Charity Grace is a digital nomad currently based in Ho Chi Minh City, a fact that may or may not change within the next few months. A marketing consultant by profession, Charity enjoys writing and yoga in her spare time. She is ardently passionate about animal protection, environmental justice, and delicious local food.
Digital nomads are a trend among millennials and Charity is definitely qualified to educate us about the topic.
With the advent of technology and the ability to work remotely, people are no longer confined to the usual 9-5 grind. Thus, the digital nomad was born. From freelancers and independent employees to outsourced contractors and consultants, these individuals have the freedom to travel while working.
Although not being tied down to a desk may sound like the ultimate dream, it isn’t a responsibility-free fairytale. Like any job, it comes with risks, particularly in the financial department. If you aren’t careful about your finances, sustaining this lifestyle can be very difficult.
For instance, an article on CNBC reveals that most digital nomads were attracted to the lifestyle because it allowed them to set their own terms and not be reliant on one company. However, this can be a double-edged sword. That’s because independent workers do not have a solid company to back them up or ensure more or less consistent earnings in the future.
So, if you’re planning on embarking on your own journey towards being a digital nomad, here are a few ways to manage your money and make sure you stay financially secure.
Have a solid budgeting system
Whether you’re a remote freelancer or a corporate employee, having a budget is the first hurdle on your road to financial stability. As discussed in a previous post here on Money Smart Millennials, budgeting is the best way to keep debt at bay.
The most important thing to remember is to always keep track of all financial transactions. It’s easy to get carried away when you don’t know where your money is going, especially when you depend on credit cards. Moreover, budgeting allows you to detect expenses that could be causing a dent in your wallet. Fortunately, there are many apps available that can help you formulate a fool-proof budget.
You can divide your expenses into two main categories: Daily or recurring, and short-term. Your daily expenses should include food, rent, and your phone bill. On the other hand, short-term expenses covers what you need to fund your next trip, such as flights and accommodation. Set a limit for each and make sure you don’t go overboard.
In this regard, Unsettled Down recommends going by the “25% Rule,” which entails adding 25% to whatever nomadic expenses you estimate. This is because flights, accommodation, transportation, food costs, and currency exchange rates can all fluctuate, so a substantial buffer is a necessity.
And don’t forget: set aside an emergency fund. Typically, you should have at least six months’ worth of living expenses saved up before setting out on your journey.
Establish a reliable income stream
There are many ways to fund your travels, but working on the road means you need income that is dependable at all times. For digital nomads, operating from paycheck to paycheck is simply not possible. As such, most successful digital nomads know not to depend on a single source of revenue.
One of the most popular jobs for nomads is web developing. This is a great option for travellers because it doesn’t require face-to-face meetings and is self-paced. Jobs in software engineering, app development, and web design all fall under this umbrella. Additionally, these rank as some of the highest-paying and in-demand jobs around.
If working with code isn’t quite your cup of tea, another top choice is marketing. Maryville University highlights how important marketing-related skills have become, especially with the boom in digital advertising. Because traditional marketing has run its course, new opportunities like SEO, social media traffic generation, and inbound marketing have surfaced. These are all jobs that can be done from virtually anywhere, anytime.
But of course, there are simpler side hustles that anyone can do. A World to Travel suggests taking up blogging, writing professional reviews, doing travel photography, or even starting your own freelance business.
Plan for retirement
Last but definitely not least, make sure to have a plan for your future. Freelancers often fall into the trap of thinking they do not have to plan for retirement yet, but this is the last thing you want to forget. Without a retirement plan, you might end up having to work forever.
No matter where you are in life, consider opening an Individual Retirement Account (IRA) or a solo 401(k) plan, both of which allow you to contribute to your retirement savings. You don’t need to be connected to a company plan to qualify for an IRA, and your retirement contributions are tax-deductible. Similarly, a solo 401(k) or one-participant 401(k) is designed for self-employed workers. It operates like an employer-sponsored plan, but minus the golden handcuffs. Look into the different plans available to determine which one works best for you.