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Stretch that Stipend

Eliminate Debt Before You Start Graduate School

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Here’s the thing about debt: When you have a low income, you think that you have to use debt to purchase the things that you/need want. Buy now and spread your payments out over time! But here’s the thing about having a low income: you can’t afford to tie up your limited income with debt payments. If you are about to enter graduate school, which for most people is an unambiguous period of low income, you should do everything in your power to avoid taking on debt and eliminate the problematic debt you already have.

eliminate debt grad school

The Trouble with Debt Payments during Graduate School

The stipend you receive in graduate school isn’t intended to be remunerative. I like to say that the universities expect us to research for free, so they pay us just enough to keep us from taking outside jobs. (That is, for the graduate students who even receive a living wage – many don’t.)

If you’re lucky, your stipend is commensurate with or slightly above the living wage for your county. That is, you hopefully will be able to pay rent, eat (in), and get around town, and perhaps you can afford another modest expenditure like visiting your family, saving a little, entertainment, or some shopping. Have you ever heard the old joke about college: “Sleep, study, socialize: Pick two.”? Well, apply that to your finances in graduate school. “Basic living expenses, a splurge here and there, and saving/debt repayment: Pick 1-2.”

I’m being slightly hyperbolic; there is obviously a range of financial situations in graduate school, but you will almost certainly be in one of these (assuming you aren’t being supported by someone else):

  • Your stipend isn’t enough to cover basic living expenses, let alone debt payments – you’re going further into debt or spending some time working an outside job.
  • Your stipend can give you an okay lifestyle as long as you don’t have debt payments.
  • You could afford debt payments on your stipend if pressed, but there are a lot of other things you’d rather do with it (e.g., lifestyle upgrades, saving).

Knock Out Your Debt Before You Matriculate

If you are planning to start graduate school next year or soon, take the next few months to eliminate your debt or at least reduce it as much as you can.

If you can’t eliminate all of your debt in that time frame, you have to triage! Sort your various debts by priority level and work on them from highest priority to lowest priority. (This method is a hybrid of the snowball and avalanche methods of debt repayment.) The objective is to minimize the debt payments you need to make during graduate school, which means eliminating certain kinds of debts entirely if possible.

With this method, you will pay the minimum balance on all of your debts and throw as much money as you can scratch up toward the top priority debt. Once you have eliminated that debt completely, you move to the next top priority debt and throw everything you can at it. Concentrating your efforts like this gives you the best chance of paying off a single debt completely, therefore eliminating its minimum monthly payment and lowering the total amount of money you are required to pay monthly toward your debt once you start graduate school.

Low-Balance Debt: Higher Priority

The easiest debts to eliminate completely are those with low balances. If you have any debt balances under $1,000 or a few thousand dollars, those should become a high priority because they are possible to eliminate completely in just a few months.

High-Interest Rate Debt: Higher Priority

Also a high priority is high-interest rate debt because that is the debt that is growing the fastest and costing you the most money overall. For example, if you have two debts both with balances of approximately $1,000, you should prioritize the one at the higher interest rate.

Deferrable Student Loans: Lower Priority

Check with your lender to be sure, but student loans should have the option to be deferred while you are in graduate school. Since there would be no minimum payment due on these loans once you matriculate, they are a lower priority to pay off before you start graduate school.

However, that does not mean that you should ignore them completely prior to or during deferment. Unsubsidized student loans accrue interest even in deferment, and it is common for student loans to have a moderate to high interest rate.

If you eliminate your higher-priority debt and can start paying your student loans down before graduate school, definitely do so, starting with the highest interest rate loan.

Mortgage: Zero Priority

If you’re near the start of your home ownership journey, I’m betting there’s no chance you can pay off your mortgage in just a few months. (If that assumption is wrong, go for it!) Mortgage debt will therefore be in your life during graduate school, so prioritize paying off basically any other debt before you start making higher-than-the-minimum mortgage payments. However, if you do own a home, you need to check that you will still be able to afford the payment once you switch to living on your stipend. Selling your home, renting out your home, and renting out bedrooms in your home are all good options if you can’t afford it on your stipend.

Dump Collateralized Debt that You Can’t Afford

You may discover, as you look at your stipend offer letter and add up your minimum monthly debt payments (taking into consideration what you can eliminate before you start graduate school), that you either can’t afford all of your remaining payments or that maintaining all of them would financially paralyze you during graduate school (no fun, no saving).

Your best option in this case is to eliminate your collateralized debt, which is your debt that is against a specific asset that you own, such as your home or car. A very accessible scenario is if you bought a car and took out a car loan based on your previous higher salary, and now that car payment is far too high for your lower stipend. A simple fix is to sell your car, pay off your car loan, and buy a less expensive car (ideally without debt). You may “lose money” by doing this because you owned the car over a period of steep depreciation, but that consequence doesn’t change your inability to afford the payment on your stipend.

