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Semester-Proof Your Academic Side Business with Digital Products

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In this episode, Emily interviews Dr. Toyin Alli, a lecturer at the University of Georgia and founder of The Academic Society. Through the Academic Society, Toyin teaches graduate students about productivity and time management. After experimenting with many different offerings, both Toyin and Emily have added digital products to their businesses to generate passive, scalable income. Toyin explains what a digital product is and how it can help a graduate student or academic “semester-proof” their business so that income flows in no matter how busy you are with other things. She also shares how to find your “zone of alignment” within your business, which might or might not relate to your academic work.

Links Mentioned in this Episode

S11E8 Semester-Proof Your Academic Side Business with Digital Products

Teaser

00:00 Toyin: And so, for me, one way that I feel fulfilled in my life and I found purpose is through my business. And so it doesn’t have to be through your business, but I do encourage everyone to think about like, what’s something outside of academia that brings me joy and brings me fulfillment?

Introduction

00:19 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 11, Episode 8, and today my guest is Dr. Toyin Alli, a lecturer at the University of Georgia and founder of The Academic Society. Through The Academic Society, Toyin teaches graduate students about productivity and time management. After experimenting with many different offerings, both Toyin and I have added digital products to our businesses to generate passive, scalable income. Toyin explains what a digital product is and how it can help a graduate student or academic “semester-proof” their business so that income flows in no matter how busy you are with other things. She also shares how to find your “zone of alignment” within your business, which might or might not relate to your academic work. I warn you that Toyin and I jump right into biz-talk at the start of this interview, so it might be helpful to go back and listen to her earlier interview, which was Season 3 Episode 12.

01:28 Emily: I need to warm you up a little bit right now for this conversation. Ask yourself: Do you want to make money on the side of your current position? Are you limited in how much time you can spend on your side hustle and does it have to be flexible? Are you subject to a draconian no-side-jobs clause in your contract? Toyin and I discuss in detail one particular type of business that could be a great fit for a graduate student or PhD: A digital products business. We discuss the pros in-depth and also some of the cons, plus how you can get started even if right now you don’t know what you want to offer or to whom. Don’t be put off by our use of the term business, either. You have a business even if it’s just you and one product or one service. Toyin has an excellent short, free video course on digital product businesses for academics, which you can join at theacademicsociety.com/weekend. I took this course prior to our interview and highly recommend it if you’re interested in this type of business.

02:32 Emily: I would be remiss if I didn’t tell you where you can find my main digital products, which I mention a few times in the interview. You can find my annual tax return workshop, How to Complete Your Grad Student Tax Return (and Understand It, Too!), at PFforPhDs.com/taxworkshop/. You can find my estimated tax workshop, Quarterly Estimated Tax for Fellowship Recipients, at PFforPhDs.com/QETax/. I also share why I’ve transitioned all my tax education work from live speaking engagements to these workshops, which comprise pre-recorded videos, worksheets, and live Q&A calls. Without further ado, here’s my interview with Dr. Toyin Alli.

Will You Please Introduce Yourself Further?

03:21 Emily: I am overjoyed to have back on the podcast today Dr. Toyin Alli. She was first on the podcast in season three, episode 12, where we talked about side hustling and finding a good side hustle fit while you’re a graduate student. And today, several years later, we’re having an evolution of that conversation. So, Toyin is, as she was before, a lecturer, she has a PhD, and she’s a business owner. And her business has, you know, moved on in the past three years and she’s learned a ton and she’s going to share a lot of what she’s learned today with us. And I’m so excited about that. So Toyin, thank you so much for coming back on the podcast. And will you please introduce yourself further for the listener?

03:59 Toyin: Yes. Thank you so much, Emily. I’m excited to be back to share with your listeners. Especially, it’ll be interesting to hear the previous episode and think about like the evolution that has occurred. But yes, I’m Dr. Toyin Alli. I got my PhD in math from the University of Alabama back in 2016. And immediately after getting my PhD, I landed, which is basically my dream job, as a lecturer at the University of Georgia. And I’ve been there for almost six years now. And last year I was actually promoted to senior lecturer. So that is very exciting. And I won a teaching award, which is amazing. I actually won two teaching awards. And I also run The Academic Society, which is my business where I help academics and grad students with time management and productivity.

04:52 Emily: Yeah. And Toyin and I have actually collaborated in the past because she’s incorporated some of my financial teaching into her programs through The Academic Society, which we’re going to learn a lot more about in a few minutes. But Toyin, like right up front, why don’t you say if people want to learn more about the subject that we’re talking about today, which is digital products and a semester-proof business, where can they go to find out more from you?

05:14 Toyin: Yes. So I’ve been talking a lot more about business on my personal Instagram account, which is @drtoyinalli, but you can also check out some videos on my YouTube channel called The Academic Society with Toyin Alli. I have a special playlist called Academic Dream Life where I talk about my life and business.

What is a Digital Product?

05:34 Emily: Oh, wow. That’s so inspirational! I need to check that out. Okay. So, I just mentioned the term digital product. This may be unfamiliar to people, although probably they’ve used a digital product, but they may not know that’s what it’s called. So what is a digital product?

05:48 Toyin: I love digital products. So a digital product is something that you can sell online without having to be involved in really any steps of the process. The whole like transaction happens with systems online. And so it’s how people do passive income online. It’s how people say they made money while they slept. And that actually happened to me. But a digital product can be, I like to classify it into three categories. You can think of it as like an ebook or any type of PDF that someone can download, a digital course where you’re teaching something and people can get access to that, or a template where people can get a link to a template that you’ve created and fill it out for themselves. So this is something that someone can go to your website, sign up for it, purchase it, and consume it without you having any interaction with them.

06:43 Emily: So, the analogy is, okay, let’s say some things that contrast to this. So a digital product contrasted to a physical product: there’s some manufacturing process there. There’s some delivery process there. In addition to, of course, the design and the creation, which you would do for a digital product as well as for a physical product. And then there’s also services. So, you can sell a service, which is sort of selling your time or your expertise, your talent for money. And that’s a great way to have a side hustle, but it’s very different from having a digital product. Like you just said, the delivery, once you’ve made the thing, the delivery is completely hands off. And so, digital products are a way that you can scale your income much beyond what you probably would be able to do with something like a service-based business. And so why do you think that digital products, that kind of business, is a good fit for an academic?

