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An American family who moved to Nicaragua for a year to live cheaply ended up blowing their $30,000 budget thanks to unexpected costs - but still spent less than life at home in the US
An American family who moved to Nicaragua for a year to live cheaply ended up blowing their $30,000 budget thanks to unexpected costs - but still spent less than life at home in the US
Over six years, they saved $30,000 while paying off debt and building an emergency fund, all of which they accomplished by living below their means and maintaining side hustles.
That $30,000 should have been enough for the year, but they were surprised by big expenses like health insurance, a car, and schooling for their kids - plus a cancer diagnosis for Mark just before they left.
Even with the unexpected costs, including an extra month in Nicaragua, they still spent less than they would have in the US.
Mark says "the experience was worth the investment."
For Mark Tew and his wife Amanda, taking a year-long mini-retirement in Nicaragua with their four children just felt right.
Mark has always had a love for Latin America, and he previously told Business Insider he felt the whole premise of traditional retirement was faulty.
"Waiting until I'm 65 when I'm likely less able or healthy enough to do the things I've always wanted to do doesn't make a lot of sense to me," he said. "Since I'm not retiring early any time soon, a mini-retirement seemed like a great way to spend quality time and have a great new experience as a family."
He continued: "One thing I knew was that if I didn't just take the plunge and go have this experience with my family, I would regret it for the rest of my life. Given that I could be hit by a car tomorrow or die of cancer when I'm 42, a mini-retirement is an absolute no brainer. You just have to have a plan and be smart about it."
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The Tews managed to pay off $50,000 worth of student loan debt, build a six-month emergency fund, and save $30,000 for a mini-retirement over the course of six years. In 2017, they moved to Nicaragua, where they rented a house, bought a car, sent their kids to school, and traveled around the country visiting lakes, volcanoes, beaches, and historical sites.
"We wanted to immerse ourselves in a new culture and just live our lives," Tew said. "We had some fear of missing out by leaving our country for one year, but when we came home and saw all of our friends and colleagues doing essentially what they had been doing before, we realized we didn't miss out on anything," Tew added. "No one is going to look back at their life wishing they had worked that one extra year in the rat race or that they had contributed just a little more to their 401(k)."
But there were a lot of costs they didn't see coming.
The Tews have always lived fairly frugally and maintained side hustles for extra income.
A full-time financial controller, Mark did tax and accounting work on the side while Amanda worked as a part-time college instructor and taught private violin lessons.
Implementing detailed financial goals and frequent budget reviews, they were able to pay off $50,000 of grad school debt in less than two years.
Mark saved his starting bonus as well as $1,500 a month from his paycheck from May 2012 to January 2014, for a total of $35,000. He and Amanda saved a total of $15,000 from their side work and by January 2014, they had paid off their student loans entirely.
After climbing out of debt, they then focused on their emergency fund.
By May 2015, they saved $30,000 by tucking away at least $1,000 a month from Mark's paychecks, $8,000 from Amanda's violin teaching, and $7,000 from Mark's CPA work.
Once their emergency fund was in place (equal to six months worth of expenses), they worked their way toward saving $20,000.
They used the same frugal and side hustle tactics to build a $10,000 "spend fund" for foreseeable emergencies and an additional $10,000 to put toward their mini-retirement. They met their savings goals in December 2015.
In 2016, Mark got a job with higher pay, but a few unexpected costs arose.
Mark and Amanda had to put money toward extra costs like childcare, maternity leave, house projects, and a cancer diagnosis for Mark about six months before they left.
They were still able to save a little more than $1,000 a month, for a total of $15,000 for the year. Combined with the $10,000 from the previous year, they now had $25,000 in their mini-retirement fund.
In the first four months of 2017, they saved another $5,000 from Mark's paychecks and the couple's side hustles.
They also sold their house in Michigan for a $50,000 profit, which they plan to save and use for a down payment if they ever buy again.
In May 2017, they left for Nicaragua.
They went over budget, but still spent less than they would have in the US — an average of $4,000 a month compared to $5,000 a month back home in Michigan.
One of the reasons monthly costs were more expensive than anticipated were due to Mark's cancer diagnosis before the family left for their year abroad.
Mark was uninsurable on international insurance plans, so he had to pay $500 extra a month for his COBRA plan, totaling $6,500.
Health insurance cost much less for the rest of the family.
They only paid $2,000 for a yearlong Latin American health insurance policy for Amanda and the kids. A consultation at the doctor cost $25.
They also spent more on schooling than they had originally planned.
The school they chose for their children didn't work out, so they ended up moving and enrolling them in an international school at $200 per kid a month, for a total of $800 a month.
Mark and Amanda reduced their housing costs by 36% compared to the US.
They originally reduced their monthly housing costs by 60%, from $1,250 a month in the US to $500 a month for a house in Nicaragua. But part of the way through their trip, they moved to be closer to the international school and their new house cost $800 a month. They had to buy furniture for the first home, which they ended up donating to locals before they left.
Utilities payments for electric, water, and gas were roughly the same as in the US. They also purchased two prepaid phones and paid about $40 a month for Internet while in Nicaragua.
Mark said they put down security deposits on their home rentals, which they don't expect to get back.
They also spent money on household help in Nicaragua.
They had a housekeeper who came two days a week for four-and-a-half hours and paid her $2 an hour, which is double the typical pay for a maid in Nicaragua, Mark said. They also had a gardener, who charged less than $7 a week.
Cars and gas are more expensive in Nicaragua compared to the US.
Mark and Amanda spent $8,000 to buy a Jeep (plus $20 on a lawyer to help them buy the car), about $4 a gallon for gas, and less than $40 for a mechanic. They planned to sell the Jeep for what they bought it for, as many expats have done, but the tourism industry and economy took a massive dive due to political unrest by the end of their stay, Mark said, so they left the car with a trusted friend.
They spent more on food than they anticipated.
For food, the Tews shopped at a chain grocery store with imported items, which were often more expensive. It would have been cheaper had they stuck to the open air markets, Mark said.
The family ended up staying an extra month in Nicaragua and spent more than they had planned for, but Mark says the investment was well worth it.
"For someone like me who watches every penny, it was a bit painful to shift my mindset with regard to the additional expenses," Mark said.
"We could have absolutely done it cheaper, but the experience was worth the investment. We had to be willing to make financial adjustments to have the experience that we wanted. And I actually ended up working and growing my accounting business a bit more than I anticipated and was able to more than offset our unanticipated increase in expense with what I earned."
