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A Dozen Frugal Tips for Graduate Students

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

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

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

frugal tips for graduate students

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Buy secondhand and at alternative retailers

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

Create Your Own Entertainment

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

Research Your Purchases Ahead of Time

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

Sell before the Move-Out Rush

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

Buy During the Move-out Rush

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

Buy and Cook in Bulk

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

Bring Your Lunch

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

Grow Your Own

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

Bicycle

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

Buy a Home

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

Put in Sweat Equity

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

Maintain Properly

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

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

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

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

Thank you for reading!

Birthing a Baby Before You Birth Your Dissertation

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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?

Your Most Important Budget Line Item in Graduate School and Why You Need to Re-Evaluate It

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The largest line item in nearly every graduate student’s budget is housing. Whether you own your home or rent, whether you live on campus or off, whether you live in an apartment/condo, townhouse, or single family home, unless someone is subsidizing it, you are almost certainly spending the biggest chunk of your income on your abode.

If your rent is $400 per month and you spend five years pursuing your PhD, over the course of your studies you will spend $24,000 on rent. If your rent is $1,000 per month and you spend six years pursuing your PhD, you will spend $72,000. These are staggering numbers, especially when you compare them to your annual stipend. Your decision of where and with whom to live is almost certainly the most financially impactful budget decision you will make during graduate school.

Housing is a very tricky expense category to budget. There is no argument that you need somewhere to lay your head. A certain fraction of your housing spending is simply a baseline that covers a necessity. (That is, unless you can get really creative, such as by living in a van.) But you can’t write off your entire housing expense as a “need,” especially if you then let yourself off the hook from evaluating its cost carefully. A fraction of your housing spending is “want” as well. Perhaps you are paying a bit more for a desirable location, an amenity, extra square footage, updated features, a parking spot, or solitude. There’s nothing wrong with wanting to upgrade from a Spartan home, but you must be honest with yourself about what aspects of your housing you could dispense with if push came to shove.

What makes housing even more special in terms of your budget is that it is a fixed expense. Once you settle on where you’ll live, your housing costs are locked in for the term of your contract. It’s difficult to change your housing costs because that involves moving or adding/subtracting a roommate. That means that you can lock in a high rate – or a low rate. Fixed expenses represent excellent opportunities for cost reduction. If you are looking for a simple, long-lasting way to reduce your spending, target a fixed expense. You have to make the decision to reduce it and put in the effort one time to carry out your decision, but after that you have the lower rate set every single month in perpetuity. And what better fixed expense to target for reduction than your largest one, housing?

The most remarkable aspect of your housing decision is that you typically have to make its first iteration before matriculating into your graduate program. If you are moving to a new city, you have to search for and secure your housing with next to no knowledge of the rental market, possibly sight unseen or after one scouting trip. Therefore, your first dwelling in graduate school may not be the most optimal for you financially. Although you should ask for advice from older graduate students when you make that initial housing decision, nothing is as informative as actually living in your city for a few months or a year.

If you haven’t yet moved once within your grad school city, take the opportunity right now to re-evaluate your current living situation. You likely have a totally new perspective on the decision compared to the last time you made it. Even if you have moved once with an intimate knowledge of the local housing market, your financial goals and budget evolve with time; perhaps you are different now and you require a new housing arrangement. It takes some patience and commitment to decide to move and then wait several months to follow through, but a significant enough reduction in housing expense makes the process worthwhile.

[The decision to purchase a home while in graduate school has an enormous financial impact. There is a great amount of financial risk associated with buying a home (both upside and downside). Buying a home is more expensive in the short term while renting is more expensive in the long term. The problem is that no one can predict whether your time in graduate school is short-term or long-term. The housing market could boom or bust during your tenure at your university. You might end up with a home that needs a lot of costly repairs. You could arrange for renters who essentially pay your mortgage for you, or end up with a landlord’s nightmare. You have to make careful calculations and considerations, but there is always a gamble involved. If you are already a homeowner, there are still a few ways for you to reduce your housing costs, such as selling and moving, taking on a roommate, or refinancing your mortgage.]

Have you re-evaluated your housing costs since you moved to graduate school? If you were able to reduce your spending on housing, what would you do with your extra cash flow? 

