I was watching a video the other day by The Nomad Capitalist.
This video was about how much money a six figure earner can make living overseas.
For the talented individual, six figures is not too difficult to make online.
But what about digital nomads making significantly less.
Can these same principles be applied?
It got me thinking.
DIGITAL NOMAD SALARY
I’m not an expert on digital nomadism.More of an enthusiast at this point.
There’s a wide range in pay scale for digital nomads.
I struggled to find an average pay.
I decided to look at one of the easier digital nomad jobs and base my numbers on the average pay for that job.
Teaching English abroad is one of the easiest online jobs you can get into.
There is not a lot of additional training, and you can be ready in weeks not years.
Compared to an online programmer career, this is a walk in a park.
Not putting down teachers, just pointing out the opportunities.
Programming can takes years to learn.
Getting a TEFL can be done in weeks.
It pays reasonably well at $20 (USD) an hour.
IS $20 ENOUGH?
When considering a job teaching English abroad I asked myself if $20 would be enough.
Many people don’t even make that in their western job so it may seem silly to question $20 per hour.
For many professionals, $20 per hour is a sharp pay cut.
Say you were making $30, $40 or even $50 per hour.
If your boss told you he was going to cut your salary back to $20 you would lose your $h!t.
You’d probably quit, but let’s pretend you accepted those terms.
What would happen?
You’d have to give up a lot of things.
- Eating out would get cut way back.
- You’d have to slow down your retirement savings
- You might have to move into a cheaper apartment
- Every penny spent would be under scrutiny
- You’re probably thinking about a few toys you own you’d no longer be able to afford.
Most of the world operates this way.
The average American salary is around $20 per hour.
But for those who have it better…
Those of us making $30+ per hour…
Sliding backwards is unthinkable.
So I ask again, is $20 enough?
$20 GOES A LOT FURTHER IN OTHER PLACES
Like Andrew Henderson from the Nomad Capitalist points out, your money goes a lot further overseas.
Lets look at another place you might want to live.
Let’s look at Chiang Mai Thailand.
I’m going to compare this to the costs of living in a tier 2 western city.
Not a NYC or San Francisco.
Something more like a Baltimore.
There are a few factors Andrew addresses in his video.
I won’t address them until the end.For now lets look at direct living costs.
Keep in mind, the average month has 165 working hours based on a 40 hour work week.
This number is important.
Everyone hates taxes but we all pay them.
Working online abroad can mean not paying federal taxes, but there are some penalties.
You’ll usually be paying self employment tax as an online teacher.
I won’t address some of Andrew’s more advanced tax strategies.
Most people aren’t ready to go that far.
I’ll keep it simple.
With the Foreign Earned Income, you can still save 6% of your income by working online while living abroad.
(often this savings can be a whole lot more.)
$20 x 6% = $1.2
So now your salary is up to $21.20
See where I am going with this?
If you’re working online, you won’t be commuting.
In Baltimore commuting costs in the ballpark of $200 per month.
200/165 = $1.21
We just hit $22.41 per hour.
In Baltimore, the average professional spends $804 per month on food. That’s mostly eating in while going out for several meals a week and a few nice dinners on the weekend.
In Chiang Mai eating out is often cheaper than groceries.
Eating out every day plus an equivalent weekend each week equates to $368 per month.
That’s another $436
436/165 = $2.64
Now we are at $25.50 per hour
In Baltimore, an apartment in a decent area goes for $1100 per month.
In Chiang Mai that same apartment goes for $300
That’s an $800 savings per month.
800 / 165 = 4.85
Woo! We just got over $30 per hour.
We’re at $30.35!
I’m talking about phone, TV, Internet, Electricity, Gas, & Water.
All the things you need to live comfortably.
In Baltimore (/month):
- Phone = $70
- Electricity / Gas = $126
- Internet / TV = $50
- Water = $50
In Chiang Mai
- Phone = $15
- Electricity = $0.25
- Internet = $15
- Water = $1
Honestly Internet is often included at the rent price I quoted above (In Thailand), but let’s not pinch pennies here.That’s about $265 saved each month.
265 / 165 = 1.6We’re up to $31.95
So a $20 per hour salary in Chiang Mai is actually more like $31.95.
From $20 to $31.95
Is that close to your current Western Salary?
IS THIS ACCURATE?
You could work the numbers and make it seem like less.
Maybe you think $20 is closer to $29.
You could also work the numbers to make it sound more impressive.
I didn’t take into account a lot of other little savings like entertainment costs, sales tax, etc.
Turning $20 into $35 wouldn’t be hard at all.
There are a lot of little factors that could add up to another $2 or $3 per hour.
The point here is these numbers can be what you choose.
You have the power to bend them one way or another.
It’s not a lottery.
It’s not, you might get these savings, it’s how much of these savings are you going to take advantage of?
You probably can’t bend the numbers $7 or $8 dollars in either direction but you can move the slider a few dollars up or down.
INDIRECT INCOME INCREASE
Like Andrew mentioned there are a lot of other benefits to a life abroad here.
It’s not just the direct cost differences you need to consider.
There are opportunity costs to consider.
Could you use this transition as an opportunity to launch a bigger business?
You’ll no doubt have more time to work with.Western lifestyles tend to eat up your day with silly routines.
An 8 hour work day is more like 12 when you factor in morning prep, commutes, lunch breaks, and unwinding.
What will you do with all that extra time?
Would this be a good point in your life to finally gain some extra skills and launch a more profitable business?
If you’re reading this, you’re probably someone who’s already working on something or planning to.
This could be the big leap that gets the train rolling.
You can put a price on mindset and relationships
When you surround yourself with people doing the same things you want to do.
When you get rid of all the negativity and doubt surrounding you right now.
When you take control of your life.
You start to see the “Matrix” around you.
You see opportunities more clearly.
You’re more amped to go after them.
You’re more willing to take risks and invest in your future.
These aren’t direct changes to your hourly pay right now, but in terms of lifelong investments, they’ll pay big dividends down the road.
WHAT ABOUT RETIREMENT AND SAVINGS
You can see this is a great opportunity, but what about the risks?
I too would be cautious about living this way if it meant I wouldn’t be able to put away some savings or invest.
My old man plan
I plan on being a grumpy old curmudgeon who doesn’t work.
I want to be able to continue to travel the world in my later years so I can complain about how the younger generations are ruining everything.
I want to sit in my old man chair on the beach and talk about how good life was.
But to live my old man dream life, I will need a retirement savings to live off of.
After taxes and living expenses in Chiang Mai, a $20 earner can still expect to have around $1700 a month to put towards savings, pay down debts, or add to a retirement fund.
A $35 earner, in Baltimore, would have only a couple hundred more per month after taxes and living expenses.
So the risk isn’t significant.You can have your cake and eat it too.
If you’re a professional who’s been considering a go at digital nomadism, I hope this helps.
A heavy reduction in salary seems like a mortal blow, but as we can see from the numbers it isn’t much of a reduction at all.
You won’t be sacrificing the way you might think.
$20 really is closer to $35 in a place like Thailand.
There are plenty of rewards to be had from living as a digital nomad, now you can see how small the risk is.
There are also plenty of nomadic jobs that pay way more.
In fact as you can see from Andrew Henderson’s video, the more you make, the more savings you can take advantage of compared to a western lifestyle.
P.S.I keep referencing this video by Nomad Capitalist but haven’t shared it with you yet. For those that want to know what video I am talking about here it is.