You’ve read plenty of posts about how to make money online while living and working from anywhere, and you’ve probably read even more posts about how to spend it working your way through all the things on your bucket list.
What you may not have read much about are the kind of money and financial practices that will set you apart from 99% of the digital nomadic, location independent entrepreneurs and keep you in a constant flow of abundance.
It’s these practices which have made the biggest difference to our lives over the past 2-3 years and which have enabled us to double our income in the past 12 months, without working more hours of the day…
#1. Make More Money
Obvious? Yes. Easy? No. This is the biggest mistake you’ll see many digital nomads and entrepreneurs make.
The truth is that some of them barely make enough to cover their living expenses and instead rely on savings they’d stashed way previously, to fund their location independent lifestyle. This is, of course, a perfectly OK strategy but it’s not sustainable unless those savings involve deep, deep, deep pockets.
If you want to stand a chance of making this lifestyle a permanent one (or as permanent for as long as you choose it to be), then you need to find a way to make more money than you spend every single day.
This is Cash Flow 101. You need to be building a business which makes more money than you spend on a daily, weekly, and monthly basis.
Maybe you work in macro cycles – focusing on the monthly or annual figures…if that’s not working for you, try focusing on the micro figures: Start tracking your performance on a weekly or even daily basis – this brings it to a more tangible, more real and often more manageable level.
The bottom line is this: Track whatever stats you need to track to ensure your income is greater than your outgoings whichever way you look at it.
#2. Obsess About Cash Flow
The most important word there is: F-L-O-W. I don’t know about your relationship with money but what I do know is that the people for whom money doesn’t flow easily and frequently typically have a poor relationship with money.
What does this mean? It means they don’t always value themselves or their skills, they don’t know how to make more money and they don’t know how to manage the money they do have. If this is you, heal your relationship with money first.
Then it’s all about creating a balanced flow of money – which means money flowing in to your life and money flowing out to others. Examples of situations where the flow is out of balance include:
- Money flowing out, with nothing flowing in – for example, using savings to fund a lifestyle with no money coming in from investments, interest, business income or other sources.
- Money flowing in and being stockpiled with a bare minimum flowing out – this could occur when you’re overly concerned with having more than you actually need before you’ll even make any move, which ultimately paralyses you.
Focusing on keeping the flow of money flowing is the only way to generate more, spend more and enjoy more.
#3. Separate the Business From the Personal
Part of your role to manage the flow of money includes structuring your bank accounts correctly. One of the most basic tips you’ll hear from any financially savvy entrepreneur is to keep your accounts separate. The number of business owners who actually do this however, is surprisingly low.
If you have a limited company/LLC or similar, you will no doubt have had to set up a business bank account anyway – if you don’t, you still need to set up a bank account which you use *solely* for business purposes.
This means *all* your income needs to be paid into this account and all your business outgoings need to paid from this account. Never use your personal account for anything business-related (no exceptions, ever) – it’s just not worth the complication when it comes to analysing and compiling your records for tax purposes.
#4. Pay Yourself. Always.
You need to treat your business like a separate, financial entity – you are an employee of your business and you are the CFO of your business. This means that it’s your responsibility to wear this hat and keep your business finances separate from the “you” that is responsible for your own personal finances.
The most effective method I’ve found is to pay myself weekly, not monthly. It means I can keep a good handle on my finances from a week-to-week basis and I don’t have to manage a large chunk of cash over 4 weeks, I just need to handle smaller chunks of cash every week.
We tend to budget on a weekly basis so it makes sense to set a payment schedule that matches this. Yours may be different so just figure out what works for you and implement it.
Again, the important thing here is to cultivate the practice of doing this: If it means paying yourself just $5 because that’s all you’ve made this week, do it. It’s the activity and the habit which counts.
#5. Bank From Anywhere
This is an obvious one for most location independent entrepreneurs since you’ll already have figured out that you won’t have access to your bank branch if you hit the road.
What’s not so obvious is to choose a bank which makes international transactions and online banking super simple, hassle-free and cheap – some banks are infinitely better than others.
Before you select an online bank (or a bank account with online access), make sure you check what transactions can be made online and which have to be made by postal correspondence (yes, it still exists!) or even a visit to your branch.
The ideal is that you can obviously complete all the transactions you’ll ever need to online (a really good check is to see if you can request a “Letter of Introduction” online – that’s one we never expected to have to do but which my bank allowed and Jonathan’s didn’t – they required him to visit a branch while we were living in Panama!).
It’s also worth checking any transaction fees for online transactions, as well as the cash withdrawal fees or overseas transactions that you make using your banking card.
#6. Leverage Credit
I’m not advocating the irresponsible use of credit to finance a lifestyle you can’t afford; instead I’m suggesting that having a credit card is a useful tool to have at your disposal as a business owner and as a travelling digital nomad.
There are several reasons that making purchases using a credit card can be useful – they include:
- Additional insurance and security should something go wrong with a purchase/transaction
- Loyalty/reward points which are extra useful if linked to an airline loyalty program or hotel reward program – we’ve had upgrades, free rooms and more from making bigger purchases using our credit cards.
- Some places (such as car rentals) often require a credit card to take a large deposit – if you don’t have one, you may end up having to withdraw big chunks of cash to cover this and/or handing over important documents as a replacement guarantee/insurance.
To reiterate, if you know you have a problem with using credit – then this isn’t for you – but otherwise, a credit card can be a useful tool to use for additional benefits and perks.
Focusing on your money and financial habits while you’re gadding about the globe or beavering away building your business from home, may not seem like the most pressing thing you can do right now but how you manage your money and your relationship with money is the thing that will determine your overall financial success for the rest of your life. Get this right and you’ll start to notice how everything else flows with ease and abundance too…