{"id":133169,"date":"2020-04-21T07:00:45","date_gmt":"2020-04-21T11:00:45","guid":{"rendered":"https:\/\/www.virtualvocations.com\/blog\/?p=133169"},"modified":"2024-11-25T17:21:28","modified_gmt":"2024-11-25T22:21:28","slug":"the-ultimate-financial-planning-guide-for-digital-nomads","status":"publish","type":"post","link":"https:\/\/www.virtualvocations.com\/blog\/digital-nomad\/the-ultimate-financial-planning-guide-for-digital-nomads\/","title":{"rendered":"The Ultimate Financial Planning Guide for Digital Nomads"},"content":{"rendered":"\n

Updated May 2024<\/em><\/strong><\/p>\n\n\n\n

When you gave up the 9-to-5 job to become a digital nomad, you gained freedom, independence, and the opportunity to roam the world. Yet, for as many perks as the lifestyle affords, there are also a few hurdles to overcome. One is taking responsibility for your own financial planning, including savings, retirement, and taxes.<\/span><\/p>\n\n\n\n

Before becoming a globetrotter, your job compensation may have included a retirement plan, insurance, and loads of other benefits. Looking at what you gave up may cause a bit of a panic attack, but don\u2019t worry. Financial planning is a skill every digital nomad must cultivate to plan for their future without an employer’s assistance. Plus, your new skills will help you to budget for other things, like the next journey to some far-off destination. To sustain the digital nomad lifestyle, here are some tips and suggestions that will help you become a finance guru.<\/span><\/p>\n\n\n\n

<\/div>\n\n\n\n

Financial Planning Guide for Taxes<\/strong><\/h2>\n\n\n\n

Understanding taxes is one of the digital nomad keys to success, but it’s also a source of anxiety. In fact, April 15 is perhaps the most dreaded day of all for digital nomads, especially if it\u2019s your first year away from the U.S. If you don\u2019t plan carefully, you can owe thousands of dollars in taxes and hinder other aspects of your financial planning. However, there are many methods to brace yourself for your tax liabilities.<\/span><\/p>\n\n\n\n

<\/div>\n\n\n\n

Paying Estimated Taxes<\/strong><\/h3>\n\n\n\n

Estimated taxes are foreign to many digital nomads, typically because they\u2019ve never been self-employed. Yet by <\/span>paying an estimated quarterly amount on your income, you can eliminate a lump-sum payment at the end of the tax year. Payments are due April 15, June 15, September 15, and January 15.<\/p>\n\n\n\n

Typically divided into two categories, estimated taxes include self-employment tax and income tax. <\/span>Self-employment tax<\/span><\/a> is a 15.3% tax that\u2019s levied on self-employed individuals, freelancers, and contractors. When you\u2019re an employee, your employer takes 7.65% out your paycheck and matches it for a total of 15.3%. However, the federal government sees digital nomads as both an employee and an employer. That\u2019s why you\u2019re on the hook for the total amount.<\/span><\/p>\n\n\n\n

This 15.3% tax does contribute to your future though, with 12.4% going toward Social Security, and the remaining 2.9% covering your Medicare\/Medicaid costs. To start your estimated tax budget, take this 15.3% right off the top of any income you earn.<\/span><\/p>\n\n\n\n

The next portion of your estimated taxes is an income tax at both the state and federal levels. Federal income tax rates range from 10% to 37% depending on your income level. Knowing where you fall on the tax tier spectrum<\/a> is an important aspect of your future financial planning.<\/span><\/p>\n\n\n\n

State income taxes cover a wide <\/span>range of rates and structures<\/span><\/a>. Eight states use a flat tax rate, which means it\u2019s the same for everyone regardless of income. Thirty-five states implement a progressive tax based on income brackets. If you\u2019re lucky enough to live or incorporate in Wyoming, Washington, Texas, South Dakota, Nevada, Florida, or Alaska, you don\u2019t have to pay any income tax at all, which is quite a boon come tax time.<\/span><\/p>\n\n\n\n

<\/div>\n\n\n
\n\t
\n\t<\/div>\n\t\n<\/div>\n\n\n
<\/div>\n\n\n
\n
\"\"<\/picture>
Get started on your journey to the digital nomad lifestyle today with eight key benefits<\/a><\/strong><\/figcaption><\/figure><\/div>\n\n
\n\t
\n\t<\/div>\n\t\n<\/div>\n\n\n
<\/div>\n\n\n\n

Write-offs and Deductions<\/strong><\/h3>\n\n\n\n

You’ll also want to make sure you take full advantage of write-offs and deductions as part of the debt side of your financial planning. Some of the most popular deductions for digital nomads include:<\/span><\/p>\n\n\n