Archive for January, 2007

How did we get here? Part 1, Family Background

January 26, 2007

In a previous post, I talked about our current financial situation. This time, I’ll begin to describe how we got to our current financial position, kicking off with some info on our family backgrounds.

I come from a city of 130,000 in a EDC (economically developed or ‘first world’ country). I spent my childhood and teenagehood in the same home, except for the year my father participated in a professional exchange in Europe – I was 2 years old. My mother was a stay-at-home parent from my birth until 6 weeks after my brother was born 4 years later, when she returned to work.

My parents’ combined income probably ranged between $60,000 and $80,000 dollars (in local currency) for most of the time I lived with them. Their retirement investments are in the form of real estate, which my father takes the lead in managing; they’re probably worth a little over $500k. My father also draws a government pension, which he’s already started drawing on.

My father and mother have both experienced periods of unemployment, and their approaches to dealing with it were quite different. My father spent most of a year not seeking work, and living on his redundancy check; my mother immediately sought a minimum-wage job until she found work in her field again.

My family drives and has always driven second-hand cars (of which more later).

In general, I’d say the culture of my home country is not extremely wealth-oriented; the income distribution is relatively flat, due to a comprehensive welfare system and a pay scale that is much flatter than here in the US. There’s a lot of emphasis on DIY and an ‘if it ain’t broke, don’t fix it’ attitude. I think this is starting to change, particularly in the last few years when there has been considerable overseas interest and investment in my country.

H1Worker was born in a LDC (less-developed or ‘third world’ country). His family moved to a large international city a few months after his birth. By his account, his family struggled to establish themselves for the first years after their relocation, but by the time of his brother’s birth six years later they were able to live a comfortable middle-class life. His father started out working in a low-level government post, but an accident meant he was no longer able to perform this work, so he moved into the business sector. Now, he’s involved in a diverse range of business initiatives. H1Worker’s mother has always been a stay-at-home mother and wife.

H1Worker’s family owns a variety of real estate and other investments, both in their current country of residence and in their home country. I’ll find out more about the rest of their portfolio…

H1Worker’s family drives new, high-end cars, which are valued very highly in their home culture and country of residence. Both places have a relatively large income spread, with people who are both extremely rich and extremely poor by global standards.

In general, i think both of our families are responsible with their finances, even though they have different goals and priorities. We are lucky in that regard! But the differences in our home environments and in family attitudes do influence our perspectives on money and finance today. It’s interesting to see how this plays out in our day to day lives.

Priced off the Beach

January 23, 2007

Canadianbusiness.com has an article up about a group of mobile home owners in Florida who are considering selling their collectively-held land to developers. Most owners stand to make at least $1 million in profit… but would lose their beachfront property, and in many cases, their primary residence. The residents interviewed for the article were understandably torn between a cash windfall – for some, the first of their life – and a lifestyle they love.

In my country of origin, many people are faced with similar decisions. As recently as 20 years ago, it was common for a middle class family to be able to afford a piece of land near a beach or lake. Most started out by building a one or two room hut with a longdrop toilet ‘out the back’, and gradually expanded their ‘bach’ over the years to host kids and extended family gatherings. And the growth of beachfront communities to include shops, doctors and hospitals, along with an increasingly healthy retired population, have seen many people renovate their properties so they can move in permanently.

However, changes in market conditions – including ease of transportation to the coast, and extensive foreign interest in my home country – have sent property prices skyrocketing. A local newspaper recently profiled this humble beachfront property. The buildings are worth jus $25,000, yet it’s on sale for 1.6 million dollars, up from $160,000 in 1994. Another article gives an overview of bach prices within driving distance of our largest city, finding few listed for less than half a million dollars.

These prices might not seem unreasonable to those accustomed to property prices in the US, but it’s important to remember that the wage distribution in my home country is a lot flatter than it is here. I’ve poked around a bit looking for statistics, but it’s hard to find equivalent ones (that is, statistics that are measuring the same thing in both places). I did find that the median household income in the US was US$54,857 in 2001; in the same year, my home country’s median household income was $34,700 in local currency. But even those statistics are calculated by quite different methods. I’ll come back and update this post when i find better information, but until then, you’ll have to take my word for it!  Also, our dollar is less powerful than the US dollar, adding to overseas interest.

What’s interesting to me, as a person coming at this whole money thing from a human behaviour perspective, is the decisions people are faced with as a result of such dramatic growth. Retired folks suddenly find themselves living in houses worth several million dollars, but have a pension of only a few hundred dollars a week to live on. Families who have owned property together for 3 or 4 generations find themselves fighting over whether to sell a property and make use of the equity, or keep it and trade money for memories. And then there’s folks like these 7 families, who are stubbornly holding onto their own little caravan park as high-rise condominums go up all around them.

