Category Archives: money

Housing Savings by Living as a Nomad

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When I started by overseas adventure I lived in Johor Bahru, Malaysia. Among the reasons I chose to move to Malaysia was to save money (from the costs of living in the USA) and to travel in SE Asia.

In some ways it worked well. Living was as cheap as I expected, which actually surprised me. I figured I would find costs were not as low as I was able to estimate from online sources. I didn’t travel as much as I planned though.

The lack of travel could be overcome by just being more diligent about making it a priority. But I tried and it just didn’t happen. Partially I think I subconsciously delayed things due to cost. I starting looking into a nomadic lifestyle and decided to give that a try.

I don’t think I am particularly well suited to a nomadic life. I like the stability of a home. I do like to travel, but I also do find I put it off or just don’t get around to it as much as I would like (while I had a real job it was even worse, which is part of the reason for moving to SE Asia in the first place). But while I am not particularly well suited to the lifestyle I also figured I can possibly try it (while for many it just won’t work at all).

View from the porch of my cabin in Luang Prabang, Laos.

View from the porch of my cabin in Luang Prabang, Laos. I had a 20 Gb data cell plan that was excellent for under $25.

One of the big advantages of a nomadic lifestyle if you want to travel is you eliminate your primary housing expense. So when you are traveling your housing expenses are just the place you are staying while you travel not that plus your main housing.

One of the big attractions to a nomadic life in low cost areas, for those from high cost areas, is the financial savings. People can go very cheap for housing or middle of the road or enjoy luxury housing they couldn’t afford in a high cost area. I go more for the middle of the road choice, which to the budget people seems extravagant luxury and the those getting very nice places for much less than they could at “home” see as unnecessary hardship.

I had a somewhat nice condo in Johor Bahru on the 16th floor with a view of Singapore and a pool and basketball court. I could walk to places downtown or take short taxi rides for a couple US$. That cost about US$850.

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Negative Interest Rates and the US Dollar

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US $ are accepted in many countries. Often visa fees in SE Asia are quoted in US Dollars (USD) – they may or may not accept other currencies. In some countries the USD is the regular currency or the main currency anyway.

For example, in Cambodia the USD is used for almost everything but for change under US$1 local Riels are used. For the US this can actually be a nice benefit. US currency serves as a loan to the US government. When the USA prints dollars and distributes they avoid issuing bonds or treasury bills for their spending.

When interest rates were 10% on long term bonds if the USA had an extra $800 billion in currency floating around outside the USA they saved $80 billion every year in interest payments (when interest rates were 5% they would have saved $40 billion a year). In addition if those bills are destroyed or lost that open the way for the USA to put new USD into circulation and avoid that much borrowing.

image of the front of the current USA dollar

It really doesn’t amount to a huge amount of help given how much the USA government spends but still it is a benefit. But with negative interest rates the reverse would be true. Currency offers what is normally seen as only 0% but in the crazy new world created by the central bankers bailing out the too-big-too-fail banks all over the world (creating massive amounts of liquidity [cash]) they started a path that has now led to the crazy situation of negative interest rates.

A negative interest rate means that say the German government borrows $10 billion today and pays back less money in 5 years. So if they got $10.5 billion today they would only have to pay back $10 billion in 5 years. This seems crazy mainly because it is.

Now the USA rates are not negative yet for long term rates (I think maybe in some really short term bills – under 60 days – it may have been). But negative interest rates have spring up in Euro denominated bonds from Germany (and a few other countries).

I find it funny that in such a case the USA would actually be giving those using their currency around the world a higher yield than those holding their long term bonds.

According the US Federal Reserve there is about $1.2 trillion dollars of USA currency in circulation (July 2013). The Federal Reserve estimates that the majority of the cash in circulation today is outside the United States.

The increased demand for the USD abroad also helps keep the USD value from declining in the face of huge trade deficits. To some extent we ship dollar bills to countries and they ship us food, cars, smart phones, etc..

Countries that use the USD as an official currency (though they may also have a local currency at least for small amounts – often under US$1): Panama, Ecuador, El Salvador, Zimbabwe and East Timor.

In some places it may seem on the ground that the USD is the official currency but it is really just the currency used without an official declaration: Cambodia, Peru and Uruguay

Related: Finding an International Business Bank as a Digital Nomad – Credit Card Currency Conversion Costs – Which Currency is the Least Bad? The USD (2012 post)

Reverse Budgeting: Money that Must be Spent

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I realize that being reluctant to spend money isn’t the normal problem people have. This is especially true where I grew up: the USA. But I do have trouble spending money, my default desire it to save money.

