Ntellivest

Financial planning for financial independence

Content, resources and services to help people make intelligent decisions with their money in route towards financial independence

Travel Destinations Where The Dollar Goes Further

My last post featured a "travel hacking" strategy that focused on maximizing your travel perks via credit card rewards.  Today's post will stick to a similar theme (getting the most out of your dollar when traveling), but this time by way of finding international destinations where your dollar can go much further with every purchase.

I noticed the benefits of favorable currency exchange rates while just recently in Australia.  Currently, the U.S. Dollar (USD) is stronger than the Australian Dollar (AUD), with 1 USD giving you roughly 1.35 AUD.  Considering the price points for items purchased in both countries are very similar, the net result was a savings of about 25% on everything bought while visiting Sydney.  Score!  This now has me exploring other future travel destinations that might be on "sale".

To be fair, most countries currencies aren't as closely tied in pricing structure as are Australia and the United States.  In fact, they can be worlds apart.  For example, one U.S. Dollar would net you roughly 63 Russian Rubles presently.  This makes basic comparison math almost impossible to do on the fly.  Also, each country also faces their own supply and demand structures, leading to different valuations for a variety of products and services.

So how is one supposed to know where they can go to get the most value from their U.S. Dollar?


Great question.  A good starting point (and one resource I love) is to utilize a tool put together by the brainy folks at The Economist called The Big Mac Index.  This index was started in 1986 as more of humorous reference piece, but has now actually morphed into a resource used and noted by many leading research and publication firms as a method for measuring purchasing power parity (PPP).  The index is calculated by comparing the price of a Big Mac across various countries (relative to their respective currencies) to help determine real purchasing power.  While certainly not an exact science (keep in mind, it's just one product), this can help direct us toward areas of the world where currencies might be undervalued in comparison to the USD.

Source:  The Economist, January 2018

Based on the running list on the right hand side of the above chart, the United States does seem to have an advantage in purchasing power (of our beloved Big Mac) relative to most other countries/currencies.  In theory, this should come as no surprise considering the U.S. Dollar has been gaining strength over the last few years.

 A pic in the   Royal Botanic Gardens   during our recent trip to Sydney

A pic in the Royal Botanic Gardens during our recent trip to Sydney

According to this measurement, the top 3 countries you likely want to avoid when traveling for the purpose of getting the most bang for your U.S. buck would be:

  • Switzerland
  • Norway
  • Sweden

And the top 3 countries where you can likely stretch your dollar to the fullest extent possible (those whose currencies are seemingly heavily undervalued) would be:

  • Ukraine
  • Egypt
  • Malaysia

These results are not at all out of line!  it is widely known that Switzerland and most countries in Scandinavia are expensive places to live and/or visit.  Likewise, a friend recently took a trip to Ukraine and he was astounded by how little he had to spend (in USD) while there.

But as mentioned, by no means should this index be considered gospel.  Instead, one should simply use it as a baseline reference point for potential cheap travel destinations.  Before booking your journey abroad, do your due diligence to not only make sure the overall numbers add up (for example, Canada seems on par with the U.S. according to The Big Mac Index but the USD is currently strong versus the CAD and does have an advantage for nearly all other items), but also to research that a particular location is safe and without turmoil.  Sometimes destinations and/or currencies are undervalued for good reason!

Here's to safe and prosperous travels :)


Where are some places you've traveled recently where you noticed that the dollar went further than you expected?  Please share.