Tracking net worth across several currencies

Here is a month that actually happens to people who have moved country.

You save nothing. You spend exactly what you earn. You make no investment, sell nothing, and move no money anywhere. At the end of the month you open your spreadsheet and your net worth has fallen by the price of a small car.

Nothing went wrong. The euro moved.

If you keep money in more than one currency, this is the central problem, and almost no personal finance advice acknowledges it exists. The standard material assumes one currency, one country, one bank. It tells you to track your net worth monthly and watch it climb. For anyone with a salary in one currency, savings in another, and a mortgage in a third, that advice produces a number that jumps around for reasons you did not cause and cannot control.

The fix is not to pick better exchange rates. It is to stop asking one number to answer two different questions.

The two questions

Every multi-currency net worth figure is really answering two things at once:

1. What did I do this month? Did I save, or spend more than I earned? Did the mortgage come down? This is the part you control and the only part worth judging yourself on.
2. What did the exchange rate do to what I already had? This is weather. You did not cause it, you cannot predict it, and reacting to it is usually a mistake.

Add them together and you get one number that tells you neither. A good month of saving hidden by a bad month of FX looks like a bad month. A terrible month of overspending masked by a favourable move looks fine. Over a year, the noise is easily larger than the signal.

Once you separate them, both become useful. The first tells you whether your habits are working. The second tells you how much currency exposure you are actually carrying, which is a question most people have never asked themselves.

Step 1. Choose a base currency, and choose it once

You need one currency that everything gets reported in. Accountants call this the functional or presentation currency; you can call it your base currency.

Choose the currency of the country you live in, not the one you earn in. The base currency should be the one your life is priced in, because the point of the number is to tell you how much life you can afford. If you live in Dubai and earn in dirhams, your base is AED, even if most of your savings sit in euros. If you live in Spain and are paid in dollars, your base is euros.

There is one exception. If you are certain you are leaving within a couple of years and will spend your savings elsewhere, use the currency of the place you are going. That is where the money will eventually be spent, so that is where it should be measured.

Then leave it alone. Changing your base currency rewrites every historical figure and destroys the comparison that made tracking worthwhile in the first place. It is one of the few genuinely disruptive changes you can make to a ledger.

Step 2. Hold every account in its own currency

This is the rule people break most often, and it is the one that corrupts history.

A savings account holding €96,400 is a €96,400 account. It is not an AED 386,240 account. If you type the converted figure into your spreadsheet, you have baked in the rate on the day you typed it, and that number is wrong tomorrow. Worse, you now have no record of which rate you used, so you can never reconstruct it.

Record the account in its own currency. Store the exchange rate separately. Let the conversion happen at the moment of display.

This has a second benefit that is easy to miss. When your euro account is recorded in euros, you can see immediately whether the euro balance went up or down. That is the question about your behaviour. The AED value is a translation of it, and translations should never be the thing you store.

Step 3. Two different rates, for two different things

This is the part that trips people up, and getting it right is what makes everything downstream work. There are only two rules.

Transactions use the rate on the day they happened. You bought a coffee in Barcelona for €3.20 on 14 March. That transaction cost you whatever €3.20 was worth on 14 March, forever. It does not become more or less expensive later because the rate moved. History is fixed.

Balances use today’s rate. Your €96,400 savings account is worth whatever €96,400 is worth today. Not what it was worth when you opened the account, or when you last made a deposit. Today.

That distinction is not an arbitrary convention. It is the difference between a flow and a stock. A transaction is a thing that happened at a moment. A balance is a thing that exists now. In formal accounting the same rule applies to monetary items: transactions at the historical rate, balances at the closing rate.

If you follow those two rules, one useful thing falls out automatically. The gap between them is exactly the FX effect, and you did not have to calculate it.

Step 4. Give the FX movement its own line

Now do the arithmetic that most people never do.

