I don’t wanna grow up, Part I: Finance
Actually, I used to be a Toys ‘R’ Us kid, too. Anyway, as my last summer vacation for a long time trickles away, I realized that I really am growing up and getting old after I received this in the mail:
Yes, it was my first snail mail solicitation from The Stanford Fund, my alma mater’s vehicle for alumni donations. (See the appendices at the bottom of this post.)
I figure that I must be getting old if my university figures that it’s trained me so well to cough up money regularly that even after I’ve graduated all they have to do is ask for it and I’d whip out my checkbook out of sheer habit. They inform me that for a gift of $100 or more I can join the ‘Leadership Circle.’ This would allow me to receive even more mailed solicitations as well as invitations solicitatory events.
Ok. ‘Solicitatory’ isn’t really a word. But when you’re a member of the Leadership Circle, who’s going to know?
Well, I guess it doesn’t work that way. And for now, The Stanford Fund will have to do without my donations. Don’t get me wrong, I’ve benefitted greatly from the opportunities I’ve had in college and am very grateful and eager to give back. Especially if I could give back by doing excellent research as a post-doc or, perhaps, a tenured professor. However, as I’ve had to inform my student loan financers, I didn’t jump on the investment banking bus to riches with the rest of my colleages and am, in fact, still poor and in school.
By the way, a quick bit of grad student economics: federally subsidized Stafford loans are interest free as long as you’re a student. That means that if you’ve been judicious and have saved enough to pay off your loans immediately, putting your savings in a long term certificate of deposit at aroudn 5% APY will end up paying for the loan in around 14 years. May they have mercy on our soul if it takes that long to graduate, but you get the point.
So, as one may note, I have been spending some of the summer trying to figure out my finances now that I’ve gotten an undergraduate degree and have little to show for it compared to my friends who have gone off to become rich. I’ve been partially inspired by former Marshall scholar Courtney, who does theoretical physics, as well as Stanford grad Ramit Sethi who has been doing pretty well convincing young people to think seriously about their finances.
A lot of my motivation, however, comes from my summer at Berkeley where it really hit me that:
- It’d be nice to have some cash to splurge once in a while on neat restaurants, hobbies, and your own copies of books that you can scribble on.
- It’s hard to make money as a physicist.
- It’s expensive to live on your own.
For two years I get a bit of a reprieve as I’m on a scholarship to study in the UK, but I’ve been advised to look into part-time employment to supplement my stipend if I intend to do take advantage of my time in Europe. (This, incidentally, touches on the upcoming Part II of this post, which deals with sociability.)
So, with an understanding that social security probably won’t be around when I need it and that I don’t expect to be making much for a long time, this summer I’ve started spending some time getting my financial life in order.
To start with, I signed up for a couple of credit cards. While this may seem counterintuitive if I’m trying to save money, credit card have three useful features:
- They help build credit, which will save lots of money when it comes time to finance a house
- They often have little reward systems (that are quite nice as long as one doesn’t use them as an excuse to spend money)
- Online statements make it easy to track my expenses and stick to a budget
Despite my upcoming trip halfway around the world, I don’t fly much, so I decided to get credit cards that offer cash back. I’ve set it up so that bills are automatically paid out of my checking account so that I don’t get in trouble with missed payments.
Another step that I’ve taken is saving and investing my money more wisely. I noticed last year that the little bit of the money that I’d saved through high school jobs and undergraduate research stipends were sitting in a low interest savings account. I’ve since transferred part of that money into a long term certificate of deposit (money for when I come back to the US for a PhD program) and a Roth IRA retirement account.
The CD is pretty self explanatory, but the retirement account (despite containing the word ‘retirement’ which is inherently boring) is sexy and exciting because I can invest that money into stocks. This is neat because now I can have conversations with fancy-schmancy investment bankers who can afford to contribute to The Stanford Fund right out of college. Though, to be honest, that never really was my crowd. Anyway, the allue of Wall Street is two fold. For one, on average “the market” has outperformed similar investments over the long run. More importantly, I think Wall Street is an interesting system to try to figure out (how much information can you get out of readily available data?). Of course, there is also the potential to lose money, so one must invest carefully.
