Insurance as a Digital Entrepreneur

Insurance is one of the important aspects entrepreneurs, even sole proprietors, must include in their business plans.

Insurance for freelancers
If you are starting a small business or simply going it alone, make sure you have insurance that will cover the unexpected. Many freelancers starting out believe their insurance needs are similar to those of any other individual, but there are business considerations that influence what kind of insurance freelancers should choose. It is important to be covered in case of lawsuits and unforeseen circumstances that could arise related to your business. You may need insurance in addition to the regular home, health and auto insurance that everyone needs (assuming you have an auto).

Indemnity and Liability Insurance
Indemnity insurance is a fundamental starting point for any business, including freelancers. Indemnity is also known as personal liability insurance and it provides protection cover in the case of lawsuits by clients and customers who allege negligence through error or omission. This is an example of how a simple mistake, even merely an alleged one, can land you in court and cost you a lot of money. Indemnity insurance covers cases brought in civil court but not a criminal court and operates on a similar principle to malpractice insurance. Even minor errors can end in lawsuits and can begin with a simple accusation of false claims or an allegation of misleading advice given by you as a consultant.

You may be familiar with liability insurance from your auto or home or rental coverage. Liability insurance could provide financial protection if someone is injured on your premises. If you feel you need guidance concerning whether liability insurance is for you, speak to local insurance agents if you have questions.

This coverage can often be purchase from the same company you purchased you homeowners insurance from. Often when you purchase multiple types of insurance from the same company you will get a discount. Still it is always wise to get several quotes from different insurers.

Check Your Existing Insurance Coverage
You may feel that your home, auto, and life insurance policy that you have now is sufficient to cover your needs as a freelancer. However, it is worth double checking whether your existing policies are sufficient if you change your situation (for example, open a side business or become a digital nomad). For instance, you may feel comfortable that your home office is covered, but make sure that all the contents of your office space are insured. If you use your car for driving clients around and marketing, make sure these work activities are covered under your current auto insurance plan.

Your life insurance policy, whether it is 10, 20 or 30 years, should reflect your income as a freelancer. If your income fluctuates, talk to an insurance agent about what kind of life insurance is right for you. As a freelancer, you should make sure you have your own health and dental insurance, and you may decide on plans designed especially for freelancers. In addition, disability insurance is a very important and often overlooked type of coverage.

Media Insurance
You may never have heard of media insurance, but it is becoming more popular in an environment in which a few bad reviews on social media can seriously harm a business. This type of insurance can protect you in defamation and libel suits which can involve expensive legal fees.

As you branch out with your career and decide to freelance, keep in mind that not only are your finances taxes different, but your insurance needs will change as well. Consult with an agent concerning the best insurance solutions for you and your family.

6 Tips To Help You Achieve A Better Retirement

Many people are already planning on working for a longer time because they don’t have enough money for retirement. Those reading the blog and focused on taking a different approach from the common one (either FI/RE or digital nomad or something else) already understand the traditional mindset of working hard and buying what you want (even if you go into debt) is more and more difficult. Some specifics of this post use terms that make sense in the USA (like IRA) but the ideas are universal.

The economy is no longer as robust after the financial crisis in 2007. While the recession is over, the cost of living has gone up. What’s more, there aren’t as many options to earn a high income unless you work in the technology sector. There is so much competition for even high skill jobs that it’s easy for employers to pay less than they used to in the past.

Those focused on FI/RE do consider retirement (obviously) but digital nomads for all the other ways I think this lifestyle is appealing often don’t consider the long term at all. And this is a serious problem.

For traditional employees and digital nomad and other freelance type employees one of the biggest challenges with planning for retirement is not the economy. While the economy certainly is a significant factor, it’s not the only one. You also have to take a look at your money management skills. There may be many ways that you are paying too much and saving too little. If this is the case, then it’s vital that you learn new ways of making your money go farther.

recliners and palm trees on the beach

Photo by John Hunter in Langkawi, Malaysia. Prepare so you can retire to this, or even combine FI/RE and digital nomad ideas and work here (with lower expenses) while working toward retirement.

With that in mind, here are 6 ways to save your dreams of retiring at age 65 or even earlier.

