Personal Finance for PhDs

Live a financially balanced life - no Real Job required

Main navigation

audio

How This Grad Student Fellow Resolved an Expensive Tax Bill in His Favor

by Leave a Comment

In this episode, Emily interviews Matty Dowd, a sixth-year PhD student in history at Princeton. Matty openly shares with us the tax horror story he lived for most of 2021 and into 2022. In 2018 and 2019, Matty reported his fellowship income as “other income” on his tax returns, which caused the IRS to mistakenly think that he owed self-employment tax. To compound the issue, the IRS’s snail mail communications never reached him. By the time Matty realized what was going on, the IRS thought he owed $16,000 in back taxes, penalties and interest. Matty reached out to multiple sources to help him resolve this, but ultimately used Emily’s workshop, How to Complete Your Grad Student Tax Return (and Understand It, Too!), to explain to the IRS what had gone awry and have the issue resolved in his favor. It’s a harrowing story with a happy ending! You won’t want to miss Matty’s ending thoughts on the most effective way to approach tax and financial education.

Links Mentioned in the Episode

Image for S14E2: How This Grad Student Fellow Resolved an Expensive Tax Bill in His Favor

Teaser

00:00 Matty: I’ll be very honest and upfront to the point where it may be a little bit embarrassing for me, looking back at how I handled this throughout these years.

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, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. This is Season 14, Episode 2, and today my guest is Matty Dowd, who at the time of the recording was a fifth-year PhD student in history at Princeton. Matty openly shares with us the tax horror story that he lived for most of 2021 and into 2022. In 2018 and 2019, Matty reported his fellowship income as “other income” on his tax returns, which caused the IRS to mistakenly think that he owed self-employment tax. To compound the issue, the IRS’s snail mail communications never reached him. By the time Matty realized what was going on, the IRS thought he owed $16,000 in back taxes, penalties, and interest. Matty reached out to multiple sources to help him resolve this but ultimately used my workshop, How to Complete Your Grad Student Tax Return (and Understand It, Too!), to explain to the IRS what had gone awry and have the issue resolved in his favor. It’s a harrowing story with a happy ending! You won’t want to miss Matty’s ending thoughts on the most effective way to approach tax and financial education.

01:55 Emily: If you would like to sign up for the tax workshop Matty and I discuss during this interview or one of the sister workshops for postdocs or nonresidents, you can find everything linked from the Tax Center of my website, PFforPhDs.com/tax/. The first live Q&A call for this tax season will take place this Thursday, January 26, 2023. So, if you plan to file your tax return in January, I highly recommend joining the workshop now so you’re prepared with your questions by Thursday. You can find the show notes for this episode at PFforPhDs.com/s14e2/. As ever nothing you hear on this podcast should be considered tax, financial, or legal advice for any individual. Without further ado, here’s my interview with Matty Dowd.

Will You Please Introduce Yourself Further?

02:52 Emily: On today’s episode, we are going to talk about one of my favorite subjects, which is taxes, but we do not have such a cheerful story. My guest today is Matty Dowd. He’s a fifth-year graduate student at Princeton in history. And he’s going to be telling us about a tax debacle <laugh> that he walked into a few years back, and that has taken a few years to unravel. So, it’s going to be a really like involved story. But for those of you who are confused about taxes or worried about taxes, <laugh>, this might be a really great episode to listen to and to share because a lot of people make the same kinds of mistakes that Matty did, and they get amplified and he’ll tell us how to resolve it or at least how he resolved it. So, really, really glad to have you on, Matty. Would you please introduce yourself a little bit further for the listeners?

03:36 Matty: Sure. Thank you for having me on! It’s great to be here. Yeah, so my name’s Matty. I’m a fifth-year PhD student, as was said. I studied at Tufts University for undergraduate and then did a master’s at the University of Paris. So, I went kind of straight through in the academic path, which may or may not be relevant to the later <laugh> discussion. And then I also worked a bit on the side and kind of continued to have over the past several years a mixture of like hobbies and other small jobs, translating, working as a resident assistant as a tour guide, playing piano at churches, tutoring, and that kind of thing. So, sort of supplementing my income with other hobbies slash skills that were somewhat related maybe to my interests.

Funding and Tax Preparation 2018-2019

04:23 Emily: Well, Matty, I’m really pleased that you’ve joined us because you’re going to share a tough story with us, but I know it’s going to be really beneficial to a lot of people. So, just for listeners’ notes, we are recording this in April, 2022. I’m planning to publish this in early 2023, but we are talking about events that started back in 2018, I believe. And so, Matty, tell us like for tax years 2018, and then I think you did the same thing again in 2019: How were you funded during those years? And like how did you prepare your tax return in those years?

04:56 Matty: Sure. So, in 2018 and 2019, I was on a university fellowship, so through my university, through Princeton. And in part of 2019 I was on what was called an assistantship, which was a bit different because I was a teaching assistant or a preceptor as we call them there. So, there was a W-2 tax form generated for this income, the assistantship income, that is. Whereas for the general university fellowship, there was no tax withholding, there was no W-2 form. And I also earned some side income in some of those other hobbies I referenced at the time. So, that was what comprised my income during those years.

05:35 Emily: So, I understand there was no tax withholding on the, what I call this awarded income, this like non-W-2 fellowship/stipend/training grant. There are different words for it, but I call it awarded income if it’s not reported on a W-2. You said that there was not any tax withholding, but did it show up anywhere? Did it show up on a 1098-T? Did it show up on a 1099? Anywhere?

05:54 Matty: Nowhere.

05:55 Emily: Okay. So, no tax reporting whatsoever. This is actually a pretty common approach, and it’s frustrating, but anyway, go on. How did you prepare your tax return?

06:05 Matty: <Laugh>, I should maybe say quickly before I say this kind of in general about this story, I’ll be very honest and upfront to the point where it may be a little bit embarrassing <laugh> for me, looking back at how I handled this throughout these years. But anyway, so here it goes.

06:21 Emily: The listeners are with you, don’t worry. A lot of people are in the same situation. I was, too, when I was early on in grad school.

06:29 Matty: Alright. So, I prepared the tax return myself primarily during these years using online software that was sort of available, like file your taxes, free filing, et cetera. I also didn’t pay estimated quarterly taxes during these years, even though I should have. And so, I essentially treated this, I used the filing software to kind of generate a lump sum number for the awarded income that I would then pay around the time I filed my taxes. So, obviously, this was not the right way to do this for a number of reasons, but it’s what I did for 2018, for 2019, and what I was doing for 2020 until I realized that there was a problem. And the last thing I’ll say about this is that I reported, and this will get into what the bigger problem was, that I reported my fellowship income as other income on the tax return. And so, this is what was going to lead to big problems for me down the road.

07:28 Emily: I have to say, Matty, that I did the exact same thing when I was in my first few years of graduate school. My university, Duke, does things a little bit differently because at that time they did withhold income tax from my awarded income stipend. But they issued a form 1099-miscellaneous [MISC] with Box 3 income. And so, if you look at like the instructions, like you didn’t get instructions right because you didn’t get a form. So, good on you for even like knowing that this was even taxable income. So, actually you did something right from the beginning, which was reporting it <laugh> even though you reported it slightly incorrectly. Like if you look at the instructions for what I was dealing with, it says report it as other income if it’s not self-employment income, which this wasn’t. So, I did that. And it turns out that was wrong. For me, it didn’t get caught in the same way that yours did probably because of how it was reported. So, I didn’t have the same outcome, but I started down the same path that you did. So, you are definitely not alone. I still talk to people to this day who have read my materials and are asking me, do I report this as other income? The answer is no, and we will see why.

IRS Notices During COVID

08:30 Emily: Okay. So, you know, you sort of mentioned that you figured out when you are going to file your 2020 tax returns, so that’s early 2021, right? That, you know, these errors had gone on. But let’s back it up and talk about what was happening from the IRS’s perspective. So, the IRS receives your 2018 year, 2019 returns, they see this other income. What are they thinking, and what are they trying to do to reach out to you?

08:53 Matty: So, the IRS is beginning to send me notices from, I guess it was around actually the summer of 2020, that the IRS began sending notices about my 2018 tax year. And, the thing was, I received none of the notices. This was also going to be a big part of the story. The reason for that, there are really two reasons. The first is that I had moved out of my Princeton graduate apartment abruptly at the start of COVID in March of 2020. And so, I was living in Massachusetts with my family, my sister, and her fiance, just kind of waiting out early COVID, not sure what was going to happen. I didn’t think to change my address on file with the IRS at that time, which in my slight defense I think was a reasonable thing to not think of.

09:45 Matty: The second problem though, which also gets back to another important part of why those tax filing softwares aren’t great if you don’t use them in the right way, is that the IRS didn’t even have my correct apartment number because I had typed it in correctly on the website, which I was able to go back and check, but that website generates a 1040 tax return form, which I didn’t look at before I submitted it and it cut off my apartment number. So, it said I lived at apartment 40 and not 405. So, even though after I left Princeton, I had, you know, set up a mail service through the USPS, who I don’t even know if that worked <laugh> to forward mail at home. And had I been at Princeton, you know, I know the building manager, they may have seen the letter and kept it aside for me, but in any case, not having the right address on my file did no benefits for me as the situation went on.

10:41 Matty: So, basically, yeah, from the IRS perspective, I didn’t respond to months of deficiency notices regarding 2018. And so eventually after not hearing from me, they just assessed a bill on my IRS online account for basically $7,500 in underpayments, penalties, and then fees, interest rather, associated with the non-paid taxes, which I didn’t discover until preparing my 2020 tax return in May of 2021 because it was a bit delayed during that year. Because of COVID, you could do it in May. And I saw this charge on my online account and obviously was very thrown off and surprised by that.

11:23 Emily: Okay, so in a second, I want to get to why this massive charge existed because again, you had paid what you thought was your income tax, you know, or in those earlier years. But first, I just want to take a little sidebar to tell you that I had a very similar experience with the Virginia Department of Taxation. So, state-level taxes. I moved from Virginia to North Carolina when I started graduate school. So, I was like a part-year resident in each state for that year. And for whatever reason in the next year, Virginia decided that I owed them income tax even though I was paying tax in North Carolina. And I had been a part-year resident the year before, which they supposedly should have known, but they could not track me down because I had moved multiple times near graduate school. I did not set up mail forwarding, which you were like, that’s great that you even thought of it.

12:10 Emily: I did not do that. I also got married and I changed my name. So like, they could not find me to like assess me what they thought was their tax bill. So, ultimately, that bill went to collections and I like freaked out when, this was like years later, they finally sent to collections. The collections agency immediately found me because guess what? They use things like your phone number, which the IRS does not do. The IRS will strictly only use mailing addresses. And so, anyway, the collections company found me and I was able to quickly figure out that this was just a completely like fabricated bill. Like I had no responsibility for this, and it was very easy to get it cleared up, but it really freaked me out when it happened because like, I’m supposed to be like this responsible financial person and I’m like sent to collections over something.

Incorrect Characterization of Fellowship Income

12:51 Emily: Like it’s really, anyway, I just think it’s not great that in the, you know, era that we’re in with all these other modes of communication that we have that they still rely on physical mailing addresses, but they do. That’s the policy. So, you know, we have to deal with it. So like, good on you for setting up mail forwarding <laugh>. Too bad that the address was actually wrong and blah, blah, blah, all these other problems. So, that’s my sidebar. What I want to ask you about though is, so why did the IRS think that you owed this massive tax bill?

13:19 Matty: So, this goes back to how I had characterized the fellowship income. So, actually in reality there were a few problems with the tax return for 2018, even apart from the address. But the major one, and the thing that I think raised the attention of the IRS, was the fact that I had reported this as other income, which they thought that I needed to pay self-employment taxes on. And this self-employment tax assessment was not a part of the number, the lump sum number I generated from those filing tax softwares. That was something separate that I was going to have to figure out on my own. And so, this is what led them to send the initial deficiency notice, which again, I didn’t receive, but based on the kind of the timeline, I think I figured out, would’ve come in the summer of 2020 to Princeton, with an underpayment of about $5,500 that they thought that I owed in self-employment and hadn’t paid.

14:17 Matty: And then the penalty, which was in part a function of by how much I’d underpaid, I would think it was an $1,100 penalty because I had underpaid by over $5,000 and then interest on that. So, that’s what they were really after. And if I can just add, so I’ve sort of referenced this already, but I realized I had, you know, this was after I had filed taxes for 2019, a long time before. So I knew I had the same problem for that income that I had done in the same way. And I guess we’ll maybe get into this in the next question, I don’t want to jump ahead, but just to say the low point was that in June of 2021, I started receiving notices about the 2019 tax year for about the same amount. So at one point, the Internal Revenue Service thought that I owed them about $16,000 between taxes, penalties and interest. So, that was kind of the low moment, but yeah, I hope I didn’t anticipate <laugh> your later questions there.

15:23 Emily: No, that’s horrifying for a grad student, that’s what, like 50% ish of your income for the year?

15:30 Matty: Yes.

Did You Know This Was a Mistake?

15:31 Emily: So, was there ever a point that you thought maybe they were right? Or did you know from the beginning that this was a mistake?

15:38 Matty: So, I didn’t know from the beginning that this was a mistake because I didn’t really understand how this works. I didn’t have the vocabulary to understand it. This also maybe gets into a bit where I found your site helpful and maybe I’ll say a bit more about that in a minute, but it was not really understanding it. And so this week in May of 2021, as I’m realizing that I have this charge from 2018, I’m preparing the 2020 tax return, wondering what went wrong and how to do things the right way, that I began to realize about this sort of other income question about really the specific nature of how to manage these sort of awarded income from university fellowships that don’t generate any documentation associated with them. What I will say is that I did very early in the process reach out first to my parents and then to my parents’ accountant who was, I’m sure that she’s very competent, was very nice, but didn’t have experience with this and actually thought that I did owe them that money.

16:44 Matty: And so, I was actually encouraged by a tax professional to pay the money, and then she was going help me draft a letter to try to get the penalties minimized because it was my first mistake. But around the same time I’m reading the IRS site, I’m finding your website, Emily, and even though I feel like am I being too, you know, is this hubristic of me to think that I know more than the tax professional, but I really sensed that no, this really was a mistake in how I characterized the income. I don’t actually owe it. But it was an open question for a few days whether I was right or not. And then obviously a separate question as to whether the IRS was actually going to agree that I was right or not.

17:26 Emily: Absolutely. I think it is so hard for graduate students and postdocs and anybody with this like weird academic income, as you said, to kind of like challenge or like stand up to or like correct someone who you’re paying <laugh> to help you with this process. Like who’s supposed to be an expert, but like, yeah, the fact is that they may not deal with these types of taxes very often. They may like, whatever, like you said, they’re very nice. They’re probably very competent in many areas. Like for example, small business taxes is probably what she’s much more familiar with than fellowship income. And so she was going down a route of like, oh yeah, this was self-employment income and oh yeah, these are correct, you know, charges, but like we can get the penalty blah blah. That’s a fine thing if like, the whole thing was right from the beginning, but it wasn’t. So, I would love to hear more about how you like discovered and then worked with the IRS, like to clarify for them that this was actually fellowship income that you should have never even thought to report as like other income that, you know, we just went off the rails from the start with that reporting like type.

18:28 Matty: Yeah. Yeah. So, what I was able to find out right away once I saw the charge on my account online was I could download the transcripts and records of accounts from 2018. Because remember at this point I still had received no notices about it. This is just me logging on very casually one night in May of 2021 to see if I got a stimulus payment in 2020 that I had missed. So, that 2018 tax record or record of account and transcript, which you can I think normally download from past tax years, helped me to see what was actually at issue and to see why the IRS had labeled what they had as penalties. What I then did, the good piece of advice I got from the accountant was to call the IRS either late in the day or early in the morning to try to get through and talk to someone, which I did.

19:23 Matty: And for anyone who’s called the IRS, and I would do this many times over the succeeding several months, it’s quite an experience. You know, sometimes you get people who are very helpful and knowledgeable, sometimes you don’t. Sometimes it takes a long time. Again, I was still at the stage where I was learning about this and like figuring it out. And so again, it’s difficult sometimes you don’t understand what people are telling back to you. But eventually what happened through a few phone calls in the days after I made the initial discovery was I talked to an IRS agent who basically told me that I could fax, he gave me a fax number, and said I could fax an explanation of my situation to what he called the reconsideration department, which sounded like 1984, kind of scary style instructions. But that was the first time that I talked to someone where there was a kind of glimmer of, okay, maybe there is going to be some potential light at the end of this tunnel.

20:24 Matty: So it was, in talking to those agents, I came to realize a number of the mistakes, which I’ve already communicated to you and began to see a way out of beginning to resolve the 2018 tax issue. I was also though a bit uncertain whether I should also talk to them about 2019, if that would just be confusing. Was that going to be bad for me in some way? I was almost treating it as though, I mean, I don’t have much experience like with lawyers or with like a criminal case or something, but as though I didn’t really know how to best talk to the IRS about some of these issues. And yeah, but I guess that first piece of advice was the beginning of the rest of the story.

Commercial

21:11 Emily: Emily here for a brief interlude! Tax season is about to start heating up, and the best place to go for information tailored to you as a grad student, postdoc, or postbac is PFforPhDs.com/tax/. From that page I have linked to all of my tax resources, many of which I have updated for tax year 2022. On that page you will find free podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with. The absolute most comprehensive and highest quality resources, however, are my asynchronous tax workshops. I’m offering three tax return preparation workshops for tax year 2022, one for grad students who are U.S. citizens or residents, one for postdocs who are U.S. citizens or residents, and one for grad students and postdocs who are non-residents.

22:19 Emily: Those tax return preparation workshops are in addition to my estimated tax workshop for grad student, postdoc, and postbac fellows who are U.S. citizens or residents. My preferred method for enrolling you in one of these workshops is to find a sponsor at your university or institute. Typically that sponsor is a graduate school, graduate student association, postdoc office, postdoc association, or an individual school or department. I would very much appreciate you recommending one or more of these workshops to a potential sponsor. If that doesn’t work out, I do sell these workshops to individuals, but I think it’s always worth trying to get it into your hands for free or a subsidized cost. Again, you can find all of these free and paid resources, including a page you can send to a potential workshop sponsor, linked from PFforPhDs.com/tax/. Now back to the interview.

Helpful Advice: Finding the PF for PhDs Tax Workshop

23:20 Emily: So, let’s continue then. So, how did you ultimately figure out that, you know, you should have explicitly communicated this as being fellowship income, and that that miscommunication was at the root of all these other issues?

23:34 Matty: So, I think this is really where your website and especially your workshop on the, I forget the specific title, like filing a grad student tax return and understand it too. Something like that.

23:47 Emily: Yeah, it’s How to Complete your Grad Student Tax Return (and Understand It, Too!). If anyone wants to find it, you can go to PFforPhDs.com/taxworkshop. I will have the 2022, presumably, version of that available by the time this comes out. So, yes, go on.

24:03 Matty: Yeah, so I, you know, I think I had maybe found on the IRS website some information about this as I was looking around, but the clearest statement of and the most focused advice for graduate students in the situation that I was facing at least, I mean, not so much, you know, when you’re two years behind the ball and facing what I was facing with the IRS, but with just filing a tax return in general–because I still needed to do the 2020 one at that time–was through your website. And so that’s, I think when it became clearest to me about this other income that this was what sort of my problem had been and finding the steps that I would need to do in order to to do the 2020 return, right?

24:56 Matty: And then also in the communications that I was to have with the IRS, by faxing them info about 2018, how I should sort of write my statement explaining what had happened. So, I think that workshop was, I mean, it was helpful on its face for just filing a sort of a normal tax return and understanding what you’re doing, but it also helped me to find the words to explain to the IRS in writing and then, which I also then backed up with other documentation that I faxed along with it, related to the 2018 issue.

25:32 Emily: So, it is interesting to me that you found the workshop. And as you said, the workshop is great for like preparing your this year’s current year’s tax return. It’s not designed to like ameliorate past issues, as you said, I’m <laugh> I’ll actually link in the show notes. It sounds like you maybe didn’t find this through a Google search, but my old personal finance website, which is evolvingpf.com, I actually published a couple of posts from people who had been in your exact same situation. They had reported their fellowship income as other income, the IRS thought it was self-employment, and I actually published their accounts as well, like we’re doing here on the podcast, of how they fixed the issue. And like even they included the text of the letter that they sent to the IRS. Would you actually be willing to share like an anonymized version of the letter that you sent, or is that too much information?

26:20 Matty: No, no. Yeah, I’d be willing to do that.

26:22 Emily: Okay. So, we’ll set that up in the show notes. So, by the time this is published, we’ll have that all ready to go. So anybody else who finds this podcast episode later and is in the same situation, can at least not have to repeat all this research that you did and like have sort of a model to go off of, as you said, to have even the language to explain to the IRS. It’s funny because when you’re filing a fresh tax return, you can just sort of report your taxable fellowship number on your tax return, and the IRS you know, in whatever, 99.999 cases is not going to come back to you and say, “Wait, was this really fellowship income? Blah, blah, blah.” But once you go down your route of you have misreported in some way and they’re suspicious about it, then you have to back it up with documentation. Like you probably sent in your award letter, I would imagine, that like uses the word fellowship. Yeah, go ahead and talk about that.

27:04 Matty: Yeah, yeah, no, so I did, I mean again, at that stage too, I was just trying to gather as much information that would be potentially helpful or would, you know, show that I was kind of legit in the case that I was making. So, I probably sent way more than they <laugh> needed or cared to look at. But I think I did include the award letter and then even maybe like, not a pay stub, but some kind of like summary of, you know, year-end summary that showed at least that I was receiving income from Princeton University as a PhD student. Yeah.

Patiently Waiting for 2018 Tax Year Resolution

27:47 Emily: Yeah. And so, did all of that like fix the issue? I understand this took several months, played out, but like this ultimately was effective. Yes. So like what was the final outcome?

27:56 Matty: Yeah, so actually maybe first, let me just say, so this was all, that initial fax was all about the 2018 tax year. But meanwhile, I knew I had this 2019 problem. I felt good about the 2020 return that I was doing, because again, I had used your website and your workshop and felt like I knew what I was doing for the first time. But for 2019, in speaking with, I’d also reached out to someone at H&R Block, local to Princeton. And their advice was basically to file an amended return for 2019 to try to anticipate if the IRS is going to probably come after me for that year because they’ll think I made the same mistake, to anticipate that by filing an amended return. That was one advice. The second piece of advice was then for me to figure out if I thought I owed anything to the IRS from those years to pay it as basically right away or as soon as I could.

