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This PhD Student’s Intricate Budgeting System Uses Cash Symbolically

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In this episode, Emily interviews Alicia Jones, a PhD student at the University of Illinois at Urbana-Champaign and the creator of the YouTube channel Alicia Does Adulting. Alicia explains in detail her intricate budgeting system, which involves creating a zero-based budget every two weeks, allocating cold hard cash into envelopes, contributing to her debt avalanche, and funding her targeted savings accounts. She uses this budget to keep her intimately connected with her spending decisions and accountable to her financial goals. Alicia and her husband have paid off $70,000 of debt in the past year and a half and now have a positive net worth.

Links Mentioned in this Episode

Teaser

00:00 Alicia: I try to turn whatever I can into a game. And finance has become a game for me. I do the little colored charts. I want to see exactly how much money I can put towards savings or debt each month and that continues to motivate me.

Introduction

00:18 Emily: Welcome to the Personal Finance for PhDs Podcast, a higher education In personal finance. I’m your host, Dr. Emily Roberts. This is season seven, episode six. And today my guest is Alicia Jones, a PhD student at the University of Illinois at Urbana-Champaign and the creator of the YouTube channel, Alicia Does Adulting. Alicia explains, in detail, her intricate budgeting system, which involves creating a zero based budget every two weeks, allocating cold, hard cash into envelopes, contributing to her debt, avalanche and funding her targeted savings accounts. She uses this budget to keep her intimately connected with her spending decisions and accountable to her financial goals. So far Alicia, and her husband has paid off $70,000 of debt in a year and a half and now have a positive net worth.

01:12 Emily: You’ll hear an exciting new addition to the interview today, which is a couple of questions contributed live by members of the Personal Finance for PhDs community. Going forward, members of the community are invited to attend my podcast recording sessions and ask their own questions of my guests. If you would like to participate in the interviews as well, all you have to do is join the community at pfforphds.community. If you’d like to check out my schedule of upcoming podcast recording sessions, you can find that pfforphds.com/podcast. Joining the community is an excellent way to support the podcast. Plus, you’ll receive myriad other benefits. Without further ado, here’s my interview with Alicia Jones from Alicia Does Adulting.

Will You Please Introduce Yourself Further?

01:58 Emily: I have joining me on the podcast today Alicia Jones from Alicia Does Adulting, which is the name of her YouTube channel. And Alicia has really fantastic story to tell us, but really primarily, she’s here to teach us her budgeting system, which is quite intricate. And I highly recommend that you go check out her YouTube channel. It’s actually really fascinating. You’ll be hearing more about it as we go forward. Ao Alicia, please introduce yourself a little bit further for our audience.

02:26 Alicia: Well, thank you so much for having me. This is super exciting. My name is Alicia. I’m a third year doctoral student and I go to the University of Illinois at Urbana-Champaige. I am studying kinesiology. I actually got my masters from U of I in kinesiology as well. And my research interests are kind of varied. I’ve not had the most traditional grad student experience. I am running on average three studies at once, just because of the way my program is. Overall, my research is how behavioral changes impact the overall wellbeing of people with and without disabilities. I also work in MS work. I work in breast cancer work. I kind of do a little bit of everything, but it’s nice being in kinesiology because you get to wear leggings to class sometimes. If you’re looking for a major or concentration, highly recommend exercise science for that.

03:20 Emily: All right. That’s really fun. Well, thank you so much for sharing that. And along the way of your grad school journey, or maybe before, I don’t know, you developed an interest in personal finance, and in particular, you started your YouTube channel, Alicia Does Adulting. The channel name is quite general, but I think that you mostly talk about personal finance stuff, is that right?

03:39 Alicia: Yeah. The way that I introduced the channel is that I’m attempting to get my life together and I’m focusing on finances first. Eventually I would like to fully adult with all the aspects of adulting, but I’m not there yet. I’m still working on the money part.

03:55 Emily: Yeah. Well, the money part is going to, it takes a lifetime to work all this stuff out.

Alicia’s Budgeting System

The Basics

03:59 Emily: Really excited to get to the topic of our conversation today, which is on your budgeting system, which of course, when I saw your YouTube videos, I was absolutely fascinated by this. Please, I know it’s going to take a little while to explain, but just kind of walk us through all the different elements that you use for your budgeting.

04:14 Alicia: Definitely. I will start off with, I’m not saying that this budgeting system is for everyone. Everyone has their own way of making this work for them. I actually originally started doing a monthly budget and it failed horribly and I started playing around with it from there. The way that I will describe my budgeting system is that it is a zero-based, paycheck-to-paycheck budget.

04:41 Alicia: What does that mean? Zero-based means that I take any remaining penny after my bills, expenses, free spending money, any of that, and it gets given a specific job. So before the pandemic, that was pretty much exclusively going towards debt. When the pandemic hit, I switched my goals and I wanted to save some money, so it all went there. So I have $0 left after my paychecks are all cleared. I do keep a little bit of money in my checking account just because math is not always my friend and sometimes I forget something. I leave about a hundred dollars cushion. So you don’t have to worry about overdraft fees this way.

05:23 Alicia: Then I do paycheck to paycheck. Between my husband and I, we have anywhere between four and eight or nine jobs at once. The paycheck to paycheck system worked well for me because every other Friday we each had a steady income coming in on those days. All of the bills that come up during that pay period, I take care of all of that during that paycheck. Then if I’m saving up for something, I can kind of devote that. It comes down to a lot of planning and a little bit of strategy, I guess.

05:56 Emily: Yeah. Let me make sure understand exactly what’s going on here, because this is definitely different from how I budget and probably how most people do it, which is one of the reasons why I wanted to have you on. When you say that you have the zero based budget, is what you mean that when you receive your pay or at least every second Friday, when you’re settling up, you are at that point, allocating all of the money for the upcoming two weeks, is that right?

06:20 Alicia: I do it within the week. Anything that was due on that Friday, I account it starting there up until the next Thursday. Whenever the bill is hit, for the most part, I tend to pay my bills about two weeks in advance, just because I’d never want to miss it. That just tends to be my system, but if you look at a true paycheck to paycheck, it would be within that Friday to the following Thursday.

Dealing with Variable Expenses

06:46 Emily: Okay. And then I understand that the bills that have come in, that’s a fixed amount, you know what it is. What about money that’s sort of up to you, like your grocery spending or some discretionary money. Are you allocating a maximum that you’re going to put towards that? Or how do you handle variable expenses?

07:05 Alicia: This is where my system probably gets more complicated to people, but it’s what works for me. I use a cash envelope system on top of it. For groceries, for example, for our household, every paycheck, I set aside $300 for household, so groceries and whatever else might come about, but then I put everything on credit cards. If you watch my channel, you’ll see I will do an expense tracker where I go through every single penny that I spent, then I actually will take the money out of the cash envelopes. The reason why I like this system is I am a chronic spender. I actually managed to get myself into $15,000 of debt in my early twenties and I never want to be in credit card debt like that again. This is kind of like a checks and balance system. If I didn’t have that check for me personally, if I say I’m only spending $50 on clothing, and then I find a $75 outfit that I really want, in my brain, I still want credit card. I want to put it on a credit card. I want it now, that kind of thing.

Alicia: What I can do with my system is, “okay, I bought the $75 outfit, I have to make a sacrifice somewhere else because I don’t have any flexibility.” That $25 could come out of my household to make up the difference, but then I can’t spend all of my money on household. It kind of becomes a checks and balance system. And for me, I’m flexible with it. Some people, with the envelope system, it’s very much like when you hit the end of your envelope, you cannot spend any more. And I just give myself a little bit more leeway. Things come up, or sometimes you just need to de-stress a little bit and maybe you go out and have a drink with a friend or something. As long as I’m making sacrifices and none of it stays on my credit card, then I’m happy with it.

09:01 Emily: So the cash aspect is actually a stand in for just, this is the limit. The important part is not literally that you’re using cash because ultimately when you make the purchases, you are not using cash, you are using credit cards. But the cash is just sort of a visual and physical reminder that, okay, that’s the end of the envelope, you’ve reached the end, now you must reallocate if you need to go beyond that. I definitely like this aspect of it because I am not that strict with my budget anymore. I used to be quite strict in a similar way, like, okay, I overspent here, I’ll have to transfer from somewhere else now. I sort of let it go, but I definitely find it attractive to, at the end of the day, make sure everything’s added up to zero to account for the entire paycheck.

How Alicia Keeps Her System Flexible

09:43 Emily: Okay, we’ve talked about it being a paycheck to paycheck budget, a zero based budget. You’re allocating every single dollar that’s coming in. We talked about the cash envelopes. Are there any other elements to your budget that you’d like to share?

09:56 Alicia: I think the big thing for me, and it’s one of the things that I think some people don’t understand if you’ve watched the channel for a little bit. It’s strict and slightly complicated, but it also allows for a lot of flexibility, and that was something that was really important to me. Everyone that’s listening to this is either in grad school or wants to go to grad school or has experienced grad school and we know how stressful it is. And I try to add as little extra stressors to my life as I can, but I have a bunch of student loan debt that I really want to pay off. I have a bunch of financial goals, like I’m working towards technically retiring early. I want to have that kind of cushion in my bank account. So I want to start working towards those goals, but I also just don’t want to stress myself any more. It is a little bit time consuming, which is why I’ll say it’s probably not for everyone, but it is something to potentially give it a try. It’s been really fun on the YouTube channel in particular, because I get to hear people trying my system and it was never really meant for other people to try it, it’s just what worked for me, so it’s been really cool to hear success stories about how it works. If you’re interested in it, definitely give it a shot.

11:11 Emily: There was one more thing that I wanted to ask you about, which is, I believe that you also use sinking funds or, I use the term targeted savings accounts for that. Is that the same as your envelopes or is that a separate sort of variation on that?

11:25 Alicia: It’s very similar, but I leave my sinking funds online because they’re usually bigger purchases and I just don’t want to have that cash on me, personally. I put all of my sinking funds into one checking account and then I have an online tracker for everything. It’s a similar kind of grace system of, I actually have three sinking funds that are negative right now, and it’s because I’ve borrowed from other places. We do an annual trip to Canada, but we didn’t this year because the borders were closed. So I have some money set aside in that account that I can borrow from. I do highly recommend sinking funds or targeted savings. They have been a massive game changer for me because that was one of the ways that when I originally started to budget without much guidance, those types of things like needing new tires, I logically knew that those that was going to happen, but I never planned for it. And then the month would come and it would be a disaster and it would go on a credit card and then I’d carry on. And that’s how I got $15,000 of credit card debt.

12:31 Emily: Yeah. Can you actually, for the listener, explain a little bit further what a sinking fund or a targeted savings account is, and actually give a few maybe examples or your list of which ones you have named.

12:41 Alicia: Definitely. Sinking funds and targeted savings accounts are things that you’re saving up for that you know will eventually happen. For me and my family, we celebrate Christmas. Christmas happens same time every single year, and I know approximately how much I want to spend. So instead of in December pulling $600 out of my budget, every single month, I put $50 into a Christmas sinking fund account. I have some for the Canada trip that I mentioned, which is usually about a $2,000 expense, so I save a couple hundred dollars every single month, so it doesn’t feel super overwhelming to me.

13:19 Alicia: I actually did some research into sinking funds because they were such a game changer and I’m a grad student nerd, so I wanted to know what the literature said, and it’s actually a concept of being able to allocate money with a name. I don’t know if any listener or if you might have this experience, but I’ve actually always been a semi-decent saver. I always had money and usually several thousand dollars, at least in my savings account, but then my tires would blow up and I would need new ones and I’d put it on a credit card because to me in my brain that wasn’t an emergency. I shouldn’t take that out of my emergency savings. That money always has to be there. So by allocating this little bit of money that just sits to the side that has a name, it makes the rational jump of, “Oh, I need new tires. I have a car maintenance fund. It comes from the car maintenance.” That is probably one thing I will keep the rest of my life, no matter what. It is a massive game changer for me.

14:19 Emily: Yeah. I absolutely love sinking funds and targeted savings accounts as well. I started using them in grad school as well, when, similar to you, I had some expenses come up and in our case we didn’t go into credit card debt, but we just had to say no to a bunch of stuff that we didn’t want to say no to. And it kind of helped us realize, okay, well we do need to do some advanced planning for these sort of large expenses that come up every so often. So I started using them in grad school as well. And I did have a year when I didn’t use them, which was the year from when we left Durham, where we were living during graduate school and moved to Seattle. And so for that first year in Seattle, everything was an upheaval and we had no idea, it was a lot harder to predict your expenses once you moved to new place, et cetera, et cetera. But after that year, I was like, “Nope, I’m tired of living this way. I need to go back to having the targeted savings accounts in place.” So they’re back in place and still in play, which has been wonderful. Of course, 2020 has thrown things off quite a bit. Like you didn’t end up using your Canada trip money and certainly we’ve had spending opportunities that we anticipated that didn’t happen, so there’s definitely been some reallocation, but you kind of have to roll with it.

Using a Combination of Cash and Credit

15:25 Emily: Actually we have a question that just came in from one of my Personal Finance for PhD community members. I invite my community members to listen in on my podcast recordings. So if you are listening to this podcast and you want to be in on these recording sessions and ask your own questions, I invite you to join the community. You can find it at pfforphds.community. The question that just came in is: why or how did you decide to use both cash and a credit card and not just cash? What do you do with the cash since you’re not actually spending it? And this is exactly the question that I was gonna ask too, so please go ahead.

16:00 Alicia: Yeah. This is one of the biggest questions that I get. The big reason why I didn’t want to use just cash is because I’m on campus very late at night. And so I didn’t feel comfortable. I have a very relatively safe campus, but I just didn’t want to have any extra money on me that I didn’t need to have. I’m also not a purse or bag carrier, so I have just like a little wallet that has my keys. So having the credit cards was more convenient for me and some places on my campus actually don’t take cash, they only take cards. So the few times I’d like go to pay for something. I would have had to put it on a card anyway. But there are a few benefits for me personally, at least I guess, not just me, but you do get a little bit of extra security. If something goes wrong, if it’s a payment that you didn’t actually make or something like that, there’s security systems built into credit cards, which is beneficial. I have a little bit of extra leeway. If something massive happens, so for a real life example, last night, I had to take my cat to an emergency vet and that is $2,000 and that was not in the budget. That will go on a credit card, which now gives me 30 days to pay it off before any interest hits. That’s a nice benefit. And you also get cash back. Eventually I do want to get into travel hacking, but right now I just use the cash back to help pay off random bills that come up that I wasn’t expecting or kind of like treat yourself things. And on average, I make about a hundred dollars a month on my cash back credit cards, so I’ll take that.

17:42 Emily: Yeah, that definitely helps with the budget as well, to give you a little bit more wiggle room. And then the other part of that question was, so you literally have cash in your home, and it just gets recycled paycheck to paycheck period? What exactly is happening with that cash?

17:56 Alicia: It kind of depends. Before COVID, I was very good at taking that money, putting it into the deposit envelope and taking it right back to the bank. Since I’ve been limiting my trips, it has been getting recycled. So the people at my bank know me very well and they know I have very specific denominations that I asked for. They were very used to me doing it, but it is just kind of like a cycle of cash. So I end my week on a Thursday and usually on Friday is when I will go through all of my expenses and pull out all the cash. If it’s convenient for me to go to the bank, that money just goes back and then goes directly to credit cards. If not, since COVID that money kind of just sits there, and then the next time I need to take out cash, I just don’t take it. So the cash that got left in the bank account that never came out, goes towards the credit cards.

Commercial

18:49 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, which I add to every month. There is also a discussion forum, monthly live calls with me, book club 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.

Debt Repayment Under Alicia’s Budgeting System

19:53 Emily: You mentioned earlier that you’re working on student loan debt repayments, some other debt repayment — how does your debt repayment process figure into the budget?

20:02 Alicia: That’s one of the reasons why I like the zero based budget. I do a debt avalanche. I target one debt at a time and I specifically targeted the highest interest debt to save the most amount of money that I could in interest. I have an allotted amount of all of the previous debt that I’ve paid off. Each month $1,600 actually goes towards debt pretty much no matter what. Maybe in a massive emergency I wouldn’t, but I pretty much do that every month. Then whatever excess money I have goes towards debt. I pay all of my bills, I do all of my cash envelopes and sinking funds, and then every other penny gets thrown towards debt.

20:47 Emily: I see.

20:48 Alicia: It becomes a big part of my budget.

20:50 Emily: Just to clarify, I think when you said all the debt you’ve paid off in the past, what you’re talking about is the minimum payments of each one of the debts that you’ve made in the past that have now been cleared. You’re still quote unquote making that minimum payment. You’re just making it to the next debt and you you’re in your list, the top debt in your list. So it used to be that you had minimum payments of $1,600 and now some portion of that is you just throwing additional money at your current top loan, is that right?

21:18 Alicia: Yep. And so the way it ended up working with the debt avalanche method in particular, pretty much all of my big minimum payments were first. I did, after about five months of starting budgeting, get a $20,000 medical bill, so I put that onto a credit card and I had one year to pay that off and I made the decision to have that as part of my minimum payments and my debt snowball too. It got a lot bigger because of that.

21:44 Emily: Yeah. Wow. I’m so glad to have these examples of real life coming at you. Not that it’s pleasant or happy, but just as instructive as it is for the listeners to learn how you’re dealing with that, because I’m sure a lot of them have had similar experiences or are having similar experiences.

22:00 Emily: One comment about that debt repayment method — I think I made this name up, so I don’t know if anyone else uses it, but I call what you just explained saving first and last. In the personal finance community, we talk a lot about pay yourself first. So as soon as you get paid, you do your debt snowball, you put money towards that, all of your financial goals, you put money there, then you spend whatever remains. But I also used your system of, okay, I have my financial goals, that’s happening right after I get paid, and then whatever money I have left over because I came in under budget in X, Y, Z categories, that also gets saved or thrown into a debt snowball or debt avalanche process. I call that saving first and last because saving last is like not a good idea, but saving first and last to me that was like motivational to come in under budget in these various categories so I would have more money to throw towards the financial goals. Does that work same for you?

22:54 Alicia: Yeah. And I don’t know if you’ve read any of like the gamify literature, but that’s kind of what I do with everything is I try to turn whatever I can into a game. And finance has become a game for me. I do the little color charts. I want to see exactly how much money I can put towards savings or debt each month. And that continues to motivate me. I hadn’t thought about that it was first and last, but it definitely is.

Why This Budgeting Method Works For Alicia

23:19 Emily: Yeah. So you mentioned earlier, your system is complex, it’s intricate. That may not be for everyone, but why have you made it so complex to yourself? Why do you think that this is working well for you?

23:32 Alicia: I think a big part of it is that I am very numbers driven and I wanted to take this journey to learn as much as I could about myself and about my finances, particularly since I’m the spender of my family. I wanted to know every little piece of data and I don’t really show it too much on the channel, but I do run the numbers for myself. I like to see exactly how much I’ve increased in household spending from this time, this year versus last time. It’s complicated, but part of it just feels like I’m learning lessons every single week. And particularly with using cash and credit, I’m having to constantly remind myself that you can have certain things, but you have to make sacrifices. You don’t just get the easy win all the time. You have to balance it out.

24:24 Emily: Yeah. When I talk with people about budgeting, sometimes I talk about the merits of using an app versus like maybe creating your own spreadsheet, or at least doing manual tracking in some manner, even if it is in an app or something. And what I say about that is that, doing these things manually keeps you very intimate with your numbers. It keeps you very closely connected to facing up to the decisions that you’re making and reconciling them. It sounds like that’s why you’re doing that. In terms of recommending the system to anyone else, who do you think the system would work well for?

24:56 Alicia: It has to be someone that’s pretty motivated, I think, because it does take more time than just tracking it within an app. But I think this is someone who, if you’re very motivated by learning, I think that’s probably the biggest thing. I’m constantly diving back into my own spending habits and I really like self help type things. I love working on self-improvement and that’s, I think why I was really drawn to this method of constantly having to learn and adapt and that to me is exciting.

