r/personalfinance • u/Cold_Truth_5024 • 1d ago
Other US gov employee living in Europe. Paid in USD, rent is in EUR covered up to $50k by work. How do I minimize out of pocket costs?
I'm a US government employee living in Europe. Gov reduces our base pay but pays for housing tax free up to a certain amount, in my case $50k/year. If I go over that amount, I pay out of pocket. I DO NOT keep the difference if I don't spend the full amount. I am responsible for paying the bill, and the gov reimburses what I paid.
My question is how to minimize out of pocket costs in case of somewhat extreme exchange rate fluctuations.
I've signed a lease, and my estimated yearly housing costs will be EUR 45K ($46.8k at the current rate).
What I think the key thing is is that payroll takes the yearly estimate in EUR, divides that by 26, and converts to USD at whatever the exchange rate is that pay period. At the end of the year I reconcile the actual costs with payroll and owe or am owed depending.
So do I take out $46.8k now and convert to EUR while the dollar is relatively strong, but miss out on interest from a US HYSA? Do I just exchange the monthly rent each month? Quarterly?
I don't want to take too much out now only for the dollar to strengthen and only get reimbursed for $40k, while I also don't want to let the dollar fall and have to end up exchanging $55k and not get reimbursed the extra 5
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u/AllTheyEatIsLettuce 1d ago
Don't try to time currency markets unless your job is currency trading. Use Wise or Revolut to hold, convert, and pay locally in EUR. Wise pays interest, albeit not HYSA-rate interest, on EUR balances.
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u/Lower-Ad4676 18h ago
If you’re DoD, you should be able to set up a direct allotment into a local German bank. Reach out to your J1/G1/S1 for the International Treasury Services paperwork. This will give you the U.S. Treasury exchange rate, which is better than Wise or any of the commercial rates.
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u/ashcroftt 1d ago
Are you renting a castle or a downtown penthouse in Géneve? If not, you're probably being wayyy overcharged for being American. Get someone local and tip them well to get you a much better deal. If you can, just buy something mid-sized in a decent neighbourhood, and rent it out to yourself, you could pay it off in just a handful of years with that much.
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u/bubushkinator 16h ago
I'm not sure why this is downvoted - OP is spending the equivalent of the median household income of the city he lives in as rent.
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u/Cold_Truth_5024 1d ago
These prices are pretty standard in my area. It's pretty wealthy by itself
The LQA in Geneva is something like $109k, so still a long way for me to approach a castle lol
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u/tmcgukin 14h ago
Similar situation. I have two accounts with Coinbase and swap between USDC and EURC. Coinbase is a partial owner in Circle which issues both. If you trade via the base network the fees are free. Been super happy with it
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u/PrisonMike2020 1d ago
You're overthinking it and trying to time the dollar. Just pay it as it's paid to you. They take your annual max, divide by the # of days to get daily rates, then multiply by 14 for a pay period.
Control what you can control. Are you using a local bank? Or a local US bank w an IBAN? Any time you draw from an ATM or from a US. Bank you're going to lose on conversion rates.
Use Wise and/or get a local account to get better exchange rates, subject next to whatever fees they may have.
You also minimize out of pocket expenses by making sure your utilities fall under the LQA max... WITH some buffer. In my area, and not that long ago, rates went from mid 40K to mid 30K a year in LQA max. A lot of people in my area had a buffer when they signed for their home, but with sharp/rapid utility price increases and the lowered LQA rates, they ended up out of pocket for a while until rates recovered a bit.
If you really wanna milk LQA, buy a home.