28:56 Matty: And so, I did both of those things for 2018 and for 2019 and, in fact, I thought I calculated that I did underpay in fact, by a few hundred dollars. And so, paid that, basically. So, by the end of May or maybe early June, I was, from my perspective, totally paid up. I didn’t know what they were going to do in terms of penalties and how that was going to work. And then for 2019, I submitted an amended return, which you can follow online, how it’s being processed and you know, it’s supposed to take, I think six to eight weeks, and it was so delayed because of COVID. So, I never even got word that it was received. I was worrying, I sent it in by sort of USPS. I was worried I didn’t put enough stamps on the package.

29:43 Matty: Like just these kind of silly administrative things that hang over you as you wonder and hear nothing about it. But anyway, so at this point then I had 2018, all the faxed information, and then 2019, the amended return. And it’s pretty amazing. I sent all that in May, and I heard nothing from the IRS about the 2018 fax from May 12th until Valentine’s Day of 2022. So, nine months. I had heard every three months I would get a letter from them saying, “Hi, we’ve received your information, which was reassuring, but we’re very busy, we’ll get to it as soon as we can.” Meanwhile, though, so this is the reconsideration department. The collections department is saying, “Hey, we’re going to file a lien or levy against your assets,” because from their perspective, this was a case open and closed, and I didn’t pay it, I didn’t challenge it, I didn’t respond.

30:35 Matty: So, they are not being as let’s say generous, that’s not the right word. Like the other side, the reconsideration department can take as much time as they need to process it. The collections department is not giving me that option, even as I explained to them what’s going on. But they’re saying, well, how do we know you have a legitimate case? Which from their perspective, it’s understandable why they would take that position. So, as this is playing out and I’m hearing nothing and just waiting, which is really the dominant part of the story, it’s the waiting in between this really frantic week in May until February to begin to hear stuff about anything actually occurring with my cases. It was being in touch with the collections department who actually I mean, they didn’t force me to, but I was highly encouraged to sign a payment agreement with them to agree to pay the 2018 taxes with the understanding that once they got to my case, if it turned out that I had, you know, paid them any more than I needed to, they would refund me the money.

31:44 Matty: And because I was nervous about what might happen, I mean, I don’t have a ton of assets <laugh>, I just didn’t know what was going to happen the longer that I was getting these sort of scary notices, final notices, and that they’re going to go after me. So, that was sort of a long-winded answer. But the major process was again, waiting, hoping the reconsideration department and amended tax return will be processed, and in the meantime, as the clock is ticking, beginning to get more notices about both years and about my needing to pay.

Agreeing to a 180-Day Payment Plan

32:18 Emily: So, ultimately, did you agree to a payment plan? Or did you hold out long enough that the reconsideration department got around to it?

32:25 Matty: So, I agreed to a 180-day, I guess I’ll be honest, I’m not entirely even sure how it was supposed to work. I agreed to, at the start of July of 2021, to a 180-day plan. And then at the end of that, I was then supposed to have made an agreement on how I was going to pay, which would include, you know, either a big lump sum or certain monthly payments. But when I made that agreement in July, I was thinking, okay, six months, like the reconsideration department is going to get it. I was so naive when I sent in that initial tax, I was like waiting the next day to get a phone call as though someone was just going to be there and call me. And so yeah, so July 1st, I do that. Six months, still not processed.

33:13 Matty: So, this is like right around Christmas now. So, I think the day after Christmas, I’m calling the IRS. Again, it’s intervening at all these different points throughout this last year of my life and making an agreement to pay them starting in February, $86 per month, until this thing is processed. Thankfully, the Valentine’s Day letter arrived and then it was in that letter where they made the adjustment to the taxes that I owed. And once they did that, the plan that I had agreed to pay was canceled, was sort of null. And yeah, so I received the February 14th letter, which reduces the tax burden by like $5,500, which is what I thought. It takes away the interest that I owed on that. It keeps, it doesn’t specify this, but it continues to say that I have like about $1,100 related to that tax year, which was the amount of the penalty.

34:11 Matty: So, I was wondering, okay, are they still keeping that penalty? Is that the right amount? Given that I didn’t underpay by as much as they thought. And so, I tried to get in touch with them over the phone, impossible. I’m like, I know how this goes, I’m just going to wait for the next notice. We’ll see. But then the ultimate resolution for 2018 came about a week later, which was I got a letter from the United States Treasury with a check <laugh> for $172 for the 2018 tax year. And then the next day, a notice from the IRS saying, we’ve adjusted totally for 2018. Like basically you’re closed out. We owed you $169 and $3 and 2 cents in interest. So, that was kind of how the 2018 resolution came about.

34:58 Emily: It’s amazing actually how much COVID impacted your story, right? From the move that made you not receive any of the notices, to the IRS being just incredibly backed up. Like I know the IRS gets, like, everybody loves to hate the IRS, but like they’ve had a lot to do <laugh> over the past couple of years, but like delayed deadlines and like the stimulus payments and then the advanced child tax credit payments, like that’s a whole new thing. Wow. Sending out like basic income to some people. They’ve never had to do that before. So like, yeah, it makes sense. They have been incredibly delayed. Maybe in a different year if COVID wasn’t impacting all of this, you would’ve gotten a response within a month or two or three months or whatever. Maybe the timelines would’ve worked out. But it’s good to know that you were patient <laugh>, you tried to get them to be as patient as possible with you. You agreed ultimately to that monthly plan, which is like, I mean, $86 a month is like not, I mean, whatever, it’s something, but compared to the amount that you actually owed, that’s a very small fraction. Or not actually owed, but they thought that you owed. Yeah.

Amended 2019 Tax Return

35:55 Emily: Okay. So, we know the 2018 resolution. For 2019, did the amended tax return work, or how did that play out?

36:02 Matty: No, so the 2019, they started sending me notices about it in June of 2021 before having processed the amended return. Which was obviously what I was trying to avoid, but in discussions then over the phone with the IRS, I was in a better position, I think, in terms of my discussions with them for being able to say, “Oh, I filed an amended return before you sent me this. I paid what I think I underpaid before you sent me this notice, and here’s all of the information.” And basically included, you know, sent a letter back to them, which included everything that I had on the amended return, and then how I came to those numbers. And so actually as we speak now, I’m still in the late stages of that. Yeah, so it was the same tax office dealing with the issue.

36:56 Matty: I think once they got to it, everything just kind of worked faster. So, it’s at the point now where the tax that I owe has been deducted for 2019, and I mean, unless something radical changes in the next few weeks, then I will have received either a check from the treasury for some kind of small amount, or maybe I’ll owe them a little bit more, something like this. But basically the same resolution of you listed the income as other income, you didn’t need to pay self-employment taxes on that. So, that’s where the 2019 stands. And I’ve heard nothing about 2020, which I think means actually, I don’t know, maybe I’ll hear something soon, but I did follow the workshop and I know what I’m doing much more than I did at that time. So, I feel pretty good about that year.

37:46 Emily: Yeah. And by the time we publish this, I mean, you can send me an update, everything went fine, it was resolved, you know, essentially in your favor or, oh, no bigger emergency. Let’s record a follow-up <laugh>. Okay. So hopefully it’ll all go through the way you expect it to.

38:01 Emily: Emily here, breaking in from post-production to give you Matty’s follow-up. Everything turned out exactly as he expected for 2019. The penalty was eliminated, and he actually ended up receiving a small refund.

Key Takeaway Points for Listeners

38:14 Emily: So, let’s kind of summarize a little bit. Key takeaway points for the listener who might be freaked out and facing a huge tax bill. By the way, I just want to say like a rule of thumb, on fellowship income, let’s say if you’re paying to the federal government more than like, I don’t know, much more than like a 10% effective tax rate, something has gone awry in this like process. So like, self-employment tax is going to be 15.3% of your income. So, if you have like 10-ish percent plus 15%, if you’re up at 25% of an effective tax rate, you know that you’ve been hit with self-employment tax. So, that’s my key takeaway of just like a sort of sanity check on how much tax do you actually owe? Don’t pay self-employment tax if you don’t actually owe it. But let’s go to your key takeaways.

39:00 Matty: So, I think my key takeaways, one of them is the “(Understand It, Too!)” parenthetical in your workshop title, because when I think back to why I got into that situation in the first place and how I sort of struggled in those early days to figure out what the problem was, I think really one of the major issues was that my approach to filling out the tax return was I was looking for a formula to just kind of input information, not have to really think about it. And then kind of hoping that everything went well and figuring that, okay, if I don’t hear anything from them, then it’s probably fine. And I didn’t hear anything for two years after starting to handle my tax return this way. So, I guess one major kind of lesson would be to really try to understand what it is that you’re doing.

39:52 Matty: And it is frustrating and I would say that most places, most websites, even the IRS website is not especially well suited to starting at a low level of knowledge of financial issues. This was one of the things that I appreciated about your website, Emily, was because I felt that it was not just how to file the tax return, but it was sort of talking about it in a way for people who aren’t used to doing that. And I think this maybe gets back to my going straight through my not having really had another full-time job apart from being a graduate student, not having a familiarity with this process in another setting that made me want to just not deal with it. I was a busy graduate student, I just figured I would be fine and I wanted the easiest way, which was that tax filing software.

40:40 Matty: So, I think once you get over the fear of not understanding the confusing nature of sort of filing taxes and paying these kinds of taxes, then it became easier to know what the problem was and know how to communicate about it. And then the second one, maybe a smaller takeaway, but again, it was just to be sort of cautious about where you get and how you get tax advice from people who don’t have experience specifically related to the types of issues that graduate students with this awarded income are facing. Because I got advice from, you know, reputable people, reputable websites that led me to the filing software to, you know, almost not that I was close to paying the initial tax penalty as I had been initially recommended to, but I mean, that’s thousands of dollars of difference if I’d just gone along and done that.

41:35 Matty: So again, maybe that returns to the first point of if you sort of know or have a better sense of of what you’re doing with a tax return and treat it that way as opposed to just, again, a chore you don’t want to deal with, or a formula that you’re looking to kind of take a shortcut with. That’s the better way to handle it. And I’ll say, I mean, I’m not an expert. I don’t mean to sound now that I have gone through this as though I know and understand everything about taxes, but at least you kind of know a little bit more and you know where the problems are, you know how to communicate. And I think that was really important for me in reaching the stage that I have at this point with the tax process.

Building Tax Vocabulary and Communication Tools

42:21 Emily: I’m really, really glad to hear you say that, that my material reached you <laugh> in a way that made sense to you that other places weren’t, because that’s really what I have been striving to do with both, you know, what’s available free on my website, pfforphds.com/tax, and also through the tax workshops. I really do want to give you those, like the vocabulary and the communication tools because I’m sort of a fan of people preparing their own tax returns, like completely manually, but I understand that most people don’t do things that way. And so, I’m trying to give you the vocabulary to like translate between what you know about your own income and expenses as a graduate student, for example, and being able to talk to an accountant or being able to interface with tax software or talk to the IRS or whatever is needed to give you that like translation ability. Yes. So, I’m glad to hear that it worked out that way for you. Is there anything else that you’d like to tell us about this story as we’re concluding here?

43:13 Matty: I guess maybe to say, yeah, I hope this didn’t come off as, you know, me trying to sound like a victim of the IRS. I mean, I think there were some issues in terms of the timing, the way that it worked out, the really frustrating bureaucratic aspects of it. But I also, you know, I made some mistakes, too, throughout the process. And so yeah, I guess it was kind of yeah, I just hope it didn’t sound like me whining about the annoying, you know, scary IRS. There were some people that I talked to there who were quite helpful and, you know, I think the most important thing was just, as you said, kind of being able to find that language to communicate with them about the specific issues, and then kind of waiting out the process which you have to do when you’re dealing with something like this.

44:08 Emily: I think what we briefly mentioned earlier, but like we talked about this with respect to the accountant that you went to, but it’s also true for the people you talked to at the IRS. They’re way more familiar with self-employment income and small business income because there are so many small businesses in the United States who have, you know, some kind of trouble and turn to resources for filing their tax returns compared to graduate students and postdocs and other people with awarded income. It’s just such a more common situation. They want to fit you into a box, that’s what they’re familiar with. And so, you as a person receiving awarded income, I think should be kind of forewarned that that’s going to happen and be able to say to them, “No, I am very confident this is not contractor income. This is not self-employment income. I do not have a business. I received fellowship income or grant income or whatever it is.”

44:52 Emily: And so, to be able to firmly say that to them will help hopefully redirect them down the correct line of thinking and away from the most common scenario, which is this other self-employment stuff. So, I’m really glad that you brought that up. I also am glad that you mentioned that there is just a lot of waiting involved with these, you know, filling, you know, figuring out the transcripts and like submitting the amended returns and all of this stuff. Yeah, that’s kind of part and process with this whole process. So, we’re getting the very, very condensed version of the story, but obviously, it took like, well, it took multiple years for this to play out in total.

Best Financial Advice for Another Early-Career PhD

45:23 Emily: Okay, Matty, thank you so much for sharing this story. It’s really amazing. I hope it, you know, prevents people from going down the same, you know, the initial mistake and then the amplification of that mistake that you had to go through. So, I want to leave the listener with the question that I always ask my guests, which is what is your best financial advice for another early-career PhD? And that could be something that we’ve touched on in the course of this conversation, or it could be something completely new.

45:50 Matty: So, I’ll stick with a similar theme. I mean, part of me hardly feels in a position to offer financial advice after the story I told, but what I would say is that, and I think this is especially applicable maybe for PhD students, is that if you are learning about some kind of financial topic, taxes, things like this, that you should ask stupid questions if you don’t understand something. I think PhD students, I certainly am, are on guard against wanting to sound stupid in, you know, seminars around professors, you sort of keep to yourself, you hide the things that you don’t know and try to present yourself in as best a light as possible, which is understandable. I get that, but I don’t think it works well with dealing with some of these topics. And, you know, everyone says, well, there are no stupid questions or you’re probably not the only one with the question, which is probably true, but I would add that even if you are the only one with a question, and even if it is a stupid question, that it’s better to humble yourself at the stage of learning something than to risk kind of misunderstanding and creating a much bigger problem for yourself down the road.

47:00 Matty: So, I guess it’s a sort of maybe I wish that I’d had a little bit more humility to ask questions and rather than just go along and pretend that I understood something at different, you know, workshops about taxes or things that I had been privy to in the past to actually just ask. And, and from there, I would’ve been in a better position. So, that’s what I would say.

47:25 Emily: I really, really love that advice. And I’ll take one final opportunity to plug my workshop, How to Complete your Grad Student Tax Return (and Understand It, Too!), PFforPhDs.com/taxworkshop. What I really like about this format, which it’s now like all these prerecorded videos, that’s probably the version that you went through as well, is that you can watch these videos as many times as you want. You can pause them, you can Google a term if I didn’t define it properly or whatever. You can take your time to really understand what’s going on. And then if you still have a question, show up at one of the many live Q&A calls that I hold for this workshop and just ask it there, because frankly, like asking me what you consider to be like a stupid question, I can probably answer it in like five seconds and it might take you an hour of reading other material to figure out what it is about your, like, misunderstanding at base that made you have that question.

48:14 Emily: So like, it’s just so much more time efficient <laugh> to enroll in something like my workshop and have access to me to ask those kinds of questions or, you know, whatever, work with another professional, that’s fine. But to just as you said, be willing to do it and have a person you can go to to ask those questions. That’s what I’m trying to provide with this tax workshop. So again, Matty, thank you so much for this interview. I think it’s been a harrowing story but really, really illuminating. I know it’s going to help a lot of people, because you are not alone, as you said. I made the same error, like it just didn’t get amplified in the same way yours did, but I made the same error. A lot of people make the same error. So thank you so, so much for sharing this.

48:50 Matty: Yeah, thank you so much for having me and again, for the work that you do with the podcast and the website. It was obviously extremely helpful to me and I’m sure it is to many others. So, thank you.

49:00 Emily: Yeah, thank you for saying that.

Outtro

49:07 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. 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 by Lourdes Bobbio and show notes creation by Meryem Ok.

Five Ways the Tax Code Disadvantages Fellowship Income

by Leave a Comment

In this episode, Emily details five ways the federal income tax code disadvantages fellowship income, sometimes resulting in a higher tax rate and sometimes just causing a bit of a headache for fellows. Additionally, she covers two ways that the tax code advantages fellowship income and one more difference that has both pluses and minuses. This episode is for current fellows and future fellows as advance tax planning and action can mitigate some of these negative effects. At the end of the episode, Emily also shares how you can advocate for change at the federal level.

Links Mentioned in this Episode

 

 

Intro

Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance.

I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others.

This is Season 14, Episode 1, and today is a solo episode for me on fellowships and federal income tax. Specifically, I am going to detail for you five ways the tax code disadvantages fellowship income, sometimes resulting in a higher tax rate and sometimes just causing a bit of a headache for fellows. Additionally, I’ll cover two ways that the tax code advantages fellowship income and one more difference that has both pluses and minuses. Keep listening to this episode if you are currently on fellowship or expect to be in the future. Advance tax planning and action can mitigate some of these negative effects. I will also tell you at the end of the episode how you can advocate for change at the federal level.

Speaking of the disadvantages of fellowship income, it’s unfortunately quite common for fellows to have a tough time getting a mortgage. Sometimes they will be preliminarily approved based on their income numbers alone, but once under contract on a home they are dropped by their lender because of their income type and documentation! However, there is one lender who works with PhDs and particularly fellows very regularly.

Sam Hogan is a mortgage originator specializing in grad students and PhDs, an advertiser with Personal Finance for PhDs, and my brother. Years ago, I told him about the issue I just outlined, and he set to work figuring out how to use fellowship income to qualify for a mortgage. While I won’t say it’s as straightforward as using W-2 income, Sam has a great success rate in presenting grad students and PhDs to the underwriters working with his employer, Movement Mortgage, and getting them approved for mortgages. Sam can readily tell you if your fellowship income is likely to be approved or not based on the specifics of your circumstances, and if not what options you still have.

I am hosting an Ask Me Anything with Sam today, Monday, January 9, 2023 at 5:30 PM PT. Come with any question you like about the home-buying process and we will do our best to help you. You can register for the AMA at PFforPhDs.com/mortgage/.

If you’re listening to this later on, you can still check that link for the next AMA date as we hold them periodically, or you can contact Sam directly at 540-478-5803 or sam.hogan@movement.com to discuss your situation.

I wish you all success with your homebuying aspirations in 2023 and following!

You can find the show notes for this episode at PFforPhDs.com/s14e1/.

Disclaimers

Disclaimer #1: This episode is going into production in early January 2023. I rely on IRS forms, instructions, and publications for this material, and at the time of this recording most of these documents have been updated for tax year 2022, but not all of them. In those cases I’m going off the 2021 material. If any content in this episode turns out to be inaccurate for tax year 2022, I will update the show notes page with the corrections, so I suggest visiting PFforPhDs.com/s14e1/ before relying on any of the information. For tax year 2023 and later, please visit PFforPhDs.com/tax/ for my most updated tax content.

Disclaimer #2: The target audience for this episode is postbacs, graduate students, and postdocs at US universities and institutes who are US citizens, permanent residents, or residents for tax purposes. Unless otherwise specified, when I say tax I mean federal income tax.

Disclaimer #3: The content in this episode is for educational purposes only and should not be considered advice for tax, legal, or financial purposes for any individual.

Without further ado, here’s my solo episode on how the tax code disadvantages fellowship income.

Motivation

You might be surprised by the topic of this episode, because striving to obtain funding via a fellowship is a super common if not universal practice in academia. Fellowships are seen as a superior form of funding because of their prestige and that they normally excuse the recipient from teaching responsibilities or similar. In many cases, winning a fellowship results in a raise as well.

I’m not making any kind of argument in this episode that you should stop applying for fellowships or reject a fellowship that you’ve won—doubly so if you will be making more money with the fellowship than without it.

What I am doing is:

  1. Pointing out the tax issues and pitfalls that can or might come with fellowship income. There are certain groups of people who are at risk of actually paying more in income tax with a fellowship, which are people under age 24, parents, and non-students. Even if you don’t end up paying more in income tax, there are certain complexities of fellowship income that you can prepare for or even avoid if you know about them. This is to help you with taking personal responsibility for your tax situation.
  2. Suggesting changes to the tax code that would resolve these disadvantages. This is to help our community know in what ways advocacy for our workforce is needed.

Outline

Here’s where we’re going with this episode. I’m going to define some terms and tell you what I am comparing the tax treatment of fellowship income to when I say that it is disadvantaged by the tax code. I have five points to cover on how the tax code disadvantages fellowship income. The first couple points apply to most fellows but don’t result in a higher tax rate when handled properly. The next couple of points are about when having fellowship income actually results in paying more income tax. The final point is about a tax benefit that is not available to fellows. Then we’re going to switch gears and discuss two ways the tax code advantages fellowship income and one difference that I see as having both pros and cons.

By the way, I am trying to keep this episode focused on how the tax code disadvantages and advantages fellowship income. I could do an entire other episode, and perhaps I will, on the ways universities disadvantage and advantage fellowship recipients through their policies. But for today, we’re sticking with the topic of the federal income tax code.

Terms

I have to establish some definitions of terms here at the start. The subject of this episode is fellowships, but academia doesn’t necessarily use that term exactly the same way the IRS does. Therefore, I have created my own framework to explain the two types of higher education income.

The most common way the word fellowship is used in academia is to describe an amount of money that is awarded to an individual, as IRS Publication 970 states, “to aid in the pursuit of study or research.” Usually these are awarded for merit via a competitive process, such as a unique application for a specific fellowship program or your application to a postbac, graduate, or postdoc program. I call this income ‘awarded income’ in my framework.

The other type of income in my framework is ‘employee income.’ This is payment for services such as teaching or research, and the postbac, grad student, or postdoc is an employee of the university or institute. Employee income is reported on a Form W-2 at tax time. It’s unusual for programs to use the word fellowship to describe employee income, but it does happen occasionally.

For the purposes of this episode, we are only discussing awarded income, which is to say fellowship income that is not reported on a Form W-2. I will continue to use the word fellowship throughout the episode, but please understand that we’re only discussing that particular variation of the term, which is the most common in academia. If you’re unsure whether your fellowship is awarded income or employee income, reference the type of tax form or forms you receive during tax season. More on that in a moment.

Income Tax Basics

Another point I need to get out of the way at the start here is to clarify that fellowship income is subject to income tax. There are nuances and special scenarios that we’ll get into later in the episode, but very generally speaking, your stipend or salary is going to be taxed at the same rate whether it is awarded income or employee income.

When I speak about fellowship income being disadvantaged by the tax code, what I am pointing out are the ways that fellowship income ends up being treated differently or ultimately taxed at a higher rate than how employee income is treated and taxed. Conversely, in some ways fellowship income has an advantage, and again that is relative to employee income. 