25:30 Emily: Yeah, that sounds wonderful. What motivates you to stick with this now intricate and somewhat time consuming system?

25:40 Alicia: Honestly, one of the biggest thing is accountability. One of the reasons why I first started this channel is I’ve found that the more that I talk about things that I experienced in my life, the more people I find to have experienced similar things, or can relate and give advice. I started talking about money with my friends and family. I started talking about it on my YouTube channel, and if you follow it, you see just about everything that I spend and do and whatnot. Unless I forget something, you see it. Knowing that that’s always there, that my friends are now tracking my progress in some ways, on the times that I’ve just really wanted to go and do something, maybe not super crazy, but a little bit frivolous I don’t because I know someone’s holding me accountable to it. And unfortunately I’m not the type of person that can just hold myself accountable. Having other people has really, really helped me in this journey.

26:39 Emily: Yeah. I’ll say another vote for that as well. My current website, my home on the web is pfforphds.com but during graduate school, I was actually blogging for under a different website, which was evolvingpf.com, Evolving Personal Finance. And I similarly, not as frequently as you, but I would do at least monthly reports of this was everything I spent and this was a very popular thing to do on the internet at that time. And I’m sure it’s still maybe on YouTube as well. And it was really, really great accountability for us, helping us to stick to our goals. We use that during the time that we were in graduate school when we really had a tight budget and we had high, lofty goals for our money. It seems less necessary in my life now, post PhD, so I’ve kind of moved on from it, but it was a really, really useful tool for that time. And just actually to mention the community again, this is something that any listener can do through the PFforPhDs Community, if you choose to use it that way. It can be great for accountability, and you’re welcome to report all your spending inside that community as well, if you want. It’ll be private. It won’t be open for everyone to see, but you will have the other community members there to at least in theory, hold you accountable.

How Alicia Uses Her Budgeting Method for Achieving Financial Goals

27:48 Emily: I was also thinking about your debt repayment journey, and now you said earlier that you’ve also started saving up more since the pandemic. Maybe your priorities are a little bit different. Can you talk about using this budgeting system and how you’re motivated to use it towards your financial goals?

28:03 Alicia: Yeah. So I started this journey with $120,000 of debt and actually just this month, I’m under the $50,000 mark, so we’re making some pretty good progress. But it comes back to the idea of kind of gamifying everything. I turn as much as I can of my life into a game to keep it fun and interesting. Each month being able to see my savings account get higher, and then you get additional interest, which is also a nice little boost because it feels like free money. And then seeing my interest amounts go down when I pay off debt or just seeing the numbers go down. Each and every month I track that I track both of those and then I also track my net worth. And so each of those has become a game to me, and again, I try to not have too much stress in my life, so if my net worth goes down, I don’t beat myself up over it. I know it’s part of the journey. When the pandemic hit, I was working really hard to pay off all of my debt by May of 2021 beause that’s when I turned 30 and I wanted to be debt free by 30. That didn’t happen and that’s not going to happen because pandemic, but now I’ve been able to see my investments grow a little bit. I’ve been able to see my savings grow. Having constant check-ins, or at least regular check-ins really helps keep me motivated.

29:21 Emily: Yeah. Thank you for telling us about that. How do you think being a PhD student interacts with this journey? I know you’re married, so presumably your husband is not a graduate student as well. Do you think that being a PhD student plays into your budgeting or your financial goals at all?

29:39 Alicia: I think in some ways. I think possibly the reason why it’s so complicated is because I do like data as much as I do, and I like being able to see those numbers. Tracking absolutely every single thing, maybe a PhD thing, but I think also being a PhD student and looking at things from more of a logical point of view has also really helped me. Being able to sit down and like logically look at the debt versus how much money I could have in retirement has really helped me on the journey. It’s helped me take some of the emotions out of finance when finance is a very emotional thing. It can be your entire life. I think that’s kind of where the PhD-ness comes out

30:23 Emily: More of like the personality of a PhD student or PhD. Will you please recommend a video or two, if people want to check out your channel, Alicia Does Adulting. So you count cash on your channel, which I had never watched a video of before, but now that I’ve seen on your channel, wow it’s actually pretty riveting. Would you recommend a video or two for people to kind of get an intro to you?

30:46 Alicia: It sounds really odd when you tell people the first time I’m a former bank teller, so the sound of cash is very soothing to me. That’s how I actually found personal finance YouTube, was cash counting. Any of the “budget with me”, you can see in detail how I do my budgets and then see the cash counting, which is very fun. I actually have a video coming out this next week, which is really exciting, so before October 1st and it’s the science of cyclical savings. I’ve kind of evolved my channel a little bit into at least two educational videos per month-ish, when I can.I dug into financial literature and I started to find different savings strategies, investment strategies. Different things that my population for the most part is not PhD students they’re not going to go to academic literature, so I kind of break it down into more lay terms for people, because I genuinely just want everyone to have a good financial standing and for it to not be stressful for them. That will be out next week and I’m really excited to talk about that, and how you can save 80% each month more than if you didn’t have a plan.

31:59 Emily: Oh, wow. Yeah. I’ll definitely watch that video and will, and get from the show notes as well beause it should be out by the time this episode comes out. That sounds fabulous.

Questions from the Personal Finance for PhDs Community

32:06 Emily: I want to take a pause here and invite any members of the Personal Finance for PhDs Community who have a question at this point. This is your opportunity to follow up with Alicia and maybe get some more specifics for your situation.

32:18 Emily: Okay, so we do have one question that came in from a community member. Would you say that using cash is symbolic for you more than anything?

32:27 Alicia: I think symbolic is a really good word for it. I just need one extra thing of accountability and I’m the type of person if I hand over $20 that actually wasn’t as painful for me as having to budget it at the end, so using just cash envelopes, didn’t really work for me in that sense, but physically going through and having to pull money out of my personal spending for an unexpected thing is very symbolic and just kind of helps visualize that process for me.

33:00 Emily: Yeah. I really liked that aspect of it as well. Thank you so much for sharing that with us. I actually didn’t really catch on to that just from watching a few of your videos, that the cash was really being recycled, at this point, not before, but at this point.

Best Financial Advice for an Early Career PhD

33:10 Emily: We’ll wrap up with our final question, Alicia, which is what is your best financial advice for another early career PhD?

33:17 Alicia: My biggest advice is it’s never too early to start and it is never too late to start. Every little bit that I’ve done along the way has helped. Every step you take really does help you and if you have never really thought about looking at your finances, today’s the day to start because you never know when one of these unexpected massive things are going to hit. Since I started my journey, I’ve had a lot of massive financial things happen and because I understood my money and I understood where I was at, I could face $20,000 of medical debt with relative calmness, which I can guarantee you, Alicia from five years ago would have been a sobbing mess over all of it and I was actually pretty calm. My biggest advice is just start. Even if it’s small, even if it’s $5, it really does add up.

34:13 Emily: Yeah, I totally totally agree. And actually just to give people some scope, you said you’ve paid off, I think it’s over $70,000 worth of debt right now. Over what time period did you do that?

34:22 Alicia: It’s been about a year and a half.

34:25 Emily: Oh wow!

34:26 Alicia: Yeah! Our first year was really good and then everything kind of hit the fan. This year has not been great, but we actually went from a negative $56,000 net worth and we’re now in the positives. We’re about to hit $10,000, which might not sound like a big net worth to a lot of people, but it was a big deal for me to be positive.

34:46 Emily: Yeah. You’re now at a $10,000-aire, right? Every order of magnitude we can celebrate. Well, this has been such a wonderful conversation, Alicia, and thank you so much for joining me and sharing your experience and your wisdom with my listeners.

35:00 Alicia: Well, thank you so much for having me. This has been super fun!

Outtro

35:04 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the personal finance for PhDs podcast. There you can find links to all the episode show notes, and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind the scenes commentary about each episode. Register at PFforPhDs.com/subscribe. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is stages of awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.

Best Practices in Side Hustling During Graduate School

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In this episode, Emily interviews Lourdes Bobbio and Meryem Ok, two PhD students who work on this podcast as virtual assistants. Today’s conversation is all about side hustling! Lourdes and Meryem each give their perspectives on why and how they started side hustling, how they manage their time, and how they handle their self-employment income with respect to taxes and budgeting. Throughout the interview, you’ll get a behind-the-scenes perspective on how this podcast is produced. The end of the interview is a discussion of the unexpected benefits Lourdes and Meryem have experience from working on the podcast.

Links Mentioned in the Episode

side hustle grad school

Teaser

00:00 Meryem: Every once in a while, if I need to make an extra purchase or a gift, I will kind of rationalize with myself, “Okay, I was able to make some extra income this month with the side hustle so it’s okay to spend that extra money.” And essentially that’s not a super cut and dry method, but it sort of helps me at least to rationalize my additional expenses and not get too anxious about finances during grad school, which is really, really nice to have that cushion outside of my usual budget.

Introduction

00:36 Emily: Welcome to the Personal Finance for PhDs podcast and higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season six, episode 18 and today my guests are Lourdes Bobbio and Meryem Ok, who are both PhD students and work with me as virtual assistants on this podcast. Today’s conversation is all things side hustling. Lourdes and Meryem each give their perspectives on why and how they started side hustling, how they manage their time, and how they handle their self employment income with respect to taxes and budgeting. Throughout the interview, you’ll get a behind the scenes perspective on how we produce this podcast. We close the interview discussing the unexpected benefits. Lourdes and Meryem have experienced from working on the podcast. Without further ado, here’s my interview with Lourdes Bobbio and Meryem Ok.

Will You Please Introduce Yourselves Further?

01:31 Emily: I’m bringing you a little bit of a different interview today. This is the first time on the PF for PhDs podcast. We have had three people on the call at once, that is two guests interviewees, and it’s really special to me because the people I’m interviewing today are my virtual assistants who work on the podcast with me, Lourdes Bobbio and Meryem Ok, and they’re both PhD students. We’re going to get into more about side hustling today, like the side hustle that they do with me and their experience with that, maybe their experiences side hustling with other people. So yeah, we’re talking side hustling today and I have my two guests with me. I’ll have you introduce yourselves, so Lourdes, why don’t you go first?

02:10 Lourdes: Hi everyone. My name Lourdes Bobbio. I’m a fifth year PhD candidate at Penn State University in the Department of Materials Science, and I work on additive manufacturing of metallic materials.

02:23 Emily: Yeah. Lourdes was actually a guest on a previous podcast episode and we will link that from the show notes. We did a budget breakdown with Lourdes, so we talked through her budget there in State College and Meryem, please introduce yourself.

02:35 Meryem: Hi, my name is Meryem. In 2016 I started the MD PhD program at the University of North Carolina at Chapel Hill — go Heels. After completing the first two years of med school in 2018, I started my PhD in UNC-NC State’s joint Department of Biomedical Engineering. Currently I am working in the Magnus Lab, developing tools to better understand human intestinal STEM cell fate. And I’m happy to say that I’m officially a PhD candidate as of two days ago.

03:05 Emily: Yes. Congratulations! We will record and release this in August 2020, so it’ll still be fresh news by the time this episode comes out. I’m just delighted to have you both on.

Why Side Hustle In Grad School?

03:17 Emily: First question here is why did you decide to start side hustling in graduate school? Why don’t we still go with Lourdes first?

03:25 Lourdes: Financially, I was doing actually pretty okay with my stipend. As Emily mentioned, I was previously on an episode where I discussed my NDSEG fellowship, and so I generally have a somewhat higher stipend than my peers and State College has a generally low cost of living. So financially I was doing, in terms of I had enough money to live on and for extras and to save, but the reason that I got into side hustling was so that I could have money to contribute to a Roth IRA. I think Emily has done an episode on this earlier in the year, but as of this current year 2020, fellowship recipients are now eligible to contribute to a Roth IRA, but previously they were not. I started one before I was being paid on fellowship and I wanted to try to contribute at least a little bit of money monthly to that, so having that side hustle, self employment income helped me to be able to do that and continue to contribute, even though I couldn’t with my general fellowship income.

04:32 Emily: That’s so strategic. I love that. It is the advice that I was giving out for people who had multi-year fellowships, is to consider that self-employment side hustle. Meryem, why’d you decide to start that side hustling.

04:44 Meryem: For me, I guess coming into medical school, I had actually taken a gap year and was able to transfer a lot of those funds into starting an IRA, so for me, it was less of a strategic approach and more just that I’ve really always had a lot of interests in gaining new skills and collaborating with other people outside of my primary career interests. I think specifically, actually, as far as video and podcast editing, I was inspired by my dad who is always the one recording all of our family memories and making home videos. And he actually founded and produced a public access TV show called Turkish American TV. That’s been going on for 15 years, completely as a passion, volunteer project. I remember many times he’d rope me into his projects and show me how to use video and editing software, and I really just felt lucky to have his guidance. I feel like I inherited his eye for detail since that’s helped me be more confident in marketing myself as a freelancer who just really genuinely enjoys editing. I guess for me, just as someone who needs to have hobbies and tasks outside of work, I wanted to try something new and also make a little extra income in line with my career development goals.

06:03 Emily: Maybe we should say what you all actually do for me with the podcast, to give you credit where credit is due. As the listeners know, I conduct the interviews for the podcast, but kind of everything that happens after that, I hand off to you two. So you do all the video and audio editing of the interviews, and you compile the show notes, which are actually full transcripts. It’s more work than it sounds actually. We use an automated tool to generate the first transcript, but then you go through with a careful listen and make it actually readable, which I really appreciate. And you also write the social media posts that we do for each episode, and you schedule things. There’s a few other tasks in there too, but those are the major pieces of work. It’s been an amazing help for me.

How did you find your current and previous side hustles?

06:44 Emily: I know how you two landed this side hustle, which is that I reached out to my mailing list when my last VA decided to leave the position. Thankfully, she gave me a lot of notice. I reached out to my mailing list and said, “Hey, podcast listeners, do you want to work on the show?” And you two both volunteered to do a trial episode and ultimately your work was great, so I hired both of you. But I don’t know if that’s the first side hustle you’ve had in graduate school, or whether you were even particularly looking for that kind of side hustle, or really how it came about kind of from your end, so why don’t you tell us. Lourdes?

07:19 Lourdes: I had done a couple of side hustles through freelancing websites. There was actually one particular one that was captioning and transcription of usually short audio files through this company called Rev. It’s basically just pick and choose these audio files and you get paid. It’s a very low paying job, but it was something that I did just sort of in my spare time. When I heard about the opening on this podcast, I was like, “Hey, this is perfect. This is like what I was doing before, but on sort of like another level and sort of a next step up.” It seemed like a perfect fit for what I like to do in general anyway, just on a higher level.

08:07 Emily: Yeah. Meryem, how about you?

08:09 Meryem: Yeah, that’s so funny, because actually that’s the first time I’m hearing this. For those who don’t know Lourdes and I actually went to undergrad together, so the fact that we serendipitously ended up as virtual assistants for the same podcast and kind of working together was phenomenal to experience and to find out. For me, I also was trying to look into doing these things independently through similar websites, but it was not really a sustainable effort or something that was really worth the rate that they were paying. And I felt like it’s so much more useful to be able to use these skills and also benefit from all of the knowledge that I’m gaining as I’m editing these episodes, which is relevant to us as graduate students trying to better our personal finances. Really it was a no brainer when I saw that email from Emily and reached out and I’m just so glad that it worked out and that we were able to take turns, Lourdes, and still have an activity shared together despite the distance and the years since college.

09:15 Emily: Yeah, that’s why I reached out to my list first, to try to hire for this position. I hoped that there would be people who would actually be interested in the material as well as having the skill set to work on the episode, instead of going with an independent agency or something, which I could have done, maybe if it hadn’t worked out, initially. I wanted to go to people who I sort of had a relationship with, and actually it happens to be the fact that I had corresponded with both of you over the years before that — we mentioned Lourdes had been on the podcast and Meryem has been on my mailing list for a long time, so we had exchanged emails and I think had call or two in that time. It was really helpful that I knew your names at least, when it came time for people to apply for that position. Meryem you have, since we started working together, taken on another podcast editing position, why don’t you talk about how that came about?

10:08 Meryem: Yeah, that’s right. Actually, I owe it to you, Emily, for alerting me to another side hustle opportunity in podcast editing with the AcaDames podcast, which is another awesome podcast focusing on women in academia. Earlier this year, I remember Emily sent an email to us, letting us know that AcaDames was looking for help since their previous student executive producer was graduating soon, and they wanted to have somebody to overlap during that period of transition. I reached out to them about that position and thankfully we were a good fit. Now I just feel really lucky that I get to work with these two amazing podcasts. My work with them partially involves editing, but also involves a little bit more of administrative and social media management work. I’ve just learned so much from both podcasts and I’m excited to be involved. And also again, benefit from all of the career development advice that I’ve been receiving just by working with both of them.

11:09 Emily: Yeah. I think it’s kind of interesting that for these positions, this podcast virtual assisting position and the AcaDames one, it sounds like we’re looking for someone who’s going to be doing a multiplicity of different things and you come in with maybe some subset of the skills, like Lourdes, you had the transcription type experience, but then we’re asking you to learn a bunch of other stuff which expands your skillset overall, even if you’re not going to be career podcast editors. I assume you’re going to do something with your PhDs, but it’s nice to have that kind of side work, I think.

Balancing Side Hustles, Grad School, and Personal Life

11:36 Emily: Between the side hustle, your graduate work, everything else that’s going on in your life. I know you two are both in relationships — Meryem, you recently got married. Lourdes, you’re engaged. You have a lot of stuff going on in your lives. And so how do you fit in this side work that you’re doing, along with everything else? Lourdes?

11:55 Lourdes: I guess for me, what attracted me to the side hustle specifically was that it’s something that I can work on from home. I don’t have to go anywhere to do anything, and I can kind of fit it into my schedule. It’s very flexible. Emily is super nice, in that she gets us a lot of heads up time between when we get audio files and when they’re going to be released. So there’s a lot of flexibility in the position, which is definitely something that I was initially looking for in side hustles, as well, when I was doing the more freelance, low paying transcription job, it’s something I could do just in my own time, so that’s been helpful in terms of being able to work it into my schedule, work my schedule around it.

12:38 Lourdes: Also, like Emily mentioned, I’m engaged, but for the last year I’ve also been long distance, and so I’ve had a little bit more free time. It’s also been really great during this work from home time, to have something else to do. Now that you’re pretty much primarily at home, we’ve all been at home, things can get a little bit stale, but having a lot of different activities to do has been really helpful in managing my own mental health. I don’t feel like I’m only at home to do work and I get to sort of have some variety in my day, so that’s been nice.

13:22 Emily: How about you Meryem? How do you do the time management aspect?

13:25 Meryem: Yeah, I want to echo everything that Lourdes said. I think it’s really nice, even without a pandemic, but especially during a pandemic, to just have something else to turn to when you need a break from grad school or just want to use a different skill set for a bit, or just kind of escape from the world. And right now, especially because of COVID, I tend to work a later shift in lab, and my understanding is Lourdes does as well, so the rest of our work is pretty much done remotely, which makes it easier, but also I have to be a little bit more diligent about priority setting and setting boundaries, because it is so easy to kind of just switch between projects both between my main job as a grad student and then my side hustles and leaving room for my personal life.

14:07 Meryem: Usually I’ll try to do this by reserving chunks of time to work on the podcast editing, either in the mornings or late in the evenings after my shift and maybe the weekends to kind of catch up, which is very useful for particularly busy weeks. I think just like setting deadlines and trying to stay organized to prioritize all the things that are going on is helpful. I will say that I recognize that it’s probably easier for me to manage everything that I have to do given that I don’t have too many responsibilities outside of my work and extracurriculars right now. I don’t have any human babies, but I do have a fur baby named Sabine, but she’s pretty self sufficient. I think overall it is pretty much managing expectations with myself and now with my husband, but overall I think, much like Lourdes said, you get into a workflow and we do have a lot more time at home so that does help a lot.

