Your Complete Guide to Budgeting as a Digital Nomad

Budgeting as a digital nomad can be tricky, but it’s essential. Travel expenses can add up quickly, and you don’t want to run out of funds in a foreign country. That said, it’s definitely possible to travel — even for an indefinite amount of time — without breaking the bank.

Below, we’ll go over everything you need to know about budgeting for a full-time digital nomad lifestyle: managing your finances, minimizing your tax liability, and more.

Understanding your digital nomad expenses

The first step in drawing up a monthly budget is estimating your expenses. When doing this, you should consider three main spending categories:

• Essential
• Discretionary
• Unexpected

Keep in mind that estimating monthly expenses will be much easier if you have an itinerary in mind ahead of time. Deciding where you want to go, when you’ll arrive, and how long you’ll stay will help give you a more accurate idea of what your costs will be.

Essential

Accommodation

For shorter stays, this could include hostels, hotels, co-living spaces, and Airbnb/Vrbo. For longer-term stays, it may be more practical to find a rental through a local platform (e.g. Inmuebles24 for Mexico, Hipflat for Thailand, Leboncoin for France) or a housing group on Facebook.

Checking out prices ahead of time will help you better understand the market and what you can expect to pay.

Food

Food planning includes both groceries and dining out. Keep in mind that depending on your accommodations, you may not have access to a full kitchen — which could mean more eating at restaurants or buying prepared food. Numbeo and Expatistan can be helpful if you want to get an idea of prices at local grocery stores and restaurants.

Transportation

Make sure to account not just for the travel to places but the travel within places. Yes, your flight from New York to Phuket will be a big-ticket item, but you’ll need to make your way around the city as well. This category should include: 

• Airplane tickets
• Train tickets
• Bus tickets/passes
• Metro tickets/passes
• Car rentals
• Scooter rentals
• Taxis
• Rideshares like Uber, Lyft, BlaBla Car, etc.
• Ferry or boat tickets
• Gas

Healthcare

One of your key healthcare expenditures should be some form of insurance, even if you’re in great health — after all, accidents happen.

Some different types of healthcare plans include:

• Travel insurance (e.g. SafetyWing, World Nomads): Tends to cover accidents and illnesses, but not pre-existing conditions. More affordable, but may not offer as extensive coverage as other plans.
• International health insurance (e.g. Cigna, Allianz, IMG): Tends to be more expensive, but offer greater coverage. May cover some pre-existing conditions, but not others.
• Local private health insurance (e.g. Bao Viet Insurance in Vietnam, Multicare in Portugal): Tends to offer coverage in one particular country, so likely not worth it unless you plan to stay long term. Prices vary widely from country to country but usually fall in between travel and international health insurance. May cover some pre-existing conditions, but not others.

Debts & loans

Just because you’re traveling doesn’t mean you can stop paying off any debt you owe back at home. Make sure to factor in things like student loans, a mortgage, car payments, etc. into your monthly expenses.

Discretionary

This category includes all of your not-strictly-necessary, but still nice-to-have expenses, like:

• Sightseeing (e.g. museums, historical sites, natural attractions) 
• Shopping & souvenirs 
• Nightlife 
• Entertainment (e.g. concert tickets, streaming services, movie tickets)
• Sports & hobbies (e.g. surfing, cooking classes, language classes)

Again, Numbeo and Expatistan can help you get a rough idea of prices in your target destination. Asking around in social media groups and online communities with locals is also a good plan.

Unexpected

Building up an emergency fund is an important financial goal even for those who aren’t planning on traveling the world.

As a rule of thumb, it’s good to have three to six months’ worth of essential expenses saved up in a rainy-day fund. That way, if you lose your job, fall ill, or encounter a major unexpected expense like having to buy a new laptop, you’ll still be able to stay afloat.

Establishing & tracking your budget

After estimating your expenses, creating a specific budgeting framework can help you spend your money wisely.