If you’ve heard that fellowship income is tax-free, that is either a false rumor, a misunderstanding, or a statement that requires a lot more caveats. Fellowship income used to be exempt from income tax, but that changed with the Tax Reform Act of 1986. I’ll tell you more about why these rumors and such persist throughout this episode, but for now just know that you should expect to pay income tax on your stipend or salary, unless your gross income for the year is quite low or you can take lots of deductions and/or credits. That is true whether your stipend or salary comes from a fellowship or an employee position. You can learn more about that in Season 2 Bonus Episode 1 of this podcast, which you can find at PFforPhDs.com/s2be1/.

Now we’ll get into the meat of this episode: my list of five tax-related disadvantages of receiving fellowship income, two advantages, and 1 neutral difference.

Disadvantages

Disadvantage #1: There is no single correct way that fellowship income is required to be reported to the postbac, grad student, or postdoc recipient. This is in contrast to employee income, which must be reported on a Form W-2.

Because there is no single correct way to report fellowship income, universities, institutes, and funding agencies take a variety of approaches. The most common form issued is a Form 1098-T, but sometimes Form 1099 is used, such as Form 1099-MISC, Form 1099-NEC, or Form 1099-G. Sometimes a courtesy letter is sent in lieu of an official tax form. Many organizations choose to not communicate at all with the fellowship recipient. When fellowship income goes unreported entirely, it contributes to the rumor mill that it is not taxable income.

These approaches can mislead fellows into not reporting their income, resulting in underpayment of tax, or misreporting it, which often results in overpayment of tax.

To put fellowship income on even footing with employee income, the IRS could require that a tax form be used to report fellowship income, whether one that currently exists or a new or adjusted one. This would greatly reduce the confusion among taxpayers and tax preparers about whether and how to account for this income on tax returns.

Disadvantage #2: The issuers of fellowships are not required to withhold income tax on behalf of the recipients, and they almost never take the responsibility to do so.

Employers virtually always withhold income tax on behalf of their employees. This is the situation that most Americans experience and are familiar with. Your employer sends in income tax payments on your behalf throughout the year, and then after you file your tax return, you receive a refund or owe some additional tax.

However, for fellowship income, the issuing organizations have no such withholding requirement. With very few exceptions, they leave paying income tax entirely up to the fellowship recipient, which is typically a very unfamiliar arrangement.

This lack of withholding also contributes to the rumors that fellowship income is not subject to income tax. I have even seen university administrators label fellowship income “tax-free.” What they mean is that it is not subject to income tax withholding; they are speaking from their own perspective. But when a fellow sees that label, they read it from their own perspective, and it is highly misleading.

By default, the IRS expects to receive income tax payments throughout the year. In the absence of employer withholding, the taxpayer is supposed to make quarterly payments through the estimated tax system, unless an exception applies to them.

This typically goes one of two ways: 1) The fellow learns about the estimated tax requirement close to the start of their fellowship, sets aside money for their future tax payments as their paychecks come in, and makes their estimated tax payments if required. This is the ideal and something I am constantly beating a drum about. 2) The fellow does not realize that they are responsible for their own income tax payments until they are hit with a large tax bill and possibly a penalty upon filing their tax return. This is at minimum extraordinarily unpleasant and in some cases dangerous to the financial, physical, or mental well-being of the fellow. I further discuss this scenario of a large, unexpected tax bill in the videos titled “Why Is My Fellowship Tax Bill So High?!” and “What to Do When Facing a Huge Fellowship Tax Bill,” which you can find on my YouTube channel, Personal Finance for PhDs.

A rare few universities and institutes do offer income tax withholding on fellowship income. My alma mater, Duke University, did so when I was a graduate student there. This relieves the fellow from calculating and making estimated tax payments and prevents large, unexpected tax bills.

To put fellowship income on even footing with employee income, the IRS could require that universities and institutes at least offer income tax withholding on fellowship income. To go along with the previous disadvantage, a specifically designed fellowship reporting form could explicitly list federal, state, and local income tax withheld.

Until such reform comes about, I recommend that fellows take my workshop, Quarterly Estimated Tax for Fellowship Recipients, which you can find linked from PFforPhDs.com/tax/.

Disadvantage #3 and this is the big one: Fellowship income is not usually considered “earned income,” and without that designation many postbacs, grad students, and postdocs pay more in income tax than they would if it were considered earned income.

The term “earned income” is actually used all over the tax code and publications, and you have to be really careful because its definition can change depending on which benefit is being discussed. For example, for the purpose of calculating the standard deduction, taxable fellowship income is included in the definition of earned income. But for the Kiddie Tax, the Earned Income Tax Credit, and the Child and Dependent Care Tax Credit, fellowship income is not considered earned income.

Let’s discuss each of these scenarios briefly in turn.

  1. The Kiddie Tax, which is a colloquial name, is when the unearned income, above a certain threshold, of a person under age 24 is taxed at their parents’ marginal tax rate. There’s a whole history behind the Kiddie Tax that I won’t go into now, but you can read my article about it linked from PFforPhDs.com/tax/. What is both perplexing and infuriating to me is that fellowship income is included in the definition of unearned income. So if you are a student under age 24 on fellowship, even if you are not claimed as a dependent on your parents’ tax return, you could be hit with the Kiddie Tax. I’m not saying you definitely will because there are calculations that go into this, but it can happen. If it does, your income is taxed at your parents’ marginal tax rate. If your parents have a low to moderate adjusted gross income, the Kiddie Tax either won’t apply or won’t increase your tax liability by much. But if your parents’ top marginal tax bracket is 22% or higher, your tax liability will be much higher than it would have been without the Kiddie Tax. And, again, it does not matter if you’re financially independent from your parents, this tax can still apply. Ugh!
  2. The Earned Income Tax Credit is a super valuable credit for people who are low-income, especially if they have children. For example, if you are single with one child and qualify for the credit, you’ll receive a benefit from the Earned Income Tax Credit if your income is below $43,492 in 2022. The lower your income is under that threshold, the more of the benefit you’ll receive, up to a maximum of, again for example, $3,733 for one child in 2022. This credit is refundable, which means that if it wipes out your entire tax liability, the IRS can end up paying you money. Again, just an incredibly valuable credit for low-income individuals and families, which you know many postbacs, grad students, and postdocs would be considered. However, as the name implies, your household has to have earned income during the calendar year to qualify, and fellowship income isn’t earned income. I will never forget a heartbreaking comment I received on my website years ago from a grad student who was married with two children and supporting the entire household on his grad student stipend. He was devastated when his tax return showed that because he switched onto fellowship and didn’t have any earned income for a calendar year, that his family lost out on thousands of dollars of a benefit they had received in prior years when he had employee grad student income. Can you imagine? Why would the IRS, Congress, we the people, exclude vulnerable families like that one from this benefit?
  3. The Child and Dependent Care Tax Credit is a tax credit that helps parents, among others, pay for daycare, preschool, after school care, etc. so that they can work or look for work. The benefit inversely scales with your income, like the Earned Income Tax Credit, but for example if you had one child in care and your income was low enough that you received the maximum benefit, this credit would reduce your tax liability by $1,050 in 2022. Pretty good benefit. However, here’s that catch again, you and your spouse if you’re married must both have earned income to qualify. There is an exception for students, so grad students will still qualify for the credit for all the months in which they are students, but postbacs and postdocs won’t. This issue was brought to my attention by a married couple with a baby, both postdocs on fellowship, who were taken aback that they weren’t able to claim this credit. And why? Does being on fellowship mean that they don’t need childcare? Or do they not deserve a similar carve-out to the one that students get?

I have to stop here because I’m getting really worked up about these issues. Pretty simple change here, IRS. Include fellowship income in the definitions of earned income everywhere. Or make exceptions for fellowship income in all of the above benefits and any other relevant ones.

I haven’t even covered how fellowship income relates to the definition of “support” for determining if someone is a dependent or subject to the Kiddie Tax, and I won’t take the time to illustrate it now. It’s a similar problem that the IRS could solve by saying that fellowship income counts as support… anyway. See my tax return workshops for further discussions of that rat’s nest. Let’s move on.

Commercial

Emily here for a brief interlude!

Tax season is about to start heating up, and the best place to go for information tailored to you as a grad student, postdoc, or postbac is PFforPhDs.com/tax/. From that page I have linked to all of my tax resources, many of which I have updated for tax year 2022.

On that page you will find free podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with.

The absolute most comprehensive and highest quality resources, however, are my asynchronous tax workshops. I’m offering three tax return preparation workshops for tax year 2022, one for grad students who are US citizens or residents, one for postdocs who are US citizens or residents, and one for grad students and postdocs who are nonresidents. Those tax return preparation workshops are in addition to my estimated tax workshop for grad student, postdoc, and postbac fellows who are US citizens or residents.

My preferred method for enrolling you in one of these workshops is to find a sponsor at your university or institute. Typically that sponsor is a graduate school, graduate student association, postdoc office, postdoc association, or an individual school or department. I would very much appreciate you recommending one or more of these workshops to a potential sponsor. If that doesn’t work out, I do sell these workshops to individuals, but I think it’s always worth trying to get it into your hands for free or a subsidized cost.

Again, you can find all of these free and paid resources, including a page you can send to a potential workshop sponsor, linked from PFforPhDs.com/tax/.

Now back to my expert discourse.

Disadvantages Continued

Disadvantage #4: There is no mechanism for making fellowship money that pays your health insurance premium tax-free unless you are a student.

This disadvantage requires a bit of background.

Think of a regular employment situation, not related to academia. Unfortunately in the US, health insurance is tightly tied to your employer partly because of a tax benefit afforded to them. When your employer provides your health insurance plan, the cost of the premium is tax-deductible for both you and the employer. That means that you don’t pay income tax on the portion of your income that goes toward that particular purpose. It’s as if you earned less money than you actually did. This is accounted for automatically for you on your Form W-2. The income listed in Box 1 is your gross income less your pre-tax payroll deductions such as your health insurance premium. Easy peasy. If you’re self-employed, there is also a mechanism to deduct your health insurance premium.

But if you’re not employed or self-employed, the only way you can perhaps deduct your health insurance premiums is if you itemize your deductions. Even in that case you can only deduct the portion of your medical expenses that exceeds 7.5% of your adjusted gross income. If you are a relatively healthy single person who wouldn’t otherwise itemize your deductions, I doubt itemizing will help you overall. Most people in this situation effectively cannot deduct their health insurance premiums or at best can only deduct a portion of them.

I need to back up now and talk about the situation with health insurance provided by universities. If you receive your health insurance through your parents, the following is not relevant to you. If you’re an employee of the university and receive health insurance because of that status, that’s a normal straightforward deduction as I just discussed. Let’s set that aside and discuss what happens when fellowship or scholarship income pays your health insurance premium, either automatically before you receive your paycheck or out of your own pocket.

If you are a grad student, there is a mechanism to make that fellowship income tax-free. We’re actually going to discuss that in the upcoming section on the tax advantages of fellowship income. However, if you’re a postbac or postdoc, this mechanism isn’t available to you. There is no way that I know of, short of itemizing their deductions, for postbacs and postdocs to make the fellowship money that pays their health insurance premiums tax-free. And that sucks.

This conundrum has been highlighted by many postdocs and postdoc associations. If a university or institute pays postdoc employees and postdoc fellows the same amount, the postdoc fellows effectively receive a pay cut because they have to pay income tax on the portion of their fellowship income that pays their health insurance premiums while postdoc employees do not.

The general solution to this whole issue is universal healthcare, but even without going that far, Congress could change the tax code so that all health insurance premiums are tax-deductible even without having to itemize deductions. I don’t know, maybe that would have disastrous effects somehow. Another way to fix this would be to expand the benefit that students use to non-student trainees as well.

Disadvantage #5: Fellowship recipients cannot contribute to their university or institute’s 403(b) or 457 plans. These are employer-sponsored tax-advantaged retirement accounts, and they are only available to employees.

Similar to the health insurance situation, the tax code has incentivized saving and investing for retirement primarily through employer-sponsored plans. These plans are exclusively offered to employees. That goes for 401(k)s as well as 403(b)s and 457s.

Looking at the situation for postdocs again, it’s typical for postdoc employees to be able to contribute to the university or institute’s 403(b) or 457, albeit usually without a match. However, postdoc fellows do not enjoy this benefit. While the universities administer these plans, again this is a policy issue at the federal level that excludes non-employees. Side note: If you’re wondering why grad student employees don’t usually have access to their university’s 403(b)s or 457s, that is a university-level policy issue as far as I can tell.

Not exactly the same but as a related issue, there is a type of tax-advantaged retirement account that is available to everyone with “taxable compensation,” which is an Individual Retirement Arrangement or IRA. You do not have to be an employee to contribute to an IRA. Up until 2019, the definition of “taxable compensation” excluded fellowship income, but the SECURE Act changed that definition starting in 2020. Taxable fellowship income for graduate students and postdocs is now considered taxable compensation for the purpose of contributing to an IRA. We know from this example that change is possible when it comes to fellowship income and federal tax benefits. You can learn more about this issue in Season 4 Bonus Episode 1 of this podcast, which you can find at PFforPhDs.com/s4be1/.

I think the most accessible solution to this particular disadvantage is actually not to somehow extend the employee-only workplace-based retirement benefit to fellows but rather to increase the contribution limit for IRAs to solve this for everyone. The contribution limits in 2023 for someone under age 50 are $6,500 for an IRA and $22,500 for a 403(b), 457, or 401(k). Why should there be such a big advantage for employees?

Advantages

Alright, it’s time for a dose of positivity. There are two advantages to fellowship income that I have come across.

Advantage #1: Students can make fellowship income tax-free by pairing it with qualified education expenses or QEEs. Basically, if your awarded income paid for a QEE, that amount of awarded income is tax-free. You essentially get to deduct the QEEs from your awarded income before you even report it on your tax return. This federal income tax benefit is found in Publication 970 Chapter 1, and I call it Tax-Free Scholarships and Fellowships or TFSF. Again, this benefit is only available to students.

How does this work differently for grad students with awarded vs. employee income for their stipends? This comes into play when you use your stipend to pay for an education expense rather than having it paid on your behalf via a scholarship or waiver.

Let’s take as a very simple example a grad student who has only two education expenses, tuition and a student health fee. The tuition is paid on their behalf by a scholarship, and they pay the student health fee out of pocket.

The scholarship that pays their tuition is awarded income, but it is made tax-free via TFSF because it pays for tuition, which is a QEE. So that awarded income doesn’t become part of the grad student’s taxable income.

The student health fee is a QEE under TFSF, so if the grad student’s stipend is from a fellowship, the student health fee makes that amount of fellowship income tax-free. It’s like taking a deduction. However, if the grad student’s stipend is employee income, no part of it can be made tax-free by the student health fee. Furthermore, student health fees are not qualified education expenses under the other two available higher education tax benefits, the Lifetime Learning Credit and the American Opportunity Tax Credit. So in this particular example, there is no tax benefit available to a grad student employee for their student health fee, whereas a grad student fellow can use the student health fee to reduce their taxable income.

That was a very simple and contrived scenario, but it turns out that this benefit can be uniquely applied, under specific circumstances, to lots of other common education expenses, such as textbooks, computers, software, and health insurance premiums.

If you are a grad student on fellowship, I highly recommend taking my tax workshop How to Complete Your Grad Student Tax Return (and Understand It, Too!) to understand TFSF and the other higher education tax benefits fully. This goes double if you did pay out of your fellowship stipend for the kinds of education expenses I just mentioned. You will learn under what circumstances you can use them to make your fellowship income tax-free and under what circumstances you cannot. Go to PFforPhDs.com/tax/ for the link to the workshop.

Advantage #2: Fellowship income is not considered taxable income in some states. For this advantage only we are leaving the realm of federal income tax. I won’t say too much about this except that I’ve run across it in two states, Pennsylvania and Alabama, and there may be others. But this is a truly fantastic benefit that puts fellowship income at a great advantage over employee income in those states.

Neutral Difference

Finally, we have a difference with fellowship income that has both pros and cons. For this one we’re also not discussing federal income tax but rather FICA tax, which pays into the Social Security and Medicare systems.

Fellowship income is not wages, so it is not subject to FICA tax. Postdoc and postbac fellows do not pay FICA tax, but postdoc and postbac employees do. Grad students by and large qualify for a FICA tax exemption, so they usually don’t pay it whether their stipends or salaries are fellowship or employee income.

When I was a grad student, I thought these exemptions were great. I was not interested in losing 7.65% of my paycheck toward a dubious far-future benefit. I still think keeping an extra 7.65% of your paycheck is super valuable for grad students, postbacs, and postdocs. However, now that I’m older and I’ve learned more about Social Security and Medicare, I think forgoing all those quarters of credits during grad school plus any postbac or postdoc fellowship years might be a little foolhardy. For example, if you become disabled as a young adult before paying into the system for the required number of quarters, you are at risk of not qualifying for the disability benefit. That’s a pretty remote possibility, but it’s scary that people could be left unprotected by this supposed last resort insurance plan because of these exemptions. And I really don’t think Social Security is going to disappear entirely. Ideally, I’d like to have both the money in my pocket and the insurance coverage, please and thank you.

At the beginning of this episode, I told you there were two purposes: First to help you with tax planning and second to direct your attention to issues about which you can advocate for change.

On that first point, the best place to go to learn more or take one of my tax workshops is PFforPhDs.com/tax/.

On the second point, I have three ideas for you if you would like to advocate for change to one of the federal tax policies I’ve mentioned:

  1. You can write to your representative in the House and/or your senators and ask your peers to do the same explaining how the tax law negatively affects your life and in what way it could change. The component of the SECURE Act that updated the definition of taxable compensation started as a bill called the Graduate Student Savings Act, which was sponsored by a bipartisan group of members of the House and Senate for several years before it was finally included in the SECURE Act.
  2. You can submit an explanation of your issue through the IRS’s Systemic Advocacy Management System. Just search for IRS SAMS and it will be the first result. The IRS will evaluate these issues and decide which to move forward with trying to correct.
  3. You can get involved with organizations that advocate for the workforce in your field or for PhD trainees generally, such as the National Association of Graduate-Professional Students and the National Postdoctoral Association. You can make them aware of these tax problems, if they aren’t already, and partner with them to advocate at the federal level.

It’s been lovely to have you with me for this wonky episode. One final time: I offer educational tax workshops both on preparing your annual tax return and calculating and paying estimated tax. I would really appreciate you recommending my workshops to a potential sponsor at your university. If that doesn’t work out, you can purchase the appropriate one for you as an individual. You can find the links to take either one of those actions at PFforPhDs.com/tax/.

Outro

Listeners, thank you for joining me for this episode!

I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/.

Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/.

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 by Lourdes Bobbio and show notes creation by Meryem Ok.

Catching Up with Prior Guests: 2022 Edition

by Leave a Comment

Emily published the first episode of this podcast in July 2018. This is the 176th episode, and over the last four and a half years, the podcast has featured 156 unique voices in addition to Emily’s. This last episode of 2022 catches up with the guests from Seasons 1 through 9. The guests were invited to submit short audio updates on how their lives and careers have evolved since the time of their interview. They also included their best financial advice for an early-career PhD if their answer has changed since the initial interview.

Links Mentioned in this Episode

Teaser

00:00 Sarah: I wasn’t ready to think about my finances until my forties <laugh>. And it’s not too late as it turns out. So, trust yourself, you’ll get there. Do it in your own way.

Introduction

00:19 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance.

00:26 Emily: I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

00:36 Emily: This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others.

00:49 Emily: This is Season 13, Episode 9, and today I am featuring many guest voices! I published the first episode of this podcast in July 2018. This is the 176th episode, and over the last four and a half years, the podcast has featured 156 unique voices in addition to my own.

01:12 Emily: For our last episode in 2022, I thought it would be fun to catch up with the guests from Seasons 6 through 9, and a few from earlier seasons as well. I invited them to submit short audio clips to update us on how their lives and careers have evolved since the time of our interview, as well as to provide their best financial advice if that has changed since our initial interview. We have some very big and very exciting updates this year, and I’m confident you are going to appreciate the perspectives that these guests bring.

01:45 Emily: The audio clips in this episode are ordered by when the original episode was published. If you’d like to circle back and listen to any of the previous interviews, you can do so in your podcatcher app or at my website, PFforPhDs.com/podcast. To keep up with future episodes, please hit subscribe on that podcatcher and/or join my mailing list at PFforPhDs.com/advice.

02:14 Emily: You’ll hear an update from me first, followed by the rest of the guests.

02:18 Emily: You can find the show notes for this episode at PFforPhDs.com/s13e9/.

02:25 Emily: Happy listening, happy holidays and happy New Year! See you in 2023!

Dr. Emily Roberts

02:35 Emily: This is Emily Roberts from Personal Finance for PhDs. I am of course the host of this podcast and you hear from me every week.

02:44 Emily: On the personal side, nothing can really top the update I gave you last year about finally becoming a homeowner. My family has been in our house in north San Diego county for about a year and a half now, and life is very sweet here. We have really integrated into our neighborhood and community. This year, I rediscovered a pastime from my youth, which is reading—voraciously. Through college, grad school, and early parenthood, reading fell by the wayside for me, but I picked it up again after tax season ended. I haven’t kept close track, but I think I’ve read a few dozen books in the last 8 months, almost all from the library, of course! One that really made an impression on me was Die with Zero by Bill Perkins. I recommend it to anyone who is inclined toward over-saving and expects to have a good income for your career, even if you’re still in grad school or your postdoc. Relatedly, I’ve been inspired to have more adventures and vacations and such with my family, and I’ve gotten back into the credit card rewards game to help fund that.

03:52 Emily: As for my business, Personal Finance for PhDs, 2022 was another awesome year with strong growth. I’ve gained a lot of clarity on how I want to spend my time, and I’m implementing more productivity and time management strategies. In 2022, I attended two in-person conferences and delivered several in-person speaking engagements, which was so so rewarding. I didn’t realize how intense my Zoom fatigue was! Going forward, I’m promoting my live in-person seminars and workshops and my pre-recorded workshops and demoting my live remote webinars. If you want me to teach you and your peers about taxes, investing, increasing income, student loans, frugality, home ownership, etc. etc., please connect me with a potential host at your university. I appreciate these recommendations so much.

04:50 Emily: Thanks for listening to my update! If you want to get in touch, you can visit my website at PFforPhDs.com or email me at emily@PFforPhDs.com.

Dr. Caitlin Faas

05:07 Caitlin: Caitlin Faas here, helping experts get off the hamster wheel for good, as a master certified life coach. I was on season one, episode number seven way back in 2018, and I also gave an update last year where I was a tenured faculty member, became a department chair, and then left in 2020 to coach full-time and paid off all my debts with my husband, and you can hear those updates.

