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Changing exchange rate in my calculations

October 17th, 2016 at 09:09 am

Last post I alluded to downgrading the value of the UK pound in my personal finance records. Well, I decided to just take the leap. Brexit will not sort itself out anytime soon.

I was using a ratio of \$1.50 for every British pound in my calculations, so I'm changing that to \$1.25 per pound.

What this affects:

- UK mortgage debt decreases from \$62,088 to \$51,740

- EF is in UK money, and that money decreases in value, but since I also added more money to it today, it doesn't feel too bad. It would've decreased from \$2,025 to \$1,688. However I also added 450 pounds to savings today, so the EF is at \$2,250.

- UK pension value goes from \$64,694 to \$53,911

- UK flat value goes from \$270,000 to \$225,000

All in, the effect on net worth is to decrease it about \$45,210. It also will set back our retirement goal. But I do feel like the pound is going to struggle for a long time, so this is a more realistic view of our finances. Even if it takes longer to become millionaires-on-paper and we miss our retirement milestone, it's better to know the truth.

5 Responses to “Changing exchange rate in my calculations”

In your shoes, I would try to fit in another trip over while the exchange rate is so favorable. Also a good time to buy stocks whose share prices are denominated in pounds.

2. scfr Says:

Always a good idea to have a realistic view of the finances.
Is the UK flat paid off?

3. ceejay74 Says:

AR--we use our UK money for spending during UK trips, so the exchange rate really wouldn't benefit us in that way.

scfr--nope, the UK mortgage debt is 41,392 pounds (now counted as \$51,740 in my calculations).

Interestingly, I found a nearly identical flat on the same street on the market for 215,000 pounds. I currently value NT's flat at 180,000. The place has been on the market a while and the price has dropped twice, so I'm not sure it could sell at that. I'll keep an eye on it and if it does sell near that amount, I can update NT's flat value. (Though I should probably go ahead and figure in the cut his management company would take in a sale, so it might not go up much on our net worth calculation.)

4. LivingAlmostLarge Says:

Why have you kept NT flat versus selling it?

5. ceejay74 Says:

We just haven't really dealt with it. For a long time when we were planning to move back to UK eventually (we only gave up on that dream in early 2014), it felt like it made sense to have the real estate there so someone could stay in it if the immigration didn't happen simultaneously. And once we got there it would be easier to deal with selling because we'd be in personal contact with the agents, etc.

Then, it wasn't even in good enough shape to rent, let alone sell if we wanted to, while we were going through all our buying/selling/renovation tribulations in mid- to late 2014. Finally in early 2015 we had the whole place renovated and rented at a higher rate. It also gained a lot of value once it was updated.

After all that craziness, I've been reluctant to get involved in another big house deal right away. It was so stressful. And now with Brexit, the value of the pound is so much less; we lost \$45K in US worth just because of that. So I feel like it might make sense to wait and see if the pound gets stronger against the dollar again.

It would also be NT's decision too. I like having the guaranteed income of rental, so I wouldn't be too against just keeping it. I could see selling it but to lose that guaranteed income, I'd want to make sure whatever we did with the money would help secure our future. Whether it's paying down principal on the US house, investing the money or buying some U.S. real estate, it would have to be something smart.

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