Want to lead the digital nomad life? Here is how to prepare financially

Ishaani Singh stares out of the window which overlooks an expanse of blue – the scene looks straight out of a postcard with waters of the lake glistening in the sunshine and green hillocks dotting the landscape. Singh works as a digital marketing specialist and her employer has granted her the privilege of working from anywhere.“The remote working model was implemented when the pandemic happened. Before that, we had the flexibility of working remotely on occasions. But the last two years made it abundantly clear that presence in the offices wasn’t necessary for ensuring seamless operations. My employer gave us the choice that those who wanted to continue working remotely indefinitely could do so and I have been making the most of this option,” narrates Singh.Singh belongs to a growing tribe of skilled workers who are choosing to ditch the office setup and are embracing the digital nomad route. Digital nomads lead a location-independent lifestyle – they can pursue a career from any corner of the world and only need a laptop, a stable internet connection, and some technological paraphernalia to continue doing their jobs. Digital nomads can be either employees of organizations who have been afforded the freedom to work from anywhere or they can be freelancers, independent contractors, or owners of online businesses.Across the globe, the nomadism trend was steadily gaining ground even before the pandemic forced the world population to confine themselves in their homes. The interest in being able to choose where one works – be it at home, in a shack on the beach, or a quaint hilltop cottage enveloped by clouds – is skyrocketing but one of the most crucial elements to be able to slip into an on-the-go working lifestyle is finances.Singh says, “It’s been three months since I have hit the road and by now I have lived in three countries. I had made ample preparations on the financial front for about a year before I took the plunge and embraced this lifestyle. In these months, my biggest learning has been that you cannot suddenly pack your bags one day and hit the road without a solid financial buffer. While I am fortunate enough to have a regular paycheck, it takes a while to get used to the uncertainty that comes with not having a permanent address. More often than not this uncertainty manifests itself in the form of unexpected monetary outflows.”Singh has been taking up freelance projects on the side too to ensure that her financial safety net is not compromised owing to the exigencies that arise when one is constantly on the move. “You need to increase your efforts at building a solid emergency reservoir before switching to the nomad lifestyle. If earlier you went by the thumb rule of having enough funds to cover you for six months, you should increase that to a year. This is because when you are on the move, it is hard to stick to a budget consistently and in unexpected circumstances, a well-stocked emergency fund can bail you out easily.”Taking the mutual fund route in the planning stage helped Singh in bolstering her financial situation so that she could travel and work from anywhere she fancied. “I drastically cut down on my expenses so that I had more capital for investing. I started investing through SIPs in a mix of debt funds and ETFs (exchange-traded funds). With ETFs, the fees were much lower and I didn’t have to keep an eye on the market. Also, my portfolio had the right level of diversification without me having to individually choose stocks or bonds.”Anant Ladha, founder of Invest Aaj for Kal says, “As a digital nomad, firstly you’ll be paying for a lot of additional expenses like transportation, food and stay. So, you’ll want to make sure that you plan for it in advance. This means calculating your up-front costs and planning for emergencies. Usually, in the case of a digital nomad, emergency funds would also be a bit higher like up to 12 months of expenditure and this can be planned via liquid or debt mutual funds.”For those who are into freelancing or own digital businesses and do not fall in the category of salaried individuals, an extra level of planning may be required. Ladha says, “You should take into consideration that your income flow can be a bit unstable at times. So here, we have to use a combination of lumpsum investments and mutual funds SIPs. Be clear about your goals and try to have some buffer for each goal once you foray into the digital nomad life. Finally, always try to minimize deviations from your budget as much as possible because you would have a plethora of new experiences frequently in this new style of living and you may be tempted to overspend and compromise on your savings and investments too often.”Action pointsIf you are planning to travel to multiple locations while working remotely for an extended period, make sure to maintain a top-notch credit score. Should there be an emergency; a good credit score can help you avail of loans in a jiffy.Pay attention to your taxes – proper tax planning can help you save a lot of money that can be used in strengthening your emergency fund or it can be channelized into your investments for your goals.This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.