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People become digital nomads for a variety of reasons, but freedom is often high on the list. The ability to take off at a moment’s notice to explore new countries, packing nothing more than a few changes of clothing and your trusty laptop, is priceless. However, with such freedom comes financial risk, and it’s how to manage this risk that we are discussing today. If you have been wondering about income protection for digital nomads, this guide is just what you need.
How to Protect Your Income
Whether you are a digital marketing specialist who works from various locations around the world or an art teacher who supports a globetrotting lifestyle with online lessons, you should have some form of income protection. If you are like most digital nomads, you are a freelancer, which means you probably have no guaranteed hours and no guaranteed income. In such a precarious position, income protection is not just something you should seriously consider; it is something you should arrange without delay. There are several possible ways to protect your income as a digital nomad:
- Renegotiating Your Contracts– While this option won’t be practical for all freelancers, it is nevertheless a viable option for some. If you have formal contracts with the companies that hire you on a freelance basis, you could offer to lower your rates in return for guaranteed hours or offer to make another similarly appealing compromise.
- Purchasing Income Protection Insurance– The best form of income protection is often insurance because it is designed specifically for this very purpose. However, not all insurers are willing to cover digital nomads for competitive premiums, and exclusions apply to certain policies, so you may need to shop around.
- Accumulating Adequate Savings– Among the DIY income protection options to consider, building a large nest egg is one of the most popular. It is a simple plan to put into action and highly effective if pursued over many years. However, because it takes so long for most people to accumulate enough cash to see them through an extended period of financial distress, this option is most often used in combination with others on this list.
- Building an Income-Generating Investment Portfolio– This is a variation on the above DIY income protection option. By diverting your cash savings into an investment portfolio that is designed to maximise income rather than capital gains, you could build a passive income that covers your basic living costs.
- Developing a Secondary Skill– Developing a second, marketable skill is one of the best income protection measures to employ. By adding another string to your bow, you gain access to more earning opportunities, making yourself less vulnerable to the financial shock that normally accompanies a sudden loss of income.
For most digital nomads, a combination of these income protection measures will be the best solution. If you are not sure what to do, consider talking over your options with a qualified and licensed financial services professional.
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