How to efficiently save money as a Digital Nomad

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Thomas is the co-founder of Curvo, where he improves the financial well-being of millennials.

Please feel free to add comments to this doc and add your investment theories and options for nomads. Photo by Pawel Janiak (Unsplash)
In this post we will look at the best options to save money and better prepare for your financial future with the help of passive investing.

Saving money whilst traveling?

Keeping track of your finances as a digital nomad can be tricky. Not only can income be sporadic but it can mean we’re less likely to have a secure nest egg for the future. We’re constantly in new places and most of the time there’s no generous workplace pension and our savings can be eaten up by a huge tax bill once a year.
One of the first exercises you can do is to evaluate how much you’re spending. Putting in place a strict budgeting for expenses and thinking through financial decisions really helps you figure out how much you can actually save and put to the side every month.
Yet the unpredictability of digital nomads and freelancers makes it even more vital that you have a sound investment strategy and you start saving up in the right way with the right conditions.
Also note that it’s vitally important to have at least three months savings readily accessible. This is essentially a “rainy” day fund and gives you peace of mind in case something happens whilst traveling or you’re unable to find work for an extended period as digital nomad/freelancer.

What sort of investments can I do as a Digital Nomad?

Crawling through the web, you’ll find a ton of opportunities and some snake oil with plenty of get rich schemes.
Bitcoin continues to be all the rage and you’ll see mentions and links to investment opportunities for new cryptocurrencies.
Many will choose real estate as a relatively “safe” investment option. Although nomads travel extensively, many will choose to try and secure a home base and work towards that goal. However, many nomads have no plans of securing a home in one particular place and you’ll most likely have to get a loan and pay it back monthly without actually living in the home.

Why passive investing works for Nomads?

Many of your fellow travelers may have some great ideas for investing and picking a stock that they heard “was sure to go up”. They may have also told you how they made a fortune in a short space of time from that Apple stock they bought ten years ago… it’s tough to break through the noise most of the time.
The market is volatile and day traders aren’t likely to strike it rich.Although sometimes difficult, thinking long-term and big picture is an important part of saving responsibly.
One investment style has been around since the eighties but until recently, it has been largely left underappreciated. It’s called passive investing. It’s based on the observation that rather than hand-picking stocks and trying to buy and sell at the right time, it’s usually more profitable to invest in the stock market as a whole.
Think about it: when you’re picking stocks, you are looking for the best bargains, and choosing companies that are cheap now but that you predict will go up in value in the future. However, remember that you are competing with all the other investors in the world who are looking for the same bargains.
Not just people like you, but mostly top analysts at big investment firms and banks, who are paid big salaries to spend the entire day researching industries and analyzing quarterly reports, all while keeping an eye on the television’s screen that is showing CNBC for the latest news on the markets. How can you possibly compete with them?

How does passive investing work?

It’s simple: you invest in index funds. An index is like a bag of stocks where the rules are very clear on which stocks are included and how much you get of each company.
The most famous index is the S&P 500, which has the 500 biggest American companies, weighted by market capitalization. The MSCI World index is another common one.
It consists of over 1,600 companies across the developed markets (US, Europe, Australia, Japan,…). Over the last fifty years this type of investment has had an annual average return rate: 8.7%.
That’s far better than a savings account or taking many risks and trying to beat that return. You can also easily build out a diversified portfolio.

Why is it important to do so?

It’s crucial to start as soon as possible with passive investing (even if it’s a small amount). The earlier you form the habit, the better you’ll be in the long run due to something called compounding.
It typically refers to the increasing value of an asset due to the interest earned on both the principal  (the money you put in) and accumulated interest (the money you’re making from your investments).
This means that the more you contribute towards your investments every month, you’ll be earning more money in the long run as your investments continue to grow. As long as you don’t get greedy, you will see success.

Practical tips

As with all investments, there’s a risk attached to it. The key (as always) is to do your research, figure out your own goals and what you’re comfortable with saving every month.
Make it into a habit and don’t focus necessarily on specific amounts (or a percentage of your salary) but rather focus on turning it into a habit and remember the benefits of compounding depending on your time scale for your investments. Keep it simple and stay on top of your finances.
  1. Never put your eggs in one basket
  2. Try your best to not be emotional with your investments
  3. If you cannot explain how a certain company, stock or cryptocurrency works, don’t touch it and waste your capital
Thomas is the CEO and co-founder of Curvo, where he improves the financial well-being of millennials through passive investing. The finance world is filled with jargon, complicated financial “solutions”, horrible stock photos of old men in suits and clunky apps. In contrast, Enzo brings simplicity and transparency, and requires no financial knowledge to start investing.


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