Here’s Why You Can’t Save Money in First 5 Years in USA

Raghuram Sukumar Personal Finance 59 Comments

save money in ua timePromoting the comment posted by Munna to Blog Post.

Thanks to Raghu for good video on How Much Money You Can Really Save in America?. It gives an idea of how life is like for those students/immigrants coming here.

It takes some time to understand the financial system in USA. At least 1 to 5 years to fully know how we can save more and smartly use our money. For most students, who haven’t managed money before, it can be challenging to get on track.

First you have to pay off the student loan and become debt free from other college expenses. Once you become debt free, you can start savign money.

Here’s real life example of expenses you will have while living in USA. Alos, followign examples exemplifies why you need good understanding on how to mange your personal finance – from credit card, credit history and getting ready to handle emergency expenses.

Interest Rates:

USA is a country of low-interest and profit for Big Banks. They punish people who want to save money as they hardly give 0.5% or 1% interest on your savings (CDs). On the other hand, they flood you with credit card offers and car offers to take more and more loans.

Indian vs American

We Indians have a different mindset then Americans. We would like to recover our investment on our studies as well as support our parents/family so savings make more sense.

As wait for Green card is very long, savings become more important as we do not know whether we will live here for rest of our life or not. While returning to India for good, we need some money.

Taxes and Health Care

Taxes are very high in USA. We have to deal with Federal tax, State tax, Medicare, Social security deductions.

Healthcare is expensive in USA. Don’t think that you have medical insurance and everything will be fine. After insurance also, you have to pay. My friend had a good insurance, still he had to pay $10,000 for his appendicitis operation even after insurance.

Get ready to pay 1000 dollars for MRI scan or tooth root canal treatment. Even eye glasses are very expensive.

Food and Utilities

Utilities are expensive. cable TV cost you 100 dollars per month.

Add electricity, water and so on.

Telephone service is most expensive in the world. 50-60 dollars per month.

Learn cooking if you want to survive in this country. That will save you tonnes of money. Eating fatty food outside and rotten Indian restaurant food will make you ill.


Most of USA do not have any public transportation. Even if they have, it is erratic and you will not be able to reach from point A to point B.

Many places, there is no footpaths to walk and they do not allow cyclist on road. And with no bus/train system, one is forced to buy car. That opens up a new source of expenditure.

Car payment/installment, gasoline, car insurance (car insurance is 50 times more expensive then India), county tax, motor vehicle inspection, car repair.

Car Repair is an experience of life-time here. Very common to get billed 200-300 dollars or even 1000 dollars for car repair.

Last but not the least, tickets/fines for over speeding and parking at wrong place.

Apartment Rent

Apartment rent in high. One bedroom cost atleast 500-600 dollars in Texas to 1500 dollars in California and NJ.

Having said that, it is possible to save money on 50  but don’t expect to save anything if you are a PhD student (recipe for Financial disaster) and Post Doc.

A post doc typically gets 36K and with all above mentioned expenses get into trouble. same way for PhD student.

Biggest compromise a person can do is to share room, cook own food everyday and buy a smart old cheap car.


Question to you

Can you think of other reasons to why it can take several years before you can actually start saving money in USA?


  1. I kind of disagree with everything on this post. It is not impossible to save money. In less than 6 months I had saved enough to buy my own round-trip to India and I am not referring to those 40-50 h flights. I find this post demotivating for incoming students. Yes, there are taxes that get deducted from your stipend but a bulk of it is returned at the end of every year, some Indian-US treaty. And I’d like to know why PhD is a financial disaster, being a PhD student, I am thoroughly offended 😛
    ps : On Telephone services are 50-60$ a month : kindly look into family plans. Its 30-35$ for smartphones. If someone goes for an ordinary (non-smart) or GoPhones, monthly its like 25-30$ max with free calling to India! The plan I use, I will be paying 50$ in a few months (shrinkage payment) and it gives me free internet and free calls and texting world over! Check your facts please before your scare newbies!

