Let’s continue from where we left off in Part One of this article.

So, let’s assume that our friend R has arrived in the USA recently (legally, of course). He holds a sufficiently good educational degree and is working a steady job with a good company. R’s employer provides Medical (and other) insurance and a 401K plan, about which R doesn’t really understand much. He’s just got his Social Security number and bank account and is planning to buy a car. So, everything looks to be in order, doesn’t it? Well, yes and no.

R has everything set up, but not in an organized manner. Let’s take a look at R’s balance sheet:

Incoming (per paycheck)
Salary = $1500
Interest = $0.00 (R opened a checking account)
Total Earnings = $1500.00

Expenses (per paycheck)
1 BR Apartment Rent = $400 (shared with wife)
Commuting = $35 (bus pass)
Cell Phone = $22.5 (2 year contract)
Cable TV = $10 (Basic cable, wasn’t that smart?)
Groceries = $120
Eating out = $20 (R rarely eats out, you see)
Gym Membership = $17 (R is a little overweight)
Savings sent to home country = $300
Books = $20 (R loves to read)
Coffee = $30 (R loves Starbucks)
Total Expenses = $954.50

Therefore, R’s Savings per paycheck = Total Income – Total Expenses = $1500 – $954.50 = $545.50

Now, R is wondering what to do with these savings of about $600. His medium term plans include:

• Buying a car
• Increase the family size – have a baby
• Moving into a bigger apartment
• Investing into the stock market
• Asking parents to visit him in the US

In the longer term, R plans to ask his employer to apply for his Green Card i.e. Permanent Residency application in the US and settle down to pursue the American dream.

What should he do to improve his earnings? Although each person’s situation and approach to it is different, there are some things that R can begin to do right away on his financial front (listed in order of highest priority first):

1. Set up his 401K correctly and maximize it
2. Set up an emergency fund
3. Set up a Roth IRA
4. Set up a Brokerage account

We’ll see each of these in detail in the next post.