  1. Are You Adding to Your Retirement Savings With Each Paycheck?
    Direct some of your paycheck to a 401(k) or IRA and you will soon be above average in preparing for your retirement.
    One of my favorite tips to nearly painlessly greatly improve your retirement life is to put some of every raise you get toward retirement savings. For example, if you get a new job (or a raise) that gives you an extra $5,000 a year in income set aside $2,000 into a retirement account (every year). As you get further raises do the same thing.
  2. Where are you spending your money?
    You may have more control of your money than you think. Take a look at your recurring expenses. Can you spend less on cable? Cable companies make millions because of the fascination people have for entertainment. Is it possible that you could spend the same amount of time sitting in front of the TV doing something else — like starting a new hobby that will be more personally enriching? What about electricity? Perhaps, you can use a local electrical supplier if you live in an area that has energy deregulation. This site explains how you can buy cheaper electricity in a deregulated market like Texas.
  3. Do you need to upgrade your car, phone, TV, laptop so often?
    In the past, buying a car every three years made fiscal sense because you would save on repair costs. However, cars are now made much better and will run well for many years. By buying a car less often and looking after it better, you could save tens of thousands of dollars because every time you drive a new car off the lot, it depreciates in value. Computers used to become painful to use (as the new software took advantage of and thus required the big gains made in hardware to work well – this is much less true today). This money could go toward your retirement.
  4. Do you have money leaks?
    It doesn’t take much to spend money on small inconsequential things. An evening with friends, a latte when you’re tired, an extra few boxes of your favorite snacks when grocery shopping… all these things can add up quickly. You can also save thousands every year by skipping the convenience of eating out and learning how to cook nutritious meals at home. While it isn’t necessary to become a tightwad overnight, wincing when things are a few dollars above your comfort level, increasing your awareness of how you’re spending your money will help you realize that many of the things you buy aren’t giving you that much satisfaction in the first place.
  5. Do you use your credit card almost reflexively?
    Paying with your credit card is convenient, but you do have to remember that even if you keep up with your monthly balance, you are still paying more for the things you bought because you’re being charged interest, perhaps even high interest. Since it’s so easy to whip out a credit card then to carry cash or try to figure out if you have enough money to use your debit card to make a purchase, it’s only too easy to buy more things than you intended. I pay for nearly everything that I don’t buy online in cash.
  6. Do you postpone money management?
    Since you are busy most of the time, it’s easy to shrug off the basics of money management—keeping a budget, living within the budget, and saving a little every month. You use excuses like promising yourself that you’ll start your retirement savings when you earn a little more or pay off your credit cards. Unfortunately, life doesn’t stop long enough to give you enough time to plan everything perfectly. Even if you have started to budget, are you sticking with it? And if you have stashed away some cash, are you now looking for ways to keep that money active?

Changing Habits is Challenging
While these seven ideas are easy enough to grasp and won’t require any financial wizardry to put into action, the challenge is breaking bad habits and replacing them with good ones. It’s uncomfortable, of course, but if you do, it will be rewarding in the long run. The earlier you get started, the better your retirement options will be.

Making Money as a Nomad in the USA

There are many posts about how to make money online as a nomad. Some ideas work pretty well for some people (freelance work – especially as a digital nomad, writer, bookkeeper, etc.). The biggest problem isn’t learning about these options (they are repeated all the time in many different places online) but actually making them work for you. It can be done and is actually easy for some people, for others it is a very hard (the biggest challenges are having the right skills, marketing and establishing a base of clients).

I have been paying much more attention lately to nomads in the USA which opens up income possibilities in addition to online income. More than I ever saw in digital nomads there are some people making a decent amount from YouTube (documenting the vanlife/RV-life and their travels) – still this is likely a crowded market and being successful will be hard (but aiming at providing a small bit of additional income may be an option for a larger group of people).

In this video Kev provides a good recap of some of the nomadic and location dependant options: getting day jobs through craigslist and temp agencies. Another popular idea is workcamping. These are essentially temp jobs specifically targeted at nomads (campgrounds, farming help often at harvest time) and some that get lots of interest from workcapers Amazon… seasonal hiring, etc. These often don’t pay a large amount of money but for people that have very low fixed expenses (no “sticks and bricks” to pay for as they travel and live in the RV/van) it can work.

Another potential source of income for earning money providing services to other nomads (work on vehicles, install solar/electrical, haircuts, etc.).

Another idea that can work is an etsy store such as the one Driving and Vibing have earned most of their income from.

Kev also mentions a digital nomad income source in his video: human intelligence tasks (mechanical turk). Find some of the better options; though these usually don’t pay very little.

Related: Vanlife in the USAHousing Savings When Living as a NomadGolden Rules for Making MoneyNomadic Businesses in the Age of the Internet

Leaving on a Jet Plane

In this post I expand on my comment on Reddit, to this comment:

> If I had one piece of advice for anyone really (really wanting, not
> just dreaming about) wanting to be a DN, it would be: buy a plane ticket!

This is advice for if you want to a digital nomad next week.

