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To sustain a lifestyle that requires a lot of travelling and no fixed base, digital nomads must practice good financial management. You’ll find that facing your financial responsibilities today prevents costly and time-consuming consequences in the future.
So if you’re ready to achieve a healthy financial status, read these tips to get started.
A secure savings fund is the ultimate goal. But you can’t secure your finances if you keep piling unnecessary debts. Pay any outstanding debt before travelling, then set aside the remaining cash for your savings.
Although it may take time to clear long-term loans like student loans or mortgages — you can find ways to pay them up faster.
Here are a few suggestions:
Digital nomads need an emergency fund more than anyone. This should be taken care of even before you hit the road. The ideal size of your emergency fund covers three to six months of your basic expenses. It is also advisable to place this in your most accessible account so you can withdraw it immediately.
If you have been working for some time, consider setting up a retirement fund. Digital nomads are considered self-employed, so you can make use of retirement savings options for the self-employed.
For professional advice, consult your bank or financial consultant to find the best retirement plan for you.
Dr. Phillippa Lally, a health psychology researcher at University College London, conducted a social experiment to measure how long it takes for an average person to form a habit.
Unlike what most life coaches claim—that it only takes 21 days for a person to form a new habit—Lally’s research revealed that it takes two to eight months for the habit to be instinctive. This depends on the person’s conviction, the habit’s level of difficulty, and the circumstance or conditions the person is in.
The takeaway? If you’re used to an extravagant lifestyle, learning to be thrifty can be a challenge.
Of course, discipline and the right mindset can sharpen your budgeting skills. To get started, practice these popular methods:
This is also known as the balanced money formula. You break down your income into the following:
This is an old-school finance management, where you prepare separate envelopes for expenses/bills, loans, and savings.
Us the envelope system for items that take a huge chunk off your budget. Think of basic needs like international insurance, accommodation, health needs (medicines, vaccinations, insurance), and clothing.
Contrary to its name, the pay-yourself-first system doesn’t show you how to earn money. Instead, the money you set aside goes directly to your own savings and investment accounts.
For example, you earn an estimated income of *$5000 USD from your web design job. After writing down your monthly pay, list your savings goals (retirement account, health/ travel insurance, etc.). If it amounts in a total of $3500, then you have a total of $1500 left for your personal expenses.
*remote and freelance work on the web generally pays in US dollars
An important part of budgeting is keeping track of expenses. You can do it by keeping a ledger or with spreadsheets like Google Sheets or Microsoft Excel. But can you really call yourself a digital nomad if you don’t look for more innovative options?
It’s easy to lose track of expenses while travelling. So make use of mobile apps that will automate the process. Here are popular options:
The digital nomad lifestyle brings a huge amount of freedom. But this freedom requires discipline and a foolproof plan to avoid financial shortcomings. Calculating monthly costs isn’t enough. You need to estimate how much you have to spend before actually setting foot out the door.
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