The Best Kind of Frugality for a Busy Grad Student

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When you live on a stipend, frugality is a way of life. You know you can’t live a freewheeling lifestyle on your grad student income, at least not without racking up massive debt. But the approach you take to frugality has an enormous effect on how restrictive you perceive your lifestyle to be and how much time you spend on spending less. When you have a dissertation to write, you don’t want to be spending hours each week scrimping and saving. Effective frugality for a grad student has to be automatic.

The best kind of frugality minimizes spending on what’s least important to you so that you can divert your money to what’s most important to you – without you compromising the time you’re suppose to devote to your studies. And practicing frugality doesn’t mean that you will feel deprived or be living paycheck-to-paycheck. You can use frugality to give yourself a leg up on wealth creation, even during grad school.

best frugality busy grad student

 

What is the best kind of frugality?

First, we recognize that the best kind of frugality is unique to each individual. Frugality is not a one-size-fits-all solution. Yes, there are popular approaches and strategies, but you still get to pick and choose which practices you will adopt. If spending money in a certain category enables you to live your values – and cutting back in that area would impede that – keep spending there. Move your search on to another category for potential cuts. Of course, the reality of living on a stipend may force you to revisit your valued category, but it should be last on the list for cutbacks.

Second, the best, most effective frugality preferentially targets your largest expenses. Third, once you do the work to reduce those expenses one time, your frugality keeps the expenses low in perpetuity, either because they are fixed expenses or because the frugal practice has become habit (ideally, an effortless habit).

Think of frugality as an 80/20 problem. You can get 80% of your total reduction in spending from 20% of your expenses, if those expenses are the largest ones in your budget. You can eliminate 10 small expenses that won’t add up to as much as one partial cut to a large expense.

Target your largest expenses first

When you’re searching for places to cut back in your spending, start at the top. Using your budget, any past spending data you have, or your memory, rank your expense categories from largest to smallest. Your largest categories likely include rent/mortgage, transportation, and groceries, and other possibilities are eating out/alcohol, entertainment, travel, utilities, childcare, and shopping.

Once you have your ranked list, process each spending category from largest to smallest, brainstorming ways you could reduce your spending in that area. Use resources like our Frugal Practices or frugality websites to target each spending category. Seriously evaluate if you can implement one of your ideas in each category.

Sometimes the prospect of reducing your spending on a very large expense is quite daunting. You may have contracts in place that limit your ability to change the expense for up to a year. Often, reducing a large expense will take quite a bit of work. People tend to be very psychologically resistant to change as well. But you have to focus on how much your quality of life can be improved in other areas by taking those steps.

There may be quite a delay from the day that you decide to reduce your spending on a large expense to the day that you accomplish it. Deciding to reduce this kind of expense isn’t as immediately rewarding as implementing a frugal strategy that you can benefit from immediately. But don’t let that deter you from planning and following through on your idea. While you wait out the contract or research the decision, keep track every month of how much money will be freed up by the change and imagine what you could be doing with it.

Reduce your fixed expenses

The best kind of frugality happens in the background of your life without you having to pay any attention to it whatsoever. When you reduce a large fixed expense, you practice that frugality without even noticing it. (The corollary is that fixed spending is easy to let inflate, as well, since it’s not an active decision.) If it was difficult to reduce that expense in the first place, like getting out of a contract, it’s pretty difficult to reverse the measure, too.

This is unlike any strategy that takes willpower or time to enact. In a tough or busy moment, you could easily forgo that strategy and return to your higher-spending ways. Reducing a fixed expense locks in that lower rate, at least for a period.

Make a habit of reducing your variable expenses

Some of your larger expense that are ripe for reduction are variable expenses, so you lose the benefit of locking in the lower rate like with a fixed expense, but they are still worth pursuing when you’re looking to reduce your spending.

The key to reducing a variable expense is to make your frugal strategy a habit. After establishing the strategy, you should automatically follow it unconsciously and without having to use willpower. Until you reach that point, you should use whatever prompting strategies work for you to remind you to follow the strategy. It won’t feel natural at first, but keep at it.

However, if you continue to chafe against the habit after weeks or months of trying it out, it’s probably not for you. Don’t use your limited time and energy forcing a frugal strategy that refuses to become a habit or takes up too much time or energy.

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Experiment

The best traits to cultivate with respect to your frugality are creativity and daring. Especially with respect to your variable expenses, ask yourself what you really have to lose by trying something new. If possible, give each frugal strategy a one-month trial. That should be enough time to get over your resistance to change, evaluate the strategy, and possibly create a new habit. If it doesn’t work out – and if you get really creative, not everything will – you can go back to your old ways. Of course, if a strategy requires becoming locked in or an up-front cost, do you research before leaping.

