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This PhD Government Scientist Is Pursuing Financial Independence: Part 2

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In this episode, Emily interviews Dr. Gov Worker, which is the moniker used by a PhD scientist and FIRE blogger. FIRE stands for Financial Independence and Early Retirement. As a PhD, Gov Worker’s motivation for and path to FIRE are different than most and specific to his high degree of training, and he thinks other PhDs should consider FIRE as well. In this second half of the conversation, Gov Worker shares what his family is doing to achieve FIRE, how being a PhD has affected his FIRE journey, and his financial advice for early-career PhDs.

Further Listening: This PhD Government Scientist Is Pursuing Financial Independence: Part 1

Links mentioned in episode

financial independence government PhD

0:00 Introduction

1:18 Did you make any changes to your lifestyle and spending when you decided to pursue financial independence?

Dr. Gov Worker says that lately he has put more effort into learning and reading. He says that he and his wife are putting money into tax favored accounts like their 401(k) and health savings account. They are prepaying their mortgage.

He suggests one of the best ways to get started is by tracking your finances. He prefers using a manual spreadsheet because writing it down himself is important. He says that through this, they cut out spending that they didn’t really need. He shares that he and his daughters take piano lessons because this is meaningful to them. They are making sure to spend money on what they value. He says to look at what you’re spending and think about how much joy you get out of it. Try cutting it out and seeing if you really need it. If you do find joy from it, add it back in.

5:10 Can you comment about high savings rates in the FIRE community?

Gov Worker says that savings rates can be misleading. He briefly explains the different methods to calculate savings rate. His key message is that you need to save as much as you can and live on as little money as you can and still be happy with your life. He says that their savings rate is not very high because childcare and mortgage are a big portion of their income. He says he hasn’t calculated his savings rate or set a timeline because the numbers are not motivating for him.

9:45 How does being a PhD affect how you think about financial independence?

Gov Worker shares that he was 27 years old when he got his PhD. In the FIRE movement, many people have retired by age 30. But if you get a PhD by age 26 or 27, you are unlikely to retire in your 30s. This delayed start to making an income is common for PhDs. However, Dr. Gov Worker says that being a graduate student helped him learn how to live frugally. He said he was more comfortable keeping his lifestyle lean. When he did get a job, he was making above the median salary.

He goes on to share that PhDs have invested years in obtaining knowledge and becoming experts. There is a different emotional aspect to consider retiring early when you are a PhD compared to someone who works just for money.

13:54 Once you have financial independence, do you think you’ll still use your PhD knowledge?

Gov Worker says that his happiest times have been when he’s on a sabbatical. He likes collaborating with new people and supplying knowledge, without having administrative duties. He says he can see himself travelling to work with a colleague without having to worry about funding.

He shares that when there was a government shutdown for a month early this year, he discovered what he would like to do if he didn’t have to work. He also realized that he had enough money saved to be able to live off of for several years. He says that society minimizes the value of leisure time and he is interested in pursuing what brings him joy.

19:57 Do you think other PhDs should be thinking about FIRE?

Gov Worker thinks everyone should think about financial independence. He says there are many benefits to having a year of living expenses saved up. He says he’s seen people who can’t leave a toxic workplace because they need the paycheck. He says trying to get in better financial shape is for everyone. He says if you want to try to save 75% of your income for early retirement, you should try it. He was happier in his job after he committed to becoming financially independent. He says there are many mental and spiritual benefits to being on this path. He considers financial independence an alternative path to happiness.

22:45 What are the next steps for someone who wants to start on FIRE?

Gov Worker suggests looking into the FIRE community online and reading books about it. He advises continuing to live a graduate student lifestyle in your first job and save as much income as possible. He says to set up a 401(k) before your first paycheck to get the most of your employer match. He says you can consider having roommates and don’t buy into what your peers spend money on.

When you save money, you are buying yourself options or flexibility later on. Dr. Gov Worker says that in graduate school you are expected to be fully devoted to your field. He says if he could have anything in his world, he wishes he had more time to spend with people he loves and doing things he loves.

26:49 Where can people find you online?

Gov Worker says he’d love to interact with anyone interested in learning more about the FIRE movement. His blog is governmentworkerfi.com. He is active on Twitter and his handle is @govworkerfi.

