The American Dream 2.0: earn in dollars and spend in pesos

With the advent of the pandemic, companies were forced to adapt to remote work, which created an opportunity for Latin American talent who, without having to travel to other countries, could start applying for international jobs and therefore receive salaries in dollars.

This situation has led more and more Colombians to pursue what many today call a new version of the “American Dream”: to earn in dollars and spend in pesos. Apparently, the fact that you earn in dollars can place you in a privileged position in the country’s social pyramid.

According to a study by Anif, if a person contributed more than $781,000 per month to their household by 2022, they could be considered middle class, and even those who contributed more than $4,200,000 per month could be considered upper class. Which means a person earning more than $1000 a month today could be living the “American Dream”.

For this reason, I would like to share some recommendations for those who live in Colombia and have the goal of starting to generate income in dollars, or for those who are already doing so. The main problem with earning in dollars and spending in pesos is managing exchange rate volatility. To mitigate this risk, it is advisable to create your own “stabilization fund”. For example, you can take the average dollar value of the past months ($4,000) as a reference and always base your monthly budget on that value.

When the dollar appreciates, the surplus of exchange is deposited in a savings account (ideally one that at least yields inflation and does not generate fees) whose sole purpose will be to save those surpluses. In the event that the dollar falls, you can go to this account, withdraw the corresponding amount and complete your “salary”, thereby compensating.

Take advantage of the exchange rate and feel free to save and invest as much as you can. Make a budget and allocate a generous percentage to building your wealth that will generate long-term income and financial security. A practical way to start is to “short” or exchange these dollars when the exchange rate is high, and at that time match them with the previously analyzed investment.

Be measured and apply emotional intelligence. Even if your bank account is full, it’s up to you to turn this opportunity into long-term financial well-being and not just a moment of uncontrolled spending. Plan ahead as contracts, projects or jobs may end.

Last but not least, just because you earn dollars doesn’t mean you should neglect your social security. Make sure you make the appropriate pension, health and ARL payments, as in many cases your employment relationship after contracting with non-Colombian companies may be similar to providing services. The UGPP is pending and non-payment could result in claims for years to come.

It is a fact that earning dollars living in Colombia has many advantages if it is managed by applying different concepts of financial education. If you’re part of that group, take the opportunity to proudly say in a few years that you’ve saved, invested, and contributed to building some of your wealth thanks to your time earning dollars.

@amhc01

Director and co-founder of Clever Finance Financial Education

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