Whether you are an experienced world traveler, making the most of your retirement, or going abroad for the first time, preparing for your trip is an extensive process. While it is exciting to plan for your adventures, it is crucial to support your plan with a solid financial foundation. Regardless of your domestic financial situation, things will be different in other countries, and some essential steps should not be overlooked during the planning process. From navigating foreign exchange rates to reducing extra fees while abroad, this blog will help you make your journey not only memorable but financially stress-free. 

Outline your trip

The first step toward making a financially sound plan is to conduct some background research on the place(s) you are going. You should review several topics that we will address throughout this blog, depending on your destination, length of stay, and current financial situation:  

  • Which Credit Card Should You Use?    
  • Why Travel Insurance Matters 
  • Understanding and Optimizing Exchange Rates   
  • Other Aspects to Consider 
  • Reassessing Your Financial Roadmap Upon Returning 

Which Credit Card Should You Use?  

When traveling abroad, choosing the right credit card is one of the best ways to get the most out of your money. The options nowadays are seemingly endless, as there is a card to match the needs of every type of customer. However, there are several essential steps to choosing a credit card for international travel. The first major qualifier is that the credit card should have no foreign transaction fees. These fees can reach as high as 5% depending on the card, and when considering that you will incur these fees on every foreign transaction, the costs can add up quickly. 

Now that your list has been narrowed down to cards without foreign fees, the time has come to decide which card has your favorite perks. Almost every credit card offers some type of reward for signing up and for spending regularly, but there are some that cater to travelers. Common rewards include airline miles, hotel points, or credit toward overall travel expenses. This research should start once you have decided on a destination, as you can then choose a card that gives you rewards toward a specific airline or hotel. If you will have a variety of flights and accommodations during your journey, choosing a card with regular cash back might be more suitable because it can be spent anywhere.  

Choosing the right credit card will help you rack up rewards and save money along the way, but it will also keep your money safer during your stay. First, credit cards typically provide better fraud protection, with many offering zero-liability policies for unauthorized transactions. This security feature is important when in unfamiliar environments, as it will help protect against liability if you fall victim to card skimming or lose the card. Additionally, debit cards may carry their own foreign fees and ATM fees, which can be even higher than those of credit cards. Having a credit card will also help keep you prepared for an emergency, as an unexpected expense can be put on credit, providing you with a buffer for an unanticipated expense. Overall, being equipped with the right credit card will go a long way in your travels, as it will save you money while providing a sense of security that most debit cards cannot offer. Here is a checklist to follow when choosing your travel credit card: 

  • Widely accepted globally 
  • No foreign transaction fees 
  • No ATM fees 
  • Travel rewards or points (whatever suits you best) 
  • Reasonable annual fee (some are zero!) 
  • Strong fraud protection 
  • Reliable customer service  
  • Travel insurance (optional) 

Why Travel Insurance Matters

Regardless of your level of travel experience, there is always a chance that unexpected events will pop up during your journey. It is important to be prepared for everything, as mishaps such as lost luggage or medical emergencies could turn your travels into a nightmare. The best way to prepare for this is by getting travel insurance, which will act as a safeguard against unforeseen emergency costs along the way. The cost of the plan will depend on the specifics of your trip, but the price is worth it for the feeling of financial protection. A typical travel plan will have you submit proof of your loss when you file the claim and will reimburse any losses you have incurred. In many cases, this even extends to trip cancellation. For example, if you were to get sick or injured close to your departure date and must cancel, some plans will give you a refund on any prepaid costs, even if it is past the refund date.  

While there are many benefits to travel insurance, their extent is dependent on the plan you choose. Similar to the vacation itself, an all-inclusive insurance plan will come with more benefits, but at a higher cost. Once you have ironed out the specifics of your travels, choosing the right plan becomes much easier. Some minimal plans offer protection against damage or theft to personal items, while some will even cover emergency travel and medical bills. At the end of the day, it is important to choose a plan that you feel covers the appropriate amount of risk for a cost you are comfortable paying, as it can end up being a lifesaver if things go awry.  

It is also important to note that some credit cards include travel insurance as one of their benefits. This can be a convenient option, especially if you are already looking to apply for a credit card to use internationally. Cards that include travel insurance typically come with an annual fee; however, this fee could prove to be a small price to pay for added security during your travels. 

