Becoming a digital nomad can be daunting, mainly regarding financial planning. The top fear for most individuals revolves around whether they will have sufficient funds to support themselves in a foreign country and how much they can save. Although these worries are valid, they can be allayed with careful planning and cunning tactics. Like any other occupation, managing finances becomes essential to sustain one’s passion for an extended period. It is effortless to become carried away by indulging in additional treats like coconut coffees or daily acai bowls, so it’s a good idea to cut costs as a nomadic entrepreneur.
Why is this so important? Seemingly insignificant pleasures, in the long run, gradually diminish the potential savings that could have otherwise funded an extra month at the nomad’s base. The initial consideration in financial planning for a digital lifestyle is ensuring a comfortable six-month financial cushion.
Planning a few months before the departure date is advisable, considering the individual’s travel preferences and style. Extensive research on the internet and interviews with digital nomads from around the globe have created a comprehensive guide, offering foolproof advice on managing finances when being a digital nomad.
How To Cut Costs As a Nomadic Entrepreneur
Charting a Monthly Budget (& Sticking to It)
When individuals embark on the digital nomad lifestyle, it becomes imperative for them to establish a monthly budget and maintain unwavering discipline in adhering to it. After finalising the desired location and duration of their stay, they should create a comprehensive budget plan encompassing significant expenses such as accommodation, transport, bills, insurance loans, and other significant fixed business costs.
By meticulously calculating these expenses, they can estimate the cost of living. During the initial month, they need to be conscientious of their spending patterns, identify essential expenses, and seek ways to optimise their financial allocation. By subtracting the estimated expenses from their average income, they can determine if there is a surplus or a deficit. In the case of a deficit, adjustments should be made to reduce expenses, while any surplus should be allocated for savings. Although the amount saved may vary depending on their business success, it is always prudent to prioritise saving any surplus.
While adhering strictly to the budget during month one may present challenges, individuals should aim to develop a comprehensive understanding of their living expenses by the second month, striving for accuracy and consistency.
Bank and Card Strategy
For those relocating to a foreign country, securing debit and credit cards that do not impose international fees is crucial. They should also ensure that their ATM cards allow for fee-free international withdrawals. These banking solutions offer the convenience of online account opening without any charges and often provide fee-free ATM withdrawals in most countries. With user-friendly mobile apps, managing accounts becomes seamless, and their customer support is highly reliable. Opting for an account that does not require maintaining a minimum or low balance can help individuals avoid unnecessary penalties.
As digital nomads frequently travel, possessing credit cards that offer travel rewards for flights is beneficial. They should look for cards that have reduced foreign transaction costs or provide substantial cashback for purchases made internationally. While many countries are transitioning to a cashless society, individuals should still aim to minimise bank charges when withdrawing money from overseas ATMs by opting for more significant withdrawals less frequently.
Tracking Expenses Daily
Maintaining a daily record of expenses is pivotal in effective financial management for digital nomads. By diligently tracking every expenditure, individuals gain better control over their finances. While Excel spreadsheets are commonly utilised for expense tracking, alternative tools such as NomadWallet or Mint come highly recommended by digital nomads worldwide.
While it may not be necessary to record every single expense meticulously, individuals should strive to understand their spending patterns across significant categories such as housing, food and travel expenses. Cultivating tracking habits such as expenses may require time and discipline, but it empowers individuals to proactively manage their spending and prevent their expenses from dictating their financial situation.
Finding the Right Accommodation
Selecting suitable accommodation is a significant aspect of prudent expense management for digital nomads. To optimise their budget, individuals should explore alternatives beyond traditional hotels and Airbnb unless they offer exceptional affordability. They may consider options such as housesitting, homestays, or longer-term rentals. If uncertain about the ideal accommodation, it is advisable to initially book an Airbnb for a short duration, allowing time to engage with locals and gain valuable insights that can guide them in finding a suitable and budget-friendly arrangement.
Pro Tip: Negotiating better rates for accommodation is often achievable when planning an extended stay, regardless of the booking source. Engaging in discussions with local hosts or landlords and assisting with chores can reduce accommodation expenses. This is one of the best ways to cut costs as a nomadic entrepreneur.
In conclusion, cutting costs as a nomadic entrepreneur requires careful financial planning and innovative strategies. By creating and sticking to a monthly budget, individuals can gain better control over their expenses and allocate their income effectively. It is crucial to consider major expenses and estimate the monthly cost of living, making adjustments if necessary to ensure a surplus for savings.
Choosing the right bank and card strategy, such as opting for accounts with no international fees and using credit cards that offer travel rewards or waive foreign transaction fees, can help minimise financial burdens. Tracking expenses daily is essential for maintaining financial discipline and identifying areas where spending can be optimised.
Regarding accommodation, exploring alternatives like housesitting, homestays, and long-term rentals can significantly reduce expenses. Additionally, negotiating better rates and engaging in discussions with local hosts or landlords can further contribute to cost savings. By implementing these strategies, nomadic entrepreneurs can effectively manage their finances and sustain their digital nomad lifestyle long-term.
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