The dollar has once again decided to loosen its hold on yet another penny. The dollar is now worth .67 against the euro.

As an American living in the States and spending US dollars in a US dollar environment, the currency exchange rates against any particular foreign currency will probably not affect your daily life or how you spend your money or what you spend it on which makes understanding the currency exchange rates even trickier.

You probably notice when gas prices rise by yet another penny, and by now you clearly now how a penny here and a penny there can have a definite impact on your overall budget, spending habits and travel plans.

If you are planning a trip to Europe, it's a good idea to get a handle on the exchange rate. A few months ago, my sister and cousin came for a visit. It was clear by their spending habits that they were unaware of how much they were spending. I learned a lot from that experience and hope to help you enjoy a financially sound traveling experience abroad.

The problem with using your credit card is that it becomes easy to just hand the card over to the vendor, sign your name and walk away. Let's say you saw a cute top in a store for 30 Euro. You liked it. It fit. You bought it. You would have spent $30 in the States, so 30 Euro sounds like a fair price, as well. This is where the currency exchange rate comes in handy. $30 is not equal to 30 Euro, rather $44.59 is equal to 30 Euro. Now, look at that top once again and decide if it's really how you want to spend that 30 Euro. Perhaps so. Perhaps not. The point is that due to the currency exchange rates you will not be paying in US dollars the same price you see on the tag in a foreign country. After a week of travel being aware of what you are actually spending vs not being aware of what you are actually spending can make a huge difference.

I think one of the problems my sister and cousin encountered was that both of them traveled using credit cards. A pay now, deal with it later scenerio. The credit card trap while traveling abroad has great appeal in that you don&'t actually have to think of how much your spending and you can feel a kind of freedom and liberty while experiencing all these new and fabulous places. The problem is when you get home and you see your credit card bill after the currency exchange rate has been calculated. For every 670 Euros spent, you've actually spent $1000 US. This is the difference between today's currency exchange rate against the US dollar versus the Euro.

The better you understand the currency exchange rates the more of a handle you will have on your vacation and the happier you will be when you arrive home and receive your credit card bill. Knowledge is power. Understanding the currency exchange rates while traveling abroad will allow you to control your spending habits rather than be controlled by them.

If you are planning a trip abroad, you might consider getting a currency exchange rate widget on your computer. This way you can randomly look up prices for things to see what it would cost you in euros versus dollars. As a result, while on your European adventure you will have a much better handle of how much that 40 Euro dinner really cost you ($59.46).

If you don't want a widget on your computer or wouldn't have a clue how to add one (I fit into both categories, but since I have a teenage daughter I ended up with widgets up the ying yang), I recommend visiting xe.com. It's a currency exchange rate site that is simple to use and easy to access.

Another way of controlling your spending while abroad is to use cash. Take money out of the ATM (usually at a 1% charge from the home bank) and only spend your allotted funds for that day. It is important to know before hand how much you are taking out in euros versus dollars. Let's say you plan on spending $100 per day so you go to the ATM and take out 100 euro. Well, you just took out $148.64. At today's currency exchange rate, $100 US dollars is equal to 67.28 Euros. So, if you were to take out 60 Euro on one day and 70 Euro the next day, you would be closer to that $100 daily budget goal.

Another way of not over spending is to use your debit card rather than your credit card. If you save for your trip in advance you will have the cash in the bank. You will become very aware of how much you are spending quite quickly when you see it coming out of your bank account on a daily basis. This is when you will be happy that you got a handle on the currency exchange rates before leaving for your trip.

Write out a budget. Estimate how much you will need per day for food, lodging and transportation. Don't forget to add in admission prices. I'm guessing you might want to go to a museum or perhaps the top of the Eiffel Tower. You'll need to add in those expenditures, as well. Airfare will also need to be calculated.

You could start saving at the same time or before you buy your airplane ticket. I also recommend looking at airfares over a period of time to see what you should expect to pay per person. This will help you with not over spending when it comes time to buy the airplane tickets.

If you save in advance for the trip you will have nothing but memories when you get home. You will not still be paying a trip already taken. You will be in a position to begin saving for the next trip! The exchange rate is bad enough right now, if you can avoid credit card interest rates on top of it you'll just be that much better off in the long run.

Be in control of your spending. Don't let it control you. Vacations should be empowering and enlightening experiences, not an enslaving debt that will need to be paid off over the next several years.

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