Understanding and Optimizing Exchange Rates 

Keeping up to date with the exchange rate at your destination is another step toward successful financial management during your travels. This rate determines the value of your home currency in other countries, which you must know when estimating your travel expenses. For example, as of June 2024, 1 U.S. dollar is worth 0.93 euro, while that same dollar is worth about 157 yen. Knowing the cost of items at your destination relative to the domestic price will give you a better sense of how much you are spending and how to budget going forward. Exchange rates are subject to change, meaning your purchasing power could be affected, especially when traveling for a long time. Having a strong knowledge of your home country’s exchange rate can help you capitalize on favorable rates, which will maximize the value of your money. A prime example of this occurred in September 2022 when the value of 1 U.S. dollar reached the value of 1 euro for the first time since the euro was introduced. The value increased to 1.03 euros by October 2022, meaning that the U.S. dollar has depreciated about 10% against the euro since then. This essentially means that a U.S. dollar was able to buy 10% more two years ago than it can today, which shows how important it is to monitor these changes leading up to your departure.  

Using a credit card with no foreign fees is the cheapest and most secure way to spend money while abroad, but having cash to use in certain situations is still important. If getting some foreign cash beforehand helps you feel more comfortable, you can always check with your local bank, but the availability will depend on where you are going. If you are planning to use an ATM at your destination, it is crucial to make sure your debit card does not charge a foreign fee. Also, avoid exchanging money at places with high premiums, such as airports. If you do opt to use your credit card for most purchases, it will give you the option to make a purchase in your home country’s currency or the local currency. This is called dynamic currency conversion. Purchasing with your home country’s currency could incur extra conversion fees and typically comes with a suboptimal exchange rate. Choosing to make purchases using the local currency will get you the best exchange rate possible and help avoid these fees, thus making it the cheapest option. And don’t forget, using your credit card will help you accumulate points to redeem along the way.  

Other Aspects to Consider 

Understanding Your Cellular Plan 

Before embarking on your journey, check with your cellular data provider regarding the details of international roaming. Fortunately, some carriers include free international data in their existing plans through partnerships with foreign carriers. If your plan does not include free roaming, other options might be favorable to avoid paying excessive fees during your trip. If you choose to stay with your current provider, stick to Wi-Fi as much as possible. Most places nowadays offer public Wi-Fi. Or, depending on where you are, there could be options to rent or purchase wireless hotspots. 

Enrolling in Global Entry

Offered by U.S. Customs and Border Protection, the Global Entry program allows for much more efficient international travel. To qualify, you must be preapproved through a background check. Once this clears, you can enroll in the program and complete an interview at a designated Enrollment Center. Being in the Global Entry program will help eliminate extensive paperwork and lines at the airport while also allowing you access to expedited entry at U.S. airports. At $100 for a five-year membership, this is a must-have for anyone planning to travel internationally. 

Will You Need a Visa? 

Once you have decided on the destination and duration of your stay, you will have to research the visa requirements of where you are going. The best way to do this is by using the destination search tool provided by the U.S. Department of State. This will provide you with extensive information regarding your destination, from visa requirements to local regulations to current affairs. If you are going to require a visa, this tool provides you with the correct link to start your application and the appropriate steps.  

Reassessing Your Financial Roadmap Upon Returning 

After you have successfully managed your finances and navigated a trip abroad, reassessing your situation when you return will ensure a smooth transition back. Whether you have made significant purchases, experienced currency fluctuations, or incurred unexpected expenses, you should evaluate how your long-term financial roadmap has been affected so that you remain financially healthy 

If you have a financial advisor, scheduling a meeting upon your return will help you realign your plan accordingly. In addition to making sure your financials are in order, an advisor will be able to help explain any tax implications of your trip, especially if you worked during your stay. Although there is a lot to consider, you don’t have to do it alone. If you have questions upon returning from your travels, please reach out to our team.     

Disclaimer: This is not to be considered investment, tax, or financial advice. Please review your personal situation with your tax and/or financial advisor. Milestone Financial Planning, LLC (Milestone) is a fee-only financial planning firm and registered investment advisor in Bedford, NH. Milestone works with clients on a long-term, ongoing basis. Our fees are based on the assets that we manage and may include an annual financial planning subscription fee. Clients receive financial planning, tax planning, retirement planning, and investment management services and have unlimited access to our advisors. We receive no commissions or referral fees. We put our client’s interests first.  If you need assistance with your investments or financial planning, please reach out to one of our fee-only advisors.  Advisory services are only offered to clients or prospective clients where Milestone and its representatives are properly licensed or exempt from licensure.

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