27:20 Conclusion

This PhD Government Scientist Is Pursuing Financial Independence: Part 1

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In this episode, Emily interviews Dr. Gov Worker, which is the moniker used by a PhD scientist and FIRE blogger. FIRE stands for Financial Independence and Early Retirement. As a PhD, Gov Worker’s motivation for and path to FIRE are different than most and specific to his high degree of training, and he thinks other PhDs should consider FIRE as well. In this first half of the conversation, Gov Worker fleshes out the FIRE movement for us, including why the current stereotypes are inaccurate and harmful, discusses what pushed him to pursue FIRE, and details what his family is doing to achieve FIRE.

Further Listening: This PhD Government Scientist Is Pursuing Financial Independence: Part 2

Links mentioned in episode

PhD financial independence 1

0:00 Introduction

1:25 Please Introduce Yourself

Dr. Gov Worker is the moniker for this PhD who is a government researcher. He is sharing his personal views, not the views of the government. He got his PhD in 2009. He lives in a “flyover state” and he’s happily married with three daughters. He started blogging a few months ago because he realized that his perspective is unique in the FIRE movement online. Most people pursuing FIRE and blogging about it are not PhDs and don’t have government jobs. He wanted to write content for people with these financial situations to help them optimize their decisions for pursuing FIRE.

4:22 What is FIRE?

FIRE stands for financial independence, retire early. Financial independence means you have passive income that exceeds your living expenses. Passive income is money that you don’t have to work for. In the FIRE movement, the rule of thumb is if you have 25 times your living expenses saved, you can generate enough returns on your investment to live comfortably by drawing off of 4%. The goal is that you save enough money that you don’t need to work to make money. Your work can be disassociated from an income. Early retirement is not necessarily the outcome of financial independence. Once you achieve financial independence, you have the option to leave your job.

Gov Worker emphasizes that the movement is more inclusive than it may seem. He says pursuing financial independence is for everyone and offers a lot of freedom.

10:10 What are some of the stereotypes associated with FIRE?

Gov Worker says the stereotype associated with FIRE is a single white male who learned to code and got a high paying job. He says the stereotypical person may be antisocial and not understand why people want to spend money on social activities. He says the stereotypical person is over-represented in the mainstream media and online in blogs.

Gov Worker wants to let listeners know that while early retirement sounds so extreme and it may turn off many people, the FIRE movement is more inclusive and has diversity in bloggers.

13:22 What led you to the FIRE movement?

Gov Worker shares that he saw a feature in Money Magazine about FIRE. He said he had always been interested in finance and read the Rich Dad, Poor Dad books in high school. It never occurred to him that he could retire early until he saw the feature. Then he read Your Money or Your Life and he says this book completely changed his life. Gov Worker says in academia, the mindset is to be the top of your field and it isn’t an option to have personal goals. He says he achieved career success, but it wasn’t fulfilling to him. The book Your Money or Your Life showed him that the job could be the source of income, not identity. He realized that being himself is worth more than his professional expertise.

18:54 What are you doing on your path to financial independence?

Gov Worker says that he and his wife are very frugal. They always lived way below their means. They both ride their bikes to work, and they have a ten year mortgage they are prepaying. Every time they got a raise, they would save the raise or increase retirement accounts. He says that once they had children, a notable percentage of their salary goes to daycare.

21:35 How did you manage to keep your living expenses in check when you did see an increase in income?

Gov Worker explains that when he was in graduate school, his wife was working so they lived off of two incomes. They didn’t move after he graduated, so they didn’t have moving costs. They had a daughter two years before he graduated with his PhD, so this was the main financial concern. He says the increased income was like breathing room. Gov Worker says that he enjoyed his social group of graduate students who supported each other through tough times.

26:09 Conclusion

This PhD Student Is Paying Her US Student Loans with Her Swedish Krona Salary

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In this episode, Emily interviews Crista Wathen, an American PhD student in archaeology at Stockholm University. As a PhD student in Sweden, Crista is considered more of an early-stage researcher than a student, which was one of the reasons she chose to study there. Crista’s salary and frugal living habits permit her to pay down her US federal student loans from her master’s degree. Finally, Emily and Crista discuss her blog, Richful Thinker, and why she is pursuing FIRE as a graduate student.

