Long Term Budget Planning

[oddDistribution]

When you guys think about the cost of living in BA do you think of the current situation as most likely temporary? Like, if someone was planning to move there long term with a fixed income (in dollars) would you tell them to plan for much higher prices under normal circumstances?

 

[Caribbean Cool]

plan? plan on nothing

 

[Ronnie Hotdogs]

You literally cannot plan on anything in Argentina.

However if you have earnings in foreign currency it is likely that you will be somewhat insulated from the worst of any inflation and can expect something perhaps in line with what inflation is doing in the rest of the "normal" world.

I don't see Argentina turning into Chile any time soon.

 

[Quilombo]

I'm the budgeter in our house, and I keep an annual budget in which I use spreadsheets interlinked to each other, and a tab with fixed values that I feed data to as prices change such as the value of the WU dollar, the BCRA dollar, our health insurance, etc.

I make some projections based on the crawling peg + brecha, but it requires a near daily intervention to be anywhere near accurate, and for anything more than a month out I'm grasping at straws as I have no idea what things will cost.

If you have dollars/foreign currency, the best way to budget is paying everything via credit card, especially cuotas sin intres when possible, and then paying the statement when it comes as the odds are good that the dollar will have increased in the 30 days between billings, and you'll save money vs. selling dollars then paying cash.

Just don't save in pesos, only keep what you need for a week's spending max, and you're set. Nothing is set in stone here.

 

[oddDistribution]

You literally cannot plan on anything in Argentina.

However if you have earnings in foreign currency it is likely that you will be somewhat insulated from the worst of any inflation and can expect something perhaps in line with what inflation is doing in the rest of the "normal" world.

I don't see Argentina turning into Chile any time soon.

One of the reasons I was asking is that I was looking at some old threads on this site and it looks like things were considerably more expensive like 10 years ago. Of course there is no way to know for sure what will happen though.

 

[oddDistribution]

I'm the budgeter in our house, and I keep an annual budget in which I use spreadsheets interlinked to each other, and a tab with fixed values that I feed data to as prices change such as the value of the WU dollar, the BCRA dollar, our health insurance, etc.

I make some projections based on the crawling peg + brecha, but it requires a near daily intervention to be anywhere near accurate, and for anything more than a month out I'm grasping at straws as I have no idea what things will cost.

If you have dollars/foreign currency, the best way to budget is paying everything via credit card, especially cuotas sin intres when possible, and then paying the statement when it comes as the odds are good that the dollar will have increased in the 30 days between billings, and you'll save money vs. selling dollars then paying cash.

Just don't save in pesos, only keep what you need for a week's spending max, and you're set. Nothing is set in stone here.

Isn't the exchange rate based on the day of the purchase though?

Edit: I guess you must mean to use an local credit card.

 

[oddDistribution]

You literally cannot plan on anything in Argentina.

However if you have earnings in foreign currency it is likely that you will be somewhat insulated from the worst of any inflation and can expect something perhaps in line with what inflation is doing in the rest of the "normal" world.

I don't see Argentina turning into Chile any time soon.

Also, I think it's the opposite we would have the worry about. If there was very low inflation in pesos I think things would become more expensive in dollars.

 

[wrangler]

If investor confidence remains, and Argentina continues to be allowed to issue bonds to raise funds, then inflation may not worsen beyond its current level in the short to medium term.

 

[antipodean]

When you guys think about the cost of living in BA do you think of the current situation as most likely temporary? Like, if someone was planning to move there long term with a fixed income (in dollars) would you tell them to plan for much higher prices under normal circumstances?

One thing is budgeting another thing is cash-flow planning. I budget long-term using the official dollar in order to leave ample margin incase the brecha narrows (like it used to be 5 or 6 years ago when there was no advantage to using dolar blue or parallel market rates) and assuming OECD global inflation rate in dollar terms (5-6% at the moment)

For example:
- if your electricity bill is now ARS 20.000, I would budget on US$54 per month for the year (regardless if you're actually only cashing-out US$20 now) and US$57 per month for next year and so on.
- if your food expenditure is now ARS 200.000, I would budget on US$500 per month for the year (regardless if you're actually only cashing-out US$200 now) and $530 per month for next year and so on.

Of course there are a lot of variables that come and go (market shortages, price controls, housing laws, importation restrictions, taxes, subsidies etc) that all affect prices signficantly, and with the financial volatility you're never going to have a 100% accurate budget, so best bet is to plan for the worse and leave an ample margin by never, ever, budgeting long-term using "dollar blue" or parallel FX prices as these are simply here today and gone tomorrow.

Then, if you happen to be enjoying a nice subsidy or parallel FX rate vs. your budget, go and treat yourself to a night out at Don Julio.

 

[Quilombo]

by never, ever, budgeting long-term using "dollar blue" or parallel FX prices as these are simply here today and gone tomorrow.

So, I disagree with this for a couple reasons:

- The blue also effects the price of goods/services as much as the BCRA dollar; remember when Guzmán was pushed out/resigned? The BCRA dollar stayed flat, yet the blue skyrocketed and so did prices on things like appliances and electronics
- While past performance is not indicative of future results, you can use the brecha between the BCRA dollar and CCL libre (or Blue) to get an idea of what a dollar will be worth if you pair it with the current pace of the crawling peg that has resumed. i.e. if the average devaluation is 4% a month (making this up, not sure what it is now), and the brecha between the BCRA dollar and blue is ~157%, then if the BCRA dollar goes from 350 to 364, one can assume the blue will likely follow going from 900 to 936
- You can use inflation as a guide, not just dollarization, i.e. if you Edesur/nor bill is 20K this month, expect it to be 22,400 next month if inflation is 12%/month. Generally it's less smooth and will stay flat then shoot up at once, but it's still a way you can guestimate

I think being too conservative in budgeting can as unwise as being too liberal, assuming a 2K dollar blue in 2 months for example, but nobody has lost money betting against the peso long term.