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The financial aspect to becoming a digital nomad

06 May 2019 by National Bank
Digital nomad

Digital nomads are trending. Instagram and Facebook are flooded with idyllic images of people who have left it all behind to work remotely in another country. Travelling while making a living is possible—all it takes is a little organization and financial planning before you take off.

Start by saving

Unless you’ve inherited money from a rich aunt or won the lottery, the first step to accomplishing such a goal is to regularly set money aside. There are many tools available to help you, but some are more beneficial than others, depending on your goal.

While some are lucky enough to be able to work remotely during their trip and earn a decent income, others have to freelance and perhaps find new clients.

If this is the case for you, think about setting money aside for several months (or even years) in advance so you have a small cushion when you start working from a faraway beach.

Consider contributing to a Tax-Free Savings Account (TFSA) so you can grow your savings tax-free.

Another tip: consider a line of credit. If a mishap occurs while travelling and the funds available on your credit card are insufficient, it could literally save your life.

Plan a budget for your departure

How much does it cost to start life as a digital nomad? Yes, you should plan for the cost of food and lodging, but don’t forget to take into account the cost of a plane ticket, insurance and any fees related to moving or storing your furniture, if necessary.

“Ex-pat” Facebook groups are a good place to start your research for a better idea of apartment prices. Set a daily amount to spend on food. Keep in mind that, in many countries, it’s sometimes just as economical to eat in restaurants as it is to grocery shop.

Once you know how much you need to save, set a Goal (with a capital G) and schedule automatic transfers for every time you get paid. You won’t be as tempted by superfluous spending if you have less money at your disposal (bye-bye, new sneakers).

Receive your salary abroad

Some lucky few may have a full-time job that allows them to work from anywhere. But many digital nomads have to work as freelancers.

Being a nomad means you don’t have a permanent address. Even if you use your parents’ address for your mail, you could end up waiting a long time for a paycheque to arrive via snail mail.

The most common digital solution for freelancers is to download a void blank cheque and send it to your clients. That way, you can receive a direct deposit to your bank account, if your client offers this payment method.

If you think you’ll be getting paid by clients outside of Canada, you’ll need more information from your bank, such as the SWIFT code. Expect to have to pay fees for this type of transaction. However, getting paid in euros or American dollars, for example, could make up for the fees.

If you haven’t already done so, learn how to create an invoice, because when you are self-employed, all your income starts with an invoice.

But if both you and your client have accounts in Canada, the quickest and most efficient way to get paid is via Interac e-Transfer. It’s worth asking your client if they can pay you this way.

An Interac e-Transfer is also a good way settle up if you’re travelling with a friend. Did your travel partner pay for dinner? Reimburse them for your half in just a few seconds.

Pay your expenses

When travelling, it’s often better to withdraw cash before leaving rather than arriving with Canadian dollars and looking for an exchange office. Exchange rates can vary significantly from one place to the next, and the last thing you want to do is spend all your money at an exchange office.

To get cash in the local currency, you can withdraw it directly with your debit card, or even your credit card. However, be sure to withdraw an amount that is sufficient enough instead of paying fees for several smaller withdrawals. And if you withdraw money with your credit card, it’s best to pay off your card as quickly as possible to avoid paying too much interest.

A credit card is undoubtedly a digital nomad’s best friend, as more and more businesses around the world accept payments using a card.

However, even while travelling, a credit card is not a bottomless source of money, so it’s best to use it responsibly.

Tip: Take the time to choose a credit card that suits your needs. If you expect to travel often by plane, it’s not a bad idea to choose a card with a rewards plan that offers bonus points for purchasing plane tickets.

Stressed you might lose your card? Normally you can get a replacement in just a few days anywhere in the world in case of an emergency. That’s one less thing to worry about!

It’s also important to be disciplined and keep your finances up to date. You can check that everything’s in order in between two sips of mango smoothie in Thailand by checking your budget on the mobile app, or even by using online banking services.

Take care of your health

You credit card may also provide essential travel insurance coverage.

By signing up for travel insurance, everything is already organized in advance should something go wrong. For a rather low rate, you could potentially get out of a jam in case of illness, injury or even death. Be prepared for anything.

Some insurance also offers interpretation services if you need to speak to a doctor and they need important information from you regarding your health. Shop around!

Take a look at immigration laws

Take the time to learn about immigration laws in the country you are planning to be in. While tourist visas are generally easy for Canadians to get, the same cannot be said for other types of visas, such as Germany’s freelancer visa.

The federal government also has a very helpful website you can consult for travel notices and advisories for each destination. For example, you will see there that you should “avoid all travel” in North Korea. For other destinations where it is less obvious, it’s worth taking a quick look.

Do your research and speak with your destination’s embassy before you leave to ensure that you respect their laws.

Prepare for the trip of a lifetime

Before leaving, don’t forget to send a travel notification. This will help you avoid having your cards blocked just as you’re buying your first souvenir.

There is a significant amount of preparation to consider, but it’s better to leave with total peace of mind, especially when you’re heading off to live an exciting, unique adventure.

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