The age of the digital nomad is upon us. The rise in accessible technology, the ability to work from anywhere, and the low cost of travel mean that the dream of living and working anywhere in the world has never been more achievable.
But, before you jet off overseas to enjoy a sunset margarita on an island beach, and make money while you sleep (spoiler — being a digital nomad is harder than you think), a word of caution. You need to plan for your new, independent lifestyle, and that means getting the right finances in place to support the life you want to live.
Here’s our guide to thinking about your finances, and getting the right areas in place so you can be successful wherever you are in the world.
Create a Shortlist of Places You Want to Go
Don’t limit yourself to just one option when it comes to choosing a destination. Create a list of places you could travel to and compare them. Nomad List is a great resource that compares weather, cost of living, cost of travel, fun, safety, and more across multiple cities.
Teleport is another great website that provides detailed information on thousands of cities around the world, including cost of living, the environment, local culture, economy, leisure, and much more. Create a shortlist of two or three places where you’d love to stay and work.
Work Out Your Costs of Living
Once you’ve identified a few different places you could travel to, it’s time to get the calculator out. You’ll need to figure your costs of living in the shortlist of places you’ve identified. Look into your likely costs for each of the following areas:
- Accommodation — ongoing rental, AirBNB, or elsewhere, this will likely be your biggest expense.
- Food and drink — whether you’re eating at home or going out, you’ll want enough of a budget to experience local food and beverages.
- Utilities and other costs — if you need to pay for electricity, gas, water, or other utilities, be sue to figure them in.
- Entertainment and leisure — whether you’re the life of the party or prefer staying at home, create a budget for your leisure time and expenses.
- Insurance and healthcare — if you’re going to need to pay insurance or health care costs, be sure to make a note of them. In particular, you should have comprehensive medical and travel insurance that covers you wherever you are.
- Personal care — put aside some money for toiletries, haircuts, clothes, and everything else you need to look after yourself and stay presentable.
- Travel — if you’re going to have a vehicle or you’re making other travel arrangements, note down the costs.
- Business costs — if you’re running a business from your new location, factor in those costs too. This will include all your regular business costs, plus possibly adding co-working space costs into the mix.
- Miscellaneous costs — there are bound to be other costs that are going to crop up, so think carefully about everything you’ll need to pay for.
Create a budget for all the places on your shortlist and estimate how much you’re going to spend each month. When you have a final monthly amount for your cost of living, go ahead and add on 20%. That’s for all the unexpected costs that inevitably crop up, especially if you’re on the adventure of a lifetime!
Figure in Taxes and Other Costs
Everything you earn in your new destination is going to be subject to taxation. Learn about the tax rules in your new country and city, and figure out how that’s going to impact on your budget. Make sure you understand if you’ll still need to pay tax in your country of origin too. Talk to an accountant so you can properly understand everything you’ll be liable for and work that into your overall budget.
Don’t Forget Costs Back Home
Even while you’re living the high life abroad, you may still be incurring costs back home. If you’re maintaining a house there or have other commitments, be sure to add them into your monthly budget. One of the big expenses for a digital nomad will likely be if you put your possessions into storage. Those monthly container fees can add up.
Figure Out Exactly How Much You Will be Spending Every Month
Now you know your monthly budget, taxes, costs from home, and any miscellaneous costs, you will have an overall budget. This is the amount of money you’ll need to earn on a monthly basis to maintain your lifestyle as a digital nomad.
Save Up and Put Aside Three to Six Months of Expenses
This is the hard part, but it will save you from lots of anxiety and sleepless nights! Before you travel, make sure you put aside three to six months worth of expenses. That way, you’re not having to find work or chase clients from day one and can spend some time sorting out your new life in your new destination. It’s incredibly helpful (and very stress relieving) to have a financial buffer you can rely on.
Have a Solid Plan for Making Money in Your New Location
If you’re already a remote worker and you can move your job with you, that’s ideal. Be sure to let your clients know how any changes might impact them, for example if you’re changing time zones or might have spotty internet. Ensure that your overall business profit and the drawings you take out will properly cover your monthly expenses.
If you’re relying on finding a job in your new location, the time to start exploring is now! There are plenty of job boards designed for remote workers and digital nomads. Rather than list them all here, we’ll just direct you to this awesome Medium post that covers all of the most popular job sites.
Track Your Expenses and Tweak Your Budget
Once you’re in a new location, track the money you’re spending. If you’re putting out more than just pocket change, keep the receipts and note down where all your money is going. Review your bank statements on a regular basis and review your spending against your budget. If you find that things are wildly different, adjust your budget accordingly, so you can make sure you’re bringing enough in.
Understand Exchange Rates
One of the biggest hidden costs when it comes to working overseas is exchange rates. If you’re earning money in one currency and transferring it to another, you’re paying fees and commissions every time you move your money around. These fees can quickly add up.
You might be tempted to use your bank’s currency exchange service, or a big provider like PayPal. That would be a mistake — banks and PayPal charge very high fees, and you’ll pay more than you need to. Using a dedicated money transfer provider can save you hundreds of dollars a year in commissions and fees.
Consider opening multi-currency accounts with TransferWise or CurrencyFair. They’re like virtual bank accounts with which you can receive payments from your clients, convert your money between different currencies at top exchange rates, and send money to your bank account back home or to your suppliers around the world. This will make life much easier for your clients, who’ll be able to pay you by making a simple local bank transfer. The best part? You’ll get access to your hard earned money quicker, and will save enormously on your currency exchange and international money transfers.
Here at Monito we’re dedicated to finding you the lowest cost options for exchanging money, so you get to keep more of your hard-earned cash and can fully enjoy life in your new location. You can get an immediate, live comparison of the most popular and trustworthy currency exchange providers. We also provide objective, independent reviews of every major money transfer service.
Be a Successful Digital Nomad
It’s a thrilling time to travel and see the world, and if you’ve got proper financial planning in place, it can be a stress-free experience (well, almost!) Take a little time to research, prepare, and make a budget, and you’ll create a reliable, solid foundation for your adventures in far off lands. Bon voyage!
Photo: Fineas Anton