Being an immigrant has its own challenges and I was curious to know from other immigrants how they were dealing with their finances. I wanted to find out the unique challenges they were facing and how they dealt with them.
I am excited to present the 10th guest of the interview series. He is an anonymous reader who goes with the twitter name Joe Chuck.
I hope you enjoy this interview as much as I did.
1. Can you tell us about yourself? Please include any details you feel comfortable sharing about how long you’ve been in the US, what you do for a living and your income range.
I came to the US in 2005 from India to pursue graduate school after completing a bachelor’s degree in computer science and engineering. I completed my master’s degree in computer engineering in 2007, and Ph.D., also in computer engineering, in 2011. I started working soon after graduating. It was during graduate school that I met my wife, who is also from India. She completed her master’s degree in 2010 in electrical engineering and started working soon after. We were extremely fortunate to be able to find satisfying, well-paying jobs in the same company and in the same location.
We got married in 2012. As of 2019, my wife and I have been working for about 8-9 years and have lived in the US for about 13-14 years. We both work in the tech sector and started with average salaries of about $100,000 each per year. Today we make a combined income of close to $300,000 per year. We continue to work for the same company that we started within 2010-2011.
We were extremely fortunate to be able to find satisfying, well-paying jobs in the same company and in the same location.
2. What was your relationship with money during the early days of your life? How did it influence your finances?
Both my parents are doctors, who worked for the first 20 years of my life in a not-for-profit hospital. Needless to say, they were being paid significantly less than their counterparts working in private hospitals. We had a modest, but, comfortable life. Travel was rare; large purchases were rare (TV, car, etc.) We lived in accommodation offered by the hospital and moved into our own house only when I turned 18 or so. The house itself was bought with a large mortgage. As a result of all these factors, frugality was never unfamiliar to me. But rarely were their discussions about money at home. As a result, now, when there seems to be an abundance of wealth in my life, it has taken several costly mistakes to learn how to manage it well.
3. Do you discuss money with your friends, family or colleagues? How do they react when you bring up the topic of money? Is this a taboo subject?
It has been a bit of a taboo subject within my family but I do speak about it with friends and colleagues. The discussion is more open and relevant with peers, who might be experiencing similar challenges as we do.
4. What are some of the money mistakes you have committed? What lessons did you learn from it?
I wouldn’t know where to start because there are so many of them! But in the interest of brevity, I’ll talk about the biggest one. As I mentioned previously, having little experience managing large sums of money (largest at least within our lifetimes yet,) we became conditioned to believe that the best place to park our savings is in a house. Because everyone we knew was doing it. And as is the norm, borrow money using a 30-year mortgage to buy it.
We were clear that we wanted to put down 20% to avoid paying PMI. So after deciding how much of our savings we wanted to use as the downpayment we simply multiplied that with 5 to come up with the price for the house we wanted to get. Now we realize that this was the complete opposite of how we should have thought about it. As it turned out, at the price point we thought we could afford, we got a beautiful, but enormous house — 3600 sq. ft. next to green space and everything, and on top of a mountain. It turned out to be a huge mistake simply because it was grossly excessive relative to what we needed. And expensive to live in because of the large interest payments of the initial years of the mortgage, property taxes, and utility bills commensurate with a house of that size. Let alone the opportunity cost of not using that money to buy actual assets.
The lessons from this mistake are now clear — decide first how much of house you need and then find out whether you can afford it. 30-year mortgages are extremely expensive! 10-15 year loans are what one should target if one must borrow to buy a house. In reality that’s only what you might realistically be able to afford, even though the mortgage industry and society convince you otherwise.
5. What is your view on debt? Do you carry any form of debt? Has it ever been a source of stress in your life?
Debt can be a good thing if managed responsibly. However, all too often we tend to forget that debt is, at the end of the day, borrowing from our own future selves. As a consequence, we easily underestimate how much we rob ourselves of the option of not working in the future. For example, if you have taken on too much debt and one spouse wants to take some time off for whatever reason, be it for parenting or due to some unforeseen health condition, you simply won’t have that option because you need the monthly paycheck to fulfill your monthly debt obligations.
Taking on too much debt to spend on living life up is unusual in the Indian culture. Spending within your means is generally practiced. This used to be the case at least when I was growing up. My parents never had credit cards until they were in their 40s. And when they finally did, I remember making a stop each month to the bank to drop a check off for the credit card bill payments. As a result, it is ingrained in me that using credit to buy things that you can’t afford (if unable to pay off in the same month with money in the bank) is not really the purpose of having credit cards. We don’t have any credit card debt that is over one month. In other words, we have not had a single month where a credit card bill has not been paid in full.
Both my wife and I are extremely fortunate that our parents were able to finance our undergraduate education. Granted, it was in India, and relative to the US it is tremendously cheaper. We were both, also, extremely fortunate that our graduate school education was also fully funded through research/teaching assistantships. Not only did the assistantships pay tuition fees, but it also paid a small stipend that covered living expenses. Although, we did live paycheck to paycheck. All this, to say that we are extremely fortunate to not be burdened with student loans. When started working, we started with a net worth of a big fat 0!
