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Financial Goals

Be a Fly on the Wall During a Financial Coaching Session (with Elana Gloger of Dear Grad Student)

March 1, 2021 by Lourdes Bobbio

In this episode, Emily conducts an initial financial coaching session with Elana Gloger, a PhD student at the University of Kentucky and the host of the Dear Grad Student podcast. Emily and Elana talk through Elana’s balance sheet and identify several strategies she can implement to pay off her credit card balance and stop needing to time her bills to her biweekly paychecks. They also go over the first few steps in Emily’s Financial Framework, from saving a starter emergency fund to investing for retirement, as the recommended sequence of financial goals for Elana to accomplish prior to finishing grad school. Once you finish this episode, head over to the Dear Grad Student podcast to listen to Emily’s interview with another guest on individual and institutional financial matters in grad school!

Links Mentioned in this Episode

  • Find Elana Gloger online on Twitter
  • Find Dear Grad Student on their website, on Twitter, and on Instagram
  • Dear Grad Student Podcast, Episode 27: Grad School Finances: Assistantships, Negotiating, & Challenging Institutional Financial Barriers
  • Related Episodes
    • How to Solve the Problem of Irregular Expenses
    • How to Handle Your Student Loans During Grad School and Following
    • This PhD Got a Late Start Financially But Is on Track to Retire Early
    •  How to Successfully Plan for Retirement Before and After Obtaining Your PhD
  • The Academic Society: Grad School Prep
  • Personal Finance for PhDs: Coaching
  • Personal Finance for PhDs: Tax Workshop
  • Personal Finance for PhDs: Community
  • Personal Finance for PhDs: Podcast Hub
  • Personal Finance for PhDs: Subscribe to the mailing list
financial coaching grad student

Teaser

00:00 Elana: And I think so many other students are in my position of: “Where do I start? How do I do this? It’s not possible with my stipend.” And, you know, we’re all in different levels of privilege in terms of finances, but there are little things that all of us can do and certainly steps that we can start with. And I think that this is going to be great for anybody at those beginner steps or living similar to me, which is just on that cycle of the clock of a paycheck and rent and paycheck and rent, and credit card and all of that.

Introduction

00:29 Emily: Welcome to the Personal Finance for PhDs podcast, higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season eight, episode nine, and today my guest is Elana Gloger, a PhD student at the University of Kentucky and the host of the Dear Grad Student podcast. Elana is just starting out with handling her finances intentionally. So we decided to conduct an on-air financial coaching session. This was a really enjoyable episode for me to record, and I think you’ll get nearly as much out of it as Elana did. We talk through Elana’s balance sheet and identify several strategies she can implement to pay off her credit card balance and stop needing to time her bills to her bi-weekly paychecks. We also go over the first few steps in my financial framework — from saving a starter emergency fund to investing for retirement — as the recommended sequence of financial goals for Alana to accomplish prior to finishing grad school.

01:26 Emily: Once you finish listening to this episode, head over to the Dear Grad Student podcast, to listen to a three-way discussion between me Elana and Tyler Hallmark, a grad student who advocates for financial policy change at his university. We discuss what institutions can do to better financially support their graduate students. You may be surprised by the number of solutions we identified to help graduate students out of tough financial spots at both the personal and institutional levels. It was a fantastic conversation that I learned a lot from.

01:58 Emily: If you haven’t listened to Dear Grad Student, before you are in for a treat. I’ve been so impressed with what Elana has built in just the past half year, and it’s been wonderful to collaborate with her on these two episodes. Hit subscribe to dear grad student while you’re there. And for any Dear Grad Student listeners who have come to hear Elana’s coaching session, welcome, I’m glad you’re joining us. Please hit subscribe to Personal Finance for PhDs and let us know on Twitter what you think of this episode. I challenged Elana at the end of our session to follow through with a few specific steps by the time the episode publishes, so let’s give her the accountability she wanted.

Book Giveaway

02:37 Emily: Now it’s time for the book giveaway contest. In March, 2021. I’m giving away one copy of, I will teach you to be rich by Ramit Sethi, which is the Personal Finance for PhDs Community book club selection for May, 2021. Everyone who enters the contest during March will have a chance to win a copy of this book. If you would like to enter the giveaway contest, please rate and review this podcast on Apple podcasts, take a screenshot of your review and email it to me emily@pfforphds.com. I’ll choose a winner at the end of February, from all the entries you can find full instructions at pfforphds.com/podcast.

03:19 Emily: The podcast received or review this week titled “Informative and Inspiring”. The review reads: “I love this show and this is the podcast that got me interested in personal finance. Thank you, Emily, for letting me know that even graduate students can start our journey to build wealth. Great podcast!”

03:36 Emily: Thank you so much to the reviewer for this wonderful comment! I’m so glad the podcast has served as a gateway to building wealth earlier in life than you expected. Without further ado, here’s my coaching session with Elana Gloger of Dear Grad Student.

Will You Please Introduce Yourself Further?

03:57 Emily: I have joining me on the podcast today Elana Gloger who is the host of the Dear Grad Student podcast, and a current graduate student at the University of Kentucky. And we’re doing a really special episode today. Actually, we’re doing a swap, so after you listen to this episode, go over to Dear Grad Student, listen to an interview that I did with Elana and another guest on finances and graduate schools. Okay, so listen to both the episodes, but in this episode we’re doing something that I’ve never tried before, and I’m really excited for it, which is to start off a coaching session. So the podcast is only supposed to be about half an hour long. Usually my coaching sessions are an hour, but Elana thought it would be a good idea to kind of show people what coaching with me would be like, and of course get some coaching herself. So Elana, I’m really excited to try this out and thank you so much for suggesting this format for the episode. And will you please introduce yourself to the audience?

04:50 Elana: Absolutely. Yeah. Thank you so much for having me. I had just listened to your episode about financial shame and I thought, no shame here, let’s go for it. Let’s talk about finances and make this happen. So yes. Hi, I’m Elana host and dare I say, producer of the Dear Grad Student podcast. I’m a fourth year PhD student at the university of Kentucky and I’m getting my PhD in health psychology. I do research with psychology and the immune system. So right at that intersection of psych and biology, and I’m super happy to be here today and happy to show people a little bit about grad school finances and what it feels like to have some negative net worth, but we’ll get to that in a second.

What is Money Coaching

05:31 Emily: Yes, we will. So I want to say a couple of preliminary remarks about kind of what the coaching relationship is. As a financial coach, as a money coach, well, one, I’m not a certified financial planner or anything similar to that. So we’re not talking specific investment advice, we’re not talking specific tax advice. This is kind of about budgeting and saving and cash flow and debt and things on kind of that level of finances. That’s one part of it.

05:56 Emily: Another is that as the coach, I’m not in charge of your financial life. These decisions are entirely up to you. I’m here as a resource. I’m here as an educator. I’m here as someone who can maybe prompt you into thinking about things a new way, and maybe help you strategically think through some decisions, but ultimately for the client, everything is up to you and I’m not managing anything for you. There are a couple of notes about that, that relationship.

06:22 Emily: As a preliminary exercise with you, as I do with all my clients, I asked you to fill out a balance sheet and a balance sheet is basically just a record of all of your assets. That’s every dollar in your checking account. That’s any property that you have that has value. Those are on the asset side of the equation and also all of your liabilities, which is all of your debts — credit card, debt, student loans, medical debt, all these kinds of things, and the spreadsheet breaks all that out.

Let’s Talk About Net Worth

06:50 Emily: So Elana the first thing I always ask my clients when we start a session, open up that net worth spreadsheet, the calculation that you did — by the way the net worth is the assets minus liabilities — is how did this exercise go for you? Did you learn anything? Did anything strike you in a new way?

07:08 Elana: I think the first thing, so I filled out assets first and so that’s going to be my checking account, my savings account, the $100 I have in a Roth IRA because I started that after listening to your podcast. But I looked at that and I kind of laughed at what my positive net worth was before putting in loans, because it’s just so small. I mean, just thinking about what that could buy in real life just felt like nothing. It’s interesting because I do regularly use things like credit karma, so I had a general sense of exactly what my debt looked like, but putting it all together and seeing that large negative number as my net worth, mostly I just laughed. But it was helpful to put this all in one place and also to learn that there are lots of different ways that I could have assets. Like there are three different kinds of investment accounts you have listed. And I’m like, I don’t know the difference between any of them. It was also informational, because it definitely gets me thinking there are areas that I have to grow and learn about my finances, above and beyond just knowing like what I literally have or don’t have at this point.

08:18 Emily: Yeah, thank you for saying that. For your spreadsheet, which I’m looking at, you have I would say a relatively simple financial life. There’s not a lot of different kinds of accounts going on. There’s not a lot of different categories of things. The spreadsheet itself is very catch-all, like let’s think of everything we could possibly put in here and throw it down on the sheet, but you — I don’t know how old you are — you’re a grad student and you have a simple financial life as of now. So that is perfectly in line with what I would kind of expect of someone who’s in your position.

08:49 Elana: Yeah, and I’m 25, turned 25 last June, so I’ve only been an undergrad and then a grad student I’ve never dare I say, held a real job. So there’s not a lot of complexities to have gained, I guess, at this point.

Managing Cash Flow

09:06 Emily: If you don’t mind, let’s talk through, we don’t have to use the specific numbers, but let’s talk through kind of the categories that you have filled in here and just make sure that I understand everything that’s going on. It looks like you have what I call cash equivalent — so balances in checking accounts, balances in savings accounts, money market accounts. You have some cash on hand, but you shared with me just before we started, how you sort of operate your cash flow. How does that work on a monthly or whatever paycheck frequency you have; your cash flow, that is?

09:38 Elana: Great question. I have my paycheck for my university as a graduate student, come into my checking account. I’m paid bi-weekly by my university and I am paid year round at the same rate and then taxes change over the summer or if I am not enrolled in full-time classes for a certain period of time. When that money comes in, I essentially have dates in a spreadsheet somewhere deep in my computer of when I am charged for my car payment, my phone payment, different things like that. And I have that all coming out of my checking account because what I don’t want to do is accidentally rack up a credit card debt because that is a little bit too easy for me to do. So when I have cash flow coming in from my paycheck, I have bills pulled out from my checking account and then depending on the timing of the month, I’m either throwing whatever is left over onto my credit card to pay that down, or I’m putting it towards rent. And I do split rent half and half with my partner or just about half and half. My credit card is where I do my spending — grocery trips, Chipotle runs, whatever it might be, that’s done on my credit card. I do that mostly for points and cashback and to build credit because again, 25, don’t own a house, will not own a house for many years. That’s kind of what my cash flow looks like. What we’re both looking at essentially is I keep my checking under about $100 at a time, because otherwise I’m throwing it into credit cards, or $50 a paycheck or so into savings.

11:09 Emily: Okay, got it. And I think what you just described there is like super common for Americans. That’s not to say that I love the system, so I’m going to make a suggestion here for how you can shift that. Let’s talk about the other side of the cash equivalents, which is the credit card balance. What I’m looking at is a credit card balance that exceeds the amount that’s in your checking account right now. Tell me if this is true, but what this says to me is that you are sort of using credit cards to give yourself a little bit of an advance on your next paycheck, is that right? Will you pay off this credit card entirely after your next paycheck arrives?

11:45 Elana: No.

11:46 Emily: Okay, so this is a true credit card balance that you carry at least sometimes at some points out of the year.

11:52 Elana: Yeah, it is usually little bit lower than this. What you’re seeing is I recently bought a domain for my podcast and website services, so it was a little bit higher than normal. It’s usually kept, I would say under about $500, in terms of regularly. And I will say too, as an aside, my stimulus check never arrived, so I was also kind of expecting that. This is also part of what you’re seeing, but I guess I’ll find wherever that is eventually.

12:17 Emily: Yes. And for those of you listening, I think many people are in the same scenario. This is the second round of stimulus you’re talking about, right?

12:24 Elana: Yeah, I got my first one right on time, but not the second.

12:27 Emily: Yeah. The same thing happened to me actually. So we’re recording this in February, 2021. I also was direct deposited my first stimulus check. So totally smooth. That was great. The second one, for whatever reason, the IRS chose to mail the cards, if you’ve heard about those like debit cards, whenever there. They chose to mail the debit cards, but I moved in 2020, so they went to my old address, went back to the IRS, then they had to send them to new address. So anyway, it took a little bit while longer. But if you never received the stimulus check and if anyone listening, never received the second one or the first one, and you believe that you were supposed to, you can claim it on your tax return. So you’ll add it into your tax return. It’s what’s called the recovery rebate credit, and then you’ll get it as an addition on the tax refund, if any, that you would have already received. So it’s just going to be straight added to the money that you receive as a refund from the IRS. So the sooner you file your tax return, the sooner presumably you will get access to that money. And actually we happened to be recording on February 12th, which is the first day that the IRS is accepting returns. So by the time the listener hears this, returns will already be being processed by the IRS.

13:37 Emily: Okay. That was an aside. Ideally, in an ideal world, here’s how I would love to see your cash flow functioning. And the way to get from where you are right now to this ideal world is it’s a little bit confusing because of how you and many other people use credit cards, but it’s very simply saving. You just very simply have to save more money and it’s not going to even look like you’re saving money because your checking account balance is not necessarily going to get bigger for a little while, or your savings account balance, but the debt balance on the credit card will get lower and lower and lower.

Treat Your Credit Card Like a Debit Card

14:14 Emily: The first issue I’m seeing here is just that you are using your credit card, like I said earlier, as an advance. You’re paying for things that you would not be able to pay for it with a debit card. The very, very first step is use your credit card as a debit card or stop using the credit card. And the most extreme response to being in the situation that you are in right now is to stop using the credit card. Even though it gains you points, even though it’s a boon for your finances, but to stop using the credit card until you can kind of train yourself to only use debit. And I want to know what your reaction is to this, because I’m thinking that you might be thinking, “that sounds great, Emily, but I’m living on a grad student stipend, where’s the savings going to come from?” What do you think?

15:00 Elana: I mean, part of me thinks that, except a couple of years ago, I started just automatically shoving money into my savings account every month. And I don’t even notice it. I don’t even feel it. So part of me recognizes that this is possible. I think the other part of me is thinking a lot about, there’s not much going towards a credit score right now. And not that I necessarily need — I bought a car about two years ago, so I’m not about to make a big purchase. I’m not about to get a mortgage. But other than paying off my car loans, my student loans right now are deferred as I’m a graduate student. That is kind of a thing that I think about — what happens to my credit score when there’s nothing contributing to it, except this credit card and that car loan essentially?

15:41 Emily: That’s a really, really good question. You said you use credit karma earlier, so you do have access to your credit score on it. Is your credit score — maybe I’ll just ask you like the range, is it like 740 and up?

15:57 Elana: Yes.

15:57 Emily: Okay, so that is in the great range. Credit scores can go up to 850, but like it’s very rare even to get that higher, even over 800 is like, “Whoa, you’re really trying here.” Your credit is already in a great range and that is because you have the student loans, even though they’re deferred, they still contribute in some capacity to the credit score. The car loan especially contributes to the credit score because that’s an installment loan, so you’re making the exact same payment, or at least what the payment that’s required is the exact same, every month or whatever it is over time.

16:28 Emily: The revolving debt on the credit card, that is to say credit cards are a revolving kind of debt. There are different kinds of debts. They do contribute to your credit score, but you do not have to carry a balance to do that. And even if I’m telling you, “Hey, why don’t you stop using your credit card or at least tries you for a few months”, taking that kind of a small break, maybe even up to six months. I really don’t think it’s going to have any impact on your credit score, but if you did see your credit score drop or something you were concerned about, you could do something like put one recurring charge on the credit card, $20 or less, something like that, and know that that’s part of your budget and build that in and just pay that every single month, but not use it for any of the other variable kinds of expenses.

17:13 Elana: Yeah. That makes sense. I think I could do that. I think my podcast hosting, different things with the podcast are put on my credit card, but real life, I don’t know why I don’t put the podcast in real life, but real life bills are coming from my checking account. That’s really interesting to think about that maybe I already have recurring payments that are going to keep up that credit card use at a low rate, which I also know contributes to higher credit score anyways, that maybe I just need to stop making excuses.

17:41 Emily: I mean, what you just pointed out is another really, really good point is that having a utilization ratio on your credit card, which is the amount of credit, it’s the balance at whatever point in the month the credit bureau is choosing to check. So it’s not like on your statement ending date, it’s not another date you pay. It’s just whatever point in the month they try to check, the balance versus the total amount of credit that’s been offered to you. And so that percentage is your utilization ratio. 30% or less is good, 10% or less is ideal. I don’t know what your credit limit is on that card, but carrying any kind of balance is going to contribute to that utilization ratio being a little bit higher. So yeah, paying it down. Good idea.

18:27 Emily: Now, when you mentioned earlier that some years ago you started, I call the strategy paying yourself first, you, you took money from checking into savings automatically, you never missed it. Do you think that if you stopped using your credit card, you would be able to get by okay? Is there room to naturally adjust your spending down or is this like, Oh no, we need to put together an intentional plan because no, my spending will not naturally reduce, like I need this credit card right now?

18:58 Elana: Yeah. I think I could probably be more intentional. When I think about what I’m really paying my partner every month, I think what I come up against is more timing of when I’m paid versus when bills are due. Part of my issue is that I get paid the same every paycheck, but the first half of the month, almost all of my bills are due, so I am usually coming up against that kind of wall. But I’ve also put myself in that corner because what will happen is, is that all those bills are being paid, so I use my credit card and then I’m paying off my credit card, so then I don’t have money and all the bills are being paid. I’ve kind of gotten myself stuck in this cycle where if I could wean myself down a little bit, I do think that I could manage it. I do think the credit card gives me a little bit of wiggle room to say, I don’t need to check this every day, which I know is a big no-no. It gives me a little wiggle room to say, I don’t need to be typing in to the cent or the dollar amount exactly what I’m spending, because I’m fine. But I think that that’s just financial avoidance, so I think I could probably be more intentional, a little bit more type A, but it’s hard because it’s technically worked out fine so far. I mean, I’m not drowning, so it’s hard to motivate myself a little bit when it’s been fine.

20:19 Emily: Again, I think that sentiment is super, super common. Now, so you do carry at least at some points, a balance on the credit card, so you are being charged, whatever, probably 20% interest on it. It’s crazy high, I’m sure. That is damaging you financially.

20:35 Elana: Yeah, that’s true.

20:38 Emily: But there’s another category person and this is also where you may fall at some points in the year when you don’t have a balance on the credit card, which is “I use my credit card, but I always pay off the balance in full, how is this damaging to me that I’m taking an advance on my next paycheck,” because it is not literally financially damaging you when you’re not paying interest, but I still think it’s a dangerous practice because perhaps this has happened to you is very easy to slip from, “I will get my next paycheck and I will pay off the credit card” to “Oh, no. Something else came up” and hopefully it’s not your income being lost, but maybe it’s just some large expense that was unexpected and “Oh yes. Now I’m not able to pay off their credit card in full.” And it’s such a thin line between those two like scenarios and then you are starting to be charged.

Stopping the Paycheck-to-Paycheck Cycle

21:25 Emily: I’m really glad that you brought up the timing of the paychecks and the timing of your bills, because that was the other thing I’m going to talk about. Because once again, this is like the way I’m pretty sure that most Americans live is timing their bill payment based on their paycheck. And like you, many Americans are paid biweekly. I think that’s probably the most common for proper employees, or maybe they’re paid bi-monthly. But being paid monthly, for example, which is how I was paying in graduate school, is pretty uncommon, and actually people get kind of sensitive about it. Yes, like you’re making a face right now, for the listeners.

21:56 Elana: That sounds very stressful.

21:57 Emily: Okay, but here’s the thing — my like future vision for you and your cash flow is to operate on a monthly basis instead of on a bi-weekly basis. And once again, the solution here is to save up. Basically what I would love for you to have is going into day one of the month, you have a full month’s worth of pay available to spend throughout that next month. You need to get basically two weeks back from where you are now. Essentially what I’m asking you to do is save up one paycheck and have that available in your checking account. Then that second paycheck hits and you’re going into the next month, the next budgeting period, fully funded, fully flush. There’s two stages of this: there’s completely paying off the credit card and not using it for advancing on next paycheck. And then having the discipline to operate on this monthly system instead of on the bi-weekly system. That way you will never worry about the timing of your bills. You always have the money for the entire month in advance available. How does this strike you?

23:00 Elana: Well, first I love that you have a vision for my finances at all, someone needs to. But I think the other thing, when you say that, I’m like, yeah, that sounds amazing because it felt kind of like a weight lifted off. And then I started thinking about the logistics of, okay, well, what cycles are already in motion that I need to start kind of not backpedaling on, but sort of unwinding? So paying that credit card down, I know that also probably means maybe trying to find the stimulus check even before getting the tax return, if possible and then going from there. And I know that the solution is paying from my checking account. Like even when I’m paying off my credit card, I’m like, I wouldn’t have to do this if. It sounds good and I think it just will come down to me planning it out, in terms of what I need to do month to month over two or three months maybe, to officially make that happen, in addition to paying down my credit card. But I think it’s a good strategy.

23:56 Emily: Yeah. So the amount of money that we’re talking about, essentially for you to “find”, to somehow save up and again, it won’t go into your savings account, so it’s not going to feel like savings, but it’s going to feel like your checking account being a little bit bigger and it’s going to feel like your credit card balance being completely eliminated. This is effectively the current balance on your credit card, plus one paycheck. That’s the amount of money that we’re talking about to completely unwind the situation. And it may take months and it may take a year to get this done, maybe faster once you find the stimulus check. But that’s the level of money we’re talking about. So it’s not massive, massive, it’s the credit card balance and one paycheck. But when you have gotten into this situation that you are in right now of timing the bills and of paying off the credit card, I know that it’s not trivial to find that kind of money.

24:48 Emily: I think, I’m not sure we’ll have time for it during the session, but I would love to talk with you about a plan for how to find that money either, maybe it’s some short-term fasts in your spending. To just say, this is not forever, but until I get this under control, I’m no longer going to spend on this or I’m going to reduce this by this amount, and/or increasing your income, which is kind of a whole other conversation, very difficult to do as a graduate student, but would be another solution. If the expense side is too tight and too difficult already, then we can turn to the increasing income side of the equation. I know how hard you work on your podcast and I’m so like I’m cringing even saying like, “you need to do some more work Elana and make more money,” because I know that you’re working so hard on that already, but I think that you should keep in mind that financial relief that you felt when I like express that vision and know that it’s not going to take forever to do this. It’s a limited term project, to find the money in one way or another.

25:45 Elana: Yeah. I think that that’s absolutely true. And you know, you and I have talked, you know, off the record a little bit about podcasting and how that goes, and I think it was a newer concept to me that I could make money off this and how that felt weird, then I got over that really quick. But I think that it really comes down to, you know, I don’t really spend money on clothes that often anymore, there’s already things as a grad student, I’ve had to cut back on, but in doing so I was totally fine. And I know that there are things that I can cut back on and be totally fine.

26:15 Elana: When I think about my life as well, my partner is about to finish up nursing school. He graduates in April God-willing and will have a real person job that will also mean that the little things like a date night or what have you that I don’t mind whatsoever picking up, I also know won’t necessarily come out of my spending or might be a little bit more half and half when he’s not making zero income. I do also know there’s a light at the end of that tunnel in terms of eventually he and I will get married as well. Little things like that, I know that this is possible, but wow, what would it be great to go into him having money and us getting married, with a little bit of a better sense on finances, especially as we talk about, and I know your podcast talks about really building wealth.

26:59 Elana: I want to be able to have investments and know what the heck I’m doing with them and as grad students likely know, I’m not contributing to a 401k. For right now, at least any wealth or investments or retirement, anything is on me to contribute and build up to, and the first step of that is everything that you’re saying. I totally recognize how important it is and it’s just one of those, I hate to say, I’m having a quarter-life crisis this whole year being 25, but it’s just one of those things that I’m like, it’s just time and it’s hard and no one taught me this and that’s okay. I just need to kind of kick my button gear and be like, it’s just time man, stop buying Chipotle three times a week. You can do it.

27:43 Emily: I think the other thing that will come out of this focus for a few months on cash flow, is not only hopefully the zero credit card balance and the flush, going into the month with all of your money in place already. But also as you were just saying some habits and some practices that are going to serve you super well throughout the rest of your life. Because again, most Americans live this way. If you continue in the same pattern and the paychecks get bigger after grad school, but the expenses also get bigger, sometimes the problems can get bigger too, and the trouble that you can get yourself into, if you’re not, as I was saying earlier, disciplined, and strict about the cash flow issue. I think having the best practices in place right now, when things are, as we said earlier, simple, the cash flow amounts are smaller, it’s going to serve you really, really well once you get to those later stages too. And then you won’t have to be like, okay, my entire first paycheck is going to my mortgage payment and maybe even more than that, that whole game. I just want you to not play that game. I don’t like timing games, no more timing games.

28:47 Elana: I don’t want to play this game. I just kind of fell into it and I’m like, okay, this is fine, but it’s not fine. And I don’t want this problem with bigger or more zeros after. Right now, what we’re looking at at my savings account, you and I, that’s really the amount we’re talking about essentially. And my laptop is six years old, so that’s going towards a laptop. It can’t go towards what we’re talking about cash-flow-wise, because it’s truly unbelievable that this thing is still running. But it’s an amount of money that I can manage, and it’s an amount of money that I much rather be saving up this much and not twice as much or three or four times as much because I don’t get it together until I’m 35 or 40 or however old. So yeah, I know you’re right. And it’s also good guidance because I think it’s exactly what your financial framework talked about, about like, it’s okay that you don’t know this and it’s just taking those little steps along the way.

29:43 Emily: Exactly.

Commercial

29:48 Emily: Emily here for a brief interlude. This announcement is for prospective and first year graduate students. My colleague, Dr. Toyin Alli of The Academic Society offers a fantastic course just for you called Grad School Prep. The course teaches you Toyin’s four step Grad Boss method, which is to uncover grad school secrets, transform your mindset, up-level your productivity, and master time management. I contributed a very comprehensive webinar to the course titled “Set yourself up for financial success in graduate school”. It explores the financial norms of grad school and the financial secrets of grad school. I also give you a plan for what to focus on in your finances each season of the year that you apply to and into your first year of grad school. If this all sounds great to you, please register theacademicsociety.com/Emily for Toyin’s free masterclass on what to expect in your first semester of grad school and the three big mistakes that keep grad students stuck in a cycle of anxiety, overwhelm, and procrastination. You’ll also learn more about how to join grad school prep, if you’d like to go a step further again, that’s theacademicsociety.com/Emily for my affiliate link for the course. Now back to our interview.

Going over the Financial Framework

31:15 Emily: I’d actually like to spend our last few minutes talking about the financial framework, which is what I use with my coaching clients, if they want to, it’s not like super dogmatic, but if they want some suggestions from me on where to go with the finances I use the framework, which I sent to you in advance, so you know a little bit more about it than a typical client would going into a conversation, but just for the listener, we’ll kind of talk through at least the first couple of steps and kind of figure out where you are here.

Step 0: Cash Flow

31:41 Emily: Now, I know where you are because we already identified the cash flow is an issue. That’s actually step zero on the framework, is to get on time with the cash flow and to get, as I said earlier on a monthly basis for budgeting, instead of on this like paycheck by paycheck basis. That’s really the step that you’re on, but I’m wondering, we can talk through this, do you have, sometimes people have other assets that they can throw towards, for instance, credit card debt that they just haven’t been, for some reason. We can talk about the reasons behind that. Let’s just walk through that at least the first few steps and kind of figure out if you’re doing any steps now that you should be waiting on or that kind of thing.

Step 1: Starter Emergency Fund

32:16 Emily: I have just a simple graphic here of the eight steps of my framework, so we’ll just talk through this. Step zero, as I said, is like the cash flow, are we on time with the cash flow? Step one is to save a starter emergency fund. And I think that you do not have an emergency fund right now, right?

32:36 Elana: So my savings that is going to be going towards a purchase of a laptop, I think can be prioritized to an emergency fund if need be. And I’m still contributing money to that. My goal is to be over the cost of the laptop, so I’m not going down to zero when I buy it. I know that that will be possible based on when I’m planning to purchase. However, it will not be a thousand dollars over. So yes, right now; six months from now, no.

