By Chris Wood, CPA
I was in Florida for a week and had a wonderful time. If you’ve been keeping up with my blog you know I live to travel. So, I’m already planning my next trip. It’s on to my ancestral home, Ireland. My cousin has been to Ireland before, and she along with myself and my brother and sister-in law have made tentative plans to go in 2010. However, my most favored travel companion has expressed a strong desire to go this autumn. She too is of Irish descent and has been to Ireland several times, so she is in charge of the itinerary, and I am in charge of the budget.
I’ve never been to Europe before, and this brings a new dimension into the budget, namely the exchange rate. I’ve done some research about foreign exchange rates, and I’ve come to a conclusion. This is big business.
What to do about the Euro? First, do I hedge the cost by buying some of the Euros I will need now? Second, how many Euros do I need, and how do I buy my Euros?
Do I hedge? Kathy Lien at gtforex.co concludes “Fibonacci and Moving Average resistance (sounds very scientific and somewhat impressive) suggests that the odds are skewed towards more losses than gains (for the US Dollar) in the beginning of 2009.”, and the website http://www.forecasts.org/euro.htm suggests the following table.
Therefore, I think it is a good idea to go ahead and buy at least ½ of the Euros we’ll need now to hedge against the Euro value in August when we leave.
The itinerary calls for us to spend the first three nights in a hotel in Dublin. We found a nice comfortable 3 star in the heart of downtown for about €100 per night. This will give us time to recuperate from the dreaded jet lag. After that we will rent a car and travel the countryside seeing the sights from the Powerscourt Gardens to the Cliffs of Bunsglass. We will be staying at a bed and breakfast each night at a cost of €35 to €40 per night. It’s a chance to really meet and interact with the people that live there.
Here’s how the daily budget beaks down. We will budget $100 of cash per day for the first 3 days in Dublin and $75 per day for our excursion into the countryside. This will be for castle and museum admission fees, some food, Guinness, and other incidentals. The rest of the expenses (car rental, petrol, hotel and B&B) will be paid by credit cards which apparently carry very low conversion rates. Usually 2% to 3% (AMEX has 2% and most Visa & MC has 3%). However, Capital One credit cards do not charge for foreign exchange. What’s in your wallet when you are overseas?
How do we buy the Euros? Some internet research has indicated that banks are the best value, but that varies too. Here are a couple of examples for 1/13/09:
In addition, an online service www.travelex.com is available to purchase a debit card in Euros. The debit card can be used in hundreds of ATM’s in Ireland and thousands upon thousands in Europe to withdraw Euro currency. The advantage is more security because of the PIN, and Travelex will replace lost or stolen cards, but the price is a higher.
In addition there is a small ATM transaction fee (€1.75) every time the card is used.
On to the business at hand, I will purchase some Euros tomorrow, apply for a Capital One credit card, have my passport reissued and come next August I will bid you “Sláinte chugat” from somewhere on O’Connell Street in Dublin.