If you are aspiring to become a digital nomad, one of the main risks you must be facing is a financial one. What will happen if things don’t work out as you expect them to? How agonizing would it be if you had to go back to your parents and hear them say, “I told you so…”
Although as a digital nomad you don’t have a permanent house, the idea is not to end up as a hobo either. Don’t worry! These thoughts are totally normal.
We know these thoughts far too well because we were in the same position as you. We were doubtful, we postponed, and even when we finally took the leap, we were still not sure. Moreover, through our survey, we learned that money is the number one reason why people are reluctant to change their career.
After a year of being out and about, talking with numerous digital nomads, here is the wisdom we gained. It all boils down to minimizing the risks involved.
Luckily for you, we put together the list below with the 6 things you need to do before taking the leap. Keep reading to create your own bulletproof digital nomad vest.
Since you are here, you probably want to read these posts too:
- Digital Nomad Guide to Make Money Online
- Financial Freedom – 12 Steps For Beginners
- Financial Independence Retire Early And Travel
Save this post to your Digital Nomad board on Pinterest!
1. Create an emergency fund
We know. This is one of the oldest ones in the books. Nonetheless, the list wouldn’t be complete without it. If you don’t already have an emergency fund in place that you can fall back on in case of a, ugh, emergency, then create it now.
This fund is not to be touched by all means, unless the situation is absolutely dire. Having some cash stacked aside for a rainy day will ensure that you never have to beg anyone if you are in a downward spiral. While you can avoid many risks, sometimes life throws the most unpredictable things at you, and the only thing you can do is be prepared for the unexpected.
How much money should this fund have, you wonder? Well, it should be able to cover at least one month of living costs. It should cover any medical emergency as well. With a good health insurance, you can figure out how much that might be. For digital nomads specifically, you also wan to be able to afford a flight ticket home.
2. Know how you will afford the first 3 months
Depending on what you end up doing exactly, the life of a digital nomad can be somewhat unstable. For that reason, we recommend that you know how to afford the first few months until you figure a stable way to generate income.
For the first three months, you might have sufficient savings to live off of. Otherwise, having a paying project secured for the first three moths is an option too. This will allow you some time to adjust and get jobs you are passionate about and pay sufficiently. If you need some help getting started, read our post about Remote Jobs.
3. Pick the right destinations
As someone that is just starting out as a digital nomad, you might not be paid as much as you were before. You need to gain some experience and prove your skills as a remote worker. For that reason, you should consider the destinations you want to go to at the beginning.
Even if the main reason you are becoming a digital nomad is to experience living in New York City for a while, it might not be the best place to start at. As one of the most expensive cities in the world, you might run into trouble if your first project flops or you want to look for that perfect remote job. Instead, start off with more affordable destinations.
4. Get your insurances in place
Having the right insurances in place can save you big time if unexpected things happen. While it is adding to your monthly expenses, it will be worth much more should you ever need to use them.
The insurances that we recommend looking into are: health insurance, travel insurance, and liability insurance.
For the health insurance, make sure it covers you in all the destinations you are visiting. We have been on the road for over a year, and while (knock on wood) nothing really bad happened, we did find ourselves visiting a general practitioner or a hospital a few times. Trust us, you don’t want to have a fever in a tropical country with the threat of malaria and have to consider if you should pay to get it checked.
For the travel insurance, the main thing to look for is how much they will cover. As a digital nomad, you will have some digital equipment with you. As you are moving around a lot and staying in different places, you can never be a 100% sure nothing will be damaged or stolen. Make sure your travel insurance can get you a new laptop if something happens to it. After all, without it, you are out of a job.
5. Live below your means
As mentioned earlier, when starting out as a digital nomad, you might be earning less than you had before. Additionally, your might have no job security. Therefore learning to live below your means, that is not spending a 100% of your monthly income, is extremely important.
Stay in comfortable accommodations, eat healthy food you like, and do activities you want. However, don’t exaggerate. At first, it might feel like a long holiday. Yet, with time you will realize that while everyone around you is really taking a break from their normal lives, this is in fact your normal life.
Grow your expenditure slowly as your income grows. Take time to get used to this new life. It takes some time to get stability, and learning to live below your means is an essential skill for a digital nomad.
6. Create multiple sources of income
We cannot stress this point enough. As a digital nomad, you are more at risk of becoming jobless. Having various sources of income, including passive income sources, can help you sustain a lifestyle you want even in more turbulent times.
Check out our article about the 5 steps to financial independence to learn about creating passive income.
It all boils down to minimizing your risks
The most important takeaway from this post is to minimize the risks you are taking changing your career and becoming a digital nomad. It is a big step, and while more people are doing it, it is not all that simple.
We are not trying to discourage you. We want you to understand what you are taking on and have the digital nomad bulletproof vest ready before you start the journey.