How We Manage Money On The Road
How do we manage our money while being out of our home country for several months at a time?
Here are five things that we do to make it easier to manage our money while travelling.
- Online Banking
- Online Investing
- Currency Exchange
- U.S. Financial Transactions
- Tracking and Budgeting
We do the vast majority of our banking transactions online. And that certainly helps us to keep track of our finances while travelling.
As we spend time — and money — in the United States, we have to optimize the use of our poor Canadian dollar to avoid unnecessary fees and/or prohibitive currency conversion costs.
We have a Canadian checking account, a Canadian US dollar account and a Canadian US dollar MasterCard. We also have a US checking account with a US debit card. We have 18 accounts in total but these are the basic accounts that allow us to manage our finances while travelling in the United States. All of our accounts are no fee accounts. We get preferred rates on currency conversion.
Banking fees are killer fees. I try to eliminate as many fees as possible across our banking and investment accounts. It is so important to keep these fees as low as possible.
All of our income goes into our Canadian checking account. This would include things like pension and investment income as well as any big lottery wins.
We keep a small float of money in our US checking account.
We put as many purchases as possible through our Canadian US dollar MasterCard. If we can’t use the Canadian US dollar MasterCard, we use the US debit card. We try to avoid using cash. We want every transaction to be captured electronically so that we know how we are spending our money. The software we use can categorize all of our expenses making it much easier to manage to a budget.
Our money flows from the Canadian checking account to the Canadian US dollar account. We use that US dollar account to settle the Canadian US dollar MasterCard and to maintain the cash float in our US checking account.
I am an active investor and I manage all of our investments so being able to do everything through my online brokerage account is a major advantage when travelling.
We manage seven investment accounts in multiple currencies.
Most people do not manage their investments directly. Most prefer to work with an advisor. As with banking fees, it is so important to keep the fees as low as possible. My investment accounts are all no fee accounts. The drag on my investment portfolio is very low as we hold shares directly for most of our investment assets. We pay 8 basis points on the few Exchange Traded Funds that we do hold in our portfolio.
Many Canadian mutual funds charge fees in excess of 2 percent making it particularly challenging to grow an investment portfolio especially if the investments are concentrated in the Canadian stock market. Most advisors are paid by commission on products that they recommend. These can be hidden costs which erode the gains in your investment portfolio. So be careful and be knowledgeable with your investments.
Unlike banking, I find no difference between managing our investments while in Canada or while travelling in the United States. For our household, it is vital to stay current with our investments and to make any buy/sell decisions as required regardless of where we might be travelling.
There are several ways to get money converted from Canadian (CAD) to US dollars (USD). The costs for currency conversion can be quite high — often over 250 basis points — so it is well worth the effort to find the best source for converting your currency. If I wasn’t getting such a great deal at my own bank, I would consider Knightsbridge or Canadian Snowbirds.
U.S. Financial Transactions
I produce a detailed budget and I relentlessly track every single expense. What makes life difficult for a Canadian snowbird in the U.S.? The currency. It is always changing. Just look at the past 12 hours.
When we convert, when we settle payments, when we buy, the amounts are never the same. The timing around all of our U.S. financial transactions can contribute to making things more expensive simply because of currency fluctuations. Currency desks are down on the Canadian dollar due to the level of Canadian household debt (too high), the price of oil (too low), the Canadian government (too left), and taxation (too high).
The currency can swing substantially from day to day, week to week, month to month.
Here is another chart from the Canadian perspective, showing how the Canadian dollar has fared against the US dollar over the past 10 years.
Immediately after the Great Financial Collapse of 2008/2009, the Canadian dollar soared and was above parity for a few years. And then it began to devalue. Largely due to the collapse of oil and the rebounding of the U.S. economy.
Late 2015 was a very expensive time for Canadian snowbirds. And even now, with the Canadian dollar trading so low, it makes the timing of U.S. financial transactions challenging. Very difficult to predict what the Canadian dollar might do an hour from now, never mind a week from now.
If you live in the U.S. you probably never worry about the value of your dollar. Sure, you might be concerned about prices rising but the purchasing power stays relatively consistent over time.
Not so for Canadian snowbirds.
We will stock up on US dollars whenever the Canadian dollar gets above 85 cents or so. Beneath that level, we try our best to minimize the damage.
Tracking and Budgeting
We use a wonderful app for the Mac called Banktivity. It allows me to track all of our expenses. I categorize all of our spending and the software will produce detailed planned versus actual spending reports. I generally review our expenses every few days. Banktivity will automatically convert our US transactions into Canadian dollars so I can keep all of our household spending plans in one currency.
Keeping track of how we spend our money allows us to spend our money appropriately. It provides us with stability. We know where we are and we know what we can responsibly do with our money at all times. Regardless of whether it is in US or Canadian dollars.
There you have it. Our attempt at navigating the financial jungle while enjoying our time south in the United States.
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