If your preference is to increase your odds of having a successful digital nomad experience then I suggest taking longer. Do 3 things:

1) Get experience earning money in a location independent way (you can do that where you live more easily than anywhere else).

2) Save up some money. This item most people will skip but it is helpful. It can be hard for many people to do. And if you don’t want to you can do well without saving much. But you do increase the risks of running into money problems that you could have smoothed over with savings.

3) Travel to where you would like to be a nomad for a trial run. If you want to do it in SE Asia take some time visiting and seeing what it is like. Travel in the way you plan to as a digital nomad. Don’t stay in nice hotels if your digital nomad plan is to live cheaply.

As with all this advice you can ignore the particular advice and learn from even just doing part of it (visiting but staying in much nicer places and being just a tourist will tell you more than never going at all), but doing more will prepare you better (and let you learn if it is what you really want to do).

Some might require extra steps, maybe to earn location independent money you will need to learn a new skill, and maybe need to gain experience etc..

view from my porch (with laptop in forground, plants and another cabin in the photo), Luang Prabang

View from my porch in Luang Prabang, Laos. This was a great place to work (not my average location to work, one of my favorites). I tethered my laptop to my cell phone connection which was fine (you could stream video), it did fail for about 20 hours over 2 days but otherwise was good.

Just leaving on a jet plane tomorrow does work for some people. But I think there are many more people it doesn’t work for than it would work for.

And truthfully many people don’t want to take the time to do a thorough job of the 3 steps I mention. You don’t have to do a thorough job if you don’t want, but it will give you a better chance to succeed and enjoy your experience.

There are also many other sensible things to do first: learn about visa rules, pack well, deal with things like health insurance, deal with mail (family, friend or service) – you often need a physical address at home for some things, find good sources or information on living as a digital nomad, figure out how you will handle banking (it can be a real pain to find an international business bank as a digital nomad), and on and on. You can read about these things on my post here and in some posts on my Curious Cat Travel Destinations blog and many other good blogs.

Related: Financial Independence Retire Early (FIRE) and Location Independent WorkingLocation Independent Living Can Be In Your Comfort Zone and a Good ExperienceTransfer Money Between Currencies Using New Providers Not Banks And SaveMy Early Experience as a Digital Nomad: Part Two

Health Insurance Considerations for Digital Nomads

Health insurance is something that many young healthy people don’t think about. And many digital nomads are young healthy people, though not all of them are. And if you are from most rich countries you may not think about health insurance as your country makes it pretty easy to just be treated if you have health care needs, without a need to have bought health insurance.

But when you are traveling outside your country health insurance is important. I am not very familiar with the details of how health coverage works for all the different countries so you will have to figure it out for your own country. It wouldn’t amaze me if European countries set up some kind of reciprocal care agreements but I have no idea if they do (they should if they don’t).

In the USA we know what a nightmare health insurance is. The ludicrously expensive USA health care plans generally don’t provide any coverage when you are outside the USA (even inside the USA, but not in your own state there are severe limitations). There are many wonderful things about the USA but the health care system is a nightmare and has been for decades.

If you are going to fly off and become a digital nomad one of the critical items to consider (though many don’t give it the attention it needs) is health insurance. It is true that in many countries you can pay out of your own pocket for health care that would bankrupt you if you used the USA health care system and tried to pay out of your own pocket (tens of thousands of people go bankrupt in the USA due to health costs).

If you use good personal financial planning practices you should have at least 6 months of expenses in an emergency fund (and I would strongly suggest at least a year for any digital nomads). That emergency fund should be able to pay for routine medical visits in many countries (Malaysia, Thailand, India, Indonesia, Vietnam, Singapore… – I would imagine this is true in most countries, but certainly not the USA.) without a need for health insurance.

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Should I Sell or Keep My House When I Become a Nomad?

My friend Andrew published a post: So You Want to Travel The World But You Own a House (Or Apartment) which prompted me to add a comment and I figured I would share and expand on that comment here.

Owning rental property can be a wonderful way to help support your nomad, location independent lifestyle. Rental property can provide a source of regular income to supplement your earnings. Of course, getting a rental property into that state is usually something that takes time, or a huge downpayment.

I have found dealing with property management folks to be extremely annoying. First they charge ludicrous amounts (in my opinion), especially for places that have high rents (they normally charge a % of rent + huge amount to rent the place out). These costs greatly reduce the investment appeal of renting out your property. On top of paying them a huge amount they are not very customer focused (to me paying them, or to those seeking to find a place to live).

15 years ago I started renting out my first house and obviously created a web page for it. Nearly none of the expensive professionals did that back then. Only years later they finally were dragged into catching up. And still today, they post not nearly enough useful information.