33:06 Emily: Yeah. And by the way, you’ve mentioned the savings account for the laptop, and this is a perfect expression of what step three of my framework is, but I’m really glad you’re doing it already. It’s totally okay to do it before step three, which we’ll get to in a moment. But this is very, very great strategy for graduate students to be using, to save up for large purchases like this in advance, because really in your case, the alternative is if you didn’t save up, it’s going to go on the credit card, 20% interest. This is a really great strategy that you’re using.

33:34 Emily: Okay, so you have maybe some cash savings. We’ll see how much once the laptop purchase goes through, but it’s not up to a thousand dollars, which is the bare minimum that I recommend for the starter emergency fund. And you could go anywhere up to two months of expenses. And I kind of say, this depends on how large your financial footprint is. If you’re a renter, you don’t need as large of emergency fund as a homeowner does. If you’re a non-car owner, you don’t need as much as a car owner does. If you don’t have dependents, smaller than if you had dependents. Where do you feel like you fall? Once you’re ready to start on that goal, once the laptop purchase goes through and so forth, where do you want to be? Do you think a thousand dollars is enough? Do you want to go a little bit higher than that in the starter emergency fund.

34:15 Elana: That’s a really great question. I am not a home owner and I do own my car, but I bought it new and I don’t have any dependents. When I think about all of those pieces and the fact that I live with a partner who, by the time the laptop purchase will go out, we’ll be making a decent job pay as a nurse, I do think a thousand is probably comfortable, maybe $1,500 just for any additional wiggle room. I know I’m not spending $1,000 a month, and even including rent most likely, or I’m like right at a thousand, so yeah, maybe $1500.

34:51 Emily: Okay, so one month’s expenses or so. Yeah, that sounds good. Whatever feels comfortable for you because you know, the car thing, I’m glad that you haven’t had any issues with the car so far, but you never know. You could be in an accident. You could pay a deductible on your car insurance. You could pay for a windshield crack, this kind of stuff.

Step 2: Pay Off High Priority Debt

35:09 Emily: Okay, that’s the starter emergency fund, that’s step one. Step two is to pay off all high priority debt. In your case, I would definitely include the credit card. Getting on time/paying off the credit card — getting on time is step zero, paying off the credit card completely is step two. That is to say, if you stopped using the credit card, like you stopped adding new charges to it, that might be your first step towards getting on time, but then you’ll have this balance sitting there/growing a little bit, and then it’s time to pay it down in step two. I see that you have two other types of debt listed here, the car loan and student loans. Does either one of those fall into the high priority debt category. Generally this is debt that’s somewhere between 6-8% interest and higher, not including student loans that are in deferment.

35:53 Elana: Yes. I’ll say two things. First, my student loans are in deferment and they’re all subsidized, so they never gathered interest and are still not gathering interest. My car loan is at 6.6% only because that financing, let me get money off of the car when I purchased it. Now, I am outside the window of how long I have to hold onto that before refinancing, so the smart thing to do would be refinance it at a lower interest rate. I think I can get somewhere like 2.99%, again, my credit score is pretty good, and then just continue paying at the rate that I’m at. I haven’t, because right when I hit that leeway or that grace period, COVID hit and I just was not prioritizing that, but that is sort of my next step. I think I got a 72 month loan at 6.6% because I was going to be in grad school the whole time, the timing made sense, and it was totally fine to get the money off that I did. That is certainly next step in terms of refinance at a lower interest rate and then just keep paying the same amount to make that happen quicker.

36:53 Emily: Okay, I love that you came up with that solution. Great idea! Do you know —

36:55 Elana: My boyfriend came up with that solution, I’m not going to lie.

36:59 Emily: Do you know if the refinancing will cost any money upfront or is it completely rolled into the cost of the loan?

37:07 Elana: Good question. I financed with the car dealership. So I have a Hyundai and I financed with Hyundai financial or whatever it is, and I was planning to refinance with my savings account holder, which is Ally Bank. I don’t know if it costs money to refinance, mostly because I just haven’t taken that next step. But when I did purchase the car, that was a conversation I had. I just had to have the loan for four months and after that, from what they told me, a young female in a car dealership, that it shouldn’t be an issue. So I guess we will see if that is true as I sort of take more steps towards that and look into it more.

37:45 Emily: Yeah. I would say just double check with them, make sure. I think what they’re saying is it will be an issue is that if you try to do it earlier, they would charge you some kind of fee, an early account closure fee or something like that. This actually happened to me when I took out a car loan. Anyway, so just make sure that that won’t happen and then go ahead and refinance, but the thing you just mentioned, keep paying at the same higher rate, that’s actually not what I would suggest that you do, because what you’re going to do is take that debt from being step two high priority debt and bring it down to step five medium priority, or even maybe step eight low priority. Taking that step, the credit card debt is still in that high priority category. And then there are some other steps before we get to five. Are you expressing that you are maybe a bit more debt averse than I, who created the framework is? Is this something you would like to have off your balance sheet?

38:37 Elana: You know, I think when I looked at the numbers, it was something like over a five-year period, I would only save $600 total, if I paid at the rate of the loan and the lower interest rate. For me, rather than paying for the same amount of time and in total saving $600, I guess my thought was, I would rather just have it paid off earlier. I don’t know what the savings comparison is if I paid at the same rate, with the lower interest rate in terms of just that interest differential, but it was just $600, just felt trivial over five years, but maybe that’s not trivial, but it just felt so small that I was like, well, I can just keep paying what I’m doing and that’s fine, but I don’t know.

39:21 Emily: I see this primarily as a cash flow, a boon to have this lower interest rate right now because this is really the first step you should take. Make sure it’s okay, but give this refinance to go through it because whatever you’re going to lower that payment to that’s money, you can get into your checking account that you can get onto the credit card balance. Your money can basically work harder for you in these other areas of your finances, and pretty soon, we’ll get there in a step or two, but pretty soon you’re going to be investing. That definitely, well, I shouldn’t say definitely because the stock market is quite volatile, but over the long-term we can very confidently say, you’re going to earn more in the stock market than you will paying that car loan down.

40:03 Emily: Now your balance is not so egregiously high that I think you need to take however much you refinance for, like another five years or something. I don’t think you need to take that full time, but I’d love to see you getting started with some of these other areas before you return your attention to the car loan. Maybe that’s going to be a step five medium priority debt for you, so you can get it cleared, but I would love to get the investing going first.

40:27 Elana: Yeah. Yeah.

40:29 Emily: Okay. So basically you just made a really big leap, I mean, once you carry out the step, but refinancing is going to be a big leap towards the cash flow issue that we talked about earlier. That is awesome! And really it’s just an interest rate change.

40:42 Emily: Then the other type of debt you have on here is student loans. You mentioned that they’re kind of double subsidized. They’re subsidized student loans, plus we have a federal pause at the moment on interest, so that is at 0% interest and that makes it step eight low priority debt. Just for my own curiosity, do you have any particular plans for how you’re going to repay that once you’re done with grad school. For instance, do you think you’ll use an income driven repayment plan or just straight pay them off? Or what are you thinking?

41:11 Elana: You know, I have not put a single thought to it and I’ll be honest about why. Once my friends started to do that, I was already in grad school and I knew that being enrolled in grad school for six plus years meant that they were automatically deferred and they weren’t collecting interest. It was actually a thought of mine that, Oh, do I start paying that down now, because it won’t make a difference now versus when I’m a postdoc making what maybe, $10,000 or $15,000 more years. Is that really going to feel like anything? I think it’s going to depend on once my partner and I are married, what that financial situation looks like, and if I’m being really honest, I think it’ll be interesting through this presidency to see how much debt I have left after that, because we just really don’t know if and what kind of debt canceling they may or may not do. For now, I don’t have a plan just because it’s really hard to predict. What am I going to make? Will I be married? What will he be making? Will we own a house? It’s just really far in advance and I feel it to be low priority and just helping my credit score with the length of account open kind of thing.

42:13 Emily: Yes. I’m in total agreement. I think that you should not really consider paying anything down in these loans while they’re in deferment while they’re subsidized. Wait until you know what that next job is going to be, the paycheck. Whether or not you’re working for a nonprofit and might be eligible for PSLF or not. And as you said, what your family situation and family income is at that point, there’s just so many unknowns right now. And it said 0% interest. And your balance, we won’t say what it is, but I’m looking at it and it’s small enough that you will be able to take care of this, I think pretty easily, once you have that post-graduate school kind of job. It would be very difficult to handle it right now, during grad school, but later on, it won’t be a snap, but you’ll get it paid off pretty quickly, if you want to. Or if you want to stretch it out and take 10 years or whatever, if that makes sense, you could do that too.

43:03 Elana: Yeah. I qualified for a Pell grant as an undergrad, so I basically was just having it paid off at undergrad that is with Pell grants and then a couple thousand every couple of years that I had to take as well, just as the buffer to cover anything that Pell grant didn’t. Right now this is about what I make in a year, but in a little bit, a couple of years, hopefully it’s a quarter of what I make in a year.

43:28 Emily: Yeah. And that’s the rule of thumb for the amount of — who follows this? — but the amount of debt you’re supposed to not take out any more than for at least for an undergraduate degree is one year’s worth of post degree salary. You actually manage that for even your grad student stipend, which is great, but certainly once you have that post PhD income, it’s going to be a smaller fraction of that one year’s worth of salary. Not a concern right now, I’m in total agreement with you.

43:54 Emily: Okay. So we talked about the credit cards, w talked about the student loans, we talked about the car loans. Was there any other debt that you saw on your balance sheet?

44:02 Elana: No. I don’t have a mortgage. No medical debt. I hope I don’t have IRS debt, but I don’t think so. They haven’t told me about it, so I’ll say not.

44:10 Emily: I think they would tell you. One thing I did notice that you did not include the value of your car on the assets side of the balance sheet. That could be because you don’t know the value of your car, because it’s a hard thing to know, but your net worth would look a little bit rosier if you did include that on the asset side.

44:29 Elana: I actually do because Credit Karma tells you what your car is worth. Part of the reason I didn’t put it, there is because every month it goes down by a little bit as your car gets older, but I have no problem. My car is worth about $13,000 per Credit Karma’s estimation, so that helps with the net worth a bit. I guess I’m not leasing it, so I guess it is truly an asset of mine since I financed it and I own it.

44:53 Emily: Yeah. And because the value of your car, at least supposed value is pretty significantly greater than the amount that you owe. If you were in a situation where you needed to free up some money, you could sell that car, pay off the loan and have a balance leftover to do what you wanted with it. So it is truly an asset, yes. If you want to include that there, your net worth will look quite a bit better doing that.

Step 3: Saving Up for Short Term Expenses

45:16 Emily: Okay, so we’ve talked about the step two, high priority debt. Step three, we don’t have to go into a lot of detail about, but it is saving up for short term expenses, which as I said, you’re already doing in case of this laptop purchase, which is so smart. Recently I published a whole podcast episode on targeted savings, which is what I suggest, especially for grad students that you start doing in step three, so we’ll link to that in the show notes. But I’m just wondering, have there been any other large irregular, which is to say less frequently than monthly expenses that have kind of plagued you in the past that have maybe contributed to the credit card balance that you, as we’re getting this cash flow situation under control, once you’re in step three, that you would start thinking about to prepare for?

45:58 Elana: Yeah. That’s a really great question. I think about the podcast when you say that. Not so much that there are big expenses coming up. I have the seven year old mic I’m working with, my zoom account is with my university, so I’m doing a lot of things to mitigate that, but I definitely think as things get more exciting with the podcast, and I don’t know, people have talked about merch or what have you, a lot of that comes from me first, even if I end up getting sort of reimbursed by people, paying for things or whatever. think about that kind of growth, but in terms of, you know, I bought a car two years ago, my laptop situation getting figured out, I do live a pretty simple life. I have like pet insurance for my cats in case anything comes up there. I feel like I’m being pretty safe with things. And I will say, in an emergency situation, I did get in a car accident a couple years ago, and that was a situation where family was able to help out and then I was able to pay them back. There is a little bit of that if it was going to run me bankrupt, or if it was truly something that I could not help. Like I said, I qualified for a Pell Grant, so it’s not like I have this big buffer, but I definitely have people around me that if need be in an emergency situation, I would be okay, if that makes sense. So not any big purchases, and emergencies seemed mostly covered.

47:23 Emily: That to me, relying on family as a potential backstop or at least partial backstop for a larger emergency is a reason why you could feel comfortable holding a maybe slightly smaller starter emergency fund and not getting to the full emergency fund until step six in my framework, which is where it falls. But I still think it’s a great idea to prepare for any irregular expenses that you may have. It sounds like there’s maybe not a lot, but anything related to your university, or just your graduate progress, like for instance conferences, anything that has to come out of your pocket for fees?

47:58 Elana: This is a great question. My university actually provides grad students with a thousand dollars a year for travel fund, and we do it off the university credit card. I actually don’t even need to worry about reimbursement. It’s a huge plus of my program. I’m extremely grateful. The one thing is that every semester we are charged a $250 fee. Despite the fact that they pay for our health insurance, we have to pay a student health fee because we’re students and we have to pay a fee for the university gym that I’ve never stepped foot in and they will not prorate it, so they won’t just fold it into my monthly or bi-weekly spending. And it is very annoying because that is a very large chunk of what I am paid bi-weekly. That is the, three weeks into the semester, getting the emails of please pay this fee, that I continuously come up again. There’s that. I hate it. I hate this fee, Emily. I hate it.

48:55 Emily: Yeah. So while you are working to somehow get this fee eliminated or reduced or whatever, for your own personal finances side of things, it’s something you can prepare for in step three. You’ve already mastered one aspect of step three, which is saving for large purchases that are upcoming, but the other part is saving for these recurring expenses. Another one that’s really common for car owners is car insurance. Do you pay that monthly right now?

49:21 Emily: Yes I do.

49:22 Elana: Yeah. Once you get to step three, this could be something you could consider paying for in advance, if it will give you a significant rate reduction. This is one of those ways that “frugality is expensive”. Great frugal ideas, like buying in bulk or paying for stuff in advance for a lower rate — yeah, it’s possible if you have the cash for it, but then it compounds upon itself. You had the cash to make the investment, then you get a return on that investment in lower expenses or whatever it is going forward, and then it just cycles and cycles. Somehow we need to step onto this treadmill of getting some of those kinds of deals. That would be one possible area if it seems like it’s a significant rate reduction. For now, for the cash flow problems and stuff, paying for it monthly is a great idea for you for the moment. But once you get to step three, that could be something to reconsider. In step three, you might not have a whole lot of different kinds of expenses, but there may be one or two that you want to prepare for. Maybe your cell phone, for example, another thing that people finance, but they don’t necessarily have to.

Step 4: Starting to Invest for Retirement

50:21 Emily: Step four is where I get really excited because that’s when we start to invest for retirement. And I noticed that you do have an IRA listed on your balance sheet. Can you tell us about that?

50:33 Elana: Absolutely. I listened to your podcast right before you, and I sort of reached out to each other to make this happen and the episode coming out on my podcast happen, and it was an episode where you had asked, or I should say it was an episode where you answered a Q&A question where someone talked about how do I invest when I make pennies? And you just had this really great advice about who to invest with in terms of like Vanguard versus Fidelity. And you talked a lot about just opening the IRA and putting in a little bit. And things like mutual funds and just being able to just throw something at it, build over time. It just really spoke to me. I threw $100 in there. I think I’m throwing in like $50 bucks additionally a month. I’m just sitting here in grad school and I think about the money I was able to save in that savings account over about two years. I could do that with an investment account that even if it’s just building a couple of dollars here and there, that by the time I’m out of grad school, I might have a decent sum that I can truly then contribute to, and then, hey, I can start investing right off the bat and actually maybe making a little bit more. Or just solidifying my wealth as a person, which I think it just brings down the anxiety a little bit. It kind of helps set me in this world of like, I can be functioning and I can have a little bit of money. And once again, I qualified for Pell Grant and that’s just not a situation I want my kids to be in. It’s nice that I can start that now and make a difference and kind of frustrating that universities don’t provide retirement accounts for grad students, but we don’t have to get into that now.

52:07 Emily: Yeah. I would listen to the partner podcast, the swap podcast on Dear Grad Student for, I think a little bit more about that. As much as it pains me to say, I think you should pause on the retirement contributions. Don’t reverse them, but pause in the contributions because this is step four, right? We still need to get through step zero. Step one, step two, step three. If this is motivating for you, if the investment piece is motivating for you, hold that out as the carrot, the step four carrot, once you get through those first few steps to get back to it, because I too just like am chomping at the bit to get started investing. I was in grad school. I want that for the people in my audience, but you need to do it from a position of strength. And you’re just not quite there yet.

52:52 Emily: I can see that you are going to be there. You’re going to be there very soon, a few months, a year, maybe, but you’re just not quite there yet. What I really don’t want to happen is for you to again, have some kind of emergency occur. And again, you don’t currently have that much in emergency savings. Maybe you don’t want to turn your family or your family helps you to degree and then can’t anymore and you come to a situation where you have to withdraw what you’ve already contributed, just to get that little bit more cash on hand. And that’s, that’s a really painful situation to be in.

53:19 Elana: What I want you to do is keep the money that’s in there, let it grow hopefully, or maybe it will decrease in value over the long term, grow, and work on the other cash flow stuff and work on the steps and hold that out as like, I really want to get started investing, so I’m going to power through these next few months of doing X, Y, and Z things that are a little bit uncomfortable because you really want to get to that step. I hate saying it, but it is the way I think things should go.

53:45 Elana: You’re so right. I think it’s a theme for me. I get so excited for the next step that I’m already moving that far forward and it’s super beneficial in grad school, don’t get me wrong, beneficial for the podcast, but I think you’re absolutely right. If I can come at it at a place of I’m feeling strong and I’m not doing out of anxiety, like, “Oh, I need to start doing this because I’m a grad student living on pennies”, but rather, “Oh, look, you know, my credit card has paid down, my car loan is getting paid on at a lower interest rate, I have some cashflow in my checking account and wow, it’s fun to throw this into my IRA because I’m solid.” Not because I’m on thin ice and nervous for the future and scared. That there’s a much better place and much better way to be throwing money at an IRA or anything.

54:30 Emily: And I think by the time you returned to this in a little while, you’re going to be able to contribute much more than $50 per month, because you’re going to have adjusted things about your cashflow. Either, you’ll have found some long-term ways to reduce your spending, or maybe you’ll have found some long-term ways to increase your income. You won’t be paying interest on the credit card anymore. Maybe you’ve refinanced the car. All the things that we’ve been talking about. It won’t be $50 a month at that point, maybe it’ll be $200 a month. Maybe you’ll be able to get up to the, so I recommend a 10% a minimum. Basically that’s just to say start wherever you are, but on step four, work up to 10% before you move on to starting to repay other debt in step five. So maybe you’ll be able to get to that 10% level before the end of graduate school. And again, that’s a real position of strength to be in, as you were saying earlier for having that wind at your back in terms of the investments compounding on themselves.

Next Steps and Things to Work On

55:19 Emily: I think we need to stop here because we’ve basically gone for pretty much a full coaching session length, a little bit longer than we expected, but I’m glad we got through what we did. Do you have any, first of all, any thoughts or reactions, anything you haven’t brought up yet regarding this conversation?

55:35 Elana: No, nothing. I feel like we were really thorough and I kept it as concise as possible. I know I’m a talker, I’m a podcast host. But I think this is super helpful and I think so many other students are in my position of where do I start? How do I do this? It’s not possible with my stipend. And we’re all in different levels of privilege in terms of finances, but there are little things that all of us can do and certainly steps that we can start with. And I think that this is going to be great for anybody at those beginner steps or living similar to me, which is just on that cycle of the clock of paycheck and rent and paycheck and rent and credit card and all of that. This was incredibly helpful. I hope it was helpful for everyone listening as well.

56:11 Emily: Yes, absolutely. I agree. If anybody wants to have your own coaching session with me, the way you do that as well, you can just email me and we can get the conversation started that way emily@pfforphds.com. Or you go to my website, pfforphds.com and there’s a “Work with Me” tab at the top. Go to the individual section, click on coaching, and you can read a little bit more about the coaching process. You can book a call with me through there. Whatever way you want to get in touch is awesome.

56:37 Emily: Elana, okay, we’re recording this, as I said on February 12th, it’s coming out on March 1st. What step are you going to take between now and March 1st that we can tweet you about?

56:50 Elana: Oh my goodness. I love this. Yes, please come back at me with receipts. I think the first thing that I need to do is look at my monthly spending, see what is extra and what I can cut back on to start paying down the credit card. And I’ll add on the stimulus check. I need to find that because then paying down that credit card is going to be easy to do in a paycheck. So stimulus check and seeing what expenses I can start cutting down on and throwing that money at the credit card instead.

57:21 Emily: Okay. Great idea. So are you thinking that you have a physical check somewhere in your home that you have missed?

57:27 Elana: No. We don’t check the mail every day because our mailbox is really far. So I’m like, maybe it’s there. Maybe I just need to go to that one website online to see where it’s at, who knows. I need to probably do some investigating into it.

57:39 Emily: Okay. If you aren’t able to find it, as we mentioned earlier, the recovery rebate is the solution there. Since you’re on my podcast, we’ll mention — I have a tax workshop, you are an affiliate for that tax workshop, and so if there’s a grad student in the audience who is saying to themselves, “I need to get that stimulus check, I need to get that recovery rebate credit, but oh no, I have no idea how to handle my fellowship income and my qualified education expenses.” Why don’t you share your affiliate link for that course and that that’s where they can go and sign up.

58:08 Elana: Yeah. So you’re going to go to pfforphds.com/dgsreturns. That’s Dear Grad Student, D-G-S return. And you can go ahead and sign up for Emily’s tax return workshop, or just tax workshop, I should say. I don’t know anything about taxes. Emily and I talked about this. My mom works for like a legal firm that does taxes, so she will do my taxes, but I think this year will be the first year I’m going to do them, Emily. I’m going to do them. I will. My mom says thank you in advance.

58:39 Emily: And hopefully if you do need to claim the recovery rate credit, you’ll see that nice fat return that’s going to come your way. Last, last note, I totally agree with reevaluating cash flow. I totally agree with finding the stimulus check and/or just filing your taxes as quickly as you can, but the third thing, you don’t have to take the action on it, but I want you to look into the refinancing on the car loan, because I think that’s going to make a bigger impact than you may be thinking right now, to have that big 5%, no, it was like 3% or so interest rate reduction.

59:09 Elana: Yeah. I’m at 6.6% now. And I think with my credit score, I qualify for 2.99%, so pretty decent.

59:15 Emily: Yeah. So DGS listeners, those of you following along with us, let’s check with Elana and see how far she’s gotten on this. That’s three homework pieces, so that’s a lot, but they could all make a big impact. Thank you so much for volunteering for this different kind of episode.

Best Financial Advice for Early Career PhDs

59:31 Emily: Very, very last question is one ask of all my guests, which is what is your best financial advice for another early career PhD?

59:38 Elana: Great question. My best financial advice is to listen to the Personal Finance for PhD podcast. No, but truly I think my best advice is don’t avoid your finances. Just because it’s working for you month to month and things are fine, so hey, I’m not going to check, look at your finances. Don’t be afraid of your own spending and don’t be afraid of the changes you need to make financially, even if it’s a little bit scary and it’s such an unknown. There are so many resources out there, certainly, you know, Emily’s podcasts and Emily’s website. But there’s also other students who have likely done it before been through it, so reach out to that community of students, whether it’s online or wherever, but don’t be afraid of your finances.

01:00:16 Emily: Yes. Thank you so much. And I also appreciate your work on the Dear Grad Student podcast, making finances a topic that is on the table, okay to talk about. Once again, I’m on the podcast today, March 1st, so go ahead and listen to that episode with another guest and we’re talking about all things grad school related to finances. So that should be really interesting conversation. Elana, thank you once again, so much for joining me.

01:00:40 Elana: Thank you so much for having me. This was a blast, so happy to have been here and thanks to all your listeners for listening.

Listener Q&A: Making-Up for Low Income in Grad School

01:00:44 Emily: Now on to the listener question and answer segment. Today’s question actually comes from a survey I sent out in advance of one of my university webinars this spring, so it is anonymous.

Question:

01:01:02 Emily: Here is the question: “How do I make up for years of making little money as a grad student?”

Answer

01:01:10 Emily: Thank you so much for this question. I actually have a five-part answer, so I’m going to move really quickly through the different points and refer you to a few other episodes for further listening.

01:01:21 Elana: First of all, if you are able to, to any extent, start working on your finances during grad school, because it’s not about how much money you make, it’s about how much money you keep. Of course, what you keep depends on how much you make, so for some people, it is completely out of the question to do any saving, investing, or debt repayment during grad school. But don’t let just the simple fact that you are a graduate student, keep you from considering how you might be able to save, invest and repay debt. If you spend the bulk of your twenties as a low paid graduate student, as I did, but you’re able to save and invest a small percentage of that as you go along, as I did, you are financially better off at the end of that than someone who made a much higher salary, but saved, invested none of it. So keep that perspective. It’s not about what you make. It’s about what you.

01:02:19 Emily: Two, work really, really hard on getting a well-paid job right after your PhD. I’m not saying you have to abandon your career plans or change them in any way, but just really research what the salaries are in the career track that you’re going for. Apply widely, understand the market that you’re going into. And of course negotiate that starting salary and benefits. What I’m saying is stick with your career path, passion, but get paid as much as you can within that track. To the extent that your subsequent salaries are based on that first salary, which they very well might be,iIf you stay at the same company, it’s so worth it to do this legwork and get into that highest salary band that you can, because this will compound over time, as you receive raises.

01:03:13 Emily: Point three, once you have that well-paying job, don’t inflate your lifestyle. You are accustomed to living on a small amount of money as a graduate student. I absolutely expect that you will spend more on your lifestyle once you have a post PhD job. But what I’m saying is don’t let your spending mindlessly increase to the level of your new salary. Intentionally choose certain types of expenses, levels of expenses that you will increase your spending to, because you know that you’re going to receive a lot of value from that type of spending. So don’t inflate spending across the board, intentionally increase it in the areas that mean the most to you.

01:03:55 Emily: Point four, manage your debt intelligently. I’m particularly speaking about federal student loan debt here, so if you do have federal student loans from earlier degrees, I highly recommend you listen to season seven, episode 13 with Meghan Landress, who is an expert on federal student loan repayment, and really make the best decision that you’re able to on whether you’re going to go for an income driven repayment plan to lower your payments and extend them out over a longer term. Maybe combine that with public service loan forgiveness to have them forgiven after 10 years of on-time payments. Or pay them off just, you know, more quickly than that. Each of those valid approach for a person in a slightly different financial situation, but try not to pick the wrong one, try not to pick the wrong path. And that’s what I mean by managing debt intelligently. Really look at the numbers. Don’t just try to lower your payments as much as you can, or don’t just you say to yourself, “Oh, I hate being in debt. I have to get out of debt so quickly” because in either case your money might be working harder for you doing something else. So be really strategic about that federal student loan debt. If you have other types of debt, be really strategic about that too. Look very carefully at the interest rate, at about what type of debt it is, who the lender is and so forth and decide whether you’re going to make it a priority to pay off that debt or whether you’re going to put it on the back burner while you work on some other things.

01:05:21 Emily: Lastly, five here is the real key. Invest. Once your finances are ready for that, once you have some savings in place, once you have the high priority debt paid off, invest, especially for retirement, but perhaps for some other goals as well. Put as much money away into your workplace-based retirement account as you can. Definitely meet the match if you have a match, but consider maxing out that is a reasonable possibility, if you’re making much more money post PhD than you did during graduate school, if you haven’t inflated your lifestyle. Also use an IRA, if you can, to get a little bit more contribution room. Investing is how you really make your money work for you and grow your wealth quickly. Now, if you are starting to invest a little bit later, like after graduate school, instead of during graduate school, it’s very hard to make up for that lost time, so you are going to have to do that by having a slightly higher savings rate than if you had started earlier.

01:06:21 Emily: But I want to give you some hope that this is very well possible. Dr. Sean Sanders gave me a wonderful interview in season six, episode eight. This is exactly his story of really through grad school and his post-doc not making much money, not being able to save at all, or invest for retirement. And finally, once he got that post PhD job, being able to save at that point, invest at that point, and he invested not only in stocks and bonds, like I mostly talk about, but also in real estate. And he just talks about how over the last one to two decades, his wealth has grown so much and he’s actually on track to retire in his fifties, so a little bit early. And it’s just such an inspiring story that even with a late start, the moves are possible. You can still retire early, if that’s your goal. You can still accomplish these other wonderful things with your finances.

