Andy Hough

Why You Should Always Pay in Local Currency When Traveling

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When you are using a credit card in a foreign country and asked whether you would rather pay in dollars (or whatever your home currency is) or the local currency, you should always pay in the local currency.  This is because if you choose to pay in your home currency rather than the local currency you will be overcharged.

This is due to a scam called dynamic currency conversion. This “service” is provided by the credit card payment processor. It is touted as a benefit to the consumer since it is easier for them to understand how much they are paying when the price is paid in their home currency. However, it is obvious to me that this just a way for the merchant and card processor to make actual profit. If it was actually a service the merchant would explain the choices and disclose that there is a fee for using the home currency. In my experience they never disclose that it will cost you more to choose your home currency.

When you use dynamic currency conversion you are charged an extra fee for converting from the local currency and home currency and a much worse exchange rate is also used. This results in you being overcharged for your purchase by several percentage points. Even though this overcharge is just a few percent it can really add up over several purchases or on a large purchase.

I have a couple of examples from my current visit to Thailand. I am having some dental work done that is going to cost me a little over $1200. After my first visit I was asked to pay for half of the cost of the dental work. I was asked whether I wanted to pay in dollars or baht. Since I was aware of the dynamic currency conversion scam I knew to choose to pay in the local currency of baht.

Out of curiosity of how much extra I would have paid for using dollars, I noted the price for the dollar option. By paying in dollars I would have paid $637. By paying in the local currency and letting my credit card company convert the currency from baht to dollars I only paid $616. If I had opted to pay in my home currency I would have been ripped off of $21 by the dynamic currency conversion scam.

Unfortunately, sometimes the merchant doesn’t even ask you if you want to pay in your home currency or the local currency. I had that happen at a Thai pharmacist. He didn’t say anything about paying in dollars or baht. It wasn’t until after I signed the credit card slip that he gave me an additional slip showing that the price was charged in dollars.  The credit card slip I signed showed the price in baht, although it may also have displayed the price in dollars somewhere on the slip. I will be sure to check my credit card slips more carefully from now on and specify that I want to pay in baht even if they don’t ask what currency I want to use. Although I was only overcharged $1 by the pharmacist I will be disputing the purchase amount. I do not want them to profit at all from this scam.

I am hoping that someday merchants will stop using dynamic currency conversion or the credit card companies will not allow the payment processors to add-on dynamic currency conversion charges. For now, all I can do is decline to pay in my home currency and stop frequenting merchants that try to rip me off.

I need to get a dental implant in addition to the dental work I’ve already had done. Since my current dental office tried to rip me off I will not be getting the implant from them. After my current dental work is done and payment is completed I will let them know why I am not getting the implant from them. Perhaps if enough people complain and stop using merchants that employ this deceitful practice it will stop being used.

In addition to always paying in the local currency, you should make sure that you always use a credit card that does not charge a foreign transaction fee. This a fee (usually 3%) that many credit card companies charge you for making a transaction in a foreign currency. There are many credit cards that don’t charge this fee so the fee can be easily avoided. Make sure that any credit cards you bring for international travel do not charge a foreign transaction fee. I brought three credit cards with me for this trip and I made sure none of them charge foreign transaction fees. There is no reason to pay more than you need to.

Were you aware of the dynamic currency conversion scam? Have you ever been victimized by this scam?

Lifetime Earnings – What I’ve Made and What I’ve Got

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After recently reading Budgets are Sexy’s post on lifetime earnings and the wealth ratio I decided to take a look at my own total lifetime earnings and wealth ratio.    According to Social Security’s records I have made a total of $409,128 over 35 years. At the time I looked up my total earnings I had about $57,500 in retirement savings. Dividing my savings by total earnings would give me a wealth ratio of about 14%.

However, the wealth ratio is supposed to be calculated by dividing your net worth by your total earnings. I haven’t calculated my net worth for a while but a reasonable guess is that it is about – $70,000.  Using my net worth to calculate the wealth ratio I will obviously have a negative wealth ratio.  That is not a good result.

lifetime earnings

Looking at my earnings record, it is pretty clear why I don’t have a better net worth. My main financial problem is that I have never made very much money. It is only the past few years after obtaining my tax job that I’ve made halfway decent money.  Some of the years in the 90s when I was working as a blackjack dealer in various casinos were also decent earning years. Adjusted for inflation, I was probably making as much back then as a blackjack dealer as I am now as an attorney.  Even though my law degree and passing the bar has resulted in a higher income it hasn’t resulted in anywhere near a higher enough income to be worth the expense of law school. Getting my law degree did not pay off.

