Breaking Down The Financial Benefits of The 330 Day Challenge

Introduction

So by now you’ve probably read about the benefits of FEIE and the 330 Day Challenge and understand that you can “save a bunch of money and travel the word” but you are unsure how much money you can save and exactly how the math works out.

This article will break down exactly that by giving you a picture and a road map of what your life could look like (from a financial AND lifestyle perspective) if you take the challenge.

We know the 330 Day Challenge may be difficult to take advantage of for those who’ve already started a family. So this article was crafted for readers in the age range of 25-35.

(Side note: if you’ve completed the 330 Day Challenge with kids, you‘re remarkable and we would love to share your story.)

To avoid confusion, this article will focus on FEDERAL income tax savings because STATE income tax will vary between readers. Keep in mind that STATE income tax can also be reduced to zero by moving your permanent residence to a tax friendly state prior to the 330 Day Challenge.

Monthly Tax Savings

We’ll be looking at everything in terms of a monthly budget, as that is the standard time interval people usually reference for budgeting purposes.

We’ll also just be looking it in terms of a ‘Single’ filing status, no dependents, and as if you are a W2 employee (i.e. non-business owner). For business owners, you can essentially double the FICA & Medicare Tax (to account for self-employment tax) and reduce your monthly net pay accordingly (business owners will also want to refer to our more in depth article here to optimize their FEIE tax situation).

 Monthly Net Pay Based on Varying Salary Levels (Up to the FEIE Limit) 

 
         
 Salary   Monthly Salary   Monthly Federal Income Taxes   Monthly FICA & Medicare Tax   Monthly Net Pay*
 $50,000  $4,166.67  $(510.46)  $(318.75)  $3,337.46
 $60,000  $5,000.00  $(693.79)  $(382.50)  $3,923.71
 $70,000  $5,833.33  $(877.12)  $(446.25)  $4,509.96
 $80,000  $6,666.67  $(1,060.46)  $(510.00)  $5,096.21
 $90,000  $7,500.00  $(1,250.13)  $(573.75)  $5,676.12
 $104,100  $8,675.00  $(1,532.13)  $(663.64)  $6,479.23
         
 *Assumes no state income tax. You will need to factor this in on your own, and is still owed during the Challenge. See article here for how to save on state income taxes too


Why is the monthly federal income tax title colored green? Well, that is because that is what is going back into your pocket during the 330 Day Challenge, remember, ZERO federal income tax (up to $104,100). Cha-Ching!!

It is VERY important to note however, that this tax adjustment is made at YEAR END, not each pay-cycle, so you will receive one large tax credit at the end of the year equivalent to your total annual federal income tax amount up to the $104,100 salary exemption limit (assuming you are claiming FEIE for the full 12 months). T

hat means if you are factoring in your monthly federal income tax savings to help fund your travel, you will need to come up with a means of financing this throughout the year until you receive the tax credit at the end of the year.

If you have a savings account to tap into, then perfect! If not, and you have good credit, then you can get a 12-month 0% APR (here are our recommended credit cards) and PAY IT OFF IN FULL once you receive your year-end tax credit.

This step takes careful planning based on your unique financial situation, so make sure you budget accordingly.

 

Prepping In Advance of The 330 Day Challenge

Do you know what the only thing worse than flushing money down the drain each month via your rent payment? Flushing money down the drain each month when you are not even there!

In preparation, you’ll want to end that lease payment if you have one and have zero rent obligations in the US. Have a lot of possessions that you need to a place to keep? A local storage unit will do the trick for a fraction of the cost.

If you own your own place and have a mortgage payment, I would strongly recommend renting it out for the better portion of the year or the entire year, if feasible. If the money is not a concern to you then that is another thing, but we would hate to see you paying ‘rent’ all year for something you are not using.

We are going assume that everyone is spending no more than the recommended 25% of their net monthly pay on rent (if you spend more, than your savings will be even larger!), as shown below, which will provide us with the following 330 Day Savings at varying salary levels.

Monthly 330 Day Savings Assuming No Rental Obligations In The US

 
         
 Salary   Monthly Net Pay   Rent @ 25% of Net Pay   Monthly Federal Income Taxes  330 Day Monthly Savings
 $50,000  $3,337.46  $834.37  $510.46  $1,344.83
 $60,000  $3,923.71  $980.93  $693.79  $1,674.72
 $70,000  $4,509.96  $1,127.49  $877.12  $2,004.61
 $80,000  $5,096.21  $1,274.05  $1,060.46  $2,334.51
 $90,000  $5,676.12  $1,419.03  $1,250.13  $2,669.16
 $104,100  $6,479.23  $1,619.81  $1,532.13  $3,151.94
         
*If you are forced to continue to pay rent/mortgage obligations in the US while doing the challenge, then use just your Federal Income Tax savings as your 330 Day Savings

Your estimated monthly rent and federal income taxes are now positive numbers. Why? Because they are going back into your pocket! The two-combined equal your 330 Day Savings.

