Budgeting in multiple currencies: one picture of all your money

If you’re paid in dollars, pay rent in euros and still have a pound account from a few years in London, no bank app shows you the whole picture. Here’s how to get one: a main currency, the right exchange rate for each amount, and a few habits that keep the totals honest.

Pick one main currency

Your main currency is the one you think in: usually the one you pay rent and buy groceries in. Totals, budgets and net worth are shown in it. Choosing it doesn’t convert any money: your dollars stay dollars, they’re just shown in euros next to everything else.

If you’ve moved country, pick the currency of where you live now. A good app lets you change it later, because only the way totals are shown changes, never the amounts themselves.

Keep each account in its own currency

Don’t convert your dollar account into euros by hand. Record it as what it is: a dollar account with dollar transactions. Then its balance always matches what your bank shows, and you can check it against a statement line by line.

For a card payment abroad, record what left your account, in the account’s currency. If your euro card paid £50 in London and the bank took €58.40, the expense is €58.40: that’s what it cost you, with the bank’s rate and fees included. Keep the £50 in the note if you like.

Convert each amount at its own day’s rate

To add up a month of spending in several currencies, every amount has to be converted into your main currency. There are two ways to do it, and only one gives figures you can trust:

• At the rate of the day it happened. A dollar spent in March is converted at March’s rate, so March’s total is settled once March is over.
• At today’s rate. Every past amount is converted again whenever the rate moves, so your March spending changes next week although you didn’t spend anything.

Here’s the same spending both ways. The rates are made up and round, to keep the arithmetic easy:

At today’s rate both months look the same, and both will move again tomorrow. At each day’s rate, March cost €920 and stays €920: that’s the figure to hold against your budget, and the one you’ll want when you look back in a year.

Balances are the exception. What an account holds now is worth today’s rate, so net worth uses today’s rate. That isn’t a contradiction: spending is history, and a balance is the present.

Treat transfers between currencies as moves, not spending

Moving €1,000 to your dollar account isn’t spending, and the dollars arriving aren’t income. Record it as one transfer with two amounts: what left in euros and what arrived in dollars. Together they give the rate you really got, fees included, which is usually a little worse than the rate you see quoted.

Keep transfers out of your spending totals. Otherwise every time you move money between your own accounts, it looks as if you spent it.

Budget in your main currency

Set each category’s monthly budget in your main currency, and let spending in any currency count towards it at that day’s rate. A dinner paid in dollars and a grocery run in euros both come out of the same budgets.

If one currency is a separate life, such as a flat abroad with its own bills, a budget in that currency can make sense too. Most people don’t need one.

Watch what exchange rates do to your savings

Money held in a currency other than your main one changes value in your currency even when you do nothing. That’s worth knowing rather than worrying about. It’s a reason to think about which currency your emergency fund is in: ideally the one your bills are in.

How I do it in Consistent

I built Consistent partly because my own money is in lei, euros and dollars. Each account keeps its own currency; every transaction is converted to your main currency at the rate of its own day, and balances at today’s. A transfer between currencies records both amounts and never counts as spending, and Reports show how exchange rates moved what you hold in other currencies.

Investments count too. Here’s how to see your accounts and investments from several banks in one place.