Don’t lie: It’s kind of cool to be able to refer to yourself as a digital nomad, right? I mean, who doesn’t want to be untethered of their location, freely drifting from one exotic location to the next?
Over the years, the remote workforce continues to be on the rise. In fact, according to a recent Gallup poll, 43 percent of employed Americans spent at least some time working remotely last year.
As dreamlike as digital nomadism seems, there’s a lot of not-so-fun financial planning involved to get yourself ready to achieve that dream. It’s the kind of work that magically gets forgotten and glossed over in 99.9 percent of the advice you read. So that’s exactly what we’re going to talk about today.
Project Your Budget and Monthly Expenses
I can already see you giving me the same look you give your mom when she gives you unwanted advice. But here it goes: You need to use last month’s income to budget this month’s expenses.
Or, if you’re a digital nomad, you need to use the money you make this month to budget for your expenses next month. If you want even more stability — and for your nomad dreams to last long-term — you might even want to budget two months out.
I know doing the math isn’t fun, but the finances of digital nomadism can sometimes be a double whammy: unpredictable income and unpredictable expenses. The amount of money you have available to spend in one month could mean the difference between renting out a private Airbnb apartment and staying in a 20-beds-to-one-room hostel.
So, let’s be realistic about this: Projecting your budget and expenses helps you plan your travels and stay in places you can truly afford.
Unfortunately, doing all this math in a spreadsheet by hand can be incredibly time-consuming. Instead, consider leveraging budgeting tools like YNAB or Mint that can automate your budgeting and help you make better financial plans. And why not make sure you have a healthy emergency fund while you’re at it?
Hire an Accountant to File and Pay Your Taxes
Just because you’re not physically present in your country of nationality doesn’t mean you’re exempt from paying taxes to it. And just because you’re living a magical, travel-filled life doesn’t mean your bills and payments “magically” take care of themselves.
When I was a digital nomad, dealing with taxes was by far my biggest challenge. I definitely didn’t want to be bothered to be physically present in the United States each and every April just to file and pay my taxes with an accountant. Fortunately, my accountant agreed to let me send in my documents via email and have Skype calls with me in lieu of office appointments. But when it came to actually pay my tax bill, I had to wire money to my mom to have her write checks for what I owed the government.
This may seem like a workable solution from the outside, but the Skype calls kept dropping, my accountant made assumptions about my working situation that weren’t correct, it’s expensive to wire money… everything was a huge fiasco.
If you do use an accountant to file your taxes, you will need one who’s tech savvy enough to talk to you via the internet, handle electronic versions of documents and understand that you’re not employed by a company in the country you’re currently in. I know that sounds obvious, but I’m actually speaking from experience: You need to confirm all these things. And if you use an invoicing or expense-tracking software, make your life a lot easier by sharing access with your accountant.
When you plan ahead, you won’t have to wire money to your relatives and beg them to write checks to the IRS for you. Instead, you can use an online service that tracks your monthly income, sets aside what you’ll be estimated to owe in taxes and makes quarterly tax payments for you. By leveraging these types of tax tools, you can ensure you’re up-to-date on all your payments — meaning you won’t have to worry about late fees or find yourself with a bill that’s thousands of dollars more than you expected.
If You Fail to Plan, You Plan to Fail
On the outside, the life of a digital nomad looks carefree. But for long-term digital nomads, nothing could be further from the truth when it comes to necessary recurring expenses and bills. These indys must undergo meticulous financial planning months in advance, so that they can always be aware of what they can afford and what they can’t. As a digital nomad, you should always be hyper aware of your budget and where you stand financially. After all, who wants to end up broke, in a foreign country, without enough money for a plane ticket home?