Still it can be that even with these costs and frustration it makes sense as an investment (especially in the last few years when investment climate is so challenging).

Often the decision to rent out your home (versus selling it when you leave) is impacted by your long range plans. If you want to move back into your house in a year or two or five that limits your options. You may have to accept a bad investment to keep that option open. Especially if you are just going to go give the nomad idea a try for a year, selling may not be wise (unless you don’t want to return to your house even if the nomad idea doesn’t appeal to you once you try it).

photo of a house

Another consideration, even if you don’t care about moving back into the same house, but plan on moving back to the same city, is that if you sell and real estate values climb you could find yourself priced out of the market.

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Transfer Money Between Currencies Using New Providers Not Banks And Save

One of the annoyances of travel and even more so with business (for digital nomads or expats) is converting money between currencies. It actually is fairly easy now for a traveler but can be costly. When you have a business and need to convert between currencies it can be very costly.

Using ATMs to get cash in the local currency normally give better rates than you can get in most other ways. And you are unlikely to be outright swindled any more than large banks do (which if you follow the news is a great deal, scandal after scandal of illegally taking from customers in violation of the law). The transaction costs of ATMs can be ludicrously high. In Thailand all banks seemed to have agreed to charge foreign cards $6 for a transaction. That is crazy. But you don’t have much leverage.

Schwab, and a few other, financial institution will reimburse you for ATMs fees. Many digital nomad and international travelers make sure to get such an ATM card which is wise.

And you can occasionally find banks that are must more customer friendly. The MayBank in Siem Reap, Cambodia didn’t have ATM charges for me. And I found a bank in Hoi An, Vietnam that didn’t charge either (I can’t remember the name). It may well be that they just didn’t charge do to deals between the banks so I don’t know who else it would work for.

Even though the currency exchange rates are normally not too bad on ATMs or using a credit card they are still weighted in the banks favor. And I don’t know of any banks that disclose how wide a profit margin they take for simple currency transactions (and I am sure it fluctuates depending on the situation).

When you need to transfer money (for example if you are paid in US$ but have a bank account elsewhere or if you are making a big purchase in another location) and convert currencies you can find the financial institutions taking advantage of you. There are several currency exchange services that have stepped into this business opportunity created by the large margins financial institutions have been taking from their customers.

One such service is Transfer Wise. As Transfer Wise says “Banks charge 5% in hidden fees. People on TransferWise pay 0.5%.” While banks might want to argue they don’t disclose the hidden fees and bad exchange rates they use so they don’t have much in the way of an evidence based argument to make.

TransferWise saves you money by matching your money at the mid-market rate. There’s just a small service fee and it’s all shown upfront. You can read more about our pricing here.

To demonstrate the possible savings you’ll get by using TransferWise, an average bank fee and exchange rate is shown. It’s based on independent research from Charterhouse Ltd, obtained on November 2014. The research looked into the costs of sending 1000GBP from a UK bank account, to another bank account in Germany. From this data, other currency route savings, fees and average exchange rates are worked out as well.

They still serve largely the USA and Europe but hopefully will expand further (they are also in India).

CurrencyFair is another good option and they posted a blog post looking at the costs of using old banks and even TransferWise – Money Transfer Companies Compared. The costs (including hidden costs of the banks are huge). The costs between these two are close (Currency Fair said at the time for express service they were significantly cheaper). CurrencyFair is actually a peer to peer service to match people needing to make transfers that balance each other out.

photo of currency: China, Hong Kong, Singapore, Malaysia, Thailand, Cambodia, Vietnam, USA

SE Asia, and beyond, currency: China, Hong Kong, Singapore, Malaysia, Thailand, Cambodia, Vietnam, USA. USA currency is used in Cambodia for most things and USA currency is used most airports to pay visa fees to the governments. Photo by John Hunter, see more photos of my travels.

If you are moving large amounts of money it definitely makes sense to seek out protection from old fashion banks ripping you off. These are the same banks agreeing to likely over $500 million in fines for currency manipulation (because even these huge profits on the backs of customers couldn’t satisfy bankers demands for multi-million dollar bonus for hundreds of employees at these banks every year).

CurrencyFair offers a peer to peer marketplace that lets you set a offer price and if someone agrees you can even been market exchange rates. Of course, if your currency happens to be a bit under-demand at the time you may get a bit less than market price. TransferWise sets the price based on the forex markets and then it is just up to supply on the demand on their marketplace to determine if you can find someone to take the other side of the trade.

Related: Negative Interest Rates and the US DollarFinding an International Business Bank as a Digital NomadCredit Card Currency Conversion CostsMicroFinance Currency RiskWhy the Dollar is Falling (2009)