01:07:11 Emily: Another episode to listen to is season two, episode seven, with Dr. Brandon Renfro. We talk about some of the strategies I just mentioned, like about how to kind of make up for lost time if you aren’t able to start investing until after grad school.

01:07:24 Emily: I hope those points were helpful to you start early if you can, but it’s absolutely possible to build wealth later on, if you can’t start during graduate school. If you would like to submit a question to be answered in a future episode, please go to pfforphds.com/podcast and follow the instructions you find there. I love answering questions so please submit yours!

Outtro

01:07:48 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episodes show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast and instructions for entering the book giveaway contest, and submitting a question for the Q&A segment. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media, with an email list serve, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt, repayment and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe through that list. You’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. Music is Stages of Awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC podcast, editing and show notes creation by Lourdes Bobbio.

This Grad Student and Her Family Lived on Her Stipend While Banking Her Spouse’s

February 22, 2021 by Meryem Ok

In this episode, Emily interviews Dr. Jacqueline Kory-Westlund, who recently completed her PhD in the MIT Media Lab. During their five years in Boston, Jackie and her husband lived on her grad student stipend and saved and invested all of his income. Jackie and Emily discuss the frugal tactics Jackie and her husband used to keep their expenses low, even after having their first child. Saving and investing Jackie’s husband’s income gave them a sizable nest egg by the end of grad school, which they used to purchase a home in cash in a low cost of living area of the country. Jackie and her husband have designed their lifestyle around location-independent work so they can live where they want to while they expand their family, which is now an option for more workers made remote during the pandemic.

Links Mentioned in This Episode 

  • Dr. Jacqueline Kory-Westlund’s Website 
  • This PhD Student Paid Off $62,000 in Undergrad Student Loans Prior to Graduation (Money Story by Dr. Jenni Rinker)
  • This Higher Ed Career Coach Worked Her Way Out of Financial Ruin Caused by the Great Recession (Money Story with Beth Moser)
  • Purchasing a Home as a Graduate Student with Fellowship Income (Money Story with Jonathan Sun)
  • This Grad Student Defrayed His Housing Costs By Renting Rooms to His Peers (Money Story with Dr. Matt Hotze)
  • How a Freelancing Career Can Take You from Academia to Affluence (Expert Interview with Courtney Danyel)
  • This Grad Student Didn’t Let a $1,000 Per Month Stipend Stop Her from Investing (Money Story with Dr. Rachel Blackburn)
  • The Simple Path to Wealth (Book by JL Collins)
  • E-mail Emily (Book Giveaway Contest)
  • PF for PhDs Podcast Hub
  • PF for PhDs Tax Center
  • How to Qualify for a Mortgage as a Graduate Student or PhD, Even with Non-W-2 Fellowship Income (Expert Interview with Sam Hogan) 
  • Turn Your Largest Liability into Your Largest Asset with House Hacking (Expert Interview with Sam Hogan)
  • PF for PhDs Tax Workshop
  • IRS Publication 970
  • PF for PhDs: Subscribe to Mailing List

Teaser

00:00 Jackie: We started out with a generic retirement fund, and then at some point later that year realized we could probably get better returns if we were more selective about what funds we invested in. So then we switched to some market index mutual funds and over the course of the next three years made almost $40K.

Introduction

00:26 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts. This is season eight, episode eight, and today my guest is Dr. Jacqueline Kory-Westlund, who recently completed her PhD in the MIT Media Lab. During their five years in Boston, Jackie and her husband lived on her grad student stipend and saved and invested all of his income. We discussed the frugal tactics Jackie and her husband used to keep their expenses low, even after having their first child. Saving and investing Jackie’s husband’s income gave them a sizeable nest egg by the end of grad school, which they used to purchase a home in cash in a low cost-of-living area of the country. Jackie and her husband have designed their lifestyle around location-independent work, so they can live where they want to while they expand their family.

01:18 Emily: It’s a model that is now an option for many more people whose positions went remote during the pandemic. This interview is a wonderful example of how an early, intense focus on a lofty financial goal can often result in financial freedom within a short time. Financial freedom means something different to everyone, but it could include leaving, or not taking in the first place, jobs that are unsuitable to you, location independence, working part-time, starting a business, staying home with a child, full-time travel, or just living your best life. Even if it is a bit unconventional. Financial freedom means choices. And this freedom can arrive quite a bit earlier than full financial independence, which is when you never have to earn an income again. We’ve had many stories on the podcast of guests working on or accomplishing a financial goal that seems outlandish for their career stage.

02:10 Emily: Some examples, which are linked from the show notes include Dr. Jenni Rinker paying off over $60,000 of student loan debt during grad school, Beth Moser clawing her way out of financial ruin during the great recession, Jonathan Sun and Dr. Matt Hotze house hacking during grad school, Courtney Danyel growing her freelancing writing business to over $100,000 per year, and Dr. Rachel Blackburn investing for retirement, despite her $1,000 per month grad student stipend. There are even more examples than that in the archives. Even my and my husband’s own story of increasing our net worth by over $100,000 during grad school qualifies. I can tell you that I appreciate my past self for being aggressive about frugality and retirement contributions more with every year that goes by. I don’t this to wag my finger at anyone who has not been working on a lofty financial goal. Personal finance is personal, and we all have different things we value. I just say it because I had no idea when I was in grad school and racking my brain for ways to increase our savings rate by another half a percent, how sweet financial freedom would taste just a few years later. If you’re looking for motivation to push yourself with your own finances, dream about what your best unconventional like might look like.

Book Giveaway Contest

03:28 Emily: Now, it’s time for the book giveaway contest. In February, 2021, I’m giving away one copy of The Simple Path to Wealth by JL Collins, which is the Personal Finance for PhDs Community book club selection for April, 2021. Everyone who enters the contest during February will have a chance to win a copy of this book. The Simple Path to Wealth has quickly become the go-to text in the financial independence community to explain passive investing, which is the style of investing that I practice and teach. It sometimes comes as a surprise that the most effective form of investing is both low cost and low maintenance. If you’ve been sitting on the investing sidelines, this book will almost certainly motivate you to get started by showing you how simple successful investing really is. If you would like to enter the giveaway contest, please rate and review this podcast on Apple Podcasts, take a screenshot of your review, and email it to me at emily@pfforphds.com. I’ll choose a winner at the end of February from all the entries. You can find full instructions at pfforphds.com/podcast. Without further ado, here’s my interview with Dr. Jacqueline Kory-Westlund.

Will You Please Introduce Yourself Further?

04:55 Emily: I am welcoming to the podcast Dr. Jackie Kory-Westlund, and she’s a recent graduate of her PhD program. And we are going to discuss her finances during her PhD and how she accomplished a massive financial goal, right upon completing her PhD, which was purchasing a home in cash. When Jackie emailed me about this prompt, I literally misread it because I could not believe that anybody would possibly do that. So this is going to be really exciting to figure out. But Jackie, why don’t you tell the audience a little bit about yourself first?

05:28 Jackie: Hi. Yeah. I did my PhD at MIT in the MIT Media Lab with Dr. Cynthia Breazeal. So I worked on small, cute fluffy robots that helped kids learn stuff. And I, let’s see, I finished in 2019, so I’m currently an independent scholar, writer, artist. I do not have a full-time job because I’m staying home for the most part, hanging out with my kids. My husband is a software guy so he works from home, has his own startups and all of that going on. And we had our first kid during the PhD. So that’s relevant to our finances and our financial goals.

Jackie and her Husband’s Finances at the Start of PhD

06:08 Emily: All right, let’s dive into it. This is such an exciting story. Okay. So please give me a snapshot of your finances when you started the PhD. If your husband was in the picture at the time, include him, too.

06:20 Jackie: Right. So when I started the PhD, this was back in 2012. I was one year out of undergrad. So I’d spent one year kind of doing a research internship thing. So I hadn’t made a lot of money at that point. My husband and I, we were not married yet at the time, but we both moved to Boston for MIT at the same time. I had a used car that was probably worth $2,000. We had a couple thousand in our bank accounts that we used for our first month of rent in the rental deposit and the realtor fee and a couple of thousand in student loans. And that’s about it.

06:56 Emily: Alright. Yeah. Almost zero, close to zero. It sounds like. And then what was your stipend?

07:04 Jackie: My stipend was about $30K a year. And MIT paid for healthcare for me, not for my husband. We had to add him to the plan later, once he couldn’t be on his parents’ plan anymore, you know, hitting 25 years old there. And that stipend increased slightly year to year because MIT made cost of living adjustments. And it also went up slightly when I switched from the master’s program to the PhD program, but it was never more than like 32K or so.

07:33 Emily: Okay. So from 30K, in 2012, when you started to about 32K, when you finished, you said 2019, right?

07:39 Jackie: Yeah. Though, actually for the PhD. So we actually moved and got the house the year before I finished. I finished up the last bit remotely.

07:49 Emily: Okay. Okay.

07:51 Jackie: Because I was just writing at that point, so we actually moved in the middle of 2018.

07:55 Emily: Okay, great.

07:56 Jackie: And at that point I stopped getting the stipend because I wasn’t on campus.

08:01 Emily: Oh. So you, you left the stipend behind in 2018 and finished self-funded after the last month or up to a year. And how about your husband’s income during that period?

08:11 Jackie: So initially, for the first couple of years in 2012 through about 2015 or so, he was working on a couple of startups and as a contractor, primarily working on his self-funded software startup. So was not making a huge salary, probably around $50K a year in the last couple of years. And throughout the entire time I was in grad school, our combined income never went over about $80K on our tax returns.

Strategies to Decrease Expenses During PhD

08:39 Emily: Okay. So that gives us a range to think about over that period. So pretty low at the start a little bit better by the end, but again, we’re talking about Boston, so yeah, pretty high cost of living area. So $30K is a pretty decent grad student stipend, but in a high cost of living area, it’s still really challenging. Okay. So that’s your finances when you started the PhD. So as you’re going through the PhD, I’d love to talk about, you know, both sort of frugality, like how do you keep a lid on your expenses? And also did you increase your income in any way? You just told us what the total was, but were there any, you know, methods that you used to increase it? So let’s start on the decreasing expenses side. What, you know, what were your strategies? What were the things that worked out best for you in terms of controlling those expenses?

09:21 Jackie: The biggest thing is we both just kind of by default are fairly frugal people. Neither of us like tend to eat out much. You know, we don’t usually buy that much stuff. We ate a lot of rice and beans. Probably were in the range of only about $250 a month on food. Probably the entire time we were there. I’m the one who started the trend in my lab of people packing their own lunches to bring to the lab.

09:46 Emily: Great influence.

09:49 Jackie: So we primarily lived on my stipend of about a $30K a year. And two thirds of that was rent. And our vehicle expenses tended to be pretty low because like we did have the car, but we didn’t use it that much. I took public transit and walked to MIT and that was half subsidized by MIT. And the other big thing was we had an awesome landlady who did not increase our rent.

Housing and Rent

10:13 Emily: Wow. Okay. Well, you just hit kind of the big three expenses right there. You hit housing, which at $20,000 per year is yeah. It’s a bit expensive on that grad student stipend. Really admirable, by the way of structuring your budget so that you would live just off the one income and save, presumably, the higher income. That’s really, really impressive. So you hit housing. Now was it luck that you found someone who was not going to increase rent, or was there any strategy involved in finding that place?

10:42 Jackie: That was entirely luck. When we were moving up to Boston, we spent about a week there prior to moving looking at places. And we talked to a realtor who was like, Hey, I’ve got this landlady who just needs someone. We just got lucky that she just had this policy on her own where she just didn’t like increasing rent too much. And she’s a nice old lady, lives downstairs, you know?

11:04 Emily: Yeah. I mean, actually that’s, you know, it could be luck for you, but it might be strategy for someone else. I wonder if there is something there around being neighbors with your landlord and like cultivating a positive relationship, because I think it’s definitely harder to raise rent on someone whose face you see like multiple times per week, rather than some, you know, unknown number or whatever in some system. So, yeah. So it sounds like you were living in a duplex kind of situation?

11:28 Jackie: Yeah. It was one of those three-story, three-family homes.

11:32 Emily: Triplex.

11:32 Jackie: Yeah. Triplex, that’s the word I’m looking for. Yeah. And my husband and our landlady, they both went to the same church, so that maybe was a relevant factor there, you know.

11:43 Emily: Yeah, any kind of connection you can make.

11:45 Jackie: Yeah. Yeah.

11:46 Emily: That’s awesome. Okay. So, you know, housing expense is clearly number one, but managing to get a place, you know, by luck probably that didn’t increase the rent is an incredible advantage because that, you know, the rate that rent often rises at is higher than, you know, what you’re getting in your salary increases for cost of living. So you hit housing, number one. You also mentioned transportation. You know, it’s a city life kind of thing. Like you don’t have as much need for like the car usage. And did you have one car or two?

 Sharing a Car, Reducing Food Costs

12:14 Jackie: Just the one.

12:15 Emily: Just one. Okay. So sharing a car as well, another great strategy. And you mentioned, you know, the food expenses. So not eating out very often and also, I mean, $250 per month in food is like really keeping a lid on things. You mentioned rice and beans. Presumably you’re cooking a lot. Do you have any other like, tips in that area around like managing the grocery? Both the budget and like the time that goes into cooking and meal prep?

12:40 Jackie: Well, I kind of have a hobby of cooking, so we did a lot of the crock pot full of a big dinner on Sunday, and then eat leftovers all week to reduce time cooking. Buying things in bulk, instead of popping out to the store every couple of days. We tended to go for beans over meat, which decreases expenses. You look for what’s on sale, you know. That kind of stuff.

13:05 Emily: Yeah. Do you have any like Boston specific tips, like a grocer that you really liked for good deals or something?

Roberto’s Produce (in Boston)

13:11 Jackie: Ooh, let’s see. Actually, we lived about half a mile from a produce store that had way cheaper produce prices than the main grocery store that we drove to.

13:22 Emily: And what was the name of it?

13:23 Jackie: That was, let’s see, what was it called? It was Roberto’s. Roberto’s produce. Cute little place. Just, just produce.

Financial Goals with Savings

13:30 Emily: Yeah. We actually frequented a little shop like that in Seattle as well and had great prices. You mentioned earlier that you actually bought your home prior to finishing your graduate program and that you had been, I think, saving your husband’s salary during that whole period. What were your financial goals during that time, aside from you said, living on just your income, what were you doing with your husband’s salary?

13:56 Jackie: So, in about, I think 2015 was when we realized that we had some money in the bank, we should probably do something with it, which was about my third year of grad school, I think. So we took all of our extra money and put it, invested it primarily in the stock market using Vanguard. We started out with a generic retirement fund, and then at some point later that year realized we could probably get better returns if we were more selective about what funds we invested in. So then we switched to some market index mutual funds, and over the course of the next three years made almost $40K just from having money invested, which is like free money! It’s just so cool. It was like, when we first started doing that, we were like, wait, we just get money from having our money sitting here? Like it’s pretty cool when you figure out how that works.

14:49 Emily: It doesn’t always work out like that over the short-term.

14:53 Jackie: It’s true, we got lucky with which, which years we were investing there.

14:57 Emily: Yeah. I felt that way too. I started investing basically in 2009, like at the nadir of the market and just the last decade has been incredible with, you know, a few hiccups along the way, but overall, obviously really, really strong. And was that in like retirement type accounts or was it more just taxable accounts that are accessible to you?

15:17 Jackie: We had a little bit in some IRAs and the rest of it was just like a generic account that we could move money around whenever we wanted.

Having a Child Motivated the Goal of Home Ownership

15:27 Emily: Okay. So you’re basically living on your stipend, investing your husband’s salary or whatever income he has during that period. At what point did the goal of home ownership materialize?

15:38 Jackie: About the same time we had a kid. So it was in my fourth year of the PhD. That’s when I started thinking, Hey, you know, we’ve got a baby now, at some point I’m going to finish this PhD and where are we going to go? What are we going to do? So that’s when we started doing a lot more life planning and getting a house with a yard somewhere for kids to play. And that’s when that started being like really on our radar.

16:01 Emily: Yeah. We glossed over the whole having a kid during grad school thing. How did that work out with like, did insurance cover pretty much everything? Like, how did the finances of the having a child work?

Health Insurance and Parental Leave

16:13 Jackie: MIT’s healthcare program like yeah. Insurance covered pretty much everything. We paid probably $200 total to have a baby.

16:19 Emily: Amazing. And did you get any leave?

16:22 Jackie: Yes. MIT was good about that as well. And the Media Lab gave me an extra month. So MIT had a policy of two months paid leave for any parents. And then the Media Lab gave me an additional month and that was all paid leave.

16:35 Emily: Amazing.

16:35 Jackie: So I had three months off and then last thing on that was my advisor was awesome. And my lab was awesome in that they’re all very supportive of this and I could work remotely a lot more and was at a point in the program where I didn’t have to go into class anymore because I was just able to just research stuff. So a lot of, a lot of things went into that being, not that bad, like being like a reasonably doable thing. I know it’s not for a lot of women. It can be difficult.

Did You Also Pay for Childcare?

17:06 Emily: So I think about three big expenses when it comes to having a child. We just covered two of them, health insurance and the leave. And then the third one is childcare. You just mentioned working from home, but did you also pay for childcare?

17:18 Jackie: We did not, actually. My husband and I split that.

17:21 Emily: So interesting.

17:22 Jackie: And just managed to work that into our work schedules. That was part of why he was doing such flexible work at the time. And then my lab was flexible. So we just squished childcare and somehow, you know, did lots of work when the baby was napping kind of thing.

17:36 Emily: Yes. I remember those days very well. I have two kids as well, and I’ve actually done one other interview on the podcast from season one. So if newer listeners haven’t seen this one yet, but you’re interested in having a child during graduate school, check it out because I interviewed another graduate student mother married to another PhD father who also did the same thing. I think for the first six months after their first child was born, they completely split childcare and I did not pay for any outside services in that regard. And yeah, she talks about how she managed to you know, complete her dissertation and get a TT job and have the baby. And it’s kind of a really crazy year for her. But it’s incredible that, you know, you took that on and then were able to accomplish it. Was that motivated by finances? Was it motivated by, we just wanted to spend time with our child a lot of time or, you know, what was the reasoning behind that?

18:29 Jackie: All of the above. So, childcare in Boston is ridiculously expensive. But also a lot of you want to spend time with this baby. Like, why would you have a kid if you don’t want to spend time with it? And there are some philosophical things around how we wanted to approach raising our kids and actually being around a lot of the time. I was homeschooled actually growing up. So that’s probably very influential in how I’m thinking about how to raise my kids.

18:57 Emily: Yeah, so a familiar model for you.

18:58 Jackie: Yeah.

How Did You Choose Where You Wanted to Live?

19:00 Emily: Gotcha. Okay. So got the baby, but we’re not paying for childcare or the other associated expenses. MIT did a good job providing you with the appropriate benefits. Okay. So then you said that home ownership became a goal. Once you had the child and you were like, we want to get out of the city life, how did you choose where you wanted to live?

19:19 Jackie: So we decided based on kind of two factors. One, we were not tied to any particular location first. So we could kind of pick anywhere because of the kind of flexible job situation that we’re setting up for ourselves. And then we wanted to move nearer to some of our family. We were like, we’re having kids. We’d love to have some grandparents around. We’d love to live near some family finally, because it’s been a long time since we’d done that. It was really nice. So my husband’s family is in North Carolina. Mine, a lot of them were in Idaho, North Idaho. So between the two of those, we were looking at the different areas and ended up picking Idaho for a variety of reasons. I mean, both places had a lower cost of living. It’s hard to get a higher cost of living than Boston, New York, or San Francisco. Lots of nice, pretty lakes and mountains up here.

Commercial

20:15 Emily: Emily here, for a brief interlude. Taxes are weirdly unexpectedly difficult for funded grad students and fellowship recipients at any level of PhD training. Your university might send you strange tax forms or no tax forms at all. They might not withhold your income tax from your paychecks, even though you owe it. It’s a mess. I’ve created a ton of free resources to assist you with understanding and preparing your 2020 tax return, which are available at pfforphds.com/tax. I hope you’ll check them out to ease much of the stress of tax season. If you want to go deeper with the material or have a question for me, please join one of my tax workshops, which you can find links to from P F F O R P H D S.com/T A X. It would be my pleasure to help you save time and potentially money this tax season. So don’t hesitate to reach out. Now, back to our interview.

Location Independence

21:21 Emily: Sounds like you know, you have intentionally chosen a route that not many PhDs do. You know, a lot of PhDs feel that they have to be geographically flexible to have the type of job that they want. And you’ve gone another direction and said, my primary goal here is to be in certain locations in the country and the job is going to be, it sounds like the job is going to be secondary to that in that you want to work in a way that is flexible to live wherever you want. You want to be location-independent. Is that right?

21:52 Jackie: Yep.

21:53 Emily: And that’s what you’ve done and your husband has done.

21:55 Jackie: Yes. Yeah. That’s one of the main reasons he was working on his smaller software startup was so that he would be able to work from anywhere and not be tied to someone else’s you have to work in this location. And I was not looking at the end of grad school to get an academic job, necessarily. I mean, there’s a university here, but I’m not looking for an academic job or a full-time job currently because I wanted to be able to spend time with my kids and also work on some part-time things.

22:25 Emily: Yeah. I see actually, a lot of similarities between your story and mine actually. I mentioned to you when we started the call that my husband and I recently became location-independent. He still has a job job, but it’s just remote now. And I would imagine a lot of people are in that situation and going forward, a lot of people are not going to be going back into offices and labs and all of that. So depending on the nature of the work that you do, a lot, I think more people in my audience are going to have location independence in their future.

22:54 Emily: And it’s really, it’s exciting, I was telling you too, but it’s also a little bit intimidating to figure out where exactly do I want to live.

23:01 Jackie: We made spreadsheets, we made spreadsheets.

23:05 Emily: You went the direction of going to a lower cost of living area, which is known as geographic arbitrage in the financial world. We are actually choosing to live in a very high cost of living area because we love it and want to be there, but have to make the finances, you know, work out to have balance in that area too. So, in different ends of that spectrum. Okay, so you chose based on, you know, more personal factors where you wanted to live and then comes this, you know, huge accomplishment of buying this home in cash. And I think we’ve already heard how you saved up for it, right?

23:39 Jackie: Yeah, pretty much.

How Much Money Did You Have for Home Buying?

23:40 Emily: So do you want to share like the numbers around that? Like how much money you had to work with by the time you did buy?

23:46 Jackie: Yeah. So when we decided to move, we had about $150K from our non-retirement accounts. We also emptied our IRAs for the most part which was about $25K. So we had around $200K to work with when we were buying a house up here. And relevantly because I no longer had the stipend from MIT when we were moving and my husband’s startup had, like no long-term proven history of income, we wouldn’t have been able to get a loan. So that was also relevant in us deciding to get a home in cash. So we had about $200K to work with and the market up here was moving very quickly at that time. So we came out to Idaho for about two weeks that summer with the plan of when we leave, we will have a house.

24:39 Emily: That’s an incredible story. You say, now you couldn’t have gotten a loan or it would have been, Oh my gosh. So, so difficult, so much paperwork or something. Did you know that that would be the case, like looking forward when you started that taxable savings, savings and investment, or was it just more about having flexibility at that point?

24:59 Jackie: Well, when we first started saving money, we had no idea what we were going to do with all of it. And then we were like, Hey, we should buy a house when we move out of here. And then when we started looking into, how do you buy a house? How do you get a loan? How, how much money do you have to put down on a house? How expensive are houses in the different areas that we’re looking at? As I said, we, we did spreadsheets for a lot of things and calculations about how much money might we have and how much money would we need for this kind of house in this area. And having provable income for getting a loan from just about any bank seemed to be pretty relevant. And because my husband’s business was not quite off the ground yet, it kind of got off the ground a lot more in the year right after we moved, there was relatively little income that we could prove at that point in time, which was, you know, fine for how we lived, because we didn’t need much income to live off of.

25:51 Jackie: But for the purposes of buying a house would have made getting a very expensive house difficult or getting one with a smaller down payment more difficult. And maybe, maybe there was a bank that if you talked to the guy and explained all your situation in lots of detail, lots of paperwork, maybe, maybe they could work something out. But the other factor, I guess, that I should probably talk about was our goal of being debt-free when we moved as well, because we only had a couple of thousand in student loans and we paid that off before we went for the house. So as soon as I was done with grad school I was like, all right, pay off student loans, get rid of any other debt that we have.

Challenges of Mortgages for Fellowship Recipients

26:31 Emily: Gotcha. I probably know a little bit more than I should about getting a loan at this point because my husband and I are anticipating buying a house soon. My brother is a mortgage loan officer, so he sells mortgages. So I’ve talked with him quite a lot about this process. And thirdly, he’s actually helped me quite a bit. We’ll link in the show notes to some episodes I’ve done before on how people receiving fellowships during grad school or a post-doc can or cannot ultimately get a mortgage because a lot of times they’ll be just flat, turned down right away. There is sometimes a way to get a mortgage, but it’s really tricky. So we’ve done all that in these other episodes, but to your point, self-employment income is another really kind of dodgy form of income. I know because that’s what I have that is going to be looked at a lot more carefully and you have to prove a lot more than, you know, you would for like a W2 type of situation.

27:24 Emily: So, yeah. It sounds like, you know, you, you started the savings investing for whatever, you know, because you were in a position to be living on just the one salary and saving the other, and it turns out that it helped you accomplish this like major goal. So now, you know, sounds like you have little housing expense, it would just be like insurance taxes, this kind of stuff, very minor relative to what a mortgage would be, correct?

27:51 Jackie: Correct. Yeah.

What Are Your Future Financial Goals?

27:52 Emily: Yeah. And so what are you thinking now about your finances? Like your, you know, your living expenses must be quite, quite low. So what are you working on next?

28:03 Jackie: So for what’s next we like the idea of having a bigger house with acreage around it. Because up here, we have, you know, the small neighborhood house on, you know, maybe a quarter acre, you know, enough space for a garden, a lawn. But we really liked the idea of having some more acreage out here because this is a great area for that. And then be able to keep this house and rent it out as side income. We would like to keep increasing our income enough that we can increase charitable giving, investing in the local economy and community, that kind of thing. Relevantly, we got our house for about $210K and it’s now worth over probably over $300K, just in the last two years because of the increased, this area is growing a lot. So we liked the idea of maybe being able to get something else soon and then maybe get into more real estate in this area. It seems to be growing a lot.

29:01 Emily: So what would be the plan for the next house? Would you try to take out a mortgage given the change in your husband’s income or in whatever you have going on or is it saving up more cash?

29:12 Jackie: That’s still up for debate. Kind of depends on what kind of house we want to have. Yeah we still have been talking. So that’s been actually a fairly recent conversation. We’re like, okay, we’ve been here for a couple of years now. Like jobs are working out better, you know, one is increasing, income’s increasing, like what are we doing next? So that’s something we’ve actually just been talking about a lot recently is like, what kind of house would we want next? And would we want to do that in cash again, or not? Because now we could deal with a mortgage payment, you know, we could do that now, but not sure.

Best Financial Advice for Another Early-Career PhD

29:46 Emily: Yeah. So still under development. Well it sounds, I don’t know, really lovely. It sounds like a real, you know, you’ve really done lifestyle design, I guess is the way that, you know, it’s kind of put in like the entrepreneurship community of figuring out how you want to make money, where you want to make money, where you want to live getting your expenses down very, very low, if you want them to be. And then maybe even turning this house into an income producing asset, ultimately. Wow. Like what a story. As we wrap up this interview, is there, what’s your best financial advice for another early-career PhD?

30:21 Jackie: Probably to actually have long-term financial goals. Because having something you’ve got your sights on helps a lot when you’re coming up with like, if you’re, if you’re trying to stop spending money or trying to budget and keep to a budget or whatever it is, having something in mind that you’re going for helps a lot. Because we got a lot more conscious about what we were doing with money when we were like, Oh, we have a baby and we want to move and we want to get a house. We started paying a lot more attention to what we were doing with our money. As the second thing, don’t actually be afraid of investing money in the stock market or mutual funds because in a good year, that can actually make you quite a lot.

