One of the many drivers for many internationals to work in America on H1B or L1 Visa is their ability to save more money than they can in their home country. The big question is how much money can you save in America? What are the typical expenses that someone on H1-B Visa or L1 visa would encounter? How much is the cost of living in the USA?
In this article, we will review all the typical expenses and how much you can save by looking at all of them.
What are Savings? Income vs. Expenses?
In general, the net amount of money you can save is the total amount you earn minus the taxes and total amount of expenses that you incur for your living. This is no different for H1B visa or L1 visa holders. While you may make more money, you need to factor in taxes because each state can have a different tax rate.
Net Savings = Income – ( Taxes + Expenses )
First, let’s look at the expenses you would typically incur as an international on an H1B or L1 visa.
Cost of Living in the USA on H1B/L1 Visa – Expenses List
The cost of living in the US is a sum of various expenses that you incur for your stay, food, transportation, and many other typical expenses. Below is the list of those expenses and how they can vary.
In the below calculations for the cost of living & expenses, we assume you are living in the US with your spouse. So, it is technically for two adults living in a rented house.
House Rent can vary a lot by the location you live in and the size of the house you rent. If you take a 1 BHK, it is cheaper, but many prefer to take 2 BHK or 3 BHK for convenience. Rent in bigger cities(such as New York, San Jose, San Francisco, etc) for a 2 BHK could be around $2500 to $3500 or more, depending on the house size and other options.
In smaller cities, the rent could be about $1500 or less. These smaller cities or towns are with less population and are might not be in the most happening parts of the state. Also, with inflation at the highest in the US since 2021 due to the pandemic, the rents have gone slightly higher, so you need to factor in more.
The car monthly payment, also called every month installment (EMI), can vary by the type of car you buy like the economy, regular, or luxury category car. Let’s say you buy something that is not of luxuries like BMW or Mercedes and something like Honda or Ford that is a normal car, then you can end up paying anywhere from $300 to $600 USD. This can be higher if you go for a high-end car.
Car insurance monthly payment varies by the type of car you own and your driving record. If you are a new driver and just got your license in the US, your car insurance would be high. The reason is, it is based on your driving record and history. Also, the place you live has an impact on the car insurance payment. You may pay double or more if you live in big cities. It can vary from $80 to $150 or more.
Car Gas ( Petrol )
The common American English word for Petrol is ‘Gas’. The expense for gas varies by the commuting distance from your office. If your office is a short drive, then you may pay like $100 or $150 per month. If you commute in high-traffic cities, this can be as much as $250 USD or more. Also, now with the tight supply of oil globally with the var, the prices of gas are crazy and can go up to $350 or more.
Mobile phone plans vary by the type of plan you take if you have multiple lines on the plan. Also, in recent years, the focus is more on data and unlimited data. Let’s say you go with something like Verizon Unlimited, you may end up paying anywhere from $60 to $90 USD per month per phone line. If you have a landline, you may pay a little for that too.
The amount you spend on groceries, like vegetables, milk, snacks, and other cooking-related stuff, depends on how much you cook vs. how much you eat out. If you are a foreigner on H1B or L1 Visa, odds are you may cook more at home. Also, the cost of groceries maybe even more, if you cook your country-specific cuisine like Indian Food. The reason is, that you would need to buy your home country-specific vegetables like Indian vegetables or Japanese vegetables (very expensive). This can vary anywhere from $300 to $500 per month.
Utilities ( Water, Cooking Gas, Electricity)
The cost of utilities that, include Electricity, Cooking Gas, and Water, varies by the place you live in. For electricity, if you live in a warm place like Houston, you spend more on Air conditioning, but if you live in a cold place like Wisconsin, you spend more money on heating. So, it totally varies by the city you live in. In some cities, the apartment rental includes the heat as well, in such cases, the utilities bill could be less. On average, it can vary anywhere from $200 to $300 USD per month. You can check the Average Monthly Utility Cost by US state
Calling your home country was a big expense during 2004, but over the last 15 years, things have changed and most of the times, you use WhatsApp or FaceTime for the same. At the worst, you may use Google Voice or some service occasionally. It should not cost you more than $15 to $20 USD per month if you take a dedicated monthly subscription.
