Author Topic: How to Hedge against foreign currency income drops?  (Read 2926 times)

JustGettingStarted1980

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How to Hedge against foreign currency income drops?
« on: April 21, 2016, 09:51:47 AM »
Hello,

My mother gets a large percentage of her income from a Pension in Brazil, as well as from rental income from a commercial property in Brazil.

Over the last year, the Brazilian Real has tanked, and instead of being 1:2 to the dollar, is now 1:3.5.

Of course, this has decreased her income almost in half.

My question is, how can she hedge against future income drops in the future?

forummm

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Re: How to Hedge against foreign currency income drops?
« Reply #1 on: April 22, 2016, 08:25:44 AM »
She lives and spends outside Brazil?

The only ways I can think of would decrease her income further by buying insurance contracts.

Scandium

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Re: How to Hedge against foreign currency income drops?
« Reply #2 on: April 22, 2016, 09:11:22 AM »
Move to Brazil?

Seppia

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Re: How to Hedge against foreign currency income drops?
« Reply #3 on: April 22, 2016, 09:39:11 AM »
If she lives and spends outside of Brazil she could consider selling and buying something in the currency she's into.
Moving to Brazil could work as well.
Otherwise I would just suffer the hit and hope it recovers

JustGettingStarted1980

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Re: How to Hedge against foreign currency income drops?
« Reply #4 on: April 22, 2016, 05:38:44 PM »
Ouch, any othe ideas

Retire-Canada

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Re: How to Hedge against foreign currency income drops?
« Reply #5 on: April 22, 2016, 05:53:08 PM »
My mother gets a Swiss pension and lives in Canada. In the past it's been 1 CAD = 1.3 Swiss Franc. Now it's 1 CAD = 0.76 Swiss Franc. I haven't come up with any way to deal with that other than to have some flexibility in her spending.

hodor

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Re: How to Hedge against foreign currency income drops?
« Reply #6 on: April 22, 2016, 06:14:58 PM »
My mother gets a Swiss pension and lives in Canada. In the past it's been 1 CAD = 1.3 Swiss Franc. Now it's 1 CAD = 0.76 Swiss Franc. I haven't come up with any way to deal with that other than to have some flexibility in her spending.

If she is receiving a CHF pension and buying CAD she is getting a great deal atm. Does she have to increase her spending?

Did I miss read this somehow?

Retire-Canada

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Re: How to Hedge against foreign currency income drops?
« Reply #7 on: April 22, 2016, 07:03:25 PM »
If she is receiving a CHF pension and buying CAD she is getting a great deal atm. Does she have to increase her spending?

Did I miss read this somehow?

She's doing well now in terms of exchange. It's been significantly less in the past.

What I am saying is I don't see a way to deal with this variability other than being flexible with spending to some degree. The exchange could go right back to the crappy rate and she'll have to be okay with that.

When times are good the response should be to save the extra $$ to buffer with the crappy times or at least to spend on longer duration maintenance items [say replace car or roof, etc..].

ecomic

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Re: How to Hedge against foreign currency income drops?
« Reply #8 on: April 27, 2016, 01:49:47 AM »
There are ways to cover exchange rates, but in my opinion only experts should use those type of financial products. Buying an "Option PUT" settling a price for the rate you need to cover. this is just a thought. I wouldnt advise you to do it.