Focusing on Savings Rate instead of Only the Highest Pay as a Travel Therapist

With rising student loan debt and stagnant or even declining reimbursement for therapy services, finances are often at the top of therapists’ minds. This is no different for travel therapists. Over the past few years while mentoring thousands of current and aspiring travel therapists, we’ve found that the primary reason most therapists choose to travel is to earn more money than they would at a permanent job. The therapists, especially new grads, who we have mentored are often able to earn twice as much, or even more, as the offers they received for permanent positions in their home areas. That extra money can go a long way toward paying down student debt or toward reaching a position of financial independence earlier than traditional retirement age. In fact, Whitney and I were able to leverage our higher pay as travel therapists to achieve what we refer to as semi-retirement in our 20s after only three years of working full time. As we dive deeper into this topic, if you’re unfamiliar with how pay works as a travel therapist, this article is a great place to start.

While therapists often focus on how much they can make as a travel therapist, what is often neglected in discussions about finances between travel therapists though is the expense side of the equation, which is very important as a traveler. After all, if your primary goal with travel therapy is to improve your financial situation, then earning a lot of money and subsequently spending almost all of it doesn’t really lead to the desired result. While all travel therapists want to earn as much as possible on each contract, we believe that a much more important metric is your savings rate while traveling, which takes into account both income and expenses. This is the primary metric that we focused on early in our careers as travel physical therapists and is the main reason why we were able to achieve so many of our financial goals in such a short period of time.

Savings Rate

Calculating your savings rate is pretty straightforward and easy. You simply subtract your expenses from your income, and then divide by your income for any desired time period (usually monthly). The equation looks like this:

(Income – expenses) / Income

If you aren’t keeping track of your exact spending every month and you want to keep it simple without having to track every single purchase, you can at least take a look at the big expenses that don’t change much, such as your rent/mortgage costs for your tax home, your cell phone bill and any other monthly utilities you pay, a car payment if you have one, health insurance, and your rent for your travel location (which will vary but you can look at for each individual contract). You will get the bulk of your expenses from these “big ticket items.” Then you can estimate about how much you’re spending each month on things like groceries, gas, activities, eating out, and miscellaneous purchases, to get a rough idea of your monthly expenses.

We always use after tax numbers when calculating savings rate, as we’ve found this to be more useful as travel therapists. For example: let’s say you’re a Travel PT making $1,800/week after taxes on a travel contract. All of your expenses, including your tax home costs, equal about $4,000/month. To determine your savings rate for the month, first you’d take your weekly take home pay of $1,800/week and multiply by 4.33 (the average number of weeks per month) to get your monthly income. Then you’d subtract your $4,000 in expenses. Finally you’d divide this by your monthly income calculated above and convert into a percentage. For this example the math would look like this:

((1,800*4.33)-4,000)/(1,800*4.33)= .487 = 48.7% savings rate

The higher your savings rate from month to month, the more quickly you can achieve your financial goals. A savings rate of 48.7% in the example above would be really good and nearly 7x higher than the normal US average. But with some optimization and by trying to keep our “big ticket item” expenses pretty low, Whitney and I were regularly able to reach a saving rate of 70% or higher while traveling full time. We funneled all of that savings into smart investments that have grown significantly over time, which has helped us achieve financial freedom.

Optimizing Savings Rate

A common mistake we see new travel therapists who are traveling to improve their financial position make is always chasing the highest pay packages, without paying attention to the cost of living in the area of those high paying jobs. In the search for high pay, many travelers will be enticed by a travel job paying $2,000/week after taxes on the west coast in a high cost of living city, over a job paying $1,800/week after taxes in a much lower cost of living area on the east coast or in the Midwest. The higher paying job in this situation will lead to about $900/month in additional income, but that extra income will often be more than negated by the higher expenses. Not only is housing more expensive in the higher cost of living areas, but so are food, gas, activities, and other small expenses like parking. We’ve talked to many travel therapists regularly paying $2,500/month or more just for short term housing in high paying, high cost of living areas, and we can only imagine what their total expenses look like after taking into account all of the additional costs besides just rent.

If optimizing your savings rate is the goal, then often taking moderately paying travel therapy contracts in lower cost of living areas is a very smart move. We took all of our contracts on the east coast for our first few years of travel therapy largely for this reason. Our pay packages back then averaged about $1,750/week after taxes, but we were able to keep our expenses low and subsequently save a much larger percentage of our income than we would have been able to making $2,000/week after taxes in high cost of living areas

Minimizing Expenses

Since keeping expenses relatively low is vital for having a high savings rate, for a traveler focused on finances, minimizing them should be a priority. Of course, taking travel jobs in lower cost of living areas is the primary way to do this, but another big way to decrease overall expenses is by looking at your tax home expenses. As a traveler spending most of your time in other areas for work, it’s often possible to get by with downsizing your place back home or even choosing to rent a room as your tax home, instead of an entire house or apartment. Some travelers have big, expensive houses back home with fixed costs, which significantly increases their expenses each month. Meanwhile, Whitney and I rented a room in a house at the beginning of our travel careers to cut down on our tax home expenses, and later on we bought our own townhouse but had a housemate move in to our place to split costs and reduce how much we had to pay out of pocket each month while traveling.

Another great way to minimize your expenses on the “big ticket items” of your budget is to drive a slightly used car instead of a brand new one. Although we could certainly afford to get new cars regularly with our income as travel therapists, since our primary goal has always been to have enough saved and invested so that work is optional for us, we’ve never actually bought a new car. Both Whitney and I have always driven cars that are reliable but at least a few years old in order to avoid the massive depreciation that comes with buying new cars.

Focus on What Matters

Getting the absolute highest paying travel job as a travel therapist can be wonderful, but if it means actually saving less each month due to being in a very expensive area, then this is counterproductive to your financial goals. It’s important for travel therapists to focus on not only the income side of the equation, but also on the expenses, to maximize their savings rate while traveling– which is what really matters. When scouting out your next travel job, be sure to consider the costs of that area and not just the pay for the contract. After all, when it comes to your financial security, it’s not just what you earn, but what you’re able to save!

If you have any questions about traveling or finances as a travel therapist, feel free to send us a message. You can also check out additional financial related articles on our blog. If you’re considering getting started with travel therapy and need to get connected with trustworthy travel therapy recruiters, fill out our recruiter recommendations form and we’ll help you!

Jared Casazza
Written by Jared Casazza, PT, DPT

Jared is a Doctor of Physical Therapy who has been a Travel PT since 2015. He is also a finance enthusiast and has spent thousands of hours learning about personal finance. He used his career as a Travel PT combined with strategic financial choices to achieve financial independence by the age of 30.