Digital nomad budgeting methods

The 50/30/20 budget 

Creating a budget with the 50/30/20 system involves dividing your income among three separate buckets:

• 50% for essentials
• 30% for discretionary spending
• 20% for savings

You can allocate money to these categories broadly, or add line items to each one if you want to get more detailed.

The zero-based budget

The zero-based budgeting system involves allocating all of your income to specific expense categories until you arrive at cash flow zero. This doesn’t mean blowing your whole paycheck every month, though — you just make sure each dollar goes to a specific place.

A digital nomad using the zero-based budget who nets $4,500 per month, for example, might decide to break that $4,500 down like this:

• Rent/accommodations: $1,700
• Food: $400
• Health insurance: $60
• Transportation: $300
  • Plane/train tickets: $200
  • Metro pass: $40
  • Taxi/rideshare: $60
• Sightseeing: $100
• Nightlife: $200
• Shopping & souvenirs: $140

• Entertainment: $120
• Sports & hobbies: $60
• High-yield savings account: $900
• Investment account: $520

The pay-yourself-first budget

For digital nomads who are prioritizing savings, the pay-yourself-first budget may be a good fit. This budgeting method involves setting aside money for savings first and foremost before tackling expenses and then finally, discretionary spending.

Tracking expenses

Drawing up a budget is one half of managing your money; the other half is making sure that you stick to it. You can simply review your account balances or track your spending manually, but most people find that it’s easiest to use a budgeting app.

Some of the most popular budgeting apps include:

• PocketGuard
• YNAB (You Need a Budget)
• NerdWallet
• Rocket Money
• Quicken Simplifi

Saving money while traveling

While traveling can be expensive, there are many different ways to bring down the costs.

Targeting cheaper destinations

It’s easy to burn through your budget quickly when traveling through Japan, the Maldives, and most of Western Europe. However, there are plenty of countries with a low cost of living where you can spend less as a digital nomad than you did in the US.

Some of the best destinations for budget-conscious nomads include:

• Vietnam
• Brazil
• Albania
• India
• Thailand
• Costa Rica
• Argentina
• Morocco
• Croatia

Finding budget-friendly accommodations

Hostels are typically the most cost-effective option for short-term stays. If you’re willing to stay in one place for a longer period of time, you can often find better deals on local rental sites than on platforms like Airbnb.

Some platforms, like Couchsurfing and Workaway, may even allow you to find free accommodation. Also, if you’re open to the possibility of sharing the space with another digital nomad, you may want to try co-living!

Avoiding peak travel seasons

Traveling during the offseason or shoulder season for your target destinations goes a long way toward helping you reduce costs. In most of Europe, it’s busiest in the summer; in Southeast Asia, it’s often busiest in the late fall and winter; and in Central America, it tends to be busiest in the winter and early spring.

Visiting outside of these windows can help you see an average of 23% in savings on airfare as well as discounts on accommodation.

Scoring deals on flights & transportation

For the best prices on flights, you’ll generally want to book two to eight months in advance and fly on a Wednesday or Thursday.

Sites like Skyscanner, Kayak, and Google Flights allow you to compare prices and create alerts when prices drop, while sites like Going (formerly Scott’s Cheap Flights) and PlanMoreTrips curate affordable flights.

Other affordable transportation options include:

• Taking a train or bus instead of a flight
• BlaBlaCar for long-distance rideshares
• Eurail Passes, especially if you qualify for a Youth Pass
• Budget airlines like Ryanair, EasyJet, and Norwegian
• Taking public transportation instead of taxis or rideshares

Applying for travel-friendly credit cards

Certain credit cards can save you money with no foreign transaction fees, extra points for travel-related expenses, bonus miles, travel/hotel credits, and more. Some of the top options include:

• Chase Sapphire Preferred: No foreign transaction fee; 2x points on travel; 5x points on travel reserved through Chase Ultimate Rewards; $50 hotel credit; rental car insurance
• Chase Sapphire Reserved: No foreign transaction fee; 3x points on travel; 5x points on air travel; trip cancellation insurance; $300 travel credit
• Capital One Venture X Rewards: No foreign transaction fees; 75,000 bonus miles if you spend $4,000 in the first 3 months; $300 annual travel credit; 10,000 bonus miles on account anniversary; $100 credit for Global Entry or TSA PreCheck
• American Express Platinum Card: No foreign transaction fees; 5x points on flights booked directly with airlines or American Express travel; 5x points on prepaid hotels; 80,000 points if you spend $8,000 in the first 6 months

Banking & currency considerations

Banking options

When you’ll be traveling for an extended period of time, banking is an important consideration, especially given how quickly foreign transaction fees and ATM fees can add up.

