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The Four Financial Tools for Living Abroad

Jennifer Leigh Parker, Special to CNBC.com
Tuesday, 4 Sep 2012 | 4:20 PM ET
Mature couple living abroad
Gon Bayley | Vetta | Getty Images
Mature couple living abroad

You’ve packed your universal electric plug, handheld translator, and sturdy walking shoes. You’re all set for your overseas sojourn.

But whether you are only ‘wintering’ abroad, or are living abroad in retirement, you could also use a basic set of financial equipment to manage your money — the funds going in and those going out. Keeping an open line to your money is a key to being stress-free, not to mention liquid, while you’re a world away from your home phone and mailbox.

If you’re a seasoned traveler, you likely have fashioned your own solutions to paying bills and moving funds from account to account. And the Internet, whose ubiquity is growing all the time, is constantly making the effort easier. But the connected world changes so quickly that it’s worth reviewing often to make sure you’re using the cheapest, securest, and most convenient methods.

With these few tools, your money will think you’re just across the street:

'SMART' DEVICE

For decades a laptop computer has been the default digital companion for the most intrepid professional travelers, from businessmen to photojournalists. But these days, globetrotters like Stephan Klaschka, a German who has resided in three countries, uses a tablet.

Some are loyal to their laptops. “An iPad is a toy,” says Joe Farrell, president of an aircraft leasing firm whose business keeps him in the air. “It does not replace a laptop, of which there are many very light versions.”

Still others wing it with a smart phone, which can double as a pocket GPS, via Google Maps. “More and more customers are using their phones to stay on top of their accounts,” said Brian Pearce, head of Wells Fargo’s retail mobile division.

Whichever kind of device you choose, the goal is to have a portable bank branch, which can save you money by providing reduced ATM fees and free data download. It also eliminates the hassle of opening a local bank account. “Nowadays, it’s rare that you’re required to open a foreign bank account,” says Teresa Cordoza, an executive at STA Travel.

This is a good thing, since banking abroad often leads to language-related misunderstandings. If banks at home can mask fees with nuanced language, think what trouble you can find abroad. “I don’t know if I didn’t understand them, or they didn’t understand me, says Elena Nikolova, a University of Pennsylvania graduate who studied abroad in Paris. “But no one at BNP Paribas could explain why my balance was lower than I expected when I went to close the account.”

A computer or smart phone can also act as a mobile office, where you can manage the bills you’re still paying at home (such as a lawn care company or basic utilities). Pearce recommends setting up an automatic bill-pay schedule. By authorizing certain vendors to charge your credit card automatically on a pre-set schedule, you can simply go online once a month and pay a single bill.

LOCAL PHONE

Having a local phone number in a foreign country can help you feel more at home and look like a native to others. But most of all it makes your phone bill itself manageable.

International roaming charges on major U.S. networks like Sprint, T-Mobile, Verizon, and AT&T are notoriously expensive. And though some travelers keep costs down by turning off data roaming (thereby disabling the very features you want a modern phone for, like email and picture sharing) doing so is not a long-term solution.

Buying or renting a phone from a wireless carrier in your destination country is usually the most cost-effective option, especially if you want to use the web: local data-sharing is significantly cheaper than an international arrangement. That goes double if you are using the phone for more than voice. “Roaming charges are bad, but data costs are the worst,” says Klaschka.

Some phone providers will even allow old friends and new to call you locally. European-based Piccell Wireless will assign rental customers both an overseas phone number and a U.S. number. Friends and family calling from the States will pay domestic rates, while you pay a per-minute rate for incoming calls to your U.S. number. (For a phone activated in Italy, the charge is 39 cents per minute.) The alternative is usually much higher: international rates can range from a dollar to six dollars per minute, depending on country and carrier.

What if people call from the States who don’t have your new domestic phone number? Ask your existing provider to forward your calls, which typically involves a small fee.

PREPAID TRAVEL CARD

Prepaid cards, which are effectively rechargable debit cards, are becoming more popularand soon may make travelers checks a thing of the past. (Read more: Prepaid Cards Go Beyond the 'Unbanked')

“Prepaid cards can be reloaded remotely by phone or online. This is much simpler than finding a place to cash more traveler’s checks,” said Lisa McFarland, head of consumer prepaid products for Visa. Authorized loved ones can also reload the card online, so if you find yourself in a bind, help can reach you quickly. They are fully refundable if lost or stolen.

Major credit providers like Mastercard, Visa and American Express each offer their own prepaid travel card, as the common “safer-than-cash” selling point has caught on with consumers.

Prepaid also appeals to travelers because you cannot be charged overdraft fees (good if you’re fuzzy on exchange rate math). The total amount on these cards is all that can be spent, much like cash.

McFarland points out, however, that prepaid cards aren’t meant to replace a traditional bank account. When it comes to things like leasing an apartment abroad, or any other major purchase, a credit card and a bank account are usually necessary.

TRAVEL INSURANCE

There is nothing hi-tech or up-to-the-minute about travel insurance — it’s the grandmother of tools for travelers, like a reminder to wear your scrunchable rain hat. “Travel insurance is practical and it’s a necessity. People think it’s a huge expense – though it’s not – and they don’t foresee the risks while traveling,” says STA Travel’s Cordoza.

Travel policies typically provide two main categories of protection: health insurance, and trip cancellation or delay insurance.

Before you go, call your current health insurance company to ask if they cover international travel. If you rely on Social Security, Medicare, and Medicaid programs, you will not be covered for hospital or medical costs outside the United States.

While health insurance is widely considered essential, the cost of other types of insurance – like trip cancellation – should be weighed against the cost of the trip. You may already by covered if you book your trip on your American Express, Visa or Mastercard; all offer travel insurance if you book and pay for your trip using their cards. (Coverage levels depend on the status you have with each card provider.)

If you paid without the help of a credit card, or you’d like more insurance than your card offers, you can choose from any number of independent insurers, including low-cost options like CSA Travel Protection.

Don’t wait until you arrive to insure yourself. In most countries, only by becoming a legal resident, which can take several years, are you deemed insurable by local private insurance companies. No matter how much you feel like a native, there are some areas where there is truly no place like home.

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