Travelling — The Financial Side

Finance is truly the international language that we all share, no matter where you go you can discuss items in terms of a price. It gives us the incentive to go to work to earn an income and it allows us to pay for goods and services so we can have items like housing and food. And it allows us to travel. This article will shed light on travelling aspects of finance and give you advice to make your next trip a more affordable adventure, so let’s jump into it.

Travel Budgets: Most people budget for big travel expenses like the cost of a tour or flight, but forget a daily budget for items like food and entertainment. Budgeting is the most important thing you will do for your travels, and the second most important thing is tracking your expenses against the budget and using that to make decisions. So how do you do it?

  1. Start by looking at your finances to see what you are comfortable spending on your travels, which is your maximum budget. I don’t recommend taking on debt to travel, so only use your savings for travel.
  2. Do some research, talk to people who have travelled to that area to get a sense of what they spent on a daily basis, and set your daily budget. If you want to be more advanced, add categories for items like food/beverages, accommodations, transportation, and miscellaneous. For reference, on a recent trip with my fiancée to Eastern Europe we budgeted $175 CAD per day ($87.50 per person).
  3. Track your expenses to see how you are matching up to your budget, and use that for decision making. Want to go over your budget one day for a skydiving adventure or have a spa day at a fancy hotel, do it! Just remember that you will need to restrict your spending on other days to offset those overages.
    There are some great tools out there, and I would recommend the “Trail Wallet” app. It allows you to quickly input all of your expenses and will do the currency conversions for you to get everything back in CAD!

Cash: While cash is used less frequently in many places, it is still important on your travels for small purchases, tips, cab fares, etc and some countries still depend on cash for local trade, so I would recommend carrying some cash in the local currency. How much you carry depends on your comfort level, but I generally carry the equivalent of $50 CAD in the local currency and sometimes up to $200 CAD. If you don’t have enough cash on you, or you just arrived in a new country and don’t have their foreign currency, go to an ATM and withdraw the appropriate amount (you can check the exchange rates using Google or a foreign currency app like “XE” — remember to check exchange rates and know how much in CAD you are withdrawing. When we were in Poland, the ATM screen defaults had a minimum of 2,000 PLN which was nearly $700 CAD so we had to navigate to get a more reasonable amount). This also leads to an important tip on ATM fees:

When using an ATM to withdraw foreign currency, you may not realize it but you generally get charged three fees:
1) Your bank charges a FX conversion fee
2) Your bank charges an ATM withdrawal fee
3) The ATM provider will charge a fee for using it

As a tip, you can avoid ATM charges from your bank if you get the right account. You can compare accounts using a comparison website or by speaking with your bank representative. For myself, I have the ‘TD All-Inclusive Banking Plan’ which gives me no ATM fees.

One final tip with ATMs is to change your debit card to a 4 digit pin only since most ATMs internationally only accept 4 digit pins.

Credit Card: There are many credit cards out there that have different benefits, so do your research and comparison websites like ratehub.ca are great resources. If you are using your credit card for travel or buying anything in a foreign currency, you will generally be charged an additional 2.5%-3.5% fee for foreign exchange transactions. I could only find two credit cards in Canada that don’t charge that fee. One is the Scotia Bank Passport VISA card, and the other is the Home Trust Preferred VISA. I went with the Scotia Bank Passport VISA, and it has worked great.

Let me share a recent example. Our flights from Europe to Africa cost 639.98 euros, and the vendor offered me to pay 988.73 CAD or the 639.98 Euros on their website checkout. I paid the 639.98 Euros using my ScotiaBank Passport VISA, and the conversion without the surcharge resulted in 958.76 CAD on my VISA statement. The net result: I saved $29.97, or 3.0%! That may not seem like much, but add it up on all of the transactions over the course of your travels and the savings are significant!

The key to credit cards is using them for their benefits, but making sure to repay them in full each month!

Summary: Do your research and prepare for your travel which includes getting the right credit card, chequing account (and debit card), and setting a budget you are comfortable with. During your trip, track your expenses using an app like ‘Trail Wallet’, use the reports from the app to make decisions, and know the foreign exchange currency rates using Google or the ‘XE’ app. Above all, have fun and be safe! It’s a big world out there, time to get exploring.

Note: This article owes a debt of gratitude to the advice from David Slack and Sascha Ferguson for their expertise in financial matters associated with extended travels.

Disclaimer: This article is based on my own experience/advice/opinions, and are not associated with the experience/advice/opinions of my employer.

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Steven Comaniuk

Steven is a finance professional whose employment has taken him throughout North America, and personal interests have taken him around the world.