In this edition of the reader story, Sanjoy shares the financial lessons he learned during and after earning his PhD.
About this series: I am grateful to readers for sharing intimate details about their financial lives for the benefit of readers. Some of the previous editions are linked at the bottom of this article. You can also access the full reader story archive.
Opinions published in reader stories need not represent the views of freefincal or its editors. We must appreciate multiple solutions to the money management puzzle and empathise with diverse views. Articles are typically not checked for grammar unless necessary to convey the right meaning and preserve the tone and emotions of the writers.
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Please note: We welcome such articles from young earners who have just started investing. See, for example, this piece by a 29-year-old: How I track financial goals without worrying about returns. We have also started a new “mutual fund success stories” series. This is the first edition: How mutual funds helped me reach financial independence. Now, over to the reader.
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I have read a lot about the financial education of kids in their 20s and how the savings of this decade become the wealth of future decades. However, that would probably not help a person passionate about doing a master’s and PhD, where most of the 20s are lost in almost no earnings but full of ups and downs of academic life.
Even if we are not entering into the benefit analysis of a PhD degree in the current scenario, and assuming we are 100% passionate about research, let’s talk about money. This is especially important for people from humble family backgrounds when the scholarship is a meaningful support in the family’s finances.
Although I had been selected for JAM (IIT MSc) and IISc (MS-PhD), I chose to join the latter. The assumption was that my brother had already done an MSc in IIT-M and had joined IISc for a PhD. The two brothers will stay near each other, and anyhow, if IITians are joining IISc for PhD, it is logical to go directly there.
However, this logic was merely a consolation to the pragmatism of having the INR 8000 scholarship at IISc, which would mean my father need not provide for another expensive 2-year IIT tour for the younger son. Going to IISc also means a great reduction in GRE expenses and the death of a foreign PhD dream.
Readers, at this point, must be thinking about this utopian first-world problem of a top-rated university student. Here, I need to mention that my brother and I are the first of our families even to enter college, and my father was earning only around INR 2000 in salary and variable around 4000 rupees commission in this period (around 2009). So, going to IIT / IISc was not just for degrees; maybe it would also change our lives.
After joining IISc and receiving tax-free INR 8000 in my account for the first time, I realized I now earn more than my hard-working father in his 50s. Thus, any waste of this amount would be a crime towards my family. However, you don’t need money in a good institute to be happy.
You get great mentors, good friends for life, a lot of discussion and happiness sitting on the grass eating canteen ice cream. Bangalore was booming then, and I also went for one or two trips to high-end restaurants around our campus. Soon, I discovered I was happier getting a Bengali meal on weekends than spending INR 200 on soup. Somehow, the years passed very quickly, with many ups and downs, and I had a good amount of money saved in my father’s account back home.
The only discipline was sending it away from myself as soon as it hit my bank account to my family, keeping a few thousand for my leisure or visiting the Corner House on Bel Road. It is not like life was miserable for me. I had made several trips with my friends to Ooty, Pondicherry and many other places in the most luxurious car trips, but those budgets also came from my monthly savings.
My family also never used my money, kept their lifestyle the same, or lowered it as the two sons were not home. It’s not surprising to anyone, but parents often prefer the most mundane things over luxury. The only thing I realized now, a decade later, how lucky we were not to face any medical emergency. However, at the same time, I also saw batchmates or seniors who came from humble backgrounds but got stuck in a very inflated lifestyle that they couldn’t afford until now.
In the above section, the mentioned “good amount of money” would be insignificant compared to my Techie friends’ 1 year CTC. No one is rich at the end of a PhD. They are just a different personality, for better or worse. However, after I earned my Ph.D., something new happened. You will probably become an international postdoc, and the currency will change.
The INR becomes USR/EUR, and you earn more in a month than in a year of savings during your PhD. Students are utterly unprepared, from not worrying about Income tax on scholarships to becoming an NRI and restrictions on investments (FATCA, etc.) and account maintenance in India (NRE/NRO, PPF, etc.). However, if handled properly, these couple of years can boost your funds for retirement in India beyond imagination.
The main thing to consider now is whether you are returning to India. If you are staying in a foreign land, you need to be extra frugal as you start from zero in this land, not even a parent’s home to take shelter, no trust fund, no 401K. If you are coming back, you can enjoy it a bit, but remember, this is a once-in-a-lifetime opportunity to accelerate the race towards financial freedom. Keep it simple if you are not willing to know about NRIs taxes and tax-filing nitty gritty. When I left for the USA, the USD-INR conversion rate was 64; at return time, it touched 74.
The inactions of a disciplined saver would be more beneficial than the overactions of an uninformed speculator. Focusing on finding a well-paying job in India would be more beneficial than worrying about missing an ongoing NIFTY rally. I have seen people leaving MIT’s top labs within two years to save taxes on J1 visas, moving back to India to an unsatisfactory position and blaming fate. Maybe a longer stay would mean paying taxes on the whole income, but a lifetime opportunity wouldn’t be missed early. The biggest expenses during a foreign stay would be ailing families, international trips back home and interviews, and the unnecessary flat/building in your city where you will probably not get a job.
On return to India, you would have entered your 30s. You would be amazed by the QR code payment systems while buying a Dosa in Bangalore again. You will be confused by the colour of the INR 20 and other bills; counting will be slower. You will also be afraid to cross the roads and traffic. The NRI inside you must perish, but the opened and humbled mindset must flourish. Soon, your feet will touch the ground and get lost among the crowds.
