Because of digitalization, many people are choosing to work from anywhere in the world. Before they set out for their next adventure, they should also size up their financial health.
A few months back, Carlos overheard a friend talking about "digital nomads". Intrigued, he began researching them on the Internet. He found stories of people using digital tools to do their jobs from anywhere in the world. In Spain, it’s become so popular that they’ve coined the term traviajar, from the verbs trabajar ("to work") and viajar ("to travel").
The idea of visiting places he’d always wanted to see without having to quit his job sparked Carlos's interest. So he made a list of pros and cons regarding his financial health. He needed to be sure his finances were in order before taking up that lifestyle.
How do digital nomads make money?
Carlos needed to know where the money to fund his trips would come from. Ideally, his main income would be a salary from working as a company employee or freelancer.
Though the Internet enables us to do our jobs without going to the office, remote working isn’t for every industry and profession. What’s more, some companies don't allow their employees to work remotely. That's why you should check you can do your job from any location. Graphic design, web development, video editing, translation and online retail are some popular choices for digital nomads.
As a community manager for a startup, Carlos wouldn't need to work at the office. He could pay his expenses with his salary and cover any unforeseen costs with his savings.
What are digital nomads’ overheads?
Keeping a lid on expenses is just as important as having guaranteed income. Plane, train and bus tickets, vehicle rentals, hotels, apartments, house or room rentals on collaborative economy platforms, food and other things make up the main outlay. You should also make sure your Internet connection is reliable and your working conditions are suitable to your job.
The cost of living and the exchange rate where you want to travel to must also be at the forefront of your mind. The money you make may not stretch as far in some countries if cost of living is high or the local currency is weak. However, the opposite might be true, and you could have greater purchasing power. It’s certainly something digital nomads must consider when choosing where they’re going.
Managing income and expenditure effectively makes all the difference. Check out this article (in Spanish) on Santander Consumer España’s blog, Tu Futuro Próximo (“Your near future”), about other useful tools to manage your finances.
What taxes do digital nomads pay?
According to a study by consultancy firm MBO, the number of digital nomads in the US leaped from 7.3 million in 2019 to 10.9 million in 2020. It’s also become a phenomenon in Spain, Portugal, the UK and other countries. When deciding which country to go to, you should look into its tax laws as well as visa (or permitted length of stay) and health insurance requirements.
Some countries, like Spain, consider anyone staying for over 183 consecutive days a tax resident required to pay income and other taxes. Alternatively, you may have to pay a fee under non-resident regulations.