A Third World Perspective on America

Third World Perspective on America

Hello folks! I have a special guest for you today, Stefan from The Millennial Budget is here to share a few thoughts. If you haven’t checked out his blog before, I recommend stopping by. He’s a sharp kid, demonstrated by having recently completed his MBA and now employed at one of the Big 4 accounting firms here in the US. He started his blog to help the millennial generation improve their financial aptitude. Having come from a third world country, I invited him over today to share his perspective on America. Take it away, Stefan…

A Third World Perspective on America

Having grown up my entire life on the Caribbean island of Trinidad & Tobago, I knew I wanted a change. I represented my country on the National Swim Team for several years and I knew this would be my ticket to securing an athletic scholarship to study abroad. I attended a Canadian High School and when applying to universities I realized that Canadian schools do not offer academic scholarships. Luckily, American schools do. This led to me accepting an academic and athletic scholarship at a small private university where I studied accounting and business management. I later went on to get my MBA. During these five years I learned a lot about the American culture and the opportunity to develop a substantial net worth.

Unfortunately, while I see an opportunity to build wealth I also see a lot of people wasting this opportunity. Some of the factors I believe are a cause for this are lack of knowledge, consumerism, complacency and minimal ambition.

Let’s delve into some of these topics where I will share my third world perspective and a little about my country.

Wages

Comparing wages between a developing and developed country is almost like comparing apples to oranges. While I can certainly argue that the federal minimum wage in America is $5 higher than that of Trinidad or the average salary is almost double, those assumptions simply would not be fair.

The easiest way to give you an idea of the difference in earning power is to use a personal example. During college I worked every single summer. I worked at the same company three out of the four summers as an intern, twice in Trinidad and once in America. In Trinidad, I earned roughly $2.50 per hour at this company. When I worked in the US I earned $27.50. Now I must admit, the experience was more valuable than salary for me when I worked in Trinidad as that is what ultimately got me a job in the US. Despite this fact, the reality that I earned $25 more an hour in the US is absolutely mind-blowing. However, these are just internship rates so let’s compare actual starting salaries.

Working the same job at home I would have a starting salary of roughly $1,400. I think I am being generous here to be honest. Compare this to America and I will earn more than three time as much. This is the reason I want to work and live in the US. I honestly love Trinidad but the earnings potential is mediocre compared to the US.

Access to Equity and Debt

As many people know, over 50% of Americans do not invest. This drives me crazy! Americans have access to liquid markets on a daily basis. They have access to thousands of equities and debt vehicles which can exponentially increase their wealth. Trinidad on the other hand has a very small equity market that has very low trading volume.

I think this is best illustrated with another example. I began investing during my sophomore year of college. My dad informed me about an upcoming IPO and told me to save as much of my salary as possible to invest into the IPO. I really had no idea what I was doing but of course I listened to my dad. Luckily, I invested in the IPO and doubled my money. Not bad for my first investment!

Here is the good part. Trinidad is so small, only 1.3 million people, that you pretty much know how most people are thinking and behaving. When everybody is going to purchase a stock (I was working in a bank so I knew what people were doing with their money) it was easy to realize that demand would be greater than supply. Thus the price of the stock would be expected to rise. However, when I wanted to sell my stock I had to go through a broker. We do not have apps or instant access to the markets like here in America. It took multiple days to sell my stock.

Compare this to how investing is in America. I can buy and sell stocks almost instantaneously. The markets are far more liquid as there is more buying and selling activity by major players. Prices fluctuate on a daily basis and have historically returned 8% over the long run. If I compare this to the stock I doubled my money on, it has traded sideways for almost a year after the initial jump in value after the IPO.

While we have access to purchasing international stocks in Trinidad, the trading cost are substantial. The only way to make this viable would be a large lump sum payment.

Spending Habits

This is where the comparison and difference in culture is interesting. We have established that America has higher wages and access to capital and debt markets to increase wealth quicker. Where things are substantially different, and beneficial from a third world perspective, is our spending habits. On an island there really is not much diversity in things to do. All we do is fete (French for party), hang out with friends, explore nature and pretty much live a beach life. We do not have fancy shopping malls, amusement parks or any other entertainment sources that are the norm in America.

Consumerism is the downfall of people’s net worth. At least in my opinion. When I first came for university I realized that people enjoyed shopping, a lot! Going to the mall seemed to be a weekly excursion because there was nothing else to do. Eating out was almost a daily thing during college and my internship this past summer. This is where Americans destroy their net worth. Of course there are other factors but it is ultimately up to one’s spending habits to determine their wealth…not their income. Now don’t get me wrong. I am not saying developing nations have better spending habits, because we certainly do not. What I am trying to say is that with the insane wealth and access to ways to build wealth, Americans are nowhere near as prosperous as they can be.

