One of the concerns we face as graduate students, postdoctoral fellows and research scientists in academia is that the salary is pretty low (to put it mildly). Compared to our peers in other fields, we consistently make about $20,000-$60,000 less.
It’s pretty obvious that this trend will not change anytime soon. This low income is one of the driving forces behind the fear and frustration we feel as postdocs. I felt this way for a long time. I have consumer debt and student loans from undergrad that at this rate I may pay off during my retirement if i’m lucky. For international scientists, this may not be the case. You might be debt free, but you may have kids and family obligations back home.
So I needed a plan. Something that wasn’t overwhelming or difficult to understand. I like my science complex and my investment planning simple. I simply started by listening to Dave Ramsey podcasts for motivation. Dave Ramsey recommends “7 baby steps” to guide you on the wealth building journey. I have broken them down below and included some of my own:
1. Set Goals
Goals are generally a good idea for anything. So start by setting a goal or a series of goals that you would like to accomplish. Make them attainable. Some examples are:
* Make a list of all your monthly expenses by the end of the week
* Save up $1000 in 5 months
* Pay off consumer debt in 12-18 months
2. Live within your means
It’s easy to charge things to credit cards and pay the minimum every month. However, the interest rate adds up and could add up to major bucks over time. So if you can’t afford to pay cash for it, consider saving up for it and reconsider whether you really need it or not.
3. Make & follow a zero-based budget
On the Dave Ramsey train again, he recommends following a zero-based budget. Towards the end of the month, list all your monthly expenses and subtract it from your income, and see how much you have left over. The idea is this:
Income (after taxes) – Expenses = 0
If you assign an amount to every dollar from you income at the beginning of the month, you ensure that all your expenses are taken care of and you don’t owe outstanding balances that can accumulate late fees. Track your expenses to make sure you are not over spending in one category or another. For convenience, check out the everydollar budget! There are several budget apps but for me, this one is easy to use and free as well!
4. Build up a starter emergency fund
One of the culprits for me racking up consumer debt was not having a budget and and emergency fund. A starter emergency fund when you are trying to get out of debt is critical. If you have an emergency fund (Dave recommends no more than $1000), you will feel more confident about putting all your extra income towards debt. For international students, you may feel more comfortable with an emergency fund that allows for the purchase of a last minute ticket to fly back home IF the need arises. The main thing to remember is that THIS IS FOR EMERGENCIES ONLY! Not for going out to dinner, buying groceries or buying gas.
5. Pay off consumer debt
Once you have your budget and your $1000 emergency fund, list all your debts from smallest to largest. Make minimum payments on all the debts except the smallest one. Any extra income after all your expenses have been made should be thrown at the smallest debt until it is paid off. Once the smallest debt is paid off, you move to the 2nd smallest debt and add the extra income you will free up from that first smallest debt. This is called the debt snowball. Once you pay off all your debt (except your mortgage if you have one), you are ready to move on to the next step.
If you have no extra money and can only pay the minimum on the smallest debt, look through your budget to see where you can free up some income. In my next post, I will have ideas on how to earn extra income. I will also cover steps 6 – 10 on how to retire a millionaire on a postdoc salary.
Thanks for reading!! Please come back tomorrow for part 2.
These are steps 1-5. Tomorrow, I will continue with steps 6-10!!