What if I take a gap year every decade?

Gap years are great... these are the things many of us sit in our office jobs dreaming of. In this case study we look at the impact on your retirement age of taking a gap year (where you earn nothing) every decade.

Case Studies

Johns a hard worker, he's done his homework, brushed his teeth twice a day and got a decent job. He decides that to reward himself he is going to go on a gap year every decade. He wants to know how this will affect him financially in the long run, so lets find out.

For arguments sake, John sounds like he is a fairly middle class kid, we're going to assume he gets the average Uk graduate wage of £23000 and manages to increase this by 5% a year for the first 10 years and then just levels off, increasing with inflation after that. To begin with, like most of us he's getting by. He lives on £10,000 a year at Uni and then ups it to £15,000 a year once he starts work with a take home of £19,178. He's still a fairly savvy saver and gets 4% interest a year. He's been to Uni so he didn't start work until 22. He plans to work until 60 and wants to take a gap year at 25, 35, 45 and 55. Who knows how he juggles this and having kids, maybe they go with him!

Scenario 1 - John - The grind

As a starting point, lets look at what happens if John doesn't take a break to explore the world / chill on the beach / try his own business.


Harriet's Income Trajectory
John's income trajectory on the grind.

Harriet's Income Trajectory
John's outgoings trajectory on the grind.

Harriet's Income Trajectory
John's wealth trajectory with multiple gap years.

In this scenario John achieves financial independence aged 52, go John, pat on the back for you mate.


Scenario 2 - John - The Adventurer

In this scenario John takes all his gap years. He decides to travel on a yearly budget exactly equal to his outgoings whilst at home, this means his outgoings remain the same as above. Despite trying his best to make it as a 'vlogger', he earns nothing during his years of travel.


Harriet's Income Trajectory
John's Income trajectory with multiple gap years.

Harriet's Income Trajectory
John's wealth trajectory with multiple gap years.

In this scenario John achieves financial independence aged 57, so only 5 years later than he would have done had he not taken those 4 gap years.


Conclusions

In this hypothetical scenario we can see that the price of taking the gap years early is paid for in the form of one final year of extra work that could have been a gap year had you taken them all between the age of 52 and 57 rather than 25, 35, 45 and 55. In my humble opinion this is obviously worth it, I'd much rather be travelling Australia aged 25 and then doing an extra year of work aged 57 than waiting my whole life for something that might never happen anyway.

This very important research begs the question, does this scale to taking a gap year every 5 years?! Why not head on over to the home page and work it out...