Archive for the ‘History’ Category

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.