For the first time in history, you don’t have to choose between seeing the world and earning a living. Digital nomads enjoy the best of both worlds by viewing remote work as an opportunity to travel.
When you’re not tied to a workplace, you can spend your days wherever you want—as long as there’s an internet connection. Digital nomads may freelance or be employed in a fully online role. They may have a home base or travel full-time, working out of hotels, airports, or campsites. This flexible lifestyle usually comes with unique financial needs, so financial planning should account for changing circumstances. The following steps could help.
1. Create a detailed, flexible budget.
A budget includes your income and expenses, which may change often for digital nomads. If you have a full-time remote job, you may easily account for your monthly income based on your pay rate. However, determining how much you make each month may be trickier if you freelance or juggle multiple part-time jobs. As you build your budget, err on the side of caution, and use the lowest amount you’ve made in the last six months or as long as you’ve been freelancing. That way, you may reduce the risk of overextending your finances.
Your expenses should include housing, food, bills, and transportation. For digital nomads, monthly expenses depend largely on travel plans. If you spend one month sleeping at a luxury hotel in Italy and the next camping in Colorado, you can’t expect your costs to remain the same. You might want to round up your monthly expenses and base your budget template on an amount that exceeds your average monthly costs. Each month, revisit your budget to factor in changes in income and travel plans. Whenever possible, you may want to plan pricier adventures for months with a little more income. Don’t forget to put money aside for your emergency fund and necessities like life insurance.
2. Keep taxes in mind.
When you’re traveling to multiple countries or even just different states, your taxes could get complicated. This is especially true if you rely on freelance work or don’t have a home address. U.S. citizens must pay taxes to the U.S. no matter where in the world they live. Within the U.S., the taxes you owe may vary depending on the state you reside in and the states where the companies you work for are located. Many other countries require anyone who resides in their country to pay taxes.
To avoid a tax headache, research tax laws and best practices for your destinations long before you make the trip. Maintain records of your income, tax payments, and possible deductible expenses. If possible, work with a tax professional who specializes in travel.
3. Live in the present, but plan for the future.
Make the most of your adventure, but don’t forget your retirement. Whether you want to settle down as you grow older or continue traveling, you’ll need the funds to afford it. The best choice for your retirement investments depends on your unique circumstances. If you’re employed full-time, you may have access to a 401(k) through your employer. If you’re self-employed, you may instead look to a SEP IRA or Solo 401(k) to set money aside and potentially reduce your taxable income. Otherwise, consider investing a portion of your monthly income into an account that offers returns and tax benefits, like a Roth IRA or traditional IRA.
While living on the road may shift your priorities, it’s still important to build financial security and plan for the future. That way, you can savor what the world has to offer without worrying about how to make ends meet.