The main reason I have the ability to have a digital nomad, long travel lifestyle now is not some incredible business bringing in lots of cash. It isn’t have made a huge fortune that I can now live on. It is mainly because I don’t need to spend a huge amount now. And I have saved up money by not spending a huge amount before. Investing that money well also helped.

But I do also have trouble due to my desire to not spend money even when I might like the result (when the cost just seems too high for what is offered). I have taken to a “reverse budget” where I have set money that I expect to spend. And I add to that balance each month and if it grows I have an increasing pile of money I am suppose to spend.

So when I think about getting a guide for a trip in China and I am put off by how much it costs, I can look at my balance and say if I have to spend that money there really isn’t anything I want to spend it on more than hiring a guide. So then I can spend money in the way that benefits me and I can escape the trap of saving more than really makes the most sense when you look at the overall picture.

sunset from boat

Sunset from boat tour in Kuching, Borneo, Malaysia. I may well not have taken this evening boat tour if I didn’t have money I “had” to spend.

Some people will put some amount into a checking account each month to limit their spending to say $2,000. I do something similar but for the opposite purpose to segregate money to spend. I move the decision from whether I am better off saving or spending that money to this is the money that has already been allocated for spending, so now go spend it on whatever is the best use for it.

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Finding an International Business Bank as a Digital Nomad

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Dealing with banking issues is one of the most difficult aspects of a small digital nomad business. Finding a bank for a small business isn’t easy. Add to that dealing with international banking and things get very challenging.

Finding a bank that will accept deposits via wire, provide a credit card for your business, has good online tools and you trust isn’t easy. I ran across a very useful post recently:

The Best Offshore Banks of 2014 which includes a good deal of information on the 30 best banks according to them, for example:

Butterfield Bank

Established: 1858.
Jurisdictions: Bermuda, Bahamas, Cayman Islands, Guernsey, UK.
Minimum deposit/balance: 5,000 BMD/USD/GBP for business banking, 250 – 500,000 BMD/USD/GBP for private banking.
Personal banking: Residents preferred.
Commercial banking: Yes, international.
Private banking: Quite strong.
Remote account opening: In most cases.
Mobile app: iOS, Android.
Cards: Full coverage, available in USD and GBP.
Website: http://www.butterfieldgroup.com/

All things considered, the finest bank in the Caribbean and Bermuda. 2009 to 2010 were rough years for the bank, but they bounced back to profits by the following year. Although the share price took a massive dip, but the Butterfield signature quality was never compromised.

Card services are some of the best in the region, with two airline partnerships being available (AAirways and British Airways).

Internet banking is strong but the mobile banking app, although light-years ahead of other banks in Bermuda and the Caribbean, leaves a lot to be desired.

It provides enough information for you to screen through and find some good options for you. And then you can do more research and pick one to try out. I would definitely do more research, you shouldn’t trust 1 internet post to find a bank.

Singapore Merlion with the financial district in the backgound

Singapore Merlion with the financial district in the backgound

Finding a bank that accepts EFT deposits from the USA makes a big difference but this can be a challenge. Many internet companies still are stuck a decade or two ago as far as banking is concerned. Many only pay via EFT or check. Some will also pay via paypal. The options are limited for people in many countries (with poor mail system and paypal is also not available to people in many countries).

Of all my efforts in creating a digital nomad existence banking has been by far the biggest negative surprise. It has just been a huge hassle. I may well look to using one of these banks if I can find a better option for me.

Some that look interesting to me for digital nomad businesses are: Butterfield Bank (Bermuda, Bahamas, Cayman Islands, Guernsey, UK), Crèdit Andorrà (Andorra, Panama), DBS Bank (Singapore, Hong Kong, Malaysia/Labuan, Taiwan), FirstCaribbean International Bank (Anguilla, Antigua and Barbuda, Bahamas, Barbados, British Virgin Islands, Cayman Islands, Turks and Caicos Islands), Standard Bank (Isle of Man, Jersey, Mauritius, South Africa, Ghana, Angola, Singapore, South Africa, UAE)

It has been awhile since I created this blog and haven’t posted to it, but my plan is to be more active posting here in the future.

Related: International Migrants: Economics and Banking – Private Foreign Banking Deposits by Country – The Importance of Long Term Disability Insurance – Going Nomad in SE Asia