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Financial Planning to Go Abroad

Studying abroad should be a positive experience, not one riddled with last minute financial chaos. Donít underestimate the usefulness of a well-planned budget. Having a sense of control over your budget will let you focus on the most important issues involved with your experience, like learning another culture or language.

When preparing a budget for your learning vacation abroad, use your budget at home as a guide - and then prepare for things to cost even more than you expect. Do some research on costs and seek out someone who has knowledge of day-to-day costs in the country you'll be visiting. Remember that at least for the first few weeks you may not know where to find the "best" value and you shouldn't let this stress you out.

Start with the trip costs you know, i.e., airfare, tuition, housing, etc. Then make a list of things you know you'll need additional money for. Include estimates for local and regional transportation (bus fare to/from school, plus just getting around), meals outside of the home, books and materials (required or optional) at the school, sightseeing and entertainment, laundry and clothing purchases, souvenirs, phone calls, snacks, tips, newspapers, beverages, airport taxes, medical expenses, and emergency money.

Finally, list the costs of items you may need to purchase before you leave. This category is the easiest to budget, because making sensible purchases prior to departure may leave you more money to spend on things you want abroad.

Don't buy a new travel wardrobe or new luggage (unless you need it). You're not going on vacation . . . you're going to a foreign country to live and learn with the people, so you'll want to dress appropriately and blend in. Fancy clothes and expensive luggage may target you for crime. Only buy things that will add to your comfort.

Your "Emergency" budgetary amount should be substantial and flexible. If all goes well and you don't dip into it, you can either spend it lavishly on yourself, or save it for next time. It should be based on the fact that something can go wrong and you should be prepared for it. This could mean you need it for an emergency night's lodging, a medical bill, something to wear if your luggage gets lost, or anything else that could and might happen.

Sitting down with your personal banker and discussing your plans to travel abroad may be smartest thing you do. By planning ahead, both for enjoyment and emergencies, you'll travel with a lighter conscience and have a great trip. Your personal banker should be able to answer almost every financial question you may have, covering a wide spectrum of topics: conversion and exchange rates, traveler's checks, using your ATM card abroad, credit card use, wiring funds, amenities provided by credit cards and various traveler's checks, and much more. They may even be able to set up a plan of action for a financial emergency. If something does happen, a long distance phone call to your banker could set the plan in motion for you and you'll be better off

A Few Useful Tips

1. Obtain some foreign currency in advance. You may not get the best exchange rate, but you'll have money in your pocket when you arrive.
2. Examine foreign bills and coins before you leave home. Thinking in the currency you're using instead of always trying to convert it to dollars is wiser. It will help you save time when making purchases and will help you better understand the country's economics.
3. Traveler's checks remain the safest and most reliable way to obtain cash, followed by credit cards and ATM cards. However, in most western countries it is usually easy to withdraw cash using your ATM card, which will also give you the banks more favorable exchange rate.
4. Banks in foreign countries are usually open fewer hours. Learn the bank schedules in the country you're visiting.
5. You may need a passport in order to cash traveler's checks abroad. A photo ID is helpful in cashing travelers checks.
6. Bring along a pocket calculator or exchange calculator to help you with the rates if you'll be doing some serious shopping.
7. Don't get "hung-up" on the exchange rate and allow it to spoil your experience. Sometimes you may have to pay more than the official rate. You may not want to use an unofficial rate (if available) due to some local laws. Use good judgment and follow rules.
8. Save receipts of all the money you change. Many countries require that you show these receipts upon leaving (especially if you want to convert foreign currency back to your home currency).
9. Keep two records of your travelers checks numbers. Give one to a relative at home, and keep the other one separate from the checks.
10. Keep accurate records of what travelers checks you cash and where.
11. VISA and MasterCard are the most widely accepted credit cards. American Express offers you the broadest range of services. Some credit cards offer travel insurance, shopping and emergency cash services but you'll need detailed information on how these services can be used in the countries/ cities you'll visit.
12. Leave other credit cards not useful to you abroad at home.
13. Keep all receipts of purchases, credit card and ATM transactions in a safe place.
14. Don't give money to beggars, but reward someone who performs a service for you.
15. Personal checks can virtually never be cashed - but take along a few "just in case."

The Skinny on Foreign Currency Exchange

Now take into consideration that you'll be spending a foreign currency and you may also be losing some money due to the exchange rate. Also, keep in mind that if you are going to be away for a significant period of time(ie. a year or more) that the exchange rate can vary significantly, so plan your budget based on a less favorable exchange rate to be on the safe side. A savvy traveler plans for these factors when traveling abroad.

A recent Wall Street Journal article discussed the advantages, convenience, and exchange rates when using Automatic Teller Machines. Depending on the country you'll be visiting, you may want to research the availability of ATMs in the area.

The growing number of automatic teller machines abroad is sharply expanding the places where travelers can use their ATM cards. There are also thousands of machines where travelers can use their American Express, Diners Club, MasterCard, and VISA cards to get cash abroad (although these are treated as loans, incurring high interest rates). Also, ATM and cash advance machines abroad may simply not be reliable, and in a worst case scenario, may "eat" your card.

According to an article in Conde Nast, many travelers rarely go to the trouble of comparing exchange rates and usually change their money at the most convenient outlet they can find.

The article suggests looking to professional exchange brokers before you leave the country. Apparently, rates from brokers are usually better than quotes from overseas banks, and much better than those from hotels, stores and exchange booths (cambios).

Wiring funds is sometimes necessary. Again, check with your personal banker. You can wire funds bank-to-bank, or use Western Union or American Express. Fees and delivery times vary. Once abroad, plan on several calls "coordinating" and locating the funds. Planning ahead for wiring funds in an emergency could pay off big and significantly speed up the process.