Why Did My Overseas COLA Go Down?

It’s time to download your military Leave and Earnings Statement (LES) for March. Go get it at MyPay today.Why is my overseas COLA going down? | MilitaryFinancialPlanner.com

As always, it’s important to review your LES each month. Not only to see what your end of month pay will be, but to check for errors or confirm any pay changes you have made recently.

If you’re stationed in Rota, Naples, Stuttgart, or anywhere else in the Eurozone, you might have noticed that your housing allowance and cost of living adjustment (COLA) is a lot less than it was back at Christmas. What’s going on?

Major Currency Fluctuations

Since Christmas Eve the Euro has dropped 14% against the dollar.

Euro falls against the dollar | militaryfinancialplanner.com

From OANDA.com

There are multiple reasons for the big drop, having to do with the interactions of the world’s economies: “Volatility in currency markets has recently hit levels not seen since 2011.” But the bottom line is that if you were in Naples, say, before the new year and took €100 out of an ATM, it cost you more than $124; now you can get €100 for about $110 or less.

Why Do You Get COLA?

The international exchange rates affect the COLA you receive when you are stationed overseas. The COLA is meant to give you the same purchasing power at your overseas duty station that you would have in the United States. It is a non-taxable allowance above your base pay. If you are living on the economy, your housing allowance will go up and down with the exchange rate as well. Although it is called an Overseas Housing Allowance, it will still show up on your LES as “BAH.” Why is that? Yet another enduring DFAS mystery.

If things get cheaper, as they have recently for Americans in the Eurozone, the COLA adjusts down accordingly. For example, a single new ensign (O-1) in Rota was getting $16.33 per day in COLA for the second half of December. Today she is getting $10.76 per day.

The same goes for your housing allowance. Back in December our hypothetical ensign received $1586 to pay her rent of €1260. Today she still has to pay €1260 in rent, but it costs her fewer U.S. Dollars now. Even though she’ll only get $1418 in housing allowance, she’s not losing out.

So Am I Getting Screwed?

While the official exchange rates change daily, DFAS calculates the rates for COLA and OHA twice a month. You can find those rates for your location here and here. In theory you’re not losing any money. In reality, the rate changes DFAS makes might not keep up with ground truth. You might come out ahead a little, or behind a little depending on which way the rates are moving. It’s out of your control. It really has more to do with your lifestyle and how much you depend on the local economy for everyday items. The solution? Whether it’s Dollars, Euros, Pounds, or Yen, spend less than you earn.


Related articles:

Check Your February LES For These 3 Pay Problems

2015 BAH Rates Announced

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