It is probably even more important for digital nomads to budget their money to maintain their lifestyle and keep going on their adventures. However, digital nomads probably have some instability in their finances, which could make things a bit more complicated for them when budgeting.

A systematic approach could help any digital nomad to make sure they budget their money without running out of cash and maintaining their digital nomad lifestyle. Here is my recommended approach to digital nomad budgeting.

INCOME

If you are a digital nomad with a stable income, that’s great! You don’t have to make complex predictions of your monthly income since you know how much money you have coming in during the month.

If you don’t have a stable income, which is probably the case for a digital nomad, there are some tips to help you prepare your budget for the month ahead.

First, if you are on an unstable income, you will want to ensure you have an emergency fund and a cushion. A cushion will help you cover any expenses you can’t cover in a month where your income doesn’t equal your expenses.

Your cushion should be at least your monthly expenses x6. You can look at your last six months to determine the monthly expenses number for your cushion. If you don’t have a cushion, you should start working on building it up immediately.

Ok, so you have a cushion. But how do you budget with an unstable income? You can look at your last 6 to 12 months and calculate your average income. That could be a close indication of what you might earn during the month. Taking that number, you can make any adjustments based on your best guess of what might look differently this month regarding your income. Are you working on a massive project as a freelancer and know you will bill a certain amount this month? Do you have passive dividend income and know your investments will pay dividends this month? Take the average from the past 6 to 12 months as your starting point and try to consider any other known variables.

Calculating your income number on an unstable income will not give you a perfect answer, but what you are trying to accomplish is to have your best guess. If things go wrong and you receive less income than anticipated, you don’t need to worry as you have your cushion to cover any shortages.

EXPENSES

Expenses can also be tricky to calculate for a digital nomad. Again, you can look at your last six months to help set up your budget for the month. Of course, you will again need to adjust for any expenses that could come up the month ahead that you didn’t have before.

As a digital nomad, you can budget your expenses using the following buckets.

Traveling expenses. Ensure you include all your anticipated flight costs, taxis, users, visas, etc.
Housing expenses. Depending on where you are staying, you should come up with an estimate of your housing expenses. This bucket should include any hotels, Airbnb stays, short-term leases, and utilities you might be paying. If you are heading somewhere new, you have probably researched already what it will cost you.
Food and other necessities. This will include your food and other essentials such as prescriptions, laundry, toiletries, etc. Again, depending on where you are, adjust this bucket accordingly. The cost of these will probably be different if you are in Denmark and others in Indonesia.
Other recurring expenses. Don’t forget to include any insurance payments, cell phone bills, etc.
Debt repayment. If you are repaying debt, don’t forget to include it in your budget.
Savings and investing. This is a super important bucket if you want to maintain a comfortable digital nomad lifestyle. You can decide on an amount or proportion of your income every month and put it on the side immediately into savings or invest in assets that can generate passive income.
Allowance for unexpected expenses. Do you know how, every month, there is always something that throws you off your budget? Something surprising just came up that you didn’t foresee. Just ensure you include an allowance for these expenses in your budget. If you find it hard to find an allowance, calculate the average of your unexpected costs in the last six months.
Fun! This is the money you will spend on things you enjoy doing and fun stuff you plan to do at your current place. Don’t forget to include that diving session you have planned for the weekend or that golf game next week!
OTHER TIPS

When budgeting as a digital nomad, remember the different currencies involved and ensure you don’t mix them up in your budget. You might be getting paid in USD or EUR and living in Thailand now, where they have a different currency. Make sure you use one currency consistently throughout your budget.

Another essential thing to research and keep in mind is taxes. Are you a tax resident in your home country still paying taxes there? Or are there any tax obligations where you are planning to move next? Do your research and know your taxes.

Once you have your budget for the month ahead as a digital nomad, try to check in weekly and track your expenses. Make sure you stay on track if you want to maintain the digital nomad lifestyle.