How to survive the exchange rate
September 11, 2008
CHIAfE+VRES, Belgium - For many Americans living in Europe, a night out on the town, a quick trip to Paris or a shopping spree at the mall became a thing of the past when the dollar lost its buying edge against the euro.
But it wasn't always like that.
The euro became the official currency of the European Union in 2002. That year, the dollar and the euro were nearly even as one greenback could buy you an average of euro 1.09. However, over the past six years, the value of the dollar has declined, and the impact is being felt by U.S. servicemembers, civilian employees and family members stationed throughout the continent.
Kat Albrecht, a U.S. contractor in Belgium, lived in Germany when the euro was first introduced.
"It was great when the euro first took over," she said. "At first the dollar was up and then it declined, but we were still even."
But as the dollar started to slip, Albrecht admitted that paying rent became difficult.
"My rent was 400 euros," she recalls. "When the dollar was even, it was no problem, but when the dollar dropped, my rent and utilities were about $600. As a contractor, I didn't get (a cost of living allowance), and I couldn't afford it any more and had to move."
According to figures from the U.S. Treasury, in April, May and June, Americans experienced the worst exchange rate on record with one dollar equaling an average of 66 euro cents, a 49 euro cents decline from the same quarter in 2002.
While July's official figures have not been released by the Treasury, that month the dollar slipped even further, hovering around 63 euro cents, according to various published rates.
Sgt. Jason Pettegrow, a chaplain's assistant with the U.S. Army NATO SHAPE Battalion, has been stationed at SHAPE for only seven months, and he is already feeling the effects of the dollar. "I've noticed an eight to nine cent drop," he said.
Last month, however, the dollar saw a spike and started to return to rates seen in early 2008.
Still, even the improved exchange rate makes many people shake their heads.
Making the Exchange
For most, when payday rolls around, it's time to make exchange transactions. And there are many options for Americans living in Europe, with each person having his own strategy.
Pettegrow said he usually exchanges money on post or withdraws euros from his stateside bank account at a local ATM. "The exchange rate doesn't hit me as hard at the ATM. Plus I like that the machines are available 24-hours," he said.
Albrecht also uses the ATM machine when she needs euros.
Ann Newton, an Army civilian with the 650th Military Intelligence Group, uses the Benelux Finance Office to cash checks and or a nearby bank to buy euros.
Newton has been in the Benelux for more than a year, and she has developed a strategy that works for her. "It seems like the euro shoots up around the first of the month, so I try to buy my euros prior to or after that, usually around the last two to three weeks of the month."
From civilian banks to the Benelux Finance Office on SHAPE, each facility has a competing rate and some charge additional fees.
The Department of Defense takes those fees into consideration when determining COLA and the overseas housing allowance through a computation called the community bank accommodation rate.
"The rate provides for the cost of the foreign currency and for the bank's operating costs," said Steve Burghardt, a spokesman with Defense, Finance and Accounting Service.
Both the overseas COLA and OHA include increases equal to the amounts a person would spend using a DoD Community Bank's foreign currency sales.
"There may, at times, be better deals off base," said Burghardt. "In those cases, it's up to individuals to decide which is better for them - to purchase on base or at an off-base location."
Although rates vary throughout Europe, the average daily exchange rate can be found at AFN-Europe's Web site - www.afneurope.net - by clicking on "Exchange Rates."
Getting the Most From Your Dollar
Oftentimes, the best buy for U.S. servicemembers is the Post Exchange and Commissary.
According to the Defense Commissary Agency's Web site, shoppers save an average of 30 percent compared to commercial prices. AAFES boasts a 20 percent savings and reports giving back nearly two-thirds of its earnings to Morale, Welfare and Recreation programs.
But what about shopping on the economy' That's part of the European experience, after all. From superstores to little mom-and-pop shops, the variety is endless. However, this is where the exchange rate and high taxes start to pull on the purse strings.
"We used to go to [a Belgian home improvement store] all the time," said Albrecht, "but now we plan trips to Germany to get items like lawn care and paint. And it's a lot cheaper at the bases."
She also has tips for dining on the economy: "We go to our favorite restaurants during lunch because it's less expensive." And she's trying to break her husband of the habit of tipping like he's at an American restaurant, versus one in Belgium. "[The waiter and waitresses'] pay is included in the bill, so I usually just round up the change," she said.
Pettegrow has a tip for eating dinner at home and still be able to experience life in Belgium. He gets fresh meat delivered to his house from a man he calls "The Butcher."
"We're able to experience the culture. He comes out, drops the meat off and doesn't pick up the money until the following week."
