Living as a digital nomad is a lifestyle choice – one that requires careful planning if you’re going to be at it for the long term. Digital nomads have the freedom to pursue their career without being bound by a desk job, which is what makes this lifestyle attractive. They are usually freelancers, consultants, independent workers, and remote employees.
As glamorous as it sounds, being a digital nomad isn’t easy, especially where financial management is concerned. Apart from managing your regular income, you will need to save enough money to fund your travels, food, and stay.
Fortunately, with some careful financial planning, you can continue to live as a digital nomad and travel the world.
Here are a few tips in this regard that will help.
- Close Your Debt
It can be extremely difficult to continue being a digital nomad for long if you have debts waiting to be cleared. So, before you take off on your adventure, try and repay any money that you owe. Once that’s done, you will be able to keep all your money ready for use in funding your globetrotting.
In case you have a mortgage and want to keep your residence, consider renting it out and generating an income stream to pay for the monthly expenses. It is a good idea to go for landlord insurance packages that include a guaranteed rent for times when you cannot find a tenant.
- Create a Budget
While planning your expenses in advance and allocating money to them may seem like a difficult task, it needs to be done if you want to make the transition to your new lifestyle easier.
Start by finding out about the cost of living at the new place you’re moving to. Figure out the average rent and multiply it three. This will give you a fair idea of how much money you will need to pay for getting the basics in the city.
This does not mean that you should save only enough to make ends meet. Ensure to put aside some extra money for unforeseen expenses. This may mean revising your freelancing fees accordingly.
If the thought of creating a monthly budget intimidates you, don’t fret. You can start by creating weekly or fortnightly budgets. As a rule of thumb, put aside a certain percentage of your earnings in your savings account before you start budgeting. The amount need not be huge, it can be as modest as $5-$6 in the beginning. What matters is that you put some amount every month and get habituated to saving money.
Once you set this money aside, allocate the remaining amount to fund your monthly expenses such as food, rent, internet, transportation, entertainment, and more.
- Save Up
Taking the above tip a step forward, creating a financial cushion to fund your initial costs and emergencies is crucial if you’re serious about being a digital nomad for the long-term. Make sure you have enough savings for buying a new laptop if it gets lost or stolen or breaks down, for instance.
To be sure about how much you will need to save to fund your new lifestyle, you may want to get in touch with a local financial advisor. For example, if you stay in Gainesville, you may want to consult financial advisors in Gainesville to know exactly how much of a monetary buffer you need. They can also advise you on how you can get there as fast as possible through special financial schemes that may be applicable in your state.
- Factor in Your Expenses Back Home
For some, becoming a digital nomad may mean leaving their home and town behind, and hitting the road with no clear plans of settling anywhere. Others may decide to travel for a part of the year and come back home for the rest of it.
Regardless, if you own a house or rent a property, you will need to add the associated expenses in your budget.
Make sure you budget for your rent or mortgage, along with additional expenses like property taxes, insurance, utilities, and so on. If your budget cannot accommodate these costs, consider putting your home on Airbnb or subletting your rental while you’re not in town. By doing so, you’ll ensure that your property pays for itself while you continue your nomadic journeys.
- Leverage Suitable Banking Services
If you tend to travel to different countries or are moving to another nation for a while, you should get your hands on a credit and/or debit card with no international fees. Consult local finance professionals to know your options.
You can go for bank accounts that can be opened online, don’t cost a penny, and don’t attract withdrawal fees in other countries. You can manage all your money and financial transactions through the bank’s app. Further, you should choose an account that will not penalize you in case you’re unable to maintain minimum balance.
Further, because digital nomads travel frequently, you should consider getting credit/debit and ATM cards that allow you to collect travel rewards. You can use them to pay for your flights. You can also go for cards that either waive off fees for international transactions or offer considerable cash-back on overseas purchases. It is also a good idea to minimize ATM cash withdrawals to avoid paying repeated charges.
- Track Your Expenses
It is crucial for digital nomads to track every dollar they spend. This will help you figure out where you are spending the most, what your priorities are, and where you can cut back. To be able to sustain your lifestyle, practising moderation and knowing your priorities is crucial.
You can try and live frugally when you’re not travelling. This entails choosing economical accommodation, cooking your own food, working from places with free Wi-Fi, and staying on top of cost-effective travel deals.
For effective management of expenses, track them for a month and compare it to your original budget. Put the amount saved in your savings fund. If you’re not saving the desired amount, consider revising your freelancing fees.
- Don’t Forget about Saving for Retirement
While you may not be the typical office-going employee, you’re still going to retire someday. You should, therefore, start saving for retirement. If you’re a freelance or an independent employee, an employer’s 401(k) option does not apply. So, you will have to explore other avenues.
A great way to save and avail of tax benefits is to choose either the traditional or Roth IRA. Post retirement, the former will allow you to make tax-deductible contributions, while the latter will enable you to make tax-free withdrawals.
You can also consider a solo 401(k) plan or a SIMPLE IRA or an SEP IRA. The solo 401(k) comes with the highest contribution limit among the three. This option can work well for sole proprietors who don’t have employees working for them. SIMPLE IRA and SEP IRA offer higher contribution limits compared to traditional IRA, but fall under the same tax regulations.
To determine how much amount you should put aside for your retirement every month, you should refer to your budget. Save a set amount in a tax-advantaged plan on a monthly basis.
The easiest way to expand your retirement funds is to automate contributions. Review your investment goals as well as the fees you pay for every investment periodically to make maximize the earning potential of your account.
While retirement planning can be perplexing, it is necessary as it has a long-term impact on your finances. It is always a good idea to save for your retirement as early as possible. If you feel overwhelmed, you can always turn to your local financial advisor, who will help you crunch the numbers. The fees they charge is a small amount compared to the time and effort you will save researching suitable retirement options. They can look after your finances while you enjoy your new lifestyle.
Leaving your old life behind and becoming a digital nomad is a huge change. It doesn’t happen overnight and comes with its set of financial challenges. However, with a little planning and perseverance, you can build a short as well as long-term savings pool that will allow you to sustain this thrilling lifestyle. Hopefully, the above pointers will help you cover all your bases without having to worry about money trouble as you explore the world.