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Dual PhD Couple in Seattle Spending $20k/Year on Rent

July 23, 2018 by Emily

In this episode, I break down my own budget from 2017. My husband and I earn about $100,000 per year and live in Seattle, WA with our two small children. I detail our top five expenses (rent, groceries, travel, kid spending, and transportation) as well as the financial goals that we’re currently working toward.  I give some advice for a budget-conscious person moving to Seattle. Finally, I share what it’s like to be a renter in Seattle’s rapidly inflating housing market, spending nearly $20,000 per year on rent and feeling shut out of the housing market.

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Links mentioned in episode

  • Podcast Season 1 Episode 1
  • Avoiding an Expensive 401(k) Plan through Self-Employment
  • Frugal Blitz
  • Frugal Month
  • Volunteer as a guest in Season 2

dual PhD couple Seattle

1:05 Q1: Where do you live and what is your income?

My husband, Kyle, and I live in Seattle, WA, with our two daughters, a 2-year-old and a newborn. We moved here in 2015 for Kyle to take a job at a biotech start-up. I am self-employed; Personal Finance for PhDs is my main business, and I also have a side hustle. Our household income in 2017 was around $100,000.

Further reading:

  • Why I Still Side Hustle Even Though I’m Self-Employed
  • $100K Doesn’t Feel Like Enough in Seattle, Survey Shows

1:40 Budgeting Background Info

  1. Kyle and I practice percentage-based budgeting, which means that from our gross income we:
    • Pay income and FICA tax
      • through payroll deductions on Kyle’s income.
      • through quarterly estimated tax on my self-employment income.
    • Tithe (donate 10% to our church).
    • Save into retirement accounts (20% in 2018, 18% in 2017).
  2. We live on one income. Kyle earns most of household income and has a regular salary, so we base our budget entirely off of his income after the percentage-based allocations. All of my income after the percentage-based allocations goes to savings. This helped a lot when my self-employment income was irregular, although now I pay myself a salary.
  3. We budget for our regular (monthly) and irregular (yearly) expenses. More details about this system can be found in Season 1 Episode 1.

Further reading: How to Pay Tax on Your PhD Side Hustle

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4:19 Q2: What are your five largest expenses each month?

Our total spending in 2017 was approximately $47,500 (excluding the above percentage-based allocations and health insurance premium paid as a payroll deduction).

5:09 #1 Expense: Rent

In 2017, we spent $18,870 on rent, which is a monthly average $1,570 and 40% of our total spending.

Our rent went from $1495 per month to $1645 per month.

We live inside Seattle city limits. Our apartment in older building with no amenities. The apartment is approximately 850 square feet and has two bedrooms and one bathroom. We chose the apartment based almost solely on location and price.

When we next move, we definitely want to get a place with a dishwasher! Our kitchen is pretty small. We cook and eat in a lot and with two little kids so we wash a lot of dishes every day.

6:38 #2 Expense: Groceries and Household Consumables

In 2017, we spent $7,733.54 on groceries and household consumables, which is a monthly average of $644.46 and 16% of our total spending.

This amount of spending feels high to me, and this is a category that I keep a close eye on.

We meal plan, eat virtually every meal out of our own kitchen, and usually buy food on the less processed side of the spectrum. We shop mostly at Costco and Fred Meyer and also a little at QFC. We don’t seek out organic or similar food except when we buy directly from the from farmer’s market.

Most likely the reason we spend a lot in this category is simply that we eat a lot, and the food we eat is on the more expensive side of the spectrum. These days, we alternate between eating low carb/Whole30-ish and eating the standard American diet, which means we are consistently eating meat and often dairy, which are both more expensive categories.

Our typical meals are:

  • Breakfast: Egg casserole with sausage, sweet potato, onion, and spinach.
  • Lunch: Chicken yellow curry, chili, sausage and eggplant hash, fish plus sautéed spinach or zucchini.
  • Dinner: Meat with vegetable, e.g., balsamic vinegar chicken and roasted asparagus. Kyle’s favorite meal: Brussels sprouts bowls. One of my favorite meals: Mexican breakfast bowls.
  • Snack: PB and almonds

Our toddler is a very good eater. We followed the baby led weaning technique, and now she eats the food we do plus more milk, fruit, and cheese.

