The Financial Difficulties You May Face as a Digital Nomad

The prospect of living in exotic destinations while still having a job and an income is a dream that seems a tad too far-fetched. For digital nomads, though, this is a reality! However, as incredible as it is to have the freedom to work and travel simultaneously, like everything in life, this lifestyle also comes with its own set of issues.

At times, those working from abroad will find they have fewer financial concerns than in their home country, but this, unfortunately, is only part of the picture. Unexpected or last-minute costs, inconsistent income, and taxes can put a strain on your finances in ways you may not expect.

Ahead of taking the plunge, these are some possible economic challenges to prepare for!

What Is a Digital Nomad?

Although the term 'digital nomad' has been around for some time now, it's still a relatively new concept for many. So, what exactly does it mean?

A digital nomad is someone who works remotely in jobs that aren't dependent on location. Some are employed by a specific company but are given the freedom to work from anywhere, while others are self-employed and typically earn an income from freelancing their services.

For most people in this line of work, efficient equipment and a reliable WiFi connection are all that's needed to complete a day's work. 

Your Income Can Change

Variable incomes are usually associated with digital nomads who work as freelancers. While it's more likely to affect people who have these types of contracts, it may also have an impact on company employees, depending on the firm's policies.

For client-based work, there's always a risk that one of your employers will only require your services for a specific project or decide not to renew your partnership. What's more, many freelancers aren't offered contracted work, meaning your income can be slashed out of the blue.

If you work for a company that's happy to allow remote working, ensure you're aware of any impacts on your income and benefits before taking advantage of this style of working.

The Cost of Living Is Different in Every Destination

Earning a salary from a country with a high cost of living while living somewhere where your expenses are much lower is a major draw for many digital nomads. While it's certainly possible, you'll need to take some time out to research what your average outgoings will be before deciding on a destination.

If your desire to work remotely is for the purpose of travel, there's a high chance that some of the countries on your bucket list will be substantially more expensive than others. As a result, you'll need to bear in mind that the amount you spend and save each month can differ quite a lot.

You Need to Consider the Tax Implications

Tax is among the most confusing aspects of a digital nomad's life, as so many factors are at play. The tax laws in your home country and those in the places you hope to visit both need to be taken into account, especially if you plan to stay in a particular destination for an extended period.

This can look a little different for everyone based on their circumstances. For example, some countries, including the United States, require citizens to file a tax return even if they're not employed by an American company. In other cases, there may be a double-tax agreement between the country you're currently residing in and your homeland. These are just a few of the possible considerations you might have to make.

Creating an Emergency Fund Is a Must

In a foreign country, you may not have the same security blanket that you do when you're at home. If you fall on hard times, you likely can't avail of the social measures in place for citizens in such instances, and your family and friends are limited in their abilities to provide support for you.

For this reason, you must have an emergency fund in place. Unfortunately, things can go south for anyone at any time, and building up some cash for a rainy day can be a lifeline for you further down the line.

Healthcare Can Be Expensive

Unless you've taken out a very comprehensive travel insurance policy, you might find yourself paying a lot for out-of-pocket healthcare costs. Of course, this can vary significantly depending on your illness or injury and where you get care.

If you become unwell or require medical attention, predicting how much you'll need to shell out can be difficult. For example, in developing countries, you may prefer to stick to private hospitals, incurring higher costs. Moreover, you also might need to go through a lot of back and forth with your insurance provider to reclaim your expenses and prove your claim is valid.

Technology-Related Costs Can Quickly Add Up

Living as a digital nomad can seem like a low-maintenance lifestyle on the surface, as a laptop and a smartphone are often the only pieces of technology needed. While this is true for a lucky few, there's no way to guarantee you won't run into any problems!

Depending on where in the world you find yourself, it may not be too easy to get your laptop fixed should you encounter any issues. In addition to the cost of repairs, you'll need to account for any potential lost earnings. 

Another overlooked cost is accommodation. In some locations, stable WiFi is a given, but this is far from the norm in more remote destinations. You may need to fork out more if you can only work at certain WiFi speeds.

These Are the Financial Concerns to Be Aware of Before Becoming a Digital Nomad

Even though digital nomads can enjoy an immense amount of freedom and utilize the affordable living costs of many countries, there's no way to guarantee that monetary issues won't arise from time to time. As such, it's important to account for these potential obstacles before starting your digital nomad journey.