All posts by Jonathan Lee

Jonathan Lee - backpacking traveler, writer, and business analyst extraordinaire
Business Analysis, Travel

Best Exchange Rates

Leave a comment

When traveling, you naturally want to get the best exchange rate, so that your money goes further – which is especially important given how the USD has been steadily weakening.  This article will tell you exactly how to get the best exchange rates while overseas.

1) Find out if your current bank has a partnership with any overseas bank.  For example, Bank of America has a partnership with WestPac in the Australia region.  If you use your existing bank card with a partnered bank, you not pay zero bank fees, but you also get favorable exchange rates!

It’s important to note, the partner bank may offer to convert your withdrawal into your home currency at it’s cash “buy” rate, as shown below.  Note how this dialogue box is intentionally ambiguous, not telling you what will happen if you skip conversion.  But don’t do it!  If you skip conversion here, it will be automatically converted at a much better rate (the Visa daily rate).
Exchange rate - visa trap

No, skip conversion at this horrible rate!  (VISA rates were at ~1.04 at this time)

2) Open a brokerage account with Charles Schwab, and you will automatically receive a Charles Schwab Checking account and accompanying debit card.  Use this debit card to withdraw money at any ATM.  You will have to pay a bank fee, but Charles Schwab will refund that money to you at the end of each month.

Using either option 1 or option 2, you will exchange money at the daily Visa rate.

3) Use a credit card.  Depending on your card, you will have to pay a foreign exchange fee around 3%. There are special cards that charge no foreign exchange fee, but I find that not only is it a hassle to apply, but there are often annual fees.

4) Bring USD, and use a money changer in the city.  You will have to pay a foreign exchange fee (spread) of around 5%.  From personal experience, I have found that small exchange kiosks (foreign exchange businesses) usually offer better rates than big banks.

Here’s an example of some pretty bad exchange rates being offered by a bank:
Exchange rate - bank rates

5) Bring USD, and use a money exchanger at the airport.  Foreign exchange fee of around 8%.  Ouch!

Exchange rate - horrible rates

6) Use your regular ATM / debit card at a non-affiliated bank.  You will typically get charged a $2-$10 bank fee.  If you don’t like carrying too much cash, and make many small withdrawals, these add up very quickly!

For a demonstration, you can check out the numbers in this real-life example:

Date Service Charge AUD Amount USD Fee USD Stated Rate Effective Rate Daily Visa Rate Difference
3/6/2013 Amex 36 36.91 0.99 1.02527778 1.052777778 1.02677 0.026008
3/6/2013 Schwab ANZ 102* 104.72 1.02666667 1.026666667 1.02677 -0.0001
3/8/2013 BoA Visa 71 73.08 2.19 1.02929577 1.060140845 1.02933 0.030811
3/11/2013 BoA Westpac 100 102.11 1.0211 1.0211 1.02876 -0.00766
3/11/2013 BoA Westpac 100 102.11 1.0211 1.0211 1.02876 -0.00766
3/13/2013 BoA Westpac 200 205.52 1.0276 1.0276 1.03396 -0.00636

* I withdrew $100, and was charged a $2 bank fee, but Charles Schwab refunded it at the end of the month.

As you can see, I paid the lowest exchange rates when using options 1 and 2 – using my existing bank card at a partnered bank, and using my Charles Schwab debit card.

Other travel websites often give alternate ‘expert’ advice that is often more trouble than it’s worth

– Traveler’s check: These tools are useful, but you often have to pay a fee to get your bank to provide the check..  In a world where ATMs are everywhere, if you can withdraw money without paying ATM fees, traveler’s checks are outdated.

– Services that “deliver” foreign currency to you while overseas: you can get good exchange rates with these services, but they are a tremendous hassle, since you have to book well in advance.  I prefer the flexibility of being able to find an ATM anywhere.  This option may be useful if you need access to very large amounts of money.

Travel

Airline Experiences Compared

Leave a comment

On my way from New York to Australia, I flew with three airlines: US Airways, United, and New Zealand Air.

