Money Lessons From Over Five Years as a Nomad
People think being a digital nomad is expensive –– all those plane tickets and adventures and short term rentals. And it can be…but it doesn’t have to be.
I’m from New York City so most of the world is cheaper to live in than “home.” Even if you’re not from a super expensive city like New York or San Francisco or London, you can save money by taking to the road and being a digital nomad. And even if you aren’t saving money, you don’t have to actually be spending more money than if you were living at home.
I’ve been on the road for over five years now and here are some things I’ve learned about managing my money on the road, some of them the very hard and expensive way.
Managing Your Money as a Digital Nomad
There are several things you don’t have to think about as a normal person living somewhere that can cost you a ton of money on the road if you aren’t careful. They are:
Most American credit cards charge international fees and they can be steep at around three percent of your purchase for every single purchase. Spending an extra three percent on every single purchase outside of the United States can add up fast, which is why both of my go-to cards have no international fees.
My primary card is the very popular Chase Sapphire Reserve card which earns triple points on travel and food, which means my plane and train tickets, my hotels, and all my restaurant meals earn triple points. Unfortunately, it does come with a hefty $550 annual fee you pay upfront and you do need a high credit score to qualify so it may not be the best choice for you depending on your circumstances.
My backup card is my Capital One QuickSilver card which has no annual fee, no international fees, and really nice customer service. I’ve never had any issues with the card but when I’ve called to let them know “I’m heading somewhere outside my normal loop and please don’t freeze my card”, the customer people I’ve spoken with have always been super nice. And I get 1.5 percent cash back on every purchase, no matter what it is, so I do use it a lot for shopping.
You need to have online banking set up so you can easily monitor your cash flow. There is nothing quite like getting hit by an overdraft fee because you didn’t realize the exchange rate you got on your last withdrawal.
ATM fees can be a major expense if you’re paying them out of pocket. In countries like Argentina, you can end up paying up to $10 per ATM withdrawal, which as a foreigner, is usually capped at somewhere between 2000 and 6000 Argentine Pesos. That sounds like a lot but when the exchange rate is around 60 pesos per US Dollar, that’s $33 to $100, which makes that $10 ATM fee pretty steep. I’ve also managed to spend over $35 in ATM fees in one week in Thailand, so this isn’t limited to just one country.
The best way to get around this is to have a debit card from a bank that refunds your ATM fees. Schwab is the bank I’ve been using for years because they refund my ATM fees for the entire month on the last day. It feels like a nice little bonus to get those back at the end of every month.
I recently started using SoFi because they refund your ATM fees immediately and I must admit, I’m loving that instant gratification.
If you’re not an American, I recommend looking at TransferWise and Revolut as both allow you to hold multiple currencies in one account. (I use TransferWise and am relying on friends recommendations for Revolut.)
Unclear Budgets & Expenses
Whether you’re a digital nomad or not, you need to have a clear idea of what your money situation looks like. It’s easier for digital nomads to excuse their lack of awareness because we’re so far away from our banks etc but that’s just laziness.
I use a super bizarre and convoluted system to manage my money, which I am not going to subject you to because you will hate it. Instead, I will recommend the system I am planning to switch to, which is Mint.
I don’t micromanage my cash spend but Mint does allow you to do that with their new Cash feature. Frankly, I probably should be better about seeing how much of my cash goes to coffee shops vs taxis etc.
I do make a point of checking my spending on a weekly basis to make sure I am on track for my overall budget and not blowing it and I recommend that as a check-in system. Checking daily will just stress you out and checking monthly isn’t enough.
You know what blows up your budget really fast? An emergency.
This is true whether you’re a digital nomad or not so make sure you have an emergency fund. This should be enough to cover not just your immediate emergency-related expenses but also a plane ticket home and three months of living expenses at home.
An emergency can be as mundane (but super stressful) as losing your biggest client and needing to find new clients ASAP or as eventful as having a motorbike accident, spending a week in a hospital, flying around the various specialists and then taking a year to recover. In the latter situation, your emergency fund won’t cover everything but that’s also a rare situation, especially if you’re not renting motorcycles that make you nervous.
On a related note, you should also:
Have Health Insurance on the Road
It doesn’t matter if you have great health insurance in your home country or none, you should make sure you have health insurance on the road. I was using IMG Global for years but recently switched to SafetyWing. I have never filed a claim with either one but knowing any future emergency isn’t going to cost me tens of thousands of dollars out of pocket is really nice and well worth the $10/week I’m spending for $250,000 of peace of mind.
It doesn’t sound complicated and the truth is, it isn’t. None of these digital nomad money hacks are mind-blowing revelations and they can all be used by non-nomads. But if you’re not on the road, you probably haven’t had to think about things like having travel insurance and avoiding foreign transaction fees, which can save you hundreds or tens of thousands of dollars on the road, every single year.
So bookmark this blog post and revisit it when you’re ready for that adventure that you can afford this year thanks to your super successful freelance hustle.