Table of Contents
- Financial Planning: The Nomad Way
- Understanding Your Tax Responsibilities
- The Concept of Tax Residency
- Seeking Professional Help
- Wrapping Up
Financial Planning: The Nomad Way
First and foremost, a sustainable nomadic life requires diligent financial management, just like a traditional lifestyle. Though my location changes often, some things don’t – paying for accommodation, groceries, and of course, the occasional indulgences in trying a new local cuisine or a snorkeling adventure. Also, living a location-independent lifestyle doesn’t signify the absence of long-term financial goals. My retirement savings is something I prioritize, even as I live the thrilling, uncertain life of a nomad. Furthermore, unexpected expenses can pop up anywhere, and some countries can be costlier than others. I had to learn this the hard way when I found myself in the bustling streets of Tokyo, strapped for cash and realizing how high the cost of living can be in a megacity. Therefore, formulating a budget for each country or city before traveling there is an approach I’ve found invaluable. Websites like Numbeo can give you a rough idea of the cost of living across the globe, a handy tool in my digital nomad toolbox.Understanding Your Tax Responsibilities
With finances sorted, let’s talk taxes. As exciting as it is to work from a beach in Bali, remember that you’re potentially dealing with a complex cross-border tax situation. You have to understand where and how much tax you owe. This will greatly depend on your nationality, your residency status, where you earn your income, and the international tax agreements in place. As a US citizen, even though I enjoy the sunsets on foreign beaches, Uncle Sam is interested in my global income. The US, along with Eritrea, are the only two nations that tax their citizens on worldwide income, regardless of where they live or work. Thankfully, some provisions, like the Foreign Earned Income Exclusion and Foreign Tax Credit, help offset these obligations. On the other hand, things can be different if you’re from a residential tax-based country like the UK or Canada. Here your liability may depend on your residential ties or the number of days spent in the country. Did you know that even the country where you spend most of your time might want to tax you? That’s double taxation knocking at your door. However, don’t fret – many counties have Double Taxation Agreements in place to mitigate this issue. It’s complicated, but websites like Tax Foundation can provide useful insights on various aspects of international taxation.Recommended article: Handling Time Zone Differences in Remote Work