Links mentioned in episode

student loan repayment from Sweden

0:00 Introduction

0:58 Please introduce yourself

Crista Wathen is a US citizen doing her PhD in Sweden. She is in the field of archaeology. She’s from Florida and went to the University of Florida for her undergraduate degree. She did her Masters in the UK.

1:51 What made you choose to go abroad for your Masters and PhD?

Crista says when she was an undergrad, she did an archaeology excavation trip in Ireland. She met another student who was applying to Masters in the UK, who explained that a Masters is cheaper in the UK.

Crista says that a Masters in Archaeology in the UK is only one year. This makes the degree half as expensive as a two year Masters degree in the US.

3:24 Was a Masters degree from the UK viewed differently than a degree from the US?

Crista says the degrees were viewed the same. For PhD programs in Sweden, they looked for people who could speak English or Swedish. She says most people speak English. Crista started learning Swedish, which helped her when she first arrived. However, she does not have a proper immersive language experience in Stockholm because most people speak to her in English.

5:24 What are the differences between doing your PhD in the US and doing your PhD in Sweden?

Crista says in Sweden, she is considered an early stage researcher as opposed to just being considered a student. When she applied, she had to propose a project and submit a research plan. She has two years of classes and two years of only research, though she does research all four years.

Crista says that many Masters degrees in Europe are research based. PhD programs in Sweden require applicants to have a Masters degree. Crista says she already has experience creating a project, and she built upon what she did for her Masters for her PhD application. She explains her PhD classes emphasize reading theory, and do not focus on lab or skills training.

8:33 How is your pay for your PhD research?

Crista shares that she has a salary for her PhD and she doesn’t have to worry about applying for grants. She receives monthly pay. The university pays into an annual pension fund on her behalf. In Sweden, she receives socialized healthcare. She pays up to about $100 US dollars out of pocket. She receives dental and vision care, and she has access to several other benefits such as parental leave.

Crista says she thinks she can take her pension with her if she leaves Sweden, or she can leave the pension in Sweden until she retires. When she moved to Sweden, she was given a person number and is always in the tax system.

Emily says that PhD stipends in the US are not generous, and in many cases they are barely enough to live off of. Crista says that she lives frugally. She lives in subsidized student housing, which she is able to stay in for the duration of her degree. She estimates she is paid about the median income for Stockholm, about $2,000 to $3,000 per month. She explains that the pay for PhD work increases each year. She gets 28 days of holiday leave.

14:26 Tell me about your student loans

Crista had a full ride for her undergraduate degree, the the state of Florida Bright Futures. Her loans are for her Masters program. When she exited her Masters, Crista’s loan balance was $60,000 and now it is $45,000.

Crista has federal student loans, even though her Masters was at a UK institution. When she was accepted into the PhD program in Sweden, she called the loan offices to learn about income based repayment. The loan offices told her that her pay in US dollars is effectively zero, so her loan payment is zero.

Because of compounded interest, Crista wanted to make loan payments even though she wasn’t required too. Crista is considering whether to keep her savings and make payments or to take her savings to pay off all her loans. The interest rates on the loans are nearly 7%.

Crista says the loan payment process has been smooth except for the fees to send money to the US and the exchange rate. Recently, the Swedish krona has been worth a little more than the US dollar.

22:02 Do you have any advice for a US citizen who is doing graduate work abroad and has student loan debt?

Crista says she was looking for a university that would take her project. It’s a new culture and experience, which is worth a lot. She advises to save up because it’s expensive to move. She says take logistics into account.

23:21 Where can people go to learn more about your story?

Crista has a blog called Richful Thinker. After her Masters, she worked in banking. She learned about the benefit of having a banker and all the things a banker can do for you. She thinks more people should know about this. She also talks about what it’s like to be an American doing her PhD abroad.

24:30 What is the FIRE movement and why are you part of it?

Crista explains that FIRE is financial independence, retire early. She is most interested in financial independence. She says most people who retire early are in their 30s or 40s. But since retiring is typically 65, even retiring at 50 is retiring early. Crista says she wants to be comfortable without worrying where her money is coming from.

