Crunching numbers about the sailing life, and how to make it work financially, is one of my favorite activities.
There are so many ways you can plan with numbers. How much could we save if I got a 10% raise, or a promotion? How big of a boat could we buy if we save an extra $1,000 every month? Or how much longer could we extend our adventure if we found a way to build a revenue stream while we were sailing?
The possibilities are endless.
Spending time on financial analytics keeps me focused on saving money and working towards our goal.
Even the mundane can be exciting as you progress toward your goal. Spending time adding up receipts, keeping detailed financial records, and then writing about it is another way I stay focused. Its not a chore when its driving you toward the thing you’ve been looking forward for years.
3. Watching Youtube Vlogs
We follow several sailing Vlogs on Youtube of families living our dream. They sold it all and sailed away, and often with no sailing experience. Watching their true stories and learning the lessons they share has increased our knowledge of sailing and liveaboard lifestyle, while keeping us inspired.
It also qualifies or corrects our lifestyle expectations.
We won’t be surprised by all of the boat chores, maintenance, and other challenges that we’ll face. There will be no reason to hurry because we already know that everything is dictated by weather windows when you travel on a sailboat. We do expect to see beautiful, remote landscapes, and introduce our children to nature and different cultures in a unique way.
Find What Works for You
Whatever it is that inspires you about your chosen adventure, stay focused on that and you will be fine. If you aren’t passionate enough to stick it out for however long it takes to reach your goal, maybe you haven’t found the right passion yet. Look for opportunities to learn from others who are doing what you want to do.
With the age of the internet and access to information, there is no limit to what you can learn from your armchair.
If you’ve found your passion and you are ready to actively save and plan for your mini retirement, I wish you the best of luck in achieving your dreams. Stay the course, and you will succeed.