15:06 Emily: I’m just thinking how I would answer if I asked this question of myself, of how do I manage my time? Because I do have two human babies and no childcare in a pandemic and it is definitely more challenging now than it was a few months back to be handling my schedule. But I think what Lourdes brought up initially, the fact that in our schedule we have basically a two week cycle from when I get the raw interview to you two and then we have a two week process before publication, and Ithink that really helps. I know a lot of side hustle jobs are really quick turnaround, like super short deadlines, and it’s not even really so much on your end, like I’m giving you guys a lot of time. I need a lot of time to do my part of the process as well, because I can’t necessarily jump on a response right away, because it’s just a busy long day every day right now.

Commercial

16:00 Emily: Hey, social distancers, Emily here. I hope you’re doing okay. It took a few weeks, but I think I have my bearings about me in my new normal. There is a lot of uncertainty and fear right now about our public and personal health and our economy. I would like to help you feel more secure in your personal finances and plan and prepare for whatever financial future may come. You can schedule a free 15 minute call with me at PFforPhDs.com/coaching to determine if financial coaching with me is right for you at this time, I hope you will reach out, if only to speak with someone new for a few minutes. Take care. Now back to our interview.

Budgeting Side Hustle Income

16:46 Emily: Okay, so personal financial show — let’s talk about the money that’s associated with the side hustle income. What are you doing with the money from your income? Does it have a particular job to do in your budget or how are you handling it generally? Lourdes, why don’t you go first?

17:01 Lourdes: In general, I put most of my side hustle income into savings, whether that be more long-term savings or shorter term savings, kind of depends. If I have an upcoming trip, it might go a little bit towards that. In general, how I work my budget is that, I pay myself first, in that I put money aside for savings first, and then any money leftover is my money that I get to spend for the month.

17:31 Lourdes: One of the tips I learned from the first episodes I edited was a side hustle episode, I think it was Allie Judge, and she mentioned how she holds off on paying herself her side hustle income until the month after she’s earned it. So sort of working on a delayed schedule, in terms of using the money that she’s earned. After I heard that, I’m like, that’s a great idea, so ever since then, I’ve been doing the same thing, where I count basically any money I earn in August goes towards my September monthly budget. That helps me in terms of planning and not using the money before I’ve actually earned it. That’s how I mainly handle it in terms of budgeting.

18:22 Emily: Yeah. Thank you. Meryem, how does it work in your budget?

18:26 Meryem: I’ll be totally transparent in that I don’t necessarily have a specific allocation for my side hustle income, because for me it was primarily a chance to essentially have a hobby and use a different skillset. But I kind of do try to visualize it in a way that permits me to have those extra side expenses during the course of the month that you might not otherwise be able to do. For me, it’s kind of a mental exercise, and I do have the money go straight into a savings account that I don’t really touch, but every once in a while, if I need to kind of make an extra purchase or a gift, I will kind of, I guess, rationalize with myself like, okay, I was able to make some extra income this month with the side hustle, so it’s okay to spend that extra money and think of my extra purchases outside of my needs in terms of how much of my work and effort that is worth. And essentially that’s not a super cut and dry method, but it helps me at least to rationalize my additional expenses and not get too anxious about finances during grad school, which is really, really nice to have that cushion outside of my usual budget.

19:41 Emily: Yeah. That trick, that mental framework of translating the cost of a purchase into your time, or maybe number of episodes, or however you want to structure it, is a really powerful one, a really common one for people sort of were advanced in their personal finance skills to think about really carefully, like whether they want to make a purchase and how they want to spend and so forth to translate into time. That’s a really good tip.

20:07 Emily: I’m particularly thinking about this question of how to handle your irregular income with respect to your budget because, so in August 2020, I launched a community PFforPhDs.com/community, if you want to find out more about that, but every month I’m creating new content for it. Right now I’m working on the September content, which is on how do you handle your irregular income with respect to your budget?

20:28 Emily: Lourdes, the tip that you gave is basically the first one that I’ve already put into this, which is count up your income from one month and put it towards the next month budget, that you got from Allie. It’s absolutely perfect, because you never know when something could go wrong with your side-hustle income. Like if one of you became ill, for example, maybe you need to skip an episode. That’s not a problem for us, but it would be a problem for your budget if you’d already spent the money that you expected to come in. That’s number one, baseline tip for handling side hustle income is give it a delay. Meryem, you’re doing a similar thing by putting it directly into savings, and then later on thinking about, well, how do I want to spend it, or do I want to keep it here? Different articulation, but kind of the same principle there. I’m really glad to hear that.

Side Hustle Income and Taxes

21:13 Emily: Now we come to one of my favorite subjects within personal finance, which is taxes. So you two are both self-employed, you are contractors for me, and Meryem, now you have this other contractor, essentially you’re like a real true contractor working for multiple people with the same skillset. Self employment taxes are kind of a whole other ball of wax. You’ve been doing this for a year, do you have any systems that you’ve put in place or just what are you doing with it, with respect to your taxes? Lourdes?

21:40 Lourdes: For me, it’s a little bit of two different things. I generally set aside about 30% of my self employment income for taxes. That’s taking into account the about 15% self employment tax and then income tax being around 12%. But also, I am on a fellowship that requires me to pay estimated taxes quarterly, and so at the beginning of every year, I basically estimate how much — well, I know how much I’m going to earn from my fellowship, and then I basically estimated how much I anticipate earning from doing this virtual assistant for the podcast. Basically, I have ahead of time, I know how much I have to set aside each month for both my fellowship income and this side hustle income. I immediately put that into savings and I just don’t touch that money. It’s not even money that I think about. And then I tend to over save just a little bit in terms of taxes, just because I’d rather have a cushion. Last year, I think I was off by like $150 just because of other things. I also have some investments that will change throughout the year and change my tax situation, but I do tend to oversave just so I have that little extra cushion and I don’t have to take it out of other pockets of my savings. Then if I have extra money left over, I kind of use it as my own personal tax refund. So the government isn’t giving me any, but I have some extra money left over in my tax pot. I use that and just reallocate it usually to different savings categories.

23:23 Emily: Yeah. I handle my income from my business exactly the same way, so it sounds like you’re just incorporating the self employment tax issue into your existing structure for paying quarterly estimated tax. Meryem, I want to give you a chance to answer that one as well, because I know this is shifting for you right now,

23:39 Meryem: Actually I’m absorbing all of Lourdes’ tips because for me, I just, in the month also started receiving fellowship non-W-2 income. Prior to that, I wasn’t really thinking about estimated quarterly taxes as much because I didn’t have to deal with all of that. But now moving forward for tax year 2020 into next year, I will have to kind of be thinking about that. Even though the actual amount of taxes that I’ll from the side hustle income will be less than the amount that is necessary to be able to pay estimated quarterly taxes — so my original strategy was just to collect all of the receipts that I’ll receive from PayPal and then make sure that I back calculate the amount that I have to pay for the self employment tax and pay that come tax season. That original plan is fine if you know that you’re not going to owe the amount that you would need to, to not have to pay fees for not paying estimated quarterly taxes, but I like the strategy of kind of building it in so that by the time tax season does roll around, you’ve already paid everything.

24:45 Meryem: I actually think that I’m going to adopt that policy rather than shifting it and waiting until tax season. And as for my other side hustle with AcaDames, their structure is also changing since they’re recently going through the process of incorporating and becoming an LLC. Previously, and currently during the transition, I’m being paid through W2 income because it’s very easy to me to be able to do that as a UNC student and the cohost, or at least one of the coasts now is based at UNC, so it was really easy to deal with that through payroll and not have to worry about freelancing or independent contracting. But I imagine that that will also shift within the next year as they’re making this transition into becoming an LLC. So having all of these strategies in place now will probably be really useful moving forward.

25:38 Emily: Yeah, that’s good for me to know. Interesting. I should mention also, I just brought up the Personal Finance for PhDs Community, but for the last several years, I’ve had a workshop available for individuals on quarterly estimated tax and helping them fill out their estimated tax worksheet and form 1040. That workshop is now coming under the umbrella of the community. So anyone who’s wondering about how do I file quarterly estimated tax on my fellowship, that’s where to go for that particular workshop PFforPhSs.com/community. And I just told you, I’m thinking about in September, the training that I’m going to release on handling your irregular income with respect to your budget. Later on this fall, I’m planning on doing another full workshop on the self-employment side hustle that is so common for graduate students and PhDs, and how to handle that for your taxes, so a whole other tax workshop just on this topic of self employment taxes. That’ll be available if anyone needs help with that sort of thing. I’m really excited about creating because I’ve been doing my own taxes as a self employed person for a number of years, so I have a basic familiarity with it and I’m excited to do a bit more research to figure out how it works for other kinds of businesses as well. That’s where to find out more info there.

Unexpected Benefits from Side Hustling

26:54 Emily: As a second to last question here, have there been any benefits to doing a side hustle that you didn’t anticipate when you first took on the position? Lourdes?

27:05 Lourdes: Specifically for this podcast, Emily interviews a wide range of guests and a lot of them also have social media that they promote. I’ve been able to connect with some of the different guests on social media, just as a result of sometimes promoting the episode. They’ll see that I promote it, and then we connect, we end up talking, following each other on Twitter. That’s been like something I didn’t really expect to happen, but it’s been really cool because q lot of them are fellow grad students, and then just getting into that academic sphere of Twitter has been really interesting just to see all these different graduate experiences from people all over the country and all over the world. That’s been one of the most unanticipated benefit from this particular side hustle.

27:57 Lourdes: And then also, as has been brought up multiple times, I think Meryem brought this up, just learning a different skillset that’s something very different from what I do in my normal day to day graduate work. And I, in particular, am starting to figure out what I want to do after grad school. I’m a fifth year student going into my sixth year, so I’ve been leaning towards maybe some more like alt-academic jobs, and being able to have this completely different skill set is definitely something that I think adds to my resume and adds to potential job options and sort of also gives me ideas of what other type of work is out there. Along with what I was mentioning before Emily does have so many different types of guests on the podcast, just seeing what opportunities are available to graduate students after they’ve defended and after they graduated, has been really interesting and something that I hadn’t even considered or even thought of prior to really getting to know some of these guests through the podcast.

29:04 Emily: Yeah. That’s really great for me to hear. I know that this too was an unexpected benefit for me of doing the podcast is I didn’t expect it to be such good networking. I knew some things that would happen from it, but not the networking aspect, so I’m really glad that you’ve been able to tap into that as well. So Meryem, how about you?

29:24 Meryem: Yeah, I agree completely with the networking component as this amazing side benefit of being involved with editing the podcast. And I think for me also, I just find it inspiring how relevant the episodes have been in my own personal journey as a student, often in real time. In fact, I’ll never forget that the very first trial episode that I edited was with Dr. Katie Wedemeyer-Strombel about her decision to change labs and how to prepare for the unexpected in grad school. And it just so happened that that exact same week that I was editing that episode, my former PhD advisor surprised that our lab with an announcement that she would be leaving UNC and moving across the country, and all of this was happening while I was trying to plan a wedding with my fiance, and now husband, who had just moved down to Chapel Hill to start a new job, to be with me after we’d been long distance for so many years. And anyways, it ended up working out and I was able to switch into an amazing collaborating lab and stay at UNC, but unbeknownst to Katie, her advice at that time was so timely for me and helpful for me as I was going through that transition. So I always rave about the podcast to pretty much every grad student I come across and I try to send along helpful episodes and resources to them if it sort of just happens to come across in conversation. It’s just amazing to me how many times that, that has just happened, where I’m editing an episode and realizing, wait, I really need to pay attention. This is really relevant to my life right now.

31:00 Emily: That’s really good to hear. Of course you told me at the time that that episode was striking you in that way and I’m so glad that I could help. I think that, as Lourdes, as I was saying earlier, I’ve been doing this podcast for about two years now and I have quite a few interviews under my belt and it’s not always the same type of person, as you were saying. It’s a lot of different kinds of personal finance stories coming from a lot of different sorts of people who have been in academia for a time at least. There is a good trove of episodes there, that you might find something useful to your current situation, if you do a little diving into the archives.

Best Financial Advice for Early Career PhDs

31:34 Emily: Last question here, which, you know, I ask of pretty much all the guests who come on the podcast. I’ll give you a chance to give your answers as well. What is your best financial advice for another early career PhD? And we’ll go to Lourdes first again.

31:48 Lourdes: For me, I think one of the best things for me is having a yearly budget. At the beginning of the year, and I’ve been doing this for quite a few years now, I lay out my plan for the year financially on a spreadsheet, and it really helps to be able to see a longer term plan for my money for the year. I think, especially with self employment income, side hustling, it kind of gives you an idea of…Maybe I have a trip planned later in the year, or I have some big event that I’m going to need to save up money for, and being able to more strategically allocate your money on a larger scale rather than just month to month. I think that’s been one of like a strategy that I’ve been employing for a couple of years now, and it’s just been super helpful for me, and it’s something that I will see myself doing like far into the future

32:44 Emily: That is, I think, typically a good piece of advice, but I want to know how it’s going in 2020.

32:50 Lourdes: It’s been interesting to say the least. There have been a lot of…I had some trips planned that have gotten canceled, so I have this extra money, but also different expenses that I didn’t anticipate come up. And it’s been a little bit of am eye-opener in terms of plans change as the year goes on, but I think sort of having that framework to begin with helps me realize that even if…I go back to this budget every month, it’s the same spreadsheet I use for my monthly budgeting, so it changes and updates and it’s a very fluid document, but just having that outline there to begin with has also been something that provides some structure, especially when the year got so different than what everyone anticipated.

33:43 Emily: Yeah, I also use the year as the sort of standard timeframe when I talk about irregular expenses, so expenses that come up non monthly, and you and I talked about this in our interview from a year or so ago. I think it’s a great strategy to think about what budgetarily is coming up for you — trips, as you mentioned earlier, or maybe some other kinds of irregular expenses, so you can anticipate them over the course of about a year. So yeah, I like that time frame as well. Meryem, how about you? What’s your best advice?

34:12 Meryem: Yeah, so my best advice is probably to be honest with yourself and keep an open mind about your personal finances. A wise friend once told me that disappointment happens when our expectations don’t match up with our reality, which was really helpful for me to hear at the time, as an optimist, because I used to feel a lot of guilt or disappointment if I couldn’t maintain an unrealistic budget, or if I couldn’t resist making an impulse purchase on something that maybe wasn’t necessary, but made me or someone else really happy. But I also think it’s really important for our mental and physical wellbeing to work towards a healthy relationship with money, which I know can be particularly challenging on a grad student’s stipend. So with that in mind still, I think as best as you can try to be honest with yourself and set realistic goals for yourself, not based on anybody else’s priorities or spending habits, but whatever matches your needs. That being said, if something really isn’t working for you, that’s probably a good time to have an open mind and try to adapt, effective strategies from others. I guess I would say it’s okay to experiment and even take calculated risks, while figuring out what works best for you, but being honest yourself and keeping an open mind is probably my best financial advice and general life advice as well.

35:44 Emily: I love that as well. I often think about the mismatch between expectations and reality, and how that provokes us, so I try to keep my expectations low, basically. I really love that advice and I think that’s unique. I don’t think we’ve heard that on the podcast before, but I think it’s perfect. And something that graduate students can sometimes be discouraged around their finances because they are working with such a low income, it’s for such a long period of time, and I talk a lot about investing and saving stuff and that’s just out of reach for a lot of graduate students, but they can implement your advice, Meryem. They can like learn to just figure out what’s going to work for them in managing their own finances right now and carry that skill set and that habit, whatever it is that they determined as the right system or whatever, forward into their career and post-PhD income, and hopefully have a lot of financial success at that time, having been honest with themselves and really using the time in graduate school to get to know what their preferences are with respect to managing their finances. That’s good advice for anybody, anytime. You can always implement it.

36:46 Emily: I’m so glad to have had you two on the podcast and thank you so much for volunteering to do this. Thanks for coming on.

36:53 Lourdes: Thank you, Emily.

36:54 Meryem: Thanks Emily.

Outtro

36:56 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the personal finance for PhDs podcast. There you can find links to all the episode show notes, and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind the scenes commentary about each episode. Register at PFforPhDs.com/subscribe. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is stages of awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.

How This PhD Student’s Budgeting Practice Enabled a Hawaiian Vacation

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In this episode, Emily interviews Sean from Authentically Average, a fourth-year PhD student at a university in Houston, TX. Sean and his wife have very intentionally set up their budget to reflect their values, and now live and die by their budget. Their top three budget priorities are retirement savings, tithing, and travel. Sean’s budget helps him say “no” to certain areas of spending or opportunities for spending so that he can say “yes” to his travel aspirations. Sean describes a wellness vacation he and his wife took to Hawaii and why travel is such a high priority right now.

Links Mentioned

budgeting for travel on a grad student stipend

Teaser

00:00 Sean: If you aren’t budgeting yet, try to get there as soon as possible. Tracking expenses is great and it’s helpful to get you in the right mindset. But until you are, I think, front end saying this is the money I will have coming in, here are the places it’s going to go, you can’t really capture your values fully and where to invest unless you’re doing it upfront.

Introduction

00:26 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season six, episode 12. And today my guest is Sean from Authentically Average, a fourth year PhD student at a university in Houston, Texas. Sean, and his wife live and die by their budget. And they have put a lot of effort into making sure that their budget reflects their values. Their top three budget priorities are retirement savings, timing, and travel. Sean describes a vacation they took to Hawaii and the ways they minimize spending in lower priority areas of their life so that they can spend more on vacations and other types of experiential living. By the way, we recorded this interview in September, 2019. Without further ado, here’s my interview with Sean from authentically average.

Will You Please Introduce Yourself Further?

01:18 Emily: I am delighted to have joined me on the podcast day Sean, from Authentically Average. Authentically Average is the name of his blog. And Sean, I’ll just let you introduce yourself to the listeners.

01:28 Sean: Sure. Thanks Emily for having me. My name is Sean. I run the authentically average blog. I characterize myself as a PhD student, husband, chef, pretty much all of the above kind of general life stuff, and that’s the focus of the blogs, every day kind of living. I’m a PhD student in the 3D printing space. I just started my fourth year, so I’m hopefully approaching the light at the end of the tunnel. I live in Houston with my wife, Allie. We have nine children, and by children, I mean plants and most of them are still alive. I’m doing a PhD in 3D printing space. I got my bachelor’s in chemical engineering before that, went directly to grad school, and still trying to figure out what I’m looking for afterwards. I’m thinking like medical device route. That’s a really interesting space for me and the community in Houston is really kind of exploding right now, so I’m really passionate about trying to see that grow.

02:36 Emily: Yeah. Sounds really good. And I understand that your wife is a graduate student as well.

02:41 Sean: She is. My wife is getting her MBA currently. She’s super woman. She’s working full time and getting her MBA on the weekends. A lot of school at our house.

02:50 Emily: Yeah, that’s a full plate. I guess you might not be the busiest one in the household.

02:57 Sean: I think it goes both ways. The nicety of being a PhD student, sometimes, is depending on your advisor, the work schedule is not necessarily lighter, but more flexible. I tend to do a lot more of the, I talked about this briefly on my blog, but like, I tend to do a lot more of the household activities, like the cleaning and cooking and stuff, just because I’m the one that has the time for it. It’s like not always super sexy to talk about sometimes, but if I don’t cook, we don’t eat. Somebody’s got to do it. But we like to share. I mean, she’s got a lot on her plate right now from a professional capacity, so I’m happy to take on those other roles.

Translating Life Values to Your Budget

03:45 Emily: Yeah. And I guess that’s one of those things that you can talk about on a blog that is named Authentically Average. You can talk about your everyday experiences. And money of course, is among those. You recently published a post that was kind of talking about your financial values, which is something that I love to talk about. It’s the foundational concept in personal finance, yet not one that gets a lot of airtime, I feel like, unfortunately, so why don’t you go ahead and tell us about how your values inform how you use your money.

04:20 Sean: Sure. Thank you for that. A couple of weeks ago, the focus of that post was, and we can talk about this in a little bit, but I had gone on a vacation and some people were like, “Oh wow, this is great” and some people were kind of like, “okay, great, you went on this really nice vacation, but your blog is authentically average, how do you reconcile those?” I started thinking about it. I said, okay, I should probably take a step back. The value focus, like you said, is I think central to personal finance and making “smart” decisions with money, but not one that’s talked about a lot. Primarily the goal for that was “here are my values, here’s what I try to invest my money in, and by extension a little bit my time.”