Cost of Living

To briefly touch on this topic I think the cost of living in Trinidad is comparable if not higher than that of the US, in general. Many products are far cheaper in the US because of competitive markets as opposed to our small nation. One reason somebody can argue cost of living is cheaper in Trinidad is that our gas is subsidized heavily and almost everybody lives with their parents until marriage and get their education right through tertiary level paid for by their parents. For the average person though I would argue that cost of living would have minimal impact on this comparison.

Final Thoughts

I hope I was able to give you a different perspective on how I view wealth in America. While I did not touch on topics such as 401(k)’s, IRA, credit card rewards and a plethora of other topics, I think this post has already gone far too long!

I came to the US from a developing country because I believe this is still the land of opportunity. The resources are there for everybody to become wealthy. However, it is one’s actions that will ultimately determine their wealth. I understand that not everybody cares about money the way I do but it is disheartening when people complain about money in such a wealthy country, especially when so many people spend all their money on pleasing the status quo, as I like to refer to it. For those that read Green Swan’s blog you are most certainly on the right path. Knowledge is the first step towards improving your financial situation.

If you enjoyed this topic please let me know so I can write more articles about it.

What information surprised you? What are your thoughts on the comparison?

Stefan

The Millennial Budget

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40 Comments

  1. Thanks for sharing your perspective Stefan! I think that people in the U.S. do not realize how good they have it. If they can’t build their wealth here, where could they? Too much herd mentality and keeping up with the proverbial Joneses to put any thought into wealth creation for most.

      1. You are really right about the popularity contest part – and that’s tough on adults but really tough on teens too. My son has an Iphone 5 but most of his friends have the newest Iphone already. They also driver newer cars. I think he understands (he wants to study finance in college) but it still isn’t easy. Nice post Stefan!

  2. Really good perspective.

    Here is another interesting piece of information – It is sobering to think that the average salary in the US would put that number in the top 1% of wealthiest globally.

    I had the opportunity to spend some significant time in India through work over a 3 year period and trust me, walking through the streets of Mumbai, Bangalore and Hyderabad pulls at the heart strings.

    We have it so good here in the US despite what ANY politician would say…..

    1. I was actually going to put that info in there but it slipped my mind once I began writing! I do not think people understand the true wealth this country has. Anywhere in India will pull heart strings, the conditions there are terrible but they still get by somehow. That is where the help is really needed!

  3. Great insight from someone who sees America through a different lens. While I have lived most of my life in the US, I have lived overseas, traveled extensively, and make a point to follow news from outside the US … which has the impact of changing perspectives.

    1. Thanks James! I believe everybody needs to travel outside their country and experience another culture. In general, many Americans believe that travel can be done only in their country. While the cultures is different it is nothing compared to flying out to the East for example.

    2. Absolutely. Not many people bother or care to have a more worldly view, but I think there are a lot of benefits to having a broader perspective like yourself. Thanks for the comment, James.

  4. Thanks Stefan!

    I must say I was expecting the cost of living to at least put numbers a little closer, I guess that is an assumption I shouldn’t make moving forward.

    It’s interesting reading about other countries access to capital, something I definitely have taken for granted – thanks for putting it into perspective

    1. In general I would say your assumption is correct but we are a developing nation that is oil rich so in general everything is better than the typical third world country. However, even though cost are high salaries are not and the gap between rich and poor is far more prevalent than here in America.

  5. Thank you so much for your perspective, Stefan! I do think many of us have an opportunity in the U.S. to build wealth and freedom, but we are wasting it. And, consumerism is so ingrained in our culture, I don’t think we tend to recognize it as a barrier, but more as a fact of life. But that’s why we have so many brilliant personal finance blogs out there sharing a different perspective and educating people! 🙂

    1. You are right there are a lot of us out there trying to bring awareness to this! I think with the wealth in the country consumerism is bound to happen but if it were done in moderation the wealth of the average individual would be crazy. Retirement age certainly would not be 65…

  6. I know very little about Trinidad, so this was awesome!

    That’s crazy that the cost of living in Trinidad is comparable to the U.S. Typically when you see lower spending power in third-world countries, you see lower costs of living.

    I think Americans really forget how good we have it. It’s easy to get caught up in a consumer culture, particularly if you’re raised in it and that’s all you know. Independence is about fighting against these cultural norms in favor of a simpler, frugal lifestyle to escape the rat race.

    1. Many of the Caribbean islands actually have very high cost of living, compared to other third world nations. Escaping the rat race here is pretty easy but consumerism draws it out. Either way, I would much rather work and live here due to the opportunities and because it is more fun. Hard to relax in the US though!

  7. These are great points. America is one of the countries that not only welcomes immigrants but wants to see them flourish. That’s not the case in all countries! In the ERN family, we are also immigrants (first time we reveal that!!!). We both came to the U.S. at a young age and this country offered the opportunities we were looking for. Very sad to see that some Americans don’t make more of this.

