5 Financial Mistakes New Immigrants Should Avoid
There is a lot to learn when it comes to understanding the U.S. personal finance system, but money is not a good area for the trial-and-error method! These are 5 financial mistakes new immigrants should avoid.
Ignoring credit
Depending on what country you immigrate from, credit may or may not be familiar to you. But no matter the country, it's arguable that no country relies on credit more than the U.S. Whether or not you used credit in your home country, you will almost certainly need to use it in the U.S.
That doesn't mean you have to take out credit cards or loans (although both can help build your credit), but if you want to do things like rent an apartment, pay for college expenses, or buy a vehicle or a home, you need a credit history.
Any credit history you may have had in your home country typically doesn't follow you to the U.S., which means you're starting over. That's where Upwardli comes in! Upwardli can help you build credit quickly and easily in your new home. We don't require a credit check or a Social Security number for approval. You can start building credit in your new country immediately.
2. Misusing credit cards
Credit cards can be a great financial tool and can help establish and build credit. They can also plunge you into debt that can be difficult to climb out of and hamper your efforts to achieve financial goals.
How do you avoid misusing credit cards? Pay off the balances in full each month.
3. Not understanding tax basics
The U.S. tax system is complex, and for those new to the country, it can be worthwhile to hire a professional to advise you, an accountant, CPA (Certified Public Accountant), or at least a professional tax preparer to file your tax return. The last thing you want to do is to run afoul of the IRS (Internal Revenue Service), the tax-collecting arm of the federal government.
There are some basic things to know about taxes, too, that can hurt you or at least take you by surprise if you aren't aware of them.
The difference between gross and net, for example, when it comes to your paycheck. Gross is the amount you make before taxes and any other deductions (health insurance, 401(k) contributions, etc) are taken from your paycheck. Net is the amount that you actually get after those things have been deducted.
So if you earn $20 an hour and work 40 hours per week, your gross pay is $800 per week, but that isn't the amount you'll see on your paycheck. The net amount depends on several factors, including your tax bracket, income tax in your state, if any, and any deductions for things like insurance and retirement savings plans.
The price you see on an item in a store may not be the actual price. Nearly all U.S. states and some localities charge sales tax. Specific things like groceries and medications are exempt from sales tax in some places. Sales tax rates range from 0% to 9.550%.
For example, if a taxable item has a price tag of $5 and the sales tax is 5%, the item will actually cost $5.25.
4. Not asking questions
There are certain topics that people often don't like to discuss, and money is one of them. Money is a taboo subject that many people shy away from for various reasons. But we need to remove the taboo around money because talking about something is one of the best ways to learn about it.
Not asking questions keeps us ignorant and, in some situations, allows someone to take advantage of us. Salaries are a good example of this. In the U.S., employees are permitted to discuss how much they earn at their jobs with their fellow employees without fear of being fired or otherwise disciplined.
Not everyone is aware of that, though, and people's natural hesitation to talk about money can result in them earning much less than colleagues doing similar jobs.
Discuss money. Discuss it with your family, friends, and colleagues. (Do keep discussions with colleagues discreet, though. It's illegal to fire someone for discussing salaries, but that doesn't mean an employer won't create another reason to do so.) If you don't know something, ask someone. If someone seems to be financially savvy, talk to them about money.
5. Not reading the fine print
Before you sign anything on paper or electronically, read the fine print. We know it's tedious and confusing, but there could be essential details buried there that can be detrimental to you in some way.
Be especially careful to read the fine print on things like leases, loan documents, and credit card contracts.