Illustration: Jonathan Woodward
There are certain requirements relating to your financial needs as a LIP which can add an extra dimension to your money management habits…
These include paying out big chunks of cash upfront for better rates on your longer term accommodation, not being able to go into your local bank and sort out any issues with your account and more importantly, not being able to pay cheques in.
Here are my top tips and must-have resources to manage your money as a location independent professional…
1 Online Banking
This is vital for LIPs – you must be able to get access to your bank accounts from wherever you are in the world. Some online banking services are better than others so shop around and ask about things like…
- Additional surcharges for online access
- The range of transactions you can complete online
- How to contact your bank whilst overseas (phone, secure message, fax etc.)
- How easy it is to get support or request non-standard transactions via the online service
2 A credit card with a member rewards program
Having a credit card as an emergency source of funding is not only sensible, it may be required in some countries where you have to be able to prove that you have the means to support yourself on arrival. Short of carrying around wads of cash or copies of your latest bank statements, this usually means being able to show a credit card.
If you are going to use one – and use it to pay for high cost items like flights/accommodation – then again do your research and shop around for a card which gives you membership of a good rewards/airmiles scheme.
3 Make it easy to collect payments & be paid
As a LIP, you may not be in your home country for much of the year which makes it difficult to pay cheques in from clients and customers.
Ensure you have this covered by using online payment services like Paypal, Moneybookers, Paypay or Escrow to make it easy to collect payments from clients wherever you are. Check that you can then transfer the funds from these services to your bank account, so that you can actually get your hands on the cash easily.
4 Use online invoicing tools
Mailing out invoices is not only wasting paper, it is also a minor challenge when the postal service isn’t that hot in the countries you visit. There are numerous online invoicing tools which can help, these include:
- Billable – Simple service and invoice tracking.
- SimplyBill – Easy-to-use invoicing software.
- Blinksale – Another easy-to-use invoicing software.
- Freshbooks – More comprehensive software which tracks time and lets you sends invoices by mail (to US) or email.
- InvoicePlace – another simple-to-use invoicing tool.
5 Cashflow is (still) king
Although as a LIP, you may end up in a situation where you’ve paid your big accommodation and transport bills for the next 2-3 months and all you have to pay are your living expenses, don’t get complacent with cashflow.
Having to bankroll large sums of money for upfront payments gives you a nice breather once you’ve paid them off, but don’t forget about the next payment likely to be coming up in the next few months and ensure your cashflow will cover this.
Maintaining tight control of your cashflow is even more vital as a location independent professional because your financial spending patterns may fluctuate wildly from month to month depending upon which location you’re in.
6 Don’t be slack over exchange rates
Keeping track of your finances when you’re spending (and possibly earning) in multiple incomes around the globe adds an extra step to your financial management processes.
When you’re tracking your outgoings and spending, always use a conversion service like XE.com to get a more accurate exchange rate figure than simply guessing. It may not seem like much when you’re dealing with 0.3 of a figure but it all adds up to bigger inconsistencies in your calculations over the longer term.
7 Keep track by using smart money management tools
If your current financial management system consists of folders full of receipts, then this is probably not going to work so well for you whilst you’re travelling the world as a LIP.
Equally, if your spreadsheet skills are minimal, then consider using an online service like Mint which helps you keep track of your finances really, really easily.
Great article (as always).
Paypal should not be underestimated, especially if you obtain both a Paypal debit and Paypal credit card.
Had not heard of Mint but will look at it
Thanks for all the info
Mint is really great, I have been using it and it shows all the transactions and deposits of my accounts. Very helpful. It also provides useful tips on how I can save money.
I personally have strayed away from paypal, because it is not insured. What that means is that if someone hacked into your account and stole money from the accounts, you can’t get those money back, whereas a bank would give you money back. This happened to my friend who is also a freelancer like me. She and her husband had to close all their bank accounts that were associated with paypal and opened new ones. It was quite a hassle to deal with, not to mention lost of income while she spent time away from work dealing with the unpleasantness.
Just a word of caution!
Cheers,
Cindy
Hi,
interesting article. I’m curious about the recommendation for mint.com – isn’t very US oriented? I though it doesn’t even have support for other currencies (other the USD), is that true?
Do you know of any (more global) alternatives to mint.com?
Cheers,
Paulo
Like he article Lea but I have a couple of questions:
1) Do you still use the UK as your ‘financial center’ or have you found any other locations that are more convenient? (ie. Do you have bank accounts in any other countries?)
2) On arrival at which countries did you have to show a credit card?
3) Are you still paying social security in the UK or have you severed ties completely?
OK, a few questions.
Personally, I like the LIP idea. However, moving about with the whole family (Wife and two kids), together with some kind of inate fear of renting anywhere tends to make it slightly more of a logistical nightmare….
Hey Lea
I am just transitioning into merchant accounts. I used to do all check payments but am tired of chasing after people to write the check. I am located in California, USA, so I am not sure if I would be helpful for you since I am not sure if it is UK-compatible.
Some US banks do have merchant accounts and online banking, perhaps that may be an alternative to look into for UK?
Cheers,
Cindy
What is your outlook on how to deal with receipts? They are all over the place! They must be important as LI for filing taxes (and how do you do that, by the way!?)
Lindsay
Paolo – Mint is indeed US-centric and only integrates with US banks and credit card companies.
Unfortunately, I don’t yet think there’s an online equivalent of Mint yet for non-US users (hoping someone will correct me and share one!!) but of course there are still the accounting software programs such as Quicken/Money etc. which do a similar thing but not automatically, as Mint does. With these programs, some allow you to connect through to your bank (depending upon your version) but for many you do have to upload a file.
If your finances aren’t very complicated, then I have always found a simple spreadsheet useful – I still keep one for times when I can’t/can’t be bothered to connect and log in. If I come across anything equivalent to Mint, I’ll let you know…
P.S. You might find something here: http://mashable.com/2007/07/10/online-finance/
Hi Cindy,
Thanks for the info on Paypal. I too have heard of some horror stories that certainly make me think twice about using it. What service do you use now?
Lea
Mike,
Good questions, more details on our personal circumstances are in the book but here’s some brief answers…
1) Yes for now – we still have UK bank accounts but are looking into offshore accounts to prevent having to pay tax on chunks of income, especially as our corp is set up in a different country.
2) We were actually asked to show a credit card on arrival in the US once this year even though we were only staying overnight. We’ve also had to show the cc in Grenada – not immediately on arrival but at immigration when applying to extend our stay. This is often the case if you want to extend your tourist visa, as the officials obviously want to know that/how you can support yourself if you’re not working in their country.
3) We don’t pay National Insurance in the UK anymore although we’re weighing up the options of continuing to do so as a non-resident. This is largely because we believe we will never return to the UK permanently to live – but you never know and never say never, so we’ll see how it goes!
“inate fear” of renting? That’s an interesting one! What’s behind the fear?
Hi Lindsay – great question. Funnily enough, I don’t tend to have many paper receipts as most of my purchases (certainly for business) are online. However, any paper ones I do have I take a digital photo of to store online, then keep the original in a small folder that I bring with me for any important paperwork.
Taxes….we don’t file any more! Well, that’s not strictly true – I file tax returns online in the UK for our UK assets which is a great service to use for LIPs but you do have to register with UK HMRC for it first as they then need to send you all sorts of security codes. Our company if actually an offshore one, so aside from UK things, we don’t need to file any earnings for the business.