A PhD is a long haul in grad school. If you adopt the attitude toward frugality outlined above, think how many different frugal strategies you can try out over the years. Even if you only made habits of 20% of them, that could impact your spending enormously. One of the great benefits of living on a stipend is figuring out what is important for you to spend on and what isn’t. If you maintain the comfortable but low lifestyle you fine-tune in grad school after you start earning more from your real jobs – probably with a few judicious upgrades! – you can start making huge strides in increasing your net worth.

What fixed expenses have you reduced during grad school? What frugal strategy did you try out that eventually became a habit?


What Grad Students Can Learn from the FIRE Community

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At first blush, graduate students and the FIRE community don’t have much in common. FIRE stands for Financial Independence/Retiring Early; it is a movement to retire or reach financial independence (working becomes optional) very early in life, often by age 30 or 40. FIRE aspirants usually have high-paying jobs that they wish to stay in for only a handful of years, whereas graduate students are taking a large (theoretical) pay cut to acquire training that will set them up for long, productive, not necessarily high-paying careers.

Further Reading: Early Retirement Isn’t for Us

However, I think there is a great deal that graduate students can learn from the FIRE community (and vice versa), financially and otherwise, even if they do not have the same goals.

FIREcommunity

1) They have a clear vision of what their future will hold.

FIRE people regularly fantasize about what they will do in retirement/upon reaching financial independence. They do so in detail. They have a plan for where they will live and travel, how they will fill their days, what skills they will use or learn, who they will spend time with, and how they will serve their communities. This detailed picture steels them for the sacrifices they are making in the present and motivates them to reach their goal on schedule.

Unfortunately, it’s fairly common for graduate students to apply because graduate school is the next step in their educational progression or because they haven’t been exposed to careers outside academia. Even those who matriculate with a career in mind (usually research and/or teaching) decide against pursuing it in the course of their training. This lack or loss of career focus usually results in students languishing during their training or wasting effort on projects or skill acquisition that won’t serve them later on – not to mention the time not spent on appropriate networking. The clearer the career goal, both for students pursuing academia and those pursuing alternative careers, the more effective the student’s training can be.

2) They have a roadmap to their goal and obsessively track their progress.

Another lesson along the same lines is that FIRE people have a detailed plan for how and when they will reach financial independence. They know exactly how much more money they need to earn, into what vehicles they will save and invest, and how they are going to maintain their lifestyles in the meantime. They track their financial progress on detailed graphs and spreadsheets.

Grad students do create, from time to time, plans for their research progress, but then the plan always seem to go awry or get delayed. That is the nature of research. But the more closely a grad student can stick to a detailed plan, checking off experiments or sources one by one, the better off she will be in terms of keeping her motivation and productivity high. There should be an increasingly clear picture of what the end point will be as time goes by.

3) They work their tails off.

FIRE people tend to be super hard workers. They often have demanding primary jobs, on top of which they might add one or more side income streams to get to financial independence even faster. FIRE bloggers additionally document their experience online.

There is no doubt that grad students can work hard, but many fall into a pattern of working in fits and starts, such as in advance of deadlines. The uncertainty of the progression through grad school exacerbates this tendency. It’s very difficult to push yourself to work hard when you’re not sure where the hard work is leading (see points above).

4) They are uber frugal.

When I jonined the financial blogging community and started reading about other people trying out frugal strategies and challenging themselves to no-spend weeks and months, I wasn’t very impressed. That version of frugality was just my normal life living on a stipend!

But FIRE people really know what they are doing when it comes to frugality – they are an extreme breed. The bar for frugality was set early on by Jacob from Early Retirement Extreme (a PhD scientist!), who lived in an RV for a time. While not many FIRE people go that far, they have become masters of lifestyle cost minimization in a variety of creative ways. Grad students looking for ways to cut their lifestyles further can take some pointers from other FIRE bloggers like Mr. Money Mustache and the Frugalwoods.

5) They save like mad.

There is no doubt that FIRE people understand the power of compound interest. They have taken it completely to heart. They are mad for investing and building up a large portfolio quickly so they can utilize the 4% rule to fund their lifestyles in perpetuity. Certainly many graduate students understand the power of compound interest as well. But some grad students I talk with just haven’t gotten around to starting to invest yet. Some think it’s not really worth getting started because they could only invest a small sum or a small stream. But the fantastic thing about compound interest is that, given enough time and a decent rate of return, it can turn even small sums into staggering ones. A FIRE person knows that putting away an extra $10, 50, 200 or whatever amount really does make an impact. Your savings rate is the most important factor in determining your ultimate portfolio balance, not the rate of return that you get on your investments.

