You have probably heard the terms before, but you might be wondering, what is the difference between a digital nomad and a remote worker?
A digital nomad is a specific type of remote worker who lives and works while traveling the world. Digital nomads will often move frequently to experience life in many difference cities and countries.
The idea of a digital nomad is often used to describe not only a person, but also as a term for a particular lifestyle.
What is a Digital Nomad?
First, remember that a remote worker does not need to commute to an office. Certain remote workers may meet clients at their homes or offices and work with them. However, many remote workers are telecommuters, meaning that they can work from anywhere on Earth, with no need to meet with clients.
As for the word “nomad”, recall from history class that a nomad is a person without a specific home. He wanders around to find food, and temporarily settles in a place until the food runs out.
As mentioned above, a digital nomad is a specific type of remote worker. To hammer home the point, see the masterfully designed Venn diagram below:
A digital nomad does not stay in one location for an extended period of time. Usually, he does not have a permanent home, just like nomadic humans.
Instead, a digital nomad travels between different countries frequently, living in hotels, motels, hostels, Airbnbs, or with friends, family, or colleagues.
The term “digital nomad” is often used to describe a particular lifestyle. In this lifestyle, you work on your own company, or as a freelancer for another company, both of which give you great work flexibility. You also travel frequently to see different cities and countries in the world.
This lifestyle is usually associated with younger people in their 20s or 30s, who do not have children. However, some digital nomads do manage to travel the world with children in tow.
Certainly, their children can receive a top-notch education and experience many different cultures this way. However, it will be difficult for them to form lasting childhood friendships.
Who are Digital Nomads?
Anyone can be a digital nomad. In reality, they tend to be a younger crowd, who are usually unmarried without children. This is due to the fact that there are challenges in moving frequently with a young family in tow.
Digital nomads also tend to be part of the digital/tech crowd, including:
- software engineers and computer programmers
- digital marketers
- bloggers, vloggers, writers, and content creators
However, there are many opportunities to work remotely. If you need some ideas, check out the following:
- Here, I wrote an article detailing 20 Unique Remote Business Ideas.
- I also wrote an article about how to run a remote business.
- You can also get some ideas about how to find remote freelance clients.
- There are some ideas for remote jobs for English majors, artists, educators, and nurses here.
Remember that if you can find a remote job, or create one for yourself, then you can become a digital nomad!
Why Become a Digital Nomad?
First of all, digital nomads have the benefit of living wherever they want. This gives them the opportunity to travel and experience other cities, countries, and cultures.
They also have the opportunity to meet other professionals who are pursuing the same lifestyle, which builds a network for future opportunities.
Finally, there are financial benefits to adopting the digital nomad lifestyle.
Where do Digital Nomads Live?
Digital nomads live in any place that they want to visit. This gives them a chance to experience lifestyles and cultures in many different countries very quickly.
After traveling and sampling many different cultures and cities, a digital nomad may “settle down” to some extent, perhaps cycling between two or three preferred locations, or even choosing one exclusively.
Digital nomads can often find communities of other like-minded remote workers in cities where they want to live. They can live in hotels, motels, hostels, apartments, or Airbnb rentals owned by fellow digital nomads or remote workers who have “settled” in a particular city.
Where do Digital Nomads Work?
Digital nomads work close to wherever they live, which can be anywhere on Earth! As long as they have an internet connection, they can connect to clients and employers to find work.
A digital nomad does not even need constant internet access. For instance, a software engineer can write code offline, and deliver the final product via email to a customer.
Some digital nomads have memberships in coworking spaces that have office sites all over the world. As a result, they can travel freely and always have a comfortable, well-equipped office environment to do their work.
Other digital nomads work out of cafes, restaurants, coffee shops, bookstores, and libraries in the places they live.
Some even work out of a dedicated room in an apartment or house that they rent. Again, all they need is an internet connection, and this may not even be necessary with some their work!
When a digital nomad uses coworking and other shared spaces, he has the opportunity to interact with other digital nomads. Thus, traveling and working in many different places can give a digital nomad access to a large network of remote work professionals.
How often do Digital Nomads Move?
A digital nomad may move as frequently as every few weeks, but this makes it difficult to take in much of the culture in a location. Some move a few times per year between favored locations.
In some cases, there is a necessity to move out of a favored location for a certain time period, in order to maintain favored tax status. In short, they avoid being “full-time” or “year-round” residents of a particular country, and thus receive preferable tax treatment.
What Taxes Do Digital Nomads Pay?
Tax laws will vary by country (and by state, if you live in the U.S.). They can also vary based on profession and source of income (for example, W2 employee vs. 1099 contractor in the U.S.). However, most countries will collect some sort of income tax on earned income and investment income.
A digital nomad needs to think about where he lives/earns, and where the money comes from, when thinking about income taxes.
There are also other considerations, such as tax deductions and credits. These will vary by country/state, industry, and even on an individual basis. They will also vary based on whether you file personal or business tax returns.
In addition to income tax, some digital nomads need to consider the impact of sales taxes. In the U.S., for example, different states have different sales tax rates (some charge none; my home state of Massachusetts charges 6.25%).
Digital nomads who run an Amazon FBA, drop shipping, or other e-commerce business will need to carefully consider tax implications. It is a good idea to seek the advice of a tax attorney or CPA, at least for the first year that you file a personal or business tax return as a digital nomad.
How can Digital Nomads Afford this Lifestyle?
Many digital nomads engage in “geoarbitrage” to help them afford their lifestyles. In his book “The Four Hour Workweek”, Tim Ferriss defines geoarbitrage as (roughly) “earning money in dollars, and spending in a weaker currency, in order to increase spending power on a given income”.
Consider two people, Alex and Bob, who earn the same income of $3,000 per month. At first glance, they appear to be in the same financial position. However, a closer look reveals that this is not the case.
Alex lives in an expensive city in the U.S., where he works full-time, commutes 5 hours per week, rents a studio apartment, and buys only his basic needs. This lifestyle costs him all of his income.
Alex is stuck in his apartment, in his city, and in his job. He never has the opportunity to travel or experience other cultures.
Bob works as a digital nomad, living in countries where a dollar goes much further than it does in the U.S. His lifestyle, including basic needs, costs him only half of his income. What’s more, he gets to experience different cultures as he travels the world while working remotely.
Bob can save the other half of his income, and build up his retirement savings much more quickly than Alex. Bob can also choose to live a more extravagant lifestyle in the countries he visits. He can also opt for some combination, living with some extravagance while also saving for retirement.
Even at a lower level of income, many digital nomads can afford to live in countries around the world and have a better standard of living than higher-paid counterparts in the U.S.
As an added benefit, a lower income can result in higher take-home pay, since income tax deductions for businesses and freelancers are much more generous than those for employees.
The digital nomad lifestyle is not for everyone. However, it is something to consider if you want to travel, see the world, all while stretching your dollars a bit further.
Even if you have a family, you may be able to find places where people live and work remotely while raising children.
I hope this answers some of your questions about digital nomads. Please leave any comments below.