Several years ago, I read a book called The Four Hour Workweek by Timothy Ferriss. Although the title sounds cheesy and may cause poorly produced late night infomercials to flood your mind, the content of Ferriss' book is actually quite good. Essentially, Ferriss argues the case that a person should consider taking several "mini-retirements" throughout the course of his or her life, instead of slaving away 30 years, only to enjoy "retirement" during the latter stage of life.

Well, in late summer 2010, my wife and I decided to go on our first "mini-retirement". I wanted to go to Thailand, she wanted to go to Europe. So, of course we went to Europe! The idea was simple. We would rent our home in Charlotte, NC to some friends, and rent a place in a different part of the world for 3 months. The only large expenses would be plane tickets, rental car, and rent. Otherwise, we thought expenses would be about the same as living in the States. One thing we really did not take into account, however, was how much impact the exchange rate differential would have on our finances.

Choosing Your Destination

It should go without saying that when you are choosing a destination, choose a place where your dollar is going to be stronger than the local currency. Our final destination in Europe was the island of Crete, which is off the south of Greece. We stayed in a majestic stone villa overlooking the Mediterranean for three months, but the EUR USD exchange rate really impacted us more than I had anticipated.

When we arrived in Europe, EUR USD was trading around 1.3500. That meant, essentially, that there was an immediate 35% inflation on all goods and services. We typically spend about $150 per week on groceries in the States. In Crete, we spent well over $200 because of the exchange rate. Remember to seriously consider choosing a country where the U.S. dollar is considerably stronger than the local currency. Examples: Argentina, Thailand, Singapore, Mexico, Peru, (anywhere in South America except Brazil, really).

Transaction Costs Are A Killer!

Again, I made a big mistake here. I have a cousin who travels to Greece several times a year and generally stays for 3 months at a time. He will take thousands of dollars in U.S. cash when he goes so that he does not have to pay multiple exchange rate transaction fees. My wife and I were a bit hesitant to do this because we didn't want to lose cash, so we opted to take just $1,000 in cash, and then we planned on withdrawing from ATM's in Europe.

This was a horrible idea. I honestly cannot even remember how much we paid in transaction fees during our 3 month stay, but it was hundreds of U.S. dollars. Every time you withdrawal from an ATM you are charged a little chunk, and it's much more than the $2 fee in America. Buying with a credit card or debit card doesn't work because many places like grocery stores, local shops, etc will not take credit cards! We didn't know this going in, but we do now.

The Solution

The best thing to do if you are traveling for an extended period of time is to open a bank account at your destination and then wire your U.S. funds to this new account. This will cost a one-time fee, but then you are done, and over the courses of months you will save hundreds of dollars.

Traveling abroad is an amazing experience. New cultures, new people, new sights and sounds. Just remember to take advantage of the currency game when you choose your destination and how you will move your money from the States to your destination. My wife and I are already talking about our next trip to South America. The cheap exchange rate in Argentina, Peru, Ecuador, and other countries makes living large and luxurious relatively cheap with our U.S. dollar. That is the best combination!