Digital Products and Academics

07:34 Toyin: Yes. So I believe that digital products are perfect for academics, which let’s back up and say, I have a business consultancy. So if you’re a consultant, a coach, or you do speaking, I think those are great side hustles. However, when the semester starts to get hectic and really busy, it can be really hard to deliver or have time to do those types of services. And so, a digital product is really nice because you can have a digital product and have your business be running during the busiest and most draining times in your semester. So for example, all of 2021 was very difficult for me. I just felt very drained from teaching my classes, and I wasn’t able to work in my business as much as I usually did. I wasn’t able to create as much content. I wasn’t able to do like the selling that I normally would. However, I actually made more in my business than I ever had before, because I had digital products. And so people were purchasing my products without me having to do any additional work than I had already done. So, that was really nice. So, I think it’s perfect for academics, for academics who have a business already, but they kind of fall off on working in their business during the semester when it gets really busy.

08:53 Emily: Yeah. So this makes a lot of sense to me if your, I guess, various roles in whatever you are as an academic, whether it’s a grad student, postdoc, faculty member, lecturer like you are, if they sort of ebb and flow with the semester, which so many people’s do with their teaching schedule, you know, summer could look quite different from during the academic year. Even breaks, like your winter break could be, I don’t know, three weeks or a month-long. And you know, maybe you have some grading to do, but then your schedule’s very different than what it is at other times. And so, yeah, I love the idea of being able to sort of consistently deliver the product and make the sales no matter how crazy your life is or is not at that time.

09:29 Emily: And I also really want to add, like, not only is this kind of business I think a good fit for an academic, but I’ll speak, I’m not an academic anymore, but I am a parent. And so listeners, this is actually the third time that Toyin and I have tried to record this interview. And the first two times I had to cancel because of complicated stuff going on with my children. For example, my child’s preschool closed during the Omicron wave. So, things like that can come up for lots of people, not just academics, like parents and so forth. And so having a business like mine is to some extent now that can deliver these products without you having to be on a call or in a room is very, very helpful when your life goes a little bit off the rails.

10:11 Toyin: Exactly. And that’s exactly what happened to me last year in 2021. Probably fall of 2021 was probably the worst semester I’ve ever had. And it was just so draining. And I had all of these intentions on like going live, creating videos, working on my business. And I just wasn’t up to it.

A Semester-Proof Business

10:32 Emily: So Toyin, when we were discussing this episode, you had this term that you used that I love so much that reflects what you were just talking about. Can you share what that is?

10:40 Toyin: Yeah. So I call it a semester-proof business, which means no matter how busy your semester gets, your business is semester-proof. Therefore, you can still make sales. Your business can still run without you working on it every single day. And I think the key to having a semester-proof business is to have digital products as part of your business strategy.

11:05 Emily: You know, this has really been kind of where my business has gone over the, I’ve been doing this for like seven years now. And when I first started the business, I really envisioned myself as a public speaker. That was like the thing that I did. And that was because I loved doing it. I loved speaking publicly, I loved being able to interact with people and like that format, answer questions. That’s awesome. But, I realized over the years that like, it wasn’t scalable in the way that I needed it to be. And you were just mentioning how hard fall 2021 was for you. For me, spring 2021 was also hard, but in a different way, which is that I was really, really busy. I was delivering a lot of webinars. This was during tax season, lots and lots of tax webinars for lots of different universities.

11:49 Emily: And it wasn’t like I was doing that every hour of the day, but it took a lot of energy, and I was really feeling like, kind of getting a bit like burned out on that situation. And so, what I decided to do was transition my tax material, in particular, from doing live speaking engagements for universities to offering a digital product to them, which I had already been offering to individuals, but I just decided to sell it to universities as well. And it’s been going fantastic. We’re in tax season for tax year 2021 now. And I love this delivery model. It’s so much easier on me. And, here’s the other thing. I think it’s higher quality for the recipient too. Like in comparison with the live stuff that I was doing otherwise, in a live speaking engagement, I’m not going to say things perfectly. I might flub up something versus my digital product is a hundred percent scripted. I’ve checked it over multiple times. I know it’s correct. I can expand in all the right places. So I think it’s a better product overall. This is for my business, right? That comparison. But just to illustrate to the listener, like how beneficial it can be. Maybe if you have different, you know, suites of different things that you offer, to have this as one of the things that you do that can help you scale and deliver what you want to teach or what you want to share.

12:57 Toyin: I think this is a great point, because I was talking about how beneficial a digital product could be for the academic, the business owner. But it’s also more accessible to the consumer. The consumer can consume whenever they want, they can consume it as many times as they want, and it just fits into their schedule. They can take the time to digest the material. They can repeat the material. And I think it’s just a great experience. So, it’s nice to have other offers that may be live or in-person, but to have digital products for your audience as well can only help them.

Evolution of The Academic Society

13:34 Emily: So, you and I have both experimented a lot. We’ve been doing business stuff in this space for academics for several years, we’ve tried out different things, we’ve evolved what we offer. How would you describe what you offer? Like, has something clicked for you along the way about what you should be offering, who you should be serving? How did you get to that point, and what was like, not quite there yet? Like what was not quite clicking yet?

14:00 Toyin: Yeah. So in my business, The Academic Society, I help grad students mainly with time management and productivity. And it took me a while to get to like the core digital products that I sell in that business. It took me a while to figure out what actually sell. So there was a lot of trial and error. So, the very first digital product I created was called The Grad School Toolkit. And this was, I would categorize it as a template where I made a Trello template to help graduate students organize their lives, keep track of like their degree, all of the things. And I was like, oh my goodness, I wish I had this when I was in grad school. So I made it for grad students. And I tried to sell it and it just would not sell, but I realized I didn’t really have the tools.

