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Exchange your money for cheaper travel

Money costs travel. There is no solution around it: if you want to move from one place to another it will cost you something. Once you arrive, it will cost you money to stay there. And when you're ready to go home, this will cost you money, too.

When you travel outside your home country – though I am American – this article will focus on Americans who travel outside the United States, but it applies to people of any nationality – there is another cost that most new travelers don't see. This is the cost of the money itself.

There is nothing magical about money. It is an arbitrary construct made by governments and imposed by law as a means of exchanging value. (One of the three distinct characteristics of money, in fact, is that it must be a "store of value.") While some countries choose for a number of reasons to use the currency of other countries to operate their economies, most of them exercise their sovereign right to create and print their unique form of money.

What makes all this a little difficult is that the value of one form of money versus the other fluctuates, literally continuously every second of the day around the clock. The exchange rate Between two currencies is one quantity required to purchase a predetermined amount from the other. For example, at the exact moment when this article is being written, it costs just over $ 1.95 USD (USD) to buy one British Pound (GBP).

The cause of currency fluctuations is a function of the international monetary system that is difficult to explain even in complex macroeconomic terms. However, you can think of it based on the relative strength of two economists as defined in their collective wealth, money in circulation, debt, and optimism for future growth, compared to before. (The last point is very important: many Americans feel surprised or angry when they know that the US dollar is not the strongest currency, given that the United States has the largest economy in the world. Exchange rates deal with the size of the money supply, not just the size of the economy.)

The reason that exchange rates have such an effect on travelers is that prices are in a certain language No Change based on exchange rates. For example, a double cheeseburger in a McDonald's menu costs $ 1.00 USD, regardless of whether $ 1.00 equals £ 0.65 or £ 0.50. If a British woman visits the United States and goes to McDonald's for lunch, she spends dollars, but dollars that she converted from pounds, which is how she measures her personal wealth back home. If the dollar is somewhat "weak" – if it can get more dollars for a pound than is usually the case – you'll buy that double cheese burger for less Pounds or pounds for weightIt means less money even though the dollars that are spent are the same.

If that is a bit confusing, then this is understandable. Americans do not travel as much as they say, Europeans, because our country is too big. Wherever we travel within our borders, which includes American territory such as Puerto Rico and the US Virgin Islands, we use dollars. It is only when we take risks that we face exchange rates. The impact, though, is too great.

When the US dollar is weak against a foreign currency, it costs Americans a lot to live in countries that use this currency. As of January 2007, for example, the British pound and the euro in the European Union are both strong against the dollar. This makes the cost of visiting Europe high on a daily basis Even if you get a cheap price. The longer you stay, the higher the exchange rate will affect your budget.

On the other hand, if you travel to a country where the US dollar is strong, you will spend less US money to get the same amount of local currency and thus the cost of living is lower while you are there. The Argentine peso, for example, is currently weak against the dollar. Take a trip to Buenos Aires, and you can eat steaks that would normally cost you $ 35 for about $ 12 (although the price hasn't changed in terms of pesos).

Here are some tips to keep your spending under control when traveling abroad:

  1. Do your homework. It is easy to find the prevailing exchange rates at http://www.forex.com. It is difficult to know the exchange rate Usually It is, which is what you need to know to determine whether a currency is strong or weak – for example, the US strength gauge against the Japanese yen is based on blocks of 100 yen, not 1 yen. Internet searches can help.
  2. Take trips to places with weak currency. At any given time, some currencies are strong against the dollar and others are weak. If you want to see the world at a lower cost, focus on traveling to the places where your money will go. Prices are constantly changing, so you will eventually reach every place on your list.
  3. Use the cash while you are there. It is hard enough to decide if 5 € is too expensive for a sandwich if you know 5 € has cost you $ 8.00 at the time of the exchange. With a credit card, trading is carried out using the exchange rate at the moment of sale – something you do not know.

Finally, remember that some countries have used Bound currency, Which means that they give their currencies a constant value based on the money supply in another country. For years, Argentina pegged the peso value in 1: 1 to the US dollar, forcing the peso to retain its value. If a country has pegged its currency to your currency, ignore exchange rates because the value you spend will not change. Exchange rates can be a little difficult, and are among the most complex ideas that really should be controlled. If you plan your trips properly, you can use them to make your money extend outwards more than at home. This is one of the travel budget secrets.