No. This is just one component of an optimised financial plan.
Before starting a specific medium-to-long term savings plan, there are a few things that you should put in place.
Firstly, make sure you have an “Emergency Fund”. This should be the first thing that you do – emergencies happen, and if you’re fortunate to have never faced an emergency situation where you need money quickly, please don’t assume that it will never happen – it almost certainly will, at some point. Your emergency fund should be kept somewhere instantly accessible (i.e. a bank account, separate from your day-to-day banking account), and ideally be worth between 3-to-6 times your normal monthly expenditure (note that this is different from monthly income). You will probably earn close-to-zero return on it, but it’s not there to get you a financial return directly – it’s there to make sure that if you need instant access to some cash, you don’t have to compromise other areas of your financial plan to get at that cash. Don’t sell assets below the optimum value unless you have to, don’t stop your regular monthly investing unless you absolutely have to, and try to never put yourself in the position where you miss out on certain things (i.e. loyalty bonuses on your savings plan) because you dodn’t build enough flexibility into your overall financial plan. Your emergency fund gives you the flexibility you need to keep your financial plan on track – don’t overlook this very important part of your financial planning.
Secondly, get yourself a pension. This should be separate from your other accounts and investments, because it has a very specific purpose which is 100% necessary, and isn’t going to be the most flexible part of your financial plan – it will probably be the least flexible. But set up a pension plan, put a fixed amount of money into it every month, and make sure that whatever else happens in your life or in your financial situation, make sure you’re not old AND poor. You will get old, whatever you do. You do not have to be old AND poor – you can choose not to be poor when you’re older by setting up (and sticking to) a pension plan. For more details on the best pension plan for digital nomads we know of, check out www.PensionsForNomads.com.
Thirdly, put some money into direct equities or cryptocurrency – you can use these things to “practise” saving each month, before you commit to a longer-term plan. Whilst the assets will be volatile, at least you can sell them and withdraw ay time if you need to, without compromising any other part of your financial plan. Having too much in these areas would be quite high risk, but having some, particularly if you use the strategy of “testing” how much you can save each month whilst still being financially comfortable and enjoying life, gives your overall finances some extra strength and flexibility.
Once you know how much you can comfortably save each month towards your general wealth and future big-ticket expenses, you can start your savings plan with the confidence you need to not worry about it. Then you’ll be able to still enjoy day-to-day life, whilst also knowing that you have the flexibility to withdraw larger amounts whenever you need to, or receiving high loyalty bonuses for not withdrawing if you don’t need to. Either way, you’re now in a win/win scenario.
Over time, you can expect your income to grow, and you then have the flexibility to either increase how much you save each month if you want to keep things simple, or start building wealth in other ways – such as private equity holdings, which are significantly less flexible, but as long as your portfolio is well diversified, you can reasonably expect to make significantly more profit over the long term.
You will have many financial needs in future, and you will need many financial solutions to meet those needs – this is just one solution, one important part of an optimum financial plan, it is not the only part though. For more information on creating and managing a first-rate financial plan, check out the other articles on this website and add your email to the box in the footer to receive regular information, tips and suggestions for how to optimise your finances as a digital nomad from www.DestinyForNomads.com.