14:49 Toyin: I didn’t really know how to sell. This is the first thing I ever created. And so I kind of chickened out, which I wish I didn’t, but I chickened out and I decided to give it away for free. And what happened, no one even downloaded it, even though it was free. I had to learn how to talk about what I was offering. And in order to talk about what I was offering in a way that people would actually want it and purchase it, I had to get to know my audience even more. So, something that was really helpful for me was my YouTube channel and always asking people to share in the comments and ask their questions in the comments. And so, based on the comments of my YouTube channel and the posts in my Facebook group, I was able to learn more and more about what grad students really needed and what they actually wanted.

15:38 Toyin: And that led me to my two main offers. So, there was a collection of students who were excited about starting grad school and they didn’t know what to expect. So, I created a program just for them called Grad School Prep, which is for incoming graduate students. And then I also had this group of grad students who were like struggling to get their work done and struggling with time management. And they just did not know how to motivate themselves to get their work done. So, I created a program called Focus for them. And so those are my two main products. And I would say it took me about two to three years to actually like get those, like actually in the format that they are in today. So it takes a while it takes a bit of improvement, but I think the best advice I can give is just start, put something out there, see how it’s received, and then go from there.

Commercial

16:32 Emily: Emily here for a brief interlude! Taxes are weirdly, unexpectedly difficult for funded grad students and fellowship recipients at any level of PhD training. Your university might send you strange tax forms or no tax forms at all. They might not withhold income tax from your paychecks, even though you owe it. It’s a mess. I’ve created a ton of free resources to assist you with understanding and preparing your 2021 tax return, which are available at PFforPhDs.com/tax/. I hope you will check them out to ease much of the stress of tax season. If you want to go deeper with the material or have a question for me, please join one of my tax workshops, which are linked from PFforPhDs.com/tax/. I offer one workshop on preparing your annual tax return for graduate students and one workshop on calculating your quarterly estimated tax for fellowship and training grant recipients. I’m sure I don’t have to remind you that tax day is fast approaching on April 18th, 2022. That’s the deadline by which you must file your annual tax return and also make your quarter one estimated tax payment, if applicable. The 2022 quarter one live Q&A call for my workshop, Quarterly Estimated Tax for Fellowship Recipients, is today, Monday, April 11th in the evening. It would be my pleasure to help you save time and potentially money this tax season. So, don’t hesitate to reach out. Now back to our interview.

Knowing Your Audience

18:18 Emily: For someone just starting out thinking, I would love to have a side income, even though I’m an academic and I have a busy semester, and I think this digital product thing could work really well for me. You’ve mentioned a couple times like getting to know your audience and discovering what they really want and need. And I’ve done this too, but how does someone who has no audience figure out how they can serve other people and make money doing it?

18:45 Toyin: Yes. So even if you don’t have an audience of like people to buy from you, you know, people, your friends, your family. And so when I was starting, I like made a little list of things like what do people come and ask me about? Like, what do people get advice from me about? What do I feel like I do better than others? What comes easy for me? And that was a way to get started. A way to figure out how I could help someone else. And then once I figured out who I wanted to help, I actually started asking people who fits this description? What are your questions about this topic? And so I started creating content about the topic. So for me, it was grad students with time management. I started creating content and that started to build my audience. And so, that gave me more people to ask marketing questions too.

19:37 Emily: I think this aspect of the audience is a really important element of selling digital products. And it’s something that, so I said earlier, like you could also sell services. Selling services is a really fast way to make money. Selling a digital product is maybe more scalable, but it’s more of a long-term play because you have to find the audience, you have to figure out what they want. You have to develop the product, you have to tinker around with different things like we’ve been talking about. And so I know like something that you do now is that you create content regularly for your YouTube channel, probably other places as well. And that, you know, brings people into your orbit, they’re interested in what you’re saying, and ultimately, maybe they decide they want to buy this digital product from you because they know it’s going to help them even further than what you’ve been doing for free. Is that the general model that this should follow? I guess someone could get really lucky and put something out there and suddenly people find it and love it, but that’s not typically how things go, right?

20:29 Toyin: Yes. I’m so glad you mentioned that. I would say that having a digital products business and making your business semester-proof, it’s a slow burn. It’s kind of like a snowball that kind of just like builds and builds, but it takes a while. I also agree that having a service like a consultancy or coaching or speaking, that is a much quicker way to make money, but the nice thing about a digital products business is, once you set it up, it’s good to go. So would you rather wait until you have a huge audience for people to buy to set it up, or would you rather set it up now and just start attracting people little by little? And the more you talk about what you do, the more people will learn about it, and that’s, what’s going to build that snowball effect.

Sales on Autopilot

21:16 Toyin: And there are of course things you can do to like kickstart your digital product. So, it doesn’t have to be completely passive at the very beginning. So for example, I created a workshop recently called Sales on Autopilot to help other academics. And I could have just launched it as a digital product that people could watch on their own, but I knew it was new. And so, I needed to build a little bit of hype around it. So I decided to offer it live for the first round, and that is a way to get people excited. And so if you are unsure or if you do want to have a digital product and you don’t really want to wait around to see if it catches on, try to do some type of live event around it and it can get people excited about it.

22:05 Emily: I am literally right now experimenting with this in my business because I’m super interested in reaching out more and more to prospective graduate students. Like you said, that you had a cohort of people who are like preparing for graduate school and trying to figure out all the stuff about how they’re going to succeed in graduate school. I have that same group that I’m interested in from their financial perspective. And so there are different ways that I’ve been doing this over the years, but right now I’m experimenting with delivering some content live for the first time that will ultimately be refined and live as an evergreen digital product. So like, this is something that for some aspect of your business, you may be able to do it once and then, you know, set it on autopilot. But every time you sort of have a new idea, you have to go through the same sort of iterative process on this. So, that’s really, really exciting.

22:51 Toyin: It’s also really fun to do like a live event because when you do something live, you get to hear people’s feedback real-time. And it can tell you how you may want to tweak what you’re offering, or maybe how to reposition it in a way that’s more exciting for your prospective client or customer.

