Recent months have seen market drops, businesses closing, media dramatization, international uncertainty, and wide-sweeping tragedy. In truth, that sentence can describe many periods in recent history. As Jesus Himself intimated, there will always be wars, rumors of wars, and natural disasters. While He said those things don’t necessarily mean it’s the end (Matthew 24:6-8), there are times when it sure feels like everything is going to come to a screeching halt.
Though Jesus was sharing a much larger message when He said to “be ready” and “keep watch” (24:42-44), Vagabond Finances needs to limit itself to just a few financial “readiness” issues.
Perhaps there are some financial matters that have gotten our attention in a new way during the current coronavirus pandemic. What can we learn to be more “ready” for tomorrow and for the next crisis to come along?
In today’s post, we want to reflect on some cash issues that have affected many people in general and perhaps US expats in particular. We’ll discover that, in some ways, “cash is king” but which currency, which form, and where is it? Let’s get started!
Cash and Cards in Hand
One lesson learned in almost any crisis is that flexibility is really helpful. It probably never occurred to a lot of us that even our methods of payments need to remain flexible. Let me just give some personal examples experienced by me and my loved ones:
- Cash was not accepted for a transaction because it might carry Covid-19.
Solution: Paid with a US credit card.
- A host-country merchant temporarily lost the ability to accept credit cards.
Solution: Paid with local currency.
- A US credit card was not accepted by a host-country merchant.
Solution: Paid with a host-country debit card.
- A host-country merchant stopped accepting in-person payments to create contactless delivery.
Solution: Paid by local bank transfer.
Maybe you’ve run into similar, different, or more challenging issues. The point is that having a variety of payment options during a crisis is always a good idea! While my loved ones and I managed to get through all of these situations, I’m carrying an extra card in my wallet and have more cash on hand than I did just a few months ago. Lesson learned!
Speaking of having cash on hand, a lot of Americans – expatriates or not – have learned the hard way just how important it is to have some cash saved up and available. According to the Washington Post, 10 million people in the US applied for unemployment in March of 2020. Many of them and millions that followed in subsequent weeks needed their unemployment check immediately because they couldn’t pay the next month’s bills. That’s no shock. Reports going back at least as far as 2016 have stated things like this:
In fact, about 63 percent of Americans say they’re unable to handle a $500 car repair or a $1,000 emergency room bill.CBS News
During the current crisis, many teachers at international schools were told to stay at home, many missionaries and charity workers began to wonder if donations would keep coming in, and some overseas business positions just seemed to disappear overnight. Where do you turn when your income stops unexpectedly?
Whether you call it an emergency fund like Dave Ramsey or a contingency fund like Andrew Hallam (in Step #2 of his 9 Steps to Financial Freedom), it has always made sense to keep at least six months’ of cash available so that a chipped tooth, an unplanned flight Stateside, or, well, things like a global pandemic don’t cause immediate problems. Problems will come, but that six months or more of cushion allows for some mitigating of the damage.
The problem could be that we just didn’t bother to save any money or the problem could be that we invested every last dime in a home, in a business, or in the stock market. Either way, not having cash is a problem, and it often leads to, you guessed it, debt.
Debt-Reduction and Avoidance
For the expat without a contingency fund who got a large car repair bill, how do you think they paid it? Odds are pretty high, they put it on their credit card and that that credit card didn’t get paid off in full at the end of the month. If paying off a credit card debt can save you 12.77% or more, not paying it off can put you that same 12.77% or more into debt.
Entering a crisis with no debt and incurring no new debt is ideal, but what if you already have some debt? Following Ron Blue’s 5 Simple Steps to Get Out of Debt will leave you more prepared for the next unforeseen crisis.
Frequent Flyer Points as Currency
While this is a bit of a more unusual sort of takeaway from a crisis in which many airlines have curbed or even stopped flights, it is probably worth noting here the incredible value of frequent flyer points in some circumstances. Many families, for example, found themselves separated from loved ones during the coronavirus pandemic. With a child at school in the USA or a sick family member on a mission trip to Asia, a short-notice booking may have been the only option to reunite family members in a time of crisis.
The price of flights during a crisis can vary tremendously and short-notice flights are often very expensive. However, if you’ve got enough miles or points with an airline (or, better still, with a rewards program that allows transfers of points to an airline program), you’re going to feel downright blessed. The actual cost of that flight may have jumped from $800 to $1,400 if paying in dollars, but its cost in frequent flyer miles should have held firm at, say, 60,000 points.
Whether you’re playing the miles game or just saving up miles through flights, it might be advantageous to keep a small stash of miles or transferable points for the next time an urgent trip needs to be planned. Frequent flyer points are like a currency that beat to their own drum. That brings us to our final “cash” lesson from this financial crisis.
We expatriates who have personal and financial ties with both the US and our host countries experienced an interesting period of currency fluctuation during the pandemic. Currencies were being undermined by the news and also supported by governments. None of this happened in concert, of course. At the same time the US dollar was moving up or down against certain benchmarks, your host country currency may have been moving in the opposite direction. That made for an interesting seesaw event at times.
Maybe you had to pay tuition in the US at the same time you owed rent in your host country. The crisis might not have been a great time to be forced to exchange currencies. Depending on how the coronavirus effected your host country’s currency and the US dollar, that conversion might have cost you a lot more than what you were expecting just a few weeks earlier.
For example, in just 11 days (from 9 March to 20 March 2020) the US dollar gained over 16% against my host country’s currency (the Czech Koruna). Transfering US cash to my Czech bank would have been a joy on 20 March 2020 but having to transfer in the other direction would have been painful.
This is another lesson learned from this crisis. Having enough cash reserves on hand to pay a few months’ expenses in both (or multiple) currencies might help us avoid some currency exchange shocks going forward.
So the coronavirus pandemic of 2020 had some valuable lessons for US expats. In addition to reminding us to trust in God rather than money and to show reckless generosity to those suffering financially, it also revealed to us some practical preparedness concepts when it comes to our cash in a time of personal or international crisis.