A lot of people examining the finances of the digital nomad from the outside overlook important nuances in the way we handle money. It’s not just a matter of “money in, money out” earning and spending. Many of us are fully aware that there’s a third vital component of managing our money: saving for our futures.
I’m going to take a look at this topic in some depth here today. There are many good reasons for a digital nomad or traveling worker to save money, but my main focus, for now, is one of the biggest: retirement.
Government regulation is trending toward requiring employers to take an active role in their employees’ retirement savings. These sorts of obligations are definitely not universal yet. They also ignore the millions of younger workers who are carving niches for themselves through partial or total self-employment. These entrepreneurs and freelancers are obliged to take care of themselves when it comes to taxes, investments, and other important financial matters.
While lots of us recognize these responsibilities, many of us are neglecting them. Retirement planning is a problem we tell ourselves we’ll handle later. Or even worse, we’ve let it fall off our radar entirely.
Why Is Retirement Saving Important?
Many people living the digital nomad life have settled into an employment position they consider ideal. If you’re living the dream and being your own boss, how far ahead do you really need to plan? In an ideal situation, do you need to look any further ahead than the next freelance project?
In a word, yes. Here are some hugely important reasons you need to be thinking about your financial future:
Security
It’s an unavoidable fact of life: Circumstances always change. What are the odds that your current dream job will be just as satisfying a decade from now? What about 30 or 40 years down the line? If you’re not making contingency plans for your future, you’re robbing your future self of career options. Changes in location, lifestyle, and employment become more difficult or impossible if you don’t have a financial safety net to support them.
Saving now protects your options in the future, no matter how your desires change. If you are a UK individual in the USA, then here are some great UK pensions advisers in the US
Real Vacation Travel
Many digital nomads embrace the “nomad” part of the name and move around frequently. This travel can be highly enjoyable, but the honest truth is that the constant need to work puts significant limitations on your fun. A trip to paradise is terrific, but tethering yourself to cafe wifi for hours at a time impedes your enjoyment more than a bit, doesn’t it?
A healthy savings plan will give you the financial flexibility to continue your globe-trotting without the constant need to put in work.
Being Ready For Aging
Few things are harder for a 25-year-old to imagine than the sort of health constraints lying in wait in the long decades ahead. I know we all want to believe that our preferred activities will be endlessly available to us – I’m hoping that I’m still out there driving, skiing, and climbing when I’m 70.
Everyone with an entrepreneurial has the same best-case retirement scenario: Make a multi-million-dollar heap and never have to worry about where your money comes from when you get older. This is simply not a realistic goal to plan for, though. Setting aside significant pension money ensures that you’re still taken care of even if it becomes impossible to work (and play) as hard as you do now.
Making Savings Plans – Using The Pension Calculator
Lots of us digital nomads are fully aware of the benefits of saving for our retirements. The sticking point is, instead, planning out just how to get started. How much do we need to set aside? $100 out of every paycheck? 10 percent of your income?
Plugging numbers into your plans helps make them more concrete. Use the pension calculator to see exactly how much you need to put away on a monthly basis to meet your retirement goals. This is a very flexible tool; you can customize your desired retirement age and the size of the retirement income you’re looking for. The calculator will help you zero in on the right saving pace to hit your retirement goals. You’ll be able to see at a glance whether you need to step up your contributions or if you’re ahead of the curve.
I’ve presented a run through the pension calculator here as an example. Without an employer contribution (the unfortunate reality of self-employment!), I’m currently handling my own pension by putting in $500 a month. If I leave my retirement age at 65, that means my annual payout will be $27,555.
This was a powerful motivator for me. Those figures revealed that I need to be doing more, and I bet trying the calculator for yourself will do the same for you.
Play with the pension calculator to see how your current savings activity measures up. It can also help you get started with your retirement savings if you’re not putting anything away yet.
Being self-employed is about freedom, but it also comes with plenty of responsibilities. One of the biggest ones is planning and saving for your retirement. The picture grows a lot more complicated if you build a career that blends entrepreneurial self-employment with conventional employment. What happens when a short-term employer makes pension contributions for you? How do you rescue that money and incorporate into your personal retirement plans?
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