23:10 Emily: I just wanted to share another aspect of my journey on this point that you were just making of, you know, make the product and also grow your audience. And it’s there for them whenever they want it. And as your audience grows more and more, hopefully more people will be finding it and buying it and so forth for me. Like I started teaching the tax material that I do in my business way back from the beginning, because it was one of those multiple personal finance subjects that people really needed to know about. So it had sort of, it was on the level of the other things. And then a while after that I created the digital product version, like my prerecorded tax workshop, but I was only selling it to individuals and I wasn’t selling it to universities yet. I was doing the live stuff for universities. And then like I was saying earlier, when I got so busy that I couldn’t really support the live aspect of it anymore, that product was there. And I could already tell my university clients I’ve been selling this for three years to individuals. It gets great reviews. People love it. And that was a great selling point for me. So like, my audience grew and shifted and so forth, but I was really glad that I had started experimenting with that product like years and years earlier.

24:11 Toyin: Yes. I love that. And I love like how you could scale that one offer. You’re talking about the same thing, but you’re offering it in different ways and in different capacities. That’s actually how I came up with my Grad School Prep course. I wrote a book called #GRADBOSS: A Grad School Survival Guide. And I wanted to expand on that book and go a little deeper. So, that book is available as a digital product or you can buy the physical copy, but if you want something more in-depth, something more interactive, there’s my course. I turned it into a bigger, better thing into a course. And then as you mentioned, we collaborated, and I invited Emily in on my course to help the students in there with the finance. And then that same topic, I actually scaled it up even more. I have a program for if anyone’s heard of the McNair Scholars Program, it’s for first-generation underrepresented undergraduate students. I was actually a McNair scholar, and the goal is to teach them about grad school and have them earn a terminal degree. And I was like, wow, my Grad School Prep stuff would actually be really helpful for McNair scholars. And so I scaled that product again, but tweaked it so that it was personalized for McNair scholars. So, I just feel like there are endless possibilities with digital products.

Find Your Zone of Alignment

25:33 Emily: I’m so glad you brought up the example of working with the McNair programs, which you and I are now doing, and it’s fantastic and it’s so much fun and I feel like we’re making a huge impact and it’s amazing. I think that you now call that your like zone of alignment, right? That you have the material that you’re teaching, you have the audience that you’re teaching it to. Can you expand on what that means?

25:51 Toyin: Yes. I finally discovered my zone of alignment, which is where I can position myself where I can just be myself and just really succeed. So, a lot of people talk about their zone of excellence, which is just things that you’re really, really good at. And then there’s your zone of genius where it’s like, not just the things that you’re good at that may be like draining on you, but the things that you’re good at that feels good to you. But if you take it one step further and add in your background and who you are, you can achieve your zone of alignment. So for me, I am really good at time management, and I am really good at helping graduate students with time management and productivity. That’s what I’ve built my business on. But my McNair program, it is so special to me because I was a McNair scholar.

26:44 Toyin: I achieved the goal of the McNair program of getting my PhD, and I help other graduate students. And now I’m able to help other McNair students actually achieve their goal. And so when I talk to McNair directors about my program, it’s like a no-brainer for them like, oh yeah, we teach our students about grad school. But also, they’re going to be able to learn from someone who was in the exact position as they were. And I just feel like all of the stars aligned when I created that program, and it just brings me so much joy and I feel that I’m working out of my zone of alignment. And I believe everyone has a zone of alignment. So like, if you think back to where you came from and what you’re good at, is there a way that you could help people who were just like you? And if you can find a way to do that, it tends to become almost effortless.

27:38 Emily: I can think of actually a couple recent podcast interviews that I’ve published. One with Dr. Lubos Brieda, and one with Dr. Nelson Zounlome, who were both graduate students who, I think, you know, according to your framework, like discovered their zone of alignment while in graduate school, and then launched businesses out of that zone of alignment. In Lubos’ case, he has a consulting company now. And in Nelson’s case, he’s still in academia like you are, but he has this side business that relates to his research and also his passion. And it just, it all just like feeds into one another in this like beautiful way. And I think that’s like something that our academic audience, you know, your zone of alignment might be something related to the subject matter that you’re studying in graduate school or that you did study during your PhD. You and I took kind of a step side to that of just like, how do you succeed as like a graduate student or PhD in these different areas, but it could literally be related to your research or the population that you are interested in or something like that. Like, there’s probably something about your experience as a graduate student or PhD that will help you figure out your zone of alignment

28:46 Toyin: One hundred percent, one hundred percent. And this is something I actually work on with my clients. So, I have a business consultancy where I help academic entrepreneurs figure out like how do they manage both being an academic and an entrepreneur. And academic work can be pretty draining. And so, you don’t want your business to also be draining if you already have a job that’s draining. So it’s really important to build a business, you know, from your zone of genius, but also really find that alignment so that everything just like falls into place and it becomes way more easy and more joyful and more fulfilling to work in your business when you’re working out of alignment or in alignment, rather.

Seeking Joy and Fulfillment

29:31 Emily: Toyin, I’ve just loved this conversation. Is there anything else that you want to share with us regarding digital products businesses, or zones of alignment, or anything else that we’ve touched on?

29:42 Toyin: As academics, we spend a lot of time becoming who we are and like building to our career. It takes a lot of work, and when we actually finish and make it through the program, we should feel good about that. And we should start to enjoy our lives. And so something that I really hate seeing is an academic who’s gone through the whole process of getting their degree and they get stuck in that grind of academia and their life just becomes academics, and they don’t really find a fulfilling purpose. And so for me, one way that I feel fulfilled in my life and I found purpose is through my business. And so, it doesn’t have to be through your business, but I do encourage everyone to think about like what’s something outside of academia that brings me joy and brings me fulfillment? And so, yeah, that’s just what I wanted to mention.

30:36 Emily: That’s beautiful. Toyin, where can people learn more about this subject of digital products and so forth?

30:44 Toyin: Yes. So I’ve created a free video series, which is a digital product, but it’s called Plan Your Semester-Proof Business in a Weekend. And so, it’s a multi-part video series where I walk you through the process of creating your own semester-proof business, as well as share my complete business journeys, failures, and successes. And so if you’re interested in that, you can check it out at theacademicsociety.com/weekend.