Retirement Savings

05:10 Sean: For me and my wife, we have three top tier values, and then beyond that, everything kind of falls into place. The first one is financial security, so saving for retirement, making sure that we are doing the things we need to do now so that we can live comfortably later. I think that sometimes people get really caught up in this concept of like, I’m doing what I gotta do right now, and that’s fine. And sometimes they are not saving for retirement because they feel like they can’t and that there’s a lot there to kind of go through. And sometimes because they simply don’t think about it. The first time that I kind of understood the concept of like retirement savings and compounding interest and all of that, I started to notice, Oh, wow, there’s a lot of ground that I can make up here in my late twenties and set the stage for how my thirties and forties are going to go. That’s the first piece. The second piece is —

06:14 Emily: Actually, I want to make one offshoot comment to that because of course, saving for retirement is something that I love to talk about. One point that I really like to make when I’m speaking with graduate students or other sort of people on the younger side, younger and lower income side of things, is that if you look at those compound interest calculators, the time is what matters. I mean the time and the amount of money you save, of course they both matter, but the time — you wouldn’t believe what a little bit of extra time will get you in terms of increased returns. And so I always say, whatever amount…like if you feel like you can’t save anything okay, maybe that’s true, but if you can even find like $10, $50 a month that you can start putting away for that purpose, it’s unbelievable what a huge difference that makes on the back end of things, just to have those few extra years. Don’t be discouraged if you can’t save like a thousand dollars a month. That is a very large and unreasonable amount of money for a graduate student level of income, but a smaller amount of money makes a really, really big difference too.

07:18 Sean: Yeah, definitely. And just to kind of keep going on that thread, the stereotypical thing that people give of why you should start investing as early as possible is they talk about if you invest for 10 years from 20 to 30, the amount of money that you make during that time, by the time you retire, will outpace starting from 30 and moving forward. You can’t possibly catch up. Just like you said, sometimes I think people get like, Oh no, I can’t do that much., and that’s okay, but if you can do something, that’s great.

07:55 Emily: Yeah. I think one of the really difficult things that people run into early on is that they’re dealing with debt loads and they might have to clear those first before they can even touch the investing for retirement side of things. But since you’re already starting to invest retirement, I take it you’re either debt-free or you have debt that does not concern you.

08:14 Sean: We are debt free. I would say that my wife and I are very blessed, lucky, strategic, however you want to look at it, I guess. We paid our last debt off last year. I had an outstanding car note that I paid off. We again are very fortunate, I think, to be able to cash flow her MBA. That’s something that I think is a challenge, especially in higher education. I know that the finances for PhDs vary pretty drastically depending on field. In my PhD program, it’s tuition free, and we collect a stipend for working here. When I think about my PhD, I think about it more as job than I think an education of being a student. And I think collecting a paycheck helps me keep that association clear. So yeah, we are debt free. We are investing some. I’d like to be investing more, but also, you know, like you just said, there are different things that we’re trying to take care of and trying to keep all the balls in the air at the same time.

09:23 Sean: Yeah, definitely. Okay. So that is one of your top priorities, is saving for retirement. What’s the next one?

Experiential Living

09:30 Sean: So there’s two more. The second one would be, we have a really big focus on, I call it experiential living, but in the current case it’s travel. I joked about having plant children. Allie and I don’t have any kids yet. We have plans to have kids, but we just don’t have them right now. We have this focus on like, if there are things that would either be impossible or significantly more difficult to do when we have kids and when we’re older, we’d love to do them now. That post that you mentioned earlier about our travel, we went to Maui for a week over the summer. That was born out of like, “Hey, this is a great time to just go and spend a week in Hawaii and just, you know, live it up.” I mean, responsibly, but this is great. After saving for retirement, our next focus is, Hey, we want to have a good time, and for us having a good time looks like going out and exploring.

10:33 Emily: So I was really curious about this term, you just used — experiential living. Right now you said it looks like travel. What are the other things that might fall under that category for you?

10:42 Sean: I guess one thing is I know that some people, their focus is they want this nice X or Y. I think Allie and I, we would much rather save up money for a few pay periods and go to a nice concert or go see a play or a musical or something than buy a new TV or buy something else for the house. We do live in a nice apartment and we’ve decorated and all of that, but we would much rather do something that’s I think a little bit more like out and active. There’s not anything good or bad about that, or any other way. That’s just our preference.

11:24 Emily: Okay. So is this basically boiling down to the personal finance experiences versus stuff debate where everyone has kind of come down to the side of experiences? Is that what I’m hearing

11:36 Sean: Somewhat, yeah. I think that the stuff thing, depending on what the stuff is, is very valuable, in terms of having stuff and, and that’s all fine. But also I know just from, we did the like whole KonMari thing a couple months ago and realized, Oh, I have a lot of stuff. It was nice at the time, but in hindsight I would rather, I think have spent the money that I spent on that stuff on doing something.

12:06 Emily: Yeah. I actually heard this really great thing on a podcast recently. It was on the ChooseFI podcast and the, one of the people that they were interviewing, I can’t remember who the guest was said, something like he strives to have one memorable moment per month, some new thing that he’s never tried before. Travel would certainly fall under that, but it could be like a cooking class or like just doing something different out of your routine, once per month, he has that goal to make a memory, basically, with his wife. And actually it can be the same moment or they can have two different moments, one that each one prefers more per month, but that was his goal. And I thought that was amazing, and I really want to implement it in my life now, because I do feel like months can go by where it’s like, yeah, what happened that was great or notable or important, I’m not even sure.

12:59 Emily: Okay. So experiences, concerts, travel, that kind of stuff. And so right now your focus is doing the things that you would have a harder time doing once you have children. And I will have to say that when I read your post about your vacation, I was like, how do I get rid of my kids for a week, so I can do this. It sounds awesome. What is your third top priority?

Tithing

13:20 Sean: Again, so saving for retirement, travel and experiential living. The third one, honestly, is giving back and tithing. My wife and I tithe every pay period. I know sometimes as graduate students that can seem like a tumultous topic. We already do not make all that much money —

13:45 Emily: Actually, Sean, let’s pause there because some of the listeners might not be familiar with the term “tithe”, could you define that?

13:51 Sean: Sure. In a traditional tithe you would be giving, donating a 10th or some amounts. I mean, tithe literally is “10th”, but giving some amount back to your church family. My wife and I are Catholic. We give back to, we split between the church that we currently go to and then we also support a couple of students through the FOCUS program. They do ministry on college campuses throughout the United States. Good clarification. We give back to our church. For us, we do a traditional 10% tithe. That’s just, I think how we have decided that that’s where we want to put that value at. Does that kind of answer that?

14:39 Emily: Yeah. It’s not something that’s come up on the podcast hardly at all, but we also tithe and have for throughout graduate school, a long time. And it definitely, while I knew other graduate students from our church who also did that practice, it wasn’t something that I felt like was really widespread or something that graduate students could really get a handle on that large percentage. The 10% is a very, very large chunk of your income, but, I feel like tithing for me in terms of like the budget actually pushed us towards what I call percentage-based budgeting. If a 10th of your gross income is going towards that, we also did a certain percentage, it changed over time, starting at 10%, for like saving for retirement and then now we’re up to like 20%, so we’ve increased that over time. And I’m trying to remember, well, taxes are also sort of, not exactly a percentage, but you can convert them to a percentage of your income, so for us, it was like these different goals scale with the amount of money that we make, which I really liked that there was like this flexible percentage. The percentage is fixed, but the amount of money is changes depending on what your income is.

15:51 Emily: I really liked that way of thinking about budgeting, that you should have percentages going towards different things. And it actually goes pretty well with the balanced money formula. I don’t know if you’re familiar with this at all. It basically says that you should keep your necessary expenses below half of your take home pay. And I really liked that as well because, I think for graduate students, there’s this phrase that Dave Ramsey uses that I really like, not for graduate schools, but for people in general, which is something like “act your wage”, something along those lines. I think this percentage-based budgeting, I think, is really appropriate for people who have incomes that they expect to change a lot, like graduate school. Hopefully it’ll be going up alive later on, but if you have those percentages it can keep you really grounded and something can be consistent through those fluctuations in income basically.

16:44 Sean: Right. Definitely. Yeah. We do a similar thing in terms of trying to make sure that we’re doing a percentage breakdown on our budget. One small detail, we do typically everything on net pay, and then also when we get a tax return, I mean, ideally our tax return is zero, right. But if we do get a tax return, then we’ll do the same thing on whatever the return is. But I think it basically shakes out to be the same thing. I have found that to be really helpful. I feel like it helps us recognize where are we essentially overspending in our lives, and conversely, where could we be giving more attention, certainly.

Living and Dying By Your Budget

17:32 Emily: A phrase that I read in your recent post was we live and die by our budget, and that really stuck out because you talked about, I guess, that your budget is a plan for how you’re going to spend your money. And if opportunities arise after you’ve made the, you oftentimes say no to those opportunities, you stick with your original plan. I just wanted to ask you about that. How did you guys put together your budget, and how do you find the fortitude to stick with it?

18:02 Sean: I mentioned this very briefly before, disclaimer, this is not an ad, wish it was an ad, but it’s not, my wife and I use it’s called YNAB, or You Need A Budget. It’s a budgeting tool online that you use, to keep everything in order. One of the, I think, nice things about living and dying by your budget is it tells you how much money you’ve budgeted and allocated to every, whatever category you want to put it in. And if you overspend, the color of the money bar goes from a nice, pretty green to a very angry red color. And that’s just like, I think, maybe potentially a little bit of an immature way, but it’s really reinforcing for me of like, Hey, you made your money angry because you spent more than you allocated.

18:56 Sean: I joke about that sometimes living and dying by our budget. Really, it’s taken a lot of discipline to get to the point that we are now and give yourself grace and patience to get there as you’re working through things and things come up, of course. But we’re in a space right now where we have a set of goals, like I talked about, and a set of values. Sometimes things come up that don’t align with those, or potentially detract a little bit from them and we have to make a mature decision on like, Hey, is it worth us to do this? So one of the things I talk about in that post is, a friend of ours came to us and said, Hey, we want to go to this football game, last minute. Allie and I are huge college football fans, I went to a big football school for undergrad. Great, right, in terms of an interest standpoint, I think that’s great.

19:55 Sean: We started to look at the finances and said man, this is going to be like a thousand dollar trip just out of the blue. And I think at the beginning of the year, had we started the year and said, Hey, we want this to come up and we want to plan for this — great, okay, we’ll budget for it. But a few weeks out, we had to say, no. I mean, first of all, based on our budget, we literally did not have the money to do it without taking money from other standpoints. I really struggle with the idea of pulling money that we had saved for retirement out of retirement to go to a football game. But more than that, I think it’s sometimes difficult when you…This is always a challenge when you have very diverse friend groups is like, everybody has their own different set of values. And I want those people to understand, like friends of mine, that sometimes I to turn things down. Like, hey, I love you guys. You’re great, I appreciate everything about you, and I appreciate our relationship, but just understand that me not wanting to come out, or me not wanting to do this last minute, isn’t a reflection on like our relationship and is a reflection on I just don’t have the money for it according to what my wife and I decided it was important to us.

21:11 Emily: Yeah. There’s another blogger, content creator in the personal finance space, Paula and her brand is Afford Anything. And so her tagline is kind of like, “you can afford anything, but you can’t afford everything.” She’s really, like you were just saying, you have to get really clear about what’s important to you because you want to be able to say yes to the things that are at the top of your list. And that does mean saying no to the things that fall further down and that’s hard. But you can’t say yes to everything. If you say yes to everything, you’ll end up saying no to the things that are most important to you, if you accept every opportunity that comes your way.

21:52 Emily: I have to say though, your story reminded me of when I was in graduate school. I went to Duke and Duke won two championships while I was there 2010 and 2015. 2015 was technically after I defended, but I was still enrolled as a student and I still had tickets to games and stuff. So anyway, in 2010, of course you never know, going in to the tournament, how it’s going to turn out. And at the last second, we had an opportunity to go to the Final Four. Duke went, and my husband and I had the opportunity to attend. They were giving away tickets for students. It was actually free. The tickets were free. All you had to do was get there and stay there. And we really deliberated, and I don’t know that it came down to mostly a financial decision. There were other time reasons why we decided not to go. We had already traveled actually the previous year to see them play and they hadn’t advanced, and so we already had like, kind of that disappointment. So we decided against going, and of course in 2010, they ended up winning, same story in 2015. That’s just one of my major regrets from when I was in graduate school, because I was a fan, that I let anything stand in the way of like attending those events. So I do think that my main regrets from graduate school, in terms of my personal life were things that I didn’t do that money played into why I didn’t do it. It probably wasn’t the whole situation, but yeah, there’s two times I can point to an opportunity came my way and I said no to it, a very reasoned decision, and I really think that was the wrong way to go.

23:27 Sean: Yeah. And sometimes I think that that’s a struggle because we’ve done a couple of things too, where it’s like, Oh, this is such a good opportunity to do this thing. Sometimes, and I say this with a mountain of salt, occasionally we will not live and die by the budget. And the only way that that works is to have intentionally over allocated somewhere else, so that the total amount of money is still there, like the money to cover a different decision is still there. It’s not like we’re living outside of our means, but we do give ourselves a little bit of grace. Sometimes I’m like, this is a really big deal. That trip to Hawaii was pretty much entirely planned for, but there were a couple of things once we got there, that was like, you know what, we’re here, I think we’ll regret this thing if we don’t do it, let’s do it and we’ll figure it out.

24:27 Emily: Yeah. I think that strategy of over saving or just saving for things that you don’t know quite what you’re saving for — at some point a friend will invite you to do something, at some point you’ll have an opportunity to come your way that you’ll want to say yes to at the last second. And I think the way that most people who are not on top of their finances would handle it would just say, okay, I’m going to put it on a credit card, I’ll worry about how to pay for it later, which is not a great strategy. But if you save in advance and you’re just not totally sure what that money is going to go for, but you’re pretty sure something’s going to pique your fancy along the way then you can be able to say yes again to those opportunities, knowing that it’s still within everything you’ve allocated for an advance,

25:08 Sean: Just a small insight, we have a category in our budget called “stuff we forgot to budget for”, and we put a small amount, however much, in there every pay period just because inevitably something comes up. Now, if it’s an emergency, we have separate money set aside. You mentioned Dave Ramsey earlier — we have a separate emergency fund set aside for that kind of thing. This is more like your friend asked you to do something, you have an opportunity to go watch Duke win a championship, whatever.

25:44 Emily: Yeah, exactly.

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25:48 Emily: Hey, social distancers, Emily here. I hope you’re doing okay. It took a few weeks, but I think I have my bearings about me in my new normal. There is a lot of uncertainty and fear right now about our public and personal health and our economy. I would like to help you feel more secure in your personal finances and plan and prepare for whatever financial future may come. You can schedule a free 15 minute call with me at PFforPhDs.com/coaching to determine if financial coaching with me is right for you at this time, I hope you will reach out, if only to speak with someone new for a few minutes. Take care. Now back to our interview.

Frugal Tips for Experiential Living

26:34 Emily: So I’m wondering if you have any ways, any sort of frugal things that you’ve done in your life that help you have these experiences that you want have. Either minimizing the money that it takes to do those things or minimizing other areas in your budget so that you can free up more money for your top priority. Are there any like really good strategies you use in that vein?

26:58 Sean: I think the stereotypical student might fight this a little bit. I’ll start with the like ways of like daily life first. We cook 99% of our meals. That’s just the way it is. For me that’s two reasons. That post that I wrote is primarily about investing your money in what you value, but there’s also a small segment on investing your time in what you value and no question about it, cooking for yourself takes it takes time. It costs money to go buy groceries and it takes time to cook those meals. I think it’s easier to go out to eat, from a time perspective or pick up quick ready meals and that kind of thing, but from a time perspective, like at that point, I’m investing in my health. It’s almost exclusively healthier for you to cook for yourself than it is to go out to eat, and it’s almost exclusively less expensive to cook for yourself too. In that post I talk about, Allie and I have been discussing potentially giving ourselves a little bit more room on this and kind of grace on this for when we want to go out. We don’t go out to eat ever. Like once every couple of weeks and the reasoning for that is, whatever amount of money I would spend on going out to eat a couple nights a week is better suited towards saving for Hawaii, or, we’ve been married for just over a year, for our honeymoon we went to Italy. We spent two weeks there. That’s not an inconsequential trip size, and the only way that that works is you’re making cuts, so to speak, elsewhere in your life.

28:37 Sean: The other thing for us has been we’re busy people. She’s in school part time, well, no she’s in school full time and working full time, and I’m working full time and doing things at home. And so it’s really important for us to invest in our marriage. Regular date nights are important, but it doesn’t always have to be this five star restaurant. Those types of things are nicem, but I think I also get 90 plus percent of the relationship building component from that type of date from going to somewhere kind of casual, hole-in-the-wall, or going on an experience. We talked about this this morning, actually. It’s been a couple weeks since we had a formal date, and one thing that we’re going to do next week is we’re going clothes shopping and we’re going to Marshall’s-hop. There’s like seven of them within a 10 mile radius of us and we’re just gonna — we found that when we hit, we really hit there, but they’re very hit and miss, but there’s a lot of them, so we can kind of hop between and see. I think that that might sound somewhat silly to some people, but for us, we like investing in clothes that makes us feel good and feel professional, but also not breaking the bank and this “adventuring”, so to speak, and helping each other try things on — that I think is a fun relationship building activity that literally the travel aspect only costs the gas, and then we would have budgeted for the clothes. There’s that aspect on like life-hacking.

30:11 Sean: From a travel hacking standpoint, honestly, it’s just time. You have to decide how much your time is worth, but we always look for great deals on hotels and flights. Google has a flight tracker that you can use. It’ll send you alerts when your flights fall. I do the same thing for a lot of the hotels. A lot of third party websites are great. For Italy, actually this, this is a great story. For Italy, the flights were going to be like, I don’t remember like $1800 a piece or something, like a lot of money. We went in May, so like the beginning of high season, I get it. Then, the day before I was going to buy, because they weren’t falling, I said, “Oh, let me just look on another website.” I went on, I think it was Priceline or one of the third party website and it was like half that, together. I was like, “Yes, I’m absolutely doing this. We’ll take a weird layover to save half the cost. You could write a book about that, but that’s the things that I think of.

31:15 Emily: Yeah. I think when your goal is to have experiences and make memories and so forth, I guess there’s been research on this that like the anticipation of the experience is a big component of your satisfaction with it. And so taking the time to plan, and do whatever travel hacking and price comparisons and all of that, it actually enhances like your ultimate experience when you put a lot of effort into it upfront. I don’t know, to me it’s a little bit counter-intuitive, but yeah. So pursuing these travel hacking strategies, um, in addition to saving money can actually make you feel better about the whole thing. I guess what I was thinking about when you’re talking, especially about like the food and not spending so much money on eating out and so forth. That was a strategy that we used also. We cut out basically all kinds of convenience food, in favor of cooking for ourselves. And that is like a little bit of a sacrifice because yeah, you have to plan it a little bit more and all that, that goes into cooking. But for us, like for you, the money that we were not spending on convenience eating went towards our travel fund. And so when we knew exactly where the money that we would’ve spent on one thing was going to go, if we didn’t actually carry through with the eating out or whatever it was, that makes the whole thing a lot more palatable. It makes the whole thing go down easier if you know, okay, yeah, I’m sacrificing a little bit in this moment right here, but that is going to enable something really fantastic later on.

32:43 Sean: Right, right, right, right.

32:45 Emily: Any other frugal strategies around those things, either minimizing expenses on things you really want to do or cutting expenses and things that are not such a high priority?