    1. Would love to learn more about where you came from! I am glad there are many comments on here that see the opportunity in this country. The media and recent political campaigns make this place sound so awful but it is so much better than 90% of the world!

  8. This is a great perspective. It’s crazy that salaries are so much lower than the US but cost of living almost the same. It’s so true that breaking the keeping up with Joneses mentality and hyperconsumerism offers a good chance to build wealth that over 90% of the world don’t have.

    Another crazy fact is that I saw the movie “Happy” and it was pointed out that the average American wasn’t any happier than someone in a third world country living in a slum!

    1. I think once you get used to a certain standard you accept it more or less. Once you accept that standard you will always complain but from my perspective Americans place high value on material items while those in the slums are happy to just live. I need to go and watch that movie! I would highly recommend you watch the Netflix documentary Living on One Dollar

  9. I met a guy from T&T last summer in Iowa. He was volunteering for a political campaign. He was super impressed I knew where he was from, but I didn’t want to tell him the only reason was because they made it into the World Cup one year lol. I knew you were from the Caribbean, but I didn’t know you were from there specifically. Excellent post. I like travel for just that reason- you become aware of how fortunate you really are.

  10. Canadian universities do offer academic scholarships (i.e.: http://www.future.utoronto.ca/finances/scholarships). They don’t offer sports scholarships, however. Unless I misread what you mean by academic scholarships?

    In fact, many smart Americans who pay out of pocket often take advantage of going to a world class school (such as U of T) where they get an Ivy league-style education for much less than they would in the US (and hey, I got to make some great friends!).

    1. Actually you are 100% right Tucker I meant to say athletic! Academic scholarships are also very very minimal so either way the cost of education would have been far higher. I had a lot of friends go to Canada though and you are right that U of T and other schools give the same great education at cheaper cost. Some Ivy league schools give free tuition based on income though so that may make it cheaper.

  11. Purchasing power parity shows your pretty spot on in terms of costs. Trinidad and Tobago has a price of about 0.82 to a typical 1 dollar US basket of goods. So your 2.50 was the equivalent of 3 dollars an hour US. All of the western country residents essentially won the lottery by being born there.

  12. Awesome perspective Stefan. That’s incredibly sobering to hear that it takes multiple days to sell a share of stock. I don’t think we, as Americans, really realize how efficient our capital markets really are. Thanks for sharing!!!

  13. I didn’t know that Canada doesn’t have academic scholarships. It would be interesting to research more into which types of scholarships are available. Here, you can find the most random qualifications but there are tons of options if you’re willing to put in some effort.
    The other differences were enlightening though not all that surprising. Good for you for making the best of every opportunity!

  14. Excellent points across the board. I moved from France to Japan, then to the US, and even compared to other developed countries I am regularly amazed at the amount of wealth, and, sadly, the amount of waste in the US. All countries have similar issues of course, but the scale in the US is just vastly different. People who do things correctly in the US can make 3 or 4 times the amount they’d make in France or Japan for the same job, while still paying less for every day staples, tax, etc…

    I totally agree with hoe the competitive market here means you can buy almost everything at a very good price if you want to. But you can also be lured into paying 10 times for a product with similar features/returns if you do not pay attention (*cough* iphone *cough*).

    Not paying attention to price in the US probably won’t ruin people’s lives because they can make so much, but as Stefan points out it’s just sad to see that many people could be in a much, much better financial position given all the opportunities in the US

    1. Competitive markets are huge. There are some premium products out there such as the iPhone where this does not matter but overall food, clothes etc is cheaper. Heck even the tax rate is lower here. We have flat tax of 25% which is far lower than the average in the US so people really have it good here.

  15. Nice post, thanks. Similar thoughts come to my mind looking at the wealth level and spending habits of most my fellow Dutchies. If they would only come to realize what they are doing to themselves…

  16. Thanks for the post, Stefan! I enjoyed the perspective and comparing it to my own from a lower-middle class American upbringing. Seems surprisingly similar! Particularly relatable is the part where you say it drives you crazy that over 50% of Americans do not invest – I am constantly bothered by my young 20-40 year old friends who seem to look at investing as something they are inherently and permanently unqualified to do. It is SO EASY, especially with all the technology behind our stock market now, and it’s SO BAD not to do it when you have the chance! It’s truly the central “privilege” we have being in this country!

  17. Super interesting, Stefan! Would have assumed that lower wages meant lower cost of living, but I guess on an island that’s not really true! Will have to do some introspection to make sure I’m acting in gratitude of all our opportunity.

  18. It is incredible, isn’t it Stefan. So many people have the opportunity to do something amazing and yet don’t. A shame.

    I think a lot of it comes down to desire, if you desire to make a difference in your life then more often than not, you will.

    Tristan

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