31:14 Emily: And I went through this digital product a couple of weeks ago, and I found it really, really illuminating. Even though I’ve already been in this space for like several years, I still learned several things from this series. Something I really, really liked was that you go through, as you briefly mentioned earlier, just a bunch of different examples of different digital products, but in a little bit more detail in these videos, and it can really spark ideas and just show people also like a digital product doesn’t have to be some like massive thing. Like my tax workshop, for example, which has taken years to create and hours and hours and blah, blah, blah. It does not have to be that big, it can be a small thing. That’s okay. Start somewhere and get your sort of systems up and running. I love the systems focus that you have in that series, because this is a weak part of my business. So that’s where I learned something. So anyway, it’s a free course, y’all. If anybody’s interested in creating digital products, just go and take it. It’s going to be great.

Best Financial Advice for Another Early-Career PhD

32:02 Emily: Okay. So Toyin, last question that I ask of all my interviewees is what is your best financial advice for another early-career PhD? And it can be something that we have talked about already in the interview, or it can be something completely new.

32:16 Toyin: Yes. So my best piece of advice would probably be to not underestimate the power of having savings. I am someone who always struggled with having savings. I think just since graduate school when I was applying for jobs or going to conferences, just the way that things are set up, it’s like you pay your own money and then you have to be reimbursed. And so I was often like using a credit card and then being reimbursed, but also have to use the money for other things. And so I got into a pretty deep debt. And so I was never able to build my savings. But thank goodness I have my business and I was able to get out of debt using earnings from my business. But I am really focused now on building a savings account. I think that’s really important. Like this past summer, my air conditioner broke, so I had to buy a new air conditioner. Luckily, I actually had savings this time, and I was able to do that. But yeah, I think that was something I underestimated before, but I never will again.

33:19 Emily: That’s great. That’s great. I think when you’re in a cycle of like living to paycheck to paycheck or like depending on credit cards, it’s kind of about like getting by, and you think you are. You’re doing okay, using the tools available to you. Yes, that’s true. But once you are not in that position anymore and you have the savings, like you did not even know the peace of mind that was available to you by that savings existing until you got to that point. So, definitely cosign as best you can, as soon as you can get some savings in place. And the thing that’s great, we didn’t even talk about this before, about a digital product business is that it’s so low overhead. So, you can start one without sinking a bunch of money into whatever systems and inventory and blah, blah, blah, blah. You can do it very easily. It’s going to cost you your time, but probably not much more than that. And yeah, so you can make money without having a whole lot on the expense side.

34:12 Toyin: Yes. I love that you said this. So I do this workshop called Sales on Autopilot, and you can literally set up a digital products business for $9 a month. That is it. Like it is probably the cheapest business that you could ever create.

34:29 Emily: Yeah, no kidding. Well Toyin, we’ve gotten so many insights from this interview. Thank you so much for coming on the podcast again, it’s been wonderful to talk with you!

34:37 Toyin: Thank you so much for having me, this was great!

Outtro

34:45 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? I have collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. If you’ve been enjoying the podcast, here are 3 ways you can help it grow: 1. Subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. 2. Share an episode you found particularly valuable on social media, with an email list-serv, or as a link from your website. 3. Recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and increasing cash flow. I also license pre-recorded workshops on taxes. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Lourdes Bobbio and show notes creation by Meryem Ok.

How to Pursue FIRE in Graduate School

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In this episode, Emily shares the first section of a written guide she recently added to the Personal Finance for PhDs Community, titled How to Pursue FIRE in Graduate School. FIRE stands for Financial Independence / Retire Early, and it’s a big movement among personal finance enthusiasts right now. At first, Emily didn’t believe graduate school and the pursuit of FIRE were compatible, but the many interviewees she’s had on the podcast who are pursuing a PhD and FIRE simultaneously changed her mind. In the introduction, Emily introduces FIRE and the general ways people pursue it and lists the four biggest levers a graduate student could pull to pursue FIRE right away.

Links Mentioned in the Episode

Introduction

Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts.

This is Season 10, Episode 19, and today I’m going to read to you the introduction to a written guide that I recently added to the Personal Finance for PhDs Community, titled How to Pursue FIRE in Graduate School. FIRE stands for Financial Independence / Retire Early, and it’s a big movement among personal finance enthusiasts right now. I have to admit that at first I didn’t think graduate school and the pursuit of FIRE were compatible, but the many interviewees I’ve had on the podcast who are pursuing a PhD and FIRE simultaneously changed my mind. In the introduction, which I’ll read to you momentarily, I introduce FIRE and the general ways people pursue it and list what I think are the four biggest levers a graduate student could pull to pursue FIRE right away.

If you are pursuing FIRE or are interested in it, I’d love to hear from you. Please join the Personal Finance for PhDs Community at PFforPhDs.community right now, today. Once you’re a member, you can do two things:

  1. Read the rest of the guide, which goes into detail about all the financial opportunities graduate students have to pursue FIRE, from increasing their incomes to building assets to mindset work.
  2. Join me and other Community members for a special live discussion and Q&A call on Wednesday, December 15, 2021 at 5:30 PM Pacific Time. We have live calls like this once per month, and this month’s is dedicated to the topic of FIRE. I really want to hear from you. I’m going to continue to expand and edit the guide based on the ideas and experiences of Community members and future podcast interviewees.

In case you’re listening to this after December 2021, no worries. You can still join the Community to read the current incarnation of the guide and chat with us about FIRE in the Forum or the next upcoming monthly call. Again, go to PFforPhDs.community to sign up!

One last note. I reference a bunch of previous podcast episodes in the introduction. All these episodes are linked in the show notes, which you can find linked from PFforPhDs.com/podcast/.
Without further ado, here’s the introduction to How to Pursue FIRE in Graduate School.

How to Pursue FIRE in Graduate School: Introduction

I was in graduate school when the current incarnation of the FIRE movement started picking up steam. At that time, the acronym FIRE (financial independence / retire early) was not yet in use, and people focused mostly on the “retire early” goal—not retiring at 55 like some Boomers had, but retiring by 30 or 40. Pete Adeney of Mr. Money Mustache was one of the leading voices, having achieved early retirement at age 30 by combining a well-paid engineering career with rigorous frugality.