Looking at J. Money’s total earnings he has made over twice as much money in about half the number of years. This makes it obvious that a higher income is the key to getting ahead financially. Even though I’ve been very frugal most of my adult years (most of the time I had to be) I have nothing to show for it.

Even if I hadn’t made the huge mistake of going to law school and taking out massive amounts of student loans to pay for it I probably wouldn’t have much. In 2005 before I started law school I had no debt, but I also had very little in the way of assets. I had an old car and $1000 or so in the bank. I’d like to think that without law school I still would have found a way to increase my income a bit. I doubt I’d have the $57,500 of retirement savings that I have now though. On the other hand, considering I’ve paid about $40,000 of interest on my student loan so far maybe I would have that much in savings or even more. It doesn’t really matter since I did go to law school and that can’t be changed now.

Averaging out my lifetime earnings I’ve made a bit over $11,000 a year. Adjusting for the high school years and some income that wasn’t subject to social security I would still only have a little over $12,000 a year average income. When you only make that much money basically all of your money needs to go to living expenses. There isn’t really much if anything left for savings.

A little explanation for some of my low earning years. The first few years out of high school I worked various minimum wage jobs that usually only offered part-time hours. Even though I was employed most of the time the income didn’t add up to much.  In 1990 and 1991 I was employed full-time most of each year and my income was still really low. If I remember correctly, I was making $4.50 an hour and my bi-weekly paycheck was about $350. I was living on my own and barely making more than my living expenses, but I was always able to pay my bills.

The next few years I worked a restaurant delivery job. Since a big portion of my pay was in non-taxable mileage reimbursement my earnings for these years appear a bit smaller than they actually were.

The next few years I worked as a blackjack dealer at various casinos. This is when I should have started to get ahead financially. Unfortunately, I also had a serious gambling problem during these years. Although I was making significantly more money than I previously had my finances were in much worse shape. I went through a bankruptcy during this period and even after that gambled away a lot of money that should have gone to savings.

Eventually I decided I needed to get out of the casino industry so I could break my gambling habit. I moved to Dallas and later Austin, but never managed to find a good paying job. I also started during medical studies during this time. The pay from medical studies isn’t subject to SS tax so this is why my earnings appear so low during most of this time. In 2003 though, I was employed all year as a pizza delivery driver and later providing roadside assistance and I still didn’t make much money. I’m not sure how I got by living on my own that year.

After that I decided to go to law school so I could finally start making good money. If you have been reading the blog for a while then you know how that turned out. That pretty much brings us up to the present.

Going forward, I need to significantly increase my income. I”m not sure how I am going to do that. I can work a little more overtime at my tax job when it is available. I can drive for Uber or do a different side job when I don’t have overtime available. To really increase my income I will need to find a higher-paying job or a high-paying side hustle. I don’t know if I want to leave my tax job since it is the first job that I’ve halfway liked that also paid well, but I may have to. I’m not sure what I would do for a side hustle.

When I get back from Thailand increasing my income will be a priority. Next year needs to be my highest income year ever.

August Income – $3533.90

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Here is a breakdown of my income for August.

Interest $5.27
Amazon FBA $22.17
Job $3153.62
Cash Back $27.05
Dividends $0.22
Uber $2.66
Credit Card Other $175
Online Income $0
Mystery Shopping $0
Selling Stuff $147.91
Total $3533.90

August’s income was pretty good. I got 5 paychecks from my document review job since there were 5 Fridays in August. I was also able to work one weekend making time and a half which increased my pay quite a bit.

My other sources of income only added up to about $380.  When you consider my other sources of income were more than enough to pay for my food, transportation, phone, and entertainment expenses for the month it does make the other sources of income sound more substantial.

I won’t be tracking my savings rate this month since I did a lot of moving money around to different accounts making it difficult to determine my real savings rate. I will track my months of expenses saved instead. I only count the money I have saved in my IRAs and 401ks for this purposes. I have about $60,000 saved in those accounts. If I were able to continue to replicate this month’s expenses of $947.19 that would mean I have 63.34 months of expenses saved.

This month’s income will be down significantly since I will be in SE Asia and not working. I hope I will be able to figure out a way to make some money while I’m over there. If not, I will just make a tiny bit of money from my non-job sources of income.

 

August Expenses – $947.19

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Here is a breakdown of my expenses for August.

