Flexibility is one of the most rewarding parts of being a digital nomad, but it needs to be balanced with hard work and discipline. The dream is to earn a decent amount of money from passive income-earning projects.
A 2020 MBO report revealed that 26% of digital nomads report an annual income of less than $25,000 (R358,259), while 38% report an income of $75,000 (R1,074,777) or more. Though it is clear that the digital nomad lifestyle can sufficiently cover most living expenses, you might want to give yourself an edge by diversifying your income streams. One way to do this is to generate a passive income.
Speaking of being a digital nomad, browse our guide on how to choose the best digital nomad destinations here.
Passive income is income generated with little active effort. For digital nomads, who constantly shift between locations and jobs, the steadiness of passive income can help balance the hectic nature of location independence. Below are a few examples of passive income projects digital nomads can take on while on the road.
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1. Cryptocurrencies
Cryptocurrency continues to shake up financial markets, with the value of one Bitcoin at $46,730 (R669,657) at the time of writing. There are other competing digital coins too that are becoming increasingly popular. These include Ethereum, Cardano, Ripple, and Chainlink.
You can take advantage of the assets’ fluctuating price by buying cryptocurrencies at a low price, and then selling them when their value increases. This is known as cryptocurrency trading, which you can actually automate through platforms like Binance and Kraken. This can make it more of a passive activity for you. Alternatively, you can choose to park your money in cryptocurrency as a long-term investment and wait for good returns a few years down the line.
2. Securities Trading
A security is any type of financial instrument that holds monetary value. Common types of securities are stocks, bonds, and mutual funds. Meanwhile, experts don’t consider crypto as a security just yet.
Securities represent a monetary relationship with any financial institution. According to the finance website Nerdwallet, stocks are examples of equity securities, which represent partial ownership of a corporation. Bonds, on the other hand, are debt securities, which represent loans issued to companies or governments. Mutual funds are a mix of different company stocks, bonds, and other securities.
You can profit from having these monetary relationships. For example, stockholders can earn a portion of company profits through distributions called dividends. On the other hand, those who invested in bonds can receive interest on the money they loaned. And if the value of a security rises above the price you bought it for, you can also trade it and turn up a profit.
Thinking about becoming a nomad entrepreneur at the same time? Check out our digital nomad business guide here.
3. Spread Betting
If you lack the starting capital to make high returns on securities, you can try spread betting. An FXCM write-up on spread betting defines it as the process of wagering on the movement of a security. Some securities you can bet on are stocks, bonds, mutual funds, and other financial instruments.
Through spread betting, you can profit off an asset’s rising value without having to actually own it. And unlike security trading, anything you earn from spread betting cannot be taxed, which can be ideal for digital nomads who travel through countries with unfavourable tax regulations.
4. CD Laddering
If you want a risk-free way of earning money, meaning without the volatility of financial markets, you can invest funds in a Certificate of Deposit (CD) and use the CD ladder technique. A CD is a kind of savings account that offers high interest for money deposited under a fixed term. Funds inside a CD cannot be withdrawn until that term ends.
To give yourself more flexibility, you can use the CD ladder technique. Investopedia’s CD laddering guide explains that funds get spread equally across multiple CDs of different term lengths. This allows you to benefit from both the easy access of short-term CDs and the higher yields of long-term CDs by having that income spread across multiple years. For example, you split $40,000 (R573,214) into four $1,000 (R14,330) deposits, then spread each across a one-year CD, a two-year CD, a three-year CD, and a four-year CD. That way, you gain interest on each CD and can have at least one account available to withdraw from yearly.
Crypto and securities trading, spread betting, and CD laddering are only some examples of passive income sources for digital nomads. Those who prefer more active approaches to income generation can check the different positions listed in ‘Digital Nomad Jobs’. The wide variety of options only highlights the biggest appeal of the digital nomad lifestyle: flexibility in work and location.
Good Luck With Your Projects!
These are just a few financially orientated projects that can help to earn passive income while you travel the world. There are multiple forums and communities for both digital nomads and financial traders that offer a wealth of information and tips.
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Candice Boyers
Candice Land, aka Candi Land, aka The Captain, is a freelance writer, digital nomad and full-time globe trotter.
