By: David Stone CFA®
Taking control of your financial journey is never as easy or as simple as people say. As a digital nomad, it might feel even more crucial to keep on top of your finances for the sake of your security. Understanding your need to take your financial future seriously is one thing, but finding a way to do it with ease…that’s the struggle.
Where do you start? How do you do it? When do you feel like you’ve saved enough?
The journey is always evolving, so it is important to reflect (we recommend at least annually) and take a look at where you’ve excelled and where you might have missed the mark when it comes to building your wealth. In this article, we’ll dive into some ways you can put your financial health into high gear and start saving, investing, and building your wealth for future endeavors.
Make SMART Goals Early On
Starting your wealth-building journey can feel daunting, but creating goals at the beginning will go a long way towards setting you up for a bright future. Many find using the SMART method, which includes goals that are specific, measurable, attainable, realistic, and timely, can provide you with the framework to succeed at whatever your goals may be.
When it comes to your finances, these SMART goals can take many forms. Saving for a vehicle, a big trip, or even paying down your debts are just a few examples of the goals you can have for your financial journey. If you’re thinking about the big picture, consider setting the major goals you want to hit early on. If you have a year-long or multi-year goal, there may be certain milestones you want to accomplish along the way. Consider giving yourself smaller monthly checkpoints to help you reach those goals. Breaking up the bigger tasks into smaller, more easily achievable ones will help you get comfortable with saving, investing, etc. more frequently.
Example of SMART Finance Goals for Digital Nomads
In the world of digital nomads, it’s necessary to set and track your SMART goals closely. Thankfully, as you move to different destinations, your money moves with you. Keeping a log of your progress in reaching your targets will help you know when and if you need to adjust your expectations. Digitally monitoring your finances is a solid way for digital nomads to take control of your financial future. Creating a spreadsheet for your financial goals and updating it with each paycheck (or the 1st of every month, or another regular and frequent check-in date that works for you), will help you consistently keep tabs on your momentum.
Budget, Save, and Invest Wisely
Budgeting is one of the cornerstones of building your wealth at any stage of life. When you’re looking to build your wealth as a digital nomad, planning ahead is of the utmost importance. You want to ensure that you’re spending what you need to, you’re not falling behind on any bills, and you’re investing wisely. In an earlier post, we go into detail about some different budgeting methods and how they can be beneficial to digital nomads; but here, we’re focusing on incorporating different saving and investing opportunities into your budget.
A lot of digital nomads are freelancers, and have to rely on themselves in regards to saving and investing—as a freelancer, you aren’t offered some of the same benefits as others regularly employed by a company, like 401k matching and access to a retirement plan. Taking control of how you invest in this line of work allows you to think strategically about your choices. Between creating a Roth or Traditional IRA, and investing in various funds, there are many options for digital nomads to invest and earn at any time in their career. Remember to incorporate it in the SMART framework: for example, you might set a goal of saving or investing 1% of your earnings every month.
Example of Saving for Digital Nomads
When you’re looking to get the most out of your savings, it’s important to look at what types of accounts you’re putting your money in. Financial institutions offer many savings account options with varying requirements that yield different amounts of interest. Choosing a higher-yield savings account can help you earn more than you would in the average savings account. Money market accounts are a great example of how to save your money and also earn some at the same time.
Manage Your Debts
Your debts play a major part in your financial wellness and your ability to build wealth. As a digital nomad, it’s especially important to have a keen awareness of your debts and your credit health. If you’re drowning in bills from lenders, it’s hard to get ahead and focus on saving. This leads to very little wiggle room when a financial emergency arises. Breaking free from the cycle of relying on credit cards and other loans to pay for your livelihood often feels overwhelming and unrealistic.
Enlisting the help of the SMART goals mindset, you can work towards your financial freedom. When your monthly loan payments take up a big chunk of your paycheck, it may be wise to apply for a debt consolidation loan to help. Consolidating your debts into one manageable monthly payment can ease the burden on your budget. Paying down your debts will ensure you can invest more of your money into your savings and help you reach your financial goals.
Example of Credit Usage for Digital Nomads
As a digital nomad, find credit cards with reward systems offering you the most benefit. Many credit card companies have relationships with airlines that include travel perks, which could be an amazing benefit to your nomad lifestyle. It’s important that even when you use these cards, you’re not spending more than you can handle. Building your credit and managing your payments will benefit you in the long run, as having an excellent credit history will influence the health of your credit as well as your score.
Take Control of Your Financial Future
Now you have some tools in your financial toolbox to help you build your wealth! It’s important to remember that there is no one perfect path or solution as your situation is unique to your needs and goals—but having a plan and setting up some SMART goals can go a very long way to finding success on your financial journey.
About the Author
David Stone CFA® is an investment professional and Certified Financial Analyst with 15 years of experience. He has spent the majority of his career working with financial institutions to provide advice and support to high net worth investors.
Featured image via Pixabay