Here's What Happens When Digital Nomads Don't Plan a Budget

As a digital nomad, it's easy to neglect planning a budget. When you're traveling and seeing all kinds of exciting new places, you probably don't want to spend much time analyzing your finances. It's also more challenging to maintain a budget, since your expenses will change each time you move.

I've been a digital nomad, so I understand why budgeting may not be your No. 1 priority. But if you don't do it, you could end up with some serious financial issues.

You're more likely to overspend

A budget is a tool for managing your spending by figuring out how much you can afford to spend on your regular bills. If you don't have one, there's a good chance that overspending will be an issue.

For example, if you plan a budget, you may decide that you'll spend no more than $400 per month at restaurants. This gives you a firm limit. If you start getting close to it, you can stop going to restaurants for the rest of the month. If you haven't set any sort of limit, you'd have no reason to slow down your restaurant spending.

This is especially important for digital nomads because there's more risk of overspending. Since you're traveling and seeing the world, it can feel like you're constantly in vacation mode. You'll be spending more on travel, and you'll probably also be tempted to go out for activities and meals more often than you would at home.

Planning for the future gets put on the back burner

Setting aside money for the future is one of the most important financial habits. A good rule of thumb is to save at least 10% of your income and invest another 10%. You can use the savings to build an emergency fund and sock away money for other upcoming expenses. Your investments are what you'll use to eventually retire.

Sadly, many people are behind on their savings and investments. To give one example, the median savings account balance in the U.S. is $1,200. That's well below the standard recommendation for an emergency fund of three to six months of living expenses.

And once again, the digital nomad lifestyle can make this even harder. Lots of digital nomads take the "live in the moment" approach. The ones who don't make saving part of the game plan often end up living paycheck to paycheck.

It's not good to live paycheck to paycheck anywhere. It's more dangerous when you're halfway around the world. You could lose your job or need to get back home at the last minute because a family member is in the hospital. In a worst-case scenario, an emergency fund helps relieve a lot of financial stress.

How to set up a simple spending plan as a digital nomad

If you're a digital nomad, you might be thinking that you don't want to spend a ton of time on a budget. I get it, and you don't need to do that. I'm going to share a method that has worked for me and takes very little time.

Start by setting monthly savings and investing goals for yourself. If you're like many digital nomads and have an income that goes up and down, percentages work great for this. You could commit to saving 10% of your income and investing 10%. If your income is fairly stable, you could also go with fixed dollar amounts, such as $500 or $1,000.

Next, figure out spending limits for your expenses. Here's how to make this easier: Focus on the big costs. These are the ones that I watch most carefully:

• Rent
• Groceries
• Dining
• Travel and activities

I recommend keeping your limits on these the same as you travel. After all, the cost of living will vary from place to place, but that doesn't affect your income.

For example, let's say you set a limit of $2,000 per month for rent. If you visit Southeast Asia, you'll likely be able to stay well under that limit. In Western Europe, you'll still have options, but you'll need to be more selective. Your housing options will change, but your housing budget won't.

Your budget doesn't need to be extremely detailed and track every single coffee and bus ticket you buy. I recommend focusing on the items that make the most impact: your savings, investments, and the amount you spend on your major expenses. If you do that, you'll be able to enjoy the digital nomad life while also managing your money well.