9:57 #3 Expense: Travel

In 2017, we spent $3,482.47 on travel, which is a monthly average of $290.21 and 7% of our total spending.

I was surprised that travel ended up in our top 5 because I perceive that we travel much less than before we had children.

In 2017 we traveled on five occasions: two weddings, our 10-year college reunion, a memorial service, and to one of our parents’ homes for Christmas.

In addition to the flights, on various of these trips we paid for hotels, rental cars, meals, entertainment, and registration.

We definitely spend more per trip than when we were in grad school. Flying with a baby has spurred us to take direct flights at convenient times of day instead of purchasing the lowest fare available.

Our current frugal practice regarding travel is to rewards credit cards; we currently have the Alaska Airlines credit card and the Chase Sapphire Reserve credit card.

12:10 #4 Expense: Miscellaneous Kid Spending

In 2017, we spent $2,688.66 on miscellaneous expenses for our oldest daughter, which is a monthly average of  $224.06 and 6% of our total income.

This is the category I have the least handle on as it is so unpredictable.

Our one regular expense included in this category was preschool tuition, but that only applied for a few months

Our spending out of this category was all over the place

  • Medical copays, occupational therapy copays, breastfeeding medicine.
  • Travel car seat and travel stroller (in addition to the ones we use at home).
  • Bookcase, mattresses for grandparents’ houses, jacket, and teether.
  • Toddler class at the local community center and zoo membership

This is a fly-by-the-seat-of-your-pants category.

I was surprised these miscellaneous kid expenses as a category cracked top 5 because our first-time-parent start-up expenses hit in 2016.

14:30 #5: Transportation

In 2017, we spent $2385.77, which is a monthly average of $197.98 and 5% of our total spending.

I really thought transportation expenses wouldn’t be in our top five; low transportation spending is a point of pride for me!

It turns out that 30% of the spending was from our regular monthly budget, and 70% was from our irregular expenses budget. Our regular expenses included gas and parking, whereas our irregular expenses included car insurance, registration, and maintentance.

We own one older car and don’t use it for commuting. Kyle has a sub-10 minute bike commute and I work from home. We generally just use the car for errands, activities with the kids, church, grocery shopping, etc.

Those irregular expenses hit in only 3 months of the entire year, which is why I sort of forgot about them. We pay our car insurance once every 6 months, and it’s inexpensive. We spent over $1000 in car repairs/maintenance in 2017, which was unusually high and not a yearly occurrence.

All of our top 5 expense categories together accounted for 74% of total yearly spending.

17:20 Q3: What are you currently doing to further your financial goals?

1: Retirement Savings

We save a fixed 20% of our gross income into our retirement accounts.

We actually don’t use Kyle’s 401(k) through work at all because of high fees. Instead, we put our retirement savings into our two Roth IRAs and my individual 401(k), which we had total control over. Kyle’s 401(k) is the account of last resort because there is no match.

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2: Down Payment Savings

In 2017, we saved 21.7% of my income and all of our self-tax refund for a down payment on a home.

Further reading: Creating Our Self-Tax Refund

In early 2018, paused our down payment savings to save into a fund to help with expenses and lost income associated with the birth of our 2nd daughter’s.

Once those expenses have settled, we’ll resume saving for our down payment. In the remainder of 2018, we plan to save a fixed rate from Kyle’s income plus 22.7% of my income.

Our initial down payment goal was $60,000, but now that we’re getting close to that number, we want to keep saving and perhaps make $100,000 our next goal. We’re not necessarily shooting for a 20% down payment, but having a lot of money available for the down payment, other fees and expenses, and moving costs will be good.

3: Kids’ College

We save a nominal amount of money toward our children’s college expenses. We plan to hit this goal harder after we buy our first home.