“But I Don’t Have a High Income Now to Pay Off My Debt!”

The advice in this article applies to practically anyone who is about to start graduate school and not currently in graduate school, even college students.

Certainly, if you have a higher-than-a-stipend salary right now, start cutting back your lifestyle to what it will be during graduate school and use the cash flow you generate to pay off your debt. You have to do it pretty soon anyway, so you might as well make your transition to graduate school less of a shock by acclimating yourself to the necessary frugality and eliminating as many minimum payments as you can.

However, even if you have a low-to-non-existent income right now, e.g., you are in college, you still have time on your side. Yes, you need to keep your grades up until graduation. Yes, you should enjoy your last few months with your college friends. But you still almost certainly have more free time now (and especially over the summer!) than you will once you start graduate school. That time can be used to generate a side income that you can immediately apply to debt repayment. Bonus points if you can establish a side income that you can continue during graduate school (time permitting), such as online freelance work or passive income.

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Don’t Forget to Save

One caveat: Don’t become so focused on debt repayment that you forget to save up some cash. It’s very helpful to have a small amount of savings available to you during your transition to graduate school, particularly if you have to move. There are a lot of expenses involved with moving and establishing a new residence and possibly fees to be paid to your university, plus most graduate students have to wait rather a long time (over a month) before their first paycheck arrives. It does you no good to work so hard to eliminate your problematic debt only to turn to a credit card because you have no savings for the transition.

Further reading: Bring Savings to Grad School

How intense you need to be in your debt repayment relates to how much high-priority debt you have and your ability to repay debt during graduate school. The more debt you have that is possible to eliminate entirely and the lower your stipend relative to the local cost of living, the more essential this process is to complete prior to matriculation.

What to Do with Your Tax Refund

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You’ve just received your tax refund for the year and it’s burning a hole in your pocket! Whether your tax refund is a couple hundred or a few thousand dollars, there are many possibilities for the money that can further your financial goals and increase your life satisfaction.

Fund Your Upcoming Cash Needs

Before you consider investing or paying down debt with your tax refund, I want you to think about your upcoming year and ask yourself how much cash you should have on hand.

Is your emergency fund a bit anemic? Do you want to make any large purchases in the next year but are not sure yet how you will pay for them? Are you coming up on an employment transition, during which it is very helpful to have cash on hand? Are you facing an un/under-funded summer or term? A yes answer to any of these questions is an indication that you should use your tax refund to beef up your cash savings.

I particularly like the idea of using a tax refund to jump-start a system of targeted savings accounts. I think targeted savings accounts are an amazing solution to the problem of irregular expenses. The really difficult part about implementing them is that at the beginning you both have to cash flow your current large irregular expenses and save up for future ones. That can put a big strain on your budget. But if you use your tax refund as the start to your targeted savings accounts, you can make the process a bit easier.

Further Reading: Targeted Savings Accounts for Irregular Expenses

Grow Your Wealth

If you have sufficient cash flow and/or savings for all your desired purchases in the upcoming year, it’s time to consider using your tax refund to increase your net worth. With a sizeable lump sum, you can make a big leap forward with any of your current financial goals.

If you currently have any bothersome debt, throw your tax return at your top priority debt. Following the debt avalanche method, you would prioritize paying down your smallest debt first. How amazing would it be to eliminate one debt completely with your tax refund! Following the debt avalanche method, you would prioritize paying down your highest interest rate debt first. This is the debt that costs you the most on a daily basis.

Further Reading: Options for Paying Down Debt during Grad School

If you are currently saving for retirement or would like to start, you can make a lump sum contribution to an Individual Retirement Arrangement (IRA). (You can also increase your contribution to a workplace-based retirement account, but that involves more paperwork.) If you receive your tax refund before tax day, you can even contribute to last year’s IRA if you still have contribution room!

Further Reading: Why You Should Contribute to Last Year’s Roth IRA

There are other possible savings/investment goals that you can use your tax refund for, such as taxable investments, a down payment for a home, and a 529 account.

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Invest in Your Success

Another way to invest your tax refund is in your own personal or career development. I know this is an unfamiliar concept for many PhDs, so hear me out!

As far as personal development goes, you could put part of your tax refund toward receiving coaching. I offer financial coaching, and some of my colleagues in the Self-Employed PhD network offer other types. For example, Katy Peplin offers grad student wellness and productivity coaching and a membership community and Caitlin Faas offers productivity coaching. And these examples are only the tip of the iceberg when it comes to personal development!

I also am launching a video course on investing for early career PhDs next month. If you sign up during the pre-launch period, your receive a discount and a free Q&A call with me once the course.

