How To: Building financial stability and grow your money

Disclaimer: I’m not a certified financial adviser and by no means should this article be construed as financial advice and should not be relied upon in making or refraining from making, any decision.

As a graduate student in the US, one of the things I learned first hand was the difficulty in building a strong financial foundation. As a Ph.D. student, your mind tends to be occupied by your coursework, research, publications, experiments etc. You must not forget that the real world is still out there, Slowly moving forward :). Most of your friends by this time have high-paying jobs, some have started their own businesses and there you are, toiling away at your next research paper, working at minimum wage and unable to afford that vacation you to Vegas you so deserved after your prelims!

My advice in one sentence: please start saving early.

It is never too early to start saving. There are a variety of methods you can use to save and grow your money. One thing my dad always taught me was that in life, you cannot rely on one source of income. You must find creative ways to make your money grow and generate additional sources of income. So here are a few tools that I have come across which are by no means exhaustive. You should treat these as a starting point for doing your own investment research.

  1. Credit cards and credit scores: Use your Credit Card to pay your utilities and recurring bills. Pay off your balances for each cycle, this will boost your credit score and by the time you graduate and get a job you can be guaranteed an excellent interest on a loan for that sexy new car or a mortgage on a new house. DO NOT just pay your minimum balance and shrug it off. Credit cards have extremely high interest rates, by not paying these off you are losing a lot of money by paying interest at a later date, also your credit score crashes and nobody will give you a car loan or home loan at a decent rate.
  2. Money Market Accounts: Barclays online bank allows you to quickly setup an online money market savings account with a 1.15% APR. This is higher than the typical savings account, for example a chase savings account only gives you 0.01% APY.Make it a habit to move a fixed amount each month into savings and don’t dip into this money unless there’s an emergency or a big important purchase (even $100 a month adds up). More on money market accounts here. A comparison of products available out there.
  3. Certificate of Deposit (CD): Again Barclays bank has great options for online CDs. A CD is a deposit that gets locked in for a set period, e.g., 12 months and earns you a higher rate of interest than a savings account. Last I checked Barclays offers 1.4% APY (Annual percentage yield) on a 12 month CD, see details here.
  4. IRA (W-2 and SSN required): If you plan on staying in the United States till retirement, In suggest you start an Individual Retirements Account (IRA).  There are 2 kinds of IRA, Roth and Traditional, here is a nice article that explains the difference, Roth IRAs are not taxable at the time of retirement, but you cannot deduct your contributions for purpose of tax savings in the short term. You can put in up to $5500 in an IRA each year and invest this money in mutual funds or index funds amongst other things. Investing in Index funds seems to be a more reliable bet, here’s why. For example Fidelity has FSTMX has FUSEX which both have a low fees and good returns. Check out this IRA retirements savings calculator to see how much your money can grow by the time you retire. Fidelity and Vanguard both allow you easy online setup. Fidelity allows foreign students to open these accounts as well.
  5. Stocks: I have used the Robinhood app to invest in the stock market. While stocks are risky, historically the stock markets have also yield the highest return, read The Intelligent Investor by Benjamin Graham. Simple strategy, invest when the market dips and hold onto shares for a long long time. You certainly don’t have the time to track the stock market daily and buy sell shares each day. Buy low, hold and sell high years/decades later, its surprising how many people forget this basic concept.
  6. Bonds: My knowledge of bonds is limited as I’ve never invested in them, but here’s an article.

Investopedia has a bunch of great articles and explains financial terms pretty well. Once you graduate and earn real money, you can use your employer 401K to grow your retirement savings, investing in real estate early is also a good idea. A 529 plan can help you save for your future child’s college education if you do plan on having kids. A lot of people are saying there’s a crash coming due to the insane amounts of credit card debt in this country. If you’re smart you will have enough in your savings account to buy property at really low rates. A lot of people made a lot of money in the 2008 crash by buying land at dirt cheap prices and selling it off 6-7 years later.

Finally, remember that you should NOT rely upon the information or opinions you read. Rather, you should use what you read here as starting points for doing independent research on investing techniques. You are responsible for your own investment decisions.

Disclaimer: I’m not a certified financial adviser and by no means should this article be construed as financial advice and should not be relied upon in making or refraining from making, any decision.

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