What I wish I knew about money when I was in graduate school

Summary

This video emphasizes the importance of a balanced life for researchers, particularly those pursuing a PhD. It explores the financial realities of graduate school, offering insights on how to manage spending, invest wisely, and understand concepts like geographic arbitrage to reduce living costs. The speaker highlights the value of skill development, pursuing business or legal education, and seeking out opportunities like angel investing or working with startups. Ultimately, the video encourages researchers to make thoughtful, long-term financial decisions to achieve both professional success and financial security.

Takeaways

• 😀 Manage your finances by saving more than you spend and taking advantage of compound interest.
• 😀 Being financially successful with a PhD requires long-term planning, earning a professional salary, and being patient as wealth accumulates over time.
• 😀 Geographic arbitrage can significantly reduce living expenses by moving to lower-cost areas after graduation, even if salaries are adjusted for cost of living.
• 😀 Start investing early, even on a small scale, by using low-fee index funds, stocks, or bonds, to get experience and grow your wealth over time.
• 😀 Non-depreciating assets like vintage items or collectibles can be a good alternative to buying depreciating assets such as new electronics or cars.
• 😀 Develop marketable skills outside of your academic training (e.g., mini MBA courses) to increase your earning potential after graduation.
• 😀 Building a professional network during grad school can open doors to consulting opportunities or high-paying positions in startups, possibly with stock options.
• 😀 Consider additional professional training, such as an MBA or JD, to combine scientific expertise with business or legal knowledge for a more lucrative career.
• 😀 Passive income can be generated through investments, royalties from books or patents, or owning educational content, allowing you to earn without constant active effort.
• 😀 Avoid spending money on depreciating assets like new cars or expensive gadgets; focus on reducing living costs and making smart, long-term investments instead.

Q & A

Why is it important for people in research careers to live a good life outside the lab?

The speaker emphasizes that research professionals often earn little money during the early stages of their careers, especially in graduate school and postdoctoral positions. It's important to manage life outside the lab to maintain overall well-being and avoid burnout, as the financial sacrifices in the early career stages can be tough.

What is the speaker's main strategy for getting rich with a PhD?

The speaker suggests two key strategies for accumulating wealth with a PhD: first, earning a professional salary over the course of a career, and second, becoming older, as wealth often grows through decades of careful financial management and prudent investments.

How does the speaker explain the concept of 'geographic arbitrage'?

Geographic arbitrage involves moving to a region with a lower cost of living to keep expenses down. This is especially relevant for PhD graduates who often start with lower salaries. By relocating to a more affordable area, they can enjoy a better quality of life without spending a large percentage of their income on housing and other fixed costs.

What are some benefits of geographic arbitrage beyond financial savings?

In addition to financial savings, geographic arbitrage offers benefits such as less traffic, shorter commutes, more green space, and a lower stress environment. Certain areas also tend to be more resistant to the effects of climate change, providing additional long-term security.

What are some financial principles the speaker recommends for managing money during graduate school?

The speaker recommends saving more than you spend, taking advantage of compounding interest, and investing in appreciating assets such as stocks, bonds, and real estate. Additionally, understanding the difference between money (for goods and services) and capital (assets that generate wealth) is important.

What does the speaker mean by 'capital' and how does it relate to wealth-building?

Capital refers to assets or resources that can generate wealth, including intellectual capital (skills and knowledge), social capital (networks and relationships), and financial capital (investments). Managing and growing these forms of capital is crucial for long-term financial security.

What kind of experiences does the speaker suggest for PhD students to gain financial knowledge?

The speaker recommends that PhD students start gaining experience in financial markets even with modest savings. By investing in low-cost options like index funds or other appreciating assets, they can develop a better understanding of how markets move, even if they cannot make large investments early on.

How can PhD students and postdocs increase their earning potential after graduation?

PhD students can increase their earning potential by acquiring additional skills outside of their academic work. Taking programs like mini MBA courses or gaining proficiency in tools like Python can make them more marketable for higher-paying jobs. Developing business and entrepreneurial skills can also open up opportunities.

What are some ways PhD graduates can create passive income?

PhD graduates can create passive income through investments in real estate, index funds, or even creating intellectual property such as books or educational content. These forms of income generate money without requiring constant effort, allowing time for other ventures.

What role do relationships and networks play in the financial success of PhDs?

Building strong relationships and networks is essential for PhDs, as these connections can lead to consulting opportunities, employment at high-growth startups, or even access to stock options in successful ventures. Networking within the academic and professional world can provide valuable opportunities that help increase wealth.