Household $61.29
Rent $435
Entertainment $55.99
Transportation $162.74
Food $112.51
Travel $40.27
Phone $24.66
Health $44.38
Student Loan $0
Total $947.19

My August expenses were nice and low. I actually made my target of less than $1000 in expenses for the month.  I think using the EveryDollar (not an affiliate link) budget app did help me keep my expenses even lower than normal.

My household expense consisted of $50.29 for an Ancestry DNA kit and $11 for a gift.

Rent is self-explanatory. Utilities are included with my apartment rent. I don’t have to pay for them separately.

Entertainment was completely for movies and for food at the movies. I should stop getting food at the movies since it is a terrible value and not healthy.

Transportation was entirely for gasoline. My document review job was about a 30 minute commute each way which results in a larger than normal gas bill. Also, I visited my Mom in southern Missouri which used up a little over a tank of gas.

Food consisted of $30.42 spent on groceries and $82.09 spent on fast food. This was a lot lower total than the previous month as I cut way back on my fast food spending. I still ate fast food 15 times in August which is way to much. I need to cut that back to once or twice a week at most. This month I’ll be traveling in Malaysia and Thailand so I’ll be eating out all of the time which will likely result in a larger food bill.

Travel was for a cheap flight from Bangkok to Chiang Mai.

Phone was about $24.66 for my usual Google Fi phone bill. I used a little less data than usual since my phone wasn’t working for a few days of the month.

Health included $25 for a doctor visit co-pay, $19.38 for 2 prescription refills, and $10.35 for my monthly fitness center fee.

This month’s expenses will probably be a little higher since I’ll be traveling in SE Asia. I won’t have any rent or gasoline expense though so maybe everything will balance out to be about the same.

Goal – Lose 30 Pounds in 3 Months

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This post is to make public my goal of losing at least 30 pounds in the next 3 months. One of my goals for 2018 was to lose weight. I didn’t set an exact weight loss goal. I knew I needed to lose about 50 pounds though. Right now I weigh about 5 pounds less than I did at the beginning of the year.

It is clear I haven’t been working too hard on this weight loss goal. I actually gained weight earlier this to reach my highest weight ever. Due to that I had to lose 9 pounds in order to get to 5 pounds down for the year. At this point losing 50 pounds during the year is unrealistic, but I think losing 30 pounds can still be accomplished.

Last week I was able to lose 4 pounds by just abstaining from soda and fast food for a few days and exercising in the morning. If you’ve been reading the blog for a while you might remember that I lost 30 pounds back in 2014. Although I have since gained all of that weight back, that previous weight loss combined with last week’s results indicate to me that I am capable of losing weight when I really try.

A major factor in my favor for losing 30 pounds in 3 months is that in the past I’ve consistently lost 10 pounds a month when living outside of the United States. That was without making a special effort to lose weight.  Last year while I was in Europe for just under 3 weeks I managed to lose 5 pounds despite eating a lot of fast food and drinking a lot of soda and not making any effort to lose weight. Living in Thailand where the food will be much more foreign to me should lead to greater weight loss than I experienced in Europe. Plus, while I’m in Thailand I will actually be trying to lose  weight.

One of my goals in going to Chiang Mai for 3 months is to work on improving myself. Being in Chiang Mai should facilitate my weight loss goal. A major help will be the fact that to my understanding my favorite soda, Dr Pepper, is not available there. I have tried and failed to quit drinking soda several times this year. Starting today I am quitting soda for the rest of the year. Since I don’t especially care for any sodas other than Dr Pepper, it not being available will help me quit soda. About 25% or more of my calories come from soda so cutting the soda habit will save me a lot of calories.

I’m also thinking that I will find it easier to not eat fast food while I’m in Thailand. Although, I know they do have Western fast food in Thailand, I don’t think fast food outlets are quite as ubiquitous there. Having fast food be a little less conveniently available should help. Also, the Thai food is supposed to be much cheaper than fast food. Being a tight-fisted miser should work to my advantage since I won’t want to spend extra on the less healthy fast food.

When I choose an apartment in Chiang Mai I will pick one with a gym. Having a gym in the apartment building should overcome any resistance to working out. Also, I should have a lot of time on my hands so I will want to exercise to help fill out my day. I don’t plan on renting a scooter or frequently using ride services. I intend to walk everywhere I can reasonably walk to which will help burn more calories.

To provide myself with a little more motivation I will be posting my results at the end of three months, including before and after photos. Getting healthy should be all the motivation I need to lose weight. Just in case it isn’t sufficient motivation the desire to avoid the embarrassment of posting an after photo that looks a lot like the before photo will provide me even more motivation.  The results will posted on November 29, 2018 regardless of the outcome.