Exploring the world as a digital nomad—seeing amazing sights, meeting lots of new people, and embarking on countless adventures—is an incredibly rewarding lifestyle. Most digital nomads are freelancers or remote workers who have a unique opportunity to maintain their income while traveling full-time.

And whether you’re considering becoming a digital nomad, or if you have already started your journey, personal finance should be at the forefront of your mind—that means navigating tax situations, ensuring you have a reliable source of income, finding ways to increase your savings, and of course managing your debt.

On that last point, keep reading to learn our tips for how to keep a handle on your finances and manage your debt as a digital nomad!

Eliminate or Lower Your Debt Before You Leave

Before you set out on your travels, try to eliminate as much debt as possible. Paying off your overall debt will allow you to hit the road with a clean (or close to clean) financial slate—not to mention there being fewer monthly payments to keep track of.

If you have any remaining debt after lowering your overall owed amount, you still have a better chance of avoiding fees like increasing interest rates and late-payment fees. As always, it is a delicate balance where you should carefully consider what is best for your situation. Utilizing all your savings to pay off debt may not leave you enough to enjoy your travels, so be mindful of the trade-offs and plan accordingly.

Expand Your Credit Availability

Credit cards can be particularly useful in a pinch—especially for frequent travelers. With so many credit cards that offer travel rewards, it can be a good idea to open a new line of credit to have access to more experiences and perks. Be mindful that some cards have high annual fees, which should be taken into consideration when deciding on the right card for you.

Another possible benefit of opening a new card is that it expands the amount of credit available to you, which can be very helpful in case of an emergency. If you’re not interested in opening a new line of credit, consider asking your current card provider for an increase to your spending limit. This can often be simply done via the card’s web portal and provides that same extra cushion.

It is important to remember that just because you have access to more credit, you still need to aim to only use it within your means. Carrying only small balances, or paying off your balances every month will help you manage debt, can boost your credit score, and can give you more spending power during an emergency.

Consolidate Your Debt

If you have several instances of debt, it’s a good idea to consider a debt consolidation loan. This allows you to make one monthly payment to a loan that covers all of your debt (instead of multiple payments to different lenders, each with different due dates, fees, and interests). This can sometimes also be beneficial as a personal loan or a larger loan from a single institution, which may result in lowering your interest rate.

Cash-Out Refinance Your Mortgage

If you own a home and aren’t interested in selling it, consider a cash-out refinance on your mortgage. As your mortgage matures, you gain equity in your home either because it has appreciated in value or because you’ve been paying down the principal through monthly payments. A cash-out refinance takes advantage of the equity you’ve built over time and gives you cash in exchange for taking on a larger mortgage.

There are various costs associated with this (like apprisals) and your interest rate and monthly payment may change, but if you can handle that, then the extra cushion of new funds could go a long way in your travels.

Get Rid of Your Car

If you have a car loan and won’t be using your vehicle for an extended period of travel time, it may be time to consider selling it. This will eliminate the debt and monthly payments you owe to your lender and may allow you to cancel your car insurance.

Related: Could You Become Car-Free in Your Path to Financial Independence?

Plan Your Budget Wisely

If you can’t drop your debt completely, don’t worry. You can still set out on the right financial foot by planning your budget properly. Planning ahead will help you know exactly how much you can spend on more fun experiences. Here are a few budget planning tips:

Use an Expense Tracker

Anticipating your monthly expenses is a wise choice—regardless of your debt. To do this, create an expense tracker that lists the dates and cost of recurring expenses while traveling. Examples include groceries, your mortgage back home, medical care, clothing, travel/transport, insurance coverage, sales tax and cost of living in your destinations, and other standing bills on top of your current debt.

Don’t forget to set aside money to spend in emergency situations.

Once you have all of your expenses noted, calculate your monthly income and compare the difference. This will help you see how much wiggle room you have to spend on fun activities, souvenirs, or further travels to exciting destinations.

Start a Savings Account

To successfully live the digital nomad life, you need to balance your income and savings against your expenses and debt. Long before you start traveling, you should open a savings account to accumulate as much funding as you can to start off on a strong footing.

Setting an attainable savings goal is an important first step. Reviewing your budget and calculating your cost of living while traveling for a few months is a great way to simulate the travel experience and ensure you can meet your goals. Then by the time you leave, you can decide to use your savings as a safety net on the road or to lower any lingering debt as you can have more confidence in your success.

Related: Financial Literacy Tips for Digital Nomads

Research Your Destinations

It’s smart to have a general idea of your travel route. This way, you can account for travel costs, currency conversions, and cost of living along your route…all vital inputs to your planned budget. Additionally, you can plan your most expensive excursions to work with your monthly payment due dates. And if you’re a freelancer, knowing where you’re going will help you identify your income opportunities.

Debt Management for Digital Nomads: Final Thoughts

As an aspiring digital nomad, it is important to have a good idea of what to expect when you’re on your journey—especially if you have a large amount of debt. By planning your budget wisely (and around your debt), doing your research, and saving as much as possible, you will be visiting your bucket list destinations in no time.

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 by Samson Katt.

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