Another great investment would be in your career. You can explore career options outside of academia through Beyond the Professoriate, a new membership site from Jen Polk and Maren Wood. Jen also offers career coaching. If you’re currently applying for jobs or gearing up for it, Heidi Giusto offers application consulting services. Attending a conference to expand your network and horizons is another perfect use for your tax refund.

Live a Little

You know what they say about all work and no play… If you don’t have any pressing financial goals, why not do something fun with your tax refund? Sometimes you look at a lump sum of discretionary money differently from a small amount each month.

Could you take a vacation (or staycation)? Have you been eyeing a certain purchase? Do you want to upgrade your wardrobe or home furnishings? How about making a donation?

Change Your W-4

This last idea is not about what to do with your tax refund but rather what to do about your tax refund.

Did you like receiving a refund or would you rather keep more cash from your paycheck each month? If 2018 looks similar to 2017 for you financially, you’re probably on track to receive another refund.

If you’d rather receive a smaller refund or maybe even owe a little at year end, you can file another W-4 with your employer. You can fill out the worksheet again that helps you estimate the number of allowances you should have and hope that it is more accurate this time around. Alternatively, if you want to dig into the numbers more, you can calculate the amount of money you would like to have withheld from each paycheck and then figure out the number of allowances to claim to get to that amount of withholding.

That way, next year you can have your preference: a nice refund at tax time or more money in your pocket throughout the year!

How My Husband and I Are Using Our Tax Refund

This year, my husband and I are using our tax “refund” (technically it’s the amount of money we oversaved for taxes in our own dedicated savings account) for an upcoming cash need.

I’m due with our second child in a few months. My husband’s employer offers parental leave at half pay, so we’re saving up to help pay for our expenses during his leave since we’ll have lower cash flow. We haven’t yet learned how much time he’ll be approved to take off, so we’re squirreling away as much cash as we can in case he’s permitted to take a longer leave. We don’t want money to be the limiting factor driving him back to work.

It’s a very happy purpose for this money, and I’m looking forward to having some special time as a newly expanded family!

What to Do with Your Higher Take-Home Pay

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Whatever you might think of the Republican tax bill from last fall, it has now been passed into law and has already started to affect your income taxes for 2018. In many cases, your tax burden as a graduate student or postdoc will decrease for this year compared to last year, which means you’ll have more money in your pocket starting with your January or February paycheck.

higher take home pay

Will Your Take-Home Pay Increase?

A few weeks ago, I calculated what the tax burden would be for single or married people with no dependents with the income ranges that are most common for graduate students and postdocs ($15,000/year to $110,000/year). I found that across those income ranges, the tax burden decreased by 20-35%. Families with children under the age of 17 would see an even further decrease due to the larger Child Tax Credit.

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To perform these calculations, I assumed that you will take the standard deduction on both your 2017 and 2018 taxes. If that assumption is true (and your income is in the above range), you should see a decrease in your tax burden.

The taxpayers who may see an increase in tax due under the new law are those who currently itemize their deductions, such as households who have in the past deducted more than $10,000 in property tax and state and local taxes together. Another group that may see a higher tax liability under the bill (depending on the rest of their situation) is parents of dependent children aged 17 and older; the exemptions they used to take have been eliminated, and the expanded child tax credit is only for children up to age 16.

Further Reading:

However, I think my assumptions are valid or at least reasonably accurate for the vast majority of graduate students and postdocs, who tend to be younger with lower incomes/expenditures. It’s safe to say that most graduate students and postdocs will see a higher take-home pay in spring 2018 than they did in fall 2017; effectively, you will see a ‘raise.’

What to Do with Your Income Increase

I have no shortage of ideas of actions you can take with your increased take-home pay, whether it’s $14.50/month (for a single person with no dependents earning $20,000/year) or $109/month (for a married couple with no dependents earning $70,000/year). Chances are, last month you didn’t have a lot of money lying around begging to be put to use, and starting pretty soon you will have some non-spoken-for money to work with.

Don’t let this money just disappear into the ether! Allocate it to something specific. If possible, I recommend you set up an automated transfer from your checking account to wherever the money needs to go so that you relieve your willpower/memory of the responsibility of making the transfer manually.

Financially Responsible Action Items

Add to Your Emergency Fund

If you don’t yet have a dedicated emergency fund with a balance of $1,000 (or a higher target, e.g., three months of expenses), use the extra money to beef up your emergency fund! When (not if!) life throws you a curveball, your emergency fund is what stands between you and serious financial consequences.

Further Reading:

Start Investing/Add to Your Investments

YES it is possible and worthwhile to start investing with just a few dollars per month and it’s also amazing to even incrementally increase your existing regular savings rate!

Using this compound interest calculator to estimate, adding just $25/month to your investments for one year, at an 8% rate of return in 50 years that $300 will become over $13,000! If you kept up that higher savings rate for all 50 years, it becomes over $172,000! Sure, that’s not all the saving/investing you will need to do for your retirement, but even a small regular savings rate helps a lot.