Eat Out at Restaurants
Your expense for dining out varies by your food habits. Assuming you take a lunch box to office and cook home often, this bill would be less. You may end up spending maybe $150 to $200 for eating out. Again, this is assuming you are not going to fine dining restaurants and eating at some modest fast food or not-so-expensive restaurants.
Movies, Shopping – Misc Expenses
Your expenses for things like Movies, Shopping ( buying new clothes or items for home ), etc. totally varies by your lifestyle and the kind of things you prefer to buy. If you are into buying expensive clothes & branded items, you may get a fat bill for this item. If you are conservative and watch out for your expenses for these miscellaneous items, you can limit your expenses anywhere from $150 to $200 per month.
Health insurance is an optional expense. Most of the time, good companies pay for health insurance and this may not be your expense. But, you may need to factor in this item, if you are paying from your pocket. This totally varies by the plan, age, etc. So, we can ignore this in our calculations, but keep in mind that.
Now that you looked at all the expenses and how they can vary, let’s summarize them in a table and add them up. For the below computation, we are taking expenses in the mid-range assuming you are living a conservative lifestyle and not living a luxury life.
|Expense Description||Cost in USD ($)|
|House Rent – 2 BHK ( average in a small town/ city.|
If you are in NY, CA, rent can be up to $3,000 or more.
|Movies, shopping, other misc. expenses||200|
You can even save more or spend more based on your lifestyle. I have not included any expenses related to your travel, buying clothes, other home setup things like Sofas, dining tables, chairs, etc. Also, if you have kids, you will encounter some more expenses, which are not included in above.
Taxes you pay in the US as H1B or L1 Visa holder
Taxes are a big part of your overall salary, you would end up paying anywhere around 35% as well depending on the state you live in and your status as single or married.
For example, If you make about $60,000 USD per year in the USA, which is $5000 per month (Gross Salary). For instance, if you live in a state like Wisconsin, your take-home Net Salary would be $3,600 per month ( approximate).
See below from an actual Payslip from Wisconsin state for someone making $5000 per month.
You can use something like ADP Pay Check Calculator to get an idea of the Net Income that you will get after paying taxes. You can enter approximate numbers to get an idea. You can also read Taxes for Non-immigrant Visa Holders in the USA to understand more.
Now that we know the Taxes and Expenses, let’s look at the savings.
How much can you save – Approximate Savings?
Assuming your salary is about $60,000 per year or $5,000 per month ( for sake of simplicity), below is how the savings would look like in a state like Wisconsin(WI).
|Gross Salary ( Per month)||$5,000|
|Net Salary ( after taxes, per month)||$3,600|
Now, if you make about $120,000 per year or $10,000 per month ( for sake of simplicity), below is how much you can save in the state like Wisconsin. The tax slabs change with higher income, so even if your salary doubles, you would not get the entire money in your hand.
|Gross Salary ( Per month)||$10,000|
|Net Salary ( after taxes, per month)||$6,809|
All the above numbers are highly indicative and can vary based on state. Also, the take-home or net salary varies by state with state taxes. The above numbers are very low.
How to estimate the cost of living for a City or State?
If you look at the expenses list we reviewed above, there are two key things that drive most of the monthly expenses. The first one is home rent and the second one is taxes that you pay in the state. Other expenses are pretty much similar or can vary slightly, but not much though. Below are the two costs you need to have handy to estimate your cost of living in a city or state
- Rental Expense – How much is the average rent in a city
- Taxes – How much are the state related taxes
It is important that you understand the baseline savings that you can make when you work on H1B Visa or L1 visa. Some companies pay less, some pay more. We have given tabulation of the same for $60,000 USD per year vs $120,000 USD per year in a state like Wisconsin. As you can see, you can save anywhere from close to $1000 USD for lower salary and about $4,100 if you make higher salary.
Just looking at your salary of $60,000 USD or $120,000 USD per year, without considering taxes and your expenses, will give you wrong perceptions about savings and your financial planning. So, think about all the expenses and then
Did I miss any expenses? How are your expenses living in the US? Share your thoughts in the comments section below.
You can also read Cost of living in USA as Student on F1 Visa