Only a couple of years back remote work was considered shady by many traditional employees. The fact that today it is a norm (or, at least, part of the norm with hybrid work models) speaks volumes about the rapid changes taking place in the business environment.
What’s more, people who originally used to rely on freelancing are increasingly beginning to consider digital nomadism — a lifestyle change rather than a mere employment change.
Whether it’s good or bad remains to be seen, but if you’re considering digital nomadism, there are a couple of things to keep in mind. First and foremost, it is not for people without savings, so start leaving money aside ASAP.
What Are the Differences Between Freelancing and Digital Nomadism?
First of all, freelancers may work from anywhere in the world, but they are mainly located in their respective countries. They may occasionally work while traveling but they don’t travel all the time and usually work in coworking spaces or their own apartments.
Digital nomads, on the other hand, work while traveling. There are many instances of digital nomads having relocated to a country with lower costs of living, too. Some digital nomads run their own businesses, while others work per project or remotely for one or more companies.
Whether they are freelancers or digital nomads, if you want to develop software for your business, you can hire developers in both scenarios based on your requirements and the skills they acquire.
Going From a Freelancer to a Digital Nomad
For freelancers who want to take the leap and become digital nomads, the first step is leaving some money aside. “Aim to have at least 3 months of projected living expenses saved up before your travels, and ideally 6 months or more. You want to have a buffer in case your expenses are higher than projected or your transition to a digital nomad takes longer than you think,” says Brandon Mackie, cofounder Pickleheads.
The next no less important one is — creating a stable client base.
Basically, there are two main options for digital nomads:
- Working as individuals (with or without registering a sole proprietorship or a business)
- Running a business (registering a business or a sole proprietorship at home or abroad)
The two most important things to keep in mind when picking your preference are visa requirements and taxes and health insurance contributions.
Factually, the whole process can be summarized in the following steps:
- Planning your finances ahead
- Deciding whether to relocate or not
- Deciding whether to register a company (sole proprietorship or LLC)
- Picking a health insurance plan
- Gathering necessary documentation and leaving copies with someone trustworthy back at home
- Choose the right apps and tools
Visa Requirements for Digital Nomads
Many countries have introduced the so-called visas for digital nomads in an attempt to boost their economies following the COVID-19 onset. Some countries were offering beneficial packages to digital nomads even before the crisis (Lithuania is a trendsetter).
However, all of these countries have their unique requirements. EU countries may be a popular choice for people who want to travel freely within the member-states, but keep in mind that there are minimum wage requirements for digital nomad visas.
In addition, health insurance requirements are not to be taken lightly either.
Other countries offer access to the public health insurance system for additional tax benefits (e.g., North Macedonia), while others don’t require health insurance at all (e.g., Georgia). EU countries, for the most part, require an investment of ca. €30k in health insurance plans.
If you’re planning to country-hop rather than register a business, you may choose to work in each country for up to the visa-free limit. Many digital nomads travel in this way, as investments in health insurance and income taxes are significant expenses.
Taxes and Health Insurance Contributions
As for health insurance plans, things are more complicated. If you’re planning to relocate and register a business in another country, you’ll need to consider the stellar sums required by the governments.
If you’re planning to country-hop, consider a life insurance plan. The good news is that insurance companies are coming up with specific plans to accommodate digital nomads, so shop around.
As for the taxes, different countries have different tax rates so compare the requirements before setting out. Additionally, there are two U.S. tax rates to consider: the annual Federal Tax Return and the state taxes for expats.
Unless you’re from Alaska, Florida, Nevada, South Dakota, Texas, Washington State or Wyoming, you’ll have to pay state income taxes no matter where you are if:
- You lived in the state for any duration during the tax year
- Your immediate family lives in the state while you’re abroad
- You have a permanent place of residence in the state
- You keep your voting rights, ID card, or driver’s license in the state
If you have state residency, other income may also be taxable (pension, retirement income, and other government benefits).
Freelancing comes with fewer requirements, as you can see. Still, digital nomadism doesn’t necessarily have to be too difficult if you have some spare money and do proper research.
There’s really no unique tip to simplify things; different people have different preferences, after all. However, once you start traveling, connect with the local expat community. Nothing beats the first-hand experience these people can share.