31:01 Emily: Yes. We also made some investments in a taxable account that has grown quite a bit in the last decade, I guess. It’s actually part of our house down payment of money. Now it’s been allocated in that direction. I of course like need to say like past performance is no indication of future return. So like this was a great, you know, three or so year period where you got to do this, it’s been a great time for me investing, but you know, this ride is not going to continue forever. And so I think what you were just saying, like if you have a specific goal for your money, like think about the timing and think about how much risk you want to take with it. And if you’re flexible about it, like the house was not necessarily quite, you know, a goal on your horizon yet, it makes sense that you would, you know, invest at that time. But once you have the goal in mind, like really think about, okay, do I need the money, do I need to take it out of the market now, do I need to, you know, go a little bit more conservative in the investments because you can hit a bumpy period and then not have the time you need to write it out. But if you’re flexible, keep the money invested, then you know, you can go for the higher return over time.

32:03 Jackie: Yeah, we actually lost about $10K right before we bought the house because Trump started a trade war with China. We were like yeah so I guess we should pull this out of the stock market.

32:13 Emily: It’s really, really hard to time the market. Yes. Well, great lessons here and thank you so much for sharing, you know, again, the lifestyle design, the frugal living, the goals. I think it’s, you know, a wonderful story and well illustrated for my audience. So it’s really been a pleasure talking with you Jackie.

32:29 Jackie: Thanks. Thanks for having me on.

Listener Q&A: Tax Claims

32:36 Emily: Now, on to the listener question and answer segment. Today’s question actually comes from a survey I sent out in advance of one of my university webinars this spring. So it is anonymous. Here’s the question. Quote, how do I do my taxes? What can I claim on my taxes? Can I claim a laptop that I needed for school as an expense? End quote. So this is a really big question. Obviously not one I can answer in a few minutes on this podcast. So the best place to go for further resources about your taxes, especially as a funded graduate student, is my website pfforphds.com/tax. That’s my tax center from which I’ve linked all of my relevant podcast episodes and articles and videos and so forth. This answer is even too big for a set of articles. So I have created an entire tax workshop to help answer this question. The workshop comprises 11 videos, two worksheets, and one Q&A call per month throughout tax season. So if you’re interested in getting into the workshop and having a full exploration of this question, please go to pfforphds.com/taxworkshop.

33:55 Emily: Okay. The part of the question I do want to tackle on this episode is the last part. Can I claim a laptop that I needed for school as an expense? There are four higher education tax benefits. However, one of them is virtually always used by funded graduate students. This benefit is called tax-free scholarships and fellowships. I’ll tell you whether or not you can use a laptop or a personal computer as a qualified education expense for the purposes of making scholarship and fellowship income tax-free. I won’t comment during this episode on whether or not you could do it through one of the other three benefits. So how tax-free scholarships and fellowships generally works is that you have some income as a graduate student, for example, the scholarship or waiver that pays your tuition. If me mentioning scholarships as income shocks you, please go check out my further resources.

34:59 Emily: On the other side of the ledger, you also have some higher education expenses such as tuition. Now, tuition is always is considered a qualified education expense for the purposes of making scholarship and fellowship income tax-free as long as you are enrolled in a degree program at an eligible educational institution. So in the case of tuition for a fully-funded graduate student, how this usually works is that the tuition charge and the tuition scholarship or waiver exactly equal one another. And so basically use the qualified education expense to make the scholarship tax-free. So they cancel each other out. The income, the scholarship, has no net effect on your taxable income. You’ve made it tax-free. And furthermore, you can’t use that tuition charge to take any of the other higher education tax benefits because you’ve already used it for this one. Okay. So that’s generally how the benefit works.

36:00 Emily: The question that I’m drilling down to is, is a laptop or a personal computer considered a qualified education expense for the purpose of making scholarship and fellowship income tax-free? Now, please note, to get down to the question of whether your laptop or personal computer is a qualified education expense, you have to have some scholarship and fellowship income to cancel against it. If you’ve already canceled all of your scholarship and fellowship income against other qualified education expenses, like tuition and required fees, then you would not have any additional scholarship and fellowship income to try to cancel against a laptop. So this benefit wouldn’t apply in that situation. However, there are lots and lots of funded graduate students who have scholarship and fellowship income that exceed the tuition and required fees and so forth. So this question would apply to them. So is a laptop or a personal computer, a qualified education expense for the purpose of making scholarship and fellowship income tax-free?

37:04 Emily: I’m pulling up IRS publication 970 because I’m going to read the definition of a qualified education expense. Quote, for the purposes of tax-free scholarships and fellowship grants, these are expenses for tuition fees required to enroll at, or attend an eligible educational institution and course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction. End quote. The definition goes on to specify some types of expenses that are not qualified education expenses, laptops and personal computers were not included in that list. So we go back to the second half of this definition of qualified education expenses regarding supplies and equipment that are required for the courses at the eligible educational institution. They must be required of all students in your course of instruction. So the question is, does a laptop or personal computer fall under that definition? Here’s my opinion on the matter, this is not tax advice, by the way. If you can prove, if you can show in writing that a laptop or personal computer is required of every student in your course of instruction, that could be an individual course that you’re taking.

38:27 Emily: That could be the degree program that you’re enrolled in. That could be everybody in the graduate school. At whatever level, if a laptop or computer is required of all the students, then it can be considered a qualified education expense. I know that we both know that pretty much a laptop or a personal computer is required of every PhD student, especially in the time of COVID. However, you and I knowing that it’s a tacit requirement is not the same as it being an official requirement that the IRS would accept. The theory is that you, as a graduate student can go to the computer labs provided on campus and do all your work there, I guess, which obviously is ridiculous. But in my opinion, for this to work as a qualified education expense, it needs to be down in black and white somewhere that having your own computer was required.

39:29 Emily: Now I went searching to see if I could find some of these in-writing requirements. So I did a few different Google searches. Does X university require students to own their own computers? Obviously, you would do the search for just your own university. I found a really clear example at Iowa State University, page titled Computer Requirement, quote, beginning in fall, 2020, all students at Iowa State University will be required to own or obtain a laptop computer or other device appropriate to their discipline. End quote. The page goes on explaining why this requirement is in place, but having this page, you would be able to show to the IRS, Yes, I am required as a student at Iowa State University to have my own laptop or computer. It is a qualified education expenses for the purpose of making scholarship and fellowship income tax-free. Super clear. However, you will not find this kind of requirement or clear language everywhere.

40:25 Emily: For example, on the computing and information technology page on Brown’s website, it says, quote: Brown does not require students to own a computer. End quote. Of course, there’s more text on that page, but there it is, you’re not required to own a computer as a student at Brown. So unless you can find maybe something more specific to your course or your graduate degree that says something else, this would probably apply. So you would not be able to say that your laptop or personal computer is a qualified education expense. Now, as I said earlier, you know, there could be a university-level requirement. It could be a graduate school level requirement that could be, you know, for your individual department or program, even for an individual course, you know, you might find a requirement, any one of these levels. So please do look at all of those levels to see if you can find in black and white, this kind of requirement.

41:13 Emily: So for example, I searched out Georgia Tech, and I found their page titled, Required Computer Ownership, quote, all undergraduate students, entering Georgia Tech are required to own or lease a computer. End quote. So I could find that requirement for the undergraduates, you would have to search and see if they had a similar requirement for the graduate school or, you know, your degree program. I couldn’t find that. So I think that’s what it comes down to. Can you find in black and white that a laptop or a personal computer is required for you at some level by your university? If you can, it’s a qualified education expense, and you can use it to make some of your scholarship and fellowship income tax-free that was not already made tax-free by other qualified education expenses. This question showcases really well why you can’t rely solely on your 1098T to provide you with information about your qualified education expenses.

42:06 Emily: A laptop that you purchase from a retailer that’s not your university would not be reflected on your 1098T, yet, as we’ve seen under certain circumstances, it can be a qualified education expense for the purposes of making scholarship and fellowship income tax-free. There are other examples like this of qualified education expenses that don’t show up on your 1098T. So you cannot trust your 1098T alone. You have to really think holistically about what your higher education expenses were for the year, and then figure out whether they can be considered qualified education expenses. So I know that was a lot to follow, especially if you’re new to my tax material and you’ve never heard me talk about how your fellowship scholarships are part of your potentially taxable income. Again, if you want more resources, pfforphds.com/tax is the best place to go for articles and podcast episodes and so forth. But you’re going to find the really in-depth information in my tax workshop. Again, pfforphds.com/taxworkshop. I answer questions like this one once per month during our Q&A calls. The next Q&A call is coming up on Sunday, March 14th, 2021. Thank you so much to Anonymous for submitting this question. If you would like to submit a question to be answered in a future episode, please go to pfforphds.com/podcast and follow the instructions you find there. I love answering questions. So please submit yours.

Outtro

43:34 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast, and instructions for entering the book giveaway contest and submitting a question for the Q&A segment. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt, repayment, and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

What Happens When Personal Finance Education Becomes Your Hobby

January 11, 2021 by Meryem Ok

In this episode, Emily interviews Laura Frater, a first-year PhD student at the University of California at Davis. Laura grew up in a low-income family in Scotland and first came to the US a few years ago for a master’s degree. She went from having “zero financial literacy” at that time to being highly engaged with her finances now, and even considers personal finance education to be her hobby! Laura details the top seven tips for financial success that she has implemented over the last few years, including one just for international students. She continues to discover new strategies and experiment with her finances.

Links Mentioned in this Episode

  • Laura Frater UC Davis Profile
  • PF for PhDs: Community
  • PF for PhDs: The Wealthy PhD
  • The House Hacking Strategy (Book)
  • Emily’s e-mail address (for book giveaway contest)
  • PF for PhDs: Podcast Hub (instructions for book giveaway)
  • OPT Visa
  • PF for PhDs: Tax
  • I Will Teach You To Be Rich (Book)
  • PF for PhDs Episode with Dr. Amanda
  • PF for PhDs Episode with Dr. Michelle Roley-Roberts
  • Roostervane (Dr. Chris Cornthwaite)
  • PF for PhDs: Subscribe to Mailing List
financial education hobby

Teaser

00:00 Laura: You don’t have to sort of wait to be an adult to do those things. Like you are an adult already in grad school, and you can do other things that adults do with their money for sure.

Introduction

00:14 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season eight, episode two, and my guest today is Laura Frater, a first-year PhD student at the University of California at Davis. Laura grew up in a low-income family in Scotland and first came to the U.S. a few years ago for a master’s degree. She went from having zero financial literacy at that time to being highly engaged with her finances now and even considers personal finance education to be her hobby. Laura details the top seven tips for financial success that she has implemented over the last few years, including one just for international students. She continues to discover new strategies and experiment with her finances. For season eight of the podcast, I’ve shifted up the format. There are two new short segments, one before, and one after the interview. I hope this new format will encourage more interactions between me and you, the listener.

01:17 Emily: January is always an exciting month for Personal Finance for PhDs. First, it’s a brand new year, so a lot of people have a heightened interest in personal finance at this time. They want to start budgeting, increase their savings, open IRAs, et cetera, and I love that energy. Second, tax season has started. I rarely file my own tax return before April 15th, but I’ve learned that a lot of people file in January to get their tax refunds ASAP. Therefore, I’ve already kicked off my tax support for your 2020 return, which you heard about in last week’s episode. Third, I view January as the start of admissions season for PhD programs. Although, I know some people receive acceptances even earlier. So, it’s a thrilling and hopeful time of year for prospective graduate students, and a perfect time of year for them to connect with my material.

02:10 Emily: If you would like to learn more about personal finance and want a friendly environment in which to ask questions and discuss topics, including all of the ones I just mentioned, please consider joining the Personal Finance for PhDs Community at pfforphds.com/community. If you know that you want support in accomplishing a big financial goal this spring, I recommend my group coaching program, The Wealthy PhD. You and I will meet one-on-one to identify and plot a course toward a big financial goal. Past participants have opened IRAs, set up systems of targeted savings, started budgeting, and systematically implemented frugal tactics. Every week for eight weeks, you will participate in a small accountability group that I facilitate that will keep you on track to meet small weekly goals. The next round of The Wealthy PhD starts in mid-February, and enrollment is open now. Visit pfforphds.com/wealthyPhD to learn more.

Book Giveaway Contest

03:12 Emily: Now, onto one of the two new segments, the book giveaway contest. In January 2021, I’m giving away one copy of The House Hacking Strategy by Craig Curelop, which is the Personal Finance for PhDs Community book club selection for March 2021. Everyone who enters the contest during January will have a chance to win a copy of this book. I’m super enthused for my audience to learn about house hacking, which is when you buy a home, live in it, and rent out part of it, thereby radically reducing or even eliminating your housing expense. In fact, I’m bringing back a special guest from the past to discuss the strategy with me in an episode that will be published at the end of January. We’re going to tell you how even a grad student in certain housing markets can apply the principles explained in this book. And certainly, it’s even more viable if you have post-PhD income. If you’d like to enter the giveaway contest, please rate and review this podcast on Apple podcasts, take a screenshot of your review, and email it to me at emily@pfforphds.com. I’ll choose a winner at the end of January, from all the entries. You can find full instructions at pfforphds.com/podcast. Without further ado, here’s my interview with Laura Frater.

Will You Please Introduce Yourself Further?

04:29 Emily: I am delighted to have joining me on the podcast today Laura Frater. She is a first-year PhD student at UC Davis, and she’s going to be kind of telling us the arc of her financial story, starting as international student, and now, you know, in her PhD. And she has a great story to tell. And she’s going to be specifically telling us a few different strategies that she’s used, seven different strategies she’s used, in the course of this time to kind of get her financial life in order and now going into a PhD program. So Laura, it’s really a pleasure to have you on thank you so much for volunteering. And would you please, you know, tell the audience a little bit more about yourself?

05:10 Laura: Yeah, sure. So, my name is Laura and I just turned 29. I am originally from Scotland. I was born and raised in Glasgow and I moved to the U.S. when I was 25. So, it’s been about four years. I originally came to do my Master’s in English in New York city. And after four years of being there for very long years, I moved to Oakland, California with my husband about three months ago. So yeah, I’m still settling in and learning how to finally manage my money properly with my brand new graduate stipend, which is exciting.

Funding Journey Over the Past Four Years

05:43 Emily: Great. And so just to get a little bit more detail there, was your master’s funded? Were you paying for yourself? What were the financials during that period?

05:51 Laura: Yeah. Good question. So, I was there as an international student but it was a private school, so I had a full scholarship. I had all my tuition paid for, and then I had a fairly modest bi-weekly stipend over the course of two years. So, obviously it wasn’t a lot of money, but it kind of paid for things like travel. And my now-husband was a rock star and he took care of things like rent. So, I was definitely in a very fortunate situation overall.

06:21 Emily: And did you finish your master’s within those two funded years? And what did you do for the next two years? We’re talking about a four-year period, right?

06:28 Laura: Yeah. Four years. So the first two years, yeah, I started 2016, finished 2018. And then I went onto what’s called the OPT visa, which is like a temporary work visa for international students. So I spent about a year working on that visa, and long story cut short, I got married and applied for my green card and became a permanent resident last year.

06:53 Emily: Okay, gotcha. So, I wanted to give the listeners as well, a flavor of like your current financials. So, you came to the U.S. What was your financial life at that time, and what are you doing now? Like sort of where are you now? And then we’ll talk about, you know, how did you get from point A to point B? So, you know, what was point A, what’s point B like?

07:11 Laura: Yeah, well, point A was just a total lack of awareness with money. So, I really, I didn’t really grow up with any financial literacy, and I grew up in a very, just like a low-income household, basically. So, money was just always associated with stress and limitations. So, I didn’t have any knowledge about managing it effectively. So I would, I tended to, you know, pay for everything I needed to pay for. And then I would try and like hoard all my money and save everything, but that’s just not realistic. So, it was kind of a mess. And when I was not able to work last year waiting for my green card, I just made a huge point to learn about finances and become as aware as possible about every dollar and where it was going. So, today it’s just much more about engagement and seeing it as a way to feel more free, basically. As free as you can be in graduate school.

Financial Strategy #1: 50-30-20 Rule

08:08 Emily: Okay. So, it’s really been a lot of like sort of mindset evolution then during that period of time. And it sounds like you went about it also very intentionally, at least for a period last year. So, let’s dive into the strategies then. You have six strategies that will be sort of applicable to hopefully anybody and then one that’s particular for international students. So, we’ll talk through each one of these. So, first strategy, what is it?

08:31 Laura: Okay, so this is something I definitely picked up listening to your podcast. So, knowing exactly where your money’s going and what the goal of those segments of money actually is. Again, this is something I learned from you was just the 50, 30, 20 rule. So, 50% goes towards everything you need to pay every month, like rent and utilities, and then 30% is for your wants–things that you want to spend money on–and then 20% towards your savings goals. So, just having those goals clearly outlined has been the biggest thing.

09:04 Emily: Yeah. I definitely like that touch point, which is why you’ve heard it from me before, but I’m curious how it struck you living in New York and now living in California. Because sometimes it’s really hard to hear that living in a high cost-of-living area.

09:17 Laura: Yeah, it’s definitely challenging. And I should definitely preface this by saying that, you know, being married, I share my expenses with somebody, so I have a benefit in that sense, for sure. We talk about our money really openly and we both stay within that 50, 30, 20 limit. So, we really talked about the kind of lifestyle that we could number one afford, and then, okay. So, were we willing to make certain sacrifices to live where we ideally wanted to live? So yeah, we probably spent about a month deciding on, you know, where we wanted to live, the cost of the apartment, did we want a car. All those kinds of things. And yeah, we definitely live, we live in Oakland, so it’s very expensive, but it’s a trade-off. We’ve had to be at peace with that choice.

Impact of Location and Commute

10:05 Emily: And let me, I’ll just ask also, so you’re living in Oakland, but you’re going to UC Davis, and those are not the same city. So, is there like, are you commuting or is it different now because maybe you’re remote or what’s going on with like your choice of location?

10:19 Laura: Yeah. So everything is online at Davis until next year. So, our lease in Oakland ends October, 2021. So, we definitely have the option to go closer to Davis if we want. But honestly, my schedule is very flexible and I only have to be up there twice a week, on average, if I was going up there. So, I don’t anticipate us moving somewhere cheaper so that I can be closer to Davis. My husband works in tech, so he has to be in San Francisco. So it’s really, we have to prioritize how much he has to commute, because that would be like an everyday occurrence almost for him.

10:56 Emily: Gotcha. Well, we’ll see how all of this evolves. You know, we’re recording this interview in November, 2020, and the future is very uncertain. I guess you at least know when your remote period will definitely go until, if not maybe further. Yeah. So, we’ll see how that goes. Anything else you want to say about that? The strategy of like, of budgeting and balancing?

11:17 Laura: I mean, I think you just have to like, not be afraid of the numbers and, you know, we really sat down, especially with the rent. Coming from Manhattan, we thought there’s no way it can be more expensive than Manhattan. And it was. So, you know, this is down to my husband’s great sales skills. He really haggled with the building and got us a really good deal. I wish I could give advice on how to do that, but I don’t. You might be better to interview him for that. So, we got about 12 weeks off of our rent. So, three months of this year we don’t pay for, and we managed to get free parking in our building as well for a little bit. So, negotiation skills is probably my next financial education to-do list point.

Financial Strategy #2: Side Hustles

12:01 Emily: Yeah, that’s incredible. And I think that’s both, it’s just good to know that it’s possible and some people are successful with it. Even if you don’t know, like particularly the script that he used or whatever, you can look up those kinds of things. But I am thinking that, you know, being in San Francisco adjacent kind of area, and also during COVID times, you know, the willingness to negotiate on behalf of the company that’s running the building or whatever is probably increased. So, it’s worth trying whenever, but I suspect your success rates are going to be higher now than they will be a year or two from now or whatever. Okay. So, what is strategy number two?

12:38 Laura: So, number two is something, again, that you’ve talked about a lot is side hustles. So, I’d always aimed to find a side hustle during grad school. You kind of have to. But, I ideally wanted something that was remote during this weird time. So, I was lucky to get, it’s a grading job with UT Austin. So, you’re basically grading papers for this program that they do for high school students who are taking college-level composition classes. And I’m not totally sure how I feel about it yet. It’s definitely a lot of work for the money that you make. So, that’s something to probably think about. You know, maybe have a goal in mind in terms of how much money you want to make off of your side hustle, how much you need to make, and then decide whether that side hustle is the best fit for you. So, I’m going to do it for a few more months and see what else is out there. But I would never say no to even like a little bit extra money in the week on those stipends. So yeah, definitely go for a side hustle if you can.

13:37 Emily: Yeah. So, I do want to note that you’re saying that you did the side hustle post-getting your green card, because you’re not allowed to have an income that you are working for as an international student. So this is only for, you know, people who are citizens or residents and also even a subgroup within that of people who are not going to be risking their funding by pursuing a side hustle or, you know, their relationship with their advisor or whatever. So, it sounds like the kind of the one that you chose is probably quite flexible. Maybe the pay is not great for the hours, but you can fit it in around the other things that you’re doing.

Flexibility and Fellowships

14:09 Laura: Yeah, totally. It’s definitely very flexible and yeah, that’s a good point. I’m on a fellowship. So, I cannot work at UC Davis or any of the UC campuses, but I’m allowed to work anywhere else off those campuses. So, this was actually recommended to me by UC Davis and I felt pretty confident going into it that it was, you know, a good space in which to work. So, yeah, I think keeping an eye on how much I’m probably making per hour, given how much work I’m doing for them. And I love the job itself. I just want to be careful that I’m not giving too much of my time for, you know, a really low rate of money. So, that’s something to definitely be aware of.

14:48 Emily: Yeah. I’m really glad that UC Davis actually gave you that clarity around what the policy was, because I don’t know that that’s actually that common. So like, here’s what’s not allowed, here’s what it is allowed. Oh, recommendations for what, you know, what work you might do. I know I had a side hustle that was doing editing for journal articles for a while after I finished my PhD. And I similarly had to be really conscious and sort of suppress my like perfectionist tendencies, because I was just like, for the rate that I’m being paid, I need to be very careful how much time I spend per paper. And like, yeah, maybe I’m just going to get it 90% of the way there. That’s okay. That’s good enough. And not, you know, toil over every like last detail. So, yeah. Great tip to be conscious about that. Anything else you wanted to add about side hustling?

15:32 Laura: So, one thing I am doing right now is I’m almost a qualified yoga teacher. So, that is something I really want to pursue. And I don’t know enough about setting up my own business yet and things like that. You obviously want to make sure that you’re not, you know, you want to be paying taxes and things like that. That’s really important. But the yoga stuff is just something I love to do. And I started becoming a teacher actually during COVID. Like right at the beginning, there was a really great online course. So things like that, you know, try and make those side hustles fit in with your schedule. Don’t be like missing time on studying just to make money if you can avoid it. So yeah, just looking for flexibility and not being exploited is the most important thing, I think.

16:15 Emily: Totally agree with both of those. And I’ll also add, I really like that you are just experimenting with things. You know, like you aren’t holding onto like, what’s exactly the most perfect thing, and that’s the only thing that’s going to be acceptable. Or you don’t have these limiting beliefs around, I’m not allowed to do anything. I can’t do anything. I can’t fit it in, I don’t have time, I’m not allowed. Yeah, you’re just trying things out and I think that’s a great approach.

16:36 Laura: Yeah. It’s definitely fun. And you know, again, podcasts like yours, you know, finding out from other people what they’re doing. It doesn’t have to be a conventional, probably pretty dull side hustle. Like, you know, try and enjoy your life as much as possible because I think these years only get more intense as you keep going with the PhD. So, try and do something that is good for your soul as well as your bank account.

Financial Strategy #3: Check Your Bank Account Regularly

16:58 Emily: Yeah, that sounds good. Okay. Let’s talk about your third strategy.

17:03 Laura: Yes. So, I think just checking your bank account every single day is, it seems like the most simple advice, but something that I never used to do. I would just, you know, live in denial and not check it for days at a time. So, like take advantage of the apps from your bank. Like they need to be good for something. So, have it on your phone, check it every day. And I also try and look at the last five to six transactions. And I try and work out, are there any patterns in my spending? Are there things that I’m wasting money on? But that also helps you figure out what you actually enjoy spending your money on in the first place, so you can be prepared for it. And it also will just show up any kind of like random transactions that were maybe incorrect, which actually do happen. Like you think that they won’t, but they definitely do.

17:51 Emily: I have an example of that actually, that I was looking at our, my husband, I share a Mint account. I was looking at it the other day, and I saw a charge from Amazon Music for like $15. And I was like, Hmm, husband, did you subscribe to Amazon music without discussing that with me? And he goes, Oh, no, like weirdly my phone was like freezing up and I thought I tapped something and then I wasn’t sure. And so anyway, it was a total mistake that he, you know, accidentally subscribed and, and he, you know, he talked with them and he got it reversed and it was totally fine. But if we had gone a month or two without like catching that, or if it had just gone into the, you know, swept away with all the other transactions, then, Hey, you’re out $15 every single month. Not just one time.

18:32 Laura: Yeah. It’s a lot of money. I mean, also like looking for those free trials that you forget to cancel. Happened to me twice this month. I was so embarrassed because I pride myself on not letting that happen, but Microsoft charged me 75 bucks, which, you know, I would have gotten that free through Davis and I forgot that I paid for last year, and Hulu as well. So yeah, we still have it for one more month, but not worth it at all.

Monitoring Short-Term Savings Goals

18:56 Emily: So, what else do you get out of the particular strategy of checking every single day? Like, are you, I mean, you mentioned finding patterns in your spending, which I think is super valuable. What else are you getting out of that practice?

19:09 Laura: I think the other thing right now that I’m getting out of it is checking on my short-term savings goals, which I’ve actually established, which is really great and has lowered my anxiety. Also like looking for avoiding any bank fees, which are really, really tricky, especially with someone like Wells Fargo, who we can talk about that later, maybe, but like that bank is terrible about those fees. Checking for example, how many times I’ve used my debit card to make sure that I avoid the monthly fee. Things like that, that I never really did before. It’s just another way to be as fully engaged as possible with my spending.

Financial Strategy #4: Make Financial Education a Hobby

19:47 Emily: Alright. So, what’s your fourth strategy?

19:49 Laura: Fourth is just making your financial education a hobby. I guess that’s the best word to describe it. I used to view finances and the education around it with a lot of fear and anxiety, but finding fun ways to learn about it has really changed my life in so many ways. For example, your podcast. I’ll go for a walk by my apartment. I’ll go running, I’ll go to the gym. And I just pick an episode and then I, you know, listen to it and I make notes on it afterwards, normally. Getting an audio book is a really good idea as well. Going on YouTube and just sifting through different people’s videos. There’s definitely some weird people out there for sure. So you can, you can judge that as you, as you figure your way through it. But just making your education a part of your lifestyle, I think is really important.

20:37 Emily: Yeah. I definitely also went down this road with when I was sort of getting, I had been learning about personal finance through reading some books and stuff, but then when I got a little bit interested and more engaged, I was reading about a lot online and like starting to connect with bloggers and then I started blogging myself. So, there was like a community, you know, developing online around it. And I definitely would call that my hobby at that time, which of course has since become my business. But at the time it was just a fun thing I was doing like, you know, wake up, like check my email and like check my like feed for, you know, what the new blog posts are. And I really liked having that perspective from other people. I think those communities have moved more towards like Reddit and YouTube now.

21:17 Emily: It’s not so much like blogging. I mean, people still do that, but it’s not quite as huge as it was at that time. But just finding like a way that you like to consume information, like you were just saying, like audio works really well for you. Obviously, I love podcasts. So, audio works for me too. Finding a way you’d like to consume information and then a few people maybe like on whatever medium that is that you like to follow. There’s a big personal finance community on YouTube now, I know. So, if that’s your thing, like you could definitely find, you know, great influences there. And yeah, I think books still have their place for sure. And if audio books can do well, or if you have the time and capacity to read, then that’s perfect too.