Take your opening net worth in base currency. Add everything you earned, subtract everything you spent, both converted at the rates on the days they happened. That gives you what your net worth should be if exchange rates had never moved. Compare it to your actual closing net worth, computed at today’s rates.

The difference is your translation gain or loss. It is unrealised, it is not income, it is not something you did, and it belongs on its own line.

	AED
Opening net worth, 1 January	620,000
Income, at transaction rates	+38,000
Expenses, at transaction rates	(26,500)
Net worth if rates never moved	631,500
Actual net worth at today’s rates	651,735
Translation gain, unrealised	+20,235

Illustrative figures, shown to demonstrate the structure of the calculation.

Now look at what that table tells you that a single number could not. You saved AED 11,500. That is a fact about your behaviour, and it is the number to judge yourself on. You also gained AED 20,235 because the currencies you hold moved in your favour, which is a fact about the world and tells you nothing about your habits.

Next month the second number might be negative and larger. The first number is the one that compounds.

Step 5. Debt in another currency is the sharp edge

Here is where multi-currency tracking stops being an accounting nicety and starts to matter.

If you live in Dubai and hold a mortgage in euros on a flat in Spain, that mortgage grows in dirham terms every time the euro strengthens. You are not borrowing more. You have not missed a payment. The debt simply costs more of the currency you actually earn.

Most people never see this, because they think of the mortgage in the currency it is denominated in. The euro balance goes down every month, so it feels like progress. Meanwhile the AED cost of clearing it can be climbing.

Two things follow.

Track the liability in both. In euros, to see the amortisation. In your base currency, to see what it would actually take to be free of it. These two lines can move in opposite directions for years.

A currency mismatch between your income and your debt is the real exposure. Everyone talks about currency risk on savings. Almost nobody mentions it on borrowing, and borrowing is where it bites, because a mortgage is usually the largest single number on a household balance sheet and it is leveraged. If your income and your debt are in different currencies, you are carrying a position whether you think of it that way or not.

There is no clever trick that removes this. But knowing the size of it is the difference between a decision and a surprise.

Step 6. Look at it two ways, once a month

Twenty minutes, once a month, two views.

In base currency, with FX stripped out. This is your report card. Did net worth grow because of what you did? This is the number to look at first, and often the only one worth looking at.

In each currency separately. How much do I hold in euros, in dirhams, in dollars? What proportion of my assets is in a currency I do not spend? What proportion of my debt is in a currency I do not earn?

That second view answers a question almost nobody asks, and the answer is often uncomfortable. Plenty of people discover they hold 70% of their savings in a currency they have no intention of ever spending, purely because that is where their old bank account happened to be.

What not to do

Do not revalue at a rate you found somewhere. Pick one source, use it every month, and record which one. Mid-market rates from a single provider are fine. Consistency matters more than precision, because you are measuring a trend, not settling a trade.

Do not update rates daily. You will end up watching the number instead of managing it, and daily FX noise on a household balance sheet is entirely meaningless. Monthly is plenty. It is also enough for the numbers to be current when you need them.

Do not treat a translation gain as income. It is not spendable, it is not realised, and it can reverse next month. Counting it as income is how people talk themselves into spending money the exchange rate lent them temporarily.

Do not convert your history when the rate moves. The whole point of using transaction-date rates is that the past stays fixed. If last March changes every time the euro moves, you have no history at all, just a rolling re-interpretation of one.

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The reason this matters is not precision for its own sake. It is that a number you cannot trust is a number you stop looking at, and the entire value of tracking comes from looking.

Someone with money in one country gets a net worth figure that means something on its own. If you have moved, you have to build that meaning yourself, by separating the part you caused from the part that happened to you. It takes one extra line in your ledger.

After that, your savings rate is honest, your currency exposure is visible, and a bad month in the FX market stops feeling like a personal failure. Which, in a year when the currency you hold moves ten per cent against the currency you spend, is worth considerably more than the twenty minutes it costs.