Wednesday, February 27, 2019
Countdown to Financial Fitness: Learn Your Foreign Currency
Countdown to Financial Fitness: Learn Your Foreign Currency: We recently returned from a trip abroad, and I'm constantly amazed at stories from fellow travelers about how they grossly overpaid for...
Learn Your Foreign Currency
We recently returned from a trip abroad, and I'm constantly amazed at
stories from fellow travelers about how they grossly overpaid for services
because they didn't understand the local currency. If there's one bit of
homework you should do before you visit another country, find out what the
exchange rate is.
It's especially confusing when you have to add lots of zeros to the currency
unit to reach the USD equivalent. Local currency can seem like monopoly money.
But tack on an extra zero or two, and suddenly you're handing out serious funds
for tips and cab rides.
For example, we talked to a guy who thought he was tipping his
bartender a generous ten dollars. After comparing notes with a local customer at
the bar, he found out he'd just given the guy one hundred dollars. On the
bright side, he got great service for the remainder of his stay!
When you exchange money, take a moment to look at the bills and coins you receive. Get a feel for how much each is worth compared to
your home currency. Some denominations may look similar but vary greatly in value.
If the exchange rate for local currency versus your home currency is
not easily divisible (i.e., two to one, three to one, ten to one, etc.), don't
be afraid to whip out a calculator if you're not good at doing math in your
head. We spoke to some women who'd paid three times the amount they thought
they were negotiating for a cab ride from the airport into downtown Buenos
Aires. (At this writing, there are approximately 38 Argentine pesos to the U.S.
dollar. They'd just come from Chile, where the exchange rate is about 650 to
one; they'd assumed the two currencies were similar in value.)
Sometimes it's easier and more cost-effective to pay with a credit card
than to exchange money so you can pay with cash. However, many inexpensive
services cannot be paid for with credit cards or foreign currency: bus rides,
purchases at street markets, meals at small local restaurants, lots of taxis. If
you do pay with a credit card, try to use one that doesn't assess foreign
transaction fees, which can add up. Also, make sure you're clear on the amount
charged. The vendor may quote the price in dollars but the charge will be entered
in local currency. Verify that the amount on the slip you sign is equivalent to
what you were quoted.
We had an overnight stay in Buenos Aires before boarding a cruise ship
and we were able to pay for our hotel and transportation from the airport with
a credit card. But when we inquired about a taxi to the pier, we were told the
drivers only accepted local currency. The pier was quite close; the desk clerk
advised us the fare should not be more than 300-400 pesos.
So, we set out to get cash from an ATM, which we do frequently when we
travel abroad. But every machine we encountered assessed a transaction fee of
between six and ten dollars. The fee wouldn't have been so onerous if we were
withdrawing a large sum of money, but for the small amount we wanted, it did
not seem cost effective.
After four or five unsuccessful attempts to withdraw money without an
excessive fee, we decided to return to the hotel and cash a twenty-dollar bill
at the desk. We knew the exchange rate would be worse, but they shouldn't charge
a fee. Except then we found out our hotel did not offer currency exchange.
The desk clerk suggested he could call the taxi company and give them
our credit card number, which they could charge when the ride was complete. We
agreed, and he called us a cab.
En route to the pier, we verified the arrangement with the driver.
Credit card number to the home office? He knew nothing about it. Frantically,
he started texting back and forth with his dispatcher.
As we neared the pier, we eyed the meter, which still showed less than
200 pesos. "What if I just give you cash in U.S. dollars?" my husband
asked.
"Much better," the cab driver replied. When we arrived at our
destination, we handed him a five-dollar bill, and he was happy.
(When we got home, I checked my credit card statement to make sure no
duplicate charge had appeared from the cab company. Fortunately, there was
nothing.)
On board the ship, we played trivia with an Argentine native of Buenos
Aires, and we told him the story of our cab ride.
"Ooh… you got ripped off! Five dollars!" he guffawed.
"That ride shouldn't have cost you more than 100 pesos."
So we, too, were gullible, overtipping tourists. But the ride still
cost us less than withdrawing local currency for the fare out of the ATM.
Monday, February 11, 2019
Countdown to Financial Fitness: Plan for Contingencies
Countdown to Financial Fitness: Plan for Contingencies: Going without an expected paycheck is a hardship for most people. I've seen statistics claiming that one in three Americans is one payc...
Plan for Contingencies
Going without an expected paycheck is a hardship for most people. I've seen statistics claiming that one in three Americans is one paycheck away from homelessness. After the recent government shutdown, and watching footage of furloughed government employees lined up at soup kitchens, I suspect those numbers might not be far off.
And many jobs in corporate America are not as secure as a position with the federal government. My husband and I both worked in the airline industry during the eighties, nineties, and early two thousands, when carrier after carrier went bankrupt and/or laid off thousands of employees, and those remaining took huge pay cuts and lost benefits.
As I point out in my new book, Live Well, Grow Wealth, it's important to have an emergency fund.
What is an emergency fund? At least three to six months' living expenses stashed in a low-risk, liquid investment such as a savings account or money market fund. And it's money you don't touch unless there's an emergency: a large, unanticipated, unavoidable expense. Like losing your income.
Having an emergency fund saves you from diving deeply into debt, raiding your retirement savings and thus losing irreplaceable time value you've built up, or liquidating investments at an inopportune time, forcing you to lock in losses or incur unplanned capital gains.
If you don't have an emergency fund, now is the time to start building one. Setting aside a few dollars a week shouldn't be too daunting. Round up your change. Forgo a few treats or vices. The account won't look like much at first, but leave it alone and keep adding more; pretty soon, it will grow.
A great way to kickstart an emergency fund is with a lump sum. Maybe that tax refund you're hoping for? Or if you work for the federal government, maybe you'll receive a big check for back pay. Put what you don't need to cover unpaid obligations into your emergency fund.
What if you don't have time to save? You're living paycheck to paycheck, with nothing left over. Another shutdown is looming.
If you survived the last furlough, you hopefully developed some frugal habits out of necessity, some of which could be made permanent. Analyze your expenses and divide them into Essential and Discretionary. Drop subscriptions and memberships you're not using. Defer appointments for haircuts, manicures, professional cleaning, classes that have not been prepaid. Cook at home more, and build menus around what is on sale at the grocery store. Combine errands to use less gasoline. Don't shop for new clothes, electronics, toys, etc. Consider doing some things yourself that you normally pay someone to do for you, such as yard work, house cleaning.
Keep your credit record spotless or improve your score by always paying your bills on time. Leave plenty of available credit on your accounts and keep your debt ratio low. That way, if you do have to borrow money, you'll qualify for a decent rate and won't have to resort to usurious payday loans.
In my opinion, funding the government and paying its staff shouldn't be tied to other legislation, and politicians shouldn't jeopardize workers' livelihoods when they can't agree. But I'm not in charge. You have to be prepared for anything, by reducing your expenses so you're living within your means and building an emergency fund.
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