Further reading:

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Pay Down Debt

Similar to the investing example, a few extra dollars per month thrown at your existing debt can accelerate your progress to debt freedom.

If you currently had $500 in outstanding credit card debt and were making the minimum payment of $25/month, it would take you 23 months to pay off the card. But if you instead paid $50/month, you would knock out that debt in 11 months!

While you are not required to make payments on deferred student loans, if they are unsubsidized they are currently accruing interest. For example, if you had $10,000 of deferred unsubsidized loans at 6.8% interest and five years until graduation (and the end of the deferment), putting $25/month toward your loans would decrease the $14,036 you would have owed at the end of grad school to $12,255 (the $1,500 you paid decreased your debt by $1,781).

Further reading:

Invest in Your Career

Instead of using your money to increase your financial security or net worth directly, you could double down on your PhD training and invest in your career. Not many universities provide adequate career exploration and training for PhD students and postdocs, especially for “alternative careers.” You could use your increased cash flow to save up to attend a key conference in your field (if you’ve already used the funding available to you) or for a career path you’d like to get into. You could join a membership site like Beyond the Professoriate to help you transition out of grad school/your postdoc/your current job and into a fulfilling job. You could take a one-time seminar on negotiating a job offer; think of the ROI on that training!

Not-Financially-Focused-But-Still-Good Ideas

There are plenty of good ideas of what to do with money that will have a positive impact on your well-being rather than your bottom line specifically.

Treat Yo Self

Set aside a bit of time to consider what would give you the most ‘bang for your buck’ with this extra cash flow in terms of increasing your satisfaction in your life. You could use it on a monthly basis to take a fancy exercise class, have a special date night, enroll in a new subscription service, or care for a small pet. You could save up over the course of a few months or the year and take an extra flight to see loved ones, purchase new electronics (my husband is currently eyeing an ergonomic mechanical keyboard!), or update your wardrobe. What will mean the most to you is obviously quite personal, but whatever you choose, the key thing to do is to earmark the extra money for your choice so that it doesn’t get swept up in the rest of your expenses.

Give

At any point in 2017 or earlier, did you come across a non-profit or certain cause that you had the impulse to donate to, but you just didn’t have the available funds? This is your opportunity! You can now set up a recurring donation to a group whose work is meaningful to you. Non-profits really appreciate steady contributions that they can plan on. Alternatively, you could set aside a dedicated savings account with a monthly automatic savings rate that is earmarked for giving. My husband and I did this in graduate school for one-off donations that we would make a few times a year, and it was a wonderful feeling to be able to say “yes” when an opportunity presented itself without having to scramble or make hasty calculations.

Don’t let this opportunity to act intentionally with your increased cash flow pass you by! It might be quite a while before you get another increase in your take-home pay so make the most of it.

How to Put Your New Postdoc Salary in Context

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After a long, arduous journey through graduate school, you’ve successfully defended your PhD and are about to take the next step in your research career: a postdoc. One of the best perks of transitioning from being a graduate student to a postdoc is the pay increase. While postdocs aren’t exactly rolling in dough, they are usually paid significantly better than graduate students, and after 5+ years of zero to tiny raises, it’s gratifying to finally receive a higher salary.

However, before you buy that new car or put an offer on a house, take some time to put your new postdoc salary offer in context. There are a few subtle changes common to the grad student-postdoc transition that will decrease your take-home pay and/or discretionary income.

(This post is specific to the US.)

Employee or Fellow?

The very first question to clarify is what exactly your employment status will be with respect to your university/institute. Just like in graduate school, there are two broad ways you can be paid: compensatory or non-compensatory. In academic-speak: Are you an employee or a fellow?

If you see “fellow” in your title or offer letter, have heard “fellowship” from your advisor when discussing funding, or have won an outside individual fellowship, you are a fellow and not an employee of your university. As a fellow, you may receive no benefits from your university or only a few; you are almost certainly not going to receive all the benefits a full employee would. You should contact your university’s postdoc office or your departmental administrative assistant for a full explanation of your benefits.

If you aren’t labeled a “fellow” you are most likely an employee, but there may be multiple classes of employees at your university so it’s important to determine which one. (Postdocs may not be offered the same benefits as faculty, for example.) Once you know exactly your class of employee, you can read through material provided by Human Resources to determine your benefits, and direct any questions you have to Human Resources or the postdoc office.

When in doubt, ask if you will receive W-2 pay or not. W-2s are used for employee pay, while non-compensatory pay is not reported to the IRS or reported on a 1099-MISC.

