Managing your Finances as a Digital Nomad
Starting out as a digital nomad and want to know how best to manage your finances? Check out this article for some tips and tricks on how to do so.
Now finance management is going to vary depending on your nationality, as well as what platforms you use to complete your digital nomad work and whether you work solely as a freelancer, or whether you have a contract/s with a company/s. I will try to cover a bit about financing for a few of these different types of digital nomad jobs, as well as a few other important things you will need to consider and research, and the different types of tools and platforms you can use to manage your payments and keep track of your work and your clients.
Some Awesome Financing Tools:
- Excel Spreadsheets
Spreadsheets are a great way to manage your finances. You can set it up how you like, and easily keep track of your total earnings, client details, payment methods, type of work completed, tax and any other details you want to keep track of. There are a few great templates available online to help get you started.
If you haven’t already, set up a Paypal account – do it now! It’s free to setup and very simple to use. It also offers a lot of different services, which is going to make your digital finance management a lot easier.
PayPal allows you to be paid and pay in different currencies from anywhere in the world, you can send and manage invoices, transfer money to or from your bank account or credit card and I’ve found the support team to be very good. I use Paypal for the majority of my digital work, usually to send invoices and receive payments. Even some of my contract work is automatically paid into my Paypal account weekly or monthly.
Paypal is also generally a lot cheaper managing international transfers compared to using your personal bank account, plus it’s easier to keep a record of your digital nomad earnings and pending invoices.
Payoneer is an alternative option to Paypal for receiving and making payments, and it is definitely becoming increasingly popular. I’ve used it a couple of times, and personally I’m not a huge fan, but it is an alternative if for whatever reason your customer doesn’t want to pay via Paypal.
- Gmail/ Google Calendar
I have a couple of different email accounts, but I do most of my digital nomad work using my Gmail account. The simple reason for this is because I love being able to sync my emails to my Google calendar. Google calendar is a great way to keep track of your workload, deadlines, invoicing and payments. I also love being able to colour-code different things (such as invoicing) and being able to overlay different calendars.
These are different platforms some digital nomads use to find client or jobs. You should also include this work in your spreadsheet, however most of these platforms do keep a record of all the work completed and how much you get paid for each gig. Personally, I’m not a huge fan of these platforms due to the huge fees they charge, however it is a good way to reach out to potential clients. Usually I will try to move away from the platform for repeat customers or for larger gigs to avoid the fee. Instead of the payment being made through the platform, it will be made through Paypal or something similar.
I’ve left for last, because who likes reading about taxes?!? Regardless, it is important to find out your tax requirements; otherwise it could cost you.
Admittedly there are a lot of people out there that do digital nomad work, and don’t declare their earnings at tax times, especially if they are only earning peanuts, which seems barely worth mentioning. I completely understand this, however it is still worth finding out about your tax requirements, as there is always the risk that you could get caught out and end up having to cut your trip short to pay back taxes or fines. At the moment I think it is fairly easy to get away with not paying taxes, though with the increase in people working in the digital world, it is only time because governments and countries start cracking down on this.
Taxes will completely depend on your nationality, current country of residence and whether you are self-employed or whether you have an employment contract with a company that withholds tax for you. I’m going to give you an example of my situation (which is quite unusual/complex), just to give you an idea of what you need to consider and how it can vary from person to person. This example is likely to vary a lot from your current situation and you should definitely research your tax requirements yourself, as I’m not able to cover every aspect of it.
I’m a dual Australian and British citizen, currently living/ travelling in Canada (I also have a Canadian work permit). As an Australian resident and citizen, even though I don’t currently reside in Australia, I am still required to pay taxes on any income I earn overseas. Now, currently there is no way for the Australian Tax department to know whether I am earning overseas or how much I am earning, other than what enters my Australian bank as I believe the AT department can request this information if they wish. Australians also don’t have to pay tax until they earn over a specific threshold (I think it’s about $12,000 AUD – but don’t quote me on that). Now, currently as I’m travelling I haven’t earned over this threshold and I’m unlikely to do so before the end of the financial year, so I’m likely going to be exempt from paying tax, however I should still complete a tax form at the end of the financial year and I should keep record of all my earnings to determine whether I’m over the threshold and if so, how much tax I will need to pay. The tax department can also request this information from me, if I’m ‘randomly’ audited.
Now, this differs to Britain. As a British citizen, I don’t have to pay any taxes on income I’ve earned overseas. I’ve also never completed a tax form in the UK, as in the past this has always been done automatically on my behalf – I believe you only have to do your own taxes if you are self-employed in the UK.
I have a work permit for Canada and have done some work in Canada. I do have to complete a tax form at the end of the financial year here, and I believe I should include any digital work in this tax declaration, though I’m not sure how they will be able to check this. I think the Canadian Tax Department runs quite similar to the Australian one, so similar rules apply.
Now, if I was completing digital nomad work in a country that I did not legally have the rights to work in (ie. I wasn’t paying taxes to that country and had no legal permits to work in that country), technically I should still be paying taxes to somewhere, and in my case it would be the Australian Tax Department. If I wasn’t Australian, only British then I should declare myself as self-employed and complete a British tax declaration and pay taxes to Britain.
The other question that will/ could affect your taxes: are you self-employed, or do you have a contract, where your employer is withholding taxes on your behalf? If you are self-employed you will need to keep aside enough money to pay any taxes you might owe at the end of the tax year. If your employer does this, then you don’t have to worry about this, though you may still need to complete a tax declaration – this will depend on your nationality and where the company is registered.
In my currently situation, if my total annual income is over the tax threshold for both Canada and Australia, then legally I will have to pay taxes to both Australia and Canada, and I will need to declare my digital work earnings in both tax declarations (which personally I think is a bit unfair). I keep track of my earnings for my personal benefits and in case this information is ever requested. It’s also good to see how your earnings compare this year to the previous year, and recognise any peak work months.
Article by Kelly Sheldrick, Cycletrekkers.
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