Commercial

21:54 Emily: Emily here for brief interlude. Taxes are weirdly unexpectedly difficult for funded grad students and fellowship recipients at any level of PhD training. Your university might send you strange tax forms or no tax forms at all. They might not withhold your income tax from your paychecks, even though you owe it. It’s a mess. I’ve created a ton of free resources to assist you with understanding and preparing your 2020 tax return, which are available at pfforphds.com/tax. I hope you’ll check them out to ease much of the stress of tax season. If you want to go deeper with the material or have a question for me, please join one of my tax workshops, which you can find links to from PF F O R P H D S.com/T A X. The first live Q&A call for my workshop on preparing your 2020 PhD tax return is this Sunday, January 17th. Also, for those of you who are paid by fellowship or training grant, the deadline to make your quarter four estimated tax payment is January 15th. If you’re not going to file your tax return by the end of January. It would be my pleasure to help you save time and potentially money this tax season. So, don’t hesitate to reach out. Now, back to our interview.

Financial Strategy #5: Decide What Makes Your Life Rich

23:21 Emily: So, what is the fifth strategy on your list?

23:24 Laura: The fifth one is actually from a really good book called I Will Teach You To Be Rich, which was actually the audio book that I just downloaded. And one of the questions, gosh, the author’s name I’ve totally blanked on.

23:36 Emily: It’s Ramit Sethi.

23:38 Laura: So, yes. He’s really great. And I wasn’t super sure about the title at first. I thought it was maybe like a little bit crass, but he has some really good advice including sit down and decide what makes your life rich. And that doesn’t mean in terms of how much money you have for retirement or how much money you have on the day-to-day, but what do you really value and what do you enjoy spending your money on? So, that was something that I kind of made my husband and I sit down and talk about. You know, like what are our individual, you know, finance goals and our joint ones as a couple in the next five, 10 years. Like where do we want to live? Like what kind of life do we want to have for ourselves? And it’s not just helped us plan our savings more appropriately, but it’s also alleviated my personal guilt when I see like what I’m spending money on. For example, I love eating out. Like I never did it growing up and I love doing it now. And that’s part of what makes my life personally rich. So, it just helps you, I think, feel less shame if you’re spending things and you’re initially worried that it’s not appropriate. But if that’s what you value, then you should enjoy it if you can afford it.

24:46 Emily: Yeah. I think Ramit’s voice is a very unique one in the personal finance space, because he does have this emphasis on, you know, spend extravagantly on the things that are really important to you and increase your income so that you can support that. And do not worry about like, cut spending in the areas that are not important to you. I was just actually listening to him as a guest on another podcast a couple of days ago. And I think he said something like, you know, he drives a super old car still and he like, there are some areas of his life that he really does not spend on, but there are a few that he’s identified they’re really important where he spends lavishly. And so that’s, I think it is a really good perspective for someone who is like you were talking about earlier, like sort of afraid to spend money or like hoarding money that like, I can definitely see how that message could help you with your own money mindset.

25:38 Emily: I Will Teach You To Be Rich actually came up earlier on the podcast and we’ll link it from the show notes. We did an interview with Dr. Amanda and she talks about how that book in particular, when it was first published like 10 years ago or whatever totally turned her like money life around. That was like the sort of inception of her money, her financial journey. So, if you want to hear another perspective on, you know, how that book’s helped someone else, that’ll be linked from the show notes. Yes.

In Other Words: What Are Your Values?

26:05 Emily: So, another way of like saying this, like figure out what makes your life rich thing, which is a little bit more like classic financial planning, is what are your values? What is important to you? You also mentioned identifying goals. And I think it’s a wonderful process. Not, you know, not a lot of graduate students might get into this because they feel like they’re more on the survival level. But what I like about this exercise of figuring out what’s really important to you, what really makes you happy, what really makes you feel satisfied, is that there are sometimes ways that you can find a way to fulfill those values that don’t involve spending. And that’s okay. Like for instance, you know, you said earlier that you’ve been trained to become a yoga teacher. So, maybe, I’m guessing, physical health and mental health and balance and things like that are important to you. And it doesn’t take a lot of money to have a yoga practice, right? So, there are ways to find fulfillment, even if you aren’t able to spend right now. But then later, you know, when your income is higher, post-PhD, you can maybe think of ways that you could spend and even enhance that more later, but still find some ways to do it now and fit it into your life right now. Instead of just sort of saying to yourself, I can never do anything. I can never spend anything. I can never afford anything because of my stipend right now. And just sort of shutting all of that down.

27:19 Laura: Totally. Yeah. And I think that’s something as a cohort when you’re in your PhD program, like you should definitely talk about that with other people. Because the attitude, at least from what I witnessed, is like, everyone’s scared about their money. But you’re totally right. If you sit down and think about what brings a particular richness to your life. But when I did it, I realized, Oh, wow, I do yoga. I love hiking. I love going for walks. Like I’m such an old lady that way. So it’s like, I have all these things already there for free. And it just helps you feel, it gives you perspective on your money. It’s, you know, you don’t have a lot right now, but that’s okay because X, Y, and Z doesn’t cost me anything.

Financial Strategy #6: Talk to Your Partner About Money

27:55 Emily: Well, it’s a wonderful point. Thank you so much for expanding on that one. Sixth strategy. What’s that one?

28:02 Laura: So, the sixth is to anyone in a relationship. Talk to your partner about money. It’s not something you talk about the first couple of years, probably, when you’re on your first dates. But I mean, my husband and I have been together for almost nine years, married for just over a year. And you know, he’s so good with money and he has such a natural interest and I have such a fear of it normally that we’re kind of a perfect match that way. But the more we’ve talked about it, the more our relationship has improved, the better our goals are with our spending. There’s no awkwardness about things that we’re both buying. We do also keep, you know, separation there, which I think is healthy. I don’t know everything that he’s spending his money on, but we both know exactly how much the other person makes every month. We both know our bills when they’re due and if there’s any kind of more extravagant purchases that we’re both thinking of having as individuals, we do run them past the other, because it’s just a respectful little gesture. So, just making it a not scary thing. Just talk about it with your partner. The worst thing is to keep it a secret, for sure.

29:10 Emily: It sounds like you two have found like a balance. You have transparency but you also have a degree of autonomy. So, no secrets, anything that needs to be flagged as brought to the other person’s attention, but the decisions are still ultimately your own individually for certain aspects of your spending. And obviously certain aspects you have to come to an agreement. I did a pretty interesting podcast interview recently with Dr. Michelle Roley-Roberts where we talked about joint and separate finances.

29:40 Laura: Yes. I listened to that.

Financial Strategy #7: Learn About U.S. Credit Card Culture

29:42 Emily: Cool. Yeah. So, I’ll link that in the show notes, in case people want to follow up on like, okay, well, what is the money management system that might work well for me? And you can certainly hear, you know, Michelle and I discuss our respective systems, which are somewhat different and somewhat similar. I think that your last strategy is specific to international students. So, will you share that one please?

30:00 Laura: Yeah. So this one, I so wish I’d known before I moved here, but better late than never. Learn about credit card culture in the USA, because it’s not going away and you will be all the better for accepting it. And I know it’s not always possible on a student visa to get a proper credit card. That was the problem I ran into, but they will give you something like a credit card from certain banks, and it will be a way to transition into an adult credit card, so to speak. I just got my first credit card. I’m not ashamed to admit it. So if anyone else out there is thinking, Oh gosh, I don’t even have one yet. It’s okay. Like better to just go and do it. But I just had so many questions about them because growing up in Scotland, we were always told don’t get a credit card. It’s, you know, it’s because you’re a failure financially, if you need to get one. But here it’s a very valuable thing to have a good credit history. So, learn about it as soon as you can, and go to your bank and just ask a ton of questions. And do not leave until you know the answer to all of them. Because they’ll try and just brush you off most of the time.

31:08 Emily: So, the credit card culture that you were just mentioning. It’s so closely held for me. I was taking a second, like, what do you mean by this? What is this culture? So, what you’re saying is like the importance of credit, like your credit score, your having good credit reports and so forth is not just for when you want to get a mortgage or when you want to take out a car loan or whatever. It can be checked by landlords. It can even be checked by employers in some cases. And so it’s like, yeah, weirdly important to have a really good credit or, you know, a decent to good credit score. And it doesn’t mean, like you were just saying, that you’re necessarily in debt or, you know, taking out lots of debt, or that you’re in a need or anything like that.

31:50 Emily: But yeah, it is it’s pretty weird and it’s pretty insidious that other kinds of payments are not reported on your credit report. Like, Hey, I pay my rent every month. Shouldn’t that count for something? And it’s also weird that your income doesn’t factor into your credit score. So, it’s a very strange system. I agree. And so, okay. So, I understand. So you had to understand what was going on with the U.S. system and kind of accept that, yes, you did need to establish a credit score. These are the steps to do, you know, get a secured card, later on, get a regular credit card once you have a credit score, and then kind of work it up from there. Is that right?

32:26 Laura: Yeah, totally. And again, like I was in a very privileged position because my husband has a credit score. But again, I didn’t know that to get an apartment, for example, in New York, even with his credit score, which is really solid, it was still a challenge. Like you got to wait until it’s processed. There are a lot of questions afterwards as well. So, just establishing that, the sooner the better. It will lift your anxiety about it and it, unfortunately it just will give you more freedom down the line. So, I would start off really small. You know, I just got my credit card and I’m only allowing myself to use it for certain expenses in the month so I can practice using it appropriately. So, just figure out how to use it properly and stick to the rules. And I think you should be good to go.

Credit Cards Can Intimidate Anyone 

33:12 Emily: I’ll actually like add in, even for, you know, people have grown up in the U.S. or whatever. Like, I also was very afraid of getting my first credit card, which thankfully I don’t know how, because I was very ignorant at the time, but thankfully I did not sign up for any credit cards during my undergraduate degree. So, I got through all of that with only, you know, I had student loans and so I actually had a credit score, but I didn’t have any credit cards. Thankfully. And by the time, I don’t know, I had just been like warned so strenuously about the dangers of credit cards that I was very, very nervous to get one for the first time. But like you, I was reading about how important it is to build credit. And this is, you know, an easy way to do it without actually paying interest on anything, which is also nice.

33:52 Emily: So, I like very carefully picked out my first credit card, very reluctantly, like signed up for it, used it very infrequently. And, you know, have still maintained that account to this day because it’s my oldest account. So, it’s definitely not just international students who can be kind of like perplexed and nervous about this whole system. It’s a little bit easier, of course, if you did go to college in the U.S. and you did take off student loans because you will have a credit score, even if you have never made a payment on student loans or anything like that. It’ll actually probably be a decent, I don’t know. It’s so weird. It’s such a weird system.

34:26 Laura: It’s so weird. Yeah. I mean one last thing I would say is just when they give you those documents at the bank with all the terms and conditions. It’s very tempting to just put it in an envelope and not look at it again. I have a whole box, actually in my office right now, and I’ve gone through the whole thing with a highlighter. And I asked my husband the definitions for things. I search online. I called the bank twice more because I wanted to confirm something. Like, ignorance is just not bliss. You just, you need to know what exactly you signed up for to really feel confident about it.

Benefits of Reflecting on Your Money Mindset

34:55 Emily: Yeah. Well, thank you so much for adding that. I know that a lot of international students I think hear this advice of open up a secured credit card when you get to the U.S. But I think a lot of them will kind of find some kinship with you in your like trepidation about this. And what exactly is this about and what are the attitudes? So, yeah. Thank you so much for adding that. So, what are the benefits that you’ve experienced from going through this, you know, this process and reflecting on your money mindset that you grew up with and putting all these strategies in place. Obviously, I’m assuming your hard numbers of your financials are looking rosier than they would have if you hadn’t gone through this process. But is there anything else that you want to add about benefits aside from the, you know, the black and white?

35:38 Laura: Yeah. I think that the biggest benefit is just, you know, getting out of this mindset as a grad student that you can’t have any savings goals. That was the big misconception that I had. You know, once you learn, for example, what an emergency fund is, what a Roth IRA is, all these little things. You realize, Oh, wait, it is possible to save for the future. Yeah. It’s not going to be as much as someone working as a lawyer or whatever, but it’s going to add up over the five, six years that you are on this smaller stipend. So, you know, it gives you a lot of hope and I think the mental health during graduate school, that’s something you have to be aware of. And putting aside, you know, a couple of hundred dollars a month to your Roth IRA, for example, that’s a great feeling. And that’s, you know, one of my goals that I have by the spring. You don’t have to sort of wait to be an adult to do those things. Like you are an adult already in grad school, and you can, you can do other things that adults do with their money for sure.

36:35 Emily: Yeah. I also, very coincidentally, I gave an interview this morning for Roostervane, which is Dr. Chris Cornthwaite’s brand. And I was talking about this as well, the mindset of really that label of being a student. It makes sense in a context, but it can really trip you up and mess you up, like in your mindset, because I think, you know, at least in the U.S., you know, for traditional college students, we’ve kind of accepted that it’s an extended adolescence period of time until you graduate from college and it’s okay to be dependent on your parents. And, you know, you may be still not really working on your finances because, Hey, you’re probably taking out a bunch of debt. We’ve kind of accepted that. And then when that student label gets applied to funded PhD students, there’s really a disconnect. And it’s much healthier, as you were just saying, to not really make that student like the closest part of your identity, but recognize that you are an adult, you need to have a well-rounded life, you know, financially healthwise, in your relationships, all these other areas. It’s not really feasible for you to kind of suppress and ignore various different facets of your life for the length of a PhD, which is very long.

37:42 Laura: No. Yeah, I completely agree. And also, I do understand the anxiety of the student label, right? But at the same time, you do have to kind of wake up to the fact that people are actually offering you money from a lot of different resources. Like, especially at Davis, where they are excellent at emailing us with fellowships and funding, money here and there. You do have to be proactive about it. You know, it’s still very hard and it’s stressful, but for example, go through your emails every month. And if you’ve missed anything with free money, put it in a spreadsheet like I’ve been doing. It does add up after a while and you realize, Oh, wait, year two, I can apply for, you know, $2,000 here for this. It doesn’t have to be so limited for the entire time.

38:26 Emily: Yeah. It’s kind of funny because I think in some ways earning more money while you’re a graduate student is like frowned upon in certain corners of academia or even not allowed as we talked about earlier. But there are other ways where earning more money is like completely sanctioned and encouraged by everyone which is applying for fellowships and applying for grants and doing all these like academia-style, like raises and like, you know, the things that we would use different terms for it outside of academia, but inside it’s still allowed and still a good idea. And like you were saying, some programs are pretty good about, you know, showing those opportunities to you and presenting them in a way that’s easy for you to take advantage of. So yeah, that’s wonderful to hear.

Best Advice for Another Early-Career PhD

39:04 Emily: So, I’d like to conclude with your best advice for another early career PhD. I feel like we’ve already heard a ton of great advice throughout the whole interview, but if there’s anything you want to add to that in a different area or something you want to emphasize, make sure the listeners walk away with, you know, please let us know.

39:20 Laura: Yeah. I mean, just, I think two things. My main points of advice would be to just make your financial education, or whatever you want to call it, a hobby. The more you know, the less anxiety you’re going to feel. And don’t think that saving for things like retirement or long-term savings goals have to be put on pause. It’s better to have a little bit saved towards that kind of goal than to have nothing in five years. So, the longterm does not have to be on a permanent pause by any means.

39:48 Emily: Yeah. And even, as you know, from compound interest, any little tiny bit of investing or debt repayment that you can do right now makes a massive difference later on. So, you know, don’t feel bad if it’s like $10 a month, $50 per month. Anything on that scale is still going to really, really add up over time. Well, thank you so much for this wonderful interview, Laura. I really enjoyed getting to know you a little bit.

40:09 Laura: Yeah. Well, thank you for having me. This was really fun.

Listener Q&A: Savings

40:16 Emily: Now, on to the second of two new segments. The listener question and answer. Today’s question actually comes from a survey I sent out in advance of one of my university webinars this past fall. So, it is anonymous. Here is the question. How can I effectively build my savings back up while still feeling like I have room to go out to dinner or buy a book when I’d like to? I feel so guilty whenever I make unnecessary purchases. Thank you so much for that question, Anonymous. It sounds like your main financial goal right now is to build up savings. And you’re struggling to find a way to balance that with discretionary expenses. And you might hear this as a strange solution, but I think the answer is budgeting. Most people think of budgeting as a way to cut back on their expenses or reduce their expenses or beat themselves up when they go over the amount they were supposed to spend in one category or another.

41:17 Emily: But that’s actually not how I see budgeting. I see budgeting as a method of intentionally and thoughtfully creating balance among the different purposes that your money has. So, what I think you should do is write into your budget “unnecessary purchases,” like going out to dinner and buying a book. And in this sense, these are not categories that you should, you know, try to spend much, much less than the cap. Your goal is instead going to spend right at that level that you identified when you set up the budget. This means that you have to decide what is an adequate savings rate. There are not just two broad categories in your budget, that is paying for your necessary expenses and saving. There are three. Necessary expenses, discretionary expenses, and saving. I’ll point you to the balanced money formula, which I really like the idea behind, although I have to acknowledge that it does not work in every city in the U.S. on any grad student stipend. The balanced money formula is that you would devote no more than 50% of your after-tax income to necessary expenses, 30% to discretionary expenses and 20% to savings.

42:31 Emily: Now, for your budget, that savings rate might be a little bit too low, or it might be unattainable, depends on where you are right now. But the point is that discretionary expenses hold a place in a balanced budget. It is really psychologically difficult to go for months and years spending little to no money on discretionary purchases. If you accept what I’m saying, that you need to build discretionary expenses into your budget, but you’re still saying to yourself, I’m not saving as much as I would like to, instead of cutting back on those discretionary expenses, I want you to take a really hard look at your necessary expenses. Necessary expenses are almost like this misnomer because, yes, it is necessary to house yourself and feed yourself and clothe yourself. But often we’re spending more than we absolutely baseline need to, to accomplish those things. So, for pretty much every quote, unquote, necessary expense, there’s going to be an actual necessary portion, and a discretionary portion.

43:34 Emily: So, I would really encourage you to go through your necessary expenses with a fine-tooth comb, starting with your largest fixed expenses like housing, perhaps transportation, moving to other fixed expenses like utilities. Then moving into your large necessary expenses like groceries. Then moving into your smaller necessary expenses, like maybe gas for your car. Reevaluate every single one of those expenses in that order to try to find a way that you can reduce them. Now, that may not happen instantaneously, if you have to do something like move, obviously. But the point is that you don’t just have to focus on your discretionary expenses and your savings. You can also pay some attention to those necessary expenses. In my mind, it’s way more fun to save money and also to spend on discretionary expenses. Spending on necessary expenses doesn’t really light people up. So, it definitely makes sense to reevaluate them and see where you can cut back.

44:34 Emily: Now, if you’ve done all of that, you’ve built the discretionary expenses into your budget. You’ve really evaluated if you can reduce any of your necessary expenses, and your savings rate is still not as high as you want it to be, then you need to consider increasing your income. Maybe that is the right solution. Some grad students are able and allowed to side hustle. So, you can look into that, if that’s your case. Some grad students are not allowed to work outside their appointment as a graduate student. And so in those cases, you might have to look for side incomes that don’t require work to generate them. I’ve talked about this quite a bit on my site. You can search for a side income or side hustle to find more discussion about that. Okay, Anonymous. I hope this helped. It is legitimate to spend money on discretionary or quote unnecessary purchases.

45:22 Emily: Absolutely. It’s just a matter of finding the right balance between your savings, your discretionary expenses, and your necessary expenses. And oftentimes, the two culprits in those areas are your necessary expenses and your income being too low. I hope that helps. Thank you so much for submitting this question. If you would like to submit a question to be answered in a future episode, please go to pfforphds.com/podcast and follow the instructions you find there. I love answering questions. So, please submit yours.

Outtro

45:53 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast and instructions for entering the book giveaway contest and submitting a question for the Q&A segment. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly on social media with an email listserv or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in like investing debt, repayment, and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

Working Before Starting a PhD: The Financial and Career Advantages

November 9, 2020 by Meryem Ok

In this episode, Emily interviews Diandra from That Science Couple, a PhD student in nutrition at the University of Wisconsin at Madison. Diandra went straight from undergrad into a funded master’s program, then worked for six years before starting a PhD program. She lists the career and financial advantages to working before embarking on a PhD—and the disadvantages. Diandra and her husband are currently pursing SlowFI (Slow Financial Independence) while she is in her PhD program, and she gives excellent financial advice at the conclusion of the interview.

This is post contains affiliate links. Thank you for supporting PF for PhDs!

Links Mentioned in the Interview

  • PF for PhDs: Podcast Hub (volunteer to be interviewed)
  • Workshop: Chart Your Course to Financial Success
  • The Fioneers
  • Your Money or Your Life by Vicki Robin
  • That Science Couple Blog
  • Forks Over Knives (Documentary)
  • NutritionFacts.org
  • The Value of Enough (“That Science Couple”  blog post) 
  • PF for PhDs: Subscribe to Mailing List
work before PhD

Teaser

00:00 Diandra: I said that I never want to retire because I love research. And then I kind of shifted to, well, if money’s not the determining factor in the position that I choose, then we can spend more time with family. We can travel more and be open to different opportunities so that maybe money is more of a tool rather than a requirement. And if I want to donate my time to work on some really awesome, amazing lifestyle research that maybe doesn’t have much money in the budget to pay me, then I can choose to do that.

Introduction

00:40 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season seven, episode 10, and today my guest is Diandra from That Science Couple, a PhD student in nutrition at the University of Wisconsin at Madison. Diandra went straight from undergrad into a funded master’s program, then worked for six years before starting a PhD program. She lists the career and financial advantages to working before embarking on a PhD. And the disadvantages. Diandra and her husband are currently pursuing slow financial independence while she is in her PhD program. And she gives excellent financial advice at the conclusion of the interview. This interview came about because I noticed That Science Couple tweeting about financial independence. I checked out Diandra and her husband’s website and noticed that she is a PhD student. So I decided to invite her on the podcast. It turns out that Diandra is a long-time listener of this podcast.

01:41 Emily: I literally did not know that until just before we started our interview. So I have a message for other long-time or short-time listeners, i.e., you. I am actively looking for interviewees right now. If you have personal finance knowledge or a skill that you want to teach through an interview, I would love to have you on. It’s absolutely fine if you gained this knowledge or skill from personal experience. So don’t shy away from volunteering because I use the word teach. Go to pfforphds.com/podcast to volunteer to be interviewed. Do not make me hunt you down on Twitter. Also, if you would like to hear me interview a particular person on the podcast and can help me make that connection, please send us both an email or tag us on Twitter. I’m actually looking for interviewees who can speak to two topics in particular. One, the proper tax treatment of travel and research grants. Two, exactly what kinds of income-generating activities are and are not permissible on F1 and J1 visas. If you know a professional who works in either of those areas in the U.S., please email me that recommendation. I hope to feature many of you on this podcast. Without further ado, here’s my interview with Diandra from That Science Couple.

Will You Please Introduce Yourself Further?

02:57 Emily: I have joining me on the podcast today Diandra from That Science Couple, and I was so pleased to run across her and her brand on Twitter, that’s where I found her, to find another science couple like me and my husband, who are passionate about personal finance. So Diandra, it’s a real pleasure to have you on today. Would you please introduce yourself a bit further to the listeners?

03:18 Diandra: Okay. Thank you, Emily, for having me today. I’m a long-time listener to the podcast. I actually listened before I got into my PhD program. So that was a bonus. And my name is Diandra and I’m a second-year student, PhD student, at the University of Wisconsin-Madison in nutritional sciences. I have a Master’s in Cell and Molecular Biology from Towson University. And before I started my PhD program, I worked in the industry from technician to scientist in the field of late-stage cancer diagnostics for six years. I’ve held five positions at four different companies over the six years and met my future husband, Brad from That Science Couple, at one of them. Each move was growth and financially motivated. And I’d like to say that it all started with a simple 1% cost of living increase.

Career Advantages of Working Before School

04:02 Emily: Wow. Okay. Very fascinating. So I heard in that description that you had a pretty big change in fields between what your master’s was in, what you worked in, in industry, and then what your PhD is in. So maybe we’ll get into a little bit why that happened. Because the topic that we’re going to discuss today is that path that you took between your master’s degree and your PhD and what the advantages are of working for at least a year or two years, few years, before you start a PhD program. The financial advantages, the career advantages. So let’s dive into that. You obviously have experience in this area, but you’ve probably also observed peers as well. So what are the career advantages that you perceive for working for at least some period of time between, you know, the first round of training, whether that’s undergrad, whether that’s a master’s, and then embarking on the PhD program?

04:52 Diandra: All right. So one of the big career advantages that I noted was that you’re able to test the waters. So you can gain experience before committing that five or more years to a program. And you can also determine what you don’t want in a career rather than like, focusing on what you wanted. So as you go through, you might identify different work environments that don’t click with you or ones that you like really do like, and that can help you channel your focus for your PhD program and what career you would want after that. You also are able to learn about the business side of things. You could go through different phases to take a project from beginning to completion. You work in diverse teams. So I specifically had worked in several different companies, and that collaboration either with inside my company, or to other branches, was very valuable, I think as well.

05:47 Diandra: It also trained me how to have proper documentation. So this is very useful for a PhD program. A lot of the beginning part of work for my program right now is all acquiring samples and making sure that we have good QC metrics and that we’re starting from a level basis for all of our samples. And then also I learned a realistic view on the cost of research. So I did a lot of ordering with my jobs, and then I could see what it would take to run the samples, how many times, what you needed for different replicates and then including like the final, like analysis cost as well at the end. So I think that was really important to get a realistic view of what a project I could propose in the future might cost.

06:34 Diandra: Also, another career advantage is that I was able to network early. So when you work in the industry, every time I changed jobs, I would go on LinkedIn and I would request my coworkers so that I could follow them after I had moved on. And they became references for my future applications. I gave several of them references as well. And then I also gained new mentors through working before going into my PhD. And they’re spread across a variety of fields. So now when I come back from my PhD, I’ll be able to see where they are and then potentially choose a path that maybe they’re already on or they switched to during the meantime. And then, also, I believe that I bring something unique to my PhD from working in the industry. It definitely helped me to improve my PhD application because I had a series of projects that I completed. Products that I helped launch. So that was something that I was able to include. And then I acquired additional skill sets, knowledge, and problem solving. And I’m definitely a lot more confident this time around, and I have more life experience. So when they throw a curve ball at you, or there’s an issue with your dissertation, then I’ve already been through so many times when we’ve had to switch projects or stop in the middle and change course and correct from there.

Projected Future Career Advantages, Post-PhD

07:55 Emily: So clearly there are advantages to you as the future PhD applicant, like having a stronger application, once you do decide to go for those kinds of programs. There are advantages to you in terms of knowing what you want out of your own career, whether or not a PhD is going to fit in that, and what you want to do after the PhD. And so you’ve described what you’ve experienced so far as, you know, your path to getting into the PhD program. I wonder if you can project forward, what are going to be the advantages of having worked prior to doing the PhD, once you’re looking for your first post-PhD position. What do you imagine will be the advantages then?

08:33 Diandra: Yeah. So one of the advantages then is that I already have this network built in. So I’ve tried to collaborate potentially with like my former colleagues and so far it hasn’t gone through. But when I’m looking towards the future, there are potentials that if I was a PI, that I could actually collaborate with them more. So it being like across industry is a good connection to have. So they can give you a discount on your study as long as you’re willing to share the information. So I think that’s a big proponent and I already have some of my former colleagues that are keeping in touch with me now and seeing like where I am. So I know that they’re vested in me and that if I were to say, “Hey, I need to start a team.” I have several people who have already told me, you know, “Just let me know when and where.” And they would be willing to make the leap and come join me potentially in the future.

Financial Advantages to Working Before the PhD

09:31 Emily: Wow, that’s fantastic. I also think that it takes a variable out of the equation for your future employers of, can this person be successful in my setting, an industry setting and not just an academic setting. And that question has already been answered, especially for like you had maybe a longer period of work experience, not just like a year or two. That’s already been well demonstrated for you. Okay. So we’ve covered the career advantages. This is not a career podcast. This is a financial podcast. So what are the financial advantages to working prior to starting a PhD program?

10:05 Diandra: Okay. So this was a big one for us because it took a lot of thought into, you know, why go back when I’m already established in my field, right? So it will make a big impact on you financially. And so I think the basis is just knowing what you’re getting into. Knowing that you’re going to have a few years of low income, but you can weigh that versus the potential future gains. So originally the program that I was thinking I wanted to go into would have given me a similar skillset and would not have provided any leverage up in comparison to where I already was. But then this past year, as I was developing and choosing which lab I wanted to go into, I was able to identify like, look, this is a gap in my knowledge, this is a skill that I don’t have.

