How Does the Exchange Rate Impact Your Vacation Budget?

Are You Traveling to a Country With a Significant Exchange Rate?

When you travel outside your country, you may encounter the need to use a different country’s currency. For example, if I travel from my home country of the United States to Canada, I can’t hand over American dollars there. I need their local currency, the Canadian dollar. Sometimes, you can get away with handing over your home currency, or you might be part of a large group of countries that all use the same currency, like the European Union.

However, it’s usually a toss-up when you’re traveling as an American or even a European as to whether you can use your own currency or whether you’ll need to switch over to another country’s money. What might take you by surprise, however, is not necessarily using another country’s money but actually paying a different rate for similar services due to the exchange rate.

For example, if you’re an American traveling to Vietnam, you’ll go from seeing hotel rates in the United States that commonly range from $100 to $200 (that’s a broad average, but pretty common when you’re not pursuing ultra-budget or luxury hotels) to homestays and hotels that only cost $15 to $30 a night, when you measure them in American dollars.

What this means is that your American dollar goes much further when you’re paying for various services in Vietnam. Sure, the plane tickets will cost you an arm and a leg, but once you’re in the country, you’re paying much less for things like food, hotels, and tours. But the exchange rate may not always favor you, whether you’re traveling from the United States or any other country. Let’s learn about currency exchanges and how to budget your trip to another country.

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Researching the Exchange Rate in Your Destination Country

The first thing you’ll want to do when creating a budget for your international itinerary is take a look at the exchange rate for your home currency into the money of another country. Yesterday, I went downtown to exchange a few hundred dollars for some Euros because I’ll shortly travel to Europe and will need currency for France and Italy.

Generally speaking, a lot of the items in Europe are a little more expensive than they are in the United States, and the exchange rate (as of this writing) currently favors the Euro over the dollar. I exchanged $300 dollars but only got around $270 Euros back. Since everything in France, my first destination, is a little more expensive than the United States, my dollar won’t take me as far as it would if I was just traveling across my own country.

Overall, I know how much money I can spend on my vacation, but the exchange rate may impact the length of time I’m able to travel before I hit my budget limit. If I have $4,000 to spend on my trip, that won’t equal $4,000 Euros. It’ll be fewer Euros, and when you combine that with the fact that things like meals and hotels are more expensive in Europe, my budget won’t take me as far.

Fortunately, it’s quite easy to look up costs for pre-arranged items before you go and compare the costs in your local currency. All of the taxis, hotels, flights, and tours I booked were all done in US dollars, so it was easy to know how much money I was spending. The area where I’ve needed to do the most research is for food since booking and paying for a restaurant before you’re even in the country isn’t really feasible.

Modifying Your Budget to Accommodate a Different Currency

It helps when you’re traveling to book things ahead of time. Not only does booking ahead of time ensure you don’t miss out on an activity or face a sold-out hotel, but it also helps you maintain and stick to your budget. If you have everything but your food, tips, and souvenirs arranged before you depart, you can reduce how much money you need to take with you, as well as how much research you need to conduct into a different exchange rate.

The costs of living for the different countries I’ve traveled to so far have been wildly different, which has meant I’ve had fairly different budgets for each itinerary I’ve researched. For example, my trip to Iceland was more expensive for hotels and food than I would have paid for similar items in the United States, but I actually paid about the same for my car rental as I would have at home. The plane tickets were also not outrageous to Iceland, even though we flew several thousand miles to get there.

Conversely, flying to Vietnam cost an arm and a leg, mostly because of the initial surge in ticket prices that occurred shortly after the COVID pandemic was winding down. When we landed in Vietnam, we spent the equivalent of a few dollars for most things, and even our really nice hotel rooms were only around $15 to $30 a night. Food cost just a couple of dollars for an entire meal at a sit-down restaurant, which was easy to fit into the itinerary.

If you don’t count the international plane tickets (which aren’t really based on an exchange rate and are more of a global thing with similar costs across many different airlines), my budget for Vietnam was $2,000 less than it was for Iceland, and I stayed about the same amount of time in each country. If you’re on a very tight budget, you may find it beneficial to visit a country with drastically lower costs than your home country.

Budgeting in a Cheap Country

You might assume you can spend with wild abandon when visiting a country where it seems like everything is way cheaper than it is in your home country, but it’s still important to check on average prices and the overall exchange rate between your country and your destination. Just because a major part of your trip is really cheap doesn’t necessarily mean everything is cheap.

For example, my Vietnam trip was quite inexpensive in virtually every area except for our taxi rides. For Vietnamese citizens, vehicles remain very expensive for the locals, and as a consequence, you may find that taxi rides are much more than you’d think. For example, when we landed in Da Nang, we took a taxi to our hotel, and the cost was equal to a night’s stay in our hotel.

It was surprising to me at first, but once I researched the matter a little more, I realized that the taxi drivers were paying quite a lot for their vehicles, which meant the higher prices were warranted. However, just to be clear: the taxi prices weren’t equal to what you’d pay in the United States. You could definitely travel for less by taxi in Vietnam than you could in America; however, the cost just wasn’t as cheap as you’d assume, based on the cost of other things like hotels and guided tours.

I think the main thing to consider here is that you need to budget whether you’re traveling to a country with an exchange rate and cost of living that’s the same as your own country or whether you’re going somewhere that’s quite affordable versus where you live. Booking as much as you can in advance is a great way to avoid surprises, but before you depart, it’s helpful to consider the cost of everything you might buy on your trip, including food and tips.

Budgeting in an Expensive Country

Not surprisingly, budgeting your vacation when you’re traveling somewhere that your home currency won’t go very far is a little tricky. You might need to make some tough choices as far as where you’ll stay, how long you’ll travel, and what you’ll do while traveling. I like to use a relatively simple equation when planning a trip to another country where it will cost me more to travel than it would domestically.

I usually try to stay as long as possible and sacrifice things like convenient transportation, nice hotel rooms, and eating out. I might first look for the least expensive hotel rooms I can find that still have decent reviews. As long as you can get a comfortable night’s sleep, there’s nothing wrong with choosing a humble abode for your lodgings.

Similarly, I’ll look for places that offer free breakfast, or I’ll pack some extra food in my suitcase. When I visited England, the exchange rate from the dollar to the English currency was absolutely terrible. So, instead of eating all my meals out, I only stayed in bed & breakfasts, so I could take advantage of the free breakfast, and I brought food in my suitcase for my lunches. The only meals I paid for were my evening dinners.

You can also stretch your budget by taking slower transportation, like taking a bus instead of a taxi or taking a train instead of a flight. However, it’s always best to really take a close look at those costs because sometimes getting on a plane is three times as fast as the train, and the cost of a domestic plane ticket is virtually identical to a train ticket.

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