05:27 Caitlin: But in the past year, I’ve had some huge life transitions that I also want to give you an update on. So my husband and I decided to get divorced in January of 2022, and in April, he died unexpectedly before paperwork was filed, so I became a legal widow. And of course, the grief is devastating and it was something I never wanted to happen, and yet I also prepared for it with him financially. We had created our wills together; the idea of death and either one of us being a widow had been on my mind because I’m a developmental psychologist by training, and it was something I listened to, people who were widows, what they wish people had known, and I’m so grateful I listened, even though the statistics were never gonna happen, that one of us was gonna die before we grew old together, right? And yet it did.

06:42 Caitlin: And so taking the time now, my advice for you, take the time to write down your passwords for someone else. Check in about your financial status and showing it to somebody else that’s important in your life so that they know, I wasn’t prepared with all of those things, we hadn’t taken those steps, but, you know, some of the next financial steps are the legal will. What happens if you do lose someone important to you, will you have the capacity to work? Can you put yourself in a position of you’d be able to take off time if you needed to, if you wanted to? And taking a few minutes now will pay off if it ever does happen. I hope it doesn’t. And yet having awareness and not being afraid of it, not pushing it away, or thinking it would be like the worst thing ever can be so beneficial for your financial health. I’d really like to not have huge updates in the next year, and we’ll see what happens as I prepare for it and ride the waves of life coming at me. Best of luck as your life unfolds this year, too!

Dr. Sam Zelenka

08:05 Sam: Hi, this is Sam Zelenka from Government Worker FI. I talked with Emily in season three, episodes eight and nine about the FIRE movement, financial independence, and retire early. And I wanted to give everybody a big update about how we’re doing on our financial independence journey. About a year ago, I decided to work part-time, and this was possible because we were saving up a ton of money and preparing for full financial independence or leaving the workforce entirely. But, we decided that actually it would be really great if I could keep doing my job, just do less of it. I was able to negotiate working part-time with my employer, and I now still am a PhD, pretty academic type person, doing research, but I only do that part of the time and I have a lot more time to spend with my family and my pets and just enjoy life at a little bit slower pace.

Dr. Zach Taylor

09:15 Zach: Hey everybody, this is Zach Taylor. I’m currently an assistant professor at the University of Southern Mississippi, and I was on the Personal Finance for PhD’s podcast on [season 5] episodes 10 and 11. I can give a couple of personal updates after bouncing around to a few jobs during the pandemic. I finally was able to earn a job that is really a great fit for me at the University of Southern Mississippi, so I’m very happy about that.

09:42 Zach: Something that is just something interesting financially is that relocation assistance provided by institutions. My institution did provide relocation assistance, but when I asked about it, they said that very few people ask about it, and even fewer people actually keep receipts and document their expenses. One suggestion I would give to really early career PhDs who are either on the job market or are looking to relocate, is be very clear with your hiring manager about any relocation costs that they will reimburse you for and keep all of your receipts. I had to actually submit original paper receipts from gas stations and the moving company, and when I bought cardboard boxes, I needed to keep those paper receipts. They would not take electronic receipts. I had to have them printed off in paper from the original source. And so be very, very clear with your hiring manager, about that.

10:47 Zach: But a lot of the advice that I gave about sniping great grocery prices using coupons, I still do that all the time. I actually just discovered that the Walmart near where I live in Hattiesburg, they discount meat every Thursday. And so I usually go and check on Thursday afternoons to see what grocery items have been discounted. Then I buy those and I freeze them, and it’s as good as if it were fresh to me at least. So that is something that I continue to do in a habit that I continue to kind of implement in my everyday life. If you have any questions or want  to get in touch with me, my email address is zt@utexas.edu. That’s the letter U texas.edu, and I wish to everyone the best.

Dr. Sean Sanders

11:34 Sean S.: Hi, Emily. I was delighted to join you back in June, 2020, which I believe was episode eight of season six for a fun conversation about my financial journey and especially my desire to retire early. I wanted to send a quick update on what’s happened since we spoke. And my exciting news is that as of early next year, that’s 2023, I’ll be leaving my current job at AAAS and semi retiring. I’m still a little stunned that I managed to get to this point, but here I am. I’ll still lightly be doing some consulting work in my field, but I’m also taking a sharp turn away from editing to become a dog trainer. This has been a goal of mine for many years, and I feel like it brings together my love for dogs with my scientific curiosity. I want to understand how dogs think and perceive their world as a pathway to improving our communication with them.

12:40 Sean S.: I’m also planning to do some volunteering with some local organizations, particularly to help people with some of their basic personal finances. I’ve been thinking about early retirement or semi-retirement for a few years now, as we talked about in my 2020 interview. And I’ve been working hard to save since my first postdoc, really, and wanted to be able to enjoy the benefits of all of that effort before I was too old to do things like traveling and volunteer work and, you know, pursue some other passions. There were really two precipitating events that led me to pulling the trigger and finally making this, this decision. The first was that I felt really burnt out at my job, which I’ve been at for 15 years, and really felt that a change was needed. The second is the long bull market that we’ve enjoyed for the last 10 years or more that has grown my investments to the point that I could feel comfortable making a move to part-time work.

13:44 Sean S.: To be honest, I’m still a little nervous with all the talk of the impending recession, but I’m staying the course and have put some safeguards in place to mitigate any risk of a recession, like having a bit more cash available to get me through the next two years. This is a big move, so wish me luck. I’m excited about the prospect of still staying in touch with my science roots, but also branching out into some new and exciting areas. If I were to offer any advice to early career graduates, I’d say do your best to focus on your long-term financial goals and remember that as the saying goes, time in the market is better than timing the market. So start investing early and try not to get caught up in the daily news cycle. Thanks so much for this opportunity and stay well!

Dr. Sean Bittner

14:41 Sean B.: Hey there, this is Sean Bitner. I was interviewed by Emily on Personal Finance for PhD’s season six, episode 12 and season 10, episode 14. In the most recent episode, Emily and I discussed comparing job offers after defending my thesis, the main components of a non-academic job offer, and how to prepare for the job hunt. Since our interview aired, I’ve been able to complete my accelerator’s first cohort, and I had an opportunity to work with a group of really incredible medical device company founders. I’ve also continued my coaching work and I’ve begun leadership education at the undergraduate level. Here, I’m teaching students about important leadership and communication skills that they can use, not only while they’re in college, but also as they move out into their first jobs. On a personal note, I still love to travel, which you’ll remember from season six, episode 12. Since last year, my wife and I have taken an incredible trip to South Africa, and by the time this recap episode comes out, we’ll be gearing up for a trip to Japan.

15:39 Sean B.: To add on to my advice from previous episodes, I want to again, encourage listeners to be looking for how they can fit their PhD work or their new job into their broader life and goals, rather than trying to squish their broader life and goals into their studies. If you’d like to connect with me, you can find me on Twitter @lifescicoach, on Instagram @seanwithoutanh S E A N or on LinkedIn. I’m also taking new coaching clients, so if you’re curious about leadership coaching and want to learn more, feel free to reach out to me. Thank you again to Emily and her team for having me on the podcast and thank y’all for listening and I hope you have a great holiday season. Bye!

Dr. Travis Seifman

16:25 Travis: Hi Emily and listeners, my name is Travis Seifman and I was featured in season seven, episode four, where I talked about the pros and cons of university housing. At that time, I had just finished my PhD in history at the University of California, Santa Barbara, and was preparing to move to Japan to take up a postdoc position where I remained today as a project researcher at the University of Tokyo’s Historic Graphical Institute. Life here in Tokyo is good. I feel extremely fortunate, just so lucky to have landed the position that I did and to be able to be living the life that I am now. In contrast to paying a thousand dollars a month for a poorly maintained basic amenities housing in a middle of nowhere California town, I’m now paying 92,000 yen a month, that’s about $650 with the current exchange rate, or closer to 800 and more normal times, for a nice apartment right in Central Tokyo. Excellent, basic amenities, excellent location in one of the greatest cities in the world. I’ve been fortunate too in that I’ve been able to save a considerable amount of money from being on this postdoc. So fingers crossed, depending on what job or lack of a job I may have after this, the academic job market being what it is, I’ll at least have a sizable savings to fall back on, in case my financial situation becomes tight again.

17:46 Travis: I would offer two points of advice to current grad students regarding housing. One, do what you can to investigate research institutes in the area that might offer housing or other alternative housing options. When I first arrived at the University of Hawaii for my masters, East West Center was a mystery to me – a research institute that I had no connection with, no idea about, no sense that I could potentially move in there, and yet I di and I found in the East West Center a wonderful community in a building where I paid $400 a month to live right off campus instead of a thousand dollars a month to live alone, a long walk or bus right away, somewhere out in town. It can be difficult to know what’s hiding in plain sight sometimes right on our campuses or in our city, so do what you can to find these possibilities.

18:32 Travis: Second, organize and agitate. As I record this in mid-November 2022. As you may well know, nearly 50,000 grad students and the like across the University of California are on strike, striking for better pay and better working conditions. When our institutions won’t act on their own to create affordable, pleasant, supportive environments for students and faculty, but instead put other priorities ahead of that, they need to be held to account and to be pressured to change and to do better. I hope that these strikes lead to positive change at the UC and across the country. Good luck to you all and solidarity.

Commercial

19:10 Emily: Emily here for a brief interlude!

I’m hard at work behind the scenes updating my suite of tax return preparation workshops for tax year 2022. These pre-recorded educational workshops explain how to identify, calculate, and report your higher education-related income and expenses on your federal tax return.

For the 2022 tax season starting in January 2023, I’m offering three versions of this workshop, one each for US citizen/resident graduate students, US citizen/resident postdocs, and non-resident graduate students and postdocs. That third workshop is brand-new this year, and I’m very excited about it.

While I do sell these workshops to individuals, I prefer to license them to universities so that the end users, graduate students and postdocs, can access them for free.

Please reach out to your graduate school, graduate student government, postdoc office, international house, etc. to request that they sponsor one of my tax preparation workshops for you and your peers. I’d love to receive a warm introduction to a potential sponsor this month so we can hit the ground running in January serving those early bird filers.

You can find more information about licensing these workshops at PFforPhDs.com/tax-workshops.

Now back to our interview.

Diandra from That Science Couple

20:52 Diandra: Hi there, this is Diandra from That Science Couple and I was on the PFforPhDs podcast season seven, episode 10. I was talking about working before starting a PhD and the financial and career advantages that go along with that. Emily asked me if I could provide you an update with what I’ve been doing in the last year and so in 2022, I completed my preliminary exam and became a dissertator. My research is on diet and lifestyle factors and on the impact that they play in the risk of developing vascular dementia and white matter hyperintensities, and I’m set to graduate in spring of 2023.

21:29 Diandra: On the personal side, this past year, I took a once in a lifetime trip with my husband and parents to Italy and I overcame a major health crisis. Both of these things directly relate to what I talked about in my episode that by having a financial cushion before I entered my PhD program, it was much easier for me to handle an overseas trip and also to afford the healthcare related expenses because I had an HSA and investments to fall back on from my previous employer.

21:57 Diandra: This year, I also launched That Science Coaching and my program is evidence-based nutrition coaching in which I help others to identify food allergies, create a healthy lifestyle, and prevent or manage chronic illness through diet and lifestyle changes. When I was on the PFforPhDs podcast, my best financial advice for early career PhDs was to fight lifestyle inflation. And while I still believe that this is very important, I think you should also keep investing in yourself and in your health. While I was going through this major health crisis, I realized that it’s easier to maintain your health than to regain it, so if there are small things that you can do on a weekly basis, such as yoga or working out for self care, it’s gonna help your mental health and also your physical health. While we work really hard in the lab, I think it’s important to actually unplug and take the time to relax when you’re on vacation.

22:53 Diandra: If you’d like to contact me or follow our blog, we are online at thatsciencecouple.com. We’re also active on Twitter @science_couple and Facebook @thatsciencecouple. I’m currently accepting new clients, so if you’re interested in my program, please don’t hesitate to contact me. To wrap things up, I’d like to thank Emily for asking me to do this update. I hope everyone has a great end of their year, and please keep listening to the PFforPhDs podcast.

Dr. Samantha McDonald

23:25 Samantha: Hi, My name is Samantha McDonald. I was on season eight, episode three and I was discussing in particular in this episode, knowing your worth in an environment that devalues you work, and looking especially at someone who made more money than a lot of people in the the department at that time. Life has changed a lot. <laugh> I got my PhD woo-hoo about a year and a half ago in, I believe it was either March or May of 2021. After doing so, I took a three month break after my PhD as almost like my mini wellness sabbatical. I took a sailing class for two weeks in the Catalina Island to learn how to sail catamaran. I worked on a farm in a seek community in New Mexico for a few weeks, which was amazing. And I backpacked the High Sierra Trail in the Sierra Nevada of California, which is also amazing. It was a great break! I recommend to anyone after their PhD take a few months off. Even my partner spoke to a Nobel laureate who said that one of his biggest regrets was not taking some time off between his PhD and post-doc. It made all the difference in the world.

24:46 Samantha: After that was over, I started working full-time in industry actually at Meta, which was at the time Facebook when I joined the company. I still work for Meta, and I have for the past year and around I’d say three to five months, which has definitely been an insightful experience. Financially I am in a position I’ve never been before with making more money than I ever have or probably ever will in my life, so my finances are doing great. I save 50% of my paycheck still because I’m still in this super save mode. And luckily Meta provides a financial planner, who has been super helpful in making sure I’m making the right investment opportunities when I’m still young, still can take risks, but also figuring out some other plans.

25:33 Samantha: Personally, and the reason why I say Meta is as much money as I’m gonna make ever is I’m actually quitting my job in a few months, starting in January. Not because in particular I didn’t like my job or didn’t like industry, but mostly because I made a promise to my partner that when he finished his PhD, which is gonna be happening soon, we’d take a year off and live on a sailboat that we bought together. That’s happening very soon. It’s very different than what I thought I’d be doing, but we’ve saved up enough money, especially with my tech job that it’s a very cheap way to live financially and have an adventure for a year with his one year sabbatical after his PhD. After that, we’re going to New Mexico for a postdoc for him, and I’ll figure it out. I don’t know what I’m gonna do yet, but there’s something exciting about that, of taking a year off and just taking some time to breathe.

26:23 Samantha: My financial advice is still the same. Keep saving as much as possible, but taking as much time off and really understanding your worth and your value, it’s super important. And just understanding how much you’re worth and knowing that sometimes in industry, you’re overqualified for jobs in ways that you don’t realize that you’re there. So I’ve learned a lot in the past year and a half working in industry and I can’t wait to learn more. Contact info – my email is still the same. You can still contact me. Also, if you’re just interested, Michael and I, my partner, have started a YouTube channel for our sailing adventures, just for us to remember for ourselves and for our family to see. It’s called Sailing Ambrosia, A M B R O S I A, Ambrosia. It’s named after Michael’s grandmother. So if you’re just interested to see our adventures after PhD, it’s there too.

Dr. Jacqueline Kory-Westlund

27:14 Jacqueline: Hello, I’m Jacqueline Kory-Westlund. I was interviewed in season eight, episode eight. In that episode, I talked about how my husband and I managed our work and finances while I was in grad school so that we were able to start a family. Yes, I had my first baby as a fourth year PhD student, and then when I graduated we bought our own home in cash. We’ve continued to choose flexible work arrangements and prioritize our family. And now I’m excited to share that I have a book forthcoming from Columbia University Press, tentatively titled “#PhDone: How to Get Through Grad School Without Leaving the Rest of Your Life behind”. It’s the book I wish I’d been able to read as a student, a pragmatic how to guide on flourishing in grad school, both personally and professionally. And alongside all the life balance tips, you’ll find a whole chapter about grad school finances. You can find me on Twitter @JacquelineKory or on my website www.jakory.com.

Elana Gloger

28:25 Elana: Hi, I’m Elana Gloger, host of Dear Grad Student, and I’ve been on the Personal Finance for PhDs podcast twice. I was on season eight, episode nine where Emily and I did a financial coaching session; season 10, episode 17, where we talked all about me doing a side hustle while in grad school; and I’ve had Emily on my podcast, Dear Grad Student, she was on for episode 27 with another graduate student where we talked generally about grad school finances and episode 56 where we talked more in depth about surviving tax season.

28:59 Elana: Since you last heard from me on this podcast, I have become a PhD candidate. I’ve submitted a really exciting grant and I’m only a year and a half away from graduation. In terms of finances, I have finally almost finished saving up my emergency fund. I’m still throwing a little bit of money in that Roth IRA even though Emily told me not to. It’s just a little bit, and honestly, I’m still fighting a little bit with debt, but I know that that’s what comes along with making $20,000 a year, so mostly I’m trying to make sure that I’m setting up patterns for myself so that when I make a little bit more money, it, you know, it’ll all work out.

29:36 Elana: The best financial advice that I have for an early career PhD is don’t be afraid to budget for things that you enjoy. That way you won’t overspend if you know that you’re allotted a little bit, even with a small budget to start with. If you wanna hear more from me or Dear Grad Student, you can find the podcast Dear Grad Student anywhere on any podcast app. You can check out the website deargradstudent.com for literally everything related to the podcast, including ways to contact me, to support the podcast, and even merch, lots and lots and lots of merch! You can also find the podcast on social media. You can look up deargradstudent on Facebook. We’re @deargradstudent on Twitter @deargradstudentpod on Instagram and now on TikTok, @deargradstudent. Thanks again to Emily for having me twice on the personal Finance for PhD’s podcast. Hopefully you’re all hearing my voice again soon and have a good holiday season.

Dr. Sarah Birken

30:34 Sarah: Hey everyone, this is Sarah Birken. I am an associate professor in the Department of Implementation Science at Wake Forest University School of Medicine. And Emily interviewed me in episode 12 of season eight, and we talked about my early financial decisions in that episode. I’ve always been pretty assertive when it comes to negotiating salary and startup, but I’ve also been very passive with my personal finances. That all had to change when my partner, who is a personal financial planner, and I separated. Since then I’ve gotten very serious about managing my finances and my sister has been helping me since April really get my finances in order using YNAB, the You Need a Budget App, which Whitney Robinson, my co-host from AcaDames has always advocated for.

31:31 Sarah: Since I have been very scrupulously managing my finances, I’ve noticed a couple of things. One is that it’s unbelievably empowering <laugh>. I get to decide what I spend my money on and kind of just accept full responsibility for it. And I don’t have to answer to anyone for my decisions, which is lovely. And also I do have to answer to myself, so it’s caused me to be a lot more thoughtful and dare I say philosophical about what money is for in my life. The other thing I’ve noticed is that I’m focusing much more on managing my startup budget from my position. It’s something I’ve been starting to track as carefully as I do my personal finances and again, kind of bringing in this philosophy of what do I care enough to spend this money on that my institution has provided to me so that I can be an asset to them. I think the only additional advice I would give to early career folks is trust yourself. I wasn’t ready to think about my finances until my forties <laugh>. And it’s not too late as it turns out. So, trust yourself, you will get there. Do it in your own way. You can reach me on Twitter @BirkinSarah. Thanks everybody!

Dr. Lindy Ledohowski

33:22 Lindy: Hi everyone, this is Dr. Lindy Ledohowski. I spoke with Emily in season eight, episode 15, and she titled our conversation “How a Boom and Bust Money Mindset from Grad School Serves this Startup Founder Well”, and what we chatted about was the ways in which being a graduate student prepared me for some of the ups and downs of my post professorial life as a startup founder. I left my tenure track job as an English professor and I co-founded and then led academic writing startup, Essay Jack since I last chatted with Emily, Essay Jack has been acquired and I joined the acquiring company so I can add driving a startup through an acquisition to my resume. And I would say that that boom and bust money mindset that I carried over from graduate school into the ups and downs of startup life for five years into the acquisition and now I am Chief Operating Officer at Wise Prep, the company that acquired Essay Jack, that boom and bust Money Mindset has served me well all along the way. And luckily now I’m at a boom phase in life post-acquisition and we continue with the adventure as Essay Jack is reborn as Wize Writer part of the Wize Prep family of educational resources. So that is my little update since I last chatted with Emily about my post academic life and the way that I thought about finances as a graduate student and how that carried over into the very different world of entrepreneurship and startup life.

Rutendo Chabikwa

35:19 Rutendo: My name Rutendo Chabikwa of the So You Got a Scholarship podcast as well as the Taking Into Account podcast. I was on season nine, episode one of the Personal Finance for PhDs podcast. I’m now in my third year of my PhD at the University of Oxford. Financially, I ran into a bit of a hurdle where my tuition was unexpectedly cut and the rug taken from beneath my feet unexpectedly. However, I was able to connect with people in the university who became my allies and advocated for me and ensured that my tuition agreement would remain. And then the second thing that I have done professionally is that I have now reached a stage where I’ve done enough reflection and exercises and enough research for me to figure out that I want to be in industry at the end of my PhD. I do not want to stay in academia. And so as a result, I am now able to put my energies more into doing that, into making those connections, into getting internships, or contract positions that are more aligned with where I see myself. As a result, this has also actually helped my finances because industry positions do pay a little bit more, even if you’re working part-time.

36:39 Rutendo: And so my advice for early career PhDs, it has not fully changed since my interview, but I think with these new experiences that I’ve had, there are two things that I would say. And the first is, within your institution, do find people who are your advocates. Do find people who are your allies, especially if you’re someone who comes from an underprivileged background or from a different country and you are new to this system. Things like getting your funding pulled from you, as I have learned through my own experience, are that these things do happen to people and for others, this can mean that they do not get to finish out of no fault of their own. And so it is unfortunate that institutions do function in this way still, but it is really useful that you find the people around you who can make sure that the agreements that were made for you do stay in place.

37:29 Rutendo: And then the second thing also is that if you’re thinking about splitting your energies between part-time work and doing your project, I would advise that after at least your first year, you start to consider seriously where you want to be in terms of industry versus academia. That way you’re putting your energy into something that actually then helps you with where your next step is and it’s not just something you’re doing because it is useful for the money. I wish you all the best! My contact info, you can find me on Twitter, I am @tedoex. That is T E D O E X and all my information is available there.

Outtro

38:13 Emily: Listeners, thank you for joining me for this episode!

I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/.

Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/.

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 by Lourdes Bobbio and show notes creation by Meryem Ok.

