Traveling the world while maintaining a successful career is the stuff that dreams are made of, but despite the glamor of traveling, there are a ton of logistics around money that you have to consider. Everyone has challenges around budgeting, but as a digital nomad who works remote and travels often, you need to be on top of it.

Here’s how to do it in a practical yet modern way — with a digital envelope budgeting system using Relay. If you’re new to Relay, it’s a business banking platform used by small businesses and digital nomads to implement budgeting methods. And in this article, we’ll show you to implement digital envelope budgeting in your business using free checking accounts.

⚠️ Webinar alert: Relay, authors of this article, will host a webinar on November 17 together with Bench, America’s largest professional bookkeeping firm for remote small businesses, where they will discuss the intricacies of operating a US business from abroad. They will also take the time to answer any questions you may have related to remote entrepreneurship. Register here!

What is envelope budgeting?

If you’re not familiar with envelope budgeting, it’s an old-school budgeting method that’s been around for decades. Your grandparents or great-grandparents may have used it to manage their household budgets back in the day, but with the shift to online banking, this budgeting system has really digitized in recent years.

Envelope budgeting is a money management technique that helps business owners control their spending by categorizing their expenses into different categories or “envelopes”. Each envelope represents a business expense, such as operating costs, owner’s pay, taxes and technology tools. For digital nomads, you may have extra categories for things like business travel, health insurance or an emergency fund.

The idea behind envelope budgeting is rather simple: each month, you take your total revenue and portion it out into your “envelope” categories for the following month.

After allocating a budget for each envelope, you cannot spend more than what is in that envelope.

The exercise of having to determine your budget every month really forces you to look at your revenue and spending habits more closely.

Example of envelope budgeting for digital nomads

For digital nomads, digital envelope budgeting can be a practical way to manage your money. Of course, in order to do this, you’ll need an online bank account like Relay that allows you to create multiple bank accounts for free. Once you have a business bank account set up, you’re ready to set up your envelopes.

Let’s illustrate this with an example: say you’re a digital nomad who runs a content marketing company remotely.

As a business owner, the first thing you want to think about are the expense categories that you have. Here are some “envelopes” that come to mind:

  • Operating Expenses: Think remote office equipment and supplies like a laptop, or paying for a co-working space.
  • Payroll: To pay yourself, employees or freelance writers you may work with.
  • Software subscriptions: This is a big one for a digital nomad with tools like VPNs, password managers, communication tools (Slack, Zoom) and tech that you need to do your job (Google, Microsoft, Grammarly, etc).
  • Marketing: To help advertise your business and grow your client base, you may be running social ads or paying for a website.
  • Business Travel: Like moving locations for business purposes or conferences.
  • Insurance: As a digital nomad, you are choosing a permanent or semi-permanent life of travel, so it’s important to protect yourself with health AND travel insurance.
  • Taxes: Tax season can be extremely stressful and complex as a digital nomad, so it’s best to start saving for taxes right from the beginning.
  • Emergency fund: When working remotely, you never know what situations you may run into, so it’s best to have an emergency fund for unexpected events.

Once you’ve determined your envelopes, the next step is to figure out how much money you want to allocate to each envelope. Say your content marketing company brings in $5,500 a month, here’s a possible break down of funds:

Envelope Percentage of budget Dollar Amount (of the $5,500)
Operating expenses 20% $1,100
Payroll 30% $1,650
Software subscriptions 5% $275
Marketing 5% $275
Business Travel 10% $550
Insurance 10% $550
Taxes 15% $825
Emergency fund 5% $275

It’s important to note that the beauty of envelope budgeting is that it’s completely customizable to your business. You can have as many or as few envelopes as your business needs, and allocations for each one will differ depending on the type of business you own. As a content marketing company, your operating expenses are likely to be low, but if you run a product-based business, they could be much higher. Again, what you track will depend on what type of business you run. Additionally, as a digital nomad, taxes are an added layer of complexity, so be sure to review tax residence guidelines to determine your business tax rate.

Benefits of envelope budgeting for digital nomads

Envelope budgeting has its advantages and disadvantages, but overall, it’s a practical way to manage your money and prevent overspending. While a cash envelope system may not be convenient for digital nomads, here are some reasons why a digital envelope system can help you budget like a pro:

It’s more secure and easier to access remotely: Online banking gives you more ways to keep your business secure while banking conveniently. With the realities of travel, carrying physical cash just isn’t safe — it’s simply easier and more efficient to manage a digital system through an online bank.

Gives more clarity into spending: Having multiple bank accounts is better than keeping all your money in just one. Compartmentalizing your money gives you more clarity into what and how much you’re spending in each business category. It also forces you to confront your spending habits and make decisions about what’s really important for your business. What’s more important, a new $500 work chair or putting money towards a new computer that you desperately need to run your business?

Prevents overspending: With the digital envelope system, you can’t spend more money than what you’ve allocated into a specific envelope. When the cash is gone, it’s gone. You can’t replenish that envelope until the following month.

Keeps you accountable: Envelope budgeting really forces you to sit down and review your budget monthly. Let’s be honest, most small businesses don’t do this. While it may be difficult to allocate expenses the first month, over time, you will have more clarity into your spending and start to see trends.

Banking built for digital nomads

There are a lot of expenses to budget for as a digital nomad, but with a budgeting framework like envelope budgeting, you gain more clarity into your cash and better control your spending.

That being said, in order to implement envelope budgeting successfully as a digital nomad, you need an online banking platform that supports the creation of multiple checking accounts. With a neobank like Relay, you can open up to 20 no-fee, individual checking accounts under one centralized login to help compartmentalize your money—that’s the most free accounts out of any US online banking platform.

Cover image credit: Stocksy