It’s interesting to compare the airline experience for these three airlines:

US Airways:
I wonder if their flight attendants should be called salespeople now.  Gone are in-flight meals, gone are all free snacks, gone are all types of in-flight entertainment.  Instead, we have flight attendants hawking snacks ($3.49 for Chex Mix) and making a lengthy broadcast over the PA, for a “special offer” of the US Airways Visa card – now with 100,000 free miles and no fee for the first year!   Talk about a captive audience!

United:
Like US Airways, but now all the advertising is automated!  Everyone gets a seat back direcTV display, albeit one that asks you to pay $6.99 for access to the 100some channels for a <2 hour flight.  And woe to those who refuse to pay up – they get bombarded with endless advertisements and more urging to pay for the service!

And the best part is, the off button is non-obvious – you have to hold down the lower contrast button for 10 seconds, to turn off the advertising.

Air New Zealand:
A breath of fresh air!  Interesting in-flight safety videos!  Individual seat back displays where you can watch movies & tv shows, listen to music, and play games!  For free!  I finally got around to watching Lincoln, Cloud Atlas, and Skyfall.

Travel

America and Australia Compared

Leave a comment

America vs. Australia – as a New York yankee in Ozzieland, these are some differences I’ve noticed between America and Australia:

1. No EFTPOS signs at shops.  EFTPOS = electronic fund transfer at point of sale, which is a long way of saying credit cards / debit cards.

2. Superfunds. You’ll see advertisements of superfunds all over the place.  These are the Australian equivalent of 401k retirement savings – though in Australia, they are mandatory!

3. Driving: yes, Australia  drives on the left hand side of the street.

4. Health care: if you need to see a doctor, you go in for a 10-15 minute consultation, and are charged $70+.  If you were living in Australia, you’d have Medicare (mandatory), so you’d then get a refund sent to you, bringing down the cost of your doctor’s visit to ~$30.

5. Tax & tip: taxes are already included in all prices, and tipping is inappropriate.

6. Currency: The smallest bill is $5, with there being $2, $1, $0.50, $0.20,$0.10, and $0.05 coins.  $1 and $2 coins are golden.  Interestingly, Queen Elizabeth II is on all the coins, and as you look at coins minted in the past, you can see how she has gotten older with time.

7. In the US, we have pharmacies. In Australia, we have chemists.  And just like in the states, they are everywhere.

8: Australia, like basically the rest of the world, uses the metric system.  So, kilograms instead of pounds, kilometers instead of miles, and kilojoules instead of calories.

9: In Australia, Hungry Jacks is Burger King – apparently due to a trademark dispute!

10: TBD

Travel

Travelogue: San Francisco

Leave a comment

On my way to Australia, I made a pit stop in San Francisco for three days, visiting some good friends.  These are my notes on the city:

– San Francisco is based on a hilly peninsula right on the Pacific ocean, so even though the weather is pretty good year-round, there are always high winds, and the weather can change very quickly.  Always bring a jacket.
San Francisco - Portrait at Night

Continue reading Travelogue: San Francisco →

Travel

Travel Equipment

Leave a comment

When going on a journey,there are three questions that will shape your trip:

1) Where will you be going?
2) How long will you be there?
3) What travel equipment are you bringing?

For many backpackers, #3 is what separates the men from the boys, the travelers from the tourists, the hardcore from the casuals.

Right now, the mantra seems to be “travel light”.  To bring a rolling suitcase is a travesty, to bring just a backpack is common, and to bring less than three changes of clothing is to be a god walking amongst mortals.

Since this is my first time traveling, I decided to go a medium route – traveling light, but not completely unburdening myself of modern civilization.

The Travel Equipment List!

(disclaimer: any links to amazon use my affiliate code, which helps me finance future trips!)

The Backpack: Deuter Transit 50 Travel Pack.

Your backpack is the centerpiece of all your travel gear, since you’ll be relying on it to carry all of your gear.  If you go to a store like REI, you will see that there is a huge variety of backpacks – large and small, waterproof, with straps to carry additional gear, opening from the top vs. the side, etc.

For traveling around the world, you want to get an (appropriately named) travel backpack – these are different from camping backpacks in that they are generally smaller, are not waterproof, open from the side, and have an attached day pack.

