What To Do With Your Dollars When The Foreign Exchange Rate Is Hurting You
Ahh, your client just paid you $500 dollars for your latest project. When you converted them to your local currency, you cry in agony! You discover that you the dollar has devalued. This was much less than you received for a similar project last year. What happened?!
You've just been a victim of foreign currency fluctuations. Specifically, your local currency has fared much better than US dollar. In the Philippines, the US dollar last year was going at P51. Now, one dollar is worth only P42. This means that your $500 last year was worth Php 25,500. Today? It's 21,000. You just lost Php 4,500 right there.
Woe is you?
Not necessarily. Although it is no longer convenient to convert your money to your local currency, these ForEx adjustments leave you with some unique advantages.
Like what?
Think of it this way - an iPod ($149) last year was worth Php 7,599. Today's it's only Php 6,258.
Aha! A bright light just popped up, didn't it?
Yes, the simple fact is, when the US dollar devalues you are able to buy more dollar-based products. You can buy stuff on amazon.com at relatively much cheaper prices. You can get web hosting services, tools, online software and mp3 songs at a much lower local-currency equivalent.
So what do you do when the dollar devalues?
Don't change it into your local currency.
DO buy dollar-based items - those you couldn't get before because you thought they were too expensive.
Happy shopping!
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November 10th, 2007 - 10:18
So if your money is coming in via PayPal, it’s best to link your PayPal account to the credit card you use for dollar purchases, no? Or better, use a credit card with a separate dollar balance.
November 10th, 2007 - 10:31
Yeah, I’d prefer to do that. I’ll need to get a dollar based credit card. :)
November 10th, 2007 - 12:05
Ah so… I will just be spending my hard-earned dollars the way they should be spent: in dollars. :D
The price tag of the iPod did not change, its value in local currency did. Yeah I see your point. :)
November 11th, 2007 - 08:04
Ah! Always look on the bright side of life, ain’t it? :-)
November 11th, 2007 - 10:24
Definitely. Silver lining and all that. :)
November 12th, 2007 - 02:17
Yes, the holidays are coming up. Please spend in dollars :)
Seriously, with the dollar down, the US’s trade deficit shrunk in a major way last month. Usually when the dollar is this low, alot of people go on vacation in the US for shopping trips.
November 12th, 2007 - 17:22
Dollar charges on Philippine credit cards? Watch the forex rate the banks will use.
(That’s why I’d rather pay for dollar web costs using Paypal rather than an RP-based credit card.)
November 12th, 2007 - 17:28
I’m on Equitable, with separate peso and dollar statements. You can pay the dollar charges in greenbacks.
November 12th, 2007 - 19:08
Jozzua, being the techie I thought I was, I never really saw the forex fluctuation from that perspective. Great insight, I must say!
Honestly, the tendency for me is to fret about the conversion each time I am paid by my clients. You really have to stay competitive, even at the dollar equivalent.
But really, from now on, I will put my dollars to good use: I will pay in dollars when I can. I mean ebay, amazon, and get this — even locally, at our duty free shops! They keep their prices steady, in USD, and only convert if you pay in pesos.
November 12th, 2007 - 19:15
The most pain is felt by us dollar earner. as an ofw we are really affected by this.. Just imagine if you have a debt of 52 before Ill just have to pay $1 and now i have to pay almost $1.25.
November 14th, 2007 - 05:51
Extreme case: What if the 1 peso = 1 dollar. Then an iPod touch would only be 299 pesos. :)
November 28th, 2007 - 11:08
Supposed to keep the dollars and let them sleep in the bank, but maybe it’s time I do some travelling! Yay! :) Thanks for the great post ;)