Further viewing: Types of Grad Student Pay and Their Implications

Some of the common, though not universal, differences in benefits offered to employees though not fellows are: income tax withholding, 403(b) access, 403(b) match, subsidized health insurance premiums, health insurance premiums paid as a payroll deduction, Health Savings Account/Flexible Spending Account, group disability and/or life insurance access, and official paid time off.

Income and FICA Taxes

If you’re earning more as a postdoc, you’re also going to pay more in federal income tax (given no other changes in your personal life). Your effective tax rate will increase and possibly your marginal tax rate as well. So if your gross pay increases by $1,000 per month, for example, federal income tax may take a $120 or $220 (or somewhere in between) bite out of that increase.

The same broad story would be true for state taxes if you are not moving states, but many postdocs relocate states as well with their new positions. If you don’t want any surprises in your first paycheck, look up how your new state’s tax brackets and rates compare to your old state’s.

One of the biggest tax changes that occurs when going from a grad student to a postdoc is FICA tax (Social Security and Medicaid). As a graduate student, you did not pay FICA tax. Postdoc fellows will also not pay FICA tax (or self-employment tax) on their income as they do not technically receive “wages.” However, postdoc employees will begin to pay FICA tax. On the employee side, the Social Security tax is 6.2% and the Medicare tax is 1.45% on all of your income up to $128,400 (in 2018). If your new postdoc salary is $45,000 per year, for example, you will pay $3,442.50 in FICA tax. That can be a big shock for someone who wasn’t paying any tax in that category previously.

The best way to calculate your new take-home pay after all of these changes is to use a paycheck calculator, of which there are many. (However, due to the recency of the tax law changes, online paycheck calculators may not yet be updated for 2018. As of this writing, the IRS has not yet updated its withholding calculator.)

Further reading: Why Is My Take-Home Pay as a Postdoc Nearly the Same as When I Was a Grad Student?

Health Insurance

While your grad school and postdoc universities almost certainly offer you the option of buying group health insurance, who pays the premium and how might change.

As a graduate student, it is typical to have your health insurance premium paid partially or completely from funds that are not part of your stipend pay, so many graduate students don’t have to factor that cost into their take-home pay.

A postdoc employee will likely pay part or all of his insurance premium through a tax-free payroll deduction. A postdoc fellow’s insurance premium may be paid on her behalf, similar to a graduate student, or come completely from her salary.

This is an important benefit to check into prior to starting your postdoc position as you don’t want any lapse in coverage or to be surprised by the additional expense. The premium for a postdoc’s insurance may be much higher than a graduate student’s, depending on the risk pool each position is put in.

Student Loans

Another big change when you transition out of being a student is that your student loans, if you have any, are no longer eligible for in-school deferment. Beginning to pay off student loans can be a large monthly expense on a postdoc salary, depending on the total amount owed.

Contact your lender(s) to find the minimum payment due and the period over which you will repay your loans. Federal student loans have a standard repayment period of 10 years, but private student loans may take a shorter or longer period of time. Factor this minimum payment due into your planning for how to allocate your salary.

If you want to pay off your debt faster than the standard repayment period, which is an excellent idea for debt at a moderate or high interest rate, plan on paying more than the minimum amount due each month.

If you don’t think your postdoc salary can handle even the minimum payment on your student loans, you have two options to immediately consider.

1) With respect to your federal student loans, you may be eligible for one of the many repayment programs that lower your minimum payment due (even, potentially, to $0) by extending the repayment period and overall amount of money you will repay (income-based repayment, pay as you earn, etc.). Your eligibility for these programs depends on your household income. Carefully consider whether it is in your best interest to use one of these programs, even if you are eligible.

2) There are many lenders currently offering student loan refinancing at competitive interest rates. When you refinance, you are paying off your old loans and taking out new private loans, so make sure you would not be losing any benefits unique to student loans, such as the repayment programs for federal student loans. Be forewarned that these lenders only work with borrowers with excellent credit and low debt-to-income ratios. If you can significantly lower your interest rate, refinancing may be a positive step for your personal finances, both lowering your minimum payment due and reducing the total amount of money you will repay.

Cost of Living

With a change in university naturally comes a change in the local cost of living. As you well know, living expenses vary greatly from city to city. At the lower salary levels of a graduate student or postdoc, this can be a major concern.

There are two quick methods to estimate how the cost of living will change between your grad school city and your postdoc city.

CNN offers a cost of living comparison calculator. Plug in the two cities in question (or as close as you can get to them) and put in either your grad student salary or your postdoc salary. Your greater familiarity with the cost of living in your grad school city combined with this calculator will help you estimate how far your new salary will go in your new city.

MIT’s living wage database also provides insight. Look up the living wage for your grad school university’s county and your postdoc university’s county. The living wage will be closer to your grad student salary than your postdoc salary, but the difference between the two will also help you determine how much of an increase or decrease in cost of living you will experience.