32:54 Sean: I think the only additional thing that I’ll add is — it’s especially common, I think because like I, as a PhD understand or PhD student, rather, my time is limited. I think that my time is a little bit larger than some other people’s because I just try to make a point of, I’m only working X hours this week. Like this is my job and I’m putting this much into it. And that sometimes works for people and sometimes doesn’t. But I see a lot of, because we have such little free time, convenience buying and convenience spending somewhat to kind of what you, you mentioned earlier. And I think in some ways you do have to give yourself a little bit of that because the amount that you stress over not making convenient spend is also a use of resources, maybe not for the best. Just watch it. I always go back to “live and die by the budget”. Until I had a budget that I like actually did religiously every week and every pay period, I didn’t have a clue. And I started to look at my spending habits and said, man, I didn’t realize I was spending this much on snacks, or this much on cable and this other thing that I don’t even use. It just, it never occurred to me because I was always tracking my spending after the fact that never really looking forward any further than the next couple of weeks.

34:20 Emily: Yeah. I mean, tracking your spending is an amazing thing to do as like a first step. It actually does start to change your behavior in many cases. But if you’re just tracking it as a passive activity and it’s not actually balancing, okay, well, where do I want my money to go? And do I prefer it here? Or do I prefer it there? That’s what you have to do with your budgeting. They’re both really useful, um, activities, but I guess once the shock of the tracking wears off and you make whatever sort of subconscious changes you’re going to want to make from that, you need to start budgeting to get that further of value add from the activity.

When Budgeting Pays Off: Sean’s Trip to Hawaii

34:54 Emily: So we’ve teased this enough. Tell us about your trip to Hawaii, that made me so jealous.

35:01 Sean: We went to Maui specifically. We went to Hana, which is a very small town on the East coast of Maui. Allie was really into this idea of like a wellness retreat. And I did, I think the stereotypical husband thing that I hate and I was like, what are you talking about? No. And then I started to look into it. I was like, Oh, this actually sounds pretty awesome. So I was like, okay, yeah, let’s go for it, sure. There was a resort there called the Travaasa, just right in the town. Hana is not really the type of place that you go to and stay at unless you go to this hotel. There’s not a city center. It’s people that live there and this hotel and that’s it.

35:45 Sean: So we went and we said, okay, you know, let’s do it. This sounds great, let’s go. The only thing I’ll say about traveling to Hana is getting to the airports, great, but there’s a very famous road there called the road to Hana and it’s like 90 degree turns the whole way. It’s 40 or 50 miles and it took us three hours. You’re crawling and it’s crazy. But scenery is amazing and beautiful. The little food stops on the way are great. And then once we actually got there, it was just like paradise. It’s still the States, so there is cell service, but there’s no wifi available. The cell service is kind of shaky, we turned our work phones off, and just lived, and it was awesome.

36:34 Sean: There’s there was a lot to do there. They have a spa on site. I’m not a huge massage/spa person, but I was the most relaxed I’ve ever been in my whole life that week. The food was awesome. There was waterfront yoga and like paddle boarding and horseback riding and just like all of this stuff that we don’t ever do in our daily lives. It was really awesome to just for once I think go and just exist. My wife and I, in particular, but I think more generally PhD students and other graduate students, you’re just going nonstop all the time, and there’s not really any moment where you kind of just sit back and you’re like, “Hey, I’m not thinking about anything about tomorrow, except whether I want to do this cool thing or that cool thing.” I don’t know, I think that was a nice refresher for us.

37:34 Sean: Everything about it was super chill. The only not super chill thing about it is, there was actually a wildfire on the West side of the island while we were there. We went back to catch our flight and all the planes are delayed because they’re trying to get people that live there, like out of danger. Things are, I don’t want to say fine because you know, wildfires are extremely dangerous and there was a lot of damage there. People are generally fine. There were a lot of people that got helped. Everybody was safe. I don’t recall seeing any reports of fatalities, which is incredible. But for us, we’re literally there with our bags in a very small airport on Maui and we’re just like, “all right, guess we’ll chill.” I think a small price to pay, obviously relative to potentially losing your home in a fire, of course. But for us, nobody told us anything. Our airline didn’t give us any updates. We just got there and they were like, we’ll see what happens. Like I said, there’s a much longer post about it with pictures that are describing it way better than I can tell it, but highly recommend. Would definitely do it again. It was great.

38:54 Emily: What really struck me about the, your description of this vacation was that I didn’t do anything like that when I was in graduate school, except for my honeymoon. The honeymoon was relaxing. I mentioned that we saved a lot for travel before, but it was all obligation travel, all of it. We were usually traveling domestically to either see our families, or go to weddings, or attend reunions. Other stuff where somebody else was dictating the schedule, the timing, the place, all of that. I’m not trying to say that was a…We wanted to do it. We wanted to do all that obligation travel. Going to weddings is really important to us. That’s a high value for us, but it just kind of squeezed out any other possibility of taking a vacation that was just for us and just for the purposes of recuperation. There were always other purposes for the trips — seeing certain people, or witnessing certain events. Looking back on it, I did not give myself a proper amount of rest, throughout that process. And it’s still something that I struggle with, so I’m really glad that you guys, made it a priority, made the time for it. Hopefully you’ll do it a few more, maybe not the same vacation, but something similar, a few more times during graduate school so you guys can finish strong and finish healthy. So that sounds amazing, and yeah, we can point people to the post from the show notes.

Financial Advice for Early Career PhDs

40:23 Emily: As we finish up here Sean standard question that I ask all my guests — what is your best financial advice for another early career PhD? And that could be something related to what we’ve talked about today, or it could be something entirely different.

40:36 Sean: Sure. Just because we’re towards the end, I’ll give two quick ones, because I think they’re both very important. The first one we’ve touched about a few times is if you aren’t budgeting yet, try to get there as soon as possible. Like you said, tracking expenses is great and it’s helpful to get you in the right mindset. But until you are, I think front end, saying this is the money I will have coming in, here are the places it’s going to go, you can’t really capture your values fully in like where to invest unless you’re doing it on the front end. So that’s the first thing that I recommend.

41:12 Sean: The other thing is, depending on your program, especially for PhD students on grants and fellowships, so kind of take that with a very specific niche market in mind, sometimes you will be allowed to pursue other things outside of your degree and have side jobs and side hustles. I know, recently talked to another student, here in Houston who, I think was baby-sitting or dog-sitting. Am I remembering that right?

41:39 Emily: Pet-sitting.

41:39 Sean: Pet-sitting, right. And like, okay, great. So she had a side hustle and that’s awesome. Sometimes you can and look around for what things are available because the extra cash is really useful. Sometimes you can’t, on paper. They expect you to be in the lab, and if you have time that you could be giving to another job, you should be spending it in the lab. And I think my recommendation for that is more of a career-related one. You’re a graduate student and you’re contributing to the academic space. That’s beneficial to the field. It should also be beneficial to you, and so I think that I always recommend that students take opportunities that they find, when they become available, in stride, because it may be a value add to their career or to their finances, that isn’t necessarily a value add to their academic education. And that’s okay. I think sometimes we get this feeling of guilt of like, I’m not working hard enough in the lab. And if that’s true, okay, work harder in the lab, but if it’s not true and you can be doing other things that are beneficial for you, it’s okay to do things outside of lab. And I really struggled with that when I first got to graduate school, and I see that as a common struggle now.

42:55 Emily: Yeah, I guess, so I’ve been reading a lot about like time management, recently, to work on my own time management practices, and I guess one thing I’ve learned, I’ve been reading and listening to a lot of Laura Vanderkam’s stuff, and so she references research that’s on…First of all, that people don’t work as much as they say they do. Like people who are reporting that they work 80 hour weeks, almost always are never working more than like 55 hours a week. They may be at work for 80 hours a week, and that’s not a good return on your investment of time, is just to be around more. You should be resting or doing other things instead of that. But another part of that is that there’s sort of an optimal amount of work that you can put into something in a given week, and once you start going beyond that, your returns for the amount of time you’re putting in decrease and decrease and decrease. After 40 or 45 hours, you may be putting in more time, but you’re not necessarily getting that much more of it. It’s kind of this like 80/20 principle.

43:51 Sean: Yup, definitely.

43:52 Emily: Yeah. So I’ll just say like on that time management component, that it can really be beneficial for you if you don’t consider research to be like a black hole, you just throw more and more and more and more time into, that’s not necessarily the best way to approach it, but rather more like managing your energy and managing your time as well. And if that gives you time to pivot to a side hustle or hobby or, you know, exercise or whatever it is you want to do, that’s probably going to end up giving you more energy rather than taking away from your work. Do you know what I mean?

44:22 Sean: Right, definitely.

44:22 Emily: Just like taking vacations, you don’t do it necessarily for the reason of being more productive, but you probably are more productive when you come back from it.

44:29 Sean: Absolutely.

Where to Find Sean Online

44:33 Emily: Where can people find you if they want to read your blog or follow up with you elsewhere?

44:37 Sean: Sure. I’ll send these over so you can put them on the show notes as well. The name of the blog is Authentically Average. It’s authenticallyaverage.com. No hyphens or spaces. On Instagram and Pinterest I’m @AuthenticallyAverage, one word. Twitter was a little weird and I have @AuthenticAvg. That’s where you can find all of the different ways to connect with me. The two posts that we talked about today are up as pins on Pinterest. I can send those over and people can look at them if they want to. I love using Pinterest, just as a side note, I think it’s been really fun. If you are in the 3D-printing space and see me at an academic conference, come and say hey. I’m not shy. If you happen to recognize me, I’m happy to talk and all of that.

43:33 Emily: Yeah. Well, thank you so much for coming on the podcast and having this great discussion with me, Sean.

45:37 Sean: Yeah. Thank you for having me

Outtro

45:39 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the personal finance for PhDs podcast. There you can find links to all the episode show notes, and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind the scenes commentary about each episode. Register at PFforPhDs.com/subscribe. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is stages of awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.

Learn from This Professor’s Nightmarish Home Ownership Journey

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In this episode, Emily interviews Dr. Kevin Jennings, a professor of Criminal Justice and Criminology at Georgia Southern University in Savannah, Georgia. Kevin and his wife bought a home in Savannah shortly after he started his position, and the house has proven to be a money pit. Kevin catalogues all that has gone wrong with the house, what he wishes he would have known as a first-time home buyer, and the lessons he’s learned the hard way. He also gives excellent insight into the academic job market for someone already on the tenure track and how his status as a homeowner has affected his career prospects.

Links Mentioned in the Episode

Further Resources

Teaser

00:00 Kevin: The one thing I might’ve done differently is look for a house with fewer of these incidental costs, right? So if I wasn’t so close to the water, I wouldn’t have to do the flood insurance. If I wasn’t outside the city limits, I wouldn’t have to pay for the extra fire and protection stuff like that. I wish I would have known about those things in order to judge where to buy and which house to buy.

Intro

00:31 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season six, episode seven, and today my guest is Dr. Kevin Jennings, a professor of Criminal Justice and Criminology at Georgia Southern University in Savannah, Georgia. Kevin and his wife bought a home in Savannah shortly after he started his position. And the house has proven to be a money pit. Kevin catalogs all that has gone wrong with the house, what he wishes he would have known as a first-time home buyer, and the lessons he’s learned the hard way. You won’t want to miss Kevin’s insight into how his choice to purchase this home has affected his mindset toward his academic career. Without further ado, here’s my interview with Dr. Kevin Jennings.

Will You Please Introduce Yourself Further?

01:23 Emily: I have joining me on the podcast today Dr. Kevin Jennings, and he is going to talk to us about, well, a bit of a money pit that he is currently invested in. So, we’re going to hear tons more about that. Kevin, will you please introduce yourself to the audience?

01:37 Kevin: Yeah. Hi, I’m Dr. Kevin Jennings. I’m from Austin, Texas, and I went to Texas State University–Go Bobcats! Meow–and got a PhD in Criminal Justice in 2014. I was then hired at Armstrong State University in Savannah, Georgia, and I moved there immediately after graduating for a tenure track job, which I realize how lucky I am to land a tenure track job just out of getting my PhD. And I mostly focus on cyber crime and digital forensics. So I do a lot of work with law enforcement, but also work with computer science people and tech people to kind of find evidence on digital storage devices.

02:27 Emily: What an exciting topic. We’ll hear more about that at the end of the episode, where people can learn more. So, you moved to Savannah for this position. You said that was four years ago. Is that right?

02:40 Kevin: Five years ago.

Homeownership Journey

02:41 Emily: Five years ago. Okay. And you decided when you moved there shortly after that you were going to buy a home. Can you tell us more about how you did that shortly out of graduate school and why?

02:54 Kevin: So, we moved here in 2014 and rented a house. Unfortunately, in 2015, my grandfather passed away and he was the last of my four grandparents. And he left my parents and his three siblings a fairly decent amount of money. And my parents decided to share some of that with me and my sister. So, we got this decent size chunk of money. It wasn’t a huge amount, but it was enough for a down payment on a house. And my wife and I, having so recently started our actual career jobs, feeling like we were more adulty than we really were, decided to use that as a down payment on a house. So, we shopped around the city of Savannah. We, we were leaning towards finding either a fixer-upper that we could get for cheap and put money into, or kind of a duplex or house that had something we could rent out.

04:00 Kevin: Our real estate agent showed us this house in the neighborhood we were currently living in, which is great, less than 10 minutes from campus, really nice houses. And it was neither of those things, but we both fell in love with it. It’s kind of a two and a half story, four bedroom, two bath, huge backyard, and where the backyard ends, there’s a tidal creek right behind it. It’s just swamp and woods. And it was just beautiful. And we just kind of both fell in love with it. So, even though it wasn’t what we were looking for, we decided that this was the house we really wanted.

Making the Down Payment

04:40 Emily: And with that down payment money you were able to do the purchase?

04:44 Kevin: We were able to afford the down payment, which was I believe 10% of the total purchase cost, which was listed at $160,000. And we were super, super good negotiators and talked them down to 159. So, we put, again, I want to say it was 10% down. And we got this house and we were so excited, but we sat through kind of the lecture from the bank on, “Here’s your mortgage payment and here’s what that’s going to consist of.” And we were really shocked at how little of our actual mortgage payment goes into the principal amount of the loan. I mean, so I have my latest house bill here and my monthly payment is $1,142. Of that $1,142, $233 goes to the principal, which, I mean, that’s what, 20% maybe? So, we were kind of shocked by that. And we were looking at the other kind of things that, that had to go and pay for.

Expected vs. Unexpected Costs

06:05 Kevin: And there was the stuff we were expecting, obviously interest is going to be a big deal. The interest on ours is $460 a month. So, we knew that was going to be a big deal. Taxes, of course we expected. Coming from Texas, the taxes were actually slightly lower than we thought they were going to be. Because Georgia has an income tax rather than relying on property taxes the way Texas does. But then the other things that got added in there are the stuff that really kind of shocked us. First off, because we had that beautiful tidal creek in our backyard, we were required to get flood insurance, which most homeowners insurance doesn’t cover floods. And since Savannah is a low-lying coastal city, plus we’re right up against that tidal creek, we were required by law to get flood insurance. The other thing we didn’t expect was private mortgage insurance. It’s like $200 a month for this private mortgage insurance, essentially because we’re first-time homeowners. And that will go away when we’ve paid the mortgage down to 80% of the level of the value of the house. But since we only put 10% down, getting from 90% of the value to 80% of the value is going to take years.

07:31 Kevin: And we’ve been paying for four years and we’re still, I don’t want to say nowhere close, but not nearly as close as we’d like to be to that 80% level that will allow us to take away that private mortgage insurance. So, that’s $200 a month we’re paying for essentially not having enough money. So, just all those things combined to create a mortgage payment that we really kind of weren’t expecting. Homeowners insurance, flood insurance, private mortgage insurance, all that stuff really adds so much to the monthly fee, which really hurts in the long run.

Mortgage Structure

08:11 Emily: Yeah. I just want to jump in and make a couple of comments for the listener in case they’re not that familiar with the structure of mortgages. You mentioned a couple shocking figures, like the amount of your monthly payment that actually goes towards principal is 200 some dollars. Whereas the amount that goes towards interest is 400 some, and people may not realize this, but mortgages are on an amortization schedule where the great majority of your payment in the first year goes towards interest. Very little goes towards principal. And that shifts over the course of the loan. So, in year 30, if it’s a 30 year mortgage, you’re paying a vast majority towards principal and very little towards interest and ultimately pay off the loan. So, it’s really like when you start over with new mortgages, maybe every five years or something if you move, that amortization schedule, you’re kind of always playing around in the paying mostly interest, very little in principal, part of the amortization schedule.

09:02 Emily: And that’s why it is so difficult, like in your case, to get from 10% equity up to 20%, so you can remove that private mortgage insurance. Because mostly what you’re paying, as you said, is towards interest. Plus, all these other things you had to add onto the mortgage. So, it’s really kind of, you know, people talk about the differences between the advantages of renting versus buying. But the thing is that in your case, and many others, when you have so much of your monthly mortgage payment that goes towards anything other than the principal, that’s almost like paying rent. It’s just money that’s out the door every single month that’s not really building your own net worth, your own equity in the house. It’s just stuff that has to go out the door to keep you in that house. And so I wanted to know, when you were sitting through this explanation from your bank–which actually it’s kind of cool that they gave you the explanation, honestly, like they were doing a little bit there to help educate you–how far along in the process were you, and were you ready to like run out the door or was that no longer an option?

Mortgage: A Little Extra Goes a Long Way

09:59 Kevin: It was no longer an option. But I was so ecstatic over finally owning a home that it didn’t quite hit me, what exactly it meant until I had made a couple of payments. The other thing was, it wasn’t until I think a year after we bought the house, my wife decided to go back to school. So, she helped put me through grad school. And then a year after I graduated and moved here and got this job, she decided to go back to school to become a nurse. Because what she did before, there’s really no job market for here in this part of the country. So, while she was still kind of working a semi-decent job before she went back to school, we were paying extra towards the principal every month, which I had been told was a very, very good idea. Because anything extra you can put in, especially at the beginning of a mortgage, really knocks down the long-term cost of the mortgage.

11:17 Kevin: So, we were able to put an extra, I can’t remember exactly how much, extra 50 or $60 a month towards the mortgage for the first year, maybe two years, that we were in the house. With her back in school, we really had to tighten our belts. We were not able to do that, but now she’s graduated. Just started her new job yesterday, in fact, and I’m really excited to be able to kind of go back to doing that. Putting even just a little bit extra towards that mortgage, I think, will help a lot.

Unforeseen Costs of Home Improvement

11:50 Emily: Yeah. Like you said, you get a lot of bang for your buck when you start paying down that mortgage at the beginning a little bit faster, at least until the point where you can get rid of PMI. I mean, that’s like a really big goal when you have a mortgage. To not be paying insurance on the behalf of the bank to insure against you, to not have to pay that makes a huge difference. Yeah. So, at least to get to that point. That would be amazing. So, you know, I mentioned earlier that your house has kind of turned into a little bit of a money pit, right? So, it’s not only the structure of the mortgage payment that you were learning as you got into the house, that, “Hey, not that much of this money is actually going towards principal.” But in fact, you’ve incurred a lot of other expenses that you did not really realize or factor in when you first got into the house. So, can you outline what those are, please?

12:38 Kevin: Absolutely. So, we were buying this house and we realized we wanted to do a bunch of stuff to it. So, right off the bat, as soon as we bought it, we knew we wanted to take out all the carpet because we hate carpet. And we wanted to replace a lot of the lighting fixtures because the house was built in kind of the mid-nineties. And it had those kind of classic, like little glass globe, things that were super cheap and in every house back then. So, we knew we wanted to replace those. We knew we wanted to paint a bunch of stuff. And that was when my wife and I kind of both realized that we don’t have those skills. We were both very nerdy in high school and college and we never got those, those kind of woodworking and electrician and, you know, I can barely use a screwdriver.