The next step is to choose a size – since I want to travel light, I went with a 50+12L backpack – 50 liters of carrying capacity in the main pack, with an additional 12L in the detachable day pack.  Doing my research, there were two main backpacks to choose from at this volume – the Deuter Transit 50 Travel Pack, and the Osprey Farpoint 55.  Comparing the two, the Deuter has thicker and more comfortable straps, but the Osprey is lighter and has a larger daypack.

Ultimately, I felt the Deuter was more comfortable (if also a bit unwieldy), and went with that backpack to carry all my other travel equipment.

Clothing: five days worth

– five pairs of underwear- five tee shirts
– two pairs of shorts, one pair of cargo pants, one pair of jeans, and a set of comfortable sweatpants
– one hoodie, one stylish short-sleeved button-up shirt, and one light jacket
– five pairs of socks- one set of sneakers, one set of sandals, and my vibram toe-shoes
– swimming trunks

And to top it off, I got myself two compression packs
– this not only allows me to reduce the amount of volume my clothing takes up, but also keeps my clean clothes dry and separate from any dirty laundry.

Electronics:

– Netbook: Asus Eee PC.  Initially, I wanted to travel without a computer, so that it doesn’t distract me from my traveling, but I also wanted to keep a travelogue and research for some business projects.  An ultrabook would nicely fit the bill without being too heavy, but I didn’t want to be out $1000 in case I got robbed, so I compromised with a netbook.

Update: as somebody who is used to larger keyboards (Microsoft Ergonomic, which looks like a monster but is amazing), hot damn it is hard to get used to the tiny keyboard of a netbook.

– Camera: Panasonic DMC-ZS3 with 32gb sdcard.  Outdated, but point and shoot.  Also, charger, an extra battery (ebay), and USB cable to upload photos every once in a while.

– Phone: I have the Droid X, which is an amazing phone, but it is unfortunately a CDMA phone and unable to take a sim card, and so unusable in much of southeast Asia.  I brought it along as a backup camera, ebook reader, and occasioanl phone (wifi only).  Also, charger and two extra batteries (ebay).

Update: while in Australia, I picked up a cheap 1900s-era GSM phone – the Samsung Keystone 2.  It doesn’t even have a full keyboard, but slide in a prepaid sim card, and it works for phone calls and texts.  Plus, infinite battery life.

Misc. Travel Gear:

– compass (gift from a concerned friend, of dubious use)
– waterproof pouch for phone (again, gift from a concerned friend, of uncertain use)
– travel first aid kit
– x-shot camera mount
– money belt
– diary
– collapsible water bottle
– microfiber towel
– hanging toiletry bag + toiletries
– umbrella: it’s the rainy season here.  After having multiple umbrellas break on me over the years, I got myself a Totes umbrella, which has lasted me for 4 years now.  Heavy, though.

Update: my “travel-sized” bottle of sunscreen got confiscated by the TSA.  I certainly feel a lot safer when my straight razor makes it past their screening, but my sunscreen does not.  #securitytheater

Travel

Travel Manifesto

Leave a comment

This is a travel manifesto, outlining why I travel.

Who am I?
Hi, I’m Jonathan Lee.

What am I doing?
In one month, I am moving out of my apartment, putting all of my material possessions into storage, and buying a one way ticket to Australia.  I will bring one backpack worth of clothing and equipment, and will backpack around the Australia /Southeast Asia region indefinitely – my magic 8 ball suggests 3 months.

Why am I doing this?
– Because I have to.  All my life, I’ve been a very conservative person, always planning ahead so that I can remain fully in control, avoiding even the remote possibility of failure.  I want to change this.  And so, I’m making this trip without any real serious planning beforehand.

– Because it’s the best available time.  I’m 27 years old, single, and renting.  There’s nothing tying me down.  If I don’t do this now, I never will.  The best time might have been right after graduating from college, or immediately after getting laid off a year ago.  But the second best time, is right now.

Where am I going?
First, Australia. Then, New Zealand?  Thailand?  The Philippines?  Japan? Poland?  Germany?  Netherlands?  Only time will tell.

How will I be traveling?
Hopefully, cheaply.  I’ll be hitting up hostels and couchsurfing whenever I can!