4: Paying Down Student Loan Debt

We are currently making only the minimum payments on a standard 10-year repayment plan on my student loans. Episode 1 explains why we have not yet paid off these loans. However, as of the day of the recording, we received an update on the loans and decided to pay them off completely.

20:47 Q4: What don’t you spend money on that might surprise people?

1: Kid Expenses

A: Childcare

We don’t spend much money on childcare because of the way we have structured our life. Kyle has a regular job, and I’m self- employed. I’m also our children’s primary daytime caregiver. I work when Kyle is home with the kids and when they are sleeping. In 2017, I worked around 20 hours per week with this system. When I travel for speaking engagements, we hire sitters through a service we subscribe to, but this is irregular. We don’t have any regular childcare as of now. We are considering hiring a part-time nanny this fall since we now have two kids to help keep my work hours up.

B: Diapering and Clothing

We cloth diaper, which means we paid a bunch of money for diapers in 2016 but not in 2017. We use disposable diapers when we travel and disposable wipes sometimes.

Further reading: Cloth Diapering in an Apartment

We didn’t have to spend any money on clothes in 2017. The communities we’re plugged into gave us lots of gifts, hand-me-downs, and borrowed clothes.

Further reading: Outfitting Our Baby with Hand-Me-Down, Borrowed, and Used Stuff

When we buy stuff for our kids, we often look to the secondhand market first.

2: Eating Out

We only spent $254.38 on eating out in 2017, which is an average of $21.20 per month. This is a shockingly low figure to me. Since having our first child, we basically don’t go out to eat or get take-out any more!

We don’t drink coffee, which many people pay for out of the house.

Kyle does buy a beer at occasional happy hours with his coworkers, which probably accounts for a good fraction of the spending in this category. I’m in a non-drinking phase of life due to breastfeeding and pregnancy.

3: Entertainment

Our only recurring entertainment expense is Netflix. We are still avid Duke basketball fans, but as we’re not attending games anymore that is an inexpensive hobby.

This low spending is a big change from before we had kids. We used to have season tickets to the Broadway musicals series our local theater, which is not something we’re doing now.

Most of our entertainment now revolves around our toddler: going out doing activities or playing with friends and even at home. We attend lots of free activities around Seattle: parks, toddler rooms and gyms at community centers, and libraries. We also hang out with her toddler friends and our kids tag along to game nights with our friends.

I’m chalking this low spending up to this being a unique phase of life! We expect to spend more in this category again later.

26:31 Q5: What are you happy with in your spending and what would you like to change?

Overall I am quite happy with our spending and progress toward our financial goals.

I don’t love that we spend almost $20,000 per year on rent, but it is reasonable for this city.

I’m not so happy with the grocery and kid expenses.

I feel like we’re spending a lot on groceries. I have some frugal practices, but could do more. During the Frugal Blitz this coming September, I will focus on frugalizing my groceries.

I don’t mind spending what we do on the children, I just want it to be more predictable! Perhaps we will institute a monthly cap on spending or try to anticipate the larger expenses as they grow.

28:11 Q6: What is your best advice for someone new to your city who is budget-conscious?

Focus on housing and transportation: Do your research in advance about where to live and what your commute will be like.

Renting and buying in Seattle is on a quick timeline. Places listed for rent are available immediately or like one week out, and little notice is required when you move out of a place. In 2015 when we moved to Seattle, the rental market was quite competitive. We had to make quick decisions on where to apply and compete with others.

We handled this market by researching the prices in the neighborhoods of interest before we started our moving trip, even though we were not expecting that any of those same rentals would be available when we arrived. This gave us the ability to spot a good deal.

Further reading: Apartment Search in Seattle

You should factor in your commute if you know where you’ll be working. A lot of people avoid the higher housing prices by living outside of Seattle, but that usually increases their commute time. We chose to eliminate the commute and pay the higher housing cost so that we could have more time together.

Don’t assume you’ll commute by car. Over 50% of people in Seattle commute by other methods: bus, biking, walking.