    1. Well said Ankita.

      As I also mentioned in my post everything in this blog is incorrect. The only thing I agree is that utilities can actually get to 100$ including internet, electricity, trash, phone etc. (Though 100$ a month don’t make it impossible for anyone to save money)

      1. Dude Vish,

        Dont say ‘blog’…say “post’. when u say blog Raghu gets terrified assuming whether u plan to start ur own blog-website instead of contributing here! ya…do write a post if u can add some imp points 😀

        Of course u can hv ur own separate blog if u vish :p

        1. Vish is been following the site for long time and written few guest blogs that generated over 400 comments. plus he kinds owns the H1b section in HSB by answering H1b questions.

          WordPress users know the concept of post and pages. But most refer blog post to just blogs 🙂

        2. Alrighty!! btw i knw abt his contribution already 🙂 . u talking to Vish ryt??

          1. I meant to ask your Skype Id but will talk to Vish as well.

        3. 🙂
          I find it funny the way you found how I use the word ‘blog’. You are totally right in your observation. I promise “I do understand the difference”
          Don’t worry about Raghu, he ain’t the one to get scared easily!

      2. @vish, Well i was talking from layman’s point of view…for uninitiated ones, blog means entire blog…while post means a single post…i seriously felt u gonna start another website! sorry anyway! @Raghu, i thought u r asking somebody else as @pratik was absent, its my pleasure to talk to u, tell me where to send my skype??

        1. Pratik:
          Don’t worry, you did not say anything bad or wrong. I totally understand your point. I wasn’t sarcastic in my reply.

          I post/comment/reply on blogs on many websites including, education (this one), immigration (USA and Singapore), Credit management, Computer Storage, Fitness, Airline (flying) and a couple more.

          My idea is when I needed help, I got it on the forums/blogs, now it’s my turn to give back to the online community. As this thought is morally inspired, not financially, I don’t plan to start my blog anytime soon. I will rather keep helping people on different blogs for different issues.

        2. You can post the id here, I will add you and delete the comment.

        1. and singaporeexpats, immigrationvoice, some vmware blogs, some storage blogs.

  2. Seriously: What has most of this blog to do with savings in USA?

    If you mess up with credit card debt, you will be screwed up much faster in India (42% interest rates), compared to (29.99% max on most cards). Oh yes, and those guys from Banks in India who can beat you up any day anywhere.
    Healthcare: I can’t believe that someone had to pay 10k even when he had good insurance. Tell me more please. Even the HSA plans do not have that high out of pocket expenses.

    People need to learn to drive under speed limits and follow the rules, you can’t say that you don’t save money coz you get a speeding ticket every month.
    Car insurance is 50 times more expensive? Explain please. I pay less than $1k a year for a car that will be 20 lacs in india and the insurance in India will be much higher than $ 1k. In addition to that the car insurance in India is virtually useless.
    You don’t get a loaner car in India.
    Plastics and glasses are either NOT covered or covered with atleast 50% copay. (remember those are the things that really cost you most of the money in fender benders)
    Everything except labor, you may a major component of it once your car is more than a year old.

    btw, gas in US is much cheaper than India and maintenance for same cars in US is actually lower than India. I know that personally (my mom has exact same car in India that I have in US). I guess it is because of amazing Indian Roads.

    1. Health insurance is actually true. Happens with companies when employees come here on 2 to 3 months. Their plans are kinda bad. My friends dad came from India 3 months back and they got one if cheap $50 per month insurance. He had emergency, hospitalized for few days. Their bill after insurance -18k. They have been in USA for about 12 months, now pretty much they are in big hole. Plus emirates messed up their flight bookings and additional 1600 for changing flights. So about 20k in debt.

      For dentist – my cousin paid 3k for root canal after coverage with federal insurance.

      1. Dental, I know is a total mess here.

        For Health, as you said it was a bad plan. So if people mess up and take a crappy plan without reading what they are getting into, that’s a different thing, but the Author said, his friend had a good plan.

          1. sure, but 10k is way too high for a good plan.