This First-Year PhD Student Prioritizes Investing While on Fellowship

by Leave a Comment

In this episode, Emily interviews Michele Remer, a first-year PhD student at Michigan State University, about her financial goals for graduate school. Michelle graduated in spring 2020 and worked a few different jobs during the pandemic, so she was able to generate some savings and open a Roth IRA prior to starting grad school. Thanks to a summer 2022 internship and one-time bonus on top of her ongoing fellowship, Michele is in a strong financial position at the start of graduate school. Michele shares her investing goals and values and why she’s considering buying a house hack in the spring. She also breaks down her budget and shows how she’s keeping her large, necessary expenses under about 40% of her gross income.

Links Mentioned in the Episode

S13E8 Image: This First-Year PhD Student Prioritizes Investing While on Fellowship

Teaser

00:00 Michele: And then I also was able to start my program during the summer and I did an internship in D.C. which, technically, I wouldn’t be allowed to do because you are only supposed to, you can’t work more than 10 hours a week with your fellowship at Michigan State. But because it was part of a class, I was able to overcome that requirement. So, I had money from my internship to like live on in D.C. and then I also had that like fellowship money that I could use for like saving and investing.

Introduction

00:38 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. This is Season 13, Episode 8, and today my guest is Michele Remer, a first-year PhD student at Michigan State University. Michelle graduated in spring 2020 and worked a few different jobs during the pandemic, so she was able to generate some savings and open a Roth IRA prior to starting grad school. Thanks to a summer 2022 internship and one-time bonus on top of her ongoing fellowship, Michele is in a strong financial position at the start of graduate school. Michele shares her investing goals and values and why she’s considering buying a house hack in the spring. She also breaks down her budget and shows how she’s keeping her large, necessary expenses under about 40% of her gross income. By the way, we recorded this interview in late October 2022, and since its recording, there has been a lot of student loans news. As of November 27, 2022, the day I’m recording this, the $10k or $20k degree of cancellation that Michele and I discuss has been blocked by court challenges, which are likely to be resolved in the Supreme Court. Additionally, the administrative forbearance has been extended into summer 2023.

02:26 Emily: Speaking of the possibility of home ownership in 2023, Sam Hogan is now offering lunch-and-learn seminars on how graduate students and postdocs can purchase homes. Sam is a mortgage originator specializing in graduate students and PhDs, an advertiser with Personal Finance for PhDs, and my brother. He’s been a guest on this podcast numerous times, most recently Season 13 Episode 1. If you live in a city where graduate students and postdocs sometimes buy homes, please consider arranging for Sam to come to your campus for a lunch and learn on mortgages and the home-buying process. He’s put these on for a couple of groups this fall and has more booked the spring. He gives a short presentation and then answers questions about individual borrowing scenarios. Sam has done a ton to help grad students and postdocs with usual academic incomes like fellowships and summer pay gain access to mortgages so they can realize their dreams of home ownership. You can reach Sam about the possibility of coming to your campus—or with your own mortgage question—at sam.hogan@movement.com or 540-478-5803. You can find the show notes for this episode at PFforPhDs.com/s13e8/. Without further ado, here’s my interview with Michele Remer.

Will You Please Introduce Yourself Further?

04:03 Emily: I’m delighted to have joining me on the podcast today Michele Remer. She is a first-year graduate student at Michigan State University, and we are going to be talking today about kind of what her finances look like as a first-year graduate student and what her plans are for the future. So, Michele, it’s a delight to have you on. Will you please introduce yourself a little bit further for the listeners?

04:24 Michele: Of course. Thank you for having me by the way. So, as you said, I’m a first-year PhD student. I’m in the Fisheries and Wildlife Department at Michigan State. And I got my undergraduate degree from a small liberal arts college in Minnesota back in 2020. So, I’m a pandemic graduate. And then I was supposed to go into the Peace Corps but it ended up not working out due to the pandemic once again. So instead, I did some other seasonal jobs, which included AmeriCorps. I also want to preface this by saying that I have had some assistance from my parents for expenses in college and post-graduation as well.

05:03 Emily: Yeah, let’s talk about that more. So, it sounds like you had about two years between your graduation college and when you started graduate school. I’d love to learn more about those jobs that you did during that time and kind of what your finances looked like through that period.

05:17 Michele: Yeah, so my first, well I graduated 2020 and I still had my job through my university. It was a GIS job so I was able to do it remotely during the pandemic. So, I was just living at home with my parents and didn’t have any big expenses there, which was really nice. And then I got a job with AmeriCorps in a Conservation Corps out in western Utah. So, that’s where I went next. And that one was <laugh>. I was basically just breaking even for that job because it was volunteer and it was also a pretty low like stipend that we received. But I was able to get free housing, and they gave us like a free tent. I just had to provide the gear and a plane ticket. So, I think it worked out pretty well for me, especially because with the pandemic I was getting stir crazy in my house so I welcomed the opportunity to go somewhere new during that. When everyone else was kind of stuck inside. I was able to be out in the woods and <laugh> doing conservation projects.

06:26 Emily: And was it like a full year? Was it a full year that you were with AmeriCorps?

06:30 Michele: So, this was about seven months was my term. And then also for AmeriCorps, you get, they call it education award. That’s what it’s called. So, I got about $3,000 for my education that I was able to put towards my student loans.

06:47 Emily: Oh nice. That’s a good flexible usage.

Money Mindset Coming Into Grad School

06:52 Emily: Okay, so we’ve had I think one previous guest who was in AmeriCorps, if we can find the episode, it’ll be in the show notes. But I’m very interested in like your mindset I guess going into graduate school, having just had that AmeriCorps experience. Because I know that, I mean as much as graduate student stipends need to be higher, AmeriCorps is like whoa, you are really, as you said, it’s kind of a volunteer position that they basically just kind of give you housing and food money, right? So, can you talk about yeah, your mindset coming into graduate school, having had that experience with respect to your finances?

07:25 Michele: Yeah, I think it was actually really helpful for me personally because, so my undergrad, it was a residential school so like all of my food and stuff was like at a cafeteria and everything and included. And with this job, I like had to like cook dinner and everything. And so, that really taught me how to like meal prep and just like living on such a low wage, I was able to be really smart about like how I was handling my groceries and everything. And then like while we were on project, like, so we would work eight days and then we would get six days off. So for those eight days they provided all the food. So basically you were just like, didn’t have any expenses for eight days of the week and then, or eight days at a time and then six days you would have expenses, but we were able to like also have leftover food from that. So, it was this kind of like, and I also don’t really buy a lot of other things. Like I still to this day I basically just buy food and that’s my only other expense besides like housing with like occasional other like luxuries now that I have some more money. But yeah, so I think it was a challenge but it actually kind of set me up well for grad school.

Stipend at Michigan State

08:42 Emily: Yeah, very interesting. So, give us a picture of your finances when you started at Michigan State. So like, you know, did you have any assets? Did you, you already mentioned student loans, maybe you had other liabilities as well. And also what is your stipend at Michigan State?

08:57 Michele: Yeah, so my stipend first of all is $30,000. And I also got pretty lucky too because I got a $5,000 fellowship for getting accepted into the environmental science and policy program here. So, I can kind of lump that on top. And then I also was able to start my program during the summer and I did an internship in D.C. which, technically, I wouldn’t be allowed to do because you are only supposed to, you can’t work more than 10 hours a week with your fellowship at Michigan State. But because it was part of a class, I was able to overcome that requirement. So, I had money from my internship to like live on in D.C. and then I also had that like fellowship money that I could use for like saving and investing.

09:51 Emily: So, am I understanding that you were being double-paid during that time? You were receiving your fellowship and your internship pay?

09:58 Michele: Yeah, I was. The reason why like we decided to do the fellowship. Like I was talking to the administrators about this and everything and the class, because technically, the internship was part of a course. And so there was like a $2,600 tuition fee that I would’ve had to pay if I was just doing the internship. So this way the fellowship, because the fellowship also covers my tuition. So, in this way it covered my tuition and then I also was able to receive the money, the stipend money with that.

10:29 Emily: Nice. It sounds amazing. And that $5,000 that you mentioned, so your sort of baseline, standard stipend on the fellowship is $30,000 per year. Did you get that $5,000 as like a lump, it’s kind of like a bonus, like a lump sum at the start, is that right?

10:42 Michele: Yeah, it’s supposed to be a lump sum. I actually haven’t received it yet, but yeah, I think that’s just going to be like a lump sum to my account once they process it.

Finances: Assets and Liabilities

10:52 Emily: Okay. This is great. I so wish that more or all graduate students could get started with like, hey here’s some money just like for you to have for savings because you’re probably going to need this down the line. Because the stipend is really not, you know, necessarily enough to generate a decent savings rate, although, you know, we’ll get to yours and what your plans are with that. So let’s, if you don’t mind, could we share some numbers, like what assets did you have at the start of graduate school? What liabilities did you have?

11:16 Michele: Yeah, so I think I came in, so the AmeriCorps job that I had, I finished that. I did that right after college. So, I took another seasonal job where I was able to minimize my expenses a lot more and then I had another part-time job before starting. And I think the best thing that allowed me to build up savings was that I like basically reduced my housing expense. Like every time I got a new job it was either like free or it was like max $300 a month. So, I was doing really well in that area. So then I was able to, I had about $6,000 in my Roth coming in to grad school. And then I also have, let’s see, I guess for my other assets I just have like, oh I also just put in $2,000 into I-bonds too for my student loans after I graduate.

12:11 Michele: And then I also have some other savings just from, because I was saving up more money to pay off my loans as well. But now with the pandemic or the student loan forgiveness, I should be sitting in a much better place because after my education award using that and then the 10 grand that I’ll get from student loan forgiveness, I’ll be in a really good spot. And so, now that’s freed up a lot more money that I was going to put towards my loans because I’m super debt-averse, so I had saved up all this money to pay off my debt right away.

12:45 Emily: I see. I want to talk more about the student loans in just a second, but you don’t have any other debt, I would take it then, aside from the student loans?

12:52 Michele: No, no. Like I have a car, but it’s paid off. And yeah that was my only other sort of I guess liability since I don’t have a home or anything.

13:05 Emily: Yeah. Okay. So I want to point out for the listeners that we were recording this in October, 2022. So by the time this comes out, I’m hoping that people will have received the cancellation but as of the time that we’re talking, I don’t think anyone has started to receive it yet, although the application is open. So yeah, hopefully in the coming months. Did you already apply Michele?

13:24 Michele: Yeah, I did. I signed up for the email alerts. I was one of the first people, I think.

13:28 Emily: Okay, perfect. So, your cancellation amount hopefully will come through before the end of 2022 is the idea I think. Yeah. And so, and the rest of your student loans, the ones that weren’t being taken care of by these other sources, are they just going to be in deferment during graduate school? Or are you going to work on paying it down?

13:43 Michele: Yeah, I only took out subsidized loans, so they’ll be in deferment.

13:48 Emily: Okay, perfect. Yeah, for anyone listening, subsidized loans, well, if they’re in deferment you’re not going to make payments, and then if they’re subsidized the government pays the interest on your behalf so they won’t start accruing interest until when you come out of deferment, presumably after you graduate. And it’ll be pretty easy to hopefully take care of them at that point. So, that sounds awesome.

Making Investing a Priority

14:04 Emily: Okay, so you have some savings, you have started your Roth IRA, you bought some I-bonds, that’s great. So, let’s talk more about this investing situation. I understand you want to continue investing during graduate school. Why are you making that a priority?

14:18 Michele: Yeah, I think it’s a priority for me because I want to have the flexibility to take whatever jobs I want. And so, like with the AmeriCorps thing, I was able to take that job because, well for one, the student loan payments were on pause and it was kind of just like a good opportunity for that point in my life. But I also want to be able to take other opportunities that may not pay me as much because I’m really passionate about doing like environmental jobs that sometimes you don’t really get that high of a salary for. And so, I just want to make sure that I’m in a good financial spot in order to take those positions that I want.

14:58 Emily: So, is the idea that you’re going to start saving and investing for retirement now because perhaps at some later points in your life your salary won’t be really necessarily much higher than it is now? Or is it to be building up assets so that later you don’t have the pressure as much of having to save, you know, so much for retirement later on? It could be both, but I’m curious about your decision-making here.

15:21 Michele: I would say it’s both. I think, too, just everything I’ve read about personal finances, it’s time in the market over timing the market, and so I wanted to start as soon as possible so that I don’t have to worry about like starting after grad school. And like maybe if I don’t get a very high-paying job and I still like can’t contribute as much as I want to, this starting early allows me to have much more time to like accrue interest and just a bigger retirement savings account and that also would let me be more flexible in case I need to take like a career break of some kind or anything like that.

16:04 Emily: Yeah, I have to say, like so I’m 37 now, I’ve been out of graduate school for eight years about, and this is really like I can already see this playing out in my own life because I did start saving into a Roth IRA or investing when I was like 22, right out of college. And it’s really like because of some other stuff going on in like my and my husband’s financial life, like we, you know, saved diligently during graduate school. It was never, I’d never even maxed out my IRA so it wasn’t even like a large dollar amount, but for a graduate student it was a lot. And that portion of our portfolio in the time since then, like it’s a really big portion of our portfolio even though we have started since buying our house like last year we’ve really ramped up our retirement contributions because we no longer had like the down payment savings to be considering. But it’s like still amazing how much of our portfolio has just been those long time ago contributions that have had plenty of time to compound. And even though we’re saving a lot right now, and in the decades to come, like it’s still going to be a huge part of our portfolio despite being you know, dollar amount-wise not that much in contribution. So, I really commend you for getting started with this early. Is it your goal to max out every year? Like what number have you put around how much you’re going to contribute?

17:19 Michele: Yeah, I’m already maxing out every year so I put in $500 a month automatically so that I don’t have to like worry about forgetting doing it. And then I also am planning on increasing next year since they just announced that it’s going to be $6,500 instead of $6,000.

Getting Started with Investing

17:39 Emily: And many of the listeners who are, you know, considering getting started with investing or trying to get started now might be curious like how did you exactly get started? Like where did you choose to house your money and you know, what do you invest in? Obviously you’re not giving anyone advice but just like the path that you took.

17:54 Michele: Yeah, so for me I really wanted to make sure that I was going to be investing in funds that I believed in, like ethical investing for me. So, to do that I chose Fidelity as my I guess like taxable or tax advantaged account that I wanted to use. I’ve since learned that Vanguard has lower cost like target date funds if you’re interested in those. But I think Fidelity is a good one for graduate students because they have more fractional investing so you can invest with as little as like $10 a month, but for Vanguard you need to have I think a minimum of a thousand. So that’s why I chose Fidelity. And then as for the funds, I just chose ones that were offered by Fidelity because that those have lower expense ratios. And then also I chose environmental funds so there’s like, they have a US Sustainability Index Fund, International Sustainability Fund and then an Alternative Energy Fund. Plus some other ones. I got a little trigger happy when I was first starting out but yeah.

19:06 Emily: Okay. It sounds like though, are you like a hundred percent in equities with this with your IRA investments?

19:13 Michele: Yeah, so I have mostly stock funds right now since I’m still pretty young and I can afford to be more aggressive. I do have one bond fund which I’ve learned as I’ve been researching more that you want to have more bond funds in your Roth IRA cause it’s a tax managed account and so if I start a taxable brokerage account then I’ll switch to more stocks in that one.

19:38 Emily: Yes, this is asset location optimization, this is a really advanced strategy. But just in case anyone, any listener doesn’t want to put as much thought <laugh> as Michele has into this process, I mean it’s great to put thought into it but if you just want to get started and don’t have the time right now, whatever you choose, as long as it’s like broadly pretty appropriate, like you were just saying. Largely stocks, you know because you’re just starting out and you have a long timeline to retirement. What’s most important at this point is just to get started. And your exact asset allocation and everything, you can figure that out down the line. Because right now, the way that your portfolio is growing is mostly by your contributions <laugh> later on, you know, a couple decades from now, it’s mostly going to be growing because of the compounding interest. But for now, it’s really your contribution. So even if you’re not like a hundred percent the most optimized in what you’ve chosen, it’s okay. It’s really the thing is just to get started and to get that nice savings rate going like Michele has with her, you know, $500 per month current target. So, that sounds awesome. And are you also doing any other kinds of investing outside of your Roth IRA?

Investing Outside of Roth IRA

20:46 Michele: Yeah, so right now, like I said before, I have the I-bonds. So, my goal is to have about I think maybe like $4,000 in I-bonds so that hopefully the interest will accrue enough that when I graduate I can take those out and pay for the rest of my student loans. And then I’m also looking into doing a taxable brokerage account but I’m still exploring that because I’m still figuring out how the taxes would work on that.

21:17 Emily: Sure. Would that also be for long-term investing like for retirement? Or would it be maybe for like a shorter-term goal? Nearer-term goal?

21:24 Michele: I think that would be a longer-term goal just because I don’t want to have to worry about like taking it out and losing money because I didn’t like pick the right investment. So, I would rather leave it in there for retirement.

21:39 Emily: You’re actually taking a fairly similar approach to what my husband and I did when we started graduate school. We, as I said, we had our Roth IRA investments going at a certain rate. And then we also, I had student loans as well that were subsidized during graduate school. And so, initially I was just like, okay, forget about those. Like I don’t even need to think about those. Not like you’re doing, you’re planning from the beginning but at some point along the way in graduate school I realized, oh it would be nice to have money set aside to pay this off once they come out of deferment. And so, that became a goal as well for us. And then we also opened a taxable brokerage account. So, lots of different kind of layers to this.

Union Efforts to Obtain 403(b)

22:13 Emily: Okay. Is there anything else you want to share about your investments?

22:17 Michele: I guess I also want to, I’m part of the union here on campus now. I’m like our department representative, and one thing that I want to work with them on is getting a 403(b) account for grad students at Michigan State. Because I know that there are some other schools, a lot of schools don’t have them for grad students, but there are schools that do and I think that that would be something that would be really beneficial, not only for the grad students but also for the university to attract more people to come there. So, I think that that’s something that we could work on together to hopefully achieve <laugh>.

22:56 Emily: Yeah, that would be really exciting. I definitely want to hear an update from you about that. I mean I hope you’re successful certainly, but even if you’re not, I would love to know why like what their reasons are for, you know, not including graduate students. Because as you said, in very few places graduate students are included, and I don’t really know why they would bother like excluding them really.

23:16 Michele: Yeah, I could see maybe like, I know that the ones I’ve been looking at, they don’t provide a match. But I think they already have like a 403(b) set up for like employees. So, I think just like allowing grad students to open an account even if you don’t do a match, I think it would still, I think that would be pretty easy to do, but I don’t know. I haven’t looked into it super far yet.

23:38 Emily: A match would be, I would be shocked if I ever <laugh> Yeah. If I ever saw a match for a graduate student. Even postdocs oftentimes don’t get matches. Some of them do, especially if they’re like state employees. But yeah just the first step of like, because when I read these like plans and so forth, because I often do this with schools that I give seminars at. I’ll go into and just do a little check and see if students might have the opportunity to contribute to a 403(b). And most of them say explicitly students cannot contribute or you have to have at least a 50% appointment and they, you know, put all the students at 0.49% appointments. They have these kinds of like workarounds to specifically exclude graduate students. But why? I don’t know, is it just an administrative burden for them? I really don’t know why because I’m sure there wouldn’t be that many graduate students who would, you know, elect to use it even if they had the option. Although even just, I mean psychologically, just knowing that you had the option would actually help, I think. Students start thinking about, oh is retirement something I should be preparing for in this stage of my life? So, I love this idea, and I really want to hear an update about it.

24:41 Michele: Yeah, I think that would also maybe help like with negotiations for like increasing stipends as well.

24:50 Emily: Alright. Okay, great. To be followed up on.

Commercial

24:55 Emily: Emily here for a brief interlude! I’m hard at work behind the scenes updating my suite of tax return preparation workshops for tax year 2022. These pre-recorded educational workshops explain how to identify, calculate, and report your higher education-related income and expenses on your federal tax return. For the 2022 tax season starting in January 2023, I’m offering three versions of this workshop, one each for U.S. citizen/resident graduate students, U.S. citizen/resident postdocs, and non-resident graduate students and postdocs. That third workshop is brand-new this year, and I’m very excited about it. While I do sell these workshops to individuals, I prefer to license them to universities so that the end users, graduate students and postdocs, can access them for free. Please reach out to your graduate school, graduate student government, postdoc office, international house, etc. to request that they sponsor one of my tax preparation workshops for you and your peers. I’d love to receive a warm introduction to a potential sponsor this month so we can hit the ground running in January serving those early bird filers. You can find more information about licensing these workshops at P F f o r P h D s dot com slash tax dash workshops. Now back to our interview.

Budget Breakdown

26:36 Emily: Okay, so we’ve talked about your investing goals. How are you formulating your budget to support those goals and to support all the other things you want to be doing in your life right now?

26:47 Michele: Yeah, so actually, the reason why I want to do a budget breakdown is because I’m really bad at actually doing a budget, so this helped me to track my spending. So, right now, I guess like my fixed costs, so my rent, I’m living with two roommates. So I have, my portion of the rent is $375 a month. And then with like utilities they’re kind of high here so I’d say that brings me to like between like $450 to $500 for my portion total, sorry, when I add rent and utilities <laugh>.

27:27 Emily: Just to interrupt, because that is such a low amount of rent, I have not heard a rent amount that low in a long time. Do you have your own bedroom or are you sharing a bedroom?

27:35 Michele: No, I have my own room and then it’s actually like a really nice setup because it’s a house, and so we still have like our laundry and like a dishwasher and like a yard. So yeah, when I found this place I was like, this is great. <Laugh>.

27:50 Emily: Is that through a private landlord?

27:52 Michele: Yeah.

27:53 Emily: Okay. Yeah, I’m always curious in different cities about like, where can you get the best deal? Is it going to be a corporate place, is it going to be, you know, a mom-and-pop landlord? So yeah, that’s great. Did you find this house? Or did these roommates exist and you found the room?

28:06 Michele: So, my roommates are both also in, not my department but a similar department to me. So, they had sent out like an e-mail on the listserv, and so I reached out to them through that.

Food and Furniture

 28:18 Emily: Amazing. Love it. Okay. What’s your next expense?

28:22 Michele: Yeah, so I guess my next biggest expense would be my food which I kind of just lumped together, like going out to eat and groceries. So, I guess my first month it was $450 and then my second month was $385, so I guess roughly $410 right now. And then also with my moving, I didn’t bring any furniture with me so I actually got pretty good deals on all of them. So my total for that was $170.

29:01 Emily: You spent $170 in total on furniture? Was it just like a mattress or like what?

29:07 Michele: No, I got like someone was selling their bed at a rummage sale, so I got that pretty cheap. And then I got a desk, a chair, and two dressers. Yeah, Facebook Marketplace.

