How to Manage Your Finances as a Digital Nomad
As a freelance journalist, I’ve had the good fortune of working remotely all over the globe—from Jerusalem and Seattle to a container ship slowly sailing across the Mediterranean. I’ve typed away from charming little Parisian cafes while nibbling on a tarte tatin, and pondered story edits from sandy Caribbean beaches (often with the help of several pina coladas). Remote work is definitely one of the biggest perks of my job, and it’s now hard to imagine being cooped up in an office, waiting for a paltry 2-3 weeks of vacation a year.
With the world becoming more wired, many Canadians dream of quitting their jobs altogether and hitting the road to work remotely from exotic locales. The life of a ‘digital nomad’—those who wander the planet with just a laptop and a bare-essentials suitcase—is easy to romanticize. But there are an awful lot of logistics to figure out before taking this step, and digital nomadry is rarely carefree from a financial perspective. So how should a prospective nomad put his or her finances in order before taking the plunge?
Pay off debt first
Outstanding debt can feel like a heavy weight regardless of circumstances, but it can be particularly burdensome if you’re trying to transition to life on the road—especially for digital nomads embarking on new (and perhaps not-yet-lucrative) projects. “I certainly felt more prepared after paying off two high-interest credit cards I had racked up in my years,” says Lydia Lee, a Vancouverite who relocated to Bali several years ago to launch her Screw the Cubicle coaching business. “Having that type of debt over my head wasn’t how I wanted to start off my digital nomad journey.”
Before beginning life as a digital nomad, Lee suggests paying off high-interest debts like credit cards, and also developing a financial plan to keep up with long-term, lower-interest debts like student loans and mortgages. “Getting real with your numbers before starting your travels can really take the financial pressure off,” says Lee.
Figure out your cost of living on the road
Before Lee decamped to Bali, she sat down and made a pragmatic list of all of her key expenses in order to establish a reasonable budget. Even though the cost of living in Bali is considerably less than pricey Vancouver, she still needed to consider the cost of flights, accommodations, a co-working space membership, local transportation costs, health and travel insurance, food and recreation.
Lee also wanted to tally everything up so she could make sure she had a financial cushion that could cover almost six months of total living expenses. “When I started my digital nomad lifestyle, I was already running my own business, and needed to consider that while I travelled for the first month or so, very likely I would be earning less because I needed the time to immerse myself in new environments,” says Lee. NomadList, which compares living expenses across many destinations favoured by remote workers, is a good resource for anyone trying to piece together a financial picture of a potential new home.
Make sure you have an income stream
While it can be fun to start daydreaming about how you’re going to spend your money while globetrotting, don’t forget about the most important piece of your financial picture: finding remote work. After all, unless you’re independently wealthy or you’re planning on living off savings, you still need to make money. “A lot of people think a big idea is just going to magically appear when they travel,” says Lee. “My advice would be to experiment with freelance work and take the time to set up a small side hustle before travelling, so that you feel a lot more prepared to maintain your income.”
Lee also cautions against a common digital nomadry pitfall: the pleasures and distractions of being in an exotic new place can make it extremely hard to concentrate on the work required to make this kind of lifestyle sustainable. “Creating a work routine and separating that from your travel activities is a discipline that needs to be cultivated,” she says. “Being mindful about when you’ll work and when you’ll play is important for the longevity of your digital nomad dreams.”
Set up travel-friendly bank accounts and credit cards
When Sam Dogen, now known for his blog Financial Samurai, quit his finance job in San Francisco in 2012, he had already spent years lining up passive income that could cover his living expenses as he made his way around the world. Since then, he has visited over 60 countries and has become a working nomad in Malaysia, Taiwan, Japan, the Philippines and China. In order to access his money while abroad, he chose an international bank with branches all over the world—which can be particularly useful in unforeseen situations, such as the loss of a wallet or other mishaps.
Dogen also keeps separate credit cards for his personal expenses and his business expenses. When looking for the right plastic, he likes to use cards that offer travel insurance. We also suggest cards that can rack up travel rewards to pay for country-hopping flights, as well as cards that either waive foreign transaction fees or give significant cash back on international purchases. Since using a credit card while living abroad or travelling can often garner a better exchange rate than simply withdrawing from an ATM—not to mention the fees that can add up with every withdrawal—nomads might actually find themselves using credit cards more on the road than at home.