Financial planning is an important aspect of being a digital nomad. It is a skill that is often overlooked, especially in today’s society. Many live on credit or paycheck to paycheck and rely on social programs to assist when hard times come. For a digital nomad these are rarely options.
Financial planning is as much about peace of mind as it is about keeping a roof over your head. It is difficult to enjoy a life of freedom if you second guess choices because you’re worried about money. A little budgeting will allow you to live flexibly and respond without fear to the ever-changing situations a nomadic lifestyle presents you.
With practice it is possible to keep track of your financial situation and enjoy flexible traveling without much hassle. There are many opinions on the topic of travel budgeting. Some plan excessively and try their best to keep to a rigid spending schedule. Others plan very little and prefer not to worry about budgeting until money runs low. We fall somewhere in the middle.
Regardless of your attitude towards budgeting, it is important you have a clear picture of your financial situation. You should document your savings and income and keep tabs on what you spend on the road. Especially if you don’t have a consistent source of income and/or savings to draw from. There may be no guarantee of a paycheck next week so you should plan accordingly.
For more information check out our articles in our budget & money section that cover considerations before creating a travel budget, how to create a budget, planning for emergencies and maintaining your budget on the road.
The good news is that life remotely can be much cheaper than it is at home. You need far less money to support yourself in an underdeveloped country, especially in a rural neighborhood. It becomes easier to save money and to reduce expenses.
The bad news is that the best way to save money while traveling is to travel less. This is obviously not an ideal situation. It limits your freedom to experience a location independent lifestyle. With some planning this can be avoided.
A simple way to figure your daily expenses is to multiply your accommodation costs by three. This will give you a rough idea of your food, lodging, local transportation and spending money. To put this in perspective, a budget hotel room in Vietnam costs less than $10/night. A mid-range apartment in the suburbs of Buenos Aires costs less than $400/month. A luxury cabina on the beach in rural Nicaragua can be had for under $150/week.
It is easy to live for under $1000/month in many places.
Be warned that daily expenses are only a fraction of the cost of being location independent. Start up costs can be huge. You may have to buy gear, finance a move, get visas and vaccinations or buy flight tickets. Extra travel expenses such as tours, attraction entrance fees and transportation costs also add up quickly. Do your homework and plan accordingly.
Consider how to stretch your money. Save before you leave and spend less while you travel. An extra day of work at home could finance another week on the road. Making friends who have a flat in Mumbai could save you several hundred dollars. Finding another client for your freelance business may come in handy down the road.
A location independent lifestyle is possible with a wide variety of budgets. Don’t discount your potential until you’ve done the math. Creating a budget will allow you to define your means. Use it to plan a life that is realistic given your savings and income. Stretch your budget by spending less at home and saving more before you go or by finding ways to earn more income while you travel.