        1. My friend had a good plan means he was a Post Doc Research Scientist and he was having his employer insurance provided by University. Total bill was more then 20000 dollars and his out of pocket expenses were 10000 dollars-rest was paid by the insurance company. This is one example.

          1. Did you know, he could have offset a big portion of it using HSA and tax deductions for medical expenses?

      2. @Raghu : I dont know if this will be useful, but anyways, if someone goes to one of those fancy orthodontists with posh clinics, it will be expensive. However if you go to a good medical school, you get it cheap. I know of someone who got a root canal at 250$. You just have to sign some forms stating you are aware that you would be operated upon by a non-registered dental student 😛

    2. @vish I disagree with you regarding car maintenance and car insurance. I have Chevrolet Aveo in india and I pay 1200 rupees as car insurance for 1 year at New India Assurance company limited which is Government of India company. For similar car, I am quoted 900 dollars for 1 year here in USA by GEICO. I agree that it is next to impossible to get claims in india but then I am paying just 20 dollars per year in India as compared to 900 dollars – around 50 times more here in USA. Areas like New Jersey have even higher car insurance. Even after insurance in USA, there are out of pocket expenses and deductibles in car insurance. Out of accident bill of 1200 dollars, one has to pay first 500 dollars and remaining will be paid by insurance company.

      Your next point- car maintenance is cheaper in USA??? Not true. Car repair is very very expensive here as labor charges are high.

      Gasoline is cheaper in USA but then mileage of cars is also low. Cars in india typically give average of 40-45 miles per galllon of you do the math of converting liters and gallons and km to miles. Cars in USA typically give less mileage and distances are more here.

      1. How old is your Aveo in India? My mom has a new Camry and her insurance is about 100k INR in India. I have a better car than her camry but my insurance here is much lower. The best part is when I buy a new car or even add a second car, my insurance won’t go up.

        As for repair, seriously? What repairs does your car need? If your car repairs are getting expensive, it’s time to get a new car.

        As of MPG, it depends on the car you have. You can have a prius and go 50MPG.

        For accidents, in many states you don’t pay deductible if you are NOT at fault. Even if you pay the deductible, you generally get it back (unless you are at fault).

        In India, with any decent car, the loss you pay on plastics/glasses is way more than the 500$ deductible. In addition to that there are deductibles in India too.

        If that was NOT enough, In India, you lose your NO Claim benefit even if the accident was totally other’s fault.

        If you want to lower your insurance costs in USA, you can buy liability only insurance, which is much cheaper.

        1. You are giving extreme figures-unheard of. 1 lakh rupees per year car insurance in India???? 3200 dollars per month Ph.D. stipend???? settling Medical bills by tax deductions. If that is the case, no American will ever file for bankruptcy because of medical bills and no American will travel abroad for Medical surgery. On an average people pay few thousand rupees for car insurance-not 1 lakh-thats extreme. Talk about average cars like 5 lakh rupees car which normal people drive in india. and Ph.D. student getting stipend of 3200 dollars is unheard of. You are giving imaginary numbers.

          1. You have NO clue how insurance works. There is a difference between a 8 year old Maruti and a Camry. You need to do some research before you comment on insurance. I can provide you links if you want.

            YES, MIT is giving 3200 to my friend.

            You have NO clue about how things work. You don’t know how to compare insurance. It’s very easy to collect data for anything, you can compare really cheap cars in India for insurance to prove that india is cheaper or you can use expensive cars to prove that india is freaking expensive. btw, even on a new decent car (6-8L) the insurance in India is about 25-30k INR. I have NO clue where you got 1000 number (I still have a 2002 zen parked somewhere at our apartment in Bangalore and we pay about 2500 a year for that. The car value must be less than 100k INR).

            Do you even know how HSA works with medical payments before you decide you can’t save tax?

            The number of people who travel abroad for medical reasons is very small and the number of people who file bankruptcy for medical reasons is minimal. As a matter of fact, most people file bankruptcy because of debts they accumulate with their life style. I blog on financial forums and I know this very well. In most cases, with medical bills, people sometimes end up having baddies like late payments etc on their credit, bankruptcy is rare.

