Financial Planning for Digital Nomads: How to Prepare to Work Abroad (Temporarily!)

Like many others, I’ve come to treasure the perks of working from home (sweatpants, no commute, proximity to the fridge, etc.). But as much as I love my desktop monitor, the flexibility of being able to work from anywhere had me thinking how great my ThinkPad might look on a sunny balcony overlooking the Douro River…

Flash forward to today, I’m in Porto Portugal, writing this blog post, trying out the digital nomad life for the next month.

I couldn’t be happier about my decision to work from (and explore) Portugal and I love talking to our clients who are thinking about working abroad. To help, I’ve put together five financial tips for planning a digital nomad trip! 

Five Key Financial Planning Tips For Digital Nomads:

1. Plan ahead & start saving

An extended time away requires a bit more research and logistical foresight than a week long vacation. The further in advance you plan, the more time you have to research and save. 

If you aren’t self-employed, you will want time to discuss your plans with your employer (for example, how will your working hours change if you are in a different timezone?) Some companies have instituted “work from anywhere” policies that allow you to do this up to a certain number of weeks. Pro tip: If renting a place, make sure to read the reviews thoroughly from other digital nomads and ask about the WiFi speeds!

Once you have worked out those logistics and you have a general idea of when and where you want to go, check and make sure you understand the country’s visa requirements, as you may  need to apply for one in advance. Don’t forget to double check your passport’s expiration date! Many countries require a passport that is valid for 3 to 6 months after the date you plan to return home.  

Lastly, start saving! We’ll dive more into budgeting below but whether you plan to go for a week or a few months, you’re likely going to need to put aside extra funds in addition to your usual travel budget (if you have one). Our favorite way to save for a short term expense is to automate it. Start by setting aside a certain amount per paycheck or per month that goes directly into a high yield savings account dedicated to your trip.

2. Budget realistically 

Before booking that beautiful 5 bedroom Airbnb overlooking Lake Como, build out your budget. Do a little research on the cost of living in the country/city you’re planning to travel to and what current exchange rates are so that you have a sense of what you may spend. What parts of your current budget will stay the same? What is going to increase (or decrease)? 

For example, in Porto dining out costs less than what it costs in the States; however, because I planned to eat out more than I do at home, I left it pretty much the same. In contrast, travel expenses such as flights, hotel/Airbnb, rental cars, and other activities exceeded my usual monthly travel budget. I recommend setting a google price alert on any flights you are looking at so you can get notified when they increase or decrease. 

Lastly, add a 5% contingency to your budget–trust me you will use it!

3. Get all the insurance

While hopefully you don’t end up needing it, it’s best practice to purchase a travel insurance policy to protect you in case things go wrong. There are many different types of policies/protections you can purchase, but in my opinion the most important coverage to have is emergency medical coverage (keep in mind this is usually secondary coverage, meaning you still need to keep your primary medical coverage back home even though it likely does not cover you abroad). And just in case, look into the health system of the country you plan to visit; does it offer universal health coverage, and if so, who and what are covered? 

Some credit cards include travel insurance like baggage delay and/or loss coverage on trips purchased using the card. I actually ended up using this when my bag was delayed for 5 days (and ended up back at home instead of in Portugal, oh well!), I was covered up to $100/day to purchase necessary items to replace what I didn’t have for my trip. 

4. Optimize your spending  

Having a credit card that doesn’t charge foreign transaction fees is key as the exchange rates are usually (but not always) more favorable than exchanging cash. Depending on where you go, it may be fine to use your credit card for most things. If you do use your card and you are presented with the option to pay in USD or the local currency, make sure you select the local currency to avoid fees and markups. 

If you need cash or are going somewhere where you can’t use credit cards, find out which ATMs charge no fees or look up if your bank has any “partner banks” abroad. When taking out cash, some ATMs will ask if you want to use their guaranteed exchange rate, you should always reject this as they usually include a super high markup! 

Also, travel with more than one credit card (and store them in different places) in case your wallet gets stolen and you need to cancel a card. You don’t want to be stuck without access funds when you need it!

5. Understand possible tax implications 

Temporary trips will generally not impact your taxes. (This assumes you are working for a US company and are a US citizen.) However, it’s important to know about the 183 day rule that is used by many countries as a test of residency (and therefore tax liability). The rule states that those who reside in a country for more than 183 days in one year may be considered a resident and therefore owe tax. Another important thing to remember is that good ol’ Uncle Sam taxes your worldwide income so even if you are working remotely abroad and getting paid by non-US companies or clients you still have to report that income. There is such a thing as a foreign tax credit for taxes paid in other countries, but you should consult a CPA if you think that may apply to you. 

Note: It’s important to differentiate that the tips shared here apply to those who are planning to travel and live away from home temporarily. Hitting the road for good comes with its own set of unique financial circumstances which aren’t addressed in this post but if you want to learn more schedule a meeting with us here!

 1- Most people won’t but I still have to say it, make sure you read the fine print!