U.S. is not heaven!

For a lot of people outside the U.S. this country is like heaven. They think everyone here is rich. When you land that job offer for $50,000 you don't realize that you may end up saving only $5,000 a year. Here's the typical breakdown for a year considering a family of two:

Gross Pay: $50,000

Taxes: $16,000
Rent: $12,000
Living Expenses: $10,000
Car: $3,500
Health Care: $3,000

Amount left: $5,500

The only way to save more is to cut on living expenses which means living poor. Is that why you come to U.S.? to live poor? I know people who make $70,000 or more and can't manage to save more than $10,000 per year. That's about Rs. 4,50,000. I know many people who save more than that living lavishly in India. Let's look at the rent and health care costs in detail.

Rent:
I think in this respect the U.S. has a weird tax system where it rewards those who have money and punishes those who don't. What am I talking about?

Take the case of house rent. In Mumbai where I worked earlier, a big chunk of my salary came in the form of the House Rent Allowance. This component of salary, which in my case was about 40% of my income, fluctuated yearly based on cost of renting and was also tax-deductible. In the U.S. rent that you pay is not tax deductible from the federal tax. Ouch! To add insult to injury, if someone has enough money, they can buy lots of houses and rent them out. Agreed they will have lots of mortgages to pay, but the mortgage interest on those payments are tax-deductible.

Most of the time the rent is priced by the market in such a way that its the renters who pay for the mortgage of the landlord and the landlord gets tax-deductions from Uncle Sam as a bonus. Infact, there are many publicly traded companies whose only business is to rent out houses (eg: Home Properties). The result is higher rents than what would have been otherwise.

Health Insurance:
Typically for a family of two, you would pay anywhere between $40 and $100 per week. That's upto $5,000 per year and that's only the premium you pay not the other 70% or so that the employer pays to the insurance company. It may be noted here that your premium pre-tax but employers contribution is tax-deductible.

You may say health insurance is optional. Yes it is, but only when you can afford health care without insurance. The system is so deep-rooted that it is extremely expensive to have health care without some sort of health insurance. You may say developing countries are backwards in terms of providing health care for its residents. After getting to know the U.S. health care system, I think its better to have poorer health care than extortive health care.

The main culprit in the system is health insurance. While insurance is good for society in general, as it makes it easier for the sick to get medical services cheaper, there are those who exploit the system. Everyone might have heard about patients suing doctors for negligence. Then there are pharmaceutical companies who mass advertise their latest and most expensive products like it was some soap. Who pays for those ads? You, through your health insurance!

Then, there is the inefficiency in general at hospitals and clinics as the jobs are almost guaranteed for life. Finally there are uncurbed prices for medical supplies that drive the price of all things like medicines, staff salaries to extortive levels.

For example, when you got to an emergency room, they usually give you a blanket and a pillow while you're in the waiting room that are charged at $50! Now, if it was money going from your pocket you would cry out loud but since insurance pays for it, you don't care. And when no one cares, the insurance rates go high along with higher charges for everything else associated. During the years 2001 to 2003 when the economy shed thousands of jobs, insurance rates actually went high by about 60%. Reason? Fewer people contributing into the pool while those who needed or exploited the system stayed put.