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How to Manage Your Money as a Location-Independent Digital Nomad

Hey, digital nomads: Do you have a plan for how to manage your money while on the road?

When you’re traveling from place to place, it’s easy to forget about financial matters. After all, saving for retirement probably isn’t top of mind when you’re watching the sun set over a Thai beach or hiking up Machu Picchu.

But if you neglect certain steps, you could end up broke in a foreign country with nowhere to turn. Instead of being boring, getting your financial life together can actually be really empowering.

You can fully enjoy your travels knowing you’re keeping up with loan payments or on track toward your savings goals. So what do you need to learn about how to manage your money as a globe-trotting digital nomad?

Here are seven key steps for getting your financial life in order.

1. Estimate the cost of living in your target destination

As a digital nomad, you can work from anywhere with WiFi. You might travel around the U.S. or hit the skies and head to another country. While all this travel is exciting, it also comes with a unique challenge: Your cost of living might change drastically from place to place.

In NYC, for instance, the average person pays nearly $3,200 per month for a one-bedroom apartment in the city center, according to Numbeo (accurate as of Oct. 1, 2018). But in Chiang Mai, you could rent a one-bedroom apartment in the city center for just $350 per month.

In fact, Numbeo reveals that NYC’s rent prices are a whopping 765.26% higher than those in Chiang Mai. Of course, if you decide to leave Thailand and head west to London or Paris, you’ll be facing high costs again.

To prepare, make sure to do some research on the cost of living in your next destination. That way, you’ll have a sense of how your budget might change, and if you’ll need to change your habits accordingly. For instance, you might have to go from getting massages twice a week in Chiang Mai to once a month somewhere else (side note: I miss those incredible $7 Thai massages!).

And if you have a variable income, you might have to pick up some work to get by in a more expensive area than you would somewhere cheaper. Of course, you, like many digital nomads before you, could choose one of these popular digital nomad cities with a low cost of living. That way, your dollar can go far while you still enjoy a high quality of life.

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2. Make a budget to track your expenses

As a digital nomad, you could have a lot of variable costs, from flights to Airbnbs to visa fees. Plus, your income might change from month to month if you work as a freelancer.

So it’s important to keep a budget to track your income and expenses. Use an expense-tracking app like Mint to keep a tab on your spending or a Google spreadsheet to write down your spending plan.

While you don’t have to obsessively record every expense, it’s helpful to gauge your spending in major categories, like travel expenses, housing, and food. That way, you’ll have a sense of how much you have available for restaurants and cool experiences — and when it’s time to cut back.

It will take some time to get into the habit of keeping a budget, but once you do you’ll feel like you’re in control of your spending — rather than having your spending control you.

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3. Set aside money into an emergency fund

From a canceled flight due to a massive RyanAir strike to extending your stay due to food poisoning (both personal examples, unfortunately), you know unforeseen expenses can pop up when you’re on the road.

Put a safeguard in place by setting aside money into an emergency fund. Most experts recommend setting aside between three- and six-months’ worth of expenses in your savings (look at that budget you just created to estimate what amount would work for you).

If you’re just getting started, I’d recommend opening a savings account separate from your checking account. Some banks, like Ally and Synchrony, have high-yield accounts that earn you between 1% and 2% back on your savings.

Once you have your account set up, automate a certain percentage of your paycheck into it every couple of weeks or months. Automating this transfer lets you just set it and forget it until you reach your goal.

Hopefully, you won’t have to touch this emergency fund, but you can have peace of mind knowing it’s there in case something unexpected happens.

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4. Keep up with your student loan payments

If you’ve got student loans from college or grad school, you’re not alone. Over 44 million Americans owe a collective $1.48 trillion in student debt, and the average Class of 2017 student left school owing $39,400. Ugh.

But even if you’re out of the country, it’s important to keep up with your student loan payments. If you don’t, you could go into default, which would tank your credit score and have a host of other bad consequences.