Emily adds that for many young adults learning about personal finance, financial independence refers to being independent of parents. In the FIRE community, financial independence is being independent of a job. This could be through passive income, like making money from rentals or investments.

Crista says she knows it can be difficult to find a job after your PhD, so financial independence is a way to assure she finds a job that she will like. She doesn’t want to take the first job that’s open. Emily shares that financial independence can make having a job more fulfilling.

28:49 Conclusion

Can a PhD Achieve FIRE?

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Would you like for paid work to become optional for the rest of your life? What would you do with your time if you didn’t have to work? When you become “financially independent,” you have enough money and passive income streams to sustain you for the rest of your life without earning any more. At that point, you have the option of retiring (whether or not you actually do). Achieving this goal in youth or middle age instead of 65 is the objective of adherents of the FIRE movement (Financial Independence / Retire Early). Typically, FIRE walkers earn high salaries and save a radically large percentage of their income. This article explores whether FIRE is a good or reasonable goal for a PhD (graduate student, postdoc, or PhD with a Real Job) to set.

Can PhD FIRE

 

Further listening: This Prof Used Geographic Arbitrage to Design Her Ideal Career and Personal Life

What Is the FIRE Movement?

The FIRE movement (or at least the current iteration of the trend) started to gain traction within the last decade. Two of the fathers of the movement who documented their FIRE journeys on popular blogs are Jacob Lund Fisker (Early Retirement Extreme) and Pete Adeney (Mr. Money Mustache). They both advocate establishing a very frugal lifestyle to 1) save a high percentage of your income while working and 2) minimize the size of the nest egg needed to retire from paid work.

Now that the FIRE movement has gained popularity, it has diversified (it’s not just for young, single, male tech workers!) and splintered. One of the useful delineations is among ‘lean FIRE,’ ‘FIRE,’ and ‘fat FIRE.’ Roughly speaking, lean FIRE adherents seek to achieve FIRE primarily through expense minimization (and a high salary as well) while fat FIRE adherents seek to achieve FIRE primarily through vastly out-earning their spending (and keeping a lid on expenses as well), with regular FIRE falling somewhere in the middle.

Why Would a PhD Want to FIRE?

A person who completes a PhD has passion for her work (as well as incredible perseverance). I find it hard to imagine that such a person would want to retire early from her chosen field – especially those pursuing a life of the mind in academia.

But people who complete PhDs are also people. They end up in all types of jobs with all levels of job satisfaction. Even those with high job satisfaction might want to escape the demands of full-time work.

Even if retiring early is not attractive, becoming financially independent may be. Once you are financially independent, even if you keep working, you don’t have to be concerned about losing your job or put up with a job that’s no longer a good fit. Even during the journey to FIRE, you will have a much, much greater degree of financial security than most Americans, which brings peace of mind.

How Do You FIRE?

While difficult and rare to achieve, the mechanism of becoming FIRE is easy to understand.

To become financially independent (from active work), you need to have investments and/or passive income streams that will pay for your expenses in perpetuity. I’ll focus this discussion on the investments needed rather than the passive income streams.

Basically, to achieve FIRE, you need a nest egg of investments that is large enough that you can withdraw what you need to live on each year without eating into the principal. The higher your living expenses, the larger the nest egg you need to support them in perpetuity.

FIRE adherents usually follow the “4% Rule,” also called the Safe Withdrawal Rate (SWR), or perhaps a more conservative 3% or 3.5% Rule. The 4% Rule means that withdrawing 4% of your portfolio balance each year gives you a very good chance of your portfolio not running out of money prior to your death; it is based on historical market returns. (Early retirees may adjust this rule to be more conservative due to their post-FIRE life expectancy being longer than a typical retirement.)

The 4% Rule shows you the two vital factors to FIRE: size of your nest egg and yearly living expenses. Therefore, to achieve FIRE you must save (invest) a lot of money and keep your living expenses in check. For example, for a household with $50,000 in yearly living expenses, a portfolio of $1,250,000 is needed.

