Handling different currencies.

I live in Ireland so our currency is Euro.  I have two questions:

Some of my occupational pension comes from the UK so is paid in Sterling from three different sources.  They are regular payments so I could schedule them but I wouldn’t know exactly how much until they arrive. Should I go ahead and schedule them and then alter manually or not bother?

We will be in the UK for Christmas. Some of our Christmas shopping will be done there, so I’m going to need cash.  How do I keep track of what I spend with YNAB?

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  • You can't use the money in your budget until it arrives. I would suggest you create the scheduled transaction, but leave the amount 0, as a reminder. When you get the amount, you can update it and then budget the money.

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  • As for the cash, it would probably be simplest to record the cash withdrawal transaction against a category and consider it spent when it comes out of your bank account. I ssume there will be currency conversion involved, so you'll need to enter the withdrawal in your bank account currency rather than the withdrawal currency.

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  • I've used two approaches to the problem:

    1. Whenever I buy something in a different currency, I input my estimated cost, and I mark my transaction with the red colour. That way I know what to follow up, seeing as the "cleared" checkbox isn't too helpful there.

    2. If it's a lot of cash, repeated, I'll either just add the transaction where I take the cash out, or I'll specifically create a new account for the wallet in that currency.

    Dealing with currency in a better way is part of what I miss from the old and no longer updated Android app anMoney, which had all that granularity that you might expect.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
      • Reported - view

      Thor K. H. No good solution exists for dealing with multiple currencies in a zero-based budgeting system. It's the one situation where money is not fungible because they are not 1 to 1 and their relative value is not constant, but a zero-based budgeting system relies on fungibility.

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    • nolesrule Indeed, there's no *good* solution. However, the workarounds aren't a particular problem in a zero-based budgeting system, as they were meant only for the purchasing part of the occasion.

      For your income I see it as a lot more annoying and problematic, if you want to be strictly at zero. I tend to not be too bothered, but I can definitely agree that it'd be annoying to have little variances if estimating the value of the income in advance.

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      • negrcian
      • negrcian
      • 2 yrs ago
      • 1
      • Reported - view

      Thor K. H.  In YNAB there should not be any estimation in advance, as you only budget the money you have.

       

      That is the power of rule#1, Give every dollar a job.

      Edited to add:

      Rule#3 Roll with punches also applies. Adjust where needed.

       

      I  would enter a forex purchase as a split transaction, first leg is the transaction in the forex

      Second leg is the difference between that amount and the local currency amount, which then adjusts the total amount of the transaction to the local budget currency.

      You would use the same category for both legs of the split.

      When you know what the actual local amount is, then you can adjust the second leg so that the amounts match up in total.

      A potential third leg could be fees, or the additional split that the bank is taking on the forex rate vs the advertised rate on the forex sites. Some banks are just not charging fees but their forex rates are very expensive.

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    • negrcian Well, yes. I don't have any transactions that are entered before the money's actually there. However, whether or not the scheduled transaction is an estimate of how much it'll be in my account's currency is a different matter. I wouldn't enter it prematurely nonetheless.

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      • negrcian
      • negrcian
      • 2 yrs ago
      • Reported - view

      Thor K. H.  Note I have added some extra thoughts on dealing with the forex costs to my initial response

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      • negrcian
      • negrcian
      • 2 yrs ago
      • Reported - view

      One forex site I use to estimate what the cross rate will be is xe.com

      I know the bank will use a different rate, but it is a good start, for a scheduled transaction you could use an average cross rate based on the last month.

      When I have to claim expenses that occurred in forex ( paid using a forex based prepaid credit card), I use the month average as published by the central reserve Bank in my country. And yes the rates are never exactly that rate at the time of the transaction, but if I'm spending AUD in cash the daily rate is also not the rate I bought the currency at.

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      • nisnwot
      • nisnwot
      • 2 yrs ago
      • Reported - view

      Thor K. H. Genius!  An account in a different currency. I knew there’d be a way!

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      • negrcian
      • negrcian
      • 2 yrs ago
      • Reported - view

      nisnwot , I have done this, and for a while was going to have my salary paid into the forex account, and then pull from it, as required. 
      You just have to remember that you will need to account for forex costs in your budget, when you transfer money from the forex account to the local account. The only cross rate that matters is the rate you buy the money at or sell the money at. 

      The purchase of an item in forex using the forex doesn't cost you more in your local currency because the notional cross rate between the currencies has changed. 

