I mention that I was an NRI in the Disclosure of this blog but I wanted to address this issue head-on because of a recent comment in JagoInvestor where someone said only NRIs can save a lot in a short time which is a false statement and only serves as an excuse for the self-pity crowd.

Here’s my brief NRI story:

I worked and earned in the U.S for about 9 years. I returned to India in 2013.

But before you go “oh! that’s how you saved so much so quickly”, my U.S salary was not really high. I started with a really low salary and since increments are based on your previous salary … my salary grew very slowly especially when I was a startup employee for 6 years.

Note that as of this time, we’ve saved up only 30% of our early retirement target. See the progress bar on the right hand side.  This 30% includes my wife’s savings also. I’m now in India. This means that I’ll be saving the remaining 70% of our early retirement target working from India. My wife is currently on a break from work to explore her interests meaning we are a single-income household for the past 3 years. So I’ll be demonstrating how early retirement is possible in India by my personal example in the years to come!

My NRI salary was only good enough to buy a Rs.45 lakh apartment over 5 years without requiring any home loan. This works out to an average savings of Rs.75,000 per month for 5 years. (Rs.45 lakhs divided by 5 years). Given the real-estate crash in India right now, the apartment is now worth about Rs.65 lakhs after 9 years since I booked it in 2008 which is a terribly low CAGR return of only 4%! I would have invested that amount in mutual funds instead if I had educated myself.  The first 3-4 years of my NRI stint, I was paying off my education loan and large credit card debt I had gotten into due to poor financial habits.

I was always embarrassed that I did not earn the big salaries of my peers in the same age group. But as I write this disclosure I’m glad I didn’t because I learned to save instead to achieve my goals and not succumb to increased lifestyle expenses with increasing salary 😉 Moreover it is my U.S experience that helps me apply Early Retirement ideas from the U.S to Indian conditions.

I grappled with the dilemma of whether to mention that I had been an NRI at the time of writing the Early Retirement article and finally decided not to mention it so that readers were not distracted from the main message of saving at-least 50% of your salary each month. From the comments on the article I can now say that my decision was correct because no one complained it was not possible to save 50% on an Indian salary. Because people were already saving 50% of their Indian salary as EMI to repay house loan just not as mutual fund SIP like I was advocating.

Coming back to this self-pity comment : recently on JagoInvestor an NRI had written an inspirational article how they had saved Rs.1.5 crores in just 7 years by investing aggressively in equity and not buying real-estate. But this commenter dismissed the achievement by saying only NRIs can do it and people in India should keep saving till age 60. I posted a reply to their comment showing how people on an Indian salary can also save the same amount in just 7 years.

My reply to the self-pity comment saying only NRIs can save a lot in a few years:

1. You should compare this NRI author with a double-income household working in IT in bengaluru/pune where husband and wife each bring in Rs.1 lakh/month. I know Indian households where one spouse’s salary is used for house loan EMI and the other spouse’s salary for expenses. If this double-income couple saved Rs.75,000/month in mutual funds then @ 12% CAGR they would have Rs.1 crore saved in the same 7 years as this NRI. That is compounding & equity returns at work.

2. If households in India can afford to pay EMI of Rs.75,000 per month on a Rs.75 lakh house loan then they can invest the same amount each month in equity too. Most people in India are saving a lot each month but in the wrong manner as EMI which this NRI smartly avoided.

3. You say people in India don’t earn that much.
But I’ve recently hired IT people in Pune & Bengaluru with minimum take-home pay of Rs.1 lakh/month for 5-7 years experience. That’s when I realized that such high salaries are the norm in Pune, Bengaluru etc. You have to agree that the past decade or so has been lucrative for IT and MBA people working in India.

4. Quite a bit of people reading this blog are high-earners early in their careers in IT, MBA etc
It is possible for them working with their spouses as a team to emulate this NRI’s impressive achievement.

5. Lastly, you are discounting the fact that cost of living is also high for NRIs as it is denominated in their foreign currency. So unless you are consistently frugal, you won’t be able to save much. What is impressive about the author is that he has consistently saved for 7-9 years which requires determination.