Business Analysis

When to get Life Insurance

Leave a comment

A couple of weeks ago, some friends asked me for advice on choosing life insurance.  In response, I wrote up this essay.

Introduction:

Every year, people will die unexpectedly.  The chance of it happening to you in particular is pretty low (see actuarial tables: https://www.socialsecurity.gov/oact/STATS/table4c6.html), but when it does happen, it’s pretty rough for everyone involved.  And so, the original idea behind life insurance, as well as insurance in general, is to pool risk.  Everyone contributes some money, and the proceeds are divided up to those who got the short end of life’s straw.  When insurance companies come into the equation, they basically look at actuarial tables to determine how much you should contribute per year, based on the probability of you dying, plus a little extra to cover administrative expenses, etc.  They then take the proceeds and invest them “prudently” to keep assets (the amount of money on hand) greater than liabilities (the amount they have to pay out).

Traditionally, a form of insurance called term life insurance has been used.  In this scheme, you agree pay $X per month for the next year / 10 years / 20 years.  If you die, your family or beneficiaries receive a predetermined payout.  If not, woohoo!  You’re still alive and can continue to be the breadwinner for your family.  This is your basic “vanilla” insurance scheme, and it’s quite boring. On the other hand, you’ve got something like whole life insurance.

There are a lot of variations, but the general gist is that you pay a much larger monthly payment, but a portion of your premium is allocated to some “cash balance”.  If you die, your family or beneficiaries receive the predetermined amount.  If you keep living though, you can someday decide to “cash out” of the policy and decent chunk of change, or borrow against the balance (for a mortgage, etc).

So basically,
Whole life insurance = term life insurance + additional forced savings.

I believe that the most efficient way to do things is to get term life insurance when you need it, but otherwise just put your money in a savings or retirement account, which will basically get you the same results as whole life insurance.

The Three Factors of Whole Life vs. Term Life insurance:

Premium costs:

– Premiums for term life insurance are much cheaper than whole life insurance premiums
– The mortality rate for young folks is pretty low, and so short term life insurance premiums are very low, but will go up every year that you renew your insurance
– In contrast, since whole life insurance has typically fixed premiums, you start out paying a lot more, since you’re also covering the higher chance of you dying in your later years.  The forced savings component also increases premiums

Fees:

– Insurance companies make a lot more money from selling whole life insurance than they get from selling term life insurance
– For term life insurance, there are basically no fees.  You keep paying your premiums, and if you die, money is paid out to the beneficiary.
– For whole life insurance, there are usually a lot of fees.  Fees for cashing out of your policy early, annual fees for investing your cash balance, etc.  If you drop your whole life insurance part way through, you could lose a lot of money.

Returns:

– You’ll probably get better returns from just investing with Vanguard’s index funds (and lower fees too), instead of relying on whole life insurance for savings.

Reasons for getting life insurance:

There have typically been two motivations behind getting life insurance:

1) This is important – taking care of dependents in case you can no longer be a breadwinner.  To illustrate, I do not have life insurance – I don’t need it.  If I die, hopefully my friends will come to my funeral to send me off into the great beyond, but my death isn’t screwing anyone over.  I don’t have kids that I’m responsible for, I’m not supporting a wife, I don’t have a mortgage, my parents should be fine without me.  In contrast, think about a husband, with a pregnant stay-at-home wife and mortgage.  He wants to get life insurance – so that if he gets hit by a bus, his wife will have enough money to raise the children and keep the house.

This is also where term life insurance is very useful – to cover those 20 years of your life when you have many dependents but few assets.  After you’ve built up a nest egg, even if you kick the bucket, your savings should provide some protection to your family.

2) Taxes and estate planning.  Life insurance premiums are not (currently) taxed – and the insurance industry does a tremendous amount of lobbying to keep it this way.  In contrast, if you want to pass money directly to heirs, you usually have to pay some sort of estate tax.  This is usually a concern for people a lot more wealthy than us.

Conclusion

Without knowing your individual circumstances or the plan they’re offering you, I can’t recommend that you take any particular path.  However, just by looking at the overall financials, if you decide to get life insurance, I recommend that you go with term insurance instead of whole life insurance.  But before that though, I do recommend that you make sure you need life insurance, and you’re not getting it just because you can.