She Strengthens

The Hidden Financial Reality of Pursuing a PhD

When I completed my PhD program last month, I realized that my motivation for pursuing it wasn’t entirely driven by a passion for the field or a desire to become a professor. The truth is, I initially applied to the program for financial reasons. During the 2009 recession, I struggled to find a job, and I knew that PhD programs often provided students with a guaranteed living stipend. It seemed like a secure, albeit not lucrative, employment option for the next few years.

Assessing the Financial Aspects of Grad School

While my PhD program offered some financial benefits, such as a decent living stipend and free health insurance, it also had its drawbacks. The stipend was relatively low, and it disappeared temporarily due to circumstances beyond my control. Moreover, PhD stipends typically don’t include a retirement plan, which means that students are not encouraged or required to set aside a portion of their paycheck for retirement. This lack of retirement planning can have significant long-term consequences.

The Opportunity Cost of Not Saving for Retirement

During my five and a half years in the program, I didn’t take advantage of contributing to a Roth IRA, despite knowing that I could. I could have set aside a portion of my post-tax paycheck each month, but I didn’t. In retrospect, this decision seems shortsighted. If I had contributed just $50 or $100 per month, I would have ended up with thousands of dollars in my Roth IRA, which would have grown significantly over the next few decades.

The Psychology of Not Saving

So, why didn’t I save for retirement? I think it’s because I fell into black-and-white thinking. When you’re not making a lot of money, it’s easy to think that you can’t save anything, so you might as well not save at all. This mindset is similar to saying, “I’ve already had three cookies, so I might as well finish off the plate.” It’s a flawed approach that can lead to missed opportunities.

The Importance of Saving for Retirement

If you’re a grad student, it’s essential to prioritize saving for retirement, even if it seems like a small amount. No one will open a retirement account for you, so you need to take charge of your financial future. By setting aside a small portion of your paycheck each month, you can make a significant difference in the long run. Remember, every little bit counts, and it’s better to start early than to wait until later.

A Call to Action

Don’t fall into the trap of black-and-white thinking when it comes to saving for retirement. Take control of your finances, and make saving a priority. You might need to make some lifestyle adjustments, such as cooking at home instead of getting takeout or borrowing DVDs from the library instead of going to the movies. But trust me, it’s worth it. By starting early and being consistent, you can set yourself up for long-term financial success.