I will definitely consider this as the “inspiration story of the decade” for young people entering the workforce
We need inspirational stories like this because IT & MBA jobs are no longer secure that you can hope to work till age 60.

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6 COMMENTS

  2. My background: I am currently an NRI. I left India for US in 1999 as an 18-yr student and started working in 2002 full time as an engineer. Since i only had a bachelors degree and entered the workforce in the midst of a grand recession (dot come bubble) my salary was very modest. After 17 yrs working here in the US and comparing with India here’s my take:

    1. Wages: US ranks at the top on highest wages for technical jobs, whereas India is quickly rising in the ranks in Asia. It is common in India for employees to switch companies to seek higher wages whereas in US it is less common and annual wage increases are modest.

    2. Taxes: US tax rates are among the most competitive in the developed world. An average techie such as me with 17 yrs of experience and a family of 3, will likely linger around 24% top tax rate, with net effective tax rate of 17%. India, on the other hand, desperately needs tax reforms. Someone who earns 10L a yr is at the topmost tax rate (30%) in the country. There’s no concession for married couples when the spouse doesn’t work. In that regards, there are lessons to be learnt by India from South east Asian countries. Needless to say, honest Indians overpay on taxes compared with their global peers.

    3. Cost of Living: India certainly has cheaper prices (compared to US) on Fruits, veges & meats. However, other items such as dairy, pulses, flour, rice etc, household & personnel item prices are comparable to US. As an example, laundry detergent for automatic washing machines is twice as expensive in India compared with US. Then, there are other items that are more expensive in India – laptops, iphones, luxury/SUV cars, electricity. Quality Education (with good facilities) is free of cost in the US, whereas one has to pay to receive similar education in India. Medical expenses, on the other hand, are so much more reasonable in India.

    4. Inflation: While Inflation is a concern in India, fixed income and debt instruments have traditionally outperformed inflation in India (as compared to US). Even the equity markets in India are performing better. In 2018, Indian equity markets provided a positive return when all other major markets were in the red. Only the Brazil market outperformed India.

    Conclusion: After analyzing the landscape across US and India, my take is that saving is a matter of personal drive/habits, smart investing is easily achieved through self-education & awareness of your circumstances, irrespective of where you reside.

    • Thanks for the detailed analysis Amrit!
      I’ve been meaning to write a comparison between U.S and India for a while now. Especially to set expectations for returning NRIs.

      My take is similar to yours: If you look at expenses, I don’t find much difference between U.S & India for a middle-class budget. I don’t see expenses going down after moving to India. A lot of NRIs especially the ones who left more than 10 years ago remember only prices from that time and mistakenly assume that India will be a cheaper place to retire.

      The reality is different : once you are used to a higher quality of life and privacy in the U.S, the most natural thing upon returning to India is to replicate that similar bubble. That hikes up your India expenses making it on par with your U.S expenses. For example: Household expenses of Rs.1 lakh per month for a family of 3 living in own house in India works out to $1500/month USD minus rent. So no big difference between that family living in India or U.S at that budget level.

      The real benefit of living in the U.S is the “Quality” you get in all matters big and small. A public park is well-maintained and easily accessible from one’s house. A public school and college has decent quality of education.

      Similarly the real benefit of living in India is Household help. But for the rest you have to pay extra to get “Quality” whether in healthcare or education.

      Conclusion: if you are making a ton of money in the U.S like investment banking or silicon valley then it makes sense to retire there instead of trying to arbitrage costs in India. At that level of money, your expectations of quality will be met only by products or services in the U.S. So you will be sending your kid to study in the U.S or getting health needs met in the U.S or making International trips every year etc Might as well live and work in the U.S in that case.
      But if you are not making that kind of money, India is a better option where you can leverage your US dollar savings as a safety net and set up a nice life for your family similar to the U.S while exploring your interests in life.

  3. This is absolutely true. Amping up savings is the no. 1 thing to focus on. Being an MBA myself and my spouse working.. we have been saving 25-30L every year. Our savings rate is around 66%. A paid off house (from my US stint earliar) has been a big help.

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