Archive for February, 2007

Cameras and Cars, Supply and Demand

February 22, 2007

I’ve been in the US for almost five years now, and usually the differences between here and my home country fade into the background. Sometimes, though, they’re thrown into stark relief. Our recent experiences with cars and cameras have reminded me of one difference that’s particularly relevant to this blog: attitudes toward supply and demand.

Here in the US, it’s rare to hear the word “sold out” – especially when it comes to services such as rental cars and hotel rooms. Sure, you may not get your first choice hotel or car company – but at the very least you’ll be able to get a car of some description, or a room in a Motel 6.

In my home country, on the other hand, there’s about enough capacity in the rental car and accommodation sectors to deal with a slightly-above-average amount of demand.   Over the Christmas holiday period, you better have booked that car or you’ll probably be out of luck!  When we were back recently, we called every car company in the phone book, and they were all completely sold out.  We ended up ‘relaying’ a car back north (which had the added advantage of being free), but otherwise we would’ve had to take the bus.
Part of this is a difference of scale.  My country only has 4 million people in an area the size of the UK.  Our capital city has a population of 400,000.  The market is smaller, no two ways about it.

But I do think part of it is a different attitude toward what is ‘enough’ on the supply side.  In many industries here, ‘enough’ is being able to meet almost any level of demand – only a new product launch or aparticularly enormous sale might lead to “sold out” signs hanging in shop windows.   Huge, central warehouses are built and complicated retail software systems are developed to make sure no store shelf is ever empty and more than enough cars pack the rental yard.

At home, though, “enough” is being able to meet an average level of demand.  At high-volume times, such as the Christmas holidays for accomodation and transportation or the beginning of the school year for computers and school supplies – well, you’ll just have to wait.  My brother waited two weeks over christmas for the new laptop he wanted, and didn’t think that was unusual or overly long.

This disparity crept into our lives again recently while we were shopping for a new camera.  We’d decided what model we wanted, and now the question was where to buy it from.  For me, it was important to use a locally owned camera store – both to get a great price via a good value trade-in for my old film SLR, and to support local business and keep my dollars in our community.

So we headed to the camera store and got a better-than-expected trade in value – but the specific package we wanted wasn’t in stock.  The components of the package, sold separately, would have cost $90 more.  They thought the package would come in in one to two weeks. Fine with me!

A week passed by and then another, and we still hadn’t got the call.  I didn’t mind, but H1Worker was on edge.  “This is America!”, he said.  “Why do we have to wait for something?”

Eventually, we cut a deal with the store – they’d sell us the components separately for an additional $50.  Not my ideal choice, but it was still the best deal available thanks to the trade in, still within our budget and helped soothe H1Worker’s anxieties.  In the constant balancing act between dollars and feelings, this was a good middle ground.

So now we are the proud owners of a Nikon D80 – bought with a credit card that’s payable in full every month, so we could dispute the charge if necessary.  And it sure is worth the wait!

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Walking the Line

February 17, 2007

H1Worker and I had an interesting discussion about money recently – at our apartment complex’s monthly wine and cheese event, of all places.  (You can’t beat drinks, nibbles and low-key socializing for a free Friday night activity!)

H1Worker’s brother is coming to visit.  He’s in college, so we’ll be buying his ticket, and spending some money to entertain him too.  I was pushing H1Worker to set a budget for the visit, as we tend to overspend when we have guests – it’s an ingrained behaviour for both of us.

We do have money allocated to cover irregular expenses, but i know we have several things to pay for out of that money in the next months, and i want to give it a chance to build up a bit so we’re not running it to the ground every pay period.

This month is the first implementation of our reworked budget. In this version, we each have $200 ‘fun money’ per fortnight, which is ours to do what we want with.  This is a new thing for us – we are one of those irritating couples who debates every purchase, down to the last book and DVD and cup of coffee.  It works for us 95% of the time, but sometimes our expenditure tilts in favor of one person or another, creating friction. Buying gifts for one another – especially surprise gifts – is challenging, too.