10:53 Diandra: So if I add this, and it was data analysis, so if I add data analysis, then I can be potentially location-independent. I can also add this as like potentially a part-time job as well. So I could do research and then do data analysis on the side. So it’s a side hustle potential as well. So, it brought a lot of additional motivation to the PhD that I’m not going to just go out and make the same money that I was making before, but I can actually leverage that further in the future.

How Did Finances During Work Help with the PhD Transition?

11:26 Emily: Yeah, absolutely. I’m also thinking about, you know, let’s say traditional PhD student, you know, straight out of undergrad, straight of a master’s degree, early twenties, not a lot of capital, maybe a lot of student loan debt. What were you able to do in your finances in those years when you worked that helped you once you transitioned into the PhD program?

11:49 Diandra: Yeah, that’s a great question. So financially I didn’t have any student loan debt because my parents paid for my bachelor’s degree, which was great. And then when I got my master’s, I said, I’m only going to do it if they pay me to do it because I wasn’t quite sold on the need for it yet. And it was just at a transition point where I had an opportunity to stay on as a master’s student with my current research, my undergrad research. So it just kind of flowed right through. And I was able to get a TA position that covered it and then paid a small stipend. So I wasn’t able to pay off any, you know, credit card debt or things like that during that time. But once I started working, I was able to over the years level that out.

12:34 Diandra: So I had $5,000 of debt that I had to level out. And then Brad had also had some minor student loans that he was able to pay off during that time. So we go from a negative net worth of, you know, five, 10,000 to a positive net worth. And starting to open that 401k was a turning point for me because I had always started saving cash. And I had this number, this like specific amount that I could always get to my bank account. And then something big would happen. Like I would have a car repair or I would have a medical expense or something like that. And then I would have to, you know, bring it down again and start over in the savings. So working helped me to start investing earlier in comparison to some of my counterparts that are in the PhD program with me now.

13:28 Diandra: And I have that capital there that can grow during my program. So I was able to open a 401k, an HSA, which was very crucial. So I don’t have a ton in there since I was using it as I was contributing. But it’s been able to sustain me so far. And I’m hoping that after my program, that it will either still be there or it will have just covered all my medical expenses during the program. So I don’t have to worry, which is really, really useful. And then I’ve also started a Roth. So I’ve been able to do that post-tax money as well, that I will be able to access earlier. So if we choose to be, FI [financially independent], take time off you know, work remotely, or try to do more traveling, then I’ll have that money that I’ll be able to access since I’ve already paid the taxes on it.

14:22 Emily: Yeah. I call being able to start investing, and/or pay down debt, before you start graduate school. I call it having a financial wind at your back, right? Like if you just get that little nest egg started right at the beginning of graduate school before graduate school, and then you take whatever five plus years for your PhD training, even if you don’t add any more money to that, it’s something that it can be growing alongside you as that time passes. So it’s fantastic to be able to have that.

Common Objections to Working Before Grad School

14:50 Emily: Something I hear from people who are debating with themselves about going directly from undergrad into graduate school, debating with themselves about that versus working for a while. I hear two things. One is I’m going to get used to my financial lifestyle on my industry salary, and then it’s going to be too hard to live on a PhD stipend. So I should just go directly and never have that, like lifestyle intermediary. That’s one potential downside or whatever. The other one is that they’re concerned that their academic abilities, basically their ability to do school well, is going to deteriorate if they’re working for more than a year or two. How do you feel about those two objections?

15:36 Diandra: Yeah. Okay. So the first one, the financial aspect. I do agree. It can be really easy to get swept up in there. So I think for us, like the turning point was that we didn’t want to start like putting off our future. So we wanted to start traveling now and we didn’t want to say, “Oh, when we’re 65. That’s when we’ll start traveling.” So what we did initially was, when we started dating, moved into this nice apartment together, started saving for our first international vacation. And then when it came time to renew the release, it was going to go up. And we said, look, we can either do the vacation when we planned, or we can live in this nice apartment. And we looked at each other and I was like, I don’t want to live here. I would rather have the adventure that we planned than live in just a nice, shiny apartment that I can’t afford to have parties because I spent all my money on rent.

16:37 Diandra: So that kind of got us to stop with the lifestyle inflation. To cut back early on. And then we did back to back three years in a row, we did international trips for our birthdays and then just for the summer. So it was really nice. Like each one was only two weeks at a time, but instead of paying that extra to the nice, shiny things, we decided to pay it towards experiences. So I think if you were to work, you can still do that. But then like, what are your values? Like, does your spending align with your values? So if you value having a nice house for your children to grow up in, then that’s fine. But if you value adventure, then you don’t need to spend as much on your rent. So I think that that can be can be difficult to go up against like financially and having that inflation. But also every time I got raises, I pretended like I was still making the money that I was making in my master’s. So of course it was slightly more. But what I did was I took that extra when I got the raise, when I, the bonus and I put that into my savings and my investments, and I said, “I don’t want to see that money at all.” So I had that mindset that like, I’m still living on this fixed income, and no, I don’t have the extra to spend.

18:03 Emily: Yeah. I think that’s it’s a particular application of the advice live like a college student, live like a grad student, live like a resident, which is, if you are anticipating a future income decrease live on that future income. This is the same advice you hear, like people who are, for example, going to buy a house. Well, can you live on the mortgage payment that you’re going to make in the future? You know, is that possible for you in your budget? So like sort of projecting to your future, live on what that is, so that you make the adjustments in advance instead of having a real sudden, real abrupt, real painful lifestyle decrease when you enter, you know, something like graduate school. So I really liked that you took that approach of especially keeping your living expenses, your fixed expenses, on the lower side as if you were still a graduate student or will again be a graduate student. And saving the increase and also spending it on experiences. Because it’s not really lifestyle inflation, unless I guess those experiences become habitual for you.

Commercial

19:01 Emily: Emily here for a brief interlude. On Saturday, November 14th, 2020, I’m facilitating a new workshop: Chart Your Course to Financial Success, and you’re invited to attend. The central question this workshop will help you answer is, What should my singular financial goal be right now, and how should I best pursue it? This particular instance of the workshop is just for funded grad students. Future dates will be for post-docs and PhDs with real jobs. You can learn more and sign up at pfforphds.com/chart. That’s P F F O R P H D S.com slash C H A R T. The deadline to register is Wednesday, November 11th. So don’t delay. Now, back to the interview.

Financial Independence and Early Retirement (FIRE)

19:46 Emily: You discovered FIRE, it sounds like, in your time in industry. Financial Independence and Early Retirement. How is that pursued, or how are the principles still carrying on for you in graduate school?

19:58 Diandra: Yeah, so our basis going into graduate school was very important to see where we are and what we still need to do to get to potentially FIRE, or if not, just financial independence. So individually my husband and I are both 25% of the way towards our FI numbers. So that’s good. It means we have money that can grow. And then while I’m in my program, we’re working on our savings in two different ways. So instead of me trying to do everything and him trying to do it all separately, my focus is more on the post-tax money. So I make sure to pay myself first, every paycheck. And I have 25% of my stipend that will go in towards savings and individual investments. And then I also have another 10% that goes into a 457, and I’m treating this as a Roth account.

20:53 Diandra: So I’m paying the taxes now while I’m in a lower tax bracket in comparison to what I expect to be when I graduate. And then, so what Brad is doing is the kind of opposite. So he’s focusing on the pre-tax savings. So he’s also a university employee, but not a graduate student currently. So he’s been able to ramp up his savings and utilize a 457, 403(b), and HSA. And then while he has a moderate salary, he’s living on a similar income to me. So everything above that, instead of inflating our lifestyle, he’s saving that additional amount.

How Do You Have Access to a 457?

21:33 Emily: I was surprised to hear that you have access to a 457. How do you have access to that?

21:40 Diandra: So I have access to that through the UW system. So I actually didn’t know I had access to it in the first year of my PhD program. So I was doing like those micro investing apps. And then like, I would randomly put money into my individual retirement account, my IRA. So when Brad had gotten a job with the University, he saw all the benefits and explored it fully. And then he’s like, so I’m looking at these details. And it says that, aAt UW, that graduate students are considered employees. So since we had that label, we do have access to a 457. And I was able to go through and say, I could have it pre-tax, or it could have it post-tax. But since I know that I want to work for a few years, at least once I graduate, I’ll be in a higher tax bracket then. And so I’d rather pay the taxes now. So the whole point of it is that maybe we can get together funds that the whole first five years, when you become FI and you leave work is, it’s really hard to access your funds. So if you do like a Roth conversion ladder, that takes five years. So my aim was, what can I do now to build that initial five-year cash cushion?

Tracking Finances and Navigating Lifestyle Expectations

23:03 Emily: It sounds to me from the way you described that, that you and your husband either keep separate finances or like sort of track things kind of separately. Is that right?

23:11 Diandra: Yeah. So we don’t have any joint accounts but we do, you know, send money back and forth to each other all the time. So we keep it separately, and it’s good because then since we both did work around the same amount of time, that we have that money to grow. But we know that jointly, like if we’re going to go and buy a house, we can pull from both accounts. So like the HSA, since we got married this year, he’s going to switch over to a family plan. So I can’t contribute to my HSA during my program, but he’ll be able to contribute double. So it’s separate, but we joined them together. And like, when we look at our numbers, we’ll do both. So what do we individually and what do we combined have?

23:59 Emily: Yeah. And I think it’s also kind of a great, even though you’re keeping separate finances, it sounds like your lifestyle level you’ve agreed on. And you’re both living at this kind of grad student stipend ish level, and just doing a lot of saving above that. Because it sounded like you were saving 35 or maybe more percent of your stipend income, which is very high, very impressive. You must be keeping your lifestyle expenses quite low.

24:22 Diandra: Yeah. Yeah. So when we moved to Wisconsin from Maryland, actually, the last bonus that I got from my job paid for us to move across the country. So that was nice. It was just a net zero after that. Unfortunately I didn’t get to save any of it, but that was fine. So what we did when we moved here is we said, let’s pick an apartment that we can afford on my stipend. Since he was moving with me and for me, and he didn’t have a position to start with here. So we just immediately said, what is the lowest that we can find? And then like, you know, can we go slightly above that? You know, you want to live in a decent neighborhood, something that’s safe. But we were just very lucky. We got an apartment sight unseen.

25:12 Diandra: But it was actually only slightly higher than our rent back in Maryland. So we were able to just like, keep that nice low rent amount there. So that helped. And then one of the big things for us is that we do track all of our spending. We have a calendar. And so every day when we spend money, we have to write it on the calendar and then stare at it for the rest of the month. So it’s more like, was that purchase worth your life hours because that’s what you did and now you have to admit it. So we’re not like as stringent on what we spend, but like we always go into the grocery store with a budget. We say, we’re going to spend a hundred dollars on all our groceries. And we put every item in there individually. So we know when we’re hitting the cap. And if it’s only $5 more, well, that’s fine, but you don’t want to blow your budget. Like if you just don’t track it, then you can easily spend a lot more than you intended.

How Do You Describe SlowFI?

26:13 Emily: Well, thank you. So I actually have never heard that tip before of writing your spending on a calendar and then looking at it for a month. That’s actually a really great one. I understand that you identify as being on a SlowFI track right now. And I actually wrote a post recently on the flavors of five. So there’s all these different versions of FIRE, SlowFI being one of them. How do you describe SlowFI and yourself on that path?

26:38 Diandra: Yeah, so SlowFI is a term that was coined by the Fioneers. And so give like three big components. So they say it’s like embracing your dreams. So working in positions that will motivate you to like add to the world. To give back. Also being more intentional. So instead of just, I’m gonna work, work, work, work, work, you are in whatever you’re doing and that you’re actually like focusing on it and it speaks to you. So your position, your ultimate career should give you energy rather than take energy away from you. So I thought that was really, really key for the SlowFI movement. And then it’s also against that consumeristic kind of viewpoint of our country, where as you gain more money then you just buy more things. And then more things means more upkeep and being like environmentally-conscious.

27:38 Diandra: So for us, we just want to focus on the journey. So I think of it as what are you running towards instead of what are you running away from? So initially, we didn’t like our jobs, we weren’t satisfied. So we wanted to just get to FI so that we could take a break. But actually it’s really interesting with the pandemic right now that we’ve had glimpses of what life would be like if we were FI because we were fully remote for a while and we made our own schedules and it was interesting to see what do we choose to do with those extra hours. So finding that out now, while we still have incomes is better than leaving your job entirely, and then not knowing what you want to do, because if you say, I want to sip mojitos on the beach, that’s great.

28:30 Diandra: But how long is that going to last? So, I mean, for us, it was a really big shift when we met, I said that I never want to retire because I love research. And then I kind of shifted to, well, if money is not the determining factor in the position that I choose, then we can spend more time with family. We can travel more and be open to different opportunities so that maybe money is more of a tool rather than a requirement. And if I want to donate my time to work on some really awesome, amazing lifestyle research that maybe doesn’t have much money in the budget to pay me, then I can choose to do that. So that’s what SlowFI brings to us.

29:15 Emily: Yeah. I think the SlowFI path is probably one that’s quite appealing to PhDs. I know it’s appealing to me. Well, one, because it’s kind of necessary if you’re going to do graduate school at some point, you’re going to slow down your FI pursuit during that period. Almost certainly. It’s going to add some years. Like you said, though, earlier, there is income upside on the backside of the PhD, depending on, you know, what field you’re in. But I think PhDs also by and large have more opportunity to create work that they really love, that they’re really passionate about. That’s more, it goes with the territory, I think, of pursuing a PhD is that you found something that you love. And so yeah, work being part of your lifestyle long-term could still be attractive. Finding a job that you like, doesn’t have to be necessarily the most high-paying. Again, you don’t go into research if you want to be paid super, super, super well. You are talented enough to do other things if that’s your, you know, your primary motivation. So yeah, I think the SlowFI pursuit goes along very, very well with a lot of things that are common personality-wise to academics.

Best Advice for Another Early-Career PhD

30:15 Emily: So Diandra, as we wrap up here, would you please tell us your best financial advice for another early-career PhD?

30:23 Diandra: Sure. My best financial advice would be to fight lifestyle inflation and determine your value of enough early on. So this will be easier than trying to cut back, but instead use your bonuses or raises to supercharge your investments and move you along the path to financial independence.

30:44 Emily: So you’ve used language a couple of times in this interview that I have recognized as being from Your Money or Your Life, which I am currently reading. Would you recommend that book or how has that book shaped your journey?

30:55 Diandra: Yes. Vicki Robin is amazing. I would highly recommend Your Money or Your Life. She’s the one that talks about calculating your life-hours. And so how much money you make, and then how many hours does it take for that? So, when I was working at the startup company, I was driving an hour and a half down to the company and hour and a half back. So it was three hours. So instead of saying I had an eight-hour day, I would have to say that I had an 11-hour day, and then I needed time to wind down. So it turned into a 12-hour day. And then I had car maintenance. So then, the money that I got paid per hour started getting ticked off because of all these additional costs that I didn’t think of initially. Because you think of your hourly rate is one flat rate, but I would highly recommend it if you want to get more context and see that, is your job really paying you what you think it is or are you trading too many of your life-hours for that paycheck?

That Science Couple Blog

32:01 Emily: Yeah, absolutely. Thank you so much for that recommendation. And finally, tell us a little bit more about That Science Couple and what you’re doing with the blog.

32:08 Diandra: All right. So That Science Couple is a blog between Brad and I. And it was originally born out of a newsletter that we had written for our friends and family. So a couple of years ago, we had started our journey to becoming plant-based and we’ve used evidence-based nutrition. So there was the documentary Forks Over Knives, which I would highly recommend, and also the website nutritionfacts.org, which really motivated us to say like, look, there’s some science behind nutritional choices and that it’s not all about the macros. So we had noted that a lot of our friends and family didn’t understand the nitty-gritty details of this. And we wanted to start breaking down those complex ideas and topics into more relatable terms. So when we started our blog, we wanted it to be more holistic. Dr. T. Colin Campbell, his whole idea is treating us as like whole people.

33:07 Diandra: Also Dr. Dean Ornish does the same thing and there’s several other physicians that if we just look at one part, then we’re missing the whole picture. So what I really wanted to get across with our blog was that we can’t just talk about nutrition. But we are here because nutrition is important, but finances and having healthy finances is super important to having a lifestyle that, you know, supports health. And then our other point was the environment. So we didn’t want to tax the environment a lot. Brad was an environmental science major and got his master’s as well. So he wanted to talk about sustainability, and then that grew into, well, what makes a sustainable life? So when I was working as a scientist, it wasn’t sustainable. The commute wasn’t sustainable. The hours, the stress wasn’t sustainable. So how does that branch out further than just your impact on the environment, but your impact on you, personally?

34:09 Diandra: So those are the different categories that we’ve chosen to talk about on our blog. And, overall, we just want to provide a place for people to get information. So if you love those, you know, nerdy little citations and you want to see the references, like we’re going to be the place to go to, but then like personal growth is just like a free reign. So we had talked about The Value of Enough was a recent post that we put out. So if you’re trying to determine, you know, what makes your life sustainable, then maybe that’s a post that you would be interested in, too.

34:45 Emily: Yeah. We’ll link that post from the show notes. I can very easily see how those three topics interlock with one another and support and complement each other. So sounds wonderful. I’ve of course been to your blog and would recommend that everyone else go and check it out. And Diandra, thank you so much for joining me today and giving this wonderful interview.

35:04 Diandra: Yeah, thanks for having me. It was great.

Outtro

35:07 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind-the-scenes-commentary about each episode. Register at pfforphds.com/subscribe. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance. But it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

Fully Joint and Fully Separate Finances in Marriage: Perspectives from Two PhDs

September 21, 2020 by Meryem Ok

In this episode, Emily discusses marital finances with Dr. Michelle Roley-Roberts, an assistant professor at Creighton University. Emily and her husband keep fully joint finances, whereas Michelle and her husband keep fully separate finances. They detail their respective systems, list the advantages of each approach, consider how the legal realities line up or not with their preferred conceptions, and consider whether they would ever change their methods. They touch on IRS filing statuses, student loan debt, income shifts, living apart, and the addition of children.

Links Mentioned in the Episode

  • Dr. Michelle Roley-Roberts: Creighton Faculty Profile
  • PF for PhDs: Speaking
  • PF for PhDs: Podcast Hub
  • PF for PhDs: Subscribe to Mailing List

Teaser

00:00 Michelle: Every November, I have these two conferences and I know I’m going to be spending more money around that time. He doesn’t have to think about that at all. And if we had a joint account, we would always have to talk about that. And because we don’t, it’s not a thing that we need to discuss, he just knows that I go on these conferences.

Introduction

00:26 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season seven, episode three, and today my guest is Dr. Michelle Roley-Roberts, an assistant professor at Creighton University. Michelle and I discuss our methods for handling finances in our marriages. My husband and I keep fully joint finances, and Michelle and her husband keep fully separate finances. We detail our respective systems, list the advantages of each approach, consider how the legal realities line up with our preferred conceptions, and consider whether we’d ever change our methods. We touch on IRS filing statuses, student loan debt, income shifts, living apart, and the addition of children. Without further ado, here’s my discussion with Dr. Michelle Roley-Roberts.

Will You Please Introduce Yourself Further?

01:18 Emily: I have joining me on the podcast today, Dr. Michelle Roley-Roberts, and we’re doing a little bit of a different format today than my typical podcast interviews. Michelle and I are actually going to have a discussion today. The topic of our discussion is how to handle money in a relationship. And I was looking for someone to discuss this topic with me because my husband and I have our finances completely joint. And I know that that is not necessarily as common as a model as it used to be. And so I wanted to have someone on who would tell me about a different model. So, Michelle volunteered. She and her husband have separate finances. So, we have those two perspectives represented today. And there’s a third model that won’t be represented, which is the yours, mine, and ours model, which is sort of in between these two.

02:02 Emily: So, I hope you’ll get something from this that’ll be interesting to you. If you are in a relationship, if you handle money together as a couple, hopefully you’ll find some common ground with one or the other of us, or maybe you’ll disagree with both of us and say, “Well, I want to handle things completely differently than these two.” But yeah, that’s the topic for today. So, Michelle, thank you so much for joining me and having this discussion.

02:22 Michelle: Yeah, thanks for having me. I’m looking forward to talking about this.

02:25 Emily: All right. So, why don’t we start Michelle with a little bit further introduction to you, like your academic and career background and where you live?

02:34 Michelle: Sure. So, I am a clinical psychologist by training. I’m currently living in Omaha, Nebraska, and I am an assistant professor at Creighton University and I’m a licensed clinical psychologist at CHI Health Initiative. I have a PhD from the University of Toledo in Ohio and my husband and I have been moving all across the country, met in undergrad and have been together ever since then. So, he’s been really following me around through all of my steps to get to where I am now. And I think that really factors into how money has been handled in our relationship because he is not a PhD. So, while I’ve been accruing debts and lots of things, that’s not been true for him. We started out as, you know, dating and as roommates before we were ever married. And so, the roommate piece has always been a factor in how we’ve handled money. And I think as we married that never changed because we had already found a system that worked for us.

Timeline for Michelle and Emily’s Relationships

03:49 Emily: Gotcha. Yeah. Can you put some dates on this? Maybe I’ll share some dates of my own as well. So, like when did you meet, when did you move or change things in your relationship? Going from dating to living together to marry, those kinds of things?

04:05 Michelle: Yeah, so we met in 2004 and we did not get married until 2016. So, I graduated in May of 2008 from undergrad, moved from Ohio to North Carolina and lived for a year on my own while he was finishing up his degree. And then he moved to North Carolina with me. So, I was a postbac at Duke for three years, we, that sort of started our trajectory on roommates. And then he followed me from Duke to Toledo for my PhD. And we lived in Toledo for four years. And then a requirement for clinical psychologists is that we do a year-long APA accredited internship somewhere in the country. And so, I happened to match at the University of Arkansas for Medical Sciences. So, we moved from Toledo, Ohio to Little Rock, Arkansas in 2015. And then we got married in the middle of my internship year in 2016. And then from there, we moved from Arkansas back to Ohio for postdoc, where I was a postdoc for four years at Ohio State. And then from Columbus, Ohio to Omaha, Nebraska, and have only lived in Omaha for about two months.

Separate to Joint Finances vs. Maintaining Separate Finances in Marriage

05:40 Emily: Yeah. Thank you for sharing that. That is a lot of moving, but not too unusual right? In the PhD world. So yeah, I’ll share kind of the counterpoint. There’s actually some points of overlap in our story, which is really interesting. So, my husband and I, before we married, Kyle, we graduated from college in 2007. We started dating in 2006 and we lived in different cities for a year. He started at Duke and I did a postbac at the NIH. And then in 2008 in the fall, I moved and started my PhD at Duke. We lived separately for two years until we got married in 2010. So when we got married, moved in, that’s when we combined our finances. So, we went from completely separate to completely joint.

06:30 Emily: Well, there’s a little bit of a transition, but aspiring to be joint when we got married that was in 2010 and it’s been that way since. So, we did have a small period of living apart for a few months when I did a fellowship after I finished my PhD, but we both defended in the summer of 2014. We lived in Durham for another year. I was in DC for part of that year. And then in 2015, we moved from Durham to Seattle. So, that’s kind of our story. And for the listeners, we’re recording this in September, 2019. So, that’s the perspective there. So, we’ve already heard a little bit about the history of like how the handling of the finances for both of us has changed over the course of our relationships. Is there anything else that you want to add to that as to maybe like philosophically, like why you’ve chosen to maintain the system that you had been using all along? Whereas of course I, as I just said, we changed at some point.

07:23 Michelle: Yeah. So, for me personally, my debt that I was accruing was my debt for my education and my career advancement, wasn’t necessarily my husband’s. And yes, I know legally it’s his debt now because we’re married. By not having our finances joint, it makes me feel like it’s still my debt and I’m still working to pay off my debt. And it actually helps me a lot. So, on fellowship, I got an NIH loan repayment grant and I was able to do that pretty easily because I had not consolidated my loans, and his undergrad loans weren’t part of mine and we didn’t have to deal with any of that. And I was told by NIH loan repayment that our finances were much more straightforward and it was easier for them to give me money because they didn’t have any headache with that. So, it was helpful in that regard. We were not thinking about that when we decided not to join accounts.

Benefits of Filing Taxes Jointly as a Married Couple

08:39 Emily: Yeah, sometimes there are unexpected benefits that come up along the way. So, I’m curious, do you guys file taxes married, filing jointly, or married, filing separately?

08:49 Michelle: Jointly.

08:50 Emily: Okay. Because that also, that sometimes affects like this loan repayment, like loan forgiveness stuff, depending on like what program you’re in. Did you want to add to that?

08:58 Michelle: It’s definitely like, we talked about how we were going to do that. And I think because economically we would benefit more from filing jointly as opposed to filing separately. And so that was pretty much the decision. It was more of an economic decision as opposed to a philosophical one, I guess.

09:12 Emily: Yeah, there’s this really strange thing, I guess, in the tax code that it does matter a lot, whether you’re married or not. Right? That’s the sort of defining line is legal marriage, depending on how you file. And then there’s a real disadvantage to married filing separately. I mean, there are some conditions under which some people choose to do that, but it’s not at all the same to do married, filing separately as it is when you’re not married. Like those are two vastly different treatments under the tax code. So, I find that to be very I mean, I’m sure there are reasons for it, but I find it to be kind of puzzling. So, there are sort of very, very special circumstances where it makes sense to do married filing separately, but they’re kind of rare actually, and actually often involve large student loan debts. And that’s one reason that people do file separately.

Advantages of Separate Finances in Marriage

09:59 Emily: Okay. So, I would say for my counterpoint on that, the philosophy or the reasoning behind us joining our finances when we got married was around our understanding of marriage or our idea of what marriage should be. And so, there are certain attributes of a married couple that we believe in. And one of those is joining finances. That’s not to say that everyone has to do it the same way we do, but that’s how we view our marriage. And so, it was important for us to go from not having anything in common before we were married to, after we were married, deciding that everything would be in common. So, let’s get to talking about, kind of like, what are the advantages of the joint finances model and the separate finances model? And please go first.

10:48 Michelle: Okay. So, advantages that I see are control. Control of your own money and how you spend it. Like, I don’t have to ask my husband and he doesn’t have to ask me to spend money. Because we both know what’s in our respective accounts and we are decent money managers. And so, we’re not necessarily consulting eachother about money all the time. And in fact, it’s very rare for us to have a discussion about money, or I don’t think we’ve ever fought about money because we’ve never needed to. So, I would consider that definitely a pro because finances are a common theme for stress and tension and marriage, and by us having separate accounts, I’m never needing to have that discussion with him because the bills that I pay are paid and it’s on my own volition and what he’s paying is on his and I never have to track that.

11:50 Emily: So, I have kind of a follow-up question about that, which is so at some points you do have to make decisions around money like where to live, for example. So, do you just eat sort of assess your own budgets and so forth and say, “Okay, this is how much I can spend on the next place that we live.” And you both just kind of agree on a number, is that right?

Separate Finances, Shared Vision and Life Goals

12:08 Michelle: Yes. Yeah. In general, we know, so we have, even though our finances are separate, we have shared goals for our life. So, our goal right now is to live like a postdoc, even though I’ve started my career. And with the goal of paying off my student loans and our credit card debt, so that we can then save for a house and just have a better life down the line. And so, we both share that vision, but how we go about getting to that vision is a little bit different because our accounts are separate.

12:46 Emily: Yeah. I’m really glad that you clarify that. That like, the vision is united. And the, as you were just saying, I thought you put that very well. The methods by which you each get there financially could be separate, but you’ve agreed on kind of where you’re headed. And so, you do aspire to own a house together. It sounds like.

13:05 Michelle: I think so. That’s a goal one day.

13:08 Emily: Okay. Gotcha. Any other advantages? I mean, that’s a big one.

13:12 Michelle: I mean, that for me is the biggest one. And just a sense for my just having my own autonomy within my relationship. I think that’s an important value for me as a person. And so, I get to have that. And my husband supports that because we have a very, like our philosophy on marriage is very much partner-focused and that we’re in it together. And that neither one of us is, you know, the owner of the other. We don’t have that kind of philosophy. And I think that reflects true in our finances. And I find that as an advantage.

