Managing your finances is tricky enough when you have a steady lifestyle, but when you’re constantly moving around, the challenges mount up quickly. To ensure you’re never left in a sticky financial situation in a foreign country, keep the following five tips in mind:
1. Stick with a trusted tax accountant
Nomad taxes can get a bit confusing, so it’s important to have a trusted tax agent on your side, helping you ensure you’re meeting your obligations. By sticking with the same tax accountant year after year, you can have peace of mind knowing that they understand your situation and will ensure you’re doing everything correctly. This is especially important if you’re working online and regularly moving from country to country. It can be tricky even just working out where your tax obligations lie, so your long-term accountant will be an invaluable ally.
2. Have a robust emergency fund
The common advice among financial experts is to have an emergency fund that will cover you for six months’ worth of expenses should your main source of income dry up. However, it’s crucial to keep in mind that this advice is aimed at people who live in their home country and work steady jobs. As a digital nomad traveling the world, you have a higher chance of attracting unexpected expenses. And if your stream of income falls apart, getting back home to your safety net will cost you a bit of cash.
With these factors in mind, it’s worth bumping up your emergency fund to ensure you can cover any and all unexpected expenses that may arise. Ideally, you should build up to having a full year’s worth of expenses squirreled away in a high-yield savings account.
3. Keep track of your income and expenses
Keeping a comprehensive budget detailing your monthly income and expenses is crucial for a number of reasons. Among other things, it will help you save money, help you understand how much you need in your emergency fund, and prevent you from overspending. You can also analyze the data to see if you have high and low seasons – aka, times when your clients need more work and times when there is a lull.
Understanding your cash flow in this way can help you prepare for the ups and downs. For example, if it’s always quiet over Christmas, then why not take the opportunity to go home and spend time with your family?
4. Plan for retirement
How you do this will depend on your work situation. If you have an employer, then ensure you’re contributing as much as you can to your 401(k). If you’re freelancing with different clients, then it’s essential to set up your own retirement fund, factor the contributions into the fees you charge, and put money into your investment account each month.
5. Diversify your income streams
Unless you have a full-time contract in place with an employer, it’s financially wise to have a range of income sources. That way, if your work dries up from one client, you’ll still have money coming in. There may be times when you need to hustle a little to find a new client to fill a gap, but you won’t be left penniless.
Money troubles are hard enough as it is, but when you fall into financial strife while traveling far from home, the stress and anxiety are compounded. The tips above certainly don’t guarantee you success, but they should help you avoid many of the financial troubles that might otherwise have come your way.