So, we decided to allocate $100 fun money each and $100 from the irregular expense fund for his brother’s plane ticket, and then $50 each and $100 from the irregular expense fund for the two paychecks after that.  I’m only partially happy with that solution, even though it was my suggestion.  I feel like we’re violating the principle of fun money before we even start by allocating it to something, but i think it’s okay while our irregular expense fund is beginning to build up.  Hopefully by his brother’s next visit we can comfortably cover it from that fund!

We arrived at that decision happily, but H1Worker expressed a little chagrin that his plan for clothing purchases and other fun money allocations would be thrown off.  So I suggested that he try reducing other line items in order to increase what’s available for fun money.  He said ‘so if i can reduce expenses, I can keep that money?’ I said ‘Well, in all fairness leftover money should be divided in half… and really we should add leftover money to our savings, if we can.’

We pondered this for awhile, until i suggested ‘I’ll tell you what.  You can keep half of whatever you can help save, and we’ll put the other half into savings’.  He thought this was a great idea, and I do too.  For one, some of our budget category assignments are at the low end of his comfort zone, though well in the middle of mine.  I think it will be a good reminder for him of how much a food budget can stretch, and I know he’s also motivated by a good challenge!

I’m hoping to save a portion of my fun money anyway, so i’m more than happy to see any additional dollars I’m allocated go into our savings accounts.  Each of us is motivated by things we desire, and each of us will reap rewards from making an effort to save.  It’s a win-win situation.

Of course, we’ll have to revisit the agreement if H1Worker suddenly ends up with 3 times as much fun money as me or something – but we’ll cross that bridge when we come to it!

Feels like Home

February 11, 2007

I spent $15 of my already-depleted “fun money” on two small bags of tea this weekend. At the rate we’re brewing it up, a cup for both of us every night, it’ll barely last the week. And it’s totally worth it.

After I return from a holiday – in this case, our visit to my parents’ over the holidays – my readjustment process seems to follow a predictable pattern. There are one or two ‘sink or swim’ weeks, where I’m just trying to keep my head above water and fold myself back into the ‘dailiness of life’. There’s that awful third week, in which I’m distraught by all the places I’m not, and even my newly-organized vacation pictures seem to tease me with their blue water and bright smiles.

And then the fourth week comes, and the dailiness is no longer overwhelming. Now it’s warm and comfortable, and I remember what it’s like to be at home.

I’ve lived in 5 different places in the past three years. I’ve had my evening drink at the desk chair in my dorm room, and balanced on the single cushion that was the sum total of H1Worker’s living room furniture when i met him, and curled up on our beloved leather sofa. I’ve stared absently at dingy corkboard walls, and golden wood panelled walls, and textured plaster walls. And I’ve breathed in the aroma of crisp white tea, and milky chai, and bitter overbrewed squeeze-every-last-drop-of-caffeine-out-of-it black tea, and our new, transcendent blend of rooibos and mate.

It’s not the place that makes those cups of tea so special, so homey. It’s the ritual – sitting with the silence for a few minutes, belonging in the place that you are. For a while, i’m not coveting that perfect house that’s on the market in our dream neighborhood, or even wishing I was sitting down to dinner with my parents and brother as I was a few weeks ago. I’m just here, belonging.

That $15 tea helped me come back home. For that, it’s worth every penny. The fact that it’s sublimely delicious is just gravy.

Ten things immigrants REALLY need to know about personal finance and life in the US

February 10, 2007

One of my favourite personal finance bloggers, Trent at the Simple Dollar, wrote a post today called “Twenty Things Everyone Should Know About Living Freely And Frugally In America”.  While some of his advice is spot on, there are a lot of thing he doesn’t include – and for good reason, as he’s never had to navigate the legal minefield that comes with being nonresident in the US.  So, I’ve written this followup post pointing out some of the things you really need to know if you’re planning to come to the US on a nonimmigrant visa (which is most people who come to work or study, at least initially).  The first five are personal finance related, and the last five are culture related.