Advantages of Joint Finances

13:55 Emily: Yeah, definitely. I thought of a couple of advantages to the joint system. So, one is complete simplicity. We have one checking account, both of our names on it. We have a set of savings accounts that both of our names are on. As I said, the credit cards are a little bit more complicated. Some of those, we have both of our names on there’s like one or two on each of our sides that we only have one, mostly because the other one might sign up later to get the parks as well. So yeah, to me, that simplicity is there. Now, I’m not sure how you handle this part, but I know that for some people who, for instance, have the yours, mine and ours model, they end up having a joint checking account, separate checking accounts, joint savings, separate savings, maybe joint credit cards, maybe separate credit cards. And also there’s a lot of transferring going on. So, I don’t know, like when you pay your bills, for example, do you, like one is responsible–like, how do you handle, I guess the transferring that might need to go on? Or do you avoid that?

14:47 Michelle: Yeah, so for bills, I, in fact, up until this move, had handled all of the bill paying, and so I would pay the bills every month and then we would split finances. So, he would literally write me a check, and then I would deposit that into my account and make sure all the bills got paid. This move, because of all the stress and things in my own world that were happening around this move, he actually took some ownership on setting up some of our bills for this new move. And so, now he’s responsible for some bills that I would have previously been paying, and that seems to be working out okay. It’s just what he’s paying and then gets deducted from what he would owe for the rest of his half.

15:35 Emily: Gotcha. Yeah. So there still is some, when you live together and you have shared expenses, you still have to do some of this transferring or somehow decide how to split it up. So, one advantage of joint finances, is the simplicity. Oh, and when we get paid, like all of our money goes into that checking account. Although, you know, come to think of it. My business is something that’s separate, because the business is not in my name alone. But when I pay myself from my business, that goes into our joint checking. And I’m not like spending out of the business for personal stuff, obviously. So, kind of once it is entering into our personal finances it’s joint. So, that’s one advantage is the simplicity. Not having to do the transfers.

Complete Transparency and Agreement

16:14 Emily: And then another one is complete transparency. So, this is not something that necessarily everyone desires, but we do. And so, obviously because everything’s joint, we both have complete access to everything and there’s no, basically there’s no way that any of us could keep a secret from the other without going and opening another account. That obviously could happen. Like, logistically one of us could do that. But in terms of what we know about, we can all see everything. And actually, so in addition to actually like literally sharing the accounts in terms of his name or on them, we also have a Mint account that we share where everything goes into that. And so that was actually helpful. We started that Mint account sort of, you know, as we were getting married and joining everything. So, for the things that were separate, that we didn’t like close down right away, they were all in Mint anyway. So, we could each see what was going on, even if like, you know, that random other account was still open for a little while. So, I liked that aspect of transparency a lot. To me, another feature of joint finances is that you have to agree on everything. But of course the corollary to that is that if you don’t agree, then there’s friction, then there are problems. As you were just saying, by keeping things separate, you really minimize kind of the, the level.

17:30 Emily: Like if you agree on the big picture, like the details, whatever it’s separate, who cares as long as you’re both adhering to the shared vision, I really liked how you phrased that. But for us, it’s sort of a feature that we have to agree about everything. Like I know other people view that as like a downside, but we do have to agree on everything or agree to disagree. Right? And agree to let one another have some autonomy in our decision making and just not care. And of course we’ll still see it. As I said, with the transparency. I think this was more important to us, or it was more of a factor like us having to agree on things earlier in our marriage, because we were both in graduate school. So, we weren’t earning as much money as we are now.

18:12 Emily: And our expenses, we were just a lot more like strict around budgeting and so forth. I mean, by necessity, right? We had to be, so the incomes were lower. So, we had to agree there wasn’t really, there wasn’t really a lot of fat in the budget. Right? And so everything had–not everything, because we agreed on a lot of things automatically–but if there were any points of disagreement, we had to force ourselves to come to an agreement. Or again, agree to disagree and just spend what we will.

Both Spending Models Encourage Conversations About Finances

18:36 Emily: So, I remember like early on in our marriage, I’m a bit of a natural spender. It’s something I’ve had to kind of curb over time, especially during graduate school. And my husband could not understand. We were going to all these weddings, right? Because we were in our mid twenties, we had just gotten married. We were going to a lot of weddings. My husband could not understand why I needed a new dress for, not like literally every event, but like a lot of events. I was like telling him, “I need to buy a new dress for this.” He was like, “I’m wearing the same suit to every single one of these events.” And I was like, “Well, this is a day wedding. And this is an evening wedding. You have to consider the season and the temperature and like the fanciness level.” And so I was trying to tell him all these reasons why I had to like buy all these new dresses. And he ultimately like, did not really understand it, but he just had to like, kind of accept it for a while. And so, that was an example of sort of an ongoing, not like fight, but just like sort of puzzlement on his side of why I was making these decisions.

19:27 Emily: But what that did though, is it kind of forced him, I think, to understand something about women and women’s fashion and the constraints and the expectations that we’re under. And it also forced me ultimately, you know, I didn’t keep up that dress-buying habit for more than a few years. And so, it also kind of forced me to be like, “Well,” rethink, like, “Do I really need all these new clothes for all these new events?” And so, it was a reason for us to kind of evolve our, I guess, thinking or understanding of each other and that kind of thing. So anyway, some short-term conflicts sometimes, but I liked that we are ultimately forced to agree and work things out. So to me, that’s a feature. And then the last feature, did you want to add anything there?

20:08 Michelle: I think just, as a counter perspective, by having separate accounts, it’s actually forced us to talk about finances more than if we had a joint–and maybe not more, but in a different way. So, I like you, Emily, am more of a spender and I have to really be conscientious about saving. Whereas my husband is very frugal and he would never spend money if he could get away with that. And so, it’s more like I’m talking to him as a confidant about money and, “Okay, so I’m really, I’m considering, you know, I love shoes and I think I need a new pair of tennis shoes,” and then he’ll reflect back and say, “Well, do you really? And how are these shoes going to help you with whatever?” And sometimes I’ll listen and I’ll say, “Okay, yeah, you’re right. I probably don’t need these shoes.” And it’s more of a partnership piece as opposed to a necessity. Like, I don’t need his opinion or his approval for me to buy this thing, but I I’m seeking it because I value his input. And in some ways that’s strengthened our relationship.

21:26 Emily: Yeah. So, even though you don’t have to, at the end of the day, you do choose to, I mean, you said earlier, you don’t talk about money much, but it sounds like maybe you talk around it a little bit. Like money affects a lot of things in our lives. And so, it’s kind of hard to go without discussing it at all, at least in an oblique manner. But what I like about what you’re saying is that like you’re still bringing it up and bringing whatever the decision is out into the open. And ultimately at the end of the day, it’s still your decision, but you are seeking his opinion or his counsel. Yeah. I really like that.

Advantage of Joint Finances: Navigating Income Disparities

21:57 Emily: The last advantage that I thought of for having joint finances is that it doesn’t matter who earns what. So, like when my husband and I were in graduate school, we earned about the same amount of money. So, not really huge concerns there. Right? Two people, two incomes that were pretty much the same feels like equal, right? After graduate school, I became self-employed. My income went down–right?–initially and then has risen over time. But his income increased because he got a proper job, a proper post-PhD job. And so, he saw an income jump, and I saw initially an income decrease. And it didn’t matter, like there wasn’t tension around that. And also the decisions that we had to make, like, for example, when you were saying earlier about, okay, you need to come to an agreement on where to live. So, like had we had separate finances under that situation, it would be like, well, I almost can’t contribute anything like to the household or very little, and he would be contributing a lot.

22:57 Emily: Under the joint model, we don’t concern ourselves with that because the money all just is shared. And so, whatever we can budget and afford on the completely combined income is what is going to happen, you know, for our family. And I guess I should say that basically, had we had separate finances and were committed to both contributing, for instance, equally to the household, then I just wouldn’t have started my business. It just, it wouldn’t have happened that way or wouldn’t have happened at that time. Like I would have gone and gotten a job and had an income more equal to what his was or close to. Yeah. And so, I think that the joint finances model has actually helped me like follow my dream. Right? As starting this business. And likewise for him, like he took a job at a startup, which we know at any point the ride could be over, right?

23:51 Emily: It’s an early-stage startup. And so, I guess of course he could have like saved maybe and provided for him self, I guess, in the event of job loss or something, if that’s what an emergency fund is for. But I guess we sort of have more like peace of mind knowing there’s like two incomes going into this pot and, you know, the expenses would be paid like from those two incomes. And again, it doesn’t really matter who’s earning what. So, that’s, again, our philosophy on that. And, I guess I should also mention, we have two children and especially early on in their lives, I was doing a lot more of the childcare. So, my income was lower. I was doing a lot more of the, sort of the work for the household. Right? That was unpaid.

24:29 Emily: And he was doing more of the earning, like outside the household. And that situation has changed now, like my income has risen and we have more childcare now. So, we might be able to handle things differently if we wanted to. But I feel like at that time joint finances were really necessary because the contributions that I was making the household were not reflected in income as much. So yeah, I guess it depends also on like sort of life stage and if both people are working or what decisions are around that, but there’s, I feel like extreme advantages to the joint finances model in certain configurations of income disparities. Right?

25:04 Michelle: Yeah. And I think it might be helpful to know. So, with every transition and are, and new we’ve always moved for my career. And so, the move I was able to start working and earning right away. My husband has followed me. So, every move he’s had to find a job. And so there’s been periods of time at every step where he’d been unemployed and was living on savings until he found a job. And that is currently true for us as we just moved two months ago. So, he’s still he’s looking and does not have a job. And so, knowing that, you know, he’s set up savings, and also this piece of this transition has been around, “Okay, now my income is a lot higher than what his will be when he gets a job. And so then how do we balance bills?” Yes, jointly we have more money, but what he can contribute is less than what I could contribute. And so, we’ve talked about paying a percentage of whatever our bills are. So, if we’re going for right now, our finances are exactly the same as they were on postdoc. And so it’s easy to do what we were doing previously, but as we transition in the next few years to basically growing and towards home ownership, we might be able to afford a house that he wouldn’t be able to afford on his income alone. And so, then that’ll be a discussion of like how we’re going to handle that.

Commercial

26:52 Emily: Emily here, for a brief interlude. I bet you and your peers are hungry for financial information right now, especially if it’s tailored for your unique PhD experience. I offer seminars, webinars, and workshops on personal finance for early-career PhDs that can be billed as professional development or personal wellness programming. My events cover a wide range of personal finance topics, or take a deep dive into the financial topics that matter most to PhDs like taxes, investing, career transitions, and frugality. If you’re interested in having me speak to your group or recommending me to a potential host, you can find more information and ways to contact me at pfforphds.com/speaking. We can absolutely find a way to get this great content to you and your peers, even while social distancing. Now, back to our interview.

Disadvantages of Joint and Separate Finances

27:51 Emily: So, that was kind of the end of my list of advantages that I see in joint finances. Was there anything that you wanted to add as like maybe disadvantages of your system? Disadvantages of my system, except if they haven’t already been covered by highlighting advantages of one or the other?

28:07 Michelle: I mean, the disadvantage of the separate model is around these transitions when your finances change substantially. And now it’s a matter of us having this discussion. Whereas, like you said, with the joint model, you wouldn’t have to do that if it’s built in.

28:28 Emily: One disadvantage of joint finances that I often see brought up. I don’t personally experience it, but a lot of people will bring up, what do you do about gifts? You know, what do you want to do when you want some secrecy, but it’s for the benefit right, of the other person and for that joy of gift giving? And I don’t experience this as an issue myself and I have some like, ideas about workarounds, basically. Like, sort of in my mind, if your only hangup about joint finances is gifts, there are easy ways to get around that and still have the totally joint model. If gifts are among other reasons why you don’t like the model, then that that’s fine. That can factor in. But like after I receive the gift and I was like, “How did you pull that off?” He’s like, “Oh, I know you check Mint. So, I did it on this random card that I just didn’t update from Mint.” So, that’s very tricky. I think an easier solution is just to use cash. Just take out cash and say, “Oh, I need some cash for some reason, don’t inquire too hard.” Or, “Oh, I’m buying you a gift, but you don’t know what it is yet.”

29:31 Emily: Or go to a place like Target or Amazon where you might be buying any kind of thing and let it be a secret for the time being. So, you might need to get a little bit tricky around gift-giving or at least having an agreement of like, you know, “I won’t look at that for a little while, while you’re getting me a gift.” But to me it seems like a pretty minor, I guess, speed bump in the model for joint finance. But it’s one that comes up a lot. So, I wanted to kind of address that.

29:57 Michelle: Unless, of course, your love language is gift giving and then it’s a very big deal. And so, I could see that being more important or more impactful to defining whether to have a joint account.

30:13 Emily: Yeah, I think that’s probably where, if it was something you were doing on a very regular basis, like every month or something like that, I can see–so, there’s sort of a subset of joint finances which is like joint with allowances. And so, your allowance could come out in cash so the other person doesn’t know what you do with it. Or it could even be two separate checking accounts, but your income goes into joint account. And then the separate account gets the, whatever it is, a hundred dollars a month, whatever your allowance is. And so, that’s a way that you can regularly keep some money from your spouse seeing it while still maintaining the spirit of the joint model. But of course, yeah, the bigger the component of your life this is, the more it argues that you need to have a specific system around figuring this out, which we obviously do not.

Unique Situations for Money Management as PhDs in a Relationship

31:02 Emily: One of the last questions here, Michelle, are there any attributes or situations unique to PhDs that might inform the choice of how to manage money in a relationship? So, I thought about living apart, which I mentioned earlier, my husband and I lived apart only for about three months. So, it was very short period of time a few years ago. But I have had friends, PhDs, sometimes two PhD couples, sometimes just one PhD couple, that have been living apart for years at a time because of training and stuff. You’ve been very fortunate and very supported that your husband has been following you around. Not everyone is able or willing to do that. So yeah, I guess I can see that this might inform the decision, right? Because the more, I guess separation you have like living in one place versus another, I think the more that supports the separate, or at least partially joint, partially separate models. Because as you were saying earlier, like you don’t have to, you do, but you don’t have to consult with your husband on decisions. That doesn’t really affect him, what you do with your own finances.

32:07 Emily: So to me, that model makes a lot of sense when the day-to-day decisions don’t really involve both of you. Right? And only involves one of you. And so, I felt that a little bit. I mean, again, I was only apart from my husband for a few months, but yeah, like what I did on a daily basis, the shopping or the eating out or whatever, like he wasn’t involved in any of that. So, it was a little bit odd that, you know, the money was still coming from our joint account. And so, I think that we did have a little bit less like sort of communication around what was going on. Like he just sort of was like, well, basically by that point, like we knew each other’s spending habits. And as long as we weren’t going outside of that, it didn’t really need to come up that much. But yeah, it was kind of odd to be like living in it in a different place and still withdrawing from that joint bank account. But you know, it was just a short period of time. So for us, it wasn’t, it didn’t warrant like changing the model, but yeah, I can see how there’s a reason to be a little bit more separate if your lives are kind of separate.

33:05 Michelle: I would say that’s pretty true for us. My husband’s not a PhD, not an academic by any means. And the culture around being a PhD and, you know, having to go to conferences and networking and sort of the things we spend money on that we wouldn’t spend money on if we weren’t PhDs, that’s very real for us. Because there are many times where I’m like, “Okay, so every November I have these two conferences and I know I’m going to be spending more money around that time.’ He doesn’t have to think about that at all. And if we had a joint account, we would always have to talk about that. And because we don’t, it’s not a thing that we need to discuss. He just knows that I go on these conferences and I’m still able to pay the bills. And it’s just made things a little bit smoother, I think. And he hasn’t needed to learn the culture of being a PhD because we have these separate accounts around money.

34:08 Emily: Yeah. That’s a really good point that like, especially PhD training and even, I guess, could be as a professor to some degree as well, there are certain demands that are made of your personal finances that would not be made if you were not a trainee or an academic. And that’s super unfortunate, but the reality. And so, like you said, he doesn’t need to be fully indoctrinated in the way that we are into how academia affects your personal finances because you have things separate. Yeah, that makes sense. I didn’t think about that. That we do have to pay for more things out of pocket than maybe somebody else would in another kind of career, wow.

34:53 Michelle: Conferences, memberships for different societies and things like that. But, you know, I can only imagine if we were to actually have a joint account, he would be like, “Why do you need to spend a hundred dollars on this membership, tell me how that’s going to benefit you in your everyday life? And the answer is, “It doesn’t really, but it does help me network and that will help advance my career.” And, you know, we don’t have to have that conversation.

PhD Finances: Handling Changes in Income

35:22 Emily: Yeah. Very, very interesting. The other one that I thought of regarding PhD finances is changes in income. So you, for example, have gone from needing to take out student loan debt and so forth to having a very nice salary, presumably now, and maybe other PhDs have less dramatic swings, but usually the completion of PhD training does involve hopefully a pay raise at some point, probably a big one. So that’s just been, I don’t know how that would maybe affect advantages of one model or another, but it just does affect how you handle your finances in general. And you mentioned earlier living like a postdoc, which is a great sort of mantra to live like a college student, live like a graduate student, live like a postdoc, live like a resident. These are all meaning the same thing of live well below your means and maintaining your prior lifestyle even through income increases.

36:12 Emily: So, it’s just a good kind of personal finance strategy in general. I guess this might play a little bit into what I was mentioning earlier about income disparity. Like between me and my husband, we went from being more equal incomes to be more, at a time, more disparate. And yeah. So, if PhD do experience, let’s say hopefully a jump in income, having the joint model can be helpful, I guess, in the sense that like, you’re, I guess you’re kind of in it to gather because at a point when maybe one person isn’t contributing as much to the household, that can be sort of smoothed out, I guess over time by the other person’s income being more like stable or something like that. And the other thing is that there is an upside usually to PhD finances, which is that jump in income later. And so both people benefit from the upside, like you were talking about earlier, like you’re talking about how you and your husband together, the household might benefit from your now great increase in income by perhaps splitting the percentage a little bit differently with the joint model that sort of comes baked in, right?

37:18 Emily: Like both people enjoy the upside, but they also are together on the downside. So there’s, yeah. There are two parts of that. Just something to think about, I guess, with PhDs and those income swings is what you would prefer. I wouldn’t necessarily say it argues more for one or the other, but just something to consider.

37:36 Michelle: For us, my debt is a detriment to us buying a house, but my income increase is the asset. And so, the way that we’ve kind of balanced that is pay down my debt, which I’m doing and I’m taking ownership of, right? Because it’s mine, it’s, you know, our separate accounts, and he doesn’t ever have to think about that necessarily. While at the same time I’m paying down debt, he can take his income and stack it away in savings. And so, eventually what he’s been able to save will help us buy a house and my income level will help us buy a house.

Would You Consider Changing Your Finance Model?

38:18 Emily: Gotcha. Yeah. So, you’re contributing, but it’s in like different ways kind of in the future. Yeah. That’s interesting. So, Michelle, do you see your model changing at any point? Do you foresee any circumstances that might cause you to reconsider this?

38:33 Michelle: I don’t think so. I don’t think so. It’s been working so well for 15 years that it’s hard to imagine a time when we would need to do something different.

38:46 Emily: Yeah. You guys have you have it down pat now, right?

38:49 Michelle: Yeah.

38:50 Emily: Yeah. I think on our side as I said, kind of earlier, as our income has increased as a household, we have more flexibility. Like, I sort of phrase it as when we had a lower income, we were much more strict about our budgeting and we had to agree a lot more. Now we have a little bit more autonomy because our income is higher. Like, if we want to do more discretionary spending. So, my husband’s really into buying electronics. Before we had sort of a strict budget on that. And I didn’t really care as long as he stayed within the budget, but it was kind of a low budget. Now, it’s more like, “Okay, you want to buy something?” He’ll talk to me about it. But ultimately I’m just like, “Well, if you want it, go ahead and get it.” We have much more flexibility now. And so that’s kind of, I guess, changed like our attitudes about it. I mean, everything is still joint and it’s still sort of a decision, but we just have a lot more freedom, I guess, both of us do to do more spending, should we choose to, or should we desire to.

39:48 Emily: I think that we will probably stick with the joint model because philosophically, it’s kind of like, we’re married, so we’re going to be joint. I’m not really opposed to the yours, mine and ours thing if it’s under the allowance model that I mentioned earlier. If maybe like, “Okay, you have a few hundred dollars a month, you can do whatever you want with and go ahead and I don’t need to know about it.” Like I can maybe see us moving to that at some point, but I don’t know necessarily why it would happen because it’s not something that causes friction for us right now. So, I don’t think it would in the future. But if it did, I’m okay with that allowance sort of system of it. I definitely don’t see us moving to being fully separate at any point, or even to the point where we would have our incomes be like deposited separately.

40:31 Emily: Because I just think, especially now that we have kids, it’s just the family, it’s just the household, like everything’s together. So yeah, I think the model will more or less stay as it is. Yeah. So, you know, Michelle, I appreciate you having this discussion with me so much and I hope the listeners have heard something that they resonated with for your model or for the model that I use or something that they disagree with and it’ll help them decide how things are going. It seems like things are really working well for you. So, I’m super happy about that. And obviously I feel that way about how things are working for us too. So, it just shows that, you know, people are different, relationships are different and how you handle your finances. It might look different. Like we, you know, we started off saying, okay, you do separate an I do joint. This is like, these are extremes on a spectrum. But really we can see that in both cases, the relationship has a shared vision of where we’re going in the future and agrees to a great deal, whether talked about or not, generally is an agreement with how things need to go. And yeah, the mechanics of it look a little bit different, but there’s a lot of commonality here as well. So, I was really happy to hear that. Any concluding thoughts from you?

41:34 Michelle: I would agree. I think both models can be effective and I think it ultimately will come down to what you value in your relationship. And as a person, that’s what’s going to drive your decision-making about what model you choose.

41:52 Emily: Yup, definitely. So, thank you so much Michelle.

41:54 Michelle: You’re welcome. Thank you.

Outtro

41:58 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind-the-scenes commentary about each episode. Register at pfforphds.com/subscribe. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

How This Entering PhD Student Has Set Himself Up for Financial Success in Graduate School

August 10, 2020 by Meryem Ok

In this episode, Emily interviews George Walters-Marrah, a rising first-year PhD student in biophysics at Stanford. In the last year, as George has been applying to and preparing to attend graduate school, he’s been on a financial journey as well. We walk chronologically through the financial steps he’s taken this year, from applying for fellowships last fall to taking a personal finance course this past spring to drafting a budget this summer for how he plans to use his stipend in Palo Alto. Additionally, Emily and George have an insightful conversation on what George learned about investing in his personal finance course and how he’s already implementing some of the strategies.

Links Mentioned in the Episode

  • PF for PhDs Podcast Grad Student Fellow Examples
    • Home Purchase as a Grad Student Fellow (Jonathan Sun)
    • NDSEG Fellow (Lourdes Bobbio)
    • Grad Student Fellow Investing in Retirement, Estimated Quarterly Taxes (Lucia Capano)
  • List of portable fellowships
  • PF for PhDs Community (Discount Until August 15th, 2020!)
  • George’s Personal Finance Document
  • MIT Living Wage Calculator
  • PhD Stipends Resource
  • Quarterly Estimated Tax Article
  • Quarterly Estimated Tax Workshop
  • PF for PhDs: Podcast Hub
  • PF for PhDs: Subscribe
grad school financial success

Teaser

00:00 George: I’ve been investing for a while now. And it’s like, it’s not really time-consuming at all. I kind of like check it at least once a day just because I like looking at it. But other than that, it’s not like I’m constantly fidgeting with my stuff. And I think the more you fidget with it, the more fees you get. So, it’s like, it’s kind of like passive investing. It’s kind of like a win-win.

Introduction

00:21 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season six, episode 15, and today my guest is George Walters-Marrah, a rising first-year PhD student in biophysics at Stanford. In the last year, as George has been applying to and preparing to attend graduate school, he’s been on a financial journey as well. We walk chronologically through the financial steps he’s taken this year, from applying for fellowships last fall to taking a personal finance course this past spring to drafting a budget this summer for how he plans to use his stipend in Palo Alto. Additionally, we have an insightful conversation on what George learned about investing in his personal finance course and how he’s already implementing some of the strategies. This is a perfect episode to listen to if you are near the start of your financial journey, whether that’s at the beginning of graduate school or further on in your career. Without further ado, here’s my interview with George Walters-Marrah.

Will You Please Introduce Yourself Further?

01:26 Emily: I have joining me on the podcast today George Walters-Marrah. He is a rising PhD student. We are recording this interview in July, 2020, and within the next month or two, he’s going to be starting his PhD program at Stanford. And he’s already been on a financial journey. So, we’re going to talk through about the last year, how he’s been preparing financial aid to go into his PhD program, as well as he’s done an awesome amount of career preparation to get to that stage as well. So, George, it’s a real pleasure to have you on the podcast. Would you please introduce yourself to the listeners?

01:58 George: Thank you for having me. So, I just graduated with my bachelor’s in molecular microbiology, and I have a research interest in interdisciplinary sciences. But I’ve also been kind of really obsessed with personal finance over the last year. So, I’m glad to be able to talk about it. Because whenever I get the chance, I kind of get excited because I’ve been so involved and kind of like consumed with it for a while. So, thanks for having me.

Financial Preparation Before Grad School

02:28 Emily: Well, it’s really exciting for me as well. And the way we actually met was over Twitter, and you prepared this fabulous document of personal finance resources and included a lot of mine in there, which I’m really grateful for and you shared it. And I happened to see it and was just so flattered that you did that, and it was a fantastic document. So, I’m really excited that you have been sharing this material with your peers. We’ll get into that, why you’re doing that during the course of the interview. So, let’s take it back to almost a year ago. How were you starting to prepare financially for graduate school even, you know, well, well, before you finished your undergrad degree?

03:05 George: Yeah. So, about a year ago I was like kind of oblivious to personal finance. But what I did know was that there were things called fellowships and scholarships and stuff that I could apply to. So, like about a year ago during the summer, I was looking into scholarships and fellowships and I applied, I was starting to apply to the NSF GRFP, the Ford Fellowship, and other things like that. So, I started that pretty early and I would suggest to start that over the summer, if you can. If not, start it at the beginning of the fall, because I was able to get a couple of fellowships and I think a really big reason I was able to do that was because I started so early, kind of like reaching out to my letter writers and starting my personal statement and kind of like collecting the different, like papers that I would need to write my research proposal.

Balancing Coursework with Grad School Applications

03:54 Emily: Yeah. We’ll link in the show notes because I’ve done a couple other interviews with fellowship winners and that was a common thread of advice: start early. So, even right now, you know, July for the people who are going to be applying in the upcoming, you know, starting about six months from now, they need to really be working on this, you know, the preparation process getting started now. How did you–so I applied for graduate school and all of these fellowships after I finished my undergrad, I had a post-bac year–how did you manage sort of balancing your coursework, your thesis work, I assume, with doing these, you know, intensive applications?

04:30 George: So, full disclosure, I was a fifth year student, so I graduated in five years. So, I had most of my class requirements done. So, I had the luxury of kind of decreasing the amount of classes I had. So, I still had 12 credit hours, but I was able to kind of like pick and choose classes that weren’t like super intensive. So, I kind of did that. And I also had the luxury of having a class that could be like a placeholder and I could use that time to do my personal statement and prepare to apply to graduate school and fellowships. But I would say that, try to decrease the amount of classes that are super intensive. Try to kind of pick classes that, you don’t have a lot of, like, time-consuming, like it doesn’t consume a lot of the your time, and kind of learn how to say no to things.

05:25 George: If you can kind of just say no to a few things so you can use that time to kind of work towards your fellowship applications, work towards your grad school applications. I think that would kind of like, it builds up, like when you keep saying yes. So, if you kind of learn how to say no to things that may not be helpful to you in the future, or may not be worth the time, I think that would kind of really be helpful with allowing you to find that time to kind of complete all that you need to do that last semester.

Which Fellowships Did You Win?

05:54 Emily: Yeah. I think it’s a great idea that you actually had space in your core schedule for doing these applications, because that’s really how you need to treat it. You need to treat it as at least one class, if not multiple classes. That’s the amount of time it’ll take. So, you were successful in winning some of these fellowships. Which ones did you win?