A person pursuing LeanFIRE will primarily focus on minimizing living expenses. The rough definition of LeanFIRE is living expenses of under $40,000/year or a portfolio of $1,000,000. A person pursuing FatFIRE will primarily focus on building a large portfolio. The rough definition of FatFIRE is a portfolio of over $2,500,000 or living expenses of at least $100,000/year.

There is a delightful synergy between the necessarily high savings rate and necessarily low expenses. Given a static income, the less you spend on living expenses, the higher your savings rate can become, enabling you to achieve FIRE even faster. Mr. Money Mustache published in “The Shockingly Simple Math Behind Early Retirement” a set of ratios that illustrates the relationship between savings rate and years of saving needed until the SWR could be achieved. For example, with a savings rate of 10%, you need 51 years to save before you can retire, but that drops to 22 years with a savings rate of 40% and 8.5 years with a savings rate of 70%.

Because the key to achieving FIRE is an unusually (to say the least) high savings rate, it is almost exclusively pursued by high income earners. There is a floor on how low you can drop your living expenses (although that varies person to person), so if your income doesn’t exceed your expenses by much, achieving the “E” in FIRE becomes a remote possibility.

Can PhDs FIRE?

PhDs can FIRE if they commit to the process, but they have challenges that are not shared by their peers from college who went immediately into high-paying careers. (It has been done; Jacob Lund Fisker has a PhD and retired at age 33.)

The ideal path for someone pursuing FIRE is to obtain a high-paying job immediately upon completion of their education at 18 or 22, commit to a low-cost lifestyle, set up a radically high savings rate into investments, and keep the pedal to the metal until FIRE is achieved, for instance by age 30 or 35.

A PhD becomes derailed from this ideal path upon entering graduate school. Unless he previously set up massive passive income streams, a grad student’s income is nowhere near large enough to achieve a high savings rate (even if you live in a van like Ken Ilgunas did at Duke). This means that pursuing FIRE with a high savings rate will have to wait until landing a post-PhD Real Job.

However, the graduate school experience offers a unique advantage to FIRE: A necessarily low lifestyle. The $40,000/year maximum living expense for the definition of LeanFIRE is much higher than what virtually every graduate student takes home after paying income tax. Even a couple living the graduate student lifestyle can usually spend less than that amount.

Further reading: What Grad Students Can Learn from the FIRE Movement

A PhD also confers the possibility of a high income. While PhDs are not needed in currently high-paying careers such as finance, medicine (some specialties), computer science, and engineering, a person with a PhD does on average earn much more in a lifetime than the average person with less education, and people with PhDs can absolutely land well-paying jobs.

Therefore, a PhD maintaining her grad school lifestyle (more or less) while earning a high salary post-PhD is a recipe for FIRE, albeit starting in earnest closer to age 30 than age 20. A LeanFIRE early retirement can still be achieved within a short period, and of course she could opt for FatFIRE if her income is generous enough.

However, a graduate student (or postdoc) who commits to FIRE can go further than this default:

  1. Instead of living at 100% of net income during graduate school, save (invest) as much as possible. This will have the dual effect of further lowering living expenses and getting a head start on building your nest egg.
  2. Experiment with frugality to discover whether you want to ultimately pursue LeanFIRE, FIRE, or FatFIRE. You may decide that living below a graduate student’s means is not what you want long-term.
  3. Finish your training as quickly as possible to increase your income as early as possible. Prepare yourself to land a high-paying job through professional development and networking.

Further reading: Whether You Save During Grad School Can Have a $1,000,000 Effect on Your Retirement

What Is Your Reason to FIRE?

Ultimately, it’s vital to have clarity on why you want to pursue FIRE. It’s easy to become consumed by the numbers and the process and lose track of your motivation along the way. Sometimes it’s possible to achieve aspects of the FIRE lifestyle without actually being FIRE, and I think that’s particularly true for PhDs who have a lot of transferrable skills and potential for autonomy. Remember the parable of the fisherman and the businessman. Just like you shouldn’t put your “Real Life” on hold during graduate school, you shouldn’t put your Real Life on hold while building up to FIRE.

If you are a PhD (-in-training) and seriously pursuing FIRE, I’d love to interview you on my podcast! Please fill out this form to volunteer.