            What you are doing is taking out your frustration by pointing fingers on US expenses and a lot of them are from wrong financial decisions and not knowing how things work.

        2. Good discussion Vish. My points are more valid for people on low income like Graduate Students, Ph.D. Post doc students.

          1) So you agreed that you have a car 2002 Maruti Zen in Bangalore and its insurance is 2500 rupees per year (50 dollars) okay now take a 2002 model of cheap car in USA and can you guess how much will be liability insurance. For one year how much will be liability insurance of 2002 model cheap car -any Chevrolet or Mitsubishi in your city in USA? That will answer my point.

          2) Your HSA concept will benefit those people whose income is higher. People earning around 25K or 30 K will hardly get any benefits from that. Again do your maths. Imagine a Graduate student earning 1000 dollars per month having a medical bill of 10000 dollars. can you calculate tax breaks for him to offset his bill? Low income people dont stand benefit thru HSA.

          3) Just because your friend claims to get 3200 dollars-can you tell me out of thousands of Indian students studying Ph.D. in USA, how many students get 3000+ stipend? Overwhelming majority of students get around 2000 dollars stipend-little less or more.
          Talk about average and most common figures which people use-not just extremes. I can eat Samosa for 500 rupees at Taj Mahal Hotel in Mumbai -that doesnt mean that samosa costs 500 rupees on average in India. same way you are giving figure of 1 lakh rupees car insurance in India.

          1. What you are NOT getting is, Car insurance averages in India may NOT be 100k but the average is not 1k either, its more around 20k or so.

        3. And in terms of savings, the whole idea of savings never applies to students, tell me what did you save in your school in India?

        4. okay. But the website which you are quoting is that which gives costly insurance because of commission from private auto insurance companies such as ICICI, Reliance, Tata.

          If you go to Government run companies like New India Assurance company, Oriental Insurance company limited, United India insurance company limited, you will get much much lower quotes for car insurance, They do not charge you 4% as you claim. Your choice costly private insurance company or cheaper government run companies.

          1. OK, you atleast believe that I was NOT giving imaginary numbers. Now how bout you show me where I can get a Aveo Insurance for 1k?

        5. When you will go to the office of companies which I mentioned or contact an agent of New India Assurance company, Oriental Insurance company limited, United India insurance company limited, they will show you.
          online private websites for insurance quotes are for ignorant people in India.

        6. By the way, you still didnt answer three questions i asked you in my earlier comment????

  3. And in addition to this, some money can be saved by using HSA (30% or so tax) in case of a big out of pocket expenses. As a matter of fact, IRS allows putting money into a HSA account after you have paid the medical bills out of pocket and then reimburse yourself from HSA account and save income tax on that amount.

  4. I’m sorry Mr. Raghu, but I think you are drifting away from the whole point of your own blog. This has to be the most demotivating post I have ever read about studying in USA.
    PS: Please encourage and guide rather than discourage.

    1. Things listed here true and can actually happen to anyone coming to USA. So, get ready to face the reality and stop looking for article that smooth talks and paints everything green in other side.

      1. @Raghu: I totally agree with you that there is NO need to paint a rosy picture. It’s better that the aspirants are prepared for the ground reality.

        This said, I still believe the author of this article is truly clueless, and a little frustrated. I agree that the author may not have saved money but that’s obviously because he messed up.

        If I was a student, trying to come to USA, I will think this is a good blog post and read this article as:
        – Don’t get into credit card debt (anywhere)
        – Follow the rules and drive carefully
        – Spend wisely (do your research on how to buy things at right price)
        – Medical expenses are unpredictable and can be high, set aside some money for it (HSA is a good idea)
        – Save extra money (prob share room, don’t eat out etc) until you have at least 20k in your account for emergencies.

  5. I think, I should write a blog on how to save money in USA with tips on shopping, credit, healthcare etc. Please let me know if that makes sense.