What You Pay is What You Get

13:29 Kevin: So, those skills are something that I really wish I would have had before I decided to buy a house. So, we rip out the carpet, and two big problems presented themselves. One, there were places where the floor was uneven and the carpet kind of hid that. But two, the stairs that we had hoped to just kind of refinish, were just kind of ugly two by fours that they had nailed down. So for the floors, we hired someone to come in and put in some vinyl flooring, which was, I was shocked at how much vinyl flooring costs. But you know, it’s still cheaper than hardwood. The stairs we replaced ourselves and the flooring was not installed properly. We just kind of found somebody on Craigslist or something and brought them in. And that was a really bad idea.

14:34 Kevin: If you’re going to hire someone to come in and work on your house, don’t go for the kind of cheap fly by night operation. Definitely, definitely try to find someone you trust or a company that has, you know, you can go on Yelp and find their reviews. Stuff like that. Then there were little expenses, like we had to replace the mailbox paint, because we wanted to paint a bunch of stuff. But yeah, when we first moved into the house, those were kind of these big expenses that we kind of sort of planned for. We had saved some money to the side that we weren’t putting into the down payment just for those improvements. But we went, I don’t want to say wildly over budget, but fairly over budget on that process.

Hurricanes and Fences and Air (Conditioning) – Oh, My!

15:30 Emily: So, you’re saying there were certain things that when you bought the house, you knew, okay, you hate carpets, you’re going to tear all those out. There were certain things that were obvious upon purchase you knew you were going to take care of, and you had prepared to some degree to do that with savings. What’s next? Were there other things that have come up in the years since then?

15:49 Kevin: So, we are in a coastal city and when we moved here we were told, “Don’t worry about hurricanes. Hurricanes never hit Savannah because we’re kind of tucked into the coast.” And then of course, since we’ve moved into the house, we’ve had two hurricanes. So, our fence, when we first moved in–and for a long time we had dogs. We are, are now dogless, unfortunately, rest in peace–but one of the reasons we liked this house is because it had a fence and a big area for the dogs to play in. But one of the hurricanes that came through kind of finished it off and knocked it down, or at least a large section of it down. So, we got our entire fence replaced which was thousands of dollars we weren’t planning on spending.

16:40 Kevin: And even though we had essentially hurricane insurance, the deductible on that is like almost $5,000, I want to say. So, it really wasn’t financially viable to use the insurance to fix that fence issue. The second problem is that the upper half of the second floor was an add-on. When they originally built the house, it was just the first floor and the main part of the second floor, the upper part was all attic space. The second owners of the house finished out that attic space and turned it into a fourth bedroom. What we didn’t know when we bought the house, and what the home inspection didn’t show, is that when they finished out that area, they had to move the indoor air conditioning unit. When they did that, instead of redoing the drain line, the way they should have, they just ran a new line from where it used to be to where it is now.

AC Repair Fiasco

17:50 Kevin: So, essentially, the drain line for the air conditioner goes from one part of the house, across the house to where the air conditioner used to be, down under the flooring of the attic, then back across the house to where the air conditioner is now to actually drain out of the house. We had no idea that had been done that way. So, we had all these problems with the air conditioner. Finally, we call in a good repair company and they come in and take a look at it. And they’re like, yeah, the drain lines are all bad. But also this air conditioner system is designed and built for a house of the old size. With the addition, you’ve added so many square feet that you really should move up, and it’s getting towards the end of its like 20-year life or whatever it was anyway.

18:45 Kevin: So, if we’re going to do all this work, it’d be a lot better in the long run to just replace the entire system. So, we said, “Okay.” So, we got a new indoor unit, a new outdoor unit. Ended up needing to rerun all of the ducts because when they had done the addition, they had messed up the duct work, new thermostats, whole nine yards. I think we spent $13,000 on essentially a $15,000 system. Then it started having problems and wouldn’t work. And we spent the next year replacing parts and getting service. And finally, finally, after a year they just replaced a huge chunk of the outdoor unit, all these things, but it took them a year in the South Georgia heat with no air conditioning before they finally figured out kind of what was wrong and how it was messing up. But essentially, we ended up with, as part of the replacements, they gave us improvements. So, essentially we got a $17,000 air conditioning system for $13,000. But that’s still $13,000 we hadn’t budgeted for, we hadn’t planned on. So, I think we got a six-year loan, interest-free, luckily, and that’s $230, $240 a month that we weren’t planning on. Which, right when my wife was in the middle of nursing school, was a very difficult financial burden to kind of take on unexpectedly.

20:31 Emily: Yeah. I was just going to ask how you actually did pay for that. I’m thinking about your mortgage payment and that whole system costs about what a year of housing cost for you. That’s I mean, a huge expense. So, glad to hear that you got some decent financing, it’s not going to cost you any extra in interest, but what a saga. And especially to live for a year without proper air conditioning, as you were describing. Are those the big things that you’ve had to lay out for the house?

21:00 Kevin: Those are kind of the big things.

Commercial

21:05 Emily: Emily here for a brief interlude. I bet you and your peers are hungry for financial information right now, especially if it’s tailored for your unique PhD experience. I offer seminars, webinars, and workshops on personal finance for early-career PhDs that can be billed as professional development or personal wellness programming. My events cover a wide range of personal finance topics, or take a deep dive into the financial topics that matter most to PhDs, like taxes, investing, career transitions, and frugality. If you’re interested in having me speak to your group or recommending me to a potential host, you can find more information and ways to contact me at pfforphds.com/speaking. We can absolutely find a way to get this great content to you and your peers, even while social distancing. Now, back to our interview.

Rule of Thumb for Annual Home Expenses

22:03 Emily: There’s a rule of thumb–and you might laugh at this, but maybe you’ve heard it before–there’s a rule of thumb that you should expect to spend on average on your home 1% of the value of the house per year. So, like average 1% of the value of the house per year on home maintenance repairs and so forth. Sounds like you probably have blown that out of the water every year you’ve lived there, right?

22:25 Kevin: Yeah. Oh yeah. So, the downside is we now have our garage doors, we have two garage doors, that need to be replaced because it’s Savannah, Georgia. Everything is wet here, constantly. I mean, it’s just moisture, moisture, moisture. It’s ridiculous. So, our garage doors are rotting out and we need to replace those. Our deck, for similar reasons. It’s not bad, but we’re anticipating that we’re going to need to replace it in the next couple of years. So, there’s more thousands of dollars of stuff that we’re kind of dreading and preparing for. The other things that have really shocked me are things like–we’re technically outside of the city limits, right? So, we have to pay for fire and EMS services directly. Instead of it being paid for through our city or County taxes, we have to pay, I want to say, it’s just under $300 a year to the fire and EMS service to come out. We have to pay for termite inspection yearly, or termite service yearly, which is hundreds of dollars a year. So, all these things have really combined. We didn’t think about it. Going from an apartment to a house you expect, you know, okay, rent, mortgage. There are going to be taxes and interest and principal. But then it seems like there are all these other fees and taxes and payments for things that you would never expect, having spent your entire life, or at least entire adult life, in apartments and renting places. It’s incredible.

Lessons Learned: Do It Right the First Time, Due Diligence

24:29 Emily: Yeah. I think a couple of the lessons that I’m hearing from this, that maybe the listener can apply. Two things. One is do the work right the first time.

24:38 Kevin: Yes.

24:39 Emily: Invest in quality from the beginning, and hopefully you won’t have problems or the replacement costs or whatever won’t come up so soon. Part of that was decisions that you’ve made, part of that was the previous homeowners’ decisions, but pay for it to be done right the first time. And the second one is–maybe, I don’t know, it sounds like you did what any reasonable person would do in terms of buying the home in that you lived in that neighborhood for a year prior to buying and you think you know where everything is, you know where are the schools, whatever you’re considering in your home-buying purchase. Just by living nearby, you’ve learned a lot of those things. But it sounds like you didn’t investigate–and why would you have?–the fact that these services were being billed directly instead of through the tax system, or all these other line items. Or, you know, maybe if you’d understood more about flood insurance, you would’ve told your real estate agent, “No, I’m not interested in anything next to a creek or whatever.”

25:37 Emily: I mean, those are not things you’re going to naturally pick up just by living somewhere. You’re learning this the very hard way. And so, I’m really pleased to be able to share your story with the listeners. Just say like, there are probably going to be more expensive than you think there will be. So, just plan for the unexpected, right? And prepare for that. But maybe do a little bit more due diligence to try to figure out what the peculiarities are of this city that you’re choosing to buy in. Like you were saying, well, people told you hurricanes never hit Savannah. Turns out, at least for the recent years, that hasn’t been the case. But I don’t know, I think you did what any reasonable person would do, so I’m not criticizing you. But I’m just really glad to hear this for anyone else who’s coming up on a home-buying purchase to do a little bit more to figure out what all these little nuanced expenses are going to be.

Do Not Skimp on Home Inspection

26:24 Kevin: Absolutely. The other thing I want to point out is home inspections. Do not skimp on the home inspection. We had a fairly decent one, but they missed a lot of these things where if they’d have been just a little bit more paying attention, a little bit more thorough, we would have known about these things in the contract negotiation process, not a year or two years or three years later. So, do not skimp out on the home inspection.

26:57 Emily: Yeah, definitely. So, I live in Seattle, so in the market here, at least in recent years, it’s been a sellers market, right? And a lot of people, as part of the bid that they enter, they waive inspections. It’s just something that no one wants to hold up the process, but even if you have to go that route based on what’s standard in the market, still do the inspection. Even if you don’t have it as part of the contingency or whatever, still do it so you know all these things upfront, like you were saying.

How Does Being an Academic Affect Homeownership?

27:28 Emily: So, I’m curious about how your position as a faculty member, as an academic, has played into these homeownership decisions or your ability to handle these things, I guess. So, it sounds like you got this tenure track position. Despite a little bit of upheaval with your university, you’ve maintained that and you bought a home where you got your tenure track position, probably what anyone would try to do, if possible soon after. So, yeah. How does being an academic affect this whole homeownership situation?

28:03 Kevin: When I was in grad school, I kind of bought into the belief that if you can find a really nice, good tenure track job you can stay at that university for a long time. Decades, if not your entire career. At the university I went to and the department I was in, there were a lot of professors that had been there for 20, 30 years. So, I was kind of expecting that kind of experience. So, when I moved here and was ready to buy the house, I was very much in this mindset of, “My family will be at this university working here for a long, long, long time.” So, in the University system of Georgia, you have an option between a pension system or a 401k.

29:01 Kevin: And if you’re going to be there longer than 10 years, the pension system is really the better option. So, that’s what I chose because I thought, “Oh, I’ll be here at least 10 years, no big deal. I’ll buy a house. I’ll be here at least the five or six years that it takes to really get enough equity in a home to make a profit when moving.” But I’ve come to kind of find out and realize that job-hopping and transferring positions is almost, or just as important in academia, as it is in private industry. Growing up in Austin, there were a lot of tech people. And tech people were all talking about, “Oh, you’ve got to move jobs every five years or every however many years.” And I thought academia was kind of exempt from that. And it comes to find out, it really isn’t. It’s depressing when you’ve been working at the same university for four or five years and they make new hires, straight out of grad school, hired at well more than you’re making. So, I wish I was able to move or at least have the possibility of moving. I wouldn’t necessarily want to leave. I love my job. I like living here. I like the university I’m at, but being so tied financially, through both the house and the pension, to this one job in this one place is something that even if I am going to stay here for the next 10 or 20 years, it’s still distressing. And it makes me feel like I don’t have options. It makes me feel like I’m stuck. Even if I want to be here, that’s still kind of a bad feeling, you know?

The Golden Handcuffs

30:55 Emily: Yeah. I definitely understand that. You know, sometimes people refer to the benefits or something that a job gives you as golden handcuffs. So, it’s like you feel, you feel tied to your job because you don’t want to lose the great compensation or the benefits, whatever. The pension is a little bit like that for you, but the house is on the other side of that. That’s not so much golden handcuffs as it is kind of an anchor. Until you get this equity up to a certain point, it’s going to be very–I mean, it’s not impossible–but you may take a loss, you may have to bring money to the table. Something, if you were to try to move without having a lot of years under your belt, paying this mortgage and getting the equity up there.

Would You Have Done Anything Differently?

31:36 Emily: So, I definitely understand what you’re saying. And I think it’s really great insight for other people who are looking to enter the job market that we think a lot of times as getting that tenure track position as like, “I’ve made it, this is it. That’s all I needed to do, and I’m going to be set for the rest of my career because I landed that one position.” And what you’re saying is, “Hey, that’s good for the first few years, but don’t think that you’re never going to apply for another job to advance in the way you want to.” That you might not have to move around, as you said, like what happens in the private sector. So, I’m really glad for that insight as well. And just, I don’t know, would you have done anything differently? I mean, knowing this. Now that you know this about your job and your feelings about it, would you still have purchased the house? Because it still kind of seems like the thing to do, right?

32:26 Kevin: Yeah, it does. It depends on what the alternative is. If the alternative was, you know, renting, I don’t think I would have. The one thing I might’ve done differently is look for a house with fewer of these incidental costs, right? So, if I wasn’t so close to the water, I wouldn’t have to do the flood insurance. If I wasn’t outside the city limits, I wouldn’t have to pay for the extra fire and protection stuff like that. I wish I would have known about those things in order to judge where to buy and which house to buy. Right? Does that make sense? So, it’s not that I regret buying a house. It’s that I regret not understanding exactly what the cost of buying this particular house are.

Best Advice for Another Early-Career PhD

33:13 Emily: Right, right. Yeah. Thanks for your insight into that. So, two questions as we wrap up here. The first is what is your best piece of advice for another early-career PhD? It could be related to the conversation we’ve been having, could be something else. What is that?

33:28 Kevin: Start putting money away as fast as you can. Start saving. It can be a 401k, it can be putting extra money towards just a stock trading account. Also, speaking of stock trading accounts, I found the Fidelity, I think it’s a bank, but it has a stock trading app thing. And they have a credit card where you get 2% cash back from every purchase that goes straight into the stock trading account. So, I put all my purchases on that and pay it off in full every month. So, I never pay a dime in interest, but I still get 2% into this longterm savings account. And then once I build up enough money from that I can purchase a stock or an exchange-traded fund or something like that. And then I never touch that. That’s all just socked away money. That’s essentially free money. As long as you’re paying off that card every month, that’s essentially free money. So, definitely do something like that. It can be a travel card that gives you miles on an airline. But make sure it’s paid off in full every month.

Where Can People Find You?

34:50 Emily: And second question, last one here, is where can people find you?

34:55 Kevin: So, I’m on Twitter with the username @CyberCrimeDoc, and I’m on YouTube with the channel name, Arresting Developments. And I actually do have a group I just started not too long ago called Americans for Election Reform. It’s a big political focused on elections and election security and making sure all Americans vote and all votes count. And that is on Facebook and Twitter.

35:29 Emily: All right. Well, thank you so much for joining me today, Kevin, and for telling us this very easy to learn from story.

35:35 Kevin: Absolutely. Thank you so much having me. I really appreciate it.

Outtro

35:38 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind-the-scenes commentary about each episode. Register at pfforphds.com/subscribe. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

The Necessity of Both Economic Justice Advocacy and Personal Financial Responsibility

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In this episode, Emily interviews Dr. Ian Gutierrez, a PhD in clinical psychology and former union leader at the University of Connecticut. While in graduate school, Ian served on the bargaining committee for the newly formed graduate student union, and viewed a higher income as the solution to his personal finance challenges. During his internship year, despite earning about what he had as a graduate student, Ian challenged himself to live within his means and pay down his previously accumulated debt and in the process reformed his practice financial attitudes and practices. At the end of the episode, Ian and Emily discuss the importance of both advocating for economic justice and, to the extent possible, having good personal finance practices.

Links Mentioned

grad student union

Teaser

00:00 Ian: It was about at that time when all of the failings of my financial planning became extremely evident. Suddenly I realized that I had to live within my means, which was sort of embarrassing to say 29 or 30 year old.

Introduction

00:23 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season six, episode four, and today my guest is Dr. Ian Gutierrez, a PhD in clinical psychology and former union leader at the university of Connecticut. While in graduate school, Ian served on the bargaining committee for the newly formed graduate student union and viewed a higher income as a solution to his personal finance challenges. During his internship year, despite earning about what he had as a graduate student, Ian challenged himself to live within his means and pay down his previously accumulated debt. And in the process reformed his financial attitudes and practices. At the end of the episode, Ian and I discuss the importance of both advocating for economic justice, and, to the extent possible, having good personal finance practices. Without further ado, here’s my interview with Dr. Ian Gutierrez.

Would You Please Introduce Yourself Further?

01:23 Emily: I have joining me on the podcast today, Dr. Ian Gutierrez, and Ian and I first connected actually when I was looking for guests for my “Healthy, Wealthy, and Wise” episode that came out season five, episode two. That was the one that was a compilation episode, with a lot of people and had a couple of guests talking about unions. Ian and I connected and we had such a great conversation that I was like, “Can we just have a whole episode, just your own interview instead of trying to cram all you have to say into just this little tiny spot. So that’s how this episode came about. So Ian, will you please introduce yourself a little bit further to the audience?

02:01 Ian: Sure. Well, first of all, thank you for having me on the podcast. This is very exciting for me. My name is Ian Gutierrez. I have a BFA from New York University in recorded music, which was actually my first love. And then I got my Master’s degree in psychology from the New School, prior to becoming a doctoral student at the University of Connecticut, where I was enrolled from 2012 to 2018 when I defended my dissertation. So I now hold a PhD in clinical psychology from UConn. Shortly following the completion of my clinical training at the Veterans Affairs Medical Center in Cleveland, Ohio, I was very briefly a postdoctoral fellow at the Uniform Services University of the Health Sciences in Bethesda, Maryland. And I am currently a research psychologist with Tech Works LLC in the Washington DC area, where I conduct psychological research on mental health and resilience in support of our nation’s service members.

The Intricacies of Unionization for Graduate Employees

03:03 Emily: It sounds like a fascinating career path, something that would be great to explore at another time, but we’re actually going to go back to your graduate school days at UConn. And of course you were involved at that time with the union. Can you talk a little bit about what the climate was UConn at that time and why you got involved with the union movement?

Impetus for the Union

03:22 Ian: Sure, absolutely. I would actually say, first and foremost that it was one of the best parts of my graduate school experience was being involved with the graduate student unionizing effort. I often tell people that the experience that I had negotiating our first contract after we unionized was one of the best classes I ever took in graduate school. I first got involved with the unionizing effort in 2013. I was serving on our university’s graduate student government, and at the time the university was moving, or attempting to move graduate students over from a state-based employee health insurance plan into a student health insurance plan. Some people call it a SHIP. And bottom line was that we were getting worse health coverage for a higher price. Within the graduate student government we tried to advocate as best we could, but parallel to that, a number of other students thought that maybe unionizing was the way to go.

04:37 Ian: Now, personally, I grew up in a union family. All of my parents are union members in the theater business, actually. So that naturally struck me as the far more effective way to go about advocating for what we needed. I joined the organizing committee for our nascent union at the time and we, after interviewing a number of international unions, where you talk to the Communication Workers of America, Service Employees International Union, AFT, the American Federation of Teachers, we ultimately decided to organized with the United Auto Workers, which had had a lot of success in the area, unionizing graduate students, for instance, just up the road at the University of Massachusetts, Amherst. So we organized our union in 2013 we ran a membership drive, a card counting campaign, to get legal recognition for our union, and that it was a very successful campaign. Very exciting. The state of Connecticut recognized our union in April of 2014, and from that point we moved into the bargaining process with the university administration. At that point, ran to be one of the six members of the bargaining committee, and then over the course of the following year from starting about August of 2014, up until June of 2015, we met with the university administration, I don’t remember exactly, a dozen times, maybe more, as we negotiated our first contract. We were fortunate enough to successfully negotiate our first contract with the union in 2015.

Issues at Play in Union Negotiations

06:29 Emily: Thank you so much for giving that context. I’m wondering when you, when you went into negotiate that first contract, was it mainly the health insurance issue that you all were focusing on, or were there some other issues that also came into play?