A few good options for travelers include:

• Chase, Capital One, or American Express: Banking with these financial institutions will allow you to apply for one of the travel credit cards mentioned above
• Online banks: Certain online banks, like Varo and Capital One 360, allow you to do all of your banking without having to visit a branch or pay foreign transaction fees. Capital One 360 charges no fee for foreign ATMs, while Varo charges no withdrawal fees for Allpoint ATMs (found throughout North America, the UK, Australia, and New Zealand)
• International transfer services: Services like Wise and Revolut also allow account holders to apply for debit cards

Exchange rates

When traveling internationally, it’s important to keep exchange rates in mind. Although the United States dollar is fairly strong, it fares better in comparison to certain currencies than others.

A few places where your dollar can stretch especially far include:

• Vietnam: $1 USD is equal to ~24,965 VND
• Indonesia: $1 USD is equal to ~15,888 IRD
• Argentina: $1 USD is equal to ~861 ARP
• Hungary: $1 USD is equal to ~360 HUF
• Thailand: $1 USD is equal to ~36.5 BHT

Tax considerations for digital nomads

While taxes may not be the first thing you think about when creating a digital nomad budget, they’re nevertheless important to consider.

First and foremost, you should know that leaving the country doesn’t absolve you of your US tax and reporting obligations. 

All US citizens and permanent residents are subject to US taxes, and if you meet the minimum income reporting threshold, you must file a federal return. Depending on where you most recently lived, you may even need to file state taxes.

Digital nomad tax breaks

It’s not all bad news, though. Living abroad means you may qualify for tax breaks that you wouldn’t otherwise, including the following:

Foreign Tax Credit

The FTC gives Americans dollar-for-dollar tax credits on any foreign income taxes they’ve paid. In a country with higher taxes than the US, this typically not only erases your US tax liability but also gives you excess credits you can carry over to future years.

If you’re a true digital nomad who moves frequently enough not to be a tax resident in any other country, though, this probably isn’t the right option for you.

Foreign Earned Income Exclusion

The FEIE lets Americans abroad exclude a certain amount of their foreign-earned income from taxation. For tax year 2023, the limit is $120,000; for tax year 2024, it increases to $126,500. To qualify, you must either:

• Have been outside the US for 330 days in any 365-day period (aka the Physical Presence Test), OR
• Have lived in another country for at least one calendar year and prove it through official documentation (aka the Bona Fide Residence Test)

Reporting obligations for digital nomads

The digital nomad lifestyle may add to or change your reporting obligations. Two of the most common reports Americans abroad have to file include the:

• Foreign Bank Account Report (FBAR): Required of Americans with over $10,000 across foreign financial accounts
• Statement of Specified Foreign Financial Assets (Form 8938): Required of Americans with over $200,000 in foreign assets on the last day of the tax year, or $300,000 at any point in the tax year

Keep in mind this is just a very brief summary of tax differences for Americans abroad. For detailed information and advice, it’s best to reach out to a tax professional. 

Resources

1. How Much Should I Have In Savings?
2. The 50/30/20 rule: how to budget your money more efficiently
3. Zero-Based Budgeting: Spend Every Penny but Meet Your Financial Goals
4. Pay-yourself-first budgeting: Definition and how it works
5. 5 Reasons Why ‘Shoulder Season’ Is the Best Time to Travel
6. How Far in Advance Can You Book a Flight?
7. The Best Days to Book a Flight and When to Fly
8. The Worst Places to Exchange Currency