4 Ways Being a Nomad Saves You Money
Maybe it was when you were fresh out of college, had just moved to a new city, or that time you wanted to spend the summer in Rome. Back then, not having a permanent address just made sense — or perhaps it was your only option.
But, even as adults, there are special circumstances or times in our lives when electing a nomadic lifestyle is the right choice. In fact, it can carry significant financial and personal advantages. Read on to learn how giving up your permanent address can benefit your wallet. (See also: Save on Car Rentals With These 10 Easy Hacks)
1. Less Tax
If you're self-employed and travel a lot for work, earning the majority of your income within the U.S., you're required to pay federal income tax. But you can elect a no-income-tax state, like Florida or Texas, as your permanent address and avoid state and city taxes. If collecting mail is an issue, there are several mail service providers, like Traveling Mailbox, that will accept and scan your incoming mail and forward it anywhere.
2. Possibly No Tax
For those residing outside the U.S. for at least 330 days per year and generating the bulk of their income abroad, the Foreign Earned Income Exclusion (FEIE) of the IRS Code permits U.S. citizens pay zero federal tax on up to $101,300 (2016) of income earned abroad. In addition, ex-pats can claim annual deductions for housing expenses and meals. Freelancers and self-employed individuals also qualify for these deductions. And many overseas paradises cost a fraction of what it costs to live in the U.S.
3. Cheaper Cost of Living
Sometimes renting costs far less than homeownership. In New York City, a 600 square foot apartment will run you about $2,500 per month in rent. To buy it, it would cost roughly $750,000. That's a $150,000 down payment and a mortgage of about $2,000 per month for 30 years. That doesn't include the additional $1,000, give or take, per month you'll have to shell out for maintenance, nor does it include closing costs, PMI, property tax, or annual assessments. Instead, here's an idea: Invest the down payment today and in 30 years it'll be worth over $1.8 million (10% annual returns). Liquid. Sadly, I doubt you'd get that kind of return on your real estate, even in Manhattan.
4. Keep More of the Money You Make
You won't need to be weighed down with a lot of possessions that don't hold their value, like cars, furnishings, and electronics. Unless, of course, you are a collector of arts and antiques. Few people splurge on a temporary address, so chances are, you'll further save when that extra storage space disappears, causing you to lose that tendency to over-consume and overspend.
Have you ever lived as a nomad? How'd it help your finances?
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