Natalie, writing for UpgradedPoints.com, shares some tips on how digital nomads can manage their money ahead of a trip and while on the move. She recommends you take the time to research, plan and prepare your finances ahead of time.
Living life as a digital nomad can be wonderful – getting to experience the world while still receiving income is a dream come true for many. However, it can also be stressful, particularly where finances are concerned, as your lifestyle often becomes rather unpredictable.
Doing your research and preparing ahead of time is key to succeeding as a digital nomad. There are plenty of financial factors to consider – the cost of travel, using different currencies, finding and costing accommodation and workspaces, finding the right data package and navigating local laws and taxes – and at first, all of this can be overwhelming. In this article, we cover exactly what you need to be aware of and what you can do in advance to prepare.
Pay off your debts
It can be easy to accumulate debts in today’s day and age, especially considering the recent cost of living crisis. Many people resort to buying things they may not need for various reasons, with impulse buying becoming particularly prevalent since the pandemic. In fact, as many as 64% of Americans admitted that they increased their spending on impulse purchases in 2022. The odd extravagant transaction can help us to feel better in the short term, but consistent impulsive spending only causes more stress further down the road.
As a digital nomad, it’s a good idea to plan and prepare a spending strategy ahead of your trip. You can review your current spending and decide what will be essential and what might be considered frivolous or impulsive spending that you can budget for or limit while away. Doing this will help you save money and track your spending while working abroad.
Any debts you’ve built up should really be cleared before you begin your journey as a digital nomad. That may not be what you want to hear, but delaying your travel plans slightly will absolutely be worth it once your debts are no longer looming.
Travelling is expensive. Even if you opt for cheaper alternatives like staying in hostels, you still have to factor in the costs of flights, other transportation, and visa fees. The last thing you need to be worrying about is allocating funds to pay off debts every month, so make sure they’re paid off in advance to set yourself up for a fresh start.
Ensure you have a buffer
Once any debts are cleared, it’s time to start saving. Before you even think about setting off on your new adventure, you need to ensure that you have a decent chunk of money behind you. This might sound obvious, but aside from your main budget, you should have an additional buffer in case of emergencies.
It’s unfortunately not uncommon that a digital nomad’s plans will change at the last minute for various reasons. You could lose your belongings, you may need to find alternative accommodation or even pay for unplanned plane tickets. Having additional cash in place should you find yourself in one of those situations can really help to reduce stress. You may think it’s unlikely, but you must plan for every possible scenario when travelling alone.
Create a budget
Having a detailed, pragmatic budget can help to make you feel more prepared and confident in your spending. To start, note down your monthly income and any fixed expenses you might have, such as mortgage or rent payments back home. From there, you’ll need to get some rough estimates of accommodation, the cost of workspaces, food and general living costs in each location you plan to travel to.
This is the hard part, as the cost of living can vary hugely depending on the country that you’re visiting. While your money might go a long way in somewhere like Vietnam, Switzerland, on the other hand, will require a much higher budget.
You should already have some rough plans of where you want to stay, so find out what is included and start from there. Even having an idea of the accommodation and workspace costs versus your income will give you a much better picture of what you have available to spend.
Identify applicable taxes
The taxes that you’ll have to pay will depend on your destination and the country you normally reside in. In some cases, you’ll be required to pay local taxes as well as in your home country. These unexpected costs can hugely affect your budget for that destination, so make sure you’re aware of any regulations in advance.
If you’re planning to be away from home for a longer period of time, it might be possible to declare yourself a non-resident. This means you will no longer have to pay taxes there, freeing up some cash. Non-resident status will depend on your housing situation back home and your employer, amongst other things, but if you’re able to, it’s a great way to save money.
Utilise travel cards
Today’s market is full of different options for managing your money digitally while travelling. Take advantage of one of the many reloadable travel cards, or opt for a credit card with good exchange rates. That way, you can keep your currency digital but still easily pay for things abroad.
It’s also a much safer option, as carrying large amounts of cash with you can put you at risk. If you were to lose it all at once, you would likely be stuck with using your debit card from home and paying extortionate fees.
Be smart with cash withdrawals
The same applies to cash withdrawals. It’s inevitable that you’ll need cash once you arrive at your destination, but be smart about when and where you withdraw it. Using a specifically designed travel or credit card will help to reduce costs, but typically, there’s still a fee for taking out cash.
To help combat this, take out larger amounts of cash at once rather than doing several smaller transactions. That’s not to say you should take out any more than you would feel safe carrying, but doing it this way, where and when possible, will help to get the most out of the fixed transaction fees.
Set yourself up for success
By doing some money management preparation ahead of your trip, you’ll maximise the chances of living out your digital nomad dreams to the fullest. After all, the work it takes to plan a trip like this, the last thing you want is to have to cut it short due to being underprepared.
If you’re reading this guide and feeling stressed that you may be unable to make the necessary preparations before your trip, consider pushing it back. You’ll have a much better time without the constant financial worries, so although it may seem disappointing, you’ll be thanking yourself in the long term.