30:52: Q7: Would you like to make any other comments on what it takes to get by where you live on what you earn?

In Seattle, the high tech industry is quite dominant. Those positions are very well paid, and housing costs are being driven up quickly.

In 2017 and the first half of 2018, Seattle had the fastest-appreciating housing market.

Housing prices are heading up quickly, and it’s very discouraging for renters/first-time buyers.

Purchasing a home in our current neighborhood (maintaining that short commute) would be very difficult for us. Even earning $100,000 per year, the most we could afford in our neighborhood is the lowest priced condo possible. The median home value in our neighborhood is almost $1,000,000. The median condo price in Seattle is nearly $550,000. It’s also very hard to not get swept up in the hype of the market.

We are leaning against ever buying in Seattle. Housing is quite a struggle for first-time home buyers.

I’d love to hear from other PhDs (in training) who make less than what we do on how you manage your expenses!

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Birthing a Baby Before You Birth Your Dissertation

June 7, 2017 by Emily

Financial considerations for graduate students becoming parents.

If your relationship with your graduate advisor can be compared to a marriage, the dissertation you create together is your child. You conceive it together in early days and then spend 5 (or 6 or 7 or…) years raising it up until it can make its way into the world independently. That creative process is time-, energy-, and emotion-intensive, not to mention financially limiting due to the small stipend you receive in those years.

Is it possible to bring a human child into your family in the midst of your graduate degree and still see it to a successful completion? Plenty of newly minted PhDs celebrate their accomplishment alongside their children. But having a baby during graduate school may be even more of a challenge to your time and finances than doing so before or after.

When you are deciding whether to have a child during grad school or preparing for one already on the way, the two key areas in which you need to make space are your time and money. In this article, I outline the largest monetary costs that you will incur in the first year of your child’s life and discuss ways to minimize those expenses. The first things to come to mind when you think of these costs may be clothing, toys, or a crib, but those are actually among the more minor expenses.

Medical Care and Insurance

Prenatal, postpartum, and ongoing medical care are necessary for mother and baby, so check your insurance policies. Research the out-of-pocket costs for an uncomplicated birth with each of the providers and settings you are considering, and ask your insurance company about your deductibles and co-pays. Midwifery care tends to be less expensive than obstetric care, but that may or may not be in line with your birth preferences or affect your bottom line. You have time to save up a fund to pay for your part of the birth expenses. You should also make sure your emergency fund is a healthy size in case mother or baby experiences complications that will add to the expense.

After the birth, you can choose to add the child to either parent’s insurance policy; assuming the care options are comparable, you can choose the one that you expect to be less expensive to you between the premiums and the out-of-pocket costs. An open enrollment period prior to or during pregnancy also provides an opportunity to switch the mother’s insurance provider if that is advantageous.

If you are adding the baby to your graduate student insurance policy, expect to pay a (higher) premium. Also be aware that while a typical health insurance premium would be paid incrementally with each paycheck, your grad student insurance might require a lump sum up front for each term or year.

Parental Leave

Your university or department may have a parental leave policy in place. It should outline the amount of time you are permitted to take off; whether the leave will be unpaid, paid, or at partial pay; and whether benefits such as insurance will continue. If there is no official parental leave policy, there may be one regarding leave for a medical or an unspecified reason that will apply or a vacation policy. Failing that, it will be down to you to negotiate your leave with your advisor and possibly department. This is also a great opportunity to negotiate a different schedule for after the baby arrives.

The reason leave is included as a major cost is because of the potential loss of income. The length of your leave might be influenced by what you can afford. Similar to your medical expenses, use the time you have leading up to the birth to save a dedicated fund out of which you can pay your expenses during your unpaid or partial-pay leave.

Childcare

Childcare is easily one of the largest costs you will incur in the first year of your baby’s life, and it can be paid in either money or the caregiver’s time (i.e., opportunity cost).

If you are going to pay for childcare, compare all your local options: daycare, a nanny or nanny share, or babysitters. As a graduate student, you may be eligible to receive a subsidy for daycare on- or off-campus. Consider whether you need full-time or part-time care; if you have flexibility in when you work and money is more scarce than time, perhaps you only need part-time care.