1) If you’re coming to the US on a nonimmigrant visa (eg. student visa) you are technically not eligible for credit.

Obtaining credit (and a whole host of other things, such as life insurance) in the US requires you to be a ‘US Resident’.  Tax residence has different criteria than legal residence (see below for more), but in general, if you’re on a student visa in the US you are technically resident in your home country and therefore can’t get credit.  Even opening a bank account can sometimes be difficult.

That said, credit card companies are so hungry for business that they have no interest in checking your status, and i have NEVER heard of someone being deported for breaking this law.  If you plan to stay in the US after your degree, even for only one year, you will have a much easier time renting a house, getting a cellphone plan, and buying and insuring a car if you have a credit history.

2) No matter your visa class, after 5 years of being in the US on a nonimmigrant visa you are resident for tax purposes.

This law has a lot of implications.  One good one is that for the first five years, you don’t have to pay into Social Security or Medicare (after all, you’re probably not going to retire here), so your tax bill is reduced.

But it also has a lot of tricky loopholes for people who complete a four year degree and then wish to use their year of work authorization.  For example, you’re not eligible to complete a W-9 (a form that makes you exempt from withholding, if you’re self employed or working as a contractor).  Instead, the law says nonresidents who work as contractors must have taxes witheld at the 30% tax rate!  So be prepared.

3) If you’re here on a H1 work visa and you quit your job or get fired without having a visa transfer lined up, you (and anyone you’ve sponsored) are out of status at the instant your job ends.

It is INCREDIBLY important to know this and be prepared for it.  Although the immigration officials won’t turn up on the doorstep of your workplace to escort you out of the country then and there, you will have to take the next flight out if you want to have the best chance of getting a new visa.  This means you should appoint a friend or relative to take care of your affairs, and have money available to do so, just in case this happens to you.  (I’ll write more about this in a separate post).

Good news for students – you have 60 days from the end of your schooling (or OPT) to put your affairs in order and leave the country or change status.

4) Be VERY, VERY cautious when filing your taxes.

If you want to apply for residence (a green card) or citizenship, one thing that will be carefully scrutinized is your tax return!  So make sure you file every year, file on time, and keep copies of your tax documents for every year you have spent in the US.

Also, be aware that some tax credits and tax breaks don’t apply to nonresidents.  Tax software programs don’t always ask you if you’re a US resident or not.  If in doubt, err on the side of paying more tax – it’s better to do that than to have your application for residence denied.   It’s best to use a specialized software program for nonresidents (such as Cintax), or see someone who has experience in preparing tax returns for visa holders.

5) Most of the financial resources available aren’t written with you in mind. 

Before you follow anyone’s financial advice, check it against the requirements of your particular visa status.  The fact is that a number of opportunities and strategies available to citizens and residents aren’t available for nonresidents.  If you’re on a student or work visa, it’s illegal for you to earn income anywhere that isn’t your school or the employer sponsoring your visa.  Even taking cans for recycling and receiving payment can be a violation of the conditions of your visa.  If in doubt, please speak to an immigration lawyer – they will have the best and most accurate information

6) There is no one American culture.

The USA was founded on the principle that all people could come here and freely live according to their beliefs.  South Asians and Chinese and Arabs and Filipinos and other nonwhite immigrants have come to America for centuries, speaking their languages and maintaining their traditions. They are just as ‘American’ as cowboys and Amish and Mormons and people who celebrate Christmas.  You don’t have to conform to the dominant ‘American’ culture – or even speak English – in order to be an American.

7) But, don’t shy away from opportunities to speak English, learn about typically American values and traditions, and interact with people from a variety of cultures.

English is the business language of the US, just as French is the business language of North Africa and Spanish is the business language of South America.  If you want to interact with people outside your community, in work, at the store or in your neighborhood – and I’m sure you will – English is the language you’ll be using.  And it will help you understand your neighbors (and pass the citizenship test) if you learn about American history, core values (for example, freedom of speech) and local traditions (like Thanksgiving and Hallowe’en).