      You only incur that forex charge if when doing the transaction you change the currency as well, ie buying an item in Sterling, using a Euro denomiated credit card.  In this case you are actually doing two transactions at the same time, buying an item and buying the cash from the bank to pay for that item.

      In my case it ended up being easier for my company to pay me from their local (NZD) based bank account, as then they didn't have to transfer the monies back to their account as AUD to pay it to me in AUD, which i would then have to pay to transfer back to NZD.  Forex charges can get expensive very quickly, and the bank loves to make money. 

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  • Because it's income and not an expense, I'm all for nolesrule 's idea to schedule the payment transactions but leave the amounts at zero until they arrive. 

    You could definitely record the lump sum of your cash withdrawals against one of your categories (it's always hard for me to keep a super detailed account when traveling). But if you'd prefer to track every pound (er, euro) you can transfer the withdrawn amount into a cash account you create in the budget, then track purchases as you normally would. 

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  • I have a very convoluted way of handling foreign currency in YNAB. But it only works for me because spending 20 minutes in the evening messing with a spreadsheet after a day of hitting the Christmas Markets in Berlin is relaxing for me plus I have enough slack in my budget that a few days of guessing isn't going to hurt me.

    1) Credit cards are super straight forward. When I buy something I do a rough conversion in my head and enter the amount and just flag it so I know to confirm when the charge clears. As noted above, unless I'm buying something in the 5-figure range, it doesn't really hurt my budget to have some guesses for a few days.

    2) Cash is where I let myself jump through hoops. In the beginning of the year I spent 13 weeks over a 4 month period overseas for work. I was in a country where 95% of my transactions occurred in cash. So I had a Google Sheet. I would withdraw, for example, 40,000 in local currency (LC). My bank would immediately show that I withdrew US$110.80. I went into my spreadsheet and set that up to see that the exchange rate was US$1=3610.13 LC. I then just set up some formulas. And I would do my expense entry into the Google Sheet and let it automatically convert my 11,000 LC breakfast to $3.05. I would leave everything in there until the ATM withdrawal went from pending to cleared in my bank account in case there was any changes to the exchange rate. Once the withdrawal is finalized in my bank, I do a transfer of $110.80 from my Cash Management account to my Foreign Currency Account in YNAB. I then enter all the transactions from my Google Sheet into YNAB with the finalized USD amount. During the day I continue to enter transactions into my Google Sheet and then enter it into YNAB in the evening.

    Most people would not have the patience to deal with it in this manner. Generally my Foreign Currency Account goes down to zero once I get back home because I do try to manage my cash spending so that if I have a few bucks left over at the end of the trip I just put it in a charity box at the airport or tip generously to hotel staff. So costs would be assigned to either Non-charitable Giving (ie any donation that doesn't go to a 501c3) for the charity box or Reimbursable for the tips (I get a flat rate Meals & Incidental Expenses from work that covers tips). If I have a lot of local currency left over, I usually "sell" it to a coworker who is heading out to the field for whatever rate is on Oanda on that particular day because someone is always about to head out on a trip at work. In that case it gets treated like a transfer from the Foreign Currency account to some other account (checking if they Venmo the money, Wallet if they give me cash).

    The one exception is for Euros. Between airport layovers, actual trips, or asking someone to buy something for me when they are in Europe (I like the Colgate Herbal flavor toothpaste which you generally can't find in the US for example), I do generally keep euros on hand. So right now there is a 50 euro note in my wallet. According to YNAB, my Euro Account has $54.74 because that was the final exchange rate when I got the money out of the ATM at the airport in Amsterdam back in March because all the credit card machines in the entire airport were down but by the time I got back from the ATM to the sandwich shop they were working again and I ended up using the card for the points. What category is that money in? Don't know, don't care. It doesn't matter because it is 0.08% of my on-budget total so I don't worry about it.

    So is this a "good" way of handling foreign currency. Well, it's my way of handling foreign currency. . .

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      • nisnwot
      • nisnwot
      • 2 yrs ago
      • Reported - view

      jenmas And great excuse for not speaking to the relatives...  I could grow to like this convolution. Thank you!

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  • Hi all! I'm going to go ahead and mark this question as answered, but don't let that stop your discussion! :) 

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      • nisnwot
      • nisnwot
      • 2 yrs ago
      • Reported - view

      Janelle at YNAB Fine by me - lots of great ideas - I’ll let you know how I get on. 

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