06:12 George: So, I was able to get like three fellowships. It was kind of like three different types of fellowships. So, I had got an external fellowship and two internal fellowships. So, I got the NSF GRFP, which was external, it kind of followed me wherever I went. And then I got an internal Stanford fellowship, which is, they kind of reviewed my application and you kind of get considered for this just by applying. And they gave me that fellowship based on my application. And then my last fellowship is one I got actually pretty recently. And it was a fellowship that I got by applying to a program, a first year program, after I got accepted and after I decided to come. So, it was kind of like the first one, I applied to it way before I applied to grad school, and then I got the external one. The second one, like they considered me just by applying, and I got that one. And the third one, I applied to it after I actually got into the program. And it was like a separate first-year program at Stanford. So, like, there are kind of several different ways that you can try and get these fellowships, which I think is like really nice.

07:16 Emily: Yeah. So, the fellowship applications did not stop, you know, just after the fall of your application season. That’s awesome that you won so many different ones. I have a post that I’ll link to in the show notes where I list a bunch of these portable external fellowships, like the NSF GRFP. So, I’ll put them in the show notes if people want to kind of peruse through. A lot of people know about the NSF fellowship, but there are some other ones that are a little bit less known. You mentioned Ford earlier. That’s another great one. So anyway, there’ll be a list there, several ones you can probably apply to, you know, in the year that you’re applying to graduate school and then in a few years after that, but you’re taking care of for a few years. So, that’s amazing.

Lessons Learned from Undergrad Personal Finance Course

07:53 Emily: Okay, so now we’re going to fast forward, you know, that was kind of the fall of your last year of undergrad. And then I believe in the spring semester you took a personal finance course. So, tell me a little bit about that course. Like why did you elect to take it, and maybe like two to three big takeaways from the course that you think would be really instructive for other PhDs to know?

08:14 George: Yeah. So, my school like offers this course called Personal Finance and Investments. I actually learned about it the fall that I was applying to graduate school. And I always wanted to take a personal finance class because I didn’t really know anything about personal finance. I didn’t know how to invest. I didn’t know how to make a budget. I didn’t know any of that stuff. And in my first few semesters, I thought of like, “Oh, maybe it’s microeconomics or macroeconomics or something like that,” but I read the summary and it didn’t make sense. So, I finally found this class and that’s like, “Oh, this is the class.” So, I took it and it was a great class. Like, it was a kind of a learning curve. You had to kind of learn the language of personal finance. Like what’s a dividend and all these different stuff.

Lesson 1: You Don’t Have to be an Expert to Invest

08:55 George: But after I got the hang of it, it kind of went very smoothly and I got like way more invested in it. And if I was to say to like three things that I thought that I learned from that class that were very helpful to me, the first big one is that to invest, you don’t really need to like follow the stock market and be like an expert and kind of like, look at it every single second of every day. There are like a lot of different kinds of innovative ways that allow kind of like people who are super busy or people that are kind of inexperienced to actually have a good experience investing.

09:29 Emily: If I can summarize that first point or what you were starting to say, it’s that, I mean, I love the way you phrased it. Like investing does not have to be something that you are paying attention to all day long every day in and out. I think that is an image that we have in our culture of what investing is, maybe from like, I don’t know, the eighties or the nineties or something, like it’s kind of archaic at this point. Because index funds, which I think was what you were starting to talk about there. They’ve been around for, I don’t know, four or five decades at this point, but only have really been gaining in popularity in the last couple of decades. But index funds, like you were saying, just are a diversification. Like you get a lot of different investments, stock investments often in one bucket and it’s representative of kind of the whole market or an entire sector of the market. And so you can buy, you essentially buy everything when you buy an index fund and it’s in a given market sector. That means you’re buying the winners. It means you’re buying the losers. But it turns out that that’s a more effective strategy than trying to pick the winners and avoid the losers. Is that what you were learning through your course?

10:31 George: Yeah, so, it was big because like, I think like a lot of people think they have to beat the market, but if you match the market, you kind of avoid that pitfall of like losing to the market. Because it either could go really bad or really good, or you could just match it. And then the market kind of like trends up. So, I decided to go that way, kind of like passive investing. So, that’s like the one, the first big thing that you don’t have to, it’s not a full-time job to invest, which is really nice, since as a grad student, I’ll be very busy.

11:04 Emily: Actually, if I could expand on that for one more second. So, I also tell people like investing should not be your side hustle. Like you should not be spending a ton of time working on your investments. And I always say to them, like, if you want a full-time job doing investing, get a full-time job as an investor, be a hedge fund manager or go do that kind of thing. Like, make a ton of money off of this. Don’t just play around with your own money. If you’re going to be, you know, actually investing that kind of time into the process, which again, I don’t think is necessary or a good idea. So to me, investing is kind of like learn about it for a little while, you set up what you need to set up, and then you just let it run and you just do maintenance and you don’t have to, you know, mess around with it a whole lot.

Lesson 2: Make an Emergency Fund

11:45 George: Yeah. I totally agree, because like, I’ve been investing for a while now and it’s like, it’s not really time-consuming at all. I kind of like check it at least once a day just because I like looking at it. But other than that, it’s not like I’m constantly fidgeting with my stuff. And I think the more you fidget with it, the more fees you get. So, it’s like, it’s kind of like passive investing. It’s kind of like a win-win. But I guess two more points that I would say that are really nice that I got out of it is that kind of making an emergency fund. I never really thought of that. Kind of like before, an emergency happens, you just have the money in your savings account. So, I’ve been trying to get my emergency fund kind of like they say at a minimum is three months but I’m hoping to get it like higher, maybe to nine months, if possible.

Lesson 3: Time Value of Money

12:29 George: And I’m kind of slowly building towards that. And another thing that I learned that was pretty interesting is that, kind of like this thing called, I think it’s called time, money value, a time value of money. It’s kind of like a dollar today is worth more than a dollar a year from now. So, if you can get money today and kind of put it in your investments or put it into your savings account, maybe like a high yield savings account, that will be worth more than kind of like $50, maybe a year from now, that you weren’t able to get that interest off of by having it in your account. So, I never really thought of it that way. I kind of, I always thought that like, “Oh, if I have a thousand dollars today, it’s the same as having a thousand dollars in 10 years.” So, those are kind of like the three big things that I would think of that I got from the class.

13:15 Emily: Yeah. I think the time value of money is also just a, it’s a mind-blowing concept. Like once you kind of understand like compound interest and how much your money can work for you. And I think the point that, you know, graduate students especially should take away from that is it’s okay–it’s great–to start investing now with a very small amount of money. It will not be a small amount of money decades from now when you actually reach retirement. So, what I like to say is that graduate students should not dismiss whatever tiny amount of money they might be able to start investing right now. Maybe it’s $10 a month. Maybe it’s $50 a month. That money will add up over time with this factor of compounding with the time value of money applied to it. And so, yeah, it’s not something that you should just say, “Oh, well, I can’t really save that much, so I’m not going to bother. Like, it’s still something you should pursue, even if it’s a small amount of money today.

14:05 George: Yeah. Totally agree.

What Financial Changes Did You Make?

14:08 Emily: And so, what did you actually, you know, you took this fabulous course, you learned a lot from it. What changes did you actually make? So, you’ve already mentioned that you started investing. Can you talk a little bit about how you started down that road?

14:20 George: Yeah, so I started investing well, like the first thing I did was I tried to get my financial life together, trying to get like my financial health in order because I didn’t really know anything. So, I started tracking my finances. So, I got the Mint app. I started tracking how much money I spend in a month. And the first month I wasn’t really trying to make a budget. I was just trying to understand my money habits and see what I could change. See what I wanted to keep. And then I started thinking about budgeting. And then after that I started my emergency fund. I also started collecting all of my important documents, like my birth certificate and my social security number and putting them in one place. They were kind of like scattered around. So, I wanted to put them in one place and kind of like, just get all of my stuff, like organized, like the first few months.

15:05 George: And then after I got myself situated and kind of like knew what was going on financially, that’s when I started investing. I decided to do a Robo Roth at the start until I get kind of like experienced with the stock market. And then I plan to transfer it over to a manual one to kind of like start my own Roth. So, my manual Roth–I mean not my manual Roth, my Robo Roth, I’m kind of like, “invest stuff for me,” and it’s kind of in the safest way possible. So, I don’t kind of like put it in something that kind of like blows up in my face and I lose all my retirement money. And my brokerage account is kind of just, it’s a tax account, but I only put money in there that I put in there so I can kind of gain experience with buying stocks and selling stocks and stuff like that.

15:50 George: So, and now that I think about it, one other thing that I learned from my class is that, when I’m looking at stocks and stuff, there are these things called like target-date retirement kinds of funds, which is like kind of nice. And I plan when I make my manual Roth, I actually planned a large part of it to be a target-date fund, which will kind of like change based on how close I am to retirement. And so after I did all of that, I kind of like started thinking about like different things that I learned about in my class that I should think about when I’m kind of like investing my brokerage account. Like don’t invest what I’m not willing to lose. And like, if you don’t understand it, don’t invest in it. And I started kind of like building up my portfolio and now I have like a pretty decent nest egg. So, I’m pretty proud of how I’ve gotten so far in the last few months.

Choosing a Robo-Advisor

16:42 Emily: I know, you haven’t even started graduate school yet. I mean, which is arguably I guess not a job, and you’re just getting out of undergrad, and I don’t know, it’s a fabulous amount of progress that you’ve made in this time. Which robo-advisor did you choose to start with?

16:57 George: Oh, so I actually chose Betterment. So, there are several different websites, I think there’s NerdWallet, that kind of review all these different things. Something else I learned from my class is don’t take it from one source alone, kind of go to multiple different sources and then based on all the sources together, make a decision. And kind of like across the board people suggested Betterment. So, I kind of went with Betterment since it had such great reviews all across the board.

17:31 Emily: Mhm. I think, I don’t know specifically, this is true for Betterment. It might be because you chose them. But one of the advantages that robo-advisors have is that they often have $0 minimums to start investing. So, it’s a great place like you’re doing when you’re just at the very, very start of your journey to use something like that, as you were saying, sort of some more familiarity, get some experience. And then you can switch over as you were planning on doing to a Roth IRA that you manage yourself through one of like the discount brokerage firms, like Vanguard, Fidelity, Schwab. I’m sure you’re looking at one of those three, if not something similar, for once you switch, but those often have some kind of minimum. So, I know like my strategy when I started my Roth IRA was I started with Fidelity because they, at that time, they waived their minimum if you had a $50 per month automated investing plan. So, I did that until I had $3,000 and then I switched over to Vanguard, because that’s where I really wanted to be, once I had the Vanguard $3,000 minimum. So, it sounds like you’re probably doing something similar with your robo-advisor to, you know, a Roth IRA that you’ll manage yourself strategy. Is that right?

18:34 George: Yeah. And there are like multiple different reasons as well. Like a big one is like the minimum so that like I could start investing now so that even if it’s a little bit, I could still start growing my investments. And also, when I get to a decent amount, I’ll be able to get, like, I think there are minimums in mutual funds as well. So, it’s like in order to invest in mutual funds, you need to have a certain amount of money. I’m not there yet. So, I think I’ll keep it in my Robo fund, which is kind of very low expense. Very kind of like, easy to, well, not low expenses–you can put as little money there as possible, and then it starts going in investments. But I feel like with the robo-advisors, I don’t want to keep it in there too long because they have these expense ratios. And if I have a large amount of money, I kind of start eating at my investments. But I think early on in the process that this was the best decision for me.

19:25 Emily: Yeah. And expense ratio, for those in the audience who haven’t started investing yet, is a representation. It’s a percentage representation of the total cost of owning whatever the investment is. So, with something like a robo-advisor, they usually add to the expense ratio of the underlying funds that you buy. Maybe about a 0.25% fee, which is sort of low. It sounds like pretty low. But you can get quite a bit lower if you just manage it yourself. Like you’re planning on doing, you know, in a few months or a year or whatever. You can get down under like 0.1%, 0.05%, even down to 0% expense ratios. So, there are very, very low expense ratios out there, even though the robo-advising fee doesn’t sound very high. Over time, as you were saying, it really does add up. Whatever you’re paying in expenses compounds, as we were talking about earlier, and it could end up being quite a bit of money over your entire investing lifetime. But your plan sounds really great to me. It sounds like you’ve gone about it in a totally intelligent way. So, that’s awesome.

Commercial

20:27 Emily: Emily here, for a brief interlude. I am just bursting with this news. I have launched a Community for Personal Finance for PhDs. The Community is for PhDs and people pursuing PhDs who want to level up their practice of personal finance by opening and funding an IRA, starting to budget, aggressively paying off debt, financially navigating a life or career transition, maximizing the income from a side hustle, preparing an accurate tax return, and much more. Inside the Community, you’ll have access to a library of financial education products I’ve made in the past. And I’m going to add new trainings to that library every month. There is also a discussion forum, monthly live calls with me, a book club, and progress journaling for financial goals. Basically, the Community is going to help you reach your financial goals, whatever they are. Go to pfforphds.com/community to find out even more. If you’re listening to this in real-time, you have the opportunity to become a founding member of the Community at a discount. The price is going up on August 15th, 2020, so don’t delay. Go to pfforphds.com/community for all the details. I can’t wait to help propel you to financial success. Now, back to the interview.

George’s Financial Resources Document

21:47 Emily: Could you share like why you created the document that you did? Because I think it came out of the course, right? What you were learning from the course?

21:57 George: Yeah so, I was learning all the different stuff and I started kind of looking up all these different, like websites and I found your website and many other websites and I started bookmarking them. And then, since I was kind of so engrossed with it, I would talk about it. So, I’m a McNair scholar at University of Central Florida, and we’re in this kind of like community together. And I always talk about it to other McNair scholars, and they ask me for advice, they ask me, “Oh, what can I learn about this?” And then I would kind of like blow them up with links. And I didn’t think it was kind of the best way to go about it. So, I decided to make an easy to read document with like the links, kind of like embedded in words.

22:36 George: So, you can read through it in kind of a relaxing way, and then click a link if you want to learn more about what I was talking about. And then I posted this in our McNair group chat. But then I thought it would be nice for other people to use this as well as they wanted to. So, I posted it on my Twitter, and I think a few people were able to like use it to learn more about personal finance.

22:58 Emily: Yeah. And we’ll link to the document in the show notes as well because I thought it was really well put together. So, thank you for doing that. Thank you for that, like, community service.

Factors in Choosing a Graduate School

23:06 Emily: Okay. So, now we’re in the spring semester, you have, you know, you have applied to your fellowships, you’ve applied to graduate school. You’re being admitted to different programs. And of course, you know, we’re considering a lot of things when we choose a graduate program, the quality of the research, the mentor that you might work with, maybe overall the program, the structure of it, where it’s located and so forth. But you know, the stipend, I think should be one of those considerations. Did you factor in the finances when you were choosing which graduate program to attend, or were you able to make the decision based on those other factors?

23:41 George: So, I applied to like nine graduate schools, and I think from eliminating the first ones, it was mostly based on like the research and like the faculty and the resources and stuff like that. But then when I got to the end, it was kind of hard to decide. It was a very hard decision. And when I was down to two, like based on cost of living of the two areas, the stipends were very similar, the research interests were really similar. Like everything was very similar. So, it was kind of hard to kind of make that decision. So, I think what it came down to was kind of two things. The first thing was that one school was kind of like calling me and checking up on me, answering my questions and that kind of like had a really good impact on me.

24:27 George: But then the last thing is that the school that I decided to go to, which is Stanford, they offered transitioning costs. So, like transitioning funds. So, I think transitioning to grad, I mean, I haven’t done it yet, but I’ve heard that transitioning to grad school can be really expensive. So, that they offered kind of some funds to allow me to kind of like take that stress off of me was kind of like, I think that’s what kind of pushed me to choose Stanford since it was a really hard decision.

24:58 Emily: I think that’s an excellent, I mean it’s a really, really good insight into your decision-making process. It sounds like, you know, these final two schools, it was really close. What tipped you over was, you know, people at Stanford were really attentive to you, checking up on you, and then they offered you this moving fund. And I mean, that’s something that graduate programs should know about. If something that minor, a few thousand dollars I assume?

25:19 George: It was actually $500.

Consider Stipends AND Cost of Living

25:20 Emily: Oh, $500? Okay. Right. So, $500, which is like nothing to the graduate programs, could tip an excellent candidate like you, you know, you won this outside fellowship, you’re bringing in money. If something like offering you $500 could tip the scales in their favor, that’s something that they all should be doing, frankly, at this point. So, I think you mentioned something in there really quickly, but I believe you said something like after you factored in the cost of living of the two different places, the stipends were similar, is that right? So the stipends themselves weren’t actually the same, but they were similar to another, once you factored in the cost of living, is that right? Can you talk about how you did that?

25:57 George: Yeah. So, like the cost of living at Stanford is much higher. So, the two schools, I guess, were Stanford and Cornell. So, the cost of living in Palo Alto is much higher than the cost of living in Ithaca, New York. So, the Stanford stipend was much higher than the Cornell stipend, but there are different websites where you can put in the location. I think it’s a cost of living calculator. You could put in the location where you plan to live and then the money that you’ll be bringing in, and there are also like tax calculators, because there are different tax rules. So, you can calculate how much tax will be coming out of your stipend. They can calculate how your stipend compares if you were to live in another area. And I kind of compared the two stipends and they were very similar, like almost identical, once you took into consideration cost of living. So, I couldn’t really use that as a reason to choose one over the other.

26:53 Emily: Yeah. Thank you for pointing that out. Like, I mean, even, you know, I also was sort of getting into personal finance in the year that I was applying to graduate school, and I didn’t even do that step that you did of taking that into consideration. I was just kind of looking at, “Oh, the stipends are all sort of similar. I don’t know. I assume the cities are different, but I never sat down and like actually did that little, little bit of math that you did. So, it’s a great idea just for the audience, anyone else going through this. I really like to use the MIT Living Wage database or calculator, livingwage.mit.edu. And it shows you what the living wage is for every, you know, county or metro city area in the U.S. And so, that’s the factor that I like to use.

27:31 Emily: That’s what we use in phdstipends.com, which is my database website where people enter their stipends and then we do this little division, like you were just saying, of divide the stipend by the local cost of living from this database and spit out this like factor, you know, is it more than one? Is it less than one? So, exactly what you were doing, maybe using a different calculator, but I think it’s really, really smart.

Housing Budget and Taxes

27:51 Emily: So, okay. You’ve chosen to go to Sanford, and you already were just mentioning some of the basic building blocks of the budget that you’ll have once you start graduate school. Like you were talking about taking into consideration how much your taxes are going to be. And I know that you’ve been preparing a budget over this summer before you’re moving to Palo Alto. So, can you talk about that process a little bit, and also about your decision around housing?

28:12 George: Yeah. So, I started my budget already. So, the first thing that I kind of took out of my budget was taxes. Because what I kind of like found out that was pretty surprising is that they don’t take taxes out of fellowships. So, like your income tax will be kind of just like given to you and you’re expected to know that it’s supposed to be paid back in taxes.

Quarterly Taxes on Non-W-2 Income

28:34 Emily: Okay. Let’s pause there because I think we need to emphasize that. At most universities, it sounds like it’s Stanford included, if you’re receiving a fellowship, which is what I call non-W-2 income. So, fellowship, training grant, this kind of income. Very likely, they will not be withholding income tax for you, as a domestic student. For international students, they do. So, let’s emphasize that again. You are receiving your entire paycheck, but that does not mean that you get to keep all of that. Part of that is going to go back to the IRS in the form of income taxes, which you may have to pay quarterly. I’ll link in the show notes to my resources on that. It’s probably ones that you found, George, as you were doing this research. But yeah, please keep going. I just wanted to, like–we don’t want to gloss over that. Like, you will probably end up paying income tax and you have to do it yourself. It’s not done for you. And it’s a process that a lot of people just completely miss and they have an ugly surprise when they get to their taxes after their first year of graduate school.

29:30 George: Yeah. And actually, I plan to do quarterly taxes as well. So, I was kind of like putting it together so that every month, like I kind of calculated how much taxes I would owe at the end, and then I divided that by 12. And then I would kind of like save that amount of money every single month. So, when it comes to that time, when I have to pay my quarterly tax, I already have it in my savings account and I can just pay it. But that’s the first thing I kind of put away. And then I went to my housing. So, at Stanford, they have housing on campus which is subsidized. So, it’s kind of nice that I was able to kind of apply to housing at Stanford.

30:06 George: So, I kind of looked at all the housing options, and out all of the ones that I liked, I kind of picked the highest monthly rent, and I put that in my budget. And I was thinking that, if I get a lower one, I could just change that in my budget. It will be easier to change to lower than to higher. So, that was kind of my thought process on that. And then with my budget, I tried to make it so that it’s not a budget that I kind of don’t like looking at. So, I kind of like, as I said before, like I tried to find out how I spend my own money and I tried to make a budget that I can comfortably live within the budget, and I gave myself some breathing room.

30:44 George: I wanted my budget to be kind of pleasant to live on so I don’t kind of like break my budget. So, I kind of was thinking like, “Okay, I spent this much on food. Let me give myself a little breathing room since I can kind of like afford to do that.” And then I also put some money in there for shopping. I put some money in there for transportation because I don’t plan to bring my car with me my first year. And then I also put like 20 to 25% away for investments. So, kind of like putting stuff into my savings accounts, putting stuff into my Roth IRA. And then for my brokerage account, I don’t plan to put monthly in there until I have a good amount in my savings account, but then I plan to start putting monthly into my brokerage account. For now, I’ll just kind of like, if I have some money from the money I put away for shopping and for like kind of random stuff, I’ll buy some stocks if I feel like I want to, but it won’t be like a monthly thing that I put money specifically away for yet. But that’s kind of like what I decided to put in my budget.

Ranking Housing Options

31:53 Emily: I want to go back just to the housing point for a second, because I think you’ve made a really good decision, which was like, okay, so you’re applying for all this, you know, subsidized on-campus housing. You account in your budget for the highest possible rent you would be paying. But is that actually how it turned out? Like what housing did you, when you were saying where you wanted to live, was that the one that you put at the top of your list? Or like how did you rank order that list and what did you actually get into?

32:18 George: So, I ranked the list, so there’s like really new housing that’s coming out. It’s going to actually debut this fall semester. So, I put that at the top of my list and that was actually the most expensive, and I was able to get it. So, I didn’t change my budget, but I also had these different ones that were a little bit older, but they had good amenities. They would have good spacing. And I actually got the tour it when I was at my interview. So, I would be fine living with it. It’s not like I would be like, “Oh, I can’t live here and I’ll have to live somewhere else.” So, that’s how I ranked it.

32:53 George: But, there were other options that were really, really expensive. So, I kind of listed those. They say to list everything, so I listed them, but they were like in 30th place, like it was kind of ridiculous how much they cost. So, I tried to kind of combine quality, but also the cost of living because I feel like housing, I think when I was reading my budgeting you should try to keep housing as close to 50% as possible. My housing is a little bit, it’s still over 50%, but I think it’s kind of difficult to kind of get 50% or lower as a grad student. So, I tried to get as close to that as possible. And with some of the other housing, it was like well over 50%. So, I tried to take into consideration that I should try to be close to 50%, if at all possible.

33:43 Emily: Yeah, I think I don’t know exactly what you were learning in the course, but according to the balanced money formula, which is a framework that I like to reference, you should keep all of your necessary expenses below 50% of your net income, which is really, really challenging to do on a graduate student stipend and also on a graduate student stipend in a high cost of living area, which is what you’re doing. So, it’s not surprising at all to me that even you, you know, making a prudent housing choice, it’s still over 50% of your income. That is pretty common for graduate students in high cost of living areas. But yeah, so it sounds like you were, you know, really thinking through both the finances and the lifestyle that you wanted to have with that housing decision. So, super happy that you were, you know, really intentional about that.

Long-Term Emergency Savings Goals

34:29 Emily: And you were mentioning just now, like some of your financial goals for your finances in graduate school. You mentioned that you were going to be saving/investing 20 to 25% of your income and then possibly doing a little bit more investing if you wanted to at any particular time. And I think you also mentioned earlier that you wanted to save up an emergency fund of nine months of expenses. Is that right? Is that your ultimate goal?

34:54 George: Yeah, I’m trying to, one day I hope to get to nine months. So, I would say my kind of goals for personal finance and graduate school, in particular, are kind of modest. I’m not looking to have like a huge, huge thing by the time I graduate. I hope to kind of like build habits and get into the habit of kind of like investing, get into the habit of staying on my budget, getting into the habit of putting money away monthly. Because like in undergrad, I didn’t have any of those habits, and I think that’s something I’m going to have to kind of build. And also, have at least like three months, hopefully nine months, of my emergency fund. Because I know that emergencies are emergencies and I doubt I won’t have any emergencies in graduate school.

35:37 George: So, hopefully by the time I graduate, I’ll have at least three months, hopefully nine months. And then kind of have a decent amount in my kind of Roth IRA as well as in my brokerage account, and that I’ve kind of stayed consistent throughout the five, six, or maybe seven years that I’ll be doing my PhD of monthly, always, putting some money away and not falling into blowing money on stuff. But also giving me that kind of flexibility to have fun and to do things that I find kind of amusing so that I don’t get too stressed through graduate school.

36:13 Emily: I think that’s such an excellent point that you made. Like yes, it would be great to come out of graduate school with savings, with investments, with a nice nest egg. That’s what happened for me. My husband and I defended with quite a good nest egg, and it was really fabulous for our subsequent life. But, the more important thing, actually, is the habit formation. And it’s sort of changing your–like becoming a person who budgets, becoming a person who invests. Now, I know I said earlier that it matters a whole lot. Like if you do that with a small amount of money, it’s great, and yes, that’s true. But, even more powerful is the habit. And so, when you have that nice post-PhD salary, and you’re already in the habit of investing or you’re in the habit of saving, you can then apply those habits to that fabulous higher income and really make some fast progress with your, you know, financial goals.

Any Other Goals for Grad School?

37:02 Emily: So, I think that was such a good point that you made, and even for people who aren’t able to do what you plan on doing, which is still, you know, saving and investing during graduate school. Even getting into the habit of budgeting, like that can be a great goal for your time during graduate school is just to make those changes in yourself and who you are. Even if you aren’t able to come out with more savings, again, once you have the post-PhD income, you’ll be able to keep applying those habits and really make some fast progress. So, such an excellent point, George. Any other goals you have for graduate school, aside from the ones that we just talked about?

37:37 George: I guess like, I mean, there are like nonfinancial goals, like kind of building like skills and kind of building my network and traveling and learning all the different stuff from different people. But financial-wise, I just hope to kind of pay as little in taxes as possible, learn how to file my own taxes. Kind of learn like all the financial things that I need to know to kind of like succeed. I think for my brokerage account, I’ll be kind of investing. I think the money in there is probably going to be used as a down payment on a house in the future. That’s kind of like, well far off, but I’m kind of thinking, “Oh, I’m investing in my brokerage account. I’ll probably use it to kind of buy a house or have some money towards a house.” Kind of things like that. Those are kind of like the goals I’m thinking of, but I don’t really have like super hard, concrete stuff yet. But those are kind of the things I’ve been thinking about.

38:30 Emily: Yeah. I think it’s great that you identified like, “Okay, I know it’s important to have an emergency fund.” You’re going build that up. “I know it’s important to save for retirement. I’m going to build that up.” And then, “Okay, whatever else comes, I have this other brokerage account, you know, other savings I can use for that. If it’s a house down payment, if it’s something else.” I think that’s a great way to structure your finances when you have a lot of unknowns in the future, as is very, very common for PhDs, because we never know where we’re going to live. You know, after, it’s a lot of uncertainty that we live with kind of longterm.

38:59 Emily: But George, it was a real pleasure to talk with you today. Thank you so much for coming on the podcast and sharing this beginning part of your journey. I hope that we’ll catch up with you again in maybe a few months or a year and see if it’s all panning out the way you thought it would. Thank you so much for sharing your insight.

39:15 George: Yeah, no problem. It was a pleasure to be able to talk about it.

Outtro

39:17 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind-the-scenes commentary about each episode. Register at pfforphds.com/subscribe. See you in the next episode! And remember you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

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