The No. 1 Money Mistake for Digital Nomads

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Managing money is important for everyone, including digital nomads. Check out a common financial mistake that could lead to serious problems. [[{“value”:”

If you’ve decided to become a digital nomad, you probably don’t want to wait long. It’s an exciting change in your life, after all. I know that once I set my mind to it, I wanted to book my flight pretty much immediately.

There’s nothing wrong with this rush to get out and explore the world — if you’re well-prepared. But impatient digital nomads often make a serious financial mistake.

Living the digital nomad life on a bare-bones budget

The No. 1 money mistake for digital nomads is trying to do it on a low income. You don’t need to make six figures, as some people decide to become digital nomads on an income of $1,500 or less per month.

It is possible to do this. One of the perks of being a digital nomad is that you can visit areas with a lower cost of living. But even in affordable cities, it may be harder than you think to live on a strict budget, for a few reasons.

Short-term, furnished rentals are more expensive than other housing options

You can’t always trust average housing costs because they’re based on traditional housing options: unfurnished units with long-term leases. Furnished rentals cost more, especially in areas that are popular with digital nomads, where owners jack up the prices.

The most budget-friendly places aren’t always places where you’d want to live

A $300-per-month apartment might seem fine, until you realize the internet barely works and the neighbor loves to blast their favorite music for the world to hear. Neither of these are ideal when you’re trying to work from home. Cheaper homes are also sometimes in unsafe areas.

You’ll need money for travel and activities

Part of the fun of being a digital nomad is seeing new places. Plane tickets, meals at restaurants, and activities can quickly eat up what’s left of your income after you pay your bills.

Some people only focus on whether being a digital nomad can be done on a low income. While it certainly can, that doesn’t necessarily mean you should.

The dangers of being paycheck to paycheck as a digital nomad

If you’re only scraping by financially, you’re essentially living paycheck to paycheck. That’s a problem whether you’re in the United States, Mexico, Thailand, or anywhere else in the world. Here’s why:

You won’t be setting aside anything for the future. You’ll need money to retire one day — Social Security benefits only replace about 40% of pre-retirement earnings, on average. If you don’t start saving for retirement now, it’s hard to catch up later.You won’t have an emergency fund. Emergencies are going to happen. An emergency fund enables you to pay for them without going into debt.You’ll be more stressed about money and more limited with what you can do during your travels. Seeing the world is an incredible experience. It’s a lot better when you aren’t constantly concerned about going over budget and when you can visit more than just the most affordable destinations.

Here’s the other problem: It’s difficult to grow your income as a digital nomad. Many employers aren’t interested in hiring people who live abroad, even if they hire remote workers. It can be a tax-planning and logistical nightmare that they’d rather avoid. So if you’re hoping to find a better job later, your options may be limited.

If you’re hoping for a raise, that’s no cakewalk, either. At some companies, being 100% remote makes it practically impossible to get promoted.

You may be able to increase your earnings from abroad. But you’ll probably have the best odds of doing it in your home country.

Figure out the financial side before you take off

Moving to a new country is a big change. It’s a new culture, and maybe a new language that you’re not fluent in yet. You don’t know where anything is. The food options are different. It’s a lot to process, and it takes time to get comfortable.

Do you really want to go through all that and have financial uncertainty? Personally, I’d make sure to have stable income and be in a secure financial position first.

To be specific, your income should ideally be at least twice as much as your bills in the places you’ll be living. If you expect to spend about $2,000 per month, then aim for $4,000 per month of income. That way, you’ll have enough to comfortably pay your bills, save money, and invest, while also being able to go out and enjoy yourself.

It’s also always good to have enough in your emergency savings for three to six months of living expenses. Using that same estimate of $2,000 in bills per month, you’d want $6,000 to $12,000 in your savings account earmarked for emergencies.

Those are my personal recommendations and what I’d need to feel confident about life as a digital nomad. While some cut it closer, this lifestyle is much more enjoyable when you don’t need to worry about money.

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