What choices would you make, if the value of your property increased 500% in 10 years? 5 years? 1 year? What if it was your primary residence? What if it was property that had been in your family for generations? What if it was the difference between having a comfortable retirement in a city, or a frugal retirement in your dream home?

If you were a shareholder in that Florida community, would you sell?

So, where are we financially?

January 23, 2007

So, now that you know a little about who we are, where are we financially?

H1Worker’s situation is relatively easy to summarize. As I said, he’s a consultant in the IT industry, making a little under 90k before taxes, with good benefits and a relatively good vacation package by US standards. He has a rather gruelling work schedule which includes a lot of travel, but usually enjoys it a lot.

My situation is a little harder to describe. I’m only working for this one year before going back to school, using the period of ‘optional practical training’ students on F-1 visas are eligible for. I work for an organization in my field that I interned with while in college. I accepted a full time position with them for the summer, which took me to the East Coast. They had hoped to get grant funding to continue that position through the year, but were unsuccessful. However, they were eager to hire me as a consultant, to continue developing the organization’s programming in my area of expertise. They were only able to fund a part time position – which i accepted on the condition that I could telecommute from H1Worker’s home in the South.

So here I am, working between 1 and 4 days a week for pay and using the rest of my time to pursue side projects and apply for grad school. We rely on my flexibility to offset H1Worker’s travel and long hours, especially when it comes to things like dog care.

As my income is unpredictable, and likely to be only about $15,000 for the year anyway, all of our budgeting is done on the basis of H1Worker’s income. My income covers my expenses – when I was living on the East Coast it covered a sublet, food and transportation; now, it covers private health insurance and the costs associated with grad school applications. The rest is channelled into savings, or funding larger purchases.

Our assets include $3000 of ESPP stock from H1Worker’s previous job – we plan to diversify these soon. It also includes our car, worth $13500 in private sale value, and about $3500 in savings.

Offsetting those assets is around $1300 of consumer debt at 0% interest, and our car loan, on which we owe about $11,500 at 10.99%. Those two debts are our only debts of any kind.

So currently, we have a net worth of around $8,000. We are 25 (H1Worker) and 23 (me) years old.

In my next post, I’ll begin a series detailing our financial background and influences – starting with a little about our families’ financial histories.

Welcome!

January 21, 2007

Welcome to the American Dreaming blog – a place to discuss personal finance for non-citizens living and/or working in the US.

On this site, it’s my goal to explore personal finance from the point of view of non-citizens – especially those holding F (student) or H (skilled worker) visas. The laws governing our stay in the US mean that the conventional wisdom may not apply. For example:

How can you increase income to accelerate debt payments, when you can’t legally hold an additional job?

Is it okay to invest when you hold a work visa? What about a student visa?

How should a work visa holder plan for retirement?

I’ll also be discussing more general personal finance topics, and plan to participate in the personal finance blogging community.

A couple of notes:This blog is not intended to criticize US immigration policy. We are very grateful for the opportunity to come to the US to work, study, live and travel. My intention is simply to help non-citizens navigate the quirks and complications of the laws governing our stay here, and help us plan for the future.

I am not a lawyer, and nothing in this blog is intended as legal advice. I will provide sources for my information whenever possible, but it is your responsibility to ensure the information you have is correct. If in doubt, please consult a lawyer or other expert.

About Us

January 21, 2007

Now, a little introduction:

I’m ‘F1 Student’. I studied at a 4 year college here in the US, and graduated in May 2006 with a degree in a humanities field. I’m currently in a period of optional practical training (working in my area of specialization) following my degree. I intend to start graduate school here in the US beginning in September 2007, as my area of specialization isn’t available in my home country.

My partner, ‘H1 Worker’, also attended college in the US. He graduated in 2003 and was sponsored for an H1 visa by a contracting firm. He’s since changed companies and now works as a consultant in the field of IT. He still holds H1 status.

My partner and I live together in a large city in the South. We own a car (or part of a car, anyway – the bank owns most of it) and rent an apartment together. Currently, we’re focusing on increasing our savings rate, paying off our debt, building an emergency fund and setting aside a downpayment for a future home.  When we’re not writing about money (which is most of the time) we enjoy cooking, coffee, running and hiking, and hanging out with our two fantastic dogs. More on all of these things later!