A more involved but also more effective step if you have not yet moved to your new city is to sketch a budget. Using your best estimate of your take-home pay based on the above factors, research how much you are likely to spend on housing, food, transportation, etc. if you kept your perceived lifestyle the same from grad school into your postdoc. Ideally, this exercise will help you decide in which areas of your budget you are able and would like to upgrade your lifestyle, such as living without a roommate.

Personal Experience with the Transition to a Postdoc Position

My husband stayed in his PhD advisor’s lab for an extra year as a postdoc to finish up a few papers before applying for a “real” multi-year postdoc at another institution. My husband received one postdoc offer that he seriously considered before ultimately choosing a position in industry. We performed the calculations above regarding increased taxes and insurance costs to compare the take-home pay of his new postdoc offer directly to the take-home pay from his short-term postdoc and graduate student positions. The take-home pay from the postdoc offer was slightly less than that of his short-term postdoc position and much higher than his pay as a graduate student.

However, when we compared the cost of living in our grad school city, Durham, NC, to the cost of living in Boston, MA, where the new offer was from, we were shocked by the results. In terms of the effective purchasing power from my husband’s take-home pay, the pay for the postdoc position in Boston was “less” than even his grad student pay in Durham. We would not have expected to experience an effective pay decrease moving from a grad student position to a postdoc position, but that is how the numbers worked out. I’m very glad that we took the time to do those estimates before he made a final decision about the offer.

Further reading: An Agonizing Decision

While the gross pay from your new postdoc position may seem great in comparison with your grad student pay, don’t be fooled! You must account for several important changes in taxes, benefits, and cost of living to compare apples to apples.

Give Yourself a Raise: Re-Evaluate Your Fixed Expenses

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Increasing your income as a graduate student can be quite challenging, to put it mildly. Stipends sometimes increase with cost-of-living raises or the student’s advancement to candidacy. Fellowships that pay high stipends are quite competitive. You could take out (additional) student loans to give yourself more spending money, but you’ll pay back all that debt (plus interest) later. Establishing a side income or side gig is not an option for all grad students, and those that do are likely making a significant time investment.

A version of this post originally appeared on GradHacker.

give yourself a raise re-evaluate your fixed expenses

Because their options for earning more money are so constrained, grad students seeking to free up extra cash most often turn to decreasing their living expenses. You can effectively “give yourself a raise” by adopting positive financial habits or practicing frugality. This first post in my “Give Yourself a Raise” series focuses on doing so by evaluating your fixed expenses.

I always encourage people looking to reduce their expenses to consider their fixed expenses first. Your fixed expenses are those that are the same every time they occur, such as your rent/mortgage, minimum debt payments, and certain utilities. You only need to make and carry out a one-time decision to reduce a fixed expense, which will free up additional cash flow for you on a regular basis for months or years to come. While this one-time decision might be difficult to make or implement, in my opinion this is often preferable to trying to reduce expenses by methods that require willpower or time on an ongoing basis.

While any of your fixed expenses could potentially go on the chopping block, those that are largest and/or discretionary are usually the ripest for reduction.

Rent/Mortgage

Housing is usually the biggest monthly expenditure grad students have and therefore should be the first to be examined. We all know how to (potentially) reduce our housing expenses: move to a smaller, further, or otherwise less desirable residence; add one or more roommates; or find a better deal. More creative alternative housing arrangements may also be possible, e.g., house-sitting or serving as a resident advisor.

In this area, graduate students usually don’t have a lack of knowledge of how to reduce their housing expenses but rather may not re-examine their decisions as their priorities, finances, and options evolve or are unwilling to move even when it is warranted. My husband and I went several years during grad school without re-evaluating our housing choice until a rent increase compelled us to. Searching for housing and moving certainly wasn’t easy, but by giving up a few amenities and switching from an apartment in a complex to a privately owned townhouse we significantly reduced our rent. The result was an extra $100+ each month that we could put toward other spending that we valued more.

Cable/Internet/Subscription Services

They key question to ask yourself with respect to your fixed utilities and subscription services is “Am I getting the best deal available for what I actually need/want?” It’s easy to lose sight of how well what you’re paying for matches what you truly use, especially as offers and packages change so quickly.

In the last couple years many streaming options have become available for content that used to be the exclusive domain of cable TV. If you’re paying for cable, now is the time to determine if the channels you actually watch are available in a lower-cost form. Don’t forget that you can still watch network TV for free if you have an antenna.

After you’ve determined what you actually want to pay for, simply being a savvy consumer and shopping around for the best price may keep you from spending tens or hundreds of dollars over the course of a year. If you switch providers to get a promotional deal, though, be sure to factor in any activation-type charges that you may incur and the length of the contract you must sign.