At first, I found the idea of early retirement to be largely unappealing. The chief reason was that graduate school was supposed to be the foundation for a long, meaningful, fulfilling career… Why would I plan to retire early from that already? Why would any PhD (a group I was growing more interested in creating content for)? I couldn’t get behind that idea.

Thankfully, my disinterest in FIRE in my mid-20s didn’t diminish my passion for personal finance writ large, and I still invested, practiced frugality, and attempted to increase my income to the best of my ability and knowledge at that time.

My view is different now, a decade later. While I still don’t consider myself part of the FIRE movement, I do see its appeal, even for PhDs.

1) I’ve changed: I’m ten years older. I have children now. I’ve switched careers, and I’m a business owner. I earn and spend much more money than I did during graduate school. My and my husband’s parents have retired (at a traditional age). I better understand why having the financial ability to downshift, change, or stop active work before age 70 is attractive.

2) The FIRE movement has changed: There’s a greater emphasis on financial independence rather than early retirement. The featured voices are more diverse. There are numerous well-documented paths to achieve FIRE, not just the earn-a-lot/spend-very-little model from Mr. Money Mustache.

3) Most importantly, I’ve met numerous graduate students and PhDs who do identify as part of the FIRE movement. They don’t see a contradiction between pursuing a PhD-type career and financial independence simultaneously. I’ve learned from their philosophies and methods. The Personal Finance for PhDs Podcast interviews I’ve published that touch on FIRE have been with:

In this guide, I won’t attempt to convince you to pursue FIRE—because I haven’t fully convinced myself. I will show you how you can pursue FIRE as a funded PhD student. We will explore multiple potential strategies, and I am confident that you will be able to adopt at least one of them.

How you pursue FIRE during graduate school will look different than how you pursue it when you have a post-PhD “Real Job,” but you can get started right here, right now.

What is FIRE?

FIRE stands for Financial Independence / Retire Early. FIRE is a movement within the broader personal finance community that has gained popularity in the last decade, roughly coinciding with the long bull stock market post-Great Recession.

Being financially independent (FI) means that you no longer need to work for an income to maintain your lifestyle and that you expect to maintain this status until your death. Once you cease working to generate an income, you have retired. The early part of the name refers to achieving financial independence earlier than the typical retirement age of 70-ish. Some superstars in this movement reach FI by age 30, while others set their sights on age 40 or 50.

Broadly speaking, there are three common ways to achieve FIRE, and some people use a combination:

  1. Purchase a portfolio of paper assets (e.g., stocks and bonds) from which you can draw an income
  2. Buy or build an asset or set of assets that generate income, such as a business or real estate portfolio
  3. Qualify for a pension, e.g., after 20 years of military service

I’m going to omit the option of a pension from the remainder of my discussion because 1) it’s not common for people in my audience to qualify for one, 2) within the FIRE movement it’s typically combined with another strategy as well, and 3) there are other good resources on pensions specifically.

How you determine that you have achieved FI is beyond the scope of this guide. Our focus is on the start of the journey, the pursuit of FI, and how to do it during graduate school.

However, to give you a rough idea, to know that you are FI you must have a good grasp on how much money it takes to sustain your lifestyle, i.e., how much you spend yearly. For example, FatFIRE is considered a yearly spend of $100,000 or more, while LeanFIRE is considered a yearly spend of $40,000 or less.

If you have a pension or own a business or real estate portfolio, the amount of income it generates should be more than the amount of money you spend for you to be considered FI. With respect to paper assets, a popular rule of thumb based on the Trinity Study is to have a portfolio of twenty-five times your yearly spend. For example, if you want to live on $40,000 per year indefinitely, adjusted for inflation, your portfolio should be valued at $1,000,000 or more.

How do you pursue FIRE?

How exactly you will pursue FIRE depends a great deal on your personality, career goals, and lifestyle desires.

At some point, you must create or purchase assets of the type I listed above. While you can start on that during grad school, creating or purchasing assets does not have to be the first step on your journey to FIRE, depending on the rest of your financial picture. If you are in debt, your first step may be to repay debt. If you have no savings or little savings, your first step might be to save up cash. If your income is low or unreliable, your first step might be to increase your income so that you don’t rack up any debt.

I recommend following the eight-step Financial Framework that I developed for use by graduate students and early-career PhDs. It will help you decide which financial goal is best to pursue at any given stage in your financial journey. You can find this Framework detailed in several resources inside the Personal Finance for PhDs Community, including the ebook The Wealthy PhD and the recorded workshop Optimized Financial Goal-Setting for Early-Career PhDs.

In brief, the Framework Steps are to:

  1. Save a starter emergency fund
  2. Pay off all high-priority debt
  3. Prepare for irregular expenses
  4. Invest a minimum percent of your income for retirement
  5. Pay off all medium-priority debt
  6. Save a full emergency fund
  7. Invest more for retirement and/or other goals
  8. Pay off all low-priority debt

The Framework is fully compatible with the pursuit of FIRE, though a FIRE adherent will likely move through the Framework steps faster than the average and may pursue additional financial goals such as purchasing real estate.

There are two less tangible but no less important ways that I recommend that you pursue FIRE starting in graduate school, both of which involve your own development.

1) Your career. I am confident that one of the major reasons you entered graduate school was for career development. Using your time in graduate school to set yourself up for a fulfilling and well-paying career is vital. Do not lose sight of this goal in your pursuit of FIRE. Your future, higher income is going to play a major role in how fast you will achieve FIRE. On the flip side, if a PhD no longer figures into your vision for your future, do not stay in graduate school; jump ship for a higher-paying job.

2) Your mindset and systems. To achieve FIRE, you must have a certain kind of money mindset and well-established systems and habits. You will continually develop these in your pursuit of FIRE. Even if you are unable to increase your net worth much during graduate school, pursuing your career and mindset development now is worthwhile to pay major dividends later.

What makes grad school different?

Your pursuit of FIRE during grad school is likely to look quite different from how you would pursue it if you were not in grad school or how you will pursue it post-PhD.

