How much is a dollar worth?

Sorry to be the bearer of bad news, but for every dollar you earn, there are a number of different factors eating away at it.

There are taxes, for one, not far away with April 15 on the horizon. Then there is inflation: Even though it has moderated from the Covid years, it is still eroding the value of our money to the tune of almost 3% a year.

And now there is a new worry: The U.S. dollar, which has sunk to a multi-year lows against other currencies, is down around 10% compared to the beginning of last year.

Put all those factors together, and your cash isn’t packing a whole lot of punch when you go to the grocery store. Instead, it seems a little weak and dazed, like a boxer at the end of a 12-round fight.

“It manifests in imported goods and foreign travel, while subtly chipping away at general affordability as costs for goods and services rise and asset prices are pushed higher,” says Mike Casey, a planner with AE Advisors in Alexandria, Va. “For the average consumer, imported essentials like electronics, clothing, and oil become pricier.”

In other words, the purchasing power of that buck in your wallet is under extreme pressure. Not exactly what we needed, in an era when affordability for households has become so challenging. 

Seen from one angle, there’s not a lot average consumers can do about a weaker dollar. Its strength is determined by larger factors outside of our control, such as the level of interest rates set by the Federal Reserve.

But in another sense, there are targeted action steps we can take to maximize the value of our money. A few specific areas that a weaker dollar should make you consider:

-Foreign travel. On a daily basis, we may not realize how much the dollar has slumped. But when we go abroad, we most definitely will.

“Personally, the dollar hitting multi-year lows is affecting my travel budget,” says Theresa Pablos, a planner with Equalis Financial in Los Angeles. “I'm planning a trip to Europe this fall, and I've intentionally padded my travel budget because I know the dollar won’t go quite as far on hotels, meals, and activities as in past trips. To make up for the difference in cost, I'm looking for other ways to save, such as flying budget airlines and getting a new travel card with cash-back perks.”

Practically speaking, it means international travelers should be choosier about destinations. It could also mean deliberately saving more in advance of such a trip, as Pablos did -- or even delaying those big expenses altogether, until such a time when exchange rates look more attractive.

-Imported goods. This area is a double whammy for consumers: Not only has a weak dollar pushed the price of imports up, but some have been slapped with tariffs as well, due to the current administration’s trade policies.

One way around that is to be more intentional about buying American-made products when possible, as you will avoid the exchange rates and tariffs that have pushed some prices higher.

-Cash holdings. Everyone knows that investing involves risk, but there is also risk involved in standing pat with your money. If your cash isn’t earning anything, inflation marches on, and the dollar is declining, then you are essentially losing a little bit of ground every day. That’s a long-term risk, too.

That’s why, at a minimum, you should ensure that your cash is earning something significant. “For savings, shift to high-yield accounts,” suggests Casey.

That way, you can outpace some of these larger macroeconomic issues dragging down the currency. That’s easily done by checking your current rates and opting for accounts generating superior interest. Members on Current can earn up to a 4.00% annual bonus on money in their Savings Pods.

-Card rewards. In an era when every penny counts, probably the easiest layup is maximizing the rewards programs attached to whatever cards you use on a daily basis. And yet, according to one Bankrate survey, almost a quarter of rewards card users haven’t even cashed in any benefits in the past year.

That’s puzzling, because it’s basically leaving money on the table. With the Current Build Card, for instance, you receive points on grocery and dining purchases, which are then redeemable for cash back. If you become more intentional this year about what you’re spending, and how, you can quite easily parlay those everyday costs into extra cash in your wallet.

-International investments. If you have a percentage of foreign stocks in your portfolio, congratulations: All else being equal, the value of those holdings has likely risen, simply by virtue of being denominated in foreign currencies.

For those investors, a weak dollar is actually a good thing. “We have loved the dollar weakening,” says David Demming, a financial planner in Aurora, Ohio. “It has enhanced our overweight in international funds, with emerging markets both the cheapest and best performing last year.”

If you don’t have many international stocks yet, this weak-dollar era brings home the importance of diversifying and having some global exposure in your portfolio. That way, you won’t have all your eggs in one basket.