Transportation

29:21 Emily: I’m just delighted by this great job. <Laugh> Yeah, Facebook Marketplace. Okay, great. Yeah, have you incurred any other expenses? I think you said earlier you basically only buy like housing and food, so what else is on your list?

29:35 Michele: <Laugh> and then I guess like transportation. So, my gas money and then I’m flying home for the holidays and I’m also going to be taking the train home so I have to like buy those tickets. So, for this month it was like $282 and then last month it was like $110 for gas. And then I guess too, one other thing I should mention is I like bike to the university so that I don’t have to buy the parking pass and I can just park for free at my house when I go to the store and all that stuff, so.

30:19 Emily: So, I think we’ve covered the big three, right? Housing, food and transportation. You mentioned that you own your car outright, so you know, you’ll pay insurance on that but not a whole lot in terms of fixed costs. But even just with those three, I think you’re still under a thousand dollars a month probably. Which is quite reasonable given your gross salary, let’s just say it’s $30,000 per year. $2,500 per month. So, keeping your like larger necessary expenses under 40% of that is great. You’re doing very well. What are you doing with the rest of it? Like are you choosing to spend discretion early? Or is this just going to go into investments and savings?

Discretionary Funds

31:00 Michele: I’m still trying to figure that out. I guess I also have had like different like fees come up just from like, so I’m trying to figure how to incorporate that into my budget from like the TSO and different organizations on campus. And then I’ve just like since moving, I’ve been like finding little things that I like want to get. Like I just got some new headphones and needed to replace like my watch band and everything. So, I still don’t know how to budget the rest of my money just because I don’t like have a good grasp on it yet, but I’m hoping that I could spend like $200 a month, like discretionary and then just like either invest or save the rest of it.

31:51 Emily: Yeah. Given how low you’re keeping your fixed expenses, especially your housing and this like very decent fellowship, yeah it seems like you have a lot of choice over what you can do with that excess cash flow, so that’s great. I don’t, you know, many graduate students are not in such a fortunate position. That sounds awesome. Does this fellowship last the entire time you’re in graduate school? Or is your stipend expected to like drop at some point?

32:14 Michele: So, for this fellowship, it covers the first and the fifth year. But then like you’re supposed to work with your department to find funding for the middle three years. So, I’m supposed to always have like, at least in my offer letter it said I’m always supposed to have like the base rate somehow.

32:31 Emily: Which is 30,000 per year.

32:33 Michele: Yeah.

Best Financial Advice for Another Early-Career PhD

38:34 Emily: Okay, so let’s finish up, Michele, with the question that I ask all of my guests, which is, what is your best financial advice for another early-career PhD? And that could be something that we have touched on already in the episode or could be something completely new.

38:49 Michele: Yeah, I think my best financial advice would be to automate everything as much as possible so that you don’t miss payments or if you are investing you don’t miss your investment goals. I know most credit cards you can set up an automatic payment so that you don’t miss that at all and then you can also link your accounts together so that you can like send money from your checking account to your savings account automatically so that you don’t miss anything or spend the money that you wanted to save. And I think this also can help with fixing like if you have any problems with like overspending or just like if you get super busy in your PhD like you probably are, then you don’t have to worry about like saving your money.

39:34 Emily: I love that advice. I totally concur. It took me some time, I think, to trust myself with automation, but I’m really glad that I got there. Was there anything that you wanted to add about your bank that you wanted to say?

39:47 Michele: Yeah, I did. So, I highly recommend reading I Will Teach You to Be Rich by Ramit Sethi. I think that’s how you say his last name. Because he gives a lot of recommendations for personal finance in general but for banking. So, like I just opened up the checking account that he recommended, which is called the I think it’s the Schwab High Yield Checking account and you get a brokerage account with that, but you don’t have to invest in it if you don’t have the money or if you don’t want to invest with them. But that checking account gives you 0.4% interest, which is like awesome. And then you also get ATM reimbursement everywhere and you also, I don’t think there’s like overdraft fees. So yeah, it’s just a great account. And then also for savings accounts, he recommends like I open a Capital One 360, and there’s also like an Ally Bank account that you can get like over 2% interest right now. Yeah, because I was looking into the Aspiration account because of their, they don’t lend to fossil fuel companies, but the downside of that is I heard a lot of people talking about how they like couldn’t get their money out and so that kind of scared me a little bit, but I might look into them again once they’re more established because they’re a pretty new bank.

41:06 Emily: Yeah. That’s good to hear. And thank you so much for the recommendation of the book, I Will Teach You to Be Rich. There’s actually a 10th anniversary edition that came out, I want to say within the last year or two. So, recommendations like banks, like I’m sure those have all been updated in the new edition, so if you’re looking for that kind of recommendation, you should definitely get the new edition and not the original edition from like 10 plus years ago. Or I would imagine you can just go to his website, which is probably, I Will Teach You to Be Rich or Ramit Sethi or something like that. And he’ll have those kinds of recommendations, but that’s awesome. And yeah, I think, I read that book again recently after the new edition came out and it’s great. It’s very, very direct and actionable and he’s so confident in what he tries to teach you. So like, it’s really compelling, it’s a compelling book. And a previous podcast guest mentioned that reading that book was like her sort of catalyst for like starting to get her personal finances under control. We’ll link that episode as well in the show notes. But I think it had to do with banking. I think the first thing she did was change her bank and felt really like great about that decision and like just sort of snowballed that energy like going forward. So, that’s awesome. Thanks for the recommendation.

42:10 Michele: Yeah, no problem. Yeah, the banking was really helpful, too. Just using like an online bank that doesn’t have as many like brick and mortar locations, they save a lot of money and give it back to you. So, that was a really helpful tip from him.

42:21 Emily: Totally. I started using an online or an internet-only bank I think about a year after I graduated from college when I knew like I’m going to move for grad school and then I’m probably going to move again. And then maybe, you know, I just saw a lot of moves like in my future and didn’t want to be sort of tethered to like regional, you know, availability of brick and mortar banks. So, all great suggestions. Michele, it’s been such a pleasure to talk with you. Thank you so much for volunteering to be on the podcast!

42:45 Michele: Of course. Thank you for having me!

Outtro

42:51 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. 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 by Lourdes Bobbio and show notes creation by Meryem Ok.

How to Apply Valuable Scientific Mindsets to Your Personal Finances

by Leave a Comment

In this episode, Emily interviews Dr. Brock Bennion, a financial advisor with Kimball Creek Partners who draws on his scientific training when he works with clients. Brock and Emily discuss how the mindsets and principles that scientists learn can translate very well into their personal finances, everything from thinking long-term to avoiding flashy experiments to collaboration. Brock also lists the essential personal finance strategies to apply during or following the PhD to avoid making a big mistake.

Links Mentioned in the Episode

S13E7 Image: How to Apply Valuable Scientific Mindsets to Your Personal Finances

Teaser

00:00 Brock: In science, what we learn early on is the value of collaboration and how important it is to get your findings out there as soon as you have something. And you would never wait to present those findings until you were at a conference or you were publishing them in a journal. You find the experts along the way and you workshop it the whole time. We’re hesitant to do that with finances. You’ve got to talk with people who have done it and who have some expertise, even just through their experience. Because if you do that, you will start refining your way to a better answer.

Introduction

00:39 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. This is Season 13, Episode 7, and today my guest is Dr. Brock Bennion, a financial advisor with Kimball Creek Partners who draws on his scientific training when he works with clients. Brock and I discuss how the mindsets and principles that scientists learn can translate very well into their personal finances, everything from thinking long-term to avoiding flashy experiments to collaboration. Brock also lists the essential personal finance strategies to apply during or following the PhD to avoid making a big mistake. The inevitable—the unavoidable—is approaching. Tax season begins in about two months. But help is on the way! I have been busy this fall creating a new version of my annual federal tax return preparation workshop and updating the versions I have offered in the past. These workshops are designed exclusively for funded graduate students and postdocs.

02:08 Emily: I used to teach this material live for university clients, but in recent years have switched over to offering pre-recorded videos plus Q&A opportunities. I actually much prefer this format because you can work through the content at the time that is best for you, whether January or April or in between, and also at a comfortable pace. For the tax return preparation process in particular, I think it’s very helpful to be able to pause the videos and collect documents or make calculations and rewatch segments if you didn’t catch the nuances the first time through. Plus, you still have the ability to ask questions in case anything is unclear or you aren’t sure how to apply the information to your situation, and frankly these are even better questions than the ones I used to get during fully live workshops because you’ve had time to reflect. I’m very proud of these workshops, and they’ve been reaching more and more graduate students and postdocs every year. The new version of this workshop that I’m offering this coming tax season is for nonresident graduate students and postdocs, and I will continue to offer the versions for U.S. citizen/resident graduate students and U.S. citizen/resident postdocs.

03:20 Emily: If you would like to use one of these workshops in the upcoming tax season, you do have the option to purchase it as an individual via PFforPhDs.com/tax. However, I would much prefer that you gain access to it for free, which you can attempt to arrange by helping me find a sponsor at your university, such as your graduate school, graduate student association, postdoc office, international house, etc. I’m bringing this up now because these offices and groups generally need some time to figure out if they have any funding available to allocate toward this purpose. Please let me know of your interest in approaching a potential sponsor at your institution by emailing me at emily@PFforPhDs.com. I may already have someone in mind! Thanks for your help with spreading the word about these educational tax workshops! You can find the show notes for this episode at PFforPhDs.com/s13e7/. Without further ado, here’s my interview with Dr. Brock Bennion.

Will You Please Introduce Yourself Further?

04:28 Emily: I am delighted to have joining me on podcast today, Dr. Brock Bennion. He is a PhD from WashU in St. Louis, and he’s also a wealth strategist at Kimball Creek Partners in Tacoma, Washington. So Brock, so delighted that you’re here today. We’ve met on Twitter, which is a really fun way for me to get to meet my guests. So, I’m so glad that we, you know, had some exchanges over there and now here you are on the podcast. So, this is really fun. And would you please introduce yourself to the audience a little bit further?

04:56 Brock: Yeah, thanks. Thanks, Emily, it’s, it’s great to be here. It’s great to talk to you kind of face-to-face, like you said, it’s fun to meet people online. Like you said, I’m a wealth strategist at Kimball Creek Partners. My background is in biology. I was an immunologist, studied at Washington University. I studied viruses and autoimmune diseases and how those two things work together and I absolutely loved it. I still love science. I think it’s amazing, but I am enjoying my career here and, you know, we might talk about how I ended up here and why I did that. But now, I love talking about the interface of science and finance and how these things come together. And so, when you offered me the chance to come on the podcast, I thought, well, that sounds like a lot of fun.

Research Mindsets that Translate into Finance

05:38 Emily: So, we decided on our topic for today being, you know, for the researchers in the audience, the PhDs and PhDs-to-be who are listening, who want to enhance their practice of personal finance. What are the mindsets that we have already developed or are developing as researchers that are really going to serve us well if we’re able to translate those over into this personal finance space? And so, you and I kind of collaboratively came up with a list of a few different points together. So, we’re just going to talk through those and kind of have fun with this like, idea of translating these mindsets from research into the practice of personal finance. So, what was the first one that we came up with, Brock? And let’s start us off.

06:21 Brock: Well, so first we talked about the importance of kind of knowing your goal. I mean, if there is again, a unique aspect of a PhD, it’s the variable size and length, but how you really do view your projects in terms of years. You know, it’s not, you know, this semester’s, you know, test or you know, the upcoming quiz. It’s okay, how do I craft a story that takes place over, you know, years and then, you know, beyond your graduate work, you know, sometimes decades-long, you know, pursuits. And that’s what finance really is. You know, if you are thinking about finance properly, you’re thinking about it in terms of your life, and often beyond that and legacy planning for, you know, future generations and setting up your kids for their success. And that’s a really great skill. And something I think is underappreciated as a PhD student is the ability to say, okay, I’m starting at zero, you know, and I want to go to this point far off in the future. And that applies really well to finance, to be able to say, I’m starting at zero. How do I get to where I want to be? And let’s build a plan to get there.

07:31 Emily: I completely agree. This is one of the points that I kind of start off one of my talks with, The Graduate Student and Postdoc’s Guide to Personal Finance. I like to start off on a like a positive note of like, encouragement for the people in the audience who might feel a little bit like intimidated about, you know, a lot of people are uncomfortable talking about their finances or learning. So, I like to say to them like, if you as a PhD student or postdoc already have like a grand vision for your career and for how graduate school or your postdoc fits in to that vision of your career, you have to do that to get to the stage of being in graduate school. Like you have to write it in your essays, like how this is going to play into your career.

08:11 Brock: Exactly.

08:12 Emily: And so, you’re doing that long-term planning on the career side. And so if you could just pivot that and think about, you know, the decades in your finances and what you want your vision for your life to be, over not just the next few years, but you know, the decades, that’s already a skill that you’re developing there. And you just have to put it over to the other side of the finances and apply it there and it’s going to serve you really, really well. And I’m also thinking now about how like, you know, in setting goals, like, okay, this is what I want my career to be. And then you can break that down. Okay, that means this is what I want to do for my graduate degree and then I think I’m probably going to follow that up with a postdoc or this type of job after that.

Financial Goal-Setting

08:49 Emily: And you know, as you said earlier, people can pivot. You and I both, you know, made some pivots after graduate school, but we at least, you know, you can at least start down that path with a plan. And I think that is similar in the finances, right? Have the goals for the decades, but then back that out and have the goals for 10 years and five years and one year. And then that breaks down to your current goals as well. Yeah, is there anything you want to say about those, like links of time or like decision-making around goal-setting?

09:15 Brock: I think you’re right that like what PhDs do really well is they set these long goals, but then also that they set little goals to get there, which is the step of goal-setting that I think most people fall flat on. I’d say the first problem is people don’t set goals to begin with. If you ask somebody what are your financial goals, they’ll often just give you a blank stare. You should have some goals. And then what you need though, you need lots of small goals that get you there. You know, so if your goal is to discover, you know, something, you know, or show that a drug works, there are all these experiments that go into how does that line up? For the same way, when you’re doing a financial goal, one, you have to pick what your goal is. You have to know where you want to go. But then you’ve got to set the little goals to get there. It’s doing both of those things that really is where you harness the power of goal-setting and of planning.

Long-Term Goal: Retirement

10:03 Emily: I’d love to hear some examples now, like in that financial realm of a really long-term goal and then some more short-term or intermediate-term goals that will help you get there to that long-term goal.

10:13 Brock: Yeah, so usually, I mean, one that we talk about is just retirement. Now, not every scientist wants to retire. I used to joke that the retirement plan of many scientists, especially in academia, is something like drop dead in your office at 95 as you’re writing a grant, you know? But for those that do want to retire, you’ve got to come up with an idea of what that retirement looks like. You know, basic things of where you’re going to live, what do you want to spend your time doing? Because few people just stop and play golf now. I mean, that’s not really what retirement looks like for most people. And then, put a dollar figure on what that costs. Say, well, you know, if I want to travel abroad three times a year, once I retire, well you know, what’s that going to cost me? And then back out from there, and once you start getting a goal of a lifestyle type of thing, you put a big dollar sign on that. And then you take that big dollar sign, you break it down into smaller dollar signs of, well how much is that on a yearly basis? And then what do I need to start saving now to be able to accumulate those kinds of funds to be able to live that kind of lifestyle?

11:24 Emily: This example of retirement is one that I end up speaking about a lot because it’s obviously one of those biggest goals within personal finance that takes so long to properly prepare for, you know, and employing the power of compound interest and so forth. But I’m remembering that when I was in graduate school, and to some extent up until just like a couple of years ago, I didn’t really have that vision of what I wanted my retirement to look like. So, my shorter-term goal was just start saving and start investing and assume that you’re going to get to like the more specific vision later. Because I know it’s going to take investing to some degree either way. And I wonder if there’s a parallel that we can draw over to like the process of getting your PhD or your career on the other side of it. Like maybe it is just, okay, I’m pretty sure I need to have a PhD to do something with my career later in this area. So, I feel like a PhD is a good thing to complete, and that’s a nice five or so, you know, year term goal.

Value of Planning and Collaboration (PhD/Finance)

12:20 Brock: And I think with that recognizing though, like from the beginning, you’re investing a certain amount of time in your PhD, and what do you expect the return to be on the end? You know, for some people, it’s the logical next step from undergraduate. For others, they know going in, well this is what I want to do. And others figure it out along the way. And that’s totally fine whatever path you find yourself in, but you should be actively looking for your plan and your outcome. You know, the future belongs to those who go out and get it. And if you’re always just taking things as it comes, that’s an okay thing to do as you’re figuring things out. But eventually, you’ve got to set your sights on something, and you’ve got to go and get it.

13:04 Brock: And that’s exactly what I think a PhD teaches you really well to do. We all know the person who sat at their bench and didn’t do any experiments and eventually, they had to go do those experiments. And we all know the person that came in every morning at 6:00 AM and was off working, and they got a lot of stuff done. It’s no different in finance or in life. The other thing that you kind of brought up before, and I think, you know, dovetails nicely at this, is the hesitancy that people have to talk about their finances with others, and how they kind of hold this in close. And what I find so interesting is that’s so counter to good science <laugh> right? In science, what we learn early on is the value of collaboration and how important it is to get your findings out there as soon as you have something.

13:55 Brock: You know, from the time that, hey, I have this idea, and you go and you share it with somebody and they say, well that’s a terrible idea, but you know what, if you did this, this would be a better idea. And then you go down the hall and tell somebody else and they say, well that’s a pretty good idea. We could do this experiment that would find out if it would be a really good idea. And, and you would never wait to present those findings until you were at a conference or you were publishing it in a journal. You find the experts along the way and you workshop it the whole time. We’re hesitant to do that with finances. We say, well I want to keep this secret until I’m totally secure. Right? Once I’ve become financially independent, then maybe I’ll talk about my struggles early on or whatever it is.

14:36 Brock: And I think whether you’re choosing, you know, the loan forgiveness pathway or you’re trying to decide is now the right time to buy a house or should I go to a high cost-of-living area for this job that I think has potential? You’ve got to talk with people who have done it and who have some expertise, even just through their experience. Because if you do that, you will start refining your way to a better answer. And you don’t just talk about it once you talk about it every chance you get because everybody will add something different and you’ll form a really good understanding of where you want to go.

15:11 Emily: This is definitely something that, at least I would think many graduate programs you’re taught and encouraged to do this. In fact, find peers and collaborators at many different levels. You have your peers, like other people in your cohort or in your program or in your lab and they’re going through the similar, you know, struggles that you are and they can have something to say about your thought process or your goals or what have you. And then you have your mentor and then you have your committee, and then you have maybe a collaborator at another institute. You know, there are many different levels of people who can help and guide you. And you’re right that we don’t, I mean on like the personal finance side of things, I’m trying to think because like, yeah, some people work with someone like you, like a financial advisor usually after they have some money to be advised upon <laugh>.

Overcoming Stigma

15:54 Emily: And then before that point, when you’re in the, let’s say the training stage and you’re just like trying things out and trying to get some debt paid off and get your, you know, your investing off the ground or whatever’s happening, it’s much less common to talk either with peers or with a mentor or someone who’s been there before. And you know, I do kind of serve as that role as like an educator, but I don’t have like one-to-one relationships with people. It’s more of a teaching like mechanism for me. But people, yeah, don’t tend to talk very much among their peers, even though they could be really good, resources and sounding boards. Yeah, what have you seen, like, I guess with your clients or have you seen any way to like kind of overcome this stigma that we have?

16:34 Brock: You know, it’s hard. Like any stigma, you know, and if we’re talking about, you know, mental illness or social issues or whatever it is, any stigma is best broken by breaking it. And you really just kind of have to start and realize that most people don’t judge. Most people are very accepting, very welcoming to that being honest and open. And you actually forge some real connections with that. You know, some of the best relationships that, you know, me and my wife made during our grad school years were with other couples who were going through the exact same thing. And we’d talk about, you know, our struggles of how do you make this work in the finances, and everybody’s dealing with the same stuff. And typically, people who have already overcome are even more empathetic because they remember those years and they think about, well, how could I have been helped? I wish I would’ve known this, I wish I would’ve known this. And it’s really valuable.

17:32 Emily: I think that’s definitely an encouragement to the listeners to talk with whoever’s a little further along than you are. Like if you’re an entering graduate student, talk with an older graduate student, talk with a postdoc, anyone who’s at like a later stage. And what’s kind of interesting about academia, I mean, obviously people come from very different, um, financial backgrounds. And you know, some people might be deeply in debt coming into graduate school. Some people might have resources from their parents or maybe a prior job that they had before they started graduate school. We can all be coming from different places, but within your program, it’s pretty likely that people are being paid somewhere in a similar range to each other unless there’s like an outside fellowship involved or something like, so at least you have some degree of commonality that you can like start conversations from. Like, oh wow, you know, rent is like 40% of my income.

18:22 Emily: My goodness, what are you paying for rent? I love that question. What are you paying for rent? It’s a very easy one to answer. Everybody knows how much they’re paying for rent. And it’s low stakes, right? Like, it’s not a judgment, oh, you’re paying more or less, whatever. Oh, we found a great deal. I’d love to know how you did that. I literally did this in graduate school because I ultimately moved a couple times in graduate school, and by the time I got to the last place that we stayed, it was like the best deal that I ever lived in during that period of time. It was because I asked people, how much are you paying for this place? Seems great. Oh wow, I can’t believe it’s that little. I’m going to get on the waiting list. You know? So, it it took that like collaboration, like we were talking about earlier, in sharing information to get to those great tactics that actually really help your finances when you can do something like reduce rent. One quick example, easy example. Very easy to talk to other people about rent. I found <laugh>.

19:09 Brock: No, that’s a super great example. No, and I love that because you’re right, people, everybody knows what it is and you know, you don’t judge anybody. You know, you don’t feel any judgment. You feel like you got a deal if somebody’s saying, oh, I paid this or I paid this, and Oh, that’s a great question. I like that.

Commercial

19:26 Emily: Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as goal-setting, investing, frugality, increasing income, or student loans, each tailored specifically for graduate students and postdocs? I offer seminars and workshops on these topics and more in a variety of formats, and I’m now booking for the 2022-2023 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Ask the potential host to go to PFforPhDs.com/speaking/ or simply email me at emily@PFforPhDs.com to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

Not-Flashy Experiments in Research and in Finance

20:49 Emily: Another point that we put in our outline was to choose experiments that you are fairly confident are going to work in the sense that they are going to give you information. And the way you put that was don’t be flashy. So, what does this in the research realm, and then how does this translate over to the personal finance realm?