Generally speaking, PhD students accept a low stipend in exchange for training that—we hope—will qualify them for more lucrative jobs later on. They could be making more money right now in another job, but graduate school is a long-term career investment. Blanket personal finance advice to switch jobs or negotiate to increase your income does not apply well for graduate students (although there are many ways to increase your income, which I cover later in this guide).

In non-pandemic times, most graduate students are required to live in close proximity to the university they attend, although some may be permitted to finish their degrees remotely. For the former group, geographic arbitrage is not available. Geographic arbitrage, a common FIRE strategy, is when you choose to live in a low cost-of-living area while maintaining an income more suited for a high cost-of-living area so that you can boost your savings rate.

Finally, graduate school is a major time commitment. Few PhD students consistently cap their work weeks at 40 hours. You may have less time for outside income-increasing or asset-creating pursuits during grad school in comparison with other times of life.

My Personal Favorite Steps

In the second half of this guide, I will explore numerous possible strategies to further your FIRE journey during grad school. Some of them are what I call “big levers,” which are strategies that are virtually guaranteed to greatly increase your available cash flow and are possibly unusual choices for a graduate student. This increased cash flow can then be saved, invested, or used to repay debt. In your pursuit of FIRE during grad school, I think it will be very helpful for your psychology to pull one of these big levers if you’re able to. It will be clear to you that you are serious about your commitment to FIRE, which will help keep you on the path.

I want to give you a quick preview here as to what I believe these big levers are before we go through all the strategies in much more detail.

Big lever #1 is to choose a graduate program that provides a 12-month stipend that is well above the local living wage. If you’re a prospective graduate student, simply don’t consider any offers that fail to meet that bar, even if they are good fit for you otherwise.

Big lever #2 is to commit to applying for awards like it’s your part-time job—everything from multi-year, full-stipend fellowships to small poster competitions.

Big lever #3 is to radically reduce or eliminate your housing expense. Two potential ways you can achieve that are to house hack or serve as a resident advisor.

Big lever #4 is to start a side business with the potential, at least, to pay you a high hourly rate. You’re most likely to generate a high pay rate by employing the skills and knowledge you’ve developed during your graduate program.

If you can’t pull one of these big levers in your remaining time in graduate school, that’s fine. Put in place one of the smaller strategies from this guide, and if possible keep stacking those up throughout your time in graduate school.

Personally, even though I hadn’t committed to FIRE when I was a graduate student, I was putting a lot of effort into my personal finances. I didn’t know about these big levers or most of the other strategies I’ll discuss in the second half of the guide. I pulled just one big lever by accident, which was to attend Duke for my PhD in biomedical engineering. I wasn’t at all considering the stipend when I made that decision, but I realized later what a boon it was. My stipend was approximately 30% higher than the local living wage, which meant that with careful budgeting I could sustain a decent savings rate.

Over our seven years of PhD training, my husband and I increased our combined net worth by over $100,000. You can hear all about how we did that in Season 1 Episode 1 of the Personal Finance for PhDs Podcast. Now, seven years removed from when we defended, I can clearly see that the time value of money continues to honor those early efforts, even though we earn and save much more post-PhD. That money forms the bedrock of our current financial security.

By applying just one of the big levers or a few of the smaller strategies in this guide, I firmly believe that you also will accelerate your progress toward FIRE, even as a graduate student. Many of the people I’ve interviewed on the Personal Finance for PhDs Podcast have far exceeded my own degree of financial success using the strategies I’ll share with you next.

Conclusion

It’s Emily again! That is the end of the introduction to How to Pursue FIRE in Graduate School. If you liked what you heard and want to read about all the strategies and join the live call on Wednesday, December 15, 2021, please join the Personal Finance for PhDs Community at PFforPhDs.community. I look forward to hearing your thoughts!

Outro

Listeners, thank you for joining me for this episode!

pfforphds.com/podcast/ is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episodes’ show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast. I’d love for you to check it out and get more involved!

If you’ve been enjoying the podcast, here are 4 ways you can help it grow:

  1. Subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use.
  2. Share an episode you found particularly valuable on social media, with a email list-serv, or as a link from your website.
  3. Recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and effective budgeting. I also license pre-recorded workshops on taxes.
  4. 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 me, Emily Roberts.

This PhD Entrepreneur Advocates for Universal Basic Income (Part 1)

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In this episode, Emily interviews Dr. Jim Pugh, the founder of ShareProgress and co-host of the Basic Income Podcast. Jim earned a PhD in computer science and subsequently worked for the Democratic National Convention and other progressive groups. He always aspired to start a business, and his post-PhD work experience inspired him to found ShareProgress, a software product and consulting service. Jim describes the evolution of his business, which now brings him sufficient income to support him in San Francisco in exchange for about 5 hours of work per week. Jim’s observations of changes in technology and the workforce while building his business and newfound time freedom drew him to investigating universal basic income.

Links Mentioned in This Episode

PhD entrepreneur basic income

Teaser

00:00 Jim: As you’re doing something, you’ll see many other, adjacent great things to do as well, but that can so easily be a distraction from actually figuring out, “Alright, what is the core of this successful business going to look like?” And if you let yourself be pulled in that direction, it can really detract from your chance of building something big.

Introduction

00:25 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 one, and today my guest is Dr. Jim Pugh, the founder of ShareProgress and cohost of The Basic Income Podcast. Jim’s doctoral work in computer science and his experience working for the Democratic National Convention inspired him to start ShareProgress seven years ago. In this first half of our interview, we discuss the growth and evolution of his business, which now brings him sufficient income to support him in San Francisco in exchange for about five hours of work per week. Jim’s observations while building his business and newfound time-freedom drew him to investigating universal basic income. Without further ado, here’s the first part of my interview with Dr. Jim Pugh.

Will You Please Introduce Yourself Further?

01:15 Emily: I am delighted to have joining me on the podcast today, Dr. Jim Pugh. It’s a really special episode for me because Jim and I know each other in real life. He is the older brother of a dear friend of mine and my husband’s from college. And we actually had lunch a couple months ago when we were visiting and had gotten into this really interesting conversation about what Jim’s up to these days, the activism that he does. And it was just really exciting and I could see there was a definite PhD angle there, not just because Jim himself has a PhD but also because what he works on has implications for PhDs. So, we will get into all of that in just a few minutes. So, Jim, will you please take a moment and introduce yourself a little bit further to the listeners?