8 ) Use the Internet to find resources and community groups from your place of origin – they will be very important for your comfort and health.

In most of the places you’ll probably end up living, you’ll find a community of people from your country or region of origin, who will have the advice and support you’ll need to navigate US society – not to mention tips on how to find your favorite foods, drinks, movies and hobbies.  You might be surprised at the people you find working together!  Often, differences and tensions that are profound ‘back home’ – Bosnian/Croat/Serb, Christian/Muslim/Hindu – seem a lot less important when you just want to speak your native language and reminisce about the weather.

9) Seek out support services that have been developed for people like you.

Whatever your reason for coming, someone in the US has thought of it and developed a support service. If you’re a refugee or brand new immigrant, you can find nonprofit organizations running classes on how to navigate US society – choosing a bread at the grocery store, opening a bank account, getting a drivers’ license, etc.  If you’re at school, there’ll be at least one international student support person (try the person who signs your I-20!) who will help you overcome ‘culture shock’ and get used to the US school system.  If you’re working, try HR.  Again, the Internet will help you find these resources.

10) Whether you like it or not, your actions reflect on your entire community, country and/or region.  

If you’re visibly identifiable as “not from here”, or if you speak with an accent, people will see you as a representative of your culture, country of origin, and/or religion. That’s a normal human tendency.  Remember that in your interactions with others and your actions.

How did we get here? Part 3, Joint Financial Lives

February 2, 2007

Previously, I’ve talked about our families’ financial positions and attitudes, and our individual financial lives. This time, I’ll tell you about our experience of merging finances when we moved in together, and our choices between then and now.

Since we’ve known each other, there’s always been a large disparity in our incomes. I was able to easily cover my expenses as a student with the income I had – but not the cost of the regular meals out, movies and other things H1Worker could afford on his $60,000 salary. And to be honest, I’d never really had much desire to – I was already amazed at how many resources I had access to at college. Free movies every weekend, interesting speakers, free gym equipment, lots of free food… why spend money to get things I could get for free?

But I was also getting mighty sick of never leaving the 2 blocks of our campus. It was nice to get a glimpse into what i thought of as ‘the corporate lifestyle’, and H1Worker was happy to cover my share so we could do things together. He didn’t have a financial plan to speak of, and very few expenses – in fact, when we met the only furniture in his 1 bedroom apartment was a futon mattress on the bedroom floor, a TV, an Xbox, a table for the TV to stand on, and 2 chenille cushions! He also didn’t own a car, and walked to work most days.

8 months later, we prepared to move in together. We had decided to share our financial records, and I was astonished to discover H1Worker had accumulated around $3000 in credit card debt. There was really no reason to have this debt, given how low our expenses were – it was a result of having paid absolutely no attention to his finances! He had enough in his checking account to pay off about a quarter of it immediately, and we got rid of most of the rest within a few months, using our tax return checks and a lump-sum fellowship payment I received.

As preparation for moving in, we calculated the disparity in our incomes and discovered H1Worker’s was approximately ten times mine (not counting the cost of my tuition). So we agreed that I would pay half of the rent – around $400 – and cover my own transportation costs. We tried to balance the disparity in salary through the distribution of chores, but in practice it didn’t work out because of the long hours I was spending at school. Still, in general it was an arrangement we were both comfortable with.

After we’d been living together for about 4 months, we decided it was time to buy a car. I’ll write more about the car-selection process in another post – to make a long story short, we decided on a late-model used Mazda , which we purchased for around $15k (with a variety of upgrades from the standard model). H1Worker’s credit history was good, but short, as student visa holders don’t generally qualify for credit cards. As a result we were only able to qualify for a rate of 10.99%.