You will have your after-tax pay and be utterly disappointed a month or two later. You will realize you will never make that kind of money again. You must tell your family to repair the old refrigerator and remember, “I am not in America anymore, we have to be considerate”. However, one day in the office, you will hear people talking about investments. You will learn, make horrible mistakes, learn more and keep on learning and smiling at your past rookie self.
At the first retirement party in office, you will learn people are retiring with the amount of money, 50% of which you already have in your pockets, thanks to the brief stay outside and quick learnings. You are not poor because of your PhD; your mind and wallet are strong. Now, you need to wait and be a disciplined learner. You will have another 25 years to retire.
Reader stories published earlier:
As regular readers may know, we publish a personal financial audit each December – this is the 2022 edition: Portfolio Audit 2022: The Annual Review of My Goal-based Investments. We asked regular readers to share how they review their investments and track financial goals.
- First audit: How Suhas tracks his MF investments and reviews financial goals.
- Second audit: How Avadhoot Joshi evaluates his investment portfolio.
- Third audit: How a single mom is on track to financial freedom
- Fourth audit: How Gowtham started goal-based investing & took control of his money
- Fifth audit: Why my financial independence & early retirement plans were postponed by four years
- Sixth audit: How Abhisek funded his marriage & is on track to financial freedom.
- Seventh audit: How Rohit’s early struggles defined his investment journey
- Eighth audit: Why my investments are still on track despite job loss and lower income.
- Ninth audit: How a retirement planning calculation scared me to take action
- Tenth audit: I made several investment mistakes but have turned my life around.
- Eleventh audit: My net worth doubled in the last financial year, thanks to patient investing!
- Update: How I achieved investing nirvana.
- Twelveth audit: My financial journey: from novice to goal-based investor.
- Thirteenth audit: My journey: from a negative net worth to goal-based investing.
- Fourteenth audit: From Fixed Deposits to Goal-based investing in MFs.
- Fifteenth audit: My 10-year financial journey – mistakes made and lessons learnt.
- Sixteenth audit (part 1): How I achieved financial independence without mutual funds or stocks.
- Sixteenth audit (part 2): Lessons from my financial independence journey and future investment plans.
- Seventeenth audit: How I plan to achieve financial independence and move to my native place
- Eighteenth audit: I used the current bull run to reduce my mutual funds from 14 to 4!
- Nineteenth audit: How a conservative investor created his financial plan
- Twentieth audit: I plan to achieve financial independence by 46; this is my master plan
- Twenty-first audit: I have made many investment mistakes but am on course to financial independence by 45.
- Twenty-second audit: I felt worthless six years ago but have achieved financial stability today
- Twenty-third audit: My financial journey was directionless until age 40: this is how I made up for lost time
- Twenty-fourth audit: Why I increased equity MF investments by 275% and reduced PPF contributions.
- Twenty-fifth audit: How I track financial goals without worrying about returns
- Twenty-sixth audit: I am 24 and started investing 1Y ago, but what am I investing for?
- Twenty-seventh audit: How we plan to achieve a retirement corpus 50 times our annual expenses.
- Twenty-eighth audit: I thought equity investing was a gamble, but now I aim to hold 60% equity for retirement
- Twenty-ninth audit: My journey: From 5 lakhs in debt to building a corpus worth six years in retirement
- Thirtieth audit: My investment journey: From random purchases to a goal-based portfolio
- Thirty-first audit: My investment journey: from product-driven to process-driven
- Thirty-second audit: How a young couple is trying to balance travelling and investing
- Thirty-third audit: My journey: From Rs. 30 bank balance to financial independence
- Thirty-fourth audit: Our journey: From scratch to a net worth of 18 times annual expenses.
- Thirty-fifth audit: From a net worth of Rs. 6000 to auto-pilot goal-based investing
- Thirty-sixth audit: How I retired from corporate bondage at 46, two years ago!
- Thirty-seventh audit: How I learnt to keep it simple and build a net worth 19 times my annual expenses
- Thirty-eighth audit: How Abhineeth plans to achieve financial independence and build a house.
- Thirty-ninth audit: How Sahil plans to achieve financial independence by efficient tracking
- Fortieth audit: My Journey to a Ten Crore Portfolio
- Forty-first audit: Burdened with debt for several years, I am now aggressively investing in equity
- Forty-second audit: From Engineer to Librarian after Financial Independence and Early Retirement (FIRE)
- Forty-third audit: I lost six months’ income in F&O and ditched it for systematic investing
- Forty-fourth audit: My retirement plan to handle the harsh realities of the IT industry
- Forty-fifth audit: My investment journey: mistakes, 10 years of MF investing and recovery
- Forty-sixth audit: My MF portfolio is worth six crores despite multiple mistakes
- Forty-seventh audit: Saving, Investing, and Running Marathons: My 25-year Journey to Financial Independence
- Forty-eighth audit: Never Too Late to Start: How I Became Financially Savvy at 40
- Forty-ninth audit: My Investment Journey to a net worth 29 times my annual expenses
- Fiftieth audit: How I audit my portfolio without tracking returns
These published audits have had a compounding effect on readers. If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail. They could be published anonymously if you so desire.
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