Personal Finance in USA – Shared by an NRI

I feel that many of us during our initial years in the US carry certain ingrained financial instincts: directing all savings to fixed and recurring deposits, buying a home quickly, using insurance policies as investments, and staying risk-averse toward market investments.

Based on my own experience, I wanted to share some quantifiable inputs. Priorities, necessities, and understanding differ for everyone, and what follows is simply my personal perspective.

This post is written by Sundeep Adusumilli, a US-based NRI who writes regularly on his blog Exploring Instincts.

Check: How to fix common financial mistakes of NRIs

Some Mistakes I Made

Transferring dollars to India to fund fixed deposits for better returns

Bank returns are broadly proportional to inflation. If a deposit in India offers 7% and inflation runs around 5%, the real return is about 2%. If a US deposit offers 3% against roughly 1% inflation, the real return is also about 2%. The Rupee tends to depreciate as inflation rises, which offsets what looks like a higher headline return in India. If India eventually matures from an emerging to a developed economy, inflation should slow, and bank returns would likely be scaled down to match. If the transferred dollars are ever repatriated, remittance costs chip away at the capital further.

A simple illustration: assume a dollar conversion rate of 51. An outward remittance rate might sit around 50, so transferring $1,000 becomes roughly ₹50,000. When repatriating, the bank’s dollar-selling rate might be around 52, so ₹50,000 converts back to about $960. Even with zero inflation or currency depreciation in the picture, that’s already a roughly 4% loss from the conversion spread alone.

The one scenario where this doesn’t hold is if Indian inflation falls below US inflation and the Rupee appreciates. Not impossible, but unlikely in the near term.

Read: Why You Should Save Early for Retirement

Buying an apartment

I bought an under-construction apartment in 2009. Based on the exchange rates at the time, I transferred roughly $112,000 (₹65 lakh) over six years. The basic cost was ₹42 lakh; the remaining ₹23 lakh went toward loan interest, amenities like car parking and clubhouse access, taxes, utility setup, registration, and interiors, almost none of which add back to the resale value.

By March 2020, the price per square foot had risen from roughly ₹3,000 to ₹6,000, valuing the apartment at about ₹84 lakh. Rental income earned so far totalled around ₹11 lakh. Even assuming a sale and full repatriation of the combined ₹95 lakh, the current valuation works out to about $122,000. After taxes, that’s roughly a 1% annualised return, with a rental yield of about 2.5%. Adjusted for inflation, this is effectively zero gain, even in a best-case scenario where the price per square foot doubled with no rental gaps.

Marginal returns and low rental yields make housing a weak investment case on the numbers alone, and moving sale proceeds back to the US adds real friction. For context, the US stock market rose roughly 15% over the same period, and the long-run historical US market return, including major recessions, is closer to 8%.

If you’re considering commercial property with a genuinely high rental yield, run the numbers carefully to see if it would beat inflation before deciding.

Read: Is it a Good Time to Invest in Property in India?

Buying life insurance policies as investments

Endowment and Unit-Linked Insurance Plans, popular in India, are expensive products with limited liquidity. Popular LIC endowment plan returns are broadly comparable to fixed deposits. ULIPs invest in mutual funds, but the returns realised tend to be noticeably lower than direct mutual fund investing, due to the costs bundled in for life coverage. The actual assured coverage is often quite small relative to the premiums paid, which undercuts the core purpose of life insurance in the first place.

Investing in Indian mutual funds while living in the US

From a US tax standpoint, unrealised gains on Indian mutual funds can be subject to income tax, while unrealised losses are not eligible for a deduction. Combined with Rupee inflation, this can meaningfully erode investment growth over time.

Check: NRI Mutual Fund Taxation in India

What to Do With US Savings Instead

It’s natural, given emotional ties and immigration uncertainty, to fixate on the idea of eventually moving back and base every financial decision around that possibility. If you’re planning to invest in the US, here’s a rough allocation framework worth considering.

Invest 10% in retirement accounts

Start a 401(K) as early as possible. If your employer doesn’t offer one, use an IRA, potentially through a robo-advisor like Betterment. Split contributions evenly between Roth and Traditional. In a Roth, gains aren’t taxed and contributions become accessible after 5 years.

This $30-versus-$300 gap isn’t a clean conclusion either way; it depends on your tax bracket at retirement (often lower than during your working years) and the opportunity cost of that upfront $30 tax saving on the Traditional side. Roth tends to be a fairly easy call for younger, high-income earners. Since neither future tax rates nor future income are certain, splitting between both adds useful diversification.

Must Check: NRIs Investing in India

Save 5% in an online-only bank

Online-only banks or credit unions typically offer returns roughly in line with current inflation, with essentially zero risk. This works well as capital preservation, and as dry powder you can deploy during a market downturn.

Invest 5% in a brokerage account

This adds flexibility that a 401(K) doesn’t offer, since retirement accounts have limited investment options and stay locked in until retirement age. A robo-advisor investing in low-cost ETFs, again something like Betterment, can make this easy to set up.

Invest 5% in a 529 Plan, if you have kids

Some states, New York among them, offer a 10% contribution exemption, and the gains are always tax-free when used for education, similar to a Roth. A 10% penalty applies if funds are used for something other than education. Over 15 to 20 years, this tax advantage can add up meaningfully.

Read: Financial Must-Haves for NRIs

A Few Other Ways to Save

1. Build toward 6 to 9 months of net income saved in a Certificate of Deposit over time.
2. Life happens. Having this buffer protects you from having to liquidate long-term investments when something unexpected comes up.
3. Enroll in whatever employer benefits are available to you. These also reduce your taxable income.

Must Read: How to Withdraw 401(K) From India

Dependent Care FSA: covers dependent care costs like child daycare.

Commuter benefits: covers commute costs like parking, train, and bus tickets.

Apply for Term Life Insurance and Create an Online Will

Death and taxes are both inevitable and uncertain, but you can at least plan around them. A reasonable rule of thumb is life coverage worth around 10 times your annual net pay, for roughly as many years as you have left in your working career. For a will, I found Willing.com useful: it takes under 10 minutes and costs less than $150.

A Few Quick Don’ts

• Don’t buy a car costing more than 25% of your annual net income.
• Don’t lease a car.
• “You should buy a home” is often naive advice on its own. Run the actual numbers methodically before deciding, and keep monthly housing payments under roughly 33% of take-home pay to preserve cash flow for everything else.

“Currently working as a Software Consultant in New York. Married since 2009 and father since 2017. Loves dogs, cricket, and fitness.” Sundeep Adusumilli

Hope you learned something new from this post. Please share your own experience as an NRI, it can genuinely help other readers.