The more I thought about this, the more it bothered me. I don’t think my parents have ever borrowed money to purchase a car, so it wasn’t something I considered a ‘normal’ expense. I added up the interest we’d pay over time – just under $5,000 over a 5 year loan, 1/3 of our car’s value! This realization spurred me into action, and H1Worker was no less motivated. Together, we made a budget and began to manage our expenditure more aggressively.

In the past year, we’ve developed what I think is a solid budget that allows us to save, pay off that car and still do the things we enjoy. We didn’t make much headway with savings until last September, as we’ve had international travel, an interstate move and a few other large expenses to deal with in the meantime. But now we’re on track to pay off the remainder of the car loan (about $11,000) by mid-2007, while continuing to save to meet our other goals.

We also plan to begin contributing to a retirement fund in the coming months. This is something of a tricky business for visa holders, and I’m sure I’ll be writing about this often – but H1Worker’s 401k match will kick in midyear, and we want to take advantage of that, at least.

I hope you’ve enjoyed this 3-part overview of our financial history to this point. I plan to explore several of the issues I’ve raised in more depth, and will come back and add links to this post as I do. You can also find all related posts in the ‘History’ category in the sidebar.

How did we get here? Part 2, Our Individual Financial Lives

February 2, 2007

In Part 1 of our financial journey, I talked about our family histories and attitudes to money and finance. In this post, I’m going to describe our financial decisions since we moved out of home. We both moved internationally, away from our families, at age 17, so that’s where I’ll start this portion of the story.

In 1998, I was lucky to receive a scholarship to spend 2 years at an international high school in a big Asian city. At the time my father was unemployed and money was tight at home. Luckily, the scholarship was a generous one, covering airfares as well as tuition and housing. My parents funded my living expenses at $30US every 2 weeks, which was enough to cover the cost of transportation around the city and the occasional meal out – our school had plenty of activities that kept me very busy. I did teach english for a while, but didn’t really need extra money, so I wasn’t extra motivated to pursue it. I funded my vacations by selling meat pies at a high-profile sports event – those two to three days’ work would bring in more than $US500, which was plenty for a few weeks’ travel in the region.

Our school’s student body ranged from children of Middle Eastern princes to people whose home address was a refugee camp, so while i had less than some, i also had more than many.

After my two years there, I was again incredibly fortunate – I was offered a scholarship to study in the US, majoring in a humanities subject at a liberal arts college in the Midwest. That scholarship, a work-study award, and a contribution of around $2000 a year from my parents (in addition to the continuing $30/fortnight allowance), covered all of my expenses during the school year. I stayed here most summers, funding my stay with various (legal!) work arrangements.

So, I was able to cover my expenses by living relatively frugally and budgeting my work-study funds, which meant i could graduate without student loans. But I didn’t save anything while at college either.

H1Worker also left home at 17 – he came to the US, to attend school on the East Coast. He started out in a humanities discipline, but after a year of study he decided that post-BA employment prospects and financial security were more important to him than his interest in the discipline. He transferred to a different school, where he majored in computer engineering. During his first semester, he was supported by his uncle and assisted with his business in return. Later, he supported himself through on-campus work (relatively well-paid at his college) and spent one summer on a paid internship at a large company in his field. He also pursued various investment activities with groups of friends, with a varying degree of success.

H1Worker recieved a partial tuition scholarship. The remainder of his college expenses were covered by his parents, who raised the money by starting a new business venture!

Upon graduation, H1Worker was recruited by an IT company in the Midwest, at a starting salary of about $60,000. Within a year, he had paid his parents back for their contribution to his education – a total of almost $25,000. Even though his parents hadn’t taken out loans to fund his education, he felt it was important to pay them back.

This was how things stood when, one fine autumn day in 2004, the two of us met on a Midwestern city corner. One thing led to another, as these things tend to do… and 8 months later, we moved in together, adopted a dog, and got engaged, all in the same month! And a new financial partnership was born.

In Part 3, I’ll talk about merging finances, and our financial decisions between when we first moved in together 18 months ago and today.