    1. That’s what I’m doing here. Series of posts should give a clear picture. I have one more experience I this series before I will give my tips and views.

      1. Sounds like a plan!

        I must say, this blog is great in the sense that it reflects the reality and helps potential immigrants avoid disappointment.

  6. Well Rajneekanth saves 100K from 1K salary!!!!
    Only rajneekanth is manage to do that in 5 years !!!

  7. I didn’t get clear message from below mention paragraph. will you please elaborate the same for phd students
    “Having said that, it is possible to save money on 50 but don’t expect to save anything if you are a PhD student (recipe for Financial disaster) and Post Doc.
    A post doc typically gets 36K and with all above mentioned expenses get into trouble. same way for PhD student.

    1. I wanted to say 50K salary if you are working, then it becomes easier to overcome all such expenses and save more. At Post Doc, you are looking at the salary of 36K and at Ph.D., even lower salary at the range of 20K. Then it becomes difficult to save.

      1. Difficult to digest. Do you mean,
        MS (50k salary) > Post Doc (36k salary) > Ph.D. (20k salary)
        Can you please explain the reason why Post Doc & Ph.D completed peoples gets less salary as compared to a MS completed person.
        Will really appreciate you reply to avoid my confusion.

        1. PhD and postdoctoral salary listed here are for those who get paid while doing postdoc.

          MS salary is for fill time job.

          Plus – PhD holder could also get lower salary than MS graduate (but less likely).

        2. I think, by PhD salary author means Stipend.

          The stipend for PhD varies by university and one of my friend is getting about 3200 a month at MIT + he can get more money by enrolling as Alumni etc.

          And after PhD, if you decide to join the research lab of a MNC, you can make serious money (way more than what you will ever make as a MS engineer).

  8. can’t we clear student loan while purusing our masters by part time jobs…..?

  9. can’t we clear student loan while pursuing masters by part time jobs…..?

  10. u have opened by eyes of ignorance !! . But this can change i mean the cost can go up and down depending on various other factors…

    Thanks for posting

  11. Thanks to HSB readers and Raghu for this post and discussion. My idea was not to demotivate students. I just wanted to put forward some points so that students can be aware of various scenarios regarding expenses in USA. Again these things matter more to students on limited budget. If a person is having a good job or he/she is from a rich background, they dont have to listen to even one point of this post. It is better to be aware and avoid such situations rather then being unaware and surprised at the last moment. If there are some negatives, there are many positive things also which I will be able to share with readers in this series. Cheers.

  12. Thanks Raghu, Nibin and Munna for sharing such an insightful post on financial management.

    This post has given me a crystal clear picture of managing expenses in the States.

    Keep up your good work!

  13. This post isn’t the best researched one on this site, and I feel (as does Vish), that it needs some balance.

    Interest Rates
    What the author says is partly true, but he neglects to mention that the US has never relied on savings account interest rates. The system here is entirely different from India, where our parents would put money into FDs and forget about them.

    If you’re investing in the US, there are many vehicles that can give you returns greater than 8%. If you’re really good, you can get returns well above that. This is mostly achieved by putting your money in ETF s (Exchange Traded Funds), Mutual Funds, or even directly in stock.

    If you know what you’re doing, you can make decent money over a long time horizon. If you don’t know what you’re doing, you can lose money too, but that’s the nature of the risk/reward balance: the higher the risk, the higher the reward.

    You can easily find a decent financial advisor and put your money into relatively safe investments. Of course, if the whole economy tanks—as it did in 2008-2010—you’re going to lose money. But investments recover along with the rest of the economy. The real problem is if you’re close to retirement, and suddenly you see your retirement account get halved; you don’t have the time (6-8 years) for the economy to recover. If you’re young, however, and have at least 10-20 years more of work, your investments will recover. (Naturally, if an asteroid hits the planet, your money is vaporized, but then so are we all, so it’s not a problem)

    In India, if your FD is giving you interest rates of 8-10%, but inflation is around 6-8%, you’re only getting 0-4% in interest, right?