06:42 Ian: When we went into negotiating our contract with the administration, of course health insurance was a major issue for graduate students. Of course, it wasn’t the only one. I think actually the university was quite surprised by the litany of issues that we brought up and the many things that we wanted to negotiate over. Healthcare, in the end, turned out to be a remarkably, I won’t go so far as to say easy, but there was a very equitable solution that we were able to come to. In this particular case, the state of Connecticut had what they called the Connecticut Partnership Plan, where the state would work with local governments to work out affordable health care plans for local employees, and so that provided a very nice rubric that could be applied to graduate employees at the university.

07:39 Ian: But that was again, not the only issue that we covered. I think the biggest issues that really came up for us were fee waivers, and then a lot of the rights and protections for the union itself. One of the major differences from being a graduate employee who’s not unionized to being graduate employee who is unionized is that there’s a clear grievance procedure, which in my opinion is actually one of the strongest components, one of the most important components of being unionized as an employee anywhere, is that there’s some kind of legal recourse when something comes up in the workplace, and there’s very clear rules about who to go to, who to raise the issue with, and how the difference can be resolved.

08:34 Ian: But second to that, of course money talks, right? Fee waivers for us was, I very clearly remember, was sort of the last issue that we negotiated over it at some great length and turned out to be the hardest thing for us to come to an agreement on. We ended up coming to a resolution where, what the university called it’s infrastructure fee, which was a $460 per year fee, ended up being waived for graduate assistants. And then the university provided GAs with a hundred dollar credit every year, that ramped up by a few dollars over the course of the contract, to help offset the cost of fees. So those were some of the major issues that came up. I think that barely scratches the surface and certainly we could talk for a long time about the, the 30 to 40 provisions in the contract, but healthcare, tuition and fees, and a grievance procedure where, I think, some of the biggest issues that we really cared about.

09:45 Emily: Yeah, I think all of those are also really common ones to come up in these negotiations across many universities. And I really appreciate your point about the grievance procedure being one of the most important components because it is like the wild west out there in academia. I mean, there’s all these power structures and imbalances and just lack of clarity, and so that actually sounds really great that you would have that in place after that point. Something I wanted to ask you about is from your position at the bargaining table, how did you come to understand that the university, or at least that university, that administration, the people who you were talking with, how did you understand that they viewed graduate students and especially around their financial issues?

Grad Students vs. the Administration

10:27 Ian: Yeah, really interesting question. That to me was one of the more shocking components of the experience. You know, university administrators talk a lot about how important students are to the university, and will say things about how the student body is the lifeblood of the university and the reason that it exists, of course, and there’s a whole political rhetoric around the way in which administrators talk about students. And I think a lot of that comes primarily from their dealings, especially with undergrad, what the undergraduate population, where things are a little bit cleaner. Undergraduates are the public consumers of the education that the university is providing. And they also make up the majority of the student body at almost almost any university.

11:20 Ian: With graduate students, it’s a little bit more complicated because on the one hand graduate students are students. We are receiving an education, but in our roles as research assistants, teaching assistants, graduate assistants, generally, we’re also employees. So things get a lot murkier there and they’re very comfortable talking about us as students. They’re much less comfortable talking about us as employees and at the bargaining table where we’re really presenting fully and in that context only as employees, a lot of that kumbaya rhetoric about us being students really falls away remarkably quickly.

12:03 Ian: At the same time there’s a lot of nostalgia that comes up for a lot of these administrators because most of them, not all of them, but most of them, were graduate students at one point, too, but a lot of their touchstones to what the graduate student experience was like, is what it was like in the sixties, seventies, the eighties, the nineties. And they were looking at a much different financial picture then, than graduate students are looking at now. Not only that, but the demographic of graduate students has in many cases shifted pretty dramatically as well. So it’s not like you’re getting…I mean, who’s ever heard, nowadays of somebody getting out of school through PhD at the age of 24 or 25. Impossible? No, but pretty rare. A lot of folks are getting their PhDs, I know at least in clinical psychology, the average age is about 31. So we’re talking about folks who might already have kids, maybe elderly parents to care for, potentially. Possibly chronic health problems.

13:08 Ian: We’re looking at a much different, a much more complicated picture of who we are, and for the administrators to come to the table and understand who we are, I think was a leap for them, in as much, to be perfectly frank as it was for us to understand the complicated financial picture that the university has to deal with. And I want to be clear in saying that, well certainly there are many acrimonious relationships between graduate employees and administrators at many institutions. I actually came away from the process being more proud of being a graduate of the University of Connecticut, because I think that, while we didn’t always see eye to eye, the administration was really fair in their dealings with us, and I think that we returned that to them in kind. It was certainly a learning experience for us, and I like to think of what’s a learning experience for them as well.

14:11 Emily: So fascinating. Thank you so much for adding that. And I am glad to hear that it wasn’t totally an adversarial relationship there at the table. I actually thought you might’ve been going in a little bit of a different direction when you mentioned the shifting demographics of current graduate students versus maybe some decades ago. Because I’m thinking about more like first generation students getting to graduate school and earning their PhDs. Also people who don’t necessarily come from families that can provide them financial support in the case of an emergency or just on an ongoing basis. I don’t know the stats on this, but I would assume that’s more common now than it was some decades ago, as you know, diversified who’s earning a PhD, which is a great thing, but it certainly comes with different sets of issues and problems then maybe people who got their PhDs some decades ago were facing

14:59 Ian: Just to jump in on that point, I think it’s also really important and one of the other really key components of what makes me proud to have been a part of that union too, was the union’s strong focus on diversity and representation. I understand full well that as a white man, receiving a PhD at a university that I come to the table with a lot of privilege and a voice that some other people might not have. But one of the things that really struck me in the way that our union organized is that the people who in my personal view really made it happen were the student employees of color, and the women who were in our organizing campaign. And it was really actually two women in particular who really made our union possible, and in many ways, to the extent that I was a part of it, I think I sort of rode on their coattails. And when we were negotiating at the table, equal protection policies for our students who might have green cards, or students of color, making sure that there was bathroom access for the trans community at the university — all of these things were a very large component of what our union was about. And I’m very proud of that.

Commercial

16:35 Emily: Hey, social distancers, Emily here. I hope you’re doing okay. It took a few weeks, but I think I have my bearings about me in my new normal. There is a lot of uncertainty and fear right now about our public and personal health and our economy. I would like to help you feel more secure in your personal finances and plan and prepare for whatever financial future may come. You can schedule a free 15 minute call with me at PFforPhDs.com/coaching to determine if financial coaching with me is right for you at this time, I hope you will reach out, if only to speak with someone new for a few minutes. Take care. Now back to our interview.

Personal Finances in Grad School in Relation to Unionization

17:21 Emily: Okay, so you’re in graduate school, you’re at the bargaining table, you’re working for better benefits, better processes, higher stipends, fee waivers and so forth. That’s one aspect of personal finance, right? What income is coming in, what your benefits are and so forth. What was going on with you? How were you handling the money that you actually received at that time?

17:43 Ian: Oh man. I would say that despite my heavy involvement in the union, I would mostly describe my practice for personal finance in graduate school as primarily relying on some degree of magical thinking. I didn’t really have a theory of the case regarding my personal finances really in any sense. I had a big picture sense that “more money, good, less money, bad,” but I never had any kind of robust plan on how I was going to move away from debt and towards wealth. I think the implicit thought process that I had was, well, I’m a graduate student and I’m poor and I’m in debt now, and somehow it all kind of come out in the wash after I get my degree and get a real job.

18:40 Emily: I think that’s super common. That sentiment is everywhere in graduate training.

18:47 Ian: And for me, even thinking about personal finances, a component of my life was…I engaged in a lot of avoidance around my own money management. And I think, as I have read into more financial guidance, you know, your Dave Ramsey or your Suze Orman’s or whoever — where do they start? They always start with, in a budget you want to first take a look at how much money you think you have coming in every month. Well, personally, speaking personally about my family background, my family worked in theater and even though you might be a part of a union, how much money you’re making in a month, you don’t know how much money you’re necessarily making in the next week or two weeks. You don’t know when your paycheck is coming and when it comes, you don’t necessarily have the best idea of how large it’s going to be. I never really had a financial budget education from my family background. But then sort of even more strikingly, I never had it in high school. I never had it in college. I never had it in graduate school. I just never had it, which, for being a pretty well educated person, still kind of leaves me. floored. Talking about money, it was almost like talking about sex. It was like everywhere and defining the culture, but you couldn’t actually get a grasp on what was going on.

20:34 Emily: That’s a great analogy.

20:34 Ian: Really striking. I think it really is because money is so personal and it’s such a component of who we are that we all have a lot of the feelings — good, bad, otherwise — around what it says about who we are and our understanding of what our life is and where our lives are going. Long story short, I just really engaged in a lot of avoidance around it, and I also think that part of the way that my own income from graduate school was structured led me into some poor practices as well. For one example, I received half of my income from a GA stipend that I received every two weeks, like a paycheck, but then the other part of my income I received from a fellowship check, which came in these two big checks every year. What it sort of led me to believe was that, well, as an adult, twice a year, you’re just going to received this huge windfall, so I can just spend up a lot of money on a credit card, and, well, no big deal because I’m going to get this big windfall every August and every January. Come to find out, at the end of this golden brick road, that’s actually not what happens in the course of typical adult living. Suddenly, after graduate school, I had this student debt and the cavalry’s not charging over the hill anymore.

22:18 Emily: That’s so interesting. I haven’t interviewed anyone before who’s spoken about the pay frequency, which I mean what you described as maybe a little bit unusual, but there’s plenty of people who deal with a couple of times per year, big checks coming in, or maybe just a pay frequency that they were unfamiliar with, like monthly instead of biweekly, or just any kind of shift. It’s interesting just to hear how that impacted actually the way that you handled your money. Of course there are many budgeting techniques to deal with this and that’s a conversation with me for another time. But I’m really curious now to hear about what actually caused you to change these attitudes in this behavior. Was it getting out of graduate school and realizing that you had a steady paycheck and it wasn’t ever going to be these windfalls? What was your motivation to start exploring the subject area?

23:05 Ian: Well, the one thing that I did decide, and this is a little bit particular to the way that graduate education is structured in clinical psychology, is that if you’re pursuing a doctorate in clinical or counseling or school psychology, you have to complete a year long internship. Most people move for this year long internship and the internship pays a stipend that is roughly similar to what you would get paid as a graduate assistant, depending on locale. It’s anywhere from $20 to $30 grand a year. When I made this move, I knew that I wasn’t going to be enrolled in enough course credits to access loans and I can either fork up a bunch of money to take on six credit hours or whatever it was, so that I could have access to student loans, or I could not sign up for those credit hours and not be eligible for loans.

24:03 Ian: I chose to not sign up for the credit hours and not be eligible for loans. I sort of took the cold turkey approach to student loans. And it was about at that time when all of the failings of my financial planning became extremely evident, because now I wasn’t receiving my windfall fellowship twice a year and I had cut myself off from student loans and a lot of my credit card balances were fairly high. Suddenly I realized that I had to live within my means, which is sort of embarrassing to say as a 29 or 30 year old, but that’s part of the reason I’m here on the podcast saying it, is because I know that my assumption in life is that if it’s affecting me, it’s probably affecting someone else. I can only imagine that there is a silent, I don’t know that it’s a majority, but a silent plurality, of current or former graduate students out there who have also suddenly realized at the ripe age of 30, that they know nothing about financial planning, have been behaving, you know, somewhat irresponsibly, and now they’re in a bad situation.

25:26 Ian: I never really took myself as someone who lived wildly outside of my means. I bought and paid off and used car and sure, my wife and I would go out dinner from time to time, but I wasn’t living the high life by any stretch of the imagination. And yet still, after all of that, I realized that I just didn’t have any scheme for how I was going to manage any of this. To keep on with the language of addiction, and there’s certainly many parallels to be drawn between credit cards and addiction, to be sure, I had sort of hit a rock bottom, where I suddenly realized that I need to come up with a plan, not only so I can pay this stuff off, but so that I can build and save for the future.

26:20 Emily: Yeah. Thank you so much for sharing that because I think you’re absolutely right that many people are waking up at some time or another to realize that in the same way that you did. So first of all, average American kind of thing, a lot of people don’t live within their means or they do in some aspects of their budgeting and they don’t in other. Like they are racking up credit card debt and then occasionally will pay it down, and there’s this cycle there. That’s pretty common. But I think that the graduate student experience sort of exacerbates that mentality. I think academia tells us that well, while you’re a graduate student, even to some extent while you’re a postdoc, you’re excused from the general financial responsibility that you might feel at another stage or at another time in life because well, you know that your pay is going to be low and so what expectations can you really have of yourself when your pay is so low. That’s one aspect of it. The other one is, as you mentioned, the access to student loans, which I think that if people aren’t necessarily using them, they may kind of forget that they do have access to them all the way through graduate school really. But it is there as a backstop, as a good decision or as a bad decision to take it out. You really are given an out all through graduate school that you don’t have to live within your means, unless you choose to, because the culture is telling you you don’t have to do, you have student loans there if you need to take them out. It kind of just contributes to that overall problems. I definitely don’t think you are at all alone.

27:46 Emily: I really think about myself going into graduate school. I very intentionally told myself I’m going to live within my means. And I actually thought about it that way at that time, for various reasons. But that was partially because I had a break between undergrad and grad school, where I had to live within my means. I didn’t have access to student loans, and so it was like, okay, I’m just going to carry forward into my graduate degree with what I learned when I was out of school. But if you don’t have the same attitudes that I do or didn’t have exposure to the same stuff, or you went continuously from college to graduate school, you may not have had the wherewithal to even think about it that way.

Personal Finances After Grad School

28:22 Emily: Okay, you’re getting into your internship year, you don’t have access to the loans, you have the high credit card balances, you’re realizing you actually have to live within the paycheck — what did you do? How did the story evolve?

28:36 Ian: Well, let’s see. I would say that I didn’t start by coping with it in a very…I mean, despite my training in clinical psychology, I want to say that I dealt with it like in a very logical or sensible way. I think mostly I felt terrified, and then anxious, and then afraid, and then hopeless, and then angry, and I cycled through all of this stuff. That was my first reaction, and of course none of that was really particularly helpful. Eventually, I took out a Dave Ramsey book from the library. And I would say that I have mixed feelings about his guidance. I certainly have mixed feelings about prosperity gospel, for sure. But I think the basics, like the super, super basics of what he, or I mean really anyone — him, or Suze Orman, Gaby Dunn — any of these folks out out there, is that the 101 clearly gets you on the right path of figuring out how much money you have coming in every month, determining your expenses, and figuring out what you need to do to balance that equation. There were some other components that I found particularly helpful, where my feeling was, I had heard about this thing called debt snowballing with credit cards and I knew that I wanted to do that, but reading, at least based on Dave Ramsey’s recommendation, that if your finances are really a hotness, which that’s me, the first thing you want to do is save $1000. Save enough money so you have some kind of stop gap if car breaks or unexpected medical bill or what have you.

30:41 Ian: I think that’s what really got me started with it, but I do also want to say that what also got me started with it was after graduate school, having an income that gave me enough hope that I could pay down some of these debts, which I think brings me sort of full circle to a point of balance in my own way of thinking about finances, where I personally believe that true financial responsibility is not just about managing your own finances, but also advocating for greater economic justice. That they’re not separate. Blaming all of your financial problems on the world and the way it is, is not the healthiest way to look at things. Viewing your finances as a personal responsibility that you, yourself need to carry like Atlas to the end of time, come hell or high water, no matter what else is going on out in the world, I also don’t think it’s particularly healthy.

31:52 Ian: There needs to be a balance where we can say to ourselves that the world can be a cruel and unfair place. We have to do whatever it is that we can to live a financially healthy life now, while advocating and fighting for a better future for ourselves and for our children. Even in sort of tying it back to my time in the graduate students union, if I have two legacies that that I left at university of Connecticut, one is my dissertation, which is going to metaphorically collect dust on a server, because the likelihood that anybody will read it except for figuring out how to format own dissertation is pretty low. But the legacy of knowing that we have left, that I and all of the other students who worked together, hand-in-hand, to create a union so that future students could have a more prosperous future while they were in graduate school, that’s something that I can really look back on with pride. I think coming to that sort of healthy balance for me is where I’m currently at in my own thinking about financial health.

33:15 Emily: Yeah, thank you so much for that articulation, that was absolutely fascinating. And I think I also am going on a similar journey to come to the same place, but starting from the opposite side of, okay, just keep your head down, focus on your own business, and not necessarily look up at the wider picture as much. I’m sort of emerging from that viewpoint. Thanks to a lot of these interviews that I’m doing through the podcast, it’s been really a big growth experience for me.

33:45 Emily: What I wanted to ask you about though is in coming to that healthy place of being able to do both of these things, what you think about the idea of the necessity of having your own personal finances in the best shape that they can be in as enabling you to go out and do that good work in the world and advocate for others. I won’t say it’s impossible to do the latter without the former, but I think if you come from an area of personal strength, that it just further enables you to do that work. What do you think about that?

34:17 Ian: I like that idea. I think it resonates with this idea that to help others you need to help yourself, like on the airplane where you’ve got to put the oxygen mask on yourself before you help somebody who’s sitting next to you. I think that that can be true. I don’t think that one needs to preceed the other, however. I think that it’s important that we have a broader conversation, both within higher education, but within society as a whole, about the relationship between economic justice and the economic structures that we’re embedded in, and our own personal financial health. I think, actually, that unions could be a really nice and really good nexus at which students can find that, because at least to me, if a university administrator who’s making $200,000, $300,000 a year comes and lectures me about financial responsibility, my response is not going to be, Thank you, I appreciate that. As a graduate student, my response to that would be, go take a hike, to put it politely.

35:46 Ian: However, I think if unions can sell this idea that a stronger union, a more just economic society is one in which its advocates and its members and its stakeholders are able to responsibly manage their own finances, I think that’s really important. While, at the same time recognizing that there are some situations in which financial responsibility is not itself always the primary problem for someone who’s having financial difficulties. A few examples that come to mind are if you have a child or a loved one or yourself who has had a severe medical emergency and suddenly you have a six figure bill put on your doorstep, the problem there is our healthcare system, and not necessarily how you’ve managed your own money. Of course you still have to come up with a solution and that’s important, but let’s not lose sight of the big picture.

36:59 Ian: I think it’s also important that we recognize the impact that mental health can have on a person’s finances. While I was in graduate school, one of the things that I studied was gambling disorder, for instance. The processes that underly gambling disorders, I mean, I’m sure there are graduate students out there who have issues with gambling, but sort of more broadly just than gambling, if you think about shopping addiction, any kind of mental health problem that might lead to episodes of irresponsible financial behavior. Bipolar disorder would be another one that would fall very neatly in that category. We have to make enough room within our economic justice advocacy to recognize that there are people for whom their financial problems are not primarily caused by a lack of what you might call personal responsibility. I think we can come at it from both directions, but part of getting folks who are able to be financially responsible, to be financially responsible is to have the right vehicle for learning about that, that says the world can be a terrible and unfair place, but in light of that, in recognition of that, let’s help give you the skills to thrive to the best of your ability, financially, in spite of that adversity.

Best Financial Advice for Graduate Students and PhDs

38:27 Emily: I’m so glad you put that in the larger context. I’m really glad that we took the time for that. So as we wrap up the interview, what is your best financial advice for maybe a graduate student or another early career PhD, perhaps something that you’ve learned, post this transformation after you’ve reformed your own practice of personal finance?

38:50 Ian: Sure. I would say that I have three small pieces of advice. The first is keep track of everything that you spend. And this is just personally, I think if you keep track of every little thing you spend, you really understand where your money is going, and it starts to sort of become like a fun game of saving money, where you can go “Oh, well, you know, I could spend, you know, $4 at Starbucks or I could buy a bag of beans and make a cup of coffee at home for 25 cents.” That’s sort of my simple suggestion.

39:29 Ian: Number two is forgive yourself and it’s never too soon to start. Again, sort of having worked in the world of recovery, it’s never too soon to start. Whether you’re 22 and just thinking about graduate school or whether you had gone back to graduate school and you’re 37 and you have two or three kids and you’ve never really seriously considered how to build wealth, it’s never too soon to start.