That said, we still carry a home mortgage and are making monthly payments on two cars. Debt has never been perceived as a stressor in my life until recently, as I realize more and more how expensive each of these debts really is. Meaning, apart from the cost itself, the expenses of interest payments, and the opportunity costs of not having that money staying invested, all add up to non-trivial amounts in the long run. Having said that I see them as essential mistakes that had to be made in order to learn how to manage debt and wealth properly so that in the future such mistake can be avoided.
6. How is your money invested? Does being an immigrant have any influence on your investment decisions?
About 25% of our net worth is in a real estate property that is fully paid for and is rented out. About 20% is equity in the house in which we currently live. about 25% is in our 401(k) accounts. We don’t currently max out our 401(k)s but contribute a little over 60% of the IRS-allowed annual limit. A little under 5% is in company stocks of our employer. About 20% is in cash and the remaining 5% is in other liquid investments.
I think any influence on investment decisions by virtue of being an immigrant is one of constantly feeling like a fish out of water. There is a constant worry about the risks involved in investing. There aren’t any people in our networks who have gone through what we have, or something similar, who can tell us — this is what you need to do to minimize risks in investing. We’re pretty much on our own so there is a constant sense, albeit minor, of paranoia about investments, tanking. As a consequence, we find that we’re extremely conservative about investments; we are quite risk averse.
7. Do you have any specific money situation as an immigrant (e.g. supporting an aging parent or family overseas) that influences your finances?
Both my wife and I are really fortunate that (at least for now) our parents are financially independent and ready for retirement without needing financial support from us. Recently my father wanted me to make a donation to his church, but in general, no.
8. Are you aware of the FI or FIRE movement? If yes, where did you hear about it? Are you pursuing (or have you reached) financial independence?
Yes! It resonates very well with me and I am drawn to it! I think the aha moment was a few years back when I stumbled upon the Mr. Money Moustache blog. And yes, my wife and I are pursuing financial independence. We’re just starting out and are hoping that we can get there in about 10 years.
9. What are some of the apps or tools you use to manage your finances?
We use Personal Capital regularly and our own budget spreadsheets.
- mint.com to track my net worth.
- Robinhood for commission-free stock trading. Although I am becoming a little ambivalent about this because it tends to keep you too involved in watching stock price movements. This makes it hard to have and maintain a long-term outlook. For example, I get tempted to sell a stock that just jumped 10% to lock in the appreciation even though I’ve not held on to it for over a year to benefit from the long-term capital gains tax rate.
- We have an online savings account in ally.com, which yields 2.2% interest per year. This is where the bulk of our cash position remains.
- We used to have a Betterment account with about 3% of our net worth in it, but after 10 years, sub-market performance, and with markets, at all-time highs we cashed out of that last year. Although, we still continue to make small monthly transfers to Betterment.
- I recently discovered Sure Dividend (suredividend.com) and just started subscribing to one of their newsletters. It is one of those things that clicks or resonates with you within the first five minutes of discovering it. I recently started a small portfolio with their strategy; don’t have any results of value to share yet. Let’s see how it goes.
10. Are there any specific books, blogs or podcasts on personal finance that you’d recommend to others?
There are plenty but I’ll restrict myself to the one of each that have had the most influence on me and my investing actions.
- My all-time favorite podcast is The Investors Podcast by Preston Pysh and Stig Broderson.
- The Mr. Money Moustache is, of course, turning out to be somewhat of a legend in this community these days.
- Rich Dad Poor Dad by Robert Kiyosaki is essential to correctly understand the definitions of assets and liabilities.
11. What money advice do you have for new immigrants who arrive in the US?
The opportunities in this land are tremendous! There is an abundance of everything, including money. It is likely that very soon you’ll encounter levels of wealth that you’ve never encountered before in your life. Along with that also comes constructed preferences on how society expects you to spend that money. Buy a house, buy nice cars, etc. It is all too easy to follow the crowd and find yourself happily burning through everything you make, and even more. Of course, happiness is in the short term and unless you become cognizant of these forces working against you, you will make costly mistakes; I most certainly have. Whether you learn from them and fix them or whether you continue to keep making them is entirely up to you. It’ll be very expensive to retire in the US, so think about it now and figure out your finances soon before it becomes too late.
12. How can people connect with you on social media?
I am inherently quite a private person. I feel I have plenty of people I’d like to listen to, but very little to say. Twitter is fantastic for people like me. Connect with me on Twitter @JoeChuck3.
Are you a first-generation immigrant in the US? If yes, would you like to be part of this interview series? This series will focus on personal finance for first-generation immigrants and the unique challenges they face.
You can check out my page Immigrant Finances – Interview Series for more details on how to participate in this series.