The point is, however, that time is one’s greatest ally when saving for the future (as well as when making jello). As a recent grad, every bit that I can save/invest now will (thanks to the wonders of compound interest) go much further when I’m 60 than larger savings/investments later. Also, despite relatively humble stipends, I have much more risk tolerance now as a young, single student with no mortgage/insurance/dependants/etc. And so if the market takes a dip, I don’t have to worry too much: just water down that orange juice a little bit more and wait for things to pick up again.
Actually, I wasn’t joking about that, either. I have a habit of watering down my drinks because I’m not much for the taste of the super-sweet semi-natural juices they sell in the supermarket these days. Also, it’s a pain to carry back liquids from the grocery on foot, so it’s nice to try to get it to last a little longer. And besides, every dollar that I save now is worth more than six dollars when I’m sixty. (Well, six dollars in 2066, which might have different purchasing power than six 2006 dollars.)
And who knows, by then I might have enough money left over after purchasing my meds (or whatever 60 year olds do with their savings, heh heh) that I might actually be able to donate to The Stanford Fund. That is, if I have any left over from my donations to the Berkeley Center for Theoretical Physics.
Appendix I: The Stanford Fund
Stanford alumni will kindly note how I capitalized the ‘T’ in The Stanford Fund, a habit any such alumus would recognize as being borne from hand writing many ‘thank you’ letters on behalf of student groups as a way to receive university funding through The Stanford Fund. It’s sort of a sad, pitiful inside joke.
Appendix II: An Anecdote
Last year some poor colleague called me in the middle of thesis-writing on behalf of The Stanford Fund. I was being polite and doing really well until she told me that student donations play a role in determining college rankings, and so it was apparently my obligation to donate to ‘uphold’ the value of my degree. At that point I lost my temprament and explained to her that I’ve worked my butt off to “uphold the value of my degree” and if that was such a concern to her then maybe she should be calling up and soliciting from the delinquents who take advantage of Stanford as a place to binge drink at parties and otherwise accomplish nothing.
I was probably a little harsh on her, especially since The Stanford Fund has nothing to do with the Graduate School of Business. (Oooh, snap!)
Appendix III: Grad Student Fees (Cal v. Stanford)
Think of this as an addition to my Berkeley versus Stanford series. I noticed that as a Stanford student, many student groups and activities were fully supported by the university. Clubs, rec centers, IM sports leagues, and even a summer seminar that included a cruise to the Galapagos Islands (that one you have to apply for) are, for the most part, fully subsidized. Berkeley students, on the other hand, seem to have to pay dues for everything they do.
This, however, isn’t such a bad thing because of the large difference in tuition between the schools. (In my freshman year I confused a friend’s UCLA tuition bill for the full academic year with my bill for a single quarter. This situation, however, has changed quite a bit in the past few years with only little help from the governator.)
This difference, however, does make a substantial difference for graduate students. Graduate students in the sciences don’t pay for their education. There’d be no hope for us to ever repay student loans if that were the case. Instead, fellowships, research assistantships, or teaching assistantships cover tutition at a school and provide a separate fixed stipend for students. However, perks such as free student use of rec centers are included in the tuition bill for Stanford grad students, while Berkeley grad students have to pay rec center dues out of their stipend.
One example of personal interest are the Cal and Stanford triathlon teams. Both offer membership at $120 per year, though Stanford’s team has fully funded races while Berkeley’s team is only partially subsidized. This was not, however, as startling as a bigger difference between the two teams: Berkeley’s team has evening swim practice. Hence one can estimate the number of races a typical tri member participates in and calculate the ‘cost’ of not having to wake up godawful early to go swimming. (For what it’s worth, the Cal men’s team won nationals last year.)
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