As a digital nomad, you have the freedom to live wherever you like and explore new cultures directly. The trade-off for this lifestyle is that you are more likely to experience financial instability and require careful money management.
Effective budgeting isn't just essential for financial security. With the right preparation and financial planning, you'll find it easier to adjust to the foreign tax system and settle in a new country.
Read our guide to managing money for digital nomads and learn everything you need to consider, from expense tracking and tax compliance to banking and currency exchange.
Before moving to a new country, research the cost of living in a different city as an expat. You can check if you'll be able to support your ideal lifestyle and get an idea of how much you can expect to spend. Pay special attention to the costs associated with becoming a digital nomad, such as computer equipment and internet providers.
Keep in mind that costs, challenges, and opportunities vary from place to place. Numbeo and Expatistan etc.** provide you with typical housing, food and transportation costs in different areas. Check out local real estate, supermarkets and transportation** for exact**.
Check the country's current tax rates, as a significant portion of your income will go towards taxes. The Organisation for Economic Co-operation and Development (OECD) has tax databases for many jurisdictions. You can also check***
Analyzing your income** and expected living expenses will help you create a budget. The first step is to consider how much you'll earn from all sorts of ** from customers, businesses, and passive businesses. Calculate a conservative estimate of your total monthly income.
Then, decide on the minimum amount you need to allocate to the following areas:
Relocation (i.e. your digital nomad visa and travel expenses).
Housing & Utilities.
Remote work costs (i.e. wifi and co-working space rent).
Groceries and toiletries.
Health and travel insurance.
Childcare and education.
Savings and investments.
Fun money for goods, travel, and leisure.
Debt repayment (e.g., student loans).
By weighing your income against this budget, you can see how flexible you are and adjust the amount. For example, since you are not limited by location, you can opt for suburban accommodation away from public transportation routes, where rents will be lower.
While you can make an educated guess about the cost, your financial situation can change and fluctuate. Even if you have a stable income, countries often change their tax laws and visa laws regarding expats and digital nomads. It's important to keep track of your expenses and revise your budget at any time.
Use the Budgeting app to monitor your income and expenses in the same currency. Here are some of the best suggestions for digital nomads:
Mint: Connect and manage bank accounts in different countries while monitoring your credit score.
Expensify: Keep track of your freelancing expenses, such as computer equipment and software subscriptions.
Cleo: Use this app like a virtual assistant to ask questions about your spending and receive messages about your remaining funds.
Honeydue: Connect accounts and keep track of expenses as a traveler
In many popular expat countries, it can be difficult to avoid tourist traps and find the most affordable options. Ignore the popular travel guides, as these are best suited for vacationers. Instead, you should find out which shops and restaurants are used by locals, as these are more likely to meet the cost of living.
You can also get suggestions from forums and discussion groups. Many cities have internet groups dedicated to foreign tourists. Try typing "Expats are in....and place names, search for these groups in social channels.
See if you can make a short-term stay agreement with an Airbnb or rental owner. If guests stay for a few weeks or months, they can save money on cleaning and turnaround costs, so they may offer discounts. Also, if you don't mind socializing, hostels are also an evergreen budget solution.
Consider purchasing a local SIM card as soon as possible. Roaming charges can quickly create a gap in the tightest budgets, so it's crucial to guarantee connectivity even when WiFi isn't available.
Navigating taxes can be challenging for expats. You must be aware of the laws of your country and country of residence to avoid compliance issues.
Start by determining that you should pay taxes in **. Generally, if you stay in a country for a certain period of time, you automatically become a tax resident of that country. For example, EU countries have a limit of 90 non-consecutive days in a calendar year.
Also, check if there is a treaty between your home country and your country of residence. If not, you may be subject to double taxation, i.e. you have to pay to two or more jurisdictions.
Once you've assessed your tax liability, look at the places you may be eligible for deductions and deductions. Many** want to encourage travel to their home countries, so they have programs for digital nomads. Greece, for example, offers a 50% discount on your career earnings for the first two years.
Finally, clarify how and when you must pay taxes to avoid late payments. Countries have different fiscal years, so tax returns can be due in any month.
Given the complexities of international taxation, seek professional advice whenever possible. You can find professional accountants or ** looking for services in most major cities.
Fees may apply for using a card outside of your home country. Here are some ways to avoid or reduce these fees:
Choose a global bank: Some banks, such as HSBC and Barclays, offer accounts and ATMs with no foreign transaction fees in many countries.
Use digital payment platforms: Apps like Wise and Revolut offer lower transfer fees than traditional banks.
Visit a currency exchange office: study exchange rates to find the best time to exchange currency. Access reputable currency exchange services with competitive fees.
Limit cash withdrawals: For example, by using a debit card to make consolidated payments at a large grocery store (instead of many small grocery stores).
Offset with travel credits: Check to see if your credit card company offers rewards for using specific airlines, accommodations, and rentals.
If you plan to stay in a country for a long time, it may make more financial sense to open a local bank account. Look for an institution that has low fees, supports multiple currencies, and is easily accessible to foreigners. Many banks position themselves as good options for expats, so check out which banks offer offers and translation services for foreigners.
Jumping from one place to another means that digital nomads can't take advantage of social security and pension schemes. They have to look elsewhere for opportunities and rely on savings.
An international savings account is a way to save money for the future. Institutions such as HSBC Expat and Barclays International offer dedicated services for digital nomads. These accounts allow you to deposit money in multiple currencies and sometimes have a fixed interest rate.
Digital nomads also have the option to open their own retirement accounts as self-employed. For example, the United States has Individual Retirement Accounts (IRAs), while the United Kingdom has Self-Invested Personal Pensions (SIPPs). Your donations to these accounts are tax-deductible, and you can use them to invest in real estate and**.
It's a good idea to check if you have to pay a mandatory pension. If you have a bilateral agreement between your resident and home country, you may be able to claim these benefits later.
No matter how well you plan, there's always a chance that you'll experience financial setbacks like a recession or unexpected expenses. For example, after generative AI replaced jobs in the market, many creative professionals, such as graphic designers, writers, and homemakers, got bogged down.
Use the following strategies to build resilience and develop a plan to address financial challenges:
Avoid relying on one income: Having multiple incomes means that if one of them dries up, you can still rely on the others.
Diversify your skills: Being able to take on multiple roles allows you to adapt more effectively to the demands of the job market.
Investment insurance: Providing coverage for emergencies such as health issues, crime, or natural disasters can reduce the likelihood that you will incur a hefty expense at once.
Set up an emergency**: Setting aside money for medical expenses or flights abroad can save you from dipping into your savings. The goal is to save enough money to cover three to six months of income.