21:11 Brock: Yeah, I hope this wasn’t just me in grad school, but I feel like a lot of grad students, maybe it was just me, you know, early on, will sit down with their advisor and say, Hey, I read in the literature about, you know, this new aspect, this new cool thing that’s out, and I was thinking that this might be affecting this, which might be affecting this, which is actually driving, you know, my project. And you know, the advisor lovingly looks at you and says, mm, probably not <laugh>. You know, like that’s a really long stretch. It could be, and if it did, it’d be really cool and to be really impactful, but the chances of that being true, that’s not really well-grounded in the literature. And then they steer you to some experiments that whether or not, you know, whether you get a positive result that you’re expecting or a negative result, it’s the right question to be asking.

21:59 Brock: It’s the right experiment to be doing and that can go into your paper, you know, be part of your project. And, you know, often people will ask, you know, what do I need to do to be financially independent? And like a really basic way to start is save 10% of your income. Not super flashy. It’s not about a specific investment or it’s not about, you know, doing a fixer upper home or having a side hustle or whatever it is. It’s just, you know, what, if you save 10% of your income, you put it away super diligently for 30 years. I don’t run into many people that have done that and aren’t in a good place financially. They may not be super rich, but they’re in a good place financially. They did something with a high degree of probability that it was going to work, and it worked <laugh>.

22:51 Emily: I think the way that I would put this, and I’m trying, I think this was advice that I sort of, I don’t think I applied it but I sort of heard it during graduate school, was to have a couple of sort of safe aspects to your project. Maybe more conservative, maybe more likely to pan out. And then take one high flyer on some strange idea you have. But don’t devote all of your time to it, right? We’re talking about 10, 20%, something like that. And have, you know, in terms of like constructing your dissertation, like have a couple of chapters that you’re pretty sure are going to work out and then save your, you know, strange, unique, possibly very high reward, but also very high-risk idea for, you know, the last one, right?

23:32 Brock: Yes.

23:32 Emily: And so, I think that that translates over very well to personal finance. It’s like, yeah, a few people might, you know, make it big financially on essentially a gamble, but the vast majority of people do not win the lottery, whatever, you know, the crypto lottery, whatever the version of the lottery is that you’re playing. You can try it, but with the vast majority of your resources, let’s do something that’s a little more tried and true. As you were kind of saying earlier, like, you know, I think about, and maybe we’ll link it in the show notes if you can find this, but I don’t know if it’s a PhD comic or xkcd or something like that, but it’s like, you know, a circle and it’s like these are the boundaries of human knowledge, and the PhD is like putting a little tiny bump on the edge of that circle, you know, like that. It’s the same thing with finances. Like the circle is like, do the stuff like saving 10% of your income, having insurance, like do all the regular stuff that is boring. It’s not flashy, but it’s going to work. And then, okay, yeah. Like, let’s take a little risk over here and a little risk over here as, you know, your personality might lead you to, or something like that. Is that another way of phrasing what you said?

24:38 Brock: Yeah, absolutely. I mean, there are things that you should do that make a lot of sense. And then yeah, you know, I’m certainly not saying you can’t take any risk or you can’t, you know, say, have fun with some aspects of your finance. But where you get hurt is when you devote too much time to that, just like you would in a project where if you spend all your time doing high-risk projects, maybe you get lucky and you hit it out of the park, but most likely you’ll end up with a lot of dead ends. You’ll be years into your project and you won’t really have a good foundation. And that’s what we’re trying to avoid.

Not-Flashy Personal Finance Advice (But it Works)

25:15 Emily: So, let’s give people some not-flashy personal finance advice. Let’s come up with like, I don’t know, three or five like baseline things, not flashy stuff, great strategies to be using. Whether that starts during graduate school or starts a little bit afterwards if they’re not quite ready for them yet. What’s on your list?

25:31 Brock: Well, I mean, you know, you’ll always hear, you know, my favorite is they’ll always say something like, you know, man, if only I bought, you know, insert whatever tech company in the nineties, you know, now I’d have, you know, this whole fleet of jets or something, right? Like, what people don’t say is, man, I sure wish I bought a diversified low-expense ETF in the nineties. But if you did that and you waited 30 years, it grew <laugh>, it worked. And there were a lot of companies in the nineties that just went away. And so yes, we can in hindsight look back and say, it would’ve been great to have bought this one that became big and changed the world. But if you just bought a low-expense, you know, ETF-type solution, it’s not flashy, it didn’t make you a billionaire, but it did work and it did grow.

26:19 Emily: Because, also by the way, it probably included that flashy tech company, whatever the sector was that, you know, is hot at the time, right? You just bought a tiny bit of it instead of a hundred percent of your bets on that. But the thing is like when you make that diversified portfolio bet, as you were just saying, you’re going to have some winners in there. If the economy is winning, you’re going to be winning with that portfolio. And you’re going to have a lot of losers in there, too. But thank goodness you bought some of the winners as well because you were so well diversified and it didn’t rely on your research and your ingenuity and your insights and blah, blah, blah to pick those out. Okay, so passive investing, index funds, ETFs, that’s a non-flashy strategy. Great. What else is on your list?

26:58 Brock: You need to have some form of life insurance if you have people that depend on you. Now, this does not mean an expensive, you know, universal whole life, whatever policy. But what we’ll tell people is, you know, make a list of everybody you say I love you to. Put a checkmark next to anybody you’re financially responsible for, and then ask yourself what would happen to those people if I wasn’t here? It’s not a flashy way to do it, and the goal is that you die never using it, but if you’re wrong and you don’t have that, you could leave people that you care about in a very unfortunate position.

27:42 Emily: Yep. Love it. And I want to add to that disability insurance too.

27:45 Brock: Yes.

27:45 Emily: Own occupation. Okay. What else is on your list?

Don’t Overextend Yourself

27:48 Brock: Just little things like don’t overextend yourself. Keep a budget, you know. Understand where are you putting your money every week? Is that in line with your priorities? And the example I sheepishly use, soon after undergraduate, I found myself working at a company as a microbiologist and I would go to lunch at just a sandwich shop every day. And all of a sudden I looked back and I’d spent like $300 that month going to the sandwich shop. Well, it didn’t put me in a bad financial position, but I thought, this is not in line with my priorities. It didn’t bring me that much more joy and to think that I could have put that money to something that had, you know, more in line with what I wanted to be doing, well that compounded over time. And so, again, there’s nothing flashy about bringing your lunch or making those small purchases and funneling your money in the direction you want it to, but it does work and it does add up, especially when you start early.

28:52 Emily: Yeah, I think I would phrase that as like an awareness of your money and just being willing to make adjustments when things are kind of out of alignment. And as you said, not overextending yourself. When you said that, I always think of housing and transportation, right? Like large fixed expenses, like especially challenging during graduate school, but like as much as possible, keep those in alignment with your overall income at that time. It’s obviously going to be really challenging in high cost-of-living areas, but just do the best you can during that kind of strange period of life, and you’ll be able to be more in balance later on when your salary is higher. But do the best you can and be aware of it. And like we talked about earlier, just be aware of opportunities where maybe you could find a way to spend a little less on one of these expenses if you feel overextended in that area.

Focus on Your Main Job

29:38 Brock: The last one I might add to this is just lots of times, people will focus on having a side hustle or side job, which is great if you enjoy that. I’ll often talk to people about focus on your first job. You know, there are things especially early in your career that you can take on more responsibility in different areas and accelerate your career growth and your career trajectory so that you’re making more money and you don’t have to spend 10 hours a night doing something else. You could spend an extra hour at your job and show that you’re willing to take on more responsibility and you grow. And as your salary grows, you don’t let your lifestyle creep with it, but you find ways to put that money to where you value most.

30:25 Emily: I love that point, kind of the rise of the side hustle corresponded with when I was in graduate school, like during the great recession, I think you were there at that time as well. And you know, at that time it was like sort of a necessity thing. Like a lot of people didn’t have primary jobs, couldn’t make more of their primary jobs, so they were turning to the side hustle. And then sometimes we were talking about earlier, like you see these successes of people who have a great side hustle or turn their side hustle into their main thing and their businesses and forth. And that can seem really attractive. But the 80/20 on this is just make more at your primary job as best you’re able to. And that could be through negotiation, that could be through, I want to say like preparation.

31:03 Emily: So, as a graduate student, as a postdoc, I want you to negotiate, I want you to apply for the fellowships. I want you to advocate for yourself. Absolutely. But if you’ve done that to the greatest degree you can and that’s where your income is for the time being until you graduate or move on or whatever, what you can still be doing is preparing for that next stage in your career through professional development, through networking, through gaining more skills. And so, that will pay off later. It’s not going to be in the immediate future, but when you have that first post-PhD, you know, career, job or whatever, that’s when it can sort of be like pedal to the medal and you’re going to apply all that stuff you learned, you’re going to negotiate, you’re going to do all the stuff to get that great salary.

31:39 Brock: Yeah.

Don’t Be Wrong

31:40 Emily: And the last point on our outline, Brock, I love the way you said this was, don’t be wrong, <laugh>. So, what do you mean by that?

31:48 Brock: Well, it comes back to the idea of, you know, doing what works. But we’d often say that the number one rule in science is don’t be wrong. You don’t have to be totally right. Nobody publishes a paper and at the end says, and this is it. No reason for a follow-up study, no reason for discussion. This is the end of the study. No, everybody has more questions. Every good study brings up implications and has things that spread from it. What you can’t do in a study is say something that’s wrong. You can’t make a claim that’s unsubstantiated, you can’t, you know, lead the field down the wrong path. You don’t have to be a hundred percent right, but you can’t be wrong <laugh> if that makes sense. And it goes the same way for finances. Making bad investments, things that are too risky early on, paying way too much than you should for things like a car or a house early on in your career. Those are things that can get you sideways financially and really throw you off course for a long time. It is better to just not be a hundred percent right. Talk about buying a diversified fund or something like that. You buy everything, you buy some losers, you buy some winners, you’re not wrong even if you’re not a hundred percent right. And I really think that’s important. Too many people are looking for that, well what’s the trick that’ll get me there faster? And it’s those tricks that usually mess you up.

33:22 Emily: Yeah, I feel like we went over this a little bit when we were talking about those like non-flashy strategies. Because the flashy strategies are the ones where we’re like, well, you might be right, but you definitely might be wrong as well. And it takes a lot of time to like figure that out, right? I mean, if you are an active investor for example, and you love to pick your own stocks, time will tell whether your strategy was successful or not. But it’s going to be time over like decades, not over like a year. And there’s less time to course correct once you’ve figured out that statistically that did not, you know, work out very well for you. So, don’t make a big mistake like we talked about earlier, like having sufficient insurance, not just life and disability insurance, which we mentioned, but like keeping health insurance and all that other stuff. Like insurance generally is one of those like nobody wants to pay for it, but guess what? The reason why the product exists is because you have an area in your life where if something terrible happened, you would not financially be able to recover from that, or at least not very quickly. That’s why you have the home insurance and the renters insurance and all that stuff. So like insurance is definitely one of those like, don’t make a mistake kind of products like yeah, it’s not pleasant to pay for it, but what’s really unpleasant is if that thing happens that you’re trying to insure against.

34:30 Brock: Yeah, we talk about, you know, you invest in what’s probable and you insure against what’s possible. So, the things that are possible but financially devastating if they were to occur, that’s where insurance can mitigate that. We don’t invest in those kind of things that are possible but not probable. We invest in what’s probable, insure against what’s possible.

34:51 Emily: Interesting. And can you think of any other areas that would be like a big mistake? Something that we haven’t already mentioned?

34:58 Brock: Yeah, I mean the one that comes to mind, and this is probably for people considering a graduate school or something like that, but where I look at people who go into a program and don’t finish. Or, you know, and I’ve seen people that drop out, you know, maybe just after five years, but just a year or two away from finishing that you get going down the wrong path and you decide that’s not for you, but you leave taking away nothing. It’s better to finish all the way to the end and then pivot once you’re out, and this isn’t for everybody, but in a lot of cases. Because then you have something to show for that. You show you’ve completed this, then you can move on to the next thing. But where again, you can get yourself really sideways is if you spend half a decade or more going down a path only to drop everything and not at least attempt to build on that momentum that you came up with.

35:57 Emily: Yeah, this is an interesting point and I feel like actually it could apply in other areas of career as well. Like not just the choice to go to graduate school or not, but sort of going down the wrong just career path generally for you. And it goes back to what we were talking about earlier about knowing yourself, knowing your values, knowing your personality. And I think just as soon as you start to notice a misalignment with whatever is going on in that area, it behooves you to examine that and then take action. Whether that’s the action to decide to finish, let’s say the PhD, the action to leave at that point before you, you know, spend three years in that state and not take any action about it. Because there are off ramps, right? Out of academia that can still be fruitful.

Be Open to Pivoting

36:35 Brock: Oh, I’m obviously all for pivoting. Me and my career, I pivoted. I think it’s great. I think you have opportunities throughout your career to pivot. But there’s a way to build on your pivots so that they aren’t turning around, but just changing course. And I think that’s important.

36:54 Emily: Yeah, I think actually my career has been an illustration of this point, actually, because I started knowing maybe around two years into graduate school that I probably wasn’t going to continue in research. But at that point, I really did a heavy reexamination period for about a year and decided that I did want to finish the PhD and it was because I was interested in several, you know, quote unquote alternative career tracks where the PhD would be useful. And so, I finished and then I picked my head up and did another reevaluation and said, oh, but I really love personal finance now and I really wanna go in this direction. So, I ended up pivoting again. But as you said, I was very happy that I got to the credential and got to the finish point because it has been useful since then. Then again, if I had been certain earlier that I didn’t want the PhD, then that would’ve been a good point to take that exit.

37:42 Brock: Exactly. Because, just like you said, those additional years that you would’ve invested. I mean, the relationship between time and money I think is very important. And, you know, whether it’s that you realize that my time is more important spent in this other direction, that’s great. Pivot. Leave grad school if that’s the right call for you. But know and recognize what you’re giving up and what you’re changing to. Because those are the kind of decisions that, you know, make a big swing in your career, in your finances, in your life. You’ve got to pay attention where you’re swinging.

Best Financial Advice for Another Early-Career PhD

38:19 Emily: I want to finish up now with the final question that I ask all of my guests, which is what is your best financial advice for another early-career PhD? And we’ve talked about so much like advice-y kind of stuff in this podcast episode already that I actually want to give you a more specific assignment, if you don’t mind.

38:36 Brock: Yeah. Okay.

38:37 Emily: Which is that you mentioned earlier that you had children while you were in graduate school. And so, I would love it if you would give advice for another graduate student or early-career PhD who has children maybe at a time when their peers do not yet have children, and what is some financial advice for that person?

38:54 Brock: You know, I <laugh> that’s a hard one. It is hard to have kids in grad school, but for me it was so worth it. It was great. My wife and I are a fantastic team. I hope she would say the same, and certainly she shouldered a lot of that burden. And I wouldn’t have been able to focus on grad school the way I did if it wasn’t for her support. And, you know, she deserves probably more credentials than I do. The advice that I would give to somebody thinking about this is to be really intentional with your time. Kids, whether you have one or I have three now, so I can speak up to three, they take up all your time. No matter how many you have. They are, you know, they expand to the volume to which, you know, the container holds.

39:51 Brock: And so, you need to be very good about structuring your day and your time so that you can be where you need to be. Now when kids are young, they don’t really know whether you’re home or not. So, it’s as much about supporting, you know, your other team member, you know, your significant other, in that process. And you need to do that. You need to be an equal team. But know that you will have less time. You will have competing priorities, and it will be hard. But I’d say that’s okay because it’s really fun. I’m a big fan of kids <laugh>.

40:37 Emily: I think, you know, the first thing you mentioned there was like time management basically, like being really intentional about where you put your time. And that’s something that I’ve definitely been learning as a business owner and as a parent. Sort of like the, when you’re at work, be all at work, be really focused, get what you need to get done in that time. And then when you’re at home, be off of work, be with your kids, like have that quality time together. And hopefully, you can make the arrangements with your partner and your childcare provider and all this stuff so you have that like, committed time that you can devote to both. But yeah, like you just become pretty, I at least have become a lot more hands-on manage-y about my time because I need to be now that that’s a factor in my life.

41:23 Brock: Yeah. And again, it’s different ways of doing it. You know, so I mean, I had friends in grad school that they would come in later in the day and they’d stay until three in the morning. And that worked really well for them. And for me it was get in early and leave in time for dinner at home and come back if I needed to, if there was a late night time point or something for an experiment. But you need to find something that works for you. You know, your life, your finances, have a goal of what you want that to look like and then you make a plan to get there. It’s not easy. It’s actually incredibly difficult, but it is worth it, and you will find more happiness if you do it that way.

42:06 Emily: I love that note to end on. Thank you so much, Brock, for giving this interview. It’s been a pleasure to talk with you.

42:11 Brock: Thanks so much for having me on, Emily. It’s great talking.

Outtro

42:18 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. 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 by Lourdes Bobbio and show notes creation by Meryem Ok.

From Zero Funding to Graduating Student Loan Debt-Free

by Leave a Comment

In this episode, Emily interviews Dr. José Riera, who recently finished his PhD in education from Washington State University. José’s offer of admission to WSU did not include any funding, so he initially accepted some student loans and expected to accumulate a hundred thousand dollars of debt before graduation. However, through his incredible resourcefulness, José secured multiple types of funding throughout his three-year degree that paid his education and living expenses and allowed him to repay the student loans he initially took out. Jose teaches us the tactics that he used to land two assistantships, an adjunct teaching position, and 18 scholarships. Don’t miss José’s incredibly inspiring story of overcoming these and other obstacles!

Links Mentioned in This Episode

Image for S13E6: From Zero Funding to Graduating Student Loan Debt-Free

Teaser

00:00 José: I would also say that you also want to make sure that you craft a very good message so that when people meet you, they not only remember who you are, but they want to know what you’re passionate about and how you’re helping yourself and others in that. Because then they make the connection and say, “Oh, wait a second.” So, they immediately connect as opposed to saying, “Well, he’s just, or José’s just a student in need.” You want to make sure that they have some memorable talk points about what it is that you’re pursuing, your research, your career focus, and the communities that you want to help out.

Introduction

00:42 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. This is Season 13, Episode 6, and today my guest is Dr. José Riera, who recently finished his PhD in education from Washington State University. José’s offer of admission to WSU did not include any funding, so he initially accepted some student loans and expected to accumulate a hundred thousand dollars of debt before graduation. However, through his incredible resourcefulness, José secured multiple types of funding throughout his three-year degree that paid his education and living expenses and allowed him to repay the student loans he initially took out. Jose teaches us the tactics that he used to land two assistantships, an adjunct teaching position, and 18 scholarships. Don’t miss José’s incredibly inspiring story of overcoming these and other obstacles! Without further ado, here’s my interview with Dr. José Riera.

Will You Please Introduce Yourself Further?

02:09 Emily: I have joining me on the podcast today, José Riera. He recently finished his PhD in education from Washington State University, so he has a different kind of funding path than what we normally hear on the podcast. And I’m really excited for him to share for anybody else who’s pursuing a similar degree or has similar funding challenges at the beginning of their PhD. So, José, I’m really delighted that you are joining us here. Will you please tell the listeners a little bit more about yourself?

02:33 José: Well, thank you for hosting me today, Emily. I’m very happy to be here and help you and your mission to support many worthy students obtain funding and guidance to survive what can be a very challenging process. And I consider myself blessed to have met you at the beginning of this journey. So, I was able to pave the way thanks to your support and complete really an incredible journey in a three-year time span, which is amazing. So, just a little bit about me besides the fact, like you mentioned, I just completed my PhD in education here at Washington State University. I’m in the eastern part of Washington, in the town of Pullman. Before that, my background was mostly in business administration. I did a lot of work in inner-city communities throughout the United States, serving mostly Latino and African American neighborhoods.

03:28 José: I have an undergraduate degree in finance from Georgetown University in Washington, D.C. And then I have a Master’s in Business Administration from the Wharton School of the University of Pennsylvania. So, my background prior to coming to WSU had been mostly a business administration perspective handling financial and retail aspects of different operations. And I did that throughout the United States. I think through some health challenges and just some personal reflections, I pivoted away into the area of education where I felt the focus was going to be mostly on helping others. And as I entered the second stage of my life working mostly towards was I a good steward of the resources that I was born with? And that led me, among other places, to Washington State University, where, like you mentioned, I just completed my PhD.

Funding the MBA

04:28 Emily: So fascinating. So, this was your second go-round with graduate school, actually. Tell me about how you funded the MBA.

04:37 José: Well, the MBA, it was in the University of Pennsylvania. My parents helped significantly with my MBA, and then I had also won a significant scholarship funding from the University of Pennsylvania, just based on my ethnic background that provided some support. So, I was able to cover that. That was only a two-year program. And I was in a little bit of better financial shape back then than I was coming into my PhD.

05:08 Emily: Okay. So, you didn’t take out student loans, for example, for that initial degree?

05:12 José: No, I did not.

Finances Right Before Starting Graduate School

05:13 Emily: So, tell me about your finances right before coming into graduate school. You just said you were in a different situation, so what was the situation?

05:19 José: Well, the biggest challenge for me was I had, you know, I spent several years in a hospital. And I was recovering from an accident, and that recovery process really wiped out any sort of financial support that I had. I had child support that I was accruing, unable to pay for because I had no income. And then I had just a sheer amount of health-related expenses I kept accumulating. So, that was my backdrop as I looked to complete my rehab and then get my life back in order and decide to pursue something back in education that would give me additional tools and a different perspective on my life is really the genesis of how I connected with you and how I connected with Washington State University, among other schools.

06:19 Emily: Okay. So, we have a big interruption that you just went through in your financial life. Some debts that you had accrued. So, I’m guessing that you did not want to accrue any further debt during your graduate degree. Can you tell me about how PhDs in education are typically funded?

Funding for PhDs in Education

06:41 José: Yes, very good. Well, at least at Washington State University, the program is very, very international. And a lot of the students, especially from Saudi Arabia, from China, they’re actually funded by their own host governments. So, I entered into what’s a fairly small program. My class was only about 13 students. I think I was the only citizen in the entire group. So, that just gives you a sense of the fact that a lot of them received independent funding, and the program itself wasn’t really geared towards providing financial support just because it’s seen somewhat of a, for lack of a better word, a cash cow for Washington State University. Again, you’re having a lot of students that are not only paying out-of-state tuition, but a lot of them are paying even a higher out-of-country tuition. So, it’s a big operation for them. I did not have any sort of support coming into the program.

07:46 Emily: Yeah. So, tell me about when you, like received your offer of admission to Washington State. It sounded like you didn’t receive funding along with that, Is that correct?

