Trading the familiar comforts of your 8-hour workday for a more adventurous lifestyle is no small feat. But this is the calling of digital nomads around the world. If you’re making the leap into life on the go, you’ll be joining the ranks of over 7 million American globetrotters.
However, to make this lifestyle work long-term, you’ll need to get your personal finances in order first.
With some money-savvy hacks and insider info, entrepreneurs and gig workers can travel the world without breaking the bank. Here are some personal finance tips to keep in mind before you take off.
Save Ahead of Time
As a digital nomad, you’ll be paying for transportation, food and lodging from the get-go. So you’ll want to make sure to pad your savings ahead of time. This means calculating your up-front costs and planning for emergencies.
The exact amount you need to save largely depends on your destination and employment situation. However, seasoned nomads recommend saving at least six months’ worth of living expenses before you leave. It’s also wise to always keep enough in your account for a last-minute flight home.
Diversify Your Income
The reality is that the digital nomad lifestyle isn’t all beach days and gondola rides. To truly sustain your travels, you’ll need to work. That being the case, you’ll save yourself from serious stress by establishing your income stream before you leave.
Most digital nomads are freelancers, gig workers and entrepreneurs, given that the 9-to-5 schedule isn’t always sustainable when crossing time zones. Multiple sources of income are often essential in these careers, and this is especially true when relying on intermittent paychecks to travel the world.
This is another area where it pays to plan ahead. While it can be tempting to start a blog and hope for the best, getting gigs lined up several months before you leave allows you to establish relationships with clients and get used to the change of pace.
Switch to Travel-Friendly Banking
When you’re traveling full-time, you need a bank account that goes the distance. Foreign transaction and ATM withdrawal fees can seriously add up after a few months. Switching to a travel-friendly bank can provide financial peace of mind when you’re hopping between cities.
Some banks that digital nomads recommend include:
Digital nomads love the Charles Schwab high-yield checking account for its ATM rebates and lack of foreign transaction fees. This account features solid interest rates and 24/7 online customer service, which can be a godsend when you’re in a pinch abroad.
HSBC has branches all over the world, making it a popular option. This also means that it’s fairly easy to find an HSBC ATM and avoid fees. The bank offers free money transfers, a service that can be extremely helpful when you’re establishing yourself in a new city.
While Revolut is a newer option for U.S. citizens, this U.K.-based bank is another go-to for digital nomads. The bank charges no foreign transaction fees, and you can open an account in moments with no credit check. Travelers can also send and receive 28 types of currency on the mobile app.
These are just some of the top banks that digital nomads recommend. You’ll want to do your own research to choose a bank that fits your needs. A credit card with travel perks can also be helpful, so consider making that switch as well.
Know Your Tax Requirements
U.S. citizens living abroad still need to file their taxes. While those living abroad have two extra months to do so, this process involves quite a few documents. These include your U.S. Individual Income Tax Return (1040) and the accompanying forms, as well as several forms for your foreign earned income.
Some digital nomads may also need to file a Report of Foreign Bank and Financial Accounts. To better understand your income tax requirements and take advantage of tax benefits, consider using tax software like MyExpatTaxes, which walks you step-by-step through the filing process.
Create a Budget
No matter how much you pad your savings, a nest egg is useless without adhering to a strict budget. All the intriguing experiences and wares your global lifestyle will present may tempt you to overspend and deplete your savings. And that could mean an early trip back home.
The first step in creating a budget is getting real about your spending. Some of the top items a digital nomad should account for include:
- Cell phone service
- Travel supplies
Next on your budget list should be savings, retirement and debt payments, all of which are easy to neglect when traveling the world. Automate your savings deposits and bill payments to avoid any late or bounced checks.
Travelers should consider using budgeting apps to track every dollar while on the go. Of course, you’ll want to include a budget category for miscellaneous spending—you can’t expect to travel the world and not indulge in some of its pleasures! A budget app will help you keep spending with reasonable bounds, and you can adjust your budget as your expenses change month to month.
Keeping your finances under control as a digital nomad may seem daunting. However, taking the time to manage your money well is definitely worth the effort. It will help you sustain this lifestyle—and check more countries off your bucket list.