    Understanding the financial system here takes some time, but it’s unfair to say that you can’t invest your money and watch it grow.

    And finally: just because you’re offered loans at low interest rates, you
    don’t have to take them, right? No one is forcing you to get into debt.

    The flip side of low interest rates is the ability to start a business and get a loan without a crippling interest rate.

    I’m not saying the system is perfect, but it’s certainly not all doom and gloom.

    Taxes and Health Care
    Taxes are about the same as India. Of course, it varies a little state to state, but personally I pay around 28% of my salary in taxes, which is very similar to what I was paying in India. And I live in a state with rather high taxes (though California is much higher). There are states with no income tax or sales tax (New Hampshire), though you always have to pay Federal taxes.

    Now, if you’re talking about the fact that it’s easy to not pay any taxes in India, I have nothing to say to that. I’m talking about normal salaried employees, not businessmen.

    Healthcare is expensive? No, it’s extremely expensive. If you don’t have good insurance, you’re in some deep trouble if you go to the hospital.

    That being said, if you do have good insurance, it’s really not a problem. In my first internship, I paid $500 a month out of pocket for insurance. I did this because I knew I needed to be covered. I could have bought the minimum for $100, but then I’d be looking at large bills if something happened.

    I don’t know how your friend paid that much if he really had good insurance. I know people who have had major surgery (shattered ankle, slipped disc) and spent over a week in the hospital, including X-rays, MRI, and all that, and they had to pay out of pocket less than $200. I saw the bills. The total cost was some $85,000, but there was NO out of pocket cost.

    This is because the insurance was a no-deductible plan. I have the same. I pay more for it per-month (far less than $150, it’s subsidized by my company), but I’d rather have the peace of mind.

    Dental care is expensive though, as are glasses. I’m not arguing with that. Heck, I had laser surgery in India before I came here, because the surgery cost me the same as one pair of glasses here. Best decision ever.

    Food and Utilities
    Cable TV can be had for $100 a month. You can also pay $60-70 a month. Or not get cable TV at all, if money is tight. Internet streaming is pretty good, and if you pay $30-50 for your internet, plus $8 for Netflix, you’re saving money. Cable TV is a luxury, not a necessity.

    Electricity isn’t that expensive. It’s around $20-50 a month, unless you run some seriously heavy equipment. This is for a two bedroom apartment, with two people living in it. Normal appliances, couple of computers, TV, AC, etc. However, different states have different rates, but still, it’s not that expensive. Heat can be, though, if you live in the cold states.

    Telephone service is about $50, yes. It’s usually more, if you have a smartphone and want a lot of data.

    Learning cooking is good advice, I’d concur.

    Yeah, car repairs can be expensive. But the cars are cheap, and if you know what you’re doing, you don’t pay a lot. Buy a decent 6-8 year old Honda or a Toyota for about $5000-7000. These cars basically go on forever. My first car was a 10-year old Accord, with 165,000 miles, that I paid $3,500 for. I had to replace the brakes in six months ($600), and the ignition wires a year later ($400). But that was it. The rest was routine oil changes ($40 every 3 months), and the car went on for 3 years (and is still doing well). So over $4,500 (+oil, can’t be bothered to calculate) over three years. Amortize that and compare it to India and see what you get.

    Buy a fancy car, pay tons more in repair. Insurance isn’t expensive. Yes, relative to India it is, but that kind of comparison makes no sense. You’re saying a post-doc gets $36,000, which is what, 20+lacs in India, but you’re comparing US insurance with Indian insurance rates. That’s a fallacious comparison.

    Sure, haircuts in India can be had for Rs. 50, and are $20 here, but you’re also earning 6-20x what you would in India, right?

    Drive properly. Don’t get speeding tickets. No one is forcing you to speed, or to park where you shouldn’t. The rules here are easy to follow and rigorously enforced.

    Basically, saving money on $50k is hard, but possible, and if you’re good at what you do, you can look forward to getting better jobs and much more money. $50k is an entry level starting salary, not what you will earn for 10 years.

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