01:53 Jim: Yeah. Well Emily, thanks for having me on the podcast. My background brings together a few different areas. My academic background is in the sciences. I did my undergraduate and doctorate in computer science, specifically robotics, my doctorate. And following that, ended up getting involved in the political world. And so, I spent some time working on the 2008 Obama campaigns, spent a few years in D.C. after continuing political work out there. And then about six, seven years back decided to take honestly experiences on both those fronts to start my own company called ShareProgress, working primarily with political and nonprofit organizations, providing them with tools and other technical support. And then just in the last few years, I started to delve really in on the activism side of things myself and helped to start an organization that does a lot of work around universal basic income doing both advocacy around that topic and also some policy development work in that field.

What Role Did Your PhD Have in Starting Your Business?

02:58 Emily: Yeah. Super, super exciting. Thank you. Clearly, you have a lot of skills and a lot of interesting experiences that you’ve brought to bear on these most recent endeavors. So, kind of backing up slightly to the business that you started, ShareProgress. How did your PhD prepare you for ultimately starting that business? Obviously, you had some work experience after that point before you started it, but how did the PhD specifically prepare you? Or how did it not prepare you very well for that?

03:25 Jim: So, I would say the PhD itself wasn’t terribly relevant for starting that because I was really in a hard research area and was working on algorithms and models that didn’t have any clear path to monetization to turn it into a company. So, that I don’t think was terribly relevant. What was a bit more relevant is I was involved with, at the university I was working with, which is the Institute of Technology in Lausanne, Switzerland. They actually were making a pretty significant investment in cultivating entrepreneurship amongst their students, both undergraduate and graduate. And so there was a program on campus that was talking a lot about that. And so, I feel like there was some stuff I learned through experience with that going through events, and they had various activities that they would organize. And so, I felt like that it was informative in some ways, but it really was very much focused on taking the sort of research you do through your doctoral degree, through your academic work afterwards and turning that into a company. And my company that I ended up starting really didn’t resemble that much at all because that was much more informed by the political work I’d done and seeing what the needs were in that space. So, there were there aspects around “what does it look like to go through that process?” that I would say generally provided me with some guidance. But as far as the specifics, really not much at all.

Jim’s Entrepreneurship Journey

05:02 Emily: Did you have in your mind at that time that you did want to pursue entrepreneurship?

05:08 Jim: I did. That was something from I think pretty early on in college I realized was an area I was quite interested in. And when I was graduating from undergraduate, actually, I kind of had in my head either go to grad school or do a startup. I didn’t have an idea for a startup, so I said, “Well I guess it’s grad school.” But it definitely was something that I had been thinking about for awhile.

05:34 Emily: And did you initially, when you were getting involved during your PhD program with this training program for entrepreneurship, were you thinking about the possibility that you might turn your PhD work into a company? Or were you already like, “No, that’s definitely not going to happen, but this is just like for future reference?”

05:50 Jim: More the latter. Maybe there were a few moments where I considered something that was closely connected, but in general, that wasn’t where I saw opportunity. I more generally was thinking about, “Oh, I want to do something at some point. And this is an area that interests me and is just an area that’ll be helpful to know more about.”

Relevant Technical Skills Gained During PhD

06:10 Emily: Gotcha. And what about, I guess I could say, your technical chops. Did you use those in your business, or were you always hiring out for that? And then also is that something you got from your PhD, or do you think your undergraduate education was sufficient in that area?

06:23 Jim: I think there definitely was some of that from my PhD. Obviously, as an undergrad I had done a lot in that space, but I think that some of the specific technical skills and areas of expertise–and I think also just generally understanding different technological ecosystems–some of that did come through in my PhD. When I was starting my company, I very much structured it to not have put myself in the role of that technical person because I was interested in really taking on the CEO mantle in the more traditional sense. So, I had hired out for a developer to actually build out our software platform from the get-go. That said, I was being involved in various ways with the technical stuff throughout, and at different points definitely got more engaged on that front. And so, having that background definitely proved to be important and a valuable asset. And honestly, I mean I think those of us who are deeply into tech, and particularly doing software development and whatnot, we think of tech in a pretty extreme way as compared to the population in general. And so, just knowing how to work with various technical systems out there, I know it’s a leap for a lot of people not committed to that space. And so, certainly my background had equipped me well to be able to handle that sort of thing.

07:50 Emily: Yeah, I kind of see this as being a common sort of value of the PhD. You sort of prove yourself in an area, you can work very deeply, you can master something completely. And then after that, a lot of people do take a step back and allow other people to do that kind of work and do more of the management. And that’s kind of the PI model. Right? So, that sort of does apply, in a way, to what you did after. But it sounds like the actual work experience that you had after your PhD with the Obama campaign and so forth, that was what gave you the idea–right?–for what your company would ultimately be. Can you talk a little bit more about that?

Inspiration While Working for the Democratic National Convention

08:19 Jim: Yeah, so the work I was doing, to some degree on the campaign, but in particular when I was out in D.C., I was working for the Democratic National Committee at that point, and we were actually running, effectively, the continuation of the Obama campaign. It was called Organizing for America at that point. And so, my role, I was the director of digital analytics and also web development for the program. And so, it was really paying attention to/digging in on what was actually happening under the hood with all of our digital presence, our social media, our email lists, our website, and so on. And so, I got a chance to see what’s possible, what’s not, what works well, what doesn’t. And one of the observations I had was that so much of our ability to do anything, whether that was raise money, whether it was to try calls to Congress, whether it was to get people turning out in their local communities for events, it depended on us having a wide reach.

09:19 Jim: And that reach, to a large degree, came from us intentionally doing outreach to get people involved. Whether that was big publicity efforts, whether it was paid acquisition online. But then the third category being people bringing in their friends. And actually during that time period, that was really crucial for us that so much of the new people we had coming in, it wasn’t from anything we were doing in particular, it was because our existing supporters were recruiting people they knew to get involved in a campaign and whatever the moment was. And it was an area that there really had not been much investment in as far as figuring out, “