Pettegrow said when it comes to shopping, he finds his best deals when traveling. "We like to experience what Europeans handcraft - not what's factory-made - so we plan our shopping around our trips."
So what's the secret to reasonable traveling' Albrecht, who works for SHAPE Trips and Tours, recommends taking advantage of that office's activities, which she said are often discounted for children.
As an alternative, Albrecht recommends becoming involved in a Soldier Family Readiness Group. She is the SFRG leader for Headquarters and Headquarters Company, USANATO SHAPE Battalion, and she works with the command to plan discounted trips.
"Taking such trips is a huge money saver," she said. "The SFRG sponsors trips at cost because we can use an approved government vehicle." Her group is planning a day-trip to Versailles, France, this month for only $5 per person.
Lastly, she recommends people return to carpooling and using public transportation for travel around Europe and across base.
And for additional tips on finding the best deals, turn to local nationals like coworkers or neighbors.
Adjusting Cost of Living Allowance
While getting the best exchange rate and shopping wisely can stretch the dollar, people shouldn't give up shopping off-post all together, especially when you consider how overseas COLA is calculated.
According to the Department of Defense Per Diem, Travel and Transportation Allowance Committee, "COLA is adjusted only for the portion of income that the typical member spends on the local economy in foreign currency."
A Living Pattern Survey is conducted once every three years to determine where servicemembers, civilian employees and family members shop.
If the survey shows, for example, that those in the Benelux spend 50 percent of their income on the local economy and 50 percent in dollars, then currency fluctuations will only affect 50 percent of COLA.
For instance, if the value of the dollar drops 10 percent against the euro and those within the Benelux spend 50 percent of their income on the economy, the COLA would only increase 5 percent not the full 10 percent.
In October, the U.S. Army Garrison Benelux will conduct its Living Pattern Survey.
"Universal participation is important," said Lt. Col. Daniel Fitzgerald, special projects officer, USAG Benelux. "There is a threshold requirement of 67 percent participation in certain target populations for the survey to be accepted."
The survey asks simple questions about where people buy basic items like milk or clothing. Once the data are collected, Fitzgerald and his team will conduct a Retail Price Survey to determine how much those in the Benelux spend on average for necessities.
That information will then be reported to higher command, which will use it to determine if an adjustment to overseas allowances is in order.
Getting Financial help
From learning a new language to managing rent and utilities, there are so many challenges on top of figuring out how to survive with the current exchange rate.
That's why the Army offers Financial Readiness and Army Emergency Relief to Soldiers and Families in need through Benelux Army Community Service programs and elsewhere throughout the Army in Europe.
"Financial Readiness provides services that educate and counsel servicemembers and families on financial self-sufficiency," said Bonnie Thomas, Benelux Financial Readiness manager.
She added that the price of gas, currency fluctuations and the fact that rent and utilities can cost more than 2,000 euros monthly, can make managing personal finances difficult. Thomas offers one-on-one counseling for those who find themselves faced with such challenges.
Thomas also warns Soldiers to be cautious of using their COLA to purchase large items, such as vehicles. "Once they return to the states, the COLA is gone, but the large purchase payments continue."
Emergency relief is also available. Army Emergency, Air Force Aid and Navy Marine Corps Relief Societies assist with preventing hardships, providing emergency travel and helping ease "bumps in the road".
"Servicemembers are encouraged to call and discuss their defined emergency with a caseworker to see what kind of assistance may be provided," said Thomas. "The benefit of seeking assistance from the relief societies versus another type of lender is that loans are interest free and if a grant is approved, there is no payback required."
"Each case is evaluated and assistance provided that best fits the servicemembers financial situation," she added.
For those who prefer to find help online, visit www.militaryonesource.com and click on the money link. Along with one-on-one counselors and discussion boards, the site offers a variety of information about exclusive military benefits and advice on budgeting, paying for child care, renting a house and even travel abroad.
Food and Dining Out
*Eat out for lunch instead of dinner.
*Tipping is not always required.
*Buy fruit and vegetables at local markets an hour before they close for the best prices.
*Take advantage of trips sponsored by Soldier and Family Readiness Groups.
*Don't assume hotels are the only places to stay in Europe.
*Carpool or use public transportation.
*Buy train tickets in advance for lower fares.
*Don't assume you have to leave your host country to see the best sites. There are plenty of things to see and do within every European country.
*Even the smallest towns often have tourist information in English.
*Don't wait too long to shop for Christmas. Unlike in the States, stores here tend to mark up prices closer to the holiday.
*Take advantage of the Exchange and Commissary.
*Learning some basics of the language in your host country can help when it comes to bargaining.
*Shop with a host nation colleague to learn about the culture and special deals.