Digital Nomad Tips

How to Budget for a Digital Nomadic Life

Are you preparing financially to start start your digital nomad journey? If so, you must learn how to budget your money effectively. This will help you prepare financially before your departure and create a strong foundation for a successful remote life once you hit the road.

In this blog post, we will discuss some tips for budgeting your money that Lau and I used to save up two years of projected remote life. We’ll also provide some helpful systems that will make the process of budgeting and saving a little bit easier. So let’s dive in.

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💰 What is a Budget?

A budget is simply a way of tracking your income and expenditure so that you can stay within your means. It’s essential to have a budget if you’re planning to be a digital nomad. You need to be careful with your money when traveling and working, as many expenses can pop up.

A budget gives you a clear idea of your financial situation so that you can make informed decisions. Without a budget, it’s too easy to overspend and get into debt, which can ruin your digital nomad life before it’s even begun

📊 Creating a Budget Spreadsheet

There are various ways to create a budget, but one of the simplest methods is to track your spending using a spreadsheet. This will help you to see exactly where your money is going and where you may be able to cut back on costs.

You can find budget templates online or create your own using a program like Microsoft Excel. If you’re not sure how to get started, we suggest using this free template which we use.

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Budget Spreadsheets: Once setup will give you a good idea of where your money is going, whether your income is covering your expenses, and where you could potentially cut back on costs to improve your situation each month.

Budget spreadsheet, laptop, iphone, glasses, Photo by Campaign Creators / Unsplash

🏁 Set a Savings Goal

When preparing to become a digital nomad, it’s essential to set a savings goal, which, when reached, you know you’re financially ready to start your remote life. This point is different for every nomad and depends on the lifestyle you are used to or want to create for yourself.

However, the most important thing is this savings goal should be connected to a detailed projection of your expected expenses and income whilst living as a digital nomad.

You should try to be as detailed as possible with your projection, so you don’t undershoot the mark due to an overly optimistic view. You’d be surprised how easily the expenses seem to add up!

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Your savings goal should also factor in an emergency fund, which should be used only for emergencies and for expenses of an unexpected nature.

💭 50/30/20 Rule

Now that you’ve got a clear view of your financial situation (after creating your budget spreadsheet) and you’ve set your savings goals, it’s time to focus on how you will reach it.

At this point, you’re probably looking at the money you need and thinking it’s impossible or too difficult. However, you need to try and avoid looking at it as a total sum and think of it in smaller chunks that you can reach each month. One way to achieve this, which we used, was to follow a variation of the 50/30/20 rule.

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50/30/20 rule: The rule states that you should allocate 50% of your income to essential expenses, 30% to lifestyle expenses, and 20% to savings.

Definitions:

Essential expenses: include things like rent, food, and transportation.

Lifestyle expenses: include things like entertainment, eating out and clothing.

Savings: this is whats left over each month and which you put aside to reach your financial goal and start your remote life.

This is a great starting point if you’re unsure where to begin. As you become more comfortable with this approach, we suggest adjusting the percentages, keeping in mind these three categories, based on your income, expenses, and desired departure date.

For example, suppose you’re focused on starting your digital nomad life as soon as possible. In that case, you may consider sacrificing the lifestyle expenses for a while and focus on building up your savings faster. Therefore a 50/50 rule or close to it will speed up your departure date.

✅ Tips to Help You Stick to Your Budget

Whatever approach you choose, the main thing is to stick with it over the long run and work towards your financial goal each month.

Here are a few tips to keep in mind when selecting your approach that helped us stick to our budget during this time.

💶 Be realistic

Don’t set unrealistic contribution amounts that you know you won’t be able to stick to. It’s better to start small and gradually increase your monthly savings contributions over time. You’ll find you’ll get used to the system, and as you see the money in your savings account stacking up, it will be easier to stick to the monthly contributions.

🎯 Make a plan and stick to it

We can’t stress this enough. If you have a plan, you’re more likely to stick to it. If you’re a visual person like me, write it on the wall in the bathroom, kitchen or wherever. A daily reminder of your plan might help you stay on track – It did for us.

⚖️ Use a budgeting tool

Either the budget spreadsheet you’ve already created or seek out one of the many budgeting apps that can help you stay on top of your spending. Try out different ones until you find one that works best for you. We used a number of these; however, in the end, our budget spreadsheet was what we kept returning to!

❌ Avoid impulse buying

One of the easiest ways to blow your budget is by purchasing things on impulse. If you see something you want, wait a few days before making a decision. Chances are, you’ll forget about it by then and remind yourself what you’re working towards.

⬇️ Find Areas to Cut your Spending

Try to find areas where you can reduce your expenses. Every dollar you can save speeds up your departure date. Below are a few ideas that might be applicable to your situation.

🏠 Reduce Housing Costs

If you’re looking for ways to cut your spending, one of the first places you should start is with your housing costs. This is often one of the biggest expenses for people, so it’s a great place to start saving. If you’re living out of home, one idea could be to move back to your parent’s place for a while. If this isn’t an option, look to downsize to a smaller apartment or home. Alternatively, if you have the space, look for a roommate who can help you split the cost of the rent.

⚡️ Lower Utility Costs

Utilities can also be a significant expense, particularly with inflation and the energy crisis. Hence, it’s worth looking for ways to reduce costs in this area. One way to do this is to ensure you’re not using more electricity than necessary. Turn off lights when you leave a room, and unplug appliances when they’re not in use. You can also save on your water bill by making simple changes to your daily routine. Turn the faucet off while brushing your teeth, and take shorter showers. These small changes can add up over time and help to lower your utility costs.

🍕 Save on Food Costs

Food is another necessary expense, but there are ways to save on this cost. One way to do this is to cook at home more often. This can be cheaper than eating out, and you’ll have more control over the ingredients used. Luckily for Lau and I, we love cooking, so we’d leave eating out to special occasions with friends and family. It also helped during lockdown not being able to eat out as much!

🚲 Be Smart About Transportation

Transportation can also be a significant expense. If you’re looking to save, it’s worth considering alternatives to driving. One option is to use public transportation. This can be cheaper than owning and maintaining a car. Another option is to ride a bike, something we had the opportunity to do while living in Amsterdam before starting our remote life.

❌ Stop Subscriptions and Memberships You Don’t Use

Make sure to do an audit on all your memberships when looking at your finances. You may be surprised to discover a membership or service you’re paying for that you simply don’t use anymore. After doing my audit, I discovered I had been paying €10 a month for insurance for an old phone from 2 years ago… It’s safe to say I felt pretty stupid but was glad to have found the expense as I’d just put €120 back in my pock each year.

📈 Find Ways to Grow your Income

Once you’ve exhausted all the possibilities for reducing your expenses, another great way to speed up your departure date is to find ways to grow your income.

This can involve getting a better-paying job, finding side hustles that generate extra cash or investing in assets that appreciate over time.

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While it may not be easy, these income streams will potentially support you even after you’ve started your remote life as a digital nomad.

coins in a glass jar and a plant growing, Photo by micheile henderson / Unsplash, money tree

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🔥 Final thoughts

Learning to budget will help you speed up your departure date to start your remote life and set you up financially for your journey as a digital nomad. The first step is to have a clear overview of your financial situation and your projected financial situation as a digital nomad.

Once this is clear, you need to develop an approach to saving that works for you and that you can stick to each month. With a little hard work and discipline, you’ll be traveling whilst working remotely before you know it. Let us know if you found this article helpful by dropping us a message - @remotevagabond