Debt And Digital Nomadism Are More Compatible Than You Think

In a world where we are overwhelmed by credit offers and related debt from college, the idea of selling off most of our physical possessions and having an adventure can be intensely appealing. Excluding home mortgages, the average American currently carries nearly $40,000 in personal debt, a crushing financial and psychological burden for many adults. Most studies do not consider the home mortgage when evaluating debt burden, but selling a property is actually one of the most effective ways to put a huge dent in your debt quickly.

Liquidating home equity usually results not only in the elimination of the mortgage payment but additional funds that may be put toward other debts as well. However, most homeowners argue the cost of rent will be equal to or greater than their mortgage payment. For the digital nomad, however, this is not the case. If you have the option to simplify your life by choosing to travel affordably and forego ownership of most of your larger, debt-carrying possessions, you could operate on a very reduced budget. This would allow you to allocate your “adventure savings” to paying down student loans or other debt instead.

Adventure Is Waiting

If buying a one-way ticket to a foreign country, loading up your backpack, and never looking back sounds like the adventure of a lifetime to you, you could be a digital nomad just waiting to find your true calling. While historically the “backpacking across Europe” phase of most adults’ lives happens in their early or mid-20’s, the internet has facilitated a digitally nomadic and fully sustainable professional lifestyle. That experience can last, literally, the span of their working life. In fact, many freelance workers find they can actually reduce or pay off their debts and travel the world at the same time by fully embracing this lifestyle. Most leave the lifestyle to “put down roots” eventually, but their lives are enriched and their perspectives immeasurably broadened by their previous nomadic existence.

This Lifestyle Is Fully Accessible

Many people assume that digital nomads either are independently wealthy and fund their travel in this way or are painfully impoverished and often have nowhere to stay other than an airport lounge while they wait for a standby flight home. The truth is far different. Most digital nomads are freelancers and work as much or as little as they want from anywhere they wish to stay. Software developers, writers, graphic designers, and even travel nurses find digital nomadism an appealing and viable option. There are a variety of customer-service oriented career options for digital nomads as well, and many companies, including loan consolidation organizations, offer online training programs tailored to the specific needs of service organizations.

Budgeting For Affordable Nomadism

Digital nomads traveling professionally quickly learn that it is not just affordable but also necessary to avoid hostel living. While cheap on the face, hostels can be noisy and usually are priced per-night. This makes them far more expensive for long-term nomadism than short-term rental options on platforms like Airbnb. These rentals usually provide a more affordable, all-inclusive stay that does not usually require separate payments for wi-fi, utilities, or parking. Many hosts will negotiate a discounted rate if you let them know how long you plan to stay.

Digital nomads should plan to live in walkable areas and utilize public transit rather than staying in a location that will necessitate car rental or even regular use of ride-sharing options. Of course, your food budget can be kept to a serious minimum by eating in and keeping that grocery list of local fare on the low end of the spending spectrum.

Income Expectations And Demands

Your income as a digital nomad will depend on the amount of time you dedicate to working, if you are paid hourly, and the rate of pay or scope of projects you take on. If it sounds a lot like working in an office, that is because this part of your digitally nomadic life will be largely unchanged. Do not be discouraged, however. This is a good thing. It will enable you to exert control over your income and create a predictable model for your living expenses, including paying down your debts.

If you are a freelance software developer, for example, you may earn an annual income of around $130,000. That is assuming you are working basically full-time. If you worked in any of the “best cities for software developers,” such as San Francisco, Seattle, or San Jose, then you would face living expenses that would dwarf your six-figure income. Living as a digital nomad, however, you could live in Lisbon, Portugal, and spend just about a tenth of your salary each month on living expenses. If tiny, exotic islands are more your style, then you might consider San Pedro, Belize. There, you would spend only about 9 percent of your monthly pay on living expenses!

Breaking Down “The Boring Stuff”

As a digital nomad, you have the opportunity to live a life of high adventure. You can take the time to see amazing and new things every time you shut down your laptop and close up shop for the day. However, there are a few “boring” details to consider, like paying taxes, dealing with healthcare, and handling insurance issues. As far as your taxes go, you may qualify for the foreign earned income exclusion that allows you to exclude certain income from your taxes and deduct some foreign housing amounts. If you are self-employed, you will still owe self-employment taxes, however. You should certainly consult a tax professional about your eligibility for these savings.

As far as healthcare and health insurance goes, it will be important for you to distinguish between travel insurance, which will not apply to you if you remain abroad long-term, and international insurance. International healthcare plans provide coverage and access to providers if you plan to live abroad for a year or more. These plans range in cost from a few thousand dollars to tens of thousands of dollars. Clearly, your health will play a big role in determining your digital nomad’s budget!

Putting A Dent In Your Debt

Digital nomads’ budgets are just like any other household budget; it’s just that your household moves from place to place. Also unlike a traditional household,  you can move your home to wherever meets your budgetary needs without putting a property on the market or breaking a lease. Your digital nomad lifestyle actually lends itself to extreme savings, so make paying down your existing debt a significant part of your monthly budget. Those savings can go toward a financially free future while your adventure funds the process.

Chrissy Helders

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