07:56 José: That is correct, yes. And they were very clear from the get-go saying we’d love to welcome you into our environment, but we don’t have the financial package or wherewithal to be able to provide any sort of support into your program. So, you’re going to have to find your own way of supporting your education.

Why Washington State University?

08:17 Emily: And was that your only offered admission? Were you looking at other offers of admission at the same time? And if so, how did those funding packages look?

08:26 José: Yeah, so that’s actually a very good question. I was actually based in California, and I had been looking, and in the process of applying for Berkeley as well as University of California Davis, these schools had in-state tuition that was more affordable, obviously. But the big decision for me, there were two main factors. The first one was the fact that these schools, since I didn’t come from a background in education, in both of these universities, and I won’t even tell you about Stanford, because Stanford would’ve been a nine-year program. But these universities would have required me to pursue some master-level educational courses before being allowed to enter fully into a doctoral-level curriculum. And Washington state was not that way.

09:25 José: Washington said, “Look, we realize that you’re not from an educational background, but you have a significantly interesting, eclectic, shall we say, background. You have very strong academic credentials from your undergraduate and graduate school. We will let you start taking in doctoral level courses.” Which helped me at least reduce my academic yearly path by at least two years compared to UC Davis and UC Berkeley. So, again, it was a trade-off in that regard. And then secondly, I had other considerations. My daughter was a student at WSU, and that was a big decision for me to actually come here to make up for the years that I was unable to be in her life due to health issues and my hospital recovery.

Plan for Funding the PhD

10:23 Emily: What a beautiful opportunity. I’m so glad that lined up for you so well. Okay, but, you’re coming in with no funding. So, what was your I guess, outlook at that time? Like, what was the plan before you actually arrived on campus? What was your plan for funding the PhD?

10:41 José: Well, listen, I’m very much of a self-starter. So, at the very least, I said, “This is an opportunity that I am giving to improve my lot where I was, where I was just essentially sinking in debt and not feeling that I had much traction.” Entering into this opportunity that Washington State afforded me allowed me to make a step in the right direction. And, you know, even if I had not had any other sort of funding, because of my financial condition, I was given a fairly generous FAFSA package. You know, so I could have really loaded up on student debt to the degree that I could, upwards of $40,000 each semester. And initially, the first year, as you might imagine, I was paying out-of-state tuition, which was two-and-a-half, sometimes three times as expensive as in-state.

11:40 José: So, I started that route, especially moving in. But I had knocked on a lot of doors. Especially, I had looked at a different program. At one point I wasn’t sure if they would take me in the School of Education, so I applied for a history program, made good connections there, and the head of that school said, “Look, I know you’re not a student at the College of Arts and Sciences where the program is located, but we have this opportunity here that we’re not sure yet, but it might be able to pay for your tuition.” So, again, just knocking on different doors, calling for informational meetings. That helped me. I had a conversation with Dr. Carmen Lugo, who was the director of the school. And then when the opportunity came up, I did the interviews.

12:30 José: They liked me because you know, it was managing the language labs. I speak different languages. So that helped, and I got that opportunity, and, you know, I was even willing to do it without the tuition reimbursement. And then she pulled through, and then I had tuition covered for that. So, I was making that relationship from afar, but since I got here, I think it also helped the fact that I moved to Washington like three months before school started. So, that also meant that I could be trained to run the laboratory. And then that gave me an edge over perhaps other students that were remote when I was already local and chomping at the bit.

Being Proactive About Financial Needs and Knocking on Doors

13:16 Emily: I think this is a great lesson here for any prospective or current graduate students they can pull out. Now, obviously, you were a non-traditional student, and you had all these advantages from your past career and your past education that, you know, might or might not exist in other people who are listening. But, what you did and what they could do is that you were really proactive about two things. One, letting people know about your financial needs or concerns. Hey, I really want to get tuition covered if I can, would love to receive a stipend. I don’t know if those exactly were the conversations you were having, but I need some funding. Is there any way that I can get that? And as you said, just really knocking on a lot of doors, talking to a lot of different people about what you can offer them, and what you would need from them. And that ended up working out, as you said, with this, is it fair to say it was an assistantship, or like what kind of position?

14:06 José: It was an assistantship. Definitely a graduate assistantship. And to your point, it wasn’t the sign to be offered to graduate students outside of that home school. But because of some, you know, the fact that I was persistent. I was there, they knew me already, just as, you know, just in person having shown up, shaken hands, and done a lot of personal bonding, I was top of mind. And, I think to your point also, the age, being non-traditional. I think there’s an assumption of a certain level of maybe gravitas or just seriousness about the purpose of saying, you know, he’s not going to be, you know, calling in sick much. In fact, never did. So, you know, I think that gave me an edge, but that wasn’t the only pump that I was priming.

15:00 José: I made it a point to be known specifically by the graduate school, precisely by, you know, saying, “Look, this is where I am. Where can I access opportunities? You know, where can I access support?” Whether it’s for clothing for an interview, food security, help with financial aid, help with navigating so many expenses, maybe getting some housing support, energy conservation. So, a lot of things I checked just to, you know, as they say, you know, stretch a buck and make it scream, right? And really, you know, getting people to know who I was, what I needed, and what I was pursuing, especially as far as what my interests were. I always made sure that, you know, I had somebody that I could call on afterwards or would call me.

New Opportunities During COVID

15:52 José: And that actually came into place once the COVID pandemic initially happened, because the whole campus was sent home. And now I was residing on campus, but then my job meant that I, you know, it was a student-facing position, and since there were no students, there was no income. Hence, that position was eliminated during COVID. And that also meant that I had to pivot quickly because it was a program that I thought would carry me throughout my years here. And then there was no funding after the first year. So, having seeded the grounds with other people, I was able to, through the graduate school, find out that there was an opportunity at the Emeritus Society, which is the professors at Washington State University who have retired there have a social group, a support group, and where they come together and they had a position that was vacant to handle their events.

17:01 José: And it was a lot of challenges because it was an older demographic. And this was my second year, so the entire 2021 of the pandemic. So, everything was done remotely, and getting some of these people working on Zoom for the first time in their lives was a work in progress. But they were just such a wonderful experience, and always, and to this day still follow up on what I’m doing. So, I felt very much that it was stressful in the sense that, you know, there was a moment there between March and April of 2020 that I just said, you know, what do I do now? And then, you know, I was able to get that opportunity. And again, because of the fact that I was known on campus and known inside of my department, I had one of my professors who gave me an internship for that summer. And then I transitioned into this assistantship for my second year.

18:05 Emily: Love it. So, now we’ve seen this strategy work for you two times for your first year, and then for your second and third year, it sounded like?

18:11 José: Well, it was for my second year. So, it’s an interesting, again, interesting turn of events because of the fact that I am proactive, like you mentioned, as far as getting myself known and finding out different resources. So, for my third year, I had already accumulated a fair amount of scholarships that I had applied for and won. So, you know, about 18 different support awards from institutions that support recovered individuals like myself that overcame health conditions, to just competitive scholarships, to then even Washington State Employees’ Credit Union, which is my credit union. They have a program that they support their own members. It’s a competitive one, but it’s also one that I applied and won for consecutive years. So, I had a little bit accumulated for there.

19:11 José: And then because of, again, having talked to different people, there was a faculty position that opened up at the College of Business. Mind you, my college is a college of education, okay? But at the College of Business, they had a need to teach finance and entrepreneurship. And one of the people that I had known, one of the professors called me up and said, you know, “Is it okay if I recommend you for this adjunct, you know, position that’s there? I I think you have a rich business administration background and you can make it happen.” And I didn’t need to think twice about it when they <laugh> when they interviewed me, because it’s very unusual that you would find a graduate student also operating at a faculty level, right? That you could be, I was a student working on my dissertation, but I was also teaching and developing something for my profile.

20:06 José: So, I ended up my last year, I could have stayed a second year with the Emeritus Association, but given the fact that I was given such a great opportunity, they even welcomed the fact that, “Hey, you should pursue that.” And then I ended up teaching for two semesters in the business school. That brought in funding, and then I had enough of the scholarship that would pay for my tuition. So, I was able to potentially coast the rest of the way financially. It wasn’t easy, but it was done.

Commercial

20:42 Emily: Emily here for a brief interlude. If you are a fan of this podcast, I invite you to check out the Personal Finance for PhDs Community at PFforPhDs.community. The Community is for PhDs and people pursuing PhDs who want to take charge of their personal finances 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, including my recent set of Wealthy PhD Workshops. There is also a discussion forum, monthly live calls with me, and progress journaling for financial goals. Basically, the Community exists to help you reach your financial goals, whatever they are. Go to pfforphds.community to find out more. I can’t wait to help propel you to financial success! Now back to the interview.

High Success Rate with Scholarships

21:48 Emily: I want to pull three elements out from what you just said because I do not want the listeners to miss this. So, one, we talked earlier about you being proactive and knocking on many doors and talking with many people and letting them know what you can do for them and what you need from them. But what you said in there, and what you know, came into play again when the pandemic started, is that you developed these connections before you needed them urgently, right? You said you moved to campus a few months ahead of the other students so that you were a known face and a known entity by the time, Oh, this position is opening up, like that seems like it would be a good fit. They already knew you before the pandemic started. All that work that you had done before, continued to do, when that pivot needed to happen, you had already laid the groundwork and you had the resources in place. So, it’s almost like analogous to having an emergency fund. Like doing this networking for your career before you urgently need it is similar to keeping a cash emergency fund in your finances before you encounter an emergency that you would draw on that for. So, that’s point number one. Point number two, you said you won 18 scholarships. How many did you apply for <laugh>, do you know, to get those 18?

22:58 José: Well, I have a pretty good success rate on those. And again, I mean, you know how time is of the essence when you are a graduate student. So, I had to screen a lot of them and then make sure that, at least on paper, I had an above-average chance, you know. Just based whether, I didn’t apply for everything that was out there. Some of those came as direct referrals from the graduates school here at the WSU. So, they were internal competitions that you applied for, especially the teaching awards. So, meaning that there were scholarships available for students who were looking to expand pedagogy and become better classroom teachers. So, a lot of those came in through the internal graduate school at Washington State University.

23:50 José: But the external ones, I would say that, I just don’t want to create the wrong expectation. I probably ended up applying to about 25. So, I got to most of them because I would do the pre-screening, and I didn’t want to be wasting a lot of time either writing big essays for small dollars. So, there was also, my sweet spot was maybe focusing on ones that were between $2,500 and $5,000, because that made it meaningful. A lot of those, the money can only be used for school-related expenses. So, it’s not like you can take it out and, you know, have a party. So, that’s why you can see that that served as my nest for my last year, where even though the faculty position didn’t pay for tuition, I had enough money accumulated that did that. And then I just had to worry about my day-to-day expenses, which I did just based on the income that I received, whether assistantship or teaching. And I also did a little bit of thrift shopping on the side just to kind of like buy cheap and try to sell. That’s where the spending money came from.

25:02 Emily: Well, I’m so happy to hear that you were so strategic about those scholarship selections and the applications, and I feel like we could do an entire other interview about that strategy. Because it obviously worked out so well for you and you were, you know, judicious about how you used your time. And I just love everything you mentioned. So, that was a value-packed, you know, response there that I didn’t want the listeners to miss. And then the third point that I wanted to pull out was that you, you know, you’ve had now from what you described, two assistantships or the faculty position, non-assistantship. One assistantship, another faculty position that were not within your own school of education. And I just don’t want the listeners to have like a limiting belief around who on campus might or might not be able and willing to hire them based on these bureaucratic boundaries that may exist. So, I love your example of how you were able to, you know, cross those boundaries again because of the work you did earlier, getting known by all these people. So, I just wanted listeners to have that as well.

Learning About Financial Resources Early On

25:58 Emily: Is there anything else that you want to add about, you know, how you managed financially during the PhD? We’ve already gotten a few different details, but anything more?

26:10 José: Well, I think one of the more important things, which actually, you know, I met you, or started following your advice even before I had gotten accepted to graduate school. So, I think the importance of obtaining information so that you know what’s realistic, what’s out there, you know, what services, you know, at least populating yourself with enough information with the resources that you provide. When I was having discussions with the graduate school, and I would encourage everybody to just, regardless of where they go, I think their first stop should be the graduate school, just because they have a direct connection with you. They know where different opportunities are. They can show you, as they did, “Look, you know, there’s this whole list of information that if you fill out just a standard application, we’re going to put you in the lot to win or be eligible for some of these awards.”

27:14 José: So, it’s something that you just need to show up and do it, you know? And it’s there. So, I can’t imagine that being the process in every single school, but they’re there. They’re there for you. So, the fact that they, you know, I was able to go there and I had enough information based on your podcast, based on your personal opinions, that I could go and say, “Look, you know, this is what I need and I’ve already done my, you know, four-year span. These are kind of like the expenses that I’m seeing, you know, can I get some support here? Can I get some support there?” And even if they say no, it’s still you’re learning through this process and you know where the other resources are. And I find people want to help you.

27:56 José: They want to help you if you’re willing to put in the effort. And, you know, so I would just encourage people to do that. Even with your research, when you’re at WSU, the fact that I was in the multidisciplinary research allowed me to qualify to other experiences including summer internships. I did a summer internship with a first-gen-focused institution in Nashville. And that wasn’t necessarily initially my focus, because my focus was mostly on using technology to help individuals with disabilities. But I pivoted into first-gens because of that experience. And that gave me not only contacts in that industry, but also an opportunity of being able to do field research that then became the basis of my doctoral dissertation here at Washington State.

28:47 Emily: So amazing. Thank you so much for sharing that message. It actually is a reflection of something I heard back in the interview I did specifically for international students. A very similar message to them, which was get to know your designated school official, like we were talking about earlier, before you run into a financial crisis that of course, international students have many more restrictions on how they can earn money and whether they can take out student loans and all these issues. But get to know the people who know the resources, have access to the resources in advance, so that when, you know, if you see a crisis approaching or like you, your income source dried up, then you know who you can go to. They already aware of you. Maybe they’ve been keeping an eye out for opportunities for you. So, incredible message.

Completing the PhD Without Taking on Student Debt

29:28 Emily: I understand that you ultimately were able to complete your PhD without taking on any student debt from all of the, you know, avenues of funding that we talked about. Can you tell me about what that means to you to have been able to accomplish that?

29:44 José: Well, it was you know, I’m still a little bit giggly about that because it wasn’t the case. I mean, when I first came here, and mind you, I landed in Pullman, Washington. I actually drove here in April of 2019. And I was perfectly, not perfectly I should say that, but at least I was resigned that this might put me in a hole for at least a hundred thousand dollars. Just in the way that I had nothing written down. I had nothing committed. You know, and it was, it was very humbling saying, “Okay, I’m going to start dipping into these FAFSA funds because I just don’t have any income. And I did that for the first six weeks, and then, you know, things started coming along and then I was able to contain that initial debt. I never really added to it, carried it and then, you know, then got some scholarship funding that allowed me not only to start paying down on it, but then eventually, you know, with my stipend, being able to wipe it clean.

30:53 José: And I know there’s some who say, “Oh, if you had left it there, you probably would’ve eliminated now with some of the Washington DC funding.” But it’s okay. I mean, I think now I don’t have it. I feel much stronger. My credit score is probably almost 70 basis points higher than when I began the program. Precise, because I was not only able to keep those expenses down, but also pay down on expenses or debt that I carried from my past. And again, I’m just very grateful to you and some of the people that you’ve introduced me through your program and your podcast, including your brother as far as support that I receive to make sure that I’m lining myself up for eventual homeownership opportunities, now that I’m facing a future where I have finally some steady income, a new career, and just life outside of campus.

31:53 Emily: I’m so happy to hear that. I’m so pleased. You’re giving me a lot of credit here. But I think it was a lot. I mean, we had one conversation, but it’s a lot of the podcasts and other things that I’ve put out there. So, I’m so pleased that you’ve been using that, and I wasn’t even necessarily aware of that the whole time. One note, this is not necessarily advice for you, but for anybody who is listening at this point. This is going to come out in fall 2022. If you paid down federal student loan debt during the pandemic, which it sounds like you did, José, you can actually request a refund from your loan servicer up to the 10 or $20,000 of forgiveness that we are expecting to come through this fall. And so, if you want to do that, you could actually get that refund and then get the debt wiped away. So whatever that amount is, maybe it’s $10,000, you could actually have that in your pocket if you wanted to go ahead and do that. Not necessarily saying you have to, because I know there’s a lot of pleasure you receive from, you know, having not only paid off that student loan debt that you took at the beginning, but it sounds like you also paid down some of your other debt, which is incredible. But I just want the listeners to know that opportunity is there if they did pay off debt during the pandemic.

32:59 José: Well, thank you. I’ll be paying close attention to that upcoming podcast for sure. That may be, it’ll be an early celebration of Christmas.

Next Steps in Career and in Finances

33:08 Emily: Yeah, that sounds great. Okay. Second to last question here. What is next for you in your career and in your finances?

33:15 José: Well, I think as I indicated earlier, a lot of my journey, especially in these past few years where I’ve had to rely upon, because of the fact that I was not financially independent, I had to rely upon other people for support and show them, right? That I was worthy of the trust, and in some cases, that I was worthy of the positions that they had given me. I have an obligation now to pass forward some of those benefits that I received. And I say that because then I was originally catering or focusing in on getting into classrooms. And my focus was to go into kind of like the greater Appalachian region of the United States, which there’s a lot of financial need, there’s a lot of mentoring need for, you know, just really wonderful individuals who just don’t have the support at home and guidance to be able to know what college is all about.

34:19 José: And then they’re at risk, even if they get accepted, of not fitting in and then dropping out. So, I can make an impact in their lives. So, I was heading in that direction. And then I got a call from a non-profit that I worked with in the past that wanted me to see if I could stay behind in Washington State to help the lower-income agricultural communities in Washington State. There’s a lot of mostly Hispanic and Native American communities in the greater Yakima Valley. That allows me an opportunity of combining both my educational focus as well as my business administration to help those communities in terms of obtaining funding for school, of obtaining funding to start off their own businesses, of navigating some of their citizenship limitations. And it also allows me to stay close to, I have two daughters, one actually who was Natalia, my oldest who graduated here, I was able to graduate simultaneously with her, so that that was an extra benefit of coming to Washington State.

35:27 José: And in fact, we both walked together in May. She’s now living in Seattle. I have my youngest that lives at home with her mom in Vancouver. So, me being able to stay here in Washington State a couple of years and working where there’s a need for not only role models, but hard skills in financial and agricultural businesses. I can make an impact in a lot of financial ways and also personally meaningful ways, and still maintain contact with the important people in my life.

36:02 Emily: I’m so pleased. That’s so wonderful. I’m so glad you got that opportunity to stay there in Washington and do that mission-driven work. So happy!

Best Financial Advice for Another Early-Career PhD

36:11 Emily: Okay, last question for you. What is your best financial advice for another early-career PhD? And that could be something that we have already touched on in this interview, or it could be something completely new.

36:22 José: Well, I think again, you and I both share the perspective of knowing what it’s like to be in the hole, shall we say. And I think that that might be more meaningful, you know, to focus in on that because it’s such a threatening time and humbling time you know. Because you can think everything you want about your accomplishments and what you’re doing, but you’re still faced with the reality of how do you make ends meet and how do you survive. So, I think still for those of you who are looking, contemplating this journey, or in the middle of this journey, I think some of the things that you talked about before. Don’t be putting any sort of unnecessary limitations of your ability of being able to prosper. And don’t look at it as like I don’t want to get known around as somebody who’s in need.

37:20 José: Or you know, I don’t want to necessarily show the fact that I’m, you know, in financial need. I don’t think people will judge you for that. I think if anything, they see you more as somebody that is very responsible, is not letting the worst-case scenario happen. You’re trying to be proactive about it, and people will support you. I’m telling you, I mean, in my setting here, it’s seen as like, ‘Wow, you’re hungry, and you want to tackle this on and not let that get out of hand for different reasons.” People will find a way of helping you, but you’ve got to show up and you’ve got to do the work. They’re not going to give you a handout, because that’s just not, well, that’s just not necessarily the type of image that you want to command.

38:06 José: So, I will go back to what you were alluding to. Just knock on different doors. Don’t be afraid when they say no, it’s not a rejection necessarily. It’s just more of an issue of prioritization and saying, well, maybe it’s not the door that you need to do, but at least you leave a good presence so that in the future if something were to come up, they do call you. And I’ve seen that happen in my case, right? So, I would also say that you also want to make sure that you craft a very good message so that when people meet you, they not only remember who you are, but they want to know what you’re passionate about and how you’re helping yourself and others in that. Because then they make the connection and say, “Oh, wait a second, Emily likes to promote advance in higher education and she’s got this network. We just got this grant. Let’s call her.” So you’re ready, they immediately connect as opposed to saying, “Well, he’s just, or José’s just a student in need.” You want to make sure that they have some memorable talk points about what it is that you’re pursuing, your research, your career focus, the communities that you want to help out with.

39:20 Emily: That’s such a perfect encapsulation of like the main messages that we’ve gotten through this interview. I’m so happy to hear that like last articulation. And to put it kind of with some of my own words there, you demonstrated and what you’re encouraging other people to demonstrate, is resourcefulness. And the university does have a lot of resources, <laugh>, and they may be, you know, in different little pockets and they may be unknown. And you have to go around and talk with people and network and, as you said, let them know what you can do for them and what you bring to the table. I noticed this pattern also when I’ve spoken about negotiation of graduate student stipends. And like, in a way, what you were doing was negotiation, except they didn’t even know that they were making you an offer yet, right?

40:00 Emily: Like you were just out there trying to get those offers. What I noticed when I talk with graduate students about negotiation is that they usually do open up very vulnerably about their finances. This is the need. Hey, this is the cost of living going on. I really don’t think that this offer was sufficient to meet this cost of living. And also in some cases, oh, look what I’m bringing to the table. Okay, I’m bringing in a fellowship, I’m bringing outside money. I’m bringing in your case, a whole career, you know, a first career’s worth of work experience, graduate degrees, insights. So yeah, as you said, just leave a good impression, like let them know what you’re about and what you need. And in the future, belaying those seeds and in the future they may be able to come back to you with some kind of offer. And your case, it’s worked out over and over and over again. And I’m so glad that we captured that story in this interview. José, thank you so much for coming on the podcast. It’s been a pleasure to have you.

40:48 José: Well, I’m very blessed to be here, Emily. And I thank you for four years of putting up with me and such wonderful advice. And I’m just glad that, you know, I’m able to demonstrate what you do when you put into effect the guidance that you’ve shared with us remotely and in my case remotely and in person.

41:10 Emily: Thank you!

Outtro

41:16 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. 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 by Lourdes Bobbio and show notes creation by Meryem Ok.