Hi Mr.Money Mustache and fellows mustachians, greetings from Argentina !
My name is Ariel, Iīm 32 years old and, as most of your, Iīm also part of the IT world.
Iīm about to get my batchelor in few months (March estimated). Yeah, I know what you may be thinking... but university works different down here.
Most people work and study at the same time (9am to 6pm at the office, 7pm to 11pm at the university), meaning that a getting your batchelor takes you, on average, about 8-10 years.
Still, Iīm above the average since Iīve been at university for about 11 years so far. But thatīs because thereīs been few years were I could not take any course.
Regarding life... I live alone (renting a 1 bedroom appartemt) and I have a girlfriend (whoīs have two children aged 2 and 4 yrs).
Weīre planning to move in together next year, arround July, but in another two-bedroom appartement.
I had a terrible finance education from my parents. Thay are not doing well, and they never did.
Both of them need to rent (theyīre divorced) and each one has some amount of debt.
The philosophy at home was like most americans do (as you describe in your blog)... they always spend more than they earn and always having credit card debt.
I grew up with that in mind, and most part of my life I was not able to save, because I spent all I earned.
Luckly, few years ago I realized that that was a dead end, and that Iīll never be free going that way.
So I start saving and trying to control my expenses.
It wasn't (is not) easy, but I think I made great progress so far.
But, of course, thereīs still much to do and change.
These are my actual expenses/income:
Monthly expenses (in Argenteenean pesos):
Rent | 3300 |
Property Expenses | 540 |
City Tax | 100 |
Electricity | 20 |
Gas * | 20 |
Subtotal | 3980 |
Supermarket (food, cleaning, etc) | 1700 |
Day-by-day cash ** | 720 |
Subtotal | 2420 |
Internet | 200 |
Vida Silvestre *** | 70 |
Cell phone plan | 115 |
University **** | 1100 |
Gym | 500 |
Subtotal | 1985 |
Speartime with kids/girlfriend | 500 |
TOTAL EXPENSES 8885Total monthly income after tax: 15300 argenteenean pesos
So Iīm able to save $6415
* Not car gasoline, but gas for cooker/oven
** This would be public transportation if needed and day-by-day needed money, like if I need to buy some stuff like lunch*1 or whatever needed.
*1 I usually prepare lunch at home and take to the office, but few days Im not able to do that
*** Local Nature-care ONG I support
**** University: montlhy expense. Itīs not a loan, you donīt pay interest on that. I just what you pay each month (like a gym o cell phone plan).
The Argenteenean situation:
Thereīs a particular situation in here.... and most of the time (the past 50 years) it was this way.
We earn in pesos, our currency... but... properties are valuated in US Dollars.
And here comes the next issue... oficial current exchange is 1 dollar = 8,5 pesos... BUT... thereīs also a parallel exchange rate, thatīs is arround 1 dollar = 13 pesos.
Due to Goverment restricctions, youīre only allow to exchange some estipulated amount of dollars per month. In my case itīs about 450u$s per moth, but in a exchange rate
of 10,2. Thatīs comes from the oficial exchange rate of 8,5, plus 20% retentions the goverment puts over that.
So, every month, Iīm able to buy 450 US Dollars for about $4600 pesos (450 x 8,5 x 1,2 = $4590 pesos)
So... hereīs the thing... as I said, properties are valuated in US Dollars. For example, a 1 bedroom appartment is valuated arround 80.000u$s, and two bedroom appartment
is around 100.000u$s. Two bedroom houses and above, start at 120.000u$s
My girlfriend and I are targeting to buy a two bedroom appartment (1 bedroom to us, 1 bedroom for the kids), that would be arround 100.000u$s.
The other difficult issue here in Argentina, is that getting a mortage is pretty difficult.
Mortages cover (if youīre lucky) 75% of the total property value.
So, if you want to buy a 100.000u$s property, that means you have to have in cash, at least 25.000u$s.
And thatīs the best scenario, most mortages only cover 50% of the property total value.
So... you have it pretty difficult to get your own house, cause you need to exchange pesos to dollars, and also, you need to have like 40% of the property value in cash.
And finally... the other difficult thing... inflation.
"Oficial" infliation (what the goverment says) is around 20% annual... BUT... itīs not true.
They (Goberment) sistematicaly tweak statisticts (yeah, oficial statisticts) to match that rate... but the truth is that annual inflation if around 35%-40%.
So if you go to the supermarket every month, things that cost for example $10 pesos, next month would be at least $10,3 and so on, every month.
The sadly truth also, is that prices increeses not only by 30 cents, but most likely they raise the price to $10,5.
So... nobody really knows the "real" inflation... but on average... is arround 35% annualy.
The problem is that you donīt get salary raise according to the inflation. Maybe you get a 25% annual raise, but... still, thatīs under the real inflation.
Anyway... still, I manage to save about 40% of my salary, and tryig to but as many dollars as I can.
The problem is, Im not investing, theyīre just little workers on permanent vacation.
Althought... if you bought for example 100u$s in Juanuary, market value at that time was about 1 dollar = $10,5 pesos.
Now its about 1 dollar = 13,5 pesos... so... you are kinda investing, or at least, being ahead of inflation.
Up to now, with the $6415 pesos Iīm able to save each month, Iīm buying the 450u$s the goverment allows me each month at $10,2 exchange rate and with the rest
of the money Iīm not sure if should buy at the parallel exchange rate or try to put that money in some kind of mutual fund... the thing is that
those mutual funds or bonds only gives you around 25% return... so youīll be loosing money over time because of the 35% inflation rate.
What would you do in my case?
Target: get at least 30.000u$s for being able to qualify for mortage and eventually... being mortage-free and financial independent in the shortest time possible.
Situation: So far, we got savings for 7500u$s
Two good things... I march im finishing university... that would mean around 13% salary increese and also means that I will stop spending $1000 monthly to pay for it.
That would mean that I would be able to save about $9400 pesos per month (instead of the actual $6415).
I forgot to say that I also bike every day to work.
Public transport is also available and cheap... but still... i rather use the bike and spend zero.
Thanks and keep the blog/forum going, itīs really usefull !
Ariel