Some families may be able to arrange for childcare that does not involve an exchange of money. One parent can cease working or move to a part-time schedule, both parents can work different ‘shifts’ so one is always with the baby, or another family member may donate his or her time. This is highly dependent on your existing resources, the flexibility of your work, and how you want to spend your time.

Be very cautious about assigning your time a value equal to that of your stipend ‘hourly rate.’ This line of thought leads many lower-income workers to the conclusion that it is financially advantageous to quit a job to become a full-time caregiver rather than to pay for childcare. This is short-sighted because it does not consider future career advancement and income increases. While you are in graduate school, your income is suppressed, but you can greatly increase it by finishing graduate school and moving on to a higher-paying job. It can make financial sense to pay a comparable or higher rate for childcare than you earn from your stipend if it speeds your progress toward your post-grad school job.

Space

Just about every year a new ‘cost of raising a child’ calculation is performed. For example, in 2015 the headline cost of raising a child to age 18 was $230,000 (this is an average over all income levels and parenting choices). The largest component of that cost calculation (29%) was for housing. If you decide to move to a larger dwelling to accommodate your new child, you must account for that additional monthly cost. Depending on your parenting decisions, that’s not necessarily a cost you will incur immediately – the American Academy of of Pediatrics recommends sleeping in the same room as your infant for the first year – but eventually more space will become necessary.

Insurance

If you have not yet had reason to purchase life insurance, the birth of your first child will almost certainly motivate you to do so. The purpose of life insurance is to provide for anyone who would be financially impacted by your death. The most cost-effective type of life insurance to buy is term life insurance, not whole life or universal life. You can shop online or through an independent insurance broker to find the best policy and price for you.

Food

While the average American spends less than 10% of their disposable income on food (both at home and out), I consider food to be a major regular budget line item for graduate students (often third-largest after housing and transportation). Therefore, an infant’s food could also have a significant impact on the family’s budget. The choice to breastfeed or formula-feed – to the extent that it is a choice – is a parenting decision that has a monetary cost either way. Expect to spend some money in this category, whether on formula, bottles, breastfeeding supplies, or extra food for the mother. Starting between 4 and 6 months of age, you’ll also start purchasing solid foods for your child.

Further reading: Breastfeeding Ain’t Free

Diapers

Another significant cost in a baby’s first year of life is waste management, i.e., diapers, wipes, diapering supplies, etc. This cost is less avoidable than some of the previously listed ones (except by practicing elimination communication and potty training early), but it can be minimized. If you are using disposable diapers, it’s all about sourcing the least expensive diapers that work for your baby. Cloth diapering requires an up-front investment, but becomes less expensive than disposable diapering within the first year and realizes large savings in subsequent years and for subsequent children.

Further reading: Cloth Diapering in an Apartment

Stuff

Most of the remaining money that you will spend in your child’s first year of life are one-time purchases of various items, such as a car seat, stroller/carrier, furniture, linens, clothing, toys, and books. If you receive gifts or hand-me-downs, they will likely be in this category, so some of the cost might not be borne by your budget. You might even be able to borrow many of these types of items from a family with a child slightly older than yours. A parents’ group at your university could be a great resource in this respect. Whatever you do need to buy can be bought used, though be careful for highly regulated items like car seats and cribs that they are compliant.

Further reading: Outfitting Our Baby with Hand-Me-Down, Borrowed, and Used Stuff

While this list may appear overwhelming, not every cost may apply to your family and there are ways to minimize each one. For the costs that you expect to incur, the best way to decide if you can afford them is to pretend that you are paying them now. Draft a post-baby budget that includes your monthly additional cost for housing, childcare, purchases, etc. and see if you can live on the remainder right now. Funnel all the cash flow you are trying to do without into a dedicated fund for your child that can ultimately pay for your start-up costs.

What was the toughest financial aspect of having a baby while in grad school and how did you work through it?

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