If you haven’t already, make sure to write down the details of each loan so you know what you’re dealing with. This includes your loan amount, interest rate, repayment term, and loan servicer.

Ideally, you can set up autopay on your loans, so your servicer will automatically withdraw a payment from your bank account each month. You won’t miss a payment, and you’ll probably get a small discount — 0.25% — on your interest rate.

If your payments are way too burdensome and you’ve got federal student loans, you might also consider signing up for an income-driven repayment plan, which adjusts your monthly bills along with your income. This could make your payments more affordable, though it will extend your terms to 20 or 25 years and mean more interest over the long run.

(Fun fact: If you’re working for a foreign employer, going on an income-driven plan could reduce your monthly payments to $0! Click here to read about how this works.)

On the flip side, if you’re saving lots of money from living somewhere inexpensive like Thailand or Vietnam, consider throwing extra payments at your student loans to get out of debt even faster. Moving abroad might even be the trick you need to get out of debt years ahead of schedule!

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5. Be careful not to get into credit card debt

When you’re traveling around, you might be tempted to spend money all the time. You’re probably encountering tons of new experiences and incredible cuisines and don’t want to miss out a once-in-a-lifetime experience.

But if you spend beyond your budget with a credit card, you’ll probably come to regret it. Credit cards carry much higher interest rates than most student loans, making credit card debt extremely hard to pay off.

That said, credit cards aren’t all bad. Some are super useful, since they charge no foreign transaction fees and earn you points back on your spending. Plus, some of the best travel rewards credit cards offer extra perks, like car rental insurance or access to airport lounges.

Just be careful not to spend more than you can afford to pay off each month, or you could end up in a hole of credit card debt that’s hard to dig out of.

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6. Set aside a portion of your paycheck for retirement

If you’re in the earlier stages of your career, you’re probably not thinking about retirement. But the secret to building a nest egg is starting early.

Retirement savings accounts have tax advantages, and they allow your savings to grow over time thanks to compound interest. Since the interest compounds, your earnings could increase exponentially over time. But you’ll need to start early to see big returns.

If you have a remote job and your employer offers a 401(k), automate a certain percentage of your income into that. Definitely contribute at least enough to make the most of an employer match, if you have one.

And if you’re a freelancer or don’t have access to a 401(k), you can set up an Individual Retirement Account (IRA) on your own. Again, automate a certain percentage of your earnings into this account each month. That way, you can gradually build your retirement savings over time.

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7. Be savvy about saving money on travel expenses

To a large extent, traveling can be as expensive or as cheap as you want it to be. You could spend tons of money on first-class seats and pricey hotels, or you could slash costs on budget airlines and cheap accommodations, like hostels or low-cost Airbnbs.

If you’re looking to save money, make sure to avoid the mistakes that could bust your travel budget. For instance, try packing lunches and snacks so you don’t overpay at the airport (or have to eat airplane food, blech).

Use a no-foreign-transaction fee credit card on purchases out of the country to avoid wasting money on ATM fees. And read the fine print of a flight so you don’t get charged major fees for having too much luggage.

Shop around for your flights, too, whether that means being flexible with your dates or opting for a budget airline. Finally, when you get to your destination, try the metro, a bus, or an Uber to get to your accommodations in order to skip the high prices of a taxi or private shuttle.

Finding ways to cut costs when you travel can protect your budget and leave you with extra money for more memorable experiences than driving from the airport to your hotel.

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How to manage your money like a boss as you travel the world

When it comes to how to manage your money, there are a few key steps:

  1. Make a budget
  2. Build an emergency fund
  3. Pay off debt
  4. Save for retirement

As a traveler, you’ll also have the extra challenge of adapting to a changing cost in living or a variable income. You’ll probably also have other savings goals, whether you’re saving for a yoga teacher training in Bali, a cruise down the Amazon River, or a motorbike to drive through Vietnam.

As long as you cover the key bases, though, you can feel confident you’ve got a handle on your personal finances. Then you can turn your attention to exploring the world and building a fulfilling career.

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