40:07 Ian: And then number three, my final point would be make economic justice advocacy a core component of your own financial responsibility. Really own the idea in your heart, that taking care of others is taking care of yourself, and taking care of yourself is taking care of others. And in that spirit, hopefully, all of us can create a more economically just life for graduate students in higher education and more broadly, in society at large.

40:45 Emily: Thank you so much Ian. I’m so glad to learn from you and to have your perspective here on the podcast. So thank you so much for giving this interview.

40:53 Ian: Thank you so much. If you would like to, you can follow me on Twitter at @ianagutierrez and it’s been a real pleasure to be here.

Outtro

41:02 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the personal finance for PhDs podcast. There you can find links to all the episode show notes, and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind the scenes commentary about each episode. Register at PFforPhDs.com/subscribe. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is stages of awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC podcast editing and show notes creation by Lourdes Bobbio.

Learn From This Poor Kid-Turned-PhD Student’s Different Perspective on Frugality and Debt (Part 2)

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In this episode, Emily interview ZW Taylor (Zach), a PhD student in Educational Leadership and Policy at the University of Texas at Austin. As a child, Zach identified as a “poor kid” and never thought higher education was for him. His upbringing and winding path through community college and his bachelor’s and master’s degrees taught him lessons about money that he has carried into his life as a PhD student – for better and for worse. In this second half of the conversation, Zach gives detailed and unique financial advice to prospective and rising graduate students on evaluating stipend offer letters and selecting housing. He was determined to not go into debt during his PhD, so he thoroughly investigated his stipend offer letter and the socioeconomic layout of his new city before accepting the offer. Finally, Zach shares his vision for the future of his finances once he’s done with his PhD and earning a significantly higher paycheck.

Links Mentioned in This Episode

PhD research housing

Teaser

00:00 Zach: If they want you and they offer funding, then in a different side of the same coin, they should be able to tell you specifically what you’re getting, because how can you budget, how can you plan without knowing what your income is? I mean, it’s incredibly important. So to your point, encouraging PhD students to be their own best friends and their own advocates and be very clear about what you’re getting before you go.

Introductions

00:29 Emily: Welcome to the Personal Finance for PhDs podcast, higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season five episode eleven and today my guest is Zach Taylor, a PhD student in educational leadership and policy at the University of Texas at Austin. Zach has such a unique perspective and so much wonderful advice that I’ve split our interview into two episodes, last week’s and this one. In this episode, Zach gives detailed and unique financial advice to prospective and rising graduate students on evaluating stipend, offer letters and selecting housing. He was determined to not go into debt during his PhD, so he thoroughly investigated his stipend offer letter and the socioeconomic layout of his new city before accepting the offer. At the end of the episode, Zach shares his vision for the future of his finances once he’s done with his PhD and earning a significantly higher paycheck. Without further ado, here’s the second part of my interview with Zach Taylor.

Financial Advice for Early Career PhDs

01:30 Zach: You know, in terms of advice for other early career PhDs, in terms of saving money and thinking about going to grad school, especially with the kind of frugal mindset is I was not going to go to grad school one, if I had any debt. That was just something that I had always thought to myself that if I’m going, again another childhood lesson, if I’m going to pay for it, I’m going to pay for it in cash and I’m not going to take out a loan. My best advice for early career folks who are thinking about the PhD is if you can work before you go to grad school and pay down any undergrad debt you might have. I know it’s not possible for some folks, but try your best to get some work experience and pay down that debt.

Further reading:

02:18 Zach: And then when you’re thinking about doing the PhD, do some of the same leg work that I did. Investigate the city — where is public transportation? Where are groceries? How can you get around? Talk with other folks who have been there for a couple of years. You know, one reason I came to UT Austin is that everyone was eager to give me their perspective. I mean, when I asked people how do you like living? How much do you spend? Where do you live? How do you get to school? No one held information back from me. Everyone was so willing to share because I think you want to help other folks out. So ask questions and be inquisitive and see where you can make it work financially. But then when you make that choice, I made the choice that I was going to go to a funded PhD program. I was going to work through. I wasn’t expecting just to not have to have an assistantship. I’ve worked all the way through, but I’m also not gonna have to take out any loans. And I think if you have the right combination of work experience and academic experience in certain fields, you can find those programs that are very, very low cost or no cost and be able to work through.

03:27 Emily: I just want to add a couple of comments on those pieces of advice, starting with your most recent one. So in the STEM fields and engineering, where I’m coming from, there’s this advice I guess, that people sometimes say to a prospective graduate students, which is that an acceptance without funding is a tacit rejection. Like if you are not offered funding along with your offer of admission, they don’t really want you there. And that’s typical in those kinds of fields. And at a certain, I’ll say tier of university. Not every graduate students — I mean some people do either take, you know, fully pay for their PhDs on their own, like there’s no funding package offered or they go into a situation where they know, okay, sometimes there’s going to be funding, sometimes there’s not going to be, or okay I’m going to have funding to a degree but I’m also going to have to do X, Y, Z to make up the deficit.

Emily: It’s really hard for me to ever say something as blanket as don’t go to a PhD program if you have to take out debt, because I just, I want to allow for individual situations. But I mean it sounds like from your perspective, even being in a totally different field than I’m coming from, you were still determined, I’m not going to go to graduate school if I have to take out debt. It’s just not going to happen under those circumstances. So you were very selective about where you applied slash the programs that you were actually considering going to, to make sure that you could make it happen in that way, even though it did in your case involve outside work as well.

What to Research When Choosing a Program

04:59 Zach: Absolutely. And one thing that I really insisted upon before I came and I don’t, know of too many other young PhD prospective PhD students who do this, but you really have to push the graduate coordinator or someone in financial aid. Know exactly what you’re getting. It’s really easy to say you’ll have an assistantship and it’ll provide a stipend. After taxes and benefits, how many specific dollars am I getting? When in the month am I being paid? Am I being paid biweekly or monthly? Am I paid over the summer? What are the opportunities for employment over the summer? As someone who is going to embark on a five or six year journey, they owe that to you. They have the information, they can provide that to you.

Zach: Before I came I was very, very explicit in saying, if I’m going to leave this job that I know that I like and I’m going to forego wages for five years and give up a salary and not be able to save any money, what am I specifically getting? What are the specific opportunities? And then matching them up with the area and saying, okay, I can make this sacrifice for four or five years. Yes, I’m going to forego wages and a savings, but I’m also not going to be in so over my head or I’m going to feel pressured to make choices that I wouldn’t normally make. And you know, Emily, to your point, it’s absolutely been the case in my experiences and other classmates that there have been times where they’re unclear about their funding package because it wasn’t made specifically clear when they were admitted. Kind of that tacitly, if you’re not fully funded, we don’t fully want you. If they want you and they offer funding, then in a different side of the same coin, they should be able to tell you specifically what you’re getting, because how can you budget, how can you plan without knowing what your income is? I mean, it’s incredibly important. So to your point, encouraging PhD students to be their own best friends and their own advocates and be very clear about what you’re getting before you go.

07:10 Emily: Oh my gosh, I’m so glad that you made this point even more explicit because it’s one that I talk about frequently during admission season. Check the show notes, if you are a prospective graduate student because there will be links there to further articles and workshops and resources that I have on that exact topic of figuring out exactly what your offer letter is saying to you and asking questions when there’s a lapse in information in the offer letter. And I mean, to your point, pay frequency. I mean that’s not even something that you would necessarily think about, but it’s really important once you’re actually on the ground and doing that budgeting. I’m super glad you brought that up.

Further reading/listening/watching:


Emily: But to go back to one earlier point would you mentioned which was paying off debt and working potentially before starting graduate school. I totally have to concur on this because, now student loans I’ll put in one basket, okay, because student loans can be deferred while you’re in graduate school, but other kinds of debt — credit card debt, car debt, any other kind of debt that you have to be making payments on during graduate school — do everything within your power I would say to clear that before getting into graduate school because the stipend is already so meager, you don’t want to have ongoing payments that you don’t have to, once you’re in that situation. And then of course the student loans in another basket, if it’s at all possible to pay down part or all of them are maybe the ones that the highest interest rate or just to make some kind of progress on that student loan debt, if you’re carrying a lot of it, before you start graduate school. It’s an amazing step to take. It’s a gift to yourself. Me personally, I had some student loans coming out of undergrad. I was sure to pay off all of the unsubsidized student loans before I started graduate school. The subsidized student loans, they’re not going to garner interest during that time. At that point, wasn’t caring about that so much, but I got the unsubsidized ones wiped off before I started graduate school. Just wanted to emphasize that point as well. Please go on with your other other advice for early career PhDs.

08:59 Zach: Yes. So this is more about where you’re planning to study and how you can kind of network beforehand. You brought up a great point that I want to hit on again about where you’re living and how much you’re paying and understanding kind of the socioeconomic context of not the university, but the city. Austin, like you said, is really rapidly growing and I applied across the country. I applied to Indiana, Vanderbilt, Stanford, Michigan, Princeton, Cornell, all over the place. But I was really specific about researching Austin when I got in because I knew how rapidly Austin was growing. And to give you an idea of the cost of living increase and how much graduate students are actually paid, I moved into this current one bedroom apartment back in the spring of 2017 for $960 a month and I am a one hour commute from campus. So I’m one hour away for $960, with utilities it’s about $1200 a month. That was a sacrifice I made. However, these apartments now go for $1310. So they have increased almost $400 in two years. And I’m still one hour from campus. If I was arriving to Austin today and having to sign a lease today, I would pay almost $400 more than I would have paid just two years ago. Now you had talked a 10% increase — 30% increase, 40% increase. And these are not….we don’t have a garage. We don’t have a private yard. We don’t have too many amenities. It’s a pretty standard one bedroom apartment with air conditioning, but it’s also an hour away from campus.

10:53 Zach: I always host PhD students in the spring who are prospective students. And I always, when I show them apartments, I ask not only for the current rent because a lot of major cities have market rent, which means it changes, with the ebbs and flows of moving season throughout the year. Don’t only ask for the rent now and move in, but ask for it three years prior because they have records of all the leasing contracts and all of the, um, leasing and rental agreements. So you can see how rent has changed and gone up or gone down in a certain area. And actually I just helped a friend from Michigan move in just the other week and he and his partner made a very specific decision to go to a certain complex and neighborhood because the rent had been somewhat stable over the past three years and had only gone up about $180 over three years. Whereas my neighborhood is in a different kind of more developing area of Austin and it is growing like crazy.

Zach: Especially when you’re moving into a new city, getting an idea of historical trends and then do the exact same thing for the stipend. How much was the living stipend, how much was the assistantship five years ago? What does it now and do you anticipate a cost of living increase and is that going to be compensated by the university? Something that UT Austin recently did was dedicate new money to try to keep up with cost of living and try to develop some new graduate student housing, which we haven’t really talked about, but always inquire about graduate student and subsidized housing because some universities still do have it. Even though in a very landlocked, city locked university like UT Austin, there’s not a lot of room for expansion anymore, but always ask about the cost of living increases in historical rent in the city, how that relates to the stipend from the university and then what the university is going to do to keep up with that cost of living. I couldn’t agree more.

12:56 Emily: Yeah. I’m so glad you made that point.

Commercial

13:02 Emily: Emily here for a brief interlude. Tax season is upon us and while no one loves this time of year, it’s particularly difficult for post-bac fellows, funded grad students, and postdoc fellows. Even professional tax preparers are often thrown for a loop by our unique tax situation. And don’t get me started on tax software. I provide tons of support at this time of year for PhD trainees preparing their tax returns. From free articles and videos, to paid at-your-own-pace workshops, to live seminars and webinars for universities and research institutes. The best place to go to check out all of this material is pfforphds.com/tax that’s P F F O R P H D dot com slash T A X. Don’t struggle through tax season on your own. Visit my website for the exact information you need in the most efficient form available. Now back to the interview.

Understanding The Role of Cost of Living Increases

14:05 Emily: Really, a new idea for me is actually asking about those historical rents and seeing the increases. This might be a silly question, but does Austin have any rent protection in place? Like increases can only be a certain amount over time, like in terms of laws in place?

14:21 Zach: Not that I am aware of and it doesn’t seem to have translated to people who have actually been into leases and stayed multiple years. Our rent has only gone up $60 in two years, but for the same apartment, for new leases, it’s that new elevated price. However, and this to me was just absolutely ridiculous, I was actually outraged by this, that we have a valet trash fee that is mandated. That we have to pay $14 a month to have somebody pick up our trashcan outside the door and take it to the dumpster. Now the dumpster is a half a block away and I don’t want to pay for valet trash, but I have to because it’s part of the lease and it’s an industry that Austin supports. So there are some fees — you know I’ve heard a lot about the fee creep and higher education where you might have a tuition freeze, but you can keep charging student fees and those add up. The same thing happens with amenities and fees in Austin. The trash fee has gone up, water has gone up, electricity has gone up. It used to be that we would come in a close to $100 over the summertime for air conditioning. Now it’s closer to $140 or $150, and it’s a dramatic increase. So not only understanding the rent, but really understanding what fees you have to pay, what are mandatory, what are optional, and then how those feeds are going to be adjusted over time, because in some big cities they’re just mandated and you just have to bite the bullet and pay for them even if you don’t want to. But those really add up just in fees. We pay an extra $95 or $100 a month just in fees.

16:09 Emily: Yeah. What I’m getting from this part of our discussion is just the importance of interrogating every single component of your offer, of what your living expenses are going to be. And all the time that you put into researching these different components before you actually move to the city that your graduate school is in, or after graduate school, same story, it’s really going to be worth it. It’s going to pay off when you do this research, because the less you have to learn on the ground once you’re there and make changes, the easier it’s going to be. If you can find a place you want to live for several years right from the beginning, it’s a lot easier for you. I did want to go back to make one other point from what you said earlier about asking about the historical stipends. I definitely think you should and can ask a graduate program that, but I wanted to plug my own website, which is PhDstipends.com and also I have another one for postdocs, postdocsalaries.com. PhD Stipends has been around for five years now, I think. And people enter which academic year, the stipend their listing is for. So if your university has enough data in there, you definitely can look back, even potentially at your own department and see what they were paying five years back to compare it to what’s in your offer letter.

17:24 Zach: Yeah, absolutely. And to your point about having that access to data and actually seeking that out, now that you mentioned that, I don’t know anyone else who did that when they came. A lot of folks were really excited just to be able to come to Austin and to be in a PhD program. It’s a very highly ranked program. It’s very prestigious around the country, so a lot of folks were just happy to be there. But then down the road they really kind of regretted not understanding where they were going to live, how much they were going to make. Also the time crunch in making a decision. I had to make my decision in a series of three or four weeks. I mean really in graduate student visits when I was admitted to PhD programs, I the beginning of February really until about mid-March to visit places, do my research. So also understanding how that’s going to affect whatever job you have at the time.

Zach: When you’re exploring PhD programs, it is a serious time commitment. I mean just finding a PhD program in a city that fits you and your budget and that you can continue to maintain your expectation of living whatever that is, is like a full time job. It’s like being on the job market and people should take it with the same seriousness and explore all of those resources that they can because like you said, I have been very, very fortunate. It was some good planning, but I’ve been very, very fortunate not to have to move every year, not to have to sublet. That means my computer workstation has stayed the same. I have a routine. I’ve been able to write. I’ve been able to travel because I haven’t had to worry about where I’m going to live, how much money I’m going to make. It’s all very budgeted, all very meticulous and I think that has really made the PhD program a much more fulfilling experience, because like you said, I have gone through those hoops initially to make sure that I was in a place that I could afford and I would feel comfortable in.

Final Words of Advice

19:24 Emily: Yeah, absolutely. I’m so glad that you brought up that point as well. Any final advice for other early career PhDs?

19:31 Zach: Yes, so I guess lastly, and it’s kind of more of a philosophical point, is I did make the choice not to go to a PhD program that wasn’t going to financially support me. And I think, most people who pursue a PhD, it’s right in the prime of their earning potential, right? So you’re talking early twenties to anywhere in the late thirties like that 10 to 15 year period, you can make a lot of money during that time of your life and pay down a lot of debt. You have to understand that going and getting a PhD, you’re going to forego wages and you might take on debt. It’s such a double edged sword because you’re losing money on one hand, and you’re kind of having to borrow more money. So really, really committing and making that sacrifice, because understanding how many hundreds and thousands of dollars you may be foregoing in the future, and having to pay back debt, and having lost wages.

Zach: The sacrifices I made were having a very compromised social life and a very kind of frugal living down here because I knew it’s going to be four or five years of just extreme sacrifice. I am not going to go out. I am not going to go out to eat very often, I have only gone out for drinks three times in three and a half years and all three times were for professional networking, and to work on projects. I just don’t do it. A margarita is $12 and that’s my food budget for almost an entire week. I have made that kind of level of commitment to stay out of debt and to do it frugally. Not everyone can do that, but if you can commit to doing that, you can get out without debt or with very low debt and 10 or 15 years down the road, you’ll really thank yourself, and you’ll look back and you’ll realize, you know what? I think that sacrifice was worth it.

21:27 Emily: Yeah, I think so. I mean your point about opportunity cost is a very, very important one and not something that people, I think think about enough going into PhD program. For me, it’s another reason to work before you go into a PhD program because you have a better idea of what you are giving up on the one hand in terms of salary potential during that time. And you also have more context for your PhD work. What is this going to do for me on the career side?

Financial Plans After Grad School

21:51 Emily: I’m gonna surprise you with one last question, Zach. This is not what I prepared you with, but what do you think you’re going to be doing with your finances once you’re done with the PhD? And hopefully, you have a job you enjoy that pays you much better than whar you’re being paid right now. Do you see yourself shedding some of these mindsets and habits that you’ve carried with you to this point? And if so, how? How can you even step away from this since it’s been going on for so long in your life now?

22:22 Zach: Yes. It is such a lifestyle. I cannot emphasize that enough. I have thought about what I want to do with my money when I graduate and get a job and now I don’t have debt and the money is mine to spend. I don’t want a larger than two bedroom house because I’ve never lived in a place larger than that. I wouldn’t feel comfortable in a four bedroom house in the suburbs. That’s just not me. I would not feel at home there or comfortable. I could never buy a new car. I could never do that. I would not feel comfortable driving in a 2019 anything. I’ve always bought used cars. I wouldn’t even feel comfortable doing that. If you remember actually from HEFWA, though, what is really, really important to me is donating. I wanted to stay out of debt and get a PhD and have the earning potential to donate to certain programs that I was a part of as a kid and that really helped me out. I think when people are asked about “why do you save money?” I saved so I can give more. Since I’ve been a PhD student, I have been able to donate about $700 to my alma mater and a mentoring program that they have going that I was a part of when I was there. For me, that is such a better use of the money instead of going downtown a couple of weekends and having drinks. I feel so much better about it.

Zach: I think having an understanding of the kind of money I will make when I’m done and then how I’ve grown up, it’s going to allow me to do a lot more good and amplify a lot of the philanthropy that I’ve started doing, and that is really how I’m going to be spending a lot of my expendable income as you could say. I’m going to start a savings account. I’m going to start a 403B or a 401k or some employer sponsored a savings account. If there’s a state pension program, I’ll participate in that. But it’s really going to free me up to spend money where I think it needs to be spent, which is education and low income kids. And like I said, I’m going to look back on my time at UT and Austin and say, maybe I was able to send some kid to community college because I didn’t go out. I was able to help some kid get their associate’s degree because I made those sacrifices and I will trade that any day of the week.

24:56 Emily: I’m so glad to have that incredible perspective from you on the podcast today. It sounds like a really bright future and happy for you that you’ll be finished quite soon, and you’ll get there before too long. Zach, it’s been an absolute delight to have you on the podcast today. Thank you so much for joining me.

25:16 Zach: Absolutely. Thanks Emily.

Outtro

25:18 Emily: Listeners, thank you for joining me for this episode. PFforPphDs.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcast, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media or with your PhD peers. Three, recommend me as a speaker to your university or association. My seminars covered the personal finance topics PhDs are most interested in, like investing, debt repayment, and taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.