Further reading: The 4% Rule and the Search for a Safe Withdrawal Rate; How Important Is Your Rate of Return?; Starting Down the Road to Financial Independence? Don’t Obsess Over Investment Returns, but You MUST Obsess Over This.

Graduate students really have stepped off the beaten path when it comes to education and career, even though it doesn’t feel like it inside academia. Sometimes it’s worthwhile to take a look at other unusual but highly successful communities to adopt their best practices. Grad students would certainly benefit from taking a few pages out of the FIRE community’s book, even if their objective is not financial independence and early retirement.

A Low Income Is a Blessing in Disguise

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Believe it or not, the time you spend in graduate school earning a stipend – the very challenge that can make this period so infuriating – might very well become, in retrospect, one of most valuable times in your financial life. The value will not primarily be in the money you earn but rather the financial lessons you learn through the struggle.

(I am not calling an insufficient income – an income that doesn’t pay your basic expenses – a blessing in disguise. While it may teach you some valuable lessons, the bad certainly outweighs the good when you can’t buy food or clothing or you are racking up debt. In this post I am referring to low but sufficient stipends that are more or less living wages.)

In some cases, grad school can be a monetarily fruitful time, such as if you use your stipend to increase your net worth. But even without setting intentional financial goals, every grad student who is challenged by her stipend will learn financial lessons. These hard-won skills can be carried forward into your post-grad school life to benefit you immensely – whether or not you experience a big jump in income.

1) Budgeting

Every grad student with a low income develops a budget mindset, whether it is explicit or implicit. There is no out-earning poor spending decisions in grad school as there might be with a higher professional income. Many grad students become quite skillful with creating and sticking to an official budget, which is a wonderful habit. Even those grad students who don’t have written-down budgets naturally learn the limits of their income and how to stay within them.

2) Frugality

Living well on a stipend almost certainly involves a degree of frugality, whether or not the student knows that’s what he’s practicing. Frugality doesn’t have to look like extreme couponing or hypermiling or living in a van or any one particular strategy. It can be as simple as employing a couple easy tricks in one area to facilitate spending in another. Your limited stipend gives you the motivation to explore what frugal tactics work well for you and the time to make them habits. You won’t lose those habits when you move on to your first post-grad school job; you can choose which ones to continue with and which to conclude.

3) Discover the Fine Line Between Wants and Needs

Budget-ers usually think of needs as food, housing, transportation, utilities, clothing, etc. But those of us living on limited stipends discover that each of those types of expenditures likely involves both “need” and “want” components, i.e., some of your spending fulfills the basic need and some of it exceeds it. When you’re looking for ways to cut your spending, you become start putting expenses previously thought of as necessities on the chopping block. This is really tough to do at first, but just being aware of spending areas that you don’t truly need is immensely helpful if you ever return to a time when you have to cut back, such as during an emergency.

4) Combat Lifestyle Inflation

I think that “live like a grad student” is much better advice than “live like a college student.” I’m sure I’m not the only person to experience lifestyle deflation during graduate school. Many of our peers who went straight from college to a real job put themselves immediately on a treadmill of lifestyle inflation: every year as their income increases, their living expenses increase commensurately, so that their potential for growing their wealth or putting their money into their values is squandered or hampered. Those of us who are spending many years living on a (likely static) stipend experience a solidly deflated or non-inflating lifestyle. It’s difficult to live through, but intimately discovering this deflated lifestyle is incredibly powerful once your income increases post-graduate school. You will have an internal check against mindlessly inflate your lifestyle year after year. If you continue with your deflated lifestyle to any degree when your income is higher, you can make quick progress in building your wealth.

Further reading: Is “Live Like a College Student” Good Advice?; Earning More Does Not Cure All

The theme among all these advantages is that they confer lessons and skills over a period of time that is long enough to deeply learn but not indefinite. Of course, if your income remains low, you’ll need to keep using them. If your income jumps post-graduation and you employ the skills, however, you can gain much more satisfaction from your money than someone who doesn’t have the skills. You have the option of keeping your baseline expenses low while using the rest of your money in ways that are of high value to you.