You can look at this number as your personal travel fund. A travel fund that was essentially created from scratch; with no pay raise, promotion, side hustle, you name it. Created just from taking advantage of the US tax code and removing your US rent obligations.

Now let’s see what all those US Greenbacks can get us in different parts of the world!

The World is Your Oyster…

As a United States passport holder, we are fortunate to be able to travel to an astonishing 166 out of 195 countries in the world without a visa required prior to travel.

Many of these countries have restrictions on how long you can stay, so make sure you check here while planning your travel.

Many people complain how expensive the US is compared to other parts of the world. That sucks for people that are stuck in the US because they have a corporate job / desk job that requires them to physically be in the US (*me playing my tiny violin*).

However, the fact that the US is expensive compared to other parts of the world is THE BEST NEWS POSSIBLE for us ‘330 Day Challengers’.

Why? Because most of us still earn our compensation in the form of US dollars, meaning these US dollars will go even further abroad than they do in the US.

That’s right – first, we ‘increased’ our income artificially using the US tax code and FEIE to our benefit, and now we are increasing it even MORE by spending our expensive dollars abroad and getting, quite literally, more bang for our buck!

Not sure what I mean? Here is a cost of living map of the entire world.

Red and orange pins represent expensive cities / countries. The US is almost entirely red, orange and yellow, along with Western Europe, Australia, and a few Asian cities.

Green pins represent inexpensive cities.

As digital nomads we have the flexibility to take our US dollars and spend them in a less expensive country, and literally stretch our dollars to achieve a higher standard of living with the same or even a lower budget than while in the US.

Let’s look at an example of a green pin –

Chiang Mai, Thailand is a popular hub for digital nomads because it checks all the boxes; no visa requirement, nice weather, safe, reliable internet, and inexpensive. *It is important to note that the above percentages aren’t entirely accurate and do fluctuate, but they do give you a clear picture that Chiang Mai is MUCH cheaper than Los Angeles.*

Here is a sample budget comparison that brings everything together.

Budget Comparison Example – LA vs. Chiang Mai

 
       
   Los Angeles, CA   Chiang Mai, Thailand  % Change
Income  $70,000  $70,000  
Net Pay  $4,133  $4,510 *
330 Day Savings  $                         –  $877  
Total ‘Net Pay’  $4,133  $5,387 30%
       
Rent  $(1,500)  $(600) -60%
Disposable Income  $2,633  $4,787 82%
       
*Includes $377 saved from CA state taxes / fees from changing your state of residence prior to departing

Based on a $70,000 salary we calculate the net pay from the previous table (this time including CA state income taxes).

Then we show just the federal tax savings from the FEIE (since rent is a separate line item) bringing us to total ‘Net Pay’.

Already this number is 30% higher in Chiang Mai as it is vs. Los Angeles – for the same exact job and same exact salary. Not bad considering the average pay raise year over year is in the 2-3% range!

Next we look at a reasonable estimate of rent expense in LA of $1,500 vs. a conservative estimate of $600 for Chiang Mai (60% cheaper).

This brings us to our remaining disposable income of $2,633 for LA vs. $4,787 for Chiang Mai.

In this example your disposable income has already increased by an amazing 82%! And don’t forget – all of the stuff you’ll be spending your disposable income on will be cheaper in Chiang Mai too!

Referencing the above cost comparison from Numbeo a…

  • $30 dinner in LA will cost about $9 in CM
  • $6 pint of beer in LA will cost about $2.24 in CM
  • $4 cappuccino in LA will cost about $1.70 in CM

Average consumer prices excluding rent are about 44% cheaper in CM than LA.

So your $4,787 of disposable income really has the purchasing power of the equivalent of $8,548.21 in LA.

Compare that to your estimated disposable income in LA of $2,633 and you have an almost 225% increase in disposable income when you factor in your 330 Day Savings and your increased purchasing power – a 225% ‘bonus’ to TRAVEL THE WORLD! Seems crazy, right?

 

What Does This All Mean?

Now you see clearly the financial benefits of the 330 Day Challenge and how you can use FEIE and the purchasing power of the dollar to your advantage and essentially GET PAID to travel the world for a year (or however long you want!).

You can very likely travel for the entire year, maintaining or even increasing your standard of living, and come back with more money in the bank than if you stayed in your current situation in the US.

Even if you come back with the same amount or slightly less in the bank than if you stayed, you still traveled for the entire year in what would very likely be one of the most memorable years of your lives.

This is quite a different approach than the people that think you can only visit Chiang Mai for 3 months if you quit your job and leave everything behind. These people are taking the uniformed, lazy way out and are not thinking hard enough and using the system already in place to their advantage.

Those people end up quitting their jobs, traveling on a constrained budget, and then coming back to the US work force and having a difficult time finding a job because of the gap in their resume.

Compare that to KEEPING your job (or switching it to a remote gig) and getting PAID MORE (330 Day Savings) for the same job, living on a baller budget, AND progressing in your work career or business. That’s what we do here at 330 Days; playing chess while everyone else is playing checkers. You can thank us later.

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