Cell Phone Service

People frequently espouse fierce brand loyalties when it comes to their smartphone brands and cell plan providers, which can get in the way of finding the service that fits their needs for the best price. If you’ve never looked at providers other than AT&T and Verizon, you may be able to realize significant savings immediately or when your current contract ends. My husband recently halved his cell phone bill by switching from Verizon to Cricket Wireless, and I count my patronage of Republic Wireless as one of the best financial decisions I made during grad school. Project Fi, Ting, and other mobile virtual network operators are well worth considering, and the service and price are continually improving. Switching providers while keeping your current phone or paying up front for a new phone can give you a lot more options for lowering your fixed expenses than buying a phone through a contract (if you can manage the irregular expense of buying a full-priced phone every so often).

Insurance

Reducing insurance premiums can be tricky because forgoing insurance or paying the least amount possible is often not the best decision (e.g., dropping collision coverage on a car you can’t afford to replace), yet you don’t want to be over-insured (e.g., paying for life insurance when you have no dependents or co-owned debt).

Regularly shopping around for the best price for the types and amounts of insurance you actually need is a great habit to build. You need to do your own research on what coverage you need and not rely on a salesperson to tell you (e.g., begin your reading on auto insurance, renters insurance, and life insurance with independent sources). If you have a good emergency fund, increasing the deductibles on your policies may lower your fixed expenses without jeopardizing your finances. Buying your various policies through the same company may also lower your overall premiums.

While you can ‘give yourself a raise’ by reducing any fixed expense by any amount, in this post I have highlighted the most common fixed expenses with reasonable flexibility to effect significant savings over the course of a year. Your own budget may include other types of fixed expenses that are worth evaluating. When you desire additional cash flow and income increases are hard to come by, it is prudent to focus on reducing your living expenses as best you can. Ultimately, you are the best person to judge whether you are using your money (and time) optimally while you are in grad school.

What fixed expenses have you reduced during grad school and how did you do it? When searching for ways to free up cash flow, do you prefer to focus on your fixed or variable expenses?

A Dozen Frugal Tips for Graduate Students

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Today’s post is by Brett Green, a physics PhD student at Penn State. These frugal tips are part of the month of frugal tips going up daily on the Personal Finance for PhDs Facebook page. If you want to receive the tips for the entire month plus bonus tips by other PhD contributors like Brett, sign up here.

Frugality is the complement of earning money – earning increases income and frugality decreases expenditure. Just like how earning money can be anywhere from a necessary bore to pay the bills to a way to make a living by doing what you love, frugality doesn’t have to mean undercutting yourself and in fact can lead you to just the opposite! Sometimes it’s almost like a game to me to find new ways to be resourceful and save money, I love learning new things along the way, and habits that save money also mean reduced waste and saved energy. I hope to share some of these benefits with you and hope they prove to be helpful.

On that note, though the main focus here is on saving money, I’m sure that we all are interested in saving time as well as money. When some time-saving ideas tied naturally into these money-saving ideas, I included them too. Besides, you know what they say – “time is money”!

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Buy secondhand and at alternative retailers

Buying secondhand and other places “off the beaten path” can have even more benefits than saving you money! You never know what you’ll find at thrift stores – the like-new camera I bought for $10 would have cost me $160 retail, and I’m much happier with my historic Yugoslavian dining room chairs than I’d be with something from the big box stores. The things you’d find in a thrift store are almost invariably not only less pricey but also more unique and interesting! Check out closeout stores too if you have any around, where even new goods can be found at up to half off their normal prices.

Create Your Own Entertainment

Make your own fun instead of paying for it and you’ll save on entertainment! There are myriad ways to amuse yourself without needing to pay for tickets, cable television, or the like. Going to a park, going out with friends, are solid options, as are hobbies. If you don’t have hobbies, this would be a great reason to take one up. As a bonus, if you take up an art or craft, you can sell your work on top of your entertainment savings!

Research Your Purchases Ahead of Time

Give yourself time to have options by starting your search for something you’ll need before you direly need it. Most of the best deals are found by watching and waiting while patiently keeping a lookout. This is especially helpful if you like thrift stores, as their inventories are constantly changing. Similarly, I like to set up Craigslist searches with e-mail alerts so I can jump on good deals right away. Remember, though, that you need to be looking actively to find your query – watching and waiting alone won’t do the job! Try to think of new places to look or people to ask.

Sell before the Move-Out Rush

Plan ahead for a move-out by starting to sell things before the last minute. Your offerings will be the first others will see and you won’t be forced to accept a low offer because of a time crunch. If you aren’t able to sell something, I encourage you to donate it. Even putting aside the societal benefits of charity and waste reduction, this benefits you directly as a tax deduction.

Buy During the Move-out Rush

Conversely, going move-out hunting when students vacate dorms (usually May) and leases are ending (usually August) is a great way to pick up left-behind freebies often in new or like-new condition! Many students fail to plan ahead and end up abandoning things that are perfectly good. One May I picked up two brand-new 500GB hard drives still boxed and sealed in antistatic bags from beside a dumpster, for example, and about a month ago a friend of mine picked up and made $40 off a leather office chair.

Buy and Cook in Bulk

Buy in bulk, and then cook in bulk, use your freezer! The first saves money, the second saves time, and the third saves your food from spoilage when you go in bulk. Some grocery stores display the price per unit (e.g. per pound) beside the package price, making it easy to see that you can save as much as half by buying in bulk. If not, bring a calculator – it takes only seconds to do it yourself! Cooking in bulk means you’ll only have to preheat, clean, etc. once, which is not only a timesaver but can make it less of a chore for those of us who don’t really like to cook. Finally, the wonderful preservation technology of the freezer means you won’t have to throw it out! For example, I buy about six pounds of chicken breasts for less than $2/lb, about half the regular price, and cook and freeze them all so I can just defrost them and have them ready in less than a minute for the next several weeks.

Bring Your Lunch

Pack your own lunch to campus to save both money and time instead of making a detour midday to find a restaurant. On top of that, you get to design your lunch exactly the way you want it, not constrained by any menu!

Grow Your Own

Start your own garden and grow some of your own groceries and spices! It’s awesome to see what you can grow, and you can bet they’ll taste better just because you know that you grew them yourself. You may not even need to go to a garden store – many such as onions, lettuce, and potatoes can be grown from your leftovers. I was a proud potato papa when I found that the two I had buried had grown into twelve! You can also grow many plants from cuttings by taking a few inches off a stem and putting it in water until it roots. I’ve grown mint, basil, rosemary and lemongrass this way.

Bicycle

Buy a quality bike instead of a parking pass! Getting out and riding in the fresh air is good for you too. Learn to take good care of your bike and it’ll serve you well for many years to come, and you’ll be able to help out and impress your friends with your knowledge of bicycles. You’ll be environmentally friendly this way too.

Buy a Home

Buying a house or condominium, if you can, means you’ll be building equity instead of just paying rent. If you have spare rooms you can rent them out as well! Just to be safe, if you plan to sell it after you graduate, it would be wise to talk to those familiar with the housing market to get a picture of how the home’s value might change. I figure, at least, that if you’re looking for a house now, then by the time you’re ready to move another student will be there in your former role as the buyer.

Put in Sweat Equity

Do your own “dirty work” when applicable instead of hiring someone, and you’ll get a sense of satisfaction and pride in addition to saving money! This can be as simple as washing your car by hand, or it could be more complicated, such as home maintenance. Even many things that are at first intimidating, though, actually aren’t so hard once you start. I’ve fixed my water heater for $12 and my gas fireplace for free with just some courage and the manuals, and the sensation of accomplishment and victory afterward is awesome! On the not-so-intimidating (for a young man, at least) side, I’m about to 3D-print a larger hair clipper attachment to match the length I like.

Maintain Properly

Take care of things and they’ll last longer and work better, saving you (you guessed it!) time and money, not to mention possible frustration, in the long run! Whenever you get something new, it’s good practice to check what you need to do to keep it in great shape. Most things will have instructions or a manual available, and even for secondhand goods which no longer have the original copies you can bank on the information being online. When I get a new tool, even if I only skim the features and capabilities, the two places I’ll be sure to read through are safety and maintenance.

Note how many of these come from planning; certainly the 3rd (searching ahead), 4th (selling ahead) and 5th (move-out hunting) and less explicitly also the 6th (cooking ahead), 7th (packing lunch), 10th (buying a home) and 12th (taking care of things) can be thought of in terms of planning ahead. This wasn’t even intentional on my part – it’s just a fact of the way things work that planning ahead is the best way to get things done.

There’s one more thing I think is apropos to share with you, and that’s to keep your approach to saving balanced and in perspective. Frugality can be a double-edged sword, as I often have trouble spending money on myself even when it would be worth it. This can be, for example, buying a cheaper substitute that isn’t really what I wanted or doesn’t adequately accomplish the purpose I wanted it for, or it could be a foregone opportunity, such as museums I didn’t visit or lunch or movies with my friends that I was reluctant to pay for. To be sure, my ideas wouldn’t necessarily correlate with that sort of excessive frugality, but it’s best to be conscious of it now so you’ll be aware of it later. Just be sure that you keep doing what’s best for you overall and put the right importance on other things that matter to you!

All right, I know I said one more thing, but I suppose really it’s two. After all, I would be missing a golden opportunity were I to end this without a frugal pun! “Dumpster diving is a great way to net free stuff. The best, though, is on the side of the highway – that’s how you really get the pick of the litter!”

Thank you for reading!