Things To Consider Before Taking On The Digital Nomad Lifestyle
While scrolling through your Facebook or browsing through travel videos on YouTube, you’ve probably come across articles and/or videos by people who are telling you to quit your job, sell all of your possessions and become a digital nomad. A digital nomad can be defined as: a person who uses wireless internet to work remotely, which gives them the freedom travel and work wherever and whenever* (almost wherever and whenever). Digital nomads usually work in either work in the comfort of their accommodation (home, hostel/hotel, apartment, Airbnb, house sitting), coworking spaces or coffee shops. Many digital nomads come from “first world,” “well off” nations like the US, UK, Canada, EU nations, Australia, and New Zealand; however it’s slowly growing in many other countries. These people often flock to countries in Southeast Asia and Latin America where the cost of living is low, the internet is reliable, the weather is warm/hot year round, the locals have a decent to great understanding of the English language, and the food is delicious (however many nomad spots in Eastern and Southern Europe are growing due to its low cost of living).
Living in a low cost country allows them to take advantage of something called geoarbitrage, a concept that was popularized by Tim Ferriss, the author of The 4-Hour Workweek. It can be defined as: the concept of earning income on a strong currency (e.g. USD, GBP, EUR, CAD, AUD, NZD) while living in a country where your living expenses and leisure activities are in a weak currency (e.g. THB, VND, MXN, COP). This allows the person to have a much higher purchasing power compared to their own country, hence why people love to talk about how cheap x country is for westerners. While the digital nomad concept is nice and liberating, many popular members of the community tend to over glamorize the lifestyle and never really touch on the things one should consider before quitting their jobs, selling everything and booking a one way ticket to God knows where. Here are some things you should consider before putting in your resignation letter and selling your possessions:
- Planning Your Great Escape
Telling people to “quit your job and travel” is a great headline to get clicks to your article and/or YouTube video, however this is not practical advice. While there are people who spontaneously did this, it will not work for everyone. First, you need to figure out how you will make enough money online to live and save for the future. It would be very foolish to move across the world if you’re not making a liveable wage (unless you have enough money saved up that will last a very long time). If you have a house, you need to decide whether to rent it out or sell it. If you have children and/or other dependents, you have to be even more strategic because you are responsible for all of their expenses and for children, you need to figure out whether or not they will be home schooled or attend an international school (another large expense).
No one ever talks about taxes. I wonder if they ever pay it, or do they just shy away from the topic because they do not have enough knowledge on the subject to give advice to their followers. I can’t speak for other countries because I don’t know their laws, but in the US, it is still required for its citizens to pay taxes to government even if they are living out of the country. If you’re freelancing or have an online business, you will subject to paying self-employment tax i.e. you’ll owe a lot of money unless you can magically write it all off. If you’re an American living this lifestyle and not paying taxes, should you return home, you’ll have a hefty bill. And thanks to the new law that was put in place two years ago, if you owe more than $50,000 to the government, your passport will be revoked until you pay it.
3. Multiple Income Streams
Moving across the world and becoming complacent with only one income can be dangerous….very dangerous. What will you do if you when your sales flop? What will you do if your client lets you go and you have a hard time getting another one? As a digital nomad, you’re not allowed to legally work in the country you’re living in unless you get a work permit, which from my understanding, can only be obtained if you’re hired by a company in that country.
4. Overemphasizing How Cheap A Country Is
I don’t say this because I’m against living in low-cost countries (I’ll take a $1 Pad Thai any day of the week), I say this because people are making very poor financial decisions because it’s cheap. I’ve seen people talk about how they’re living in Chiang Mai for less than $500 a month, not necessarily because they want to live that minimally but because they can barely afford to live there. This goes back to point number 1 and 3 about not securing a financial net and a backup before you move abroad. Since Thailand is a country that is not a fan of long-term visas, living at the bare minimum in a country that is already low-cost can be super risky if you have to constantly pay money to extend your visa and do border runs every 90 days while having minimal funds. On the other hand of the spectrum, living in a low cost country can turn one into a big spender like a rookie NBA player who goes on a crazy spending spree due to his new found riches with nothing saved when his career abruptly ends. Even though you’ll feel like royalty in these countries, you still have to be smart with your money and be mindful on the amount of times you splurge.
5. “Settling Down”
Depending on your age, the future may seem like it’s light years away. Just like people working regular 9–5 jobs, digital nomads still need to plan for the future as well. Globetrotting around the world is nice in your 20s and 30s, when you’re full of energy, but do you really want to be 60+ years old doing visa runs in Thailand and living on $500 a month? God forbid something happens to you and you physically can’t work anymore. What are your long term goals? How will you finance your lifestyle when you grow tired of working on your laptop all day? Are making enough money to save right now? If not, what will you do differently to do so? Do you plan on returning to your home country? Do you plan permanently living in another country? Do you want to buy property in your home country or internationally? Take the time to seriously think about these questions.
6. Plan B
No, not the emergency contraceptive pill (maybe you need that too, haha), I’m talking about planning for your worst case scenario. Let’s say you take the leap and live the digital nomad lifestyle, and you come to realization that it’s not for you, what will be your alternative plan? Let’s say your business or freelancing gigs flop, what’s your alternative plan? Will you seek other ways to finance your lifestyle abroad? Will you go back home? Will you get a “regular job”?
You may not have all of the answers to these questions right now (that’s okay), but it is important to take this into consideration before you take the leap to move. I don’t say this to scare you away from the lifestyle, but to be strategic and think about how you will prepare for your future and to make sure that this is something that you really want to do, not because it looks nice or you want to make your friends back home jealous of your exotic Instagram pictures with a cliche caption to match.