By Mark Thomasson, 10x Management Guest Writer
Living in this day and age opens a wide number of unprecedented employment opportunities. The Internet makes it possible for us to work from any part of the world and because of that, many young business professionals decide to live as digital nomads. Of course, this lifestyle isn’t possible in every industry. Even if your profession gives you such an option, there are many financial aspects and networking aspects you should analyze before you go that way.
For instance, some successful freelancers use a full service agency like 10x Management to help manage their business affairs. If you don’t have an agent, here are five considerations that you should take into account.
1) Calculating your monthly expenses
If you’ve been working a regular 9-5 job for some time, you’re probably used to regular monthly payments. This comfort zone shapes the way you think about earning and spending money. When you know that you’ll get your payment at the same time every single month, you might become too relaxed with money.
However, if you decide to make the switch and live as a digital nomad, you need so start behaving in a more responsible way. The first pit stop on this road is calculating your monthly expenses in the places you’re planning to live and work.
When you pick the first place for your career of a digital nomad, research the expenses you’ll have there. The key elements you should take into consideration here are the rent, bills, food costs, travel expenses and entertainment. You can compare the costs of living in hundreds of different cities on the Numbeo website.
Further, visit the local forums and social media groups to find out more about the expenses and living habits in your preferred places. It will give you a clearer image of the expenses you’ll be dealing with.
Although it sounds exciting, becoming a digital nomad requires some thorough planning.
2) Building a safe cushion budget
Once you know your potential expenses, it’s imperative to form a special savings fund before you hit the road. So, start saving money that will serve as the backup budget for the first few months.
Although living the freelance lifestyle includes working on the go, you should have a special fund, in case you have to deal with some unexpected expenses. For instance, you might need to travel home fast from a distant part of the world. Having some saved assets in your bank account could be of great importance in such a situation.
The exact amount of money you should have in savings depends on your travel preferences and business goals. In this example, you can see that working and traveling around Latin America or Eastern or Southeastern Europe requires saving about $6,000 for the first six months of your nomadic life. Other parts of the world will incur different expenses, so take all these factors into consideration.
3) Dealing with accounting details
Working remotely is beneficial for many different reasons, from thinking in a more divergent way to putting your own creative ideas to practice. You can also make more money if you work for yourself. So, it’s no wonder that a growing number of people are turning to remote work, both on the road and at home.
It is important, however, to stress that you’ll be dealing with some business functions that used to be sorted out by other professionals in your company, such as accounting.
To start, it may be smart to work via a freelance platform. Those services already do most of the business accounting for you. You can keep money on your account or transfer it to your bank account. Also, Upwork, Freelancer and other mainstream platforms provide you with detailed reports about your work, earnings, billing etc.
Naturally, when you learn the basics of freelance work via these platforms, you’ll grow a desire to work on your own. If you decide to do that, make sure to keep one of the cutting-edge accounting apps by your side from day one. Such a tool will spare you a lot of hassle and allow you to work more efficiently as a digital nomad.
Further, as the number of your clients increases, it’s wise to start using a free online invoice maker. That way, you’ll make sure that your payments are well organized and that your clients pay you on time.
4) Paying bills in your home country
If you’re leaving your home country for a certain (or uncertain) period of time, make sure to tie up some loose ends, finances-wise.
First and foremost, close your domestic bank accounts. You won’t be receiving any payments in your domestic currency when living abroad and your bank will ask you to keep paying for the account fees.
Next, you should inform all your service providers to start sending you the bills for your home via email. That way, you can pay all your bills online. People who don’t own a home won’t have to deal with these issues.
If you have an active mobile phone package in your home country, think about terminating the contract. If that’s too expensive, check with the provider if you can get a grace period for the amount of time you’ll be away.
It’s extremely important to iron out all the monthly expenses you have in your home country before you leave. Otherwise, you might get caught by surprise with the interest rates for the unpaid bills when you get back home.
5) Sorting out the taxes
The last part of this financial guide for digital nomads is the one that causes most problems for this group of workers – the taxes.
When choosing the countries where you’re going to spend your time as a digital nomad, take their taxation systems into account. Roughly speaking, most countries in the world are divided into two taxation systems. The first group imposes taxes on anyone who registers as their resident. For instance, the majority of European countries will ask you to pay their local taxes if you spend 180 days as their resident. The bad news is that they’ll tax even the income you make online.
On the other hand, there are countries that won’t tax your income while you’re living there. They’re The Bahamas, Vanuatu, The Cayman Islands, and many others. Some countries, like Costa Rica or Paraguay, will have some low taxes for people who aren’t their citizens, but only temporarily live there.
Other countries, like the UK, don’t ask you to pay double taxes, but you will need to submit a legal proof that you’ve already paid your taxes in the country where you worked.
The harshest tax measures are still in the US. No matter where you live and pay the local taxes, the IRS will still ask for their share.
Whatever you do, make sure to first talk to your local tax officials before you hit the road, to make sure that you don’t miss paying any obligatory taxes.
Living as a digital nomad is a great way to open your mind for new opportunities and gather some work experience. It will give you a chance to meet new people, see different parts of the world and enrich your life in many ways. Still, you need some sort of financial stability to achieve these goals. If you deal with the financial considerations analyzed in this article on time, you’ll manage to live your life of a digital nomad successfully.
Author Bio: Mark is a biz-dev hero at Invoicebus – a simple invoicing service that gets your invoices paid faster. He passionately blogs on topics that help small biz owners succeed in their business. He is also a lifelong learner who practices mindfulness and enjoys long walks in nature more than anything else.
If you liked this article, you might enjoy reading How To Start Freelancing With No Experience