Digital nomad budgets are nothing like your vacation budget. When you travel full-time as a remote worker, you should set aside money to sustain your lifestyle abroad, so you will need to figure out all your banking and budgeting needs before you become a digital nomad. The good news is that this doesn’t mean you have to live frugally.
As long as your basic needs are met, you can live in financial freedom and stay out of debt. There are many challenges (and benefits) of the digital nomad lifestyle, but staying financially healthy should be a priority. When I moved from Madrid to Paris last year, it wasn't easy to adjust my cost of living from a city filled with low-cost tapas to a much more expensive capital. But with budgeting tips like those below, I could manage. This shows that you can make any location work for you, whether it's a budget-friendly destination or one of the most expensive cities in the world.
Decide on Your Budget
Budgeting as a digital nomad can be tricky, as your expenses can vary depending on your country or city, but there are a few things you will always need to budget for. You’ll need to make sure you have enough money to pay for flight tickets, health and travel insurance, and any visas or vaccinations required before you reach your next destination. It’s also a good idea to set up an emergency fund for any unexpected expenses, including enough for a flight home. And then after all that, there are taxes.
Americans living abroad still need to report their income to the IRS annually. You may need to pay taxes in your country of residence or to the U.S., depending on your personal circumstances. Setting aside a bit of money each month for taxes can help you avoid facing an unexpected tax bill come April.
Choose Your Budget Method
There are various budget methods that you can use as a digital nomad. Some require you to track everything in detail, while others take a more simplified approach to finances. The most important thing is to find a budget that works for you, but we’ve also rounded up some of the most popular methods below.
With a zero-sum budget, every cent of your income is accounted for. At the end of the month, your income minus your expenses should equal zero. In other words, every dollar you earn has a job, whether that’s for accommodation, food, or savings.
The zero-sum budget works best if you plan a month ahead and have all the cash you need by the first of the month. This also allows you to adjust your monthly budget as your travel plans change. For example, let's say you travel around Southeast Asia for a month and make $3,500 after taxes the prior month. Using a zero-sum budget, you would allocate each dollar a task, considering all your monthly spending.
Another budget method is the 50/30/20 budget. In this method, you separate your income into three main categories: 50% for needs, 30% for wants, and 20% for savings and debt. This budget method is simple, intuitive, and easy to adjust as you work with percentages rather than a set monthly amount.
If you’re traveling to Mexico City, for example, you would use 50% of your income for your needs like food, lodging, travel insurance, and transport. Then 30% of your income is allocated for wants such as souvenirs and dining out, while the rest (20%) you would put in your savings and retirement account or pay off any debt such as credit cards or student loans.
With a pay-yourself-first budget, you’ll first set aside money into your savings or investment accounts before using the rest of your income to pay for things you need. This method is one of the easiest budgets to keep because it doesn’t require you to track your expenses. It’s best for digital nomads who already have a good grasp on their spending and want to prioritize saving.
For example, if you aim to save 20% of your income each month, you would prioritize setting aside 20% of the money you earn into your savings or retirement accounts. The other 80% of your income can be spent on the rest of your needs and wants for the month.
The envelope budget harkens back to the days of when you actually used to use cash to pay for things. The idea is that you break your spending into broad categories, such as groceries, entertainment, transportation, etc., and put physical cash in each envelope. Once the cash is gone, you don’t have any more money for that category.
While this method works best with cash, you can also use it with a digital system. This type of budget is best for detail-oriented people as you need to identify areas where you spend too much and where you can save or readjust your spending habits as needed.
Figure Out Your Personal Finance Needs
If possible, always try to stay one month ahead of your expenses, so you can keep your budget in check—especially if your income varies from month-to-month. Having a financial buffer will make you feel more comfortable and reviewing your budget at the end of each month will help you stay on track.
When reviewing your budgeting, make sure to be honest with yourself about your spending habits. Maybe you spend more on eating out than you originally thought. If you find yourself over budget, reconsider what your needs and wants are. Maybe you are spending too much on coffee or maybe you have more subscriptions than you need.
But don't beat yourself up if you don't reach your budget goals right away. It takes time and patience to adjust and find a budgeting technique that fits your lifestyle.
Research Your Banking Options
One way to make sure you’re saving abroad is to use a bank or spending app that allows you to spend abroad without occurring extra fees. For example, Revolut and Wise are two online spending apps that let you spend and transfer money at the current exchange rate for a very small fee compared to other banks.
Personally, I use both for different needs. Many of my clients pay me in my U.S. bank account so I use Wise to transfer money into Euros every month, saving an average of $25 to $30 than if I had done a direct bank transfer. Revolut is also great for getting the interbank exchange rate when paying by card in different countries. I often use them when I am traveling, whether I'm heading across the Channel to London or enjoying an extended stay in Morrocco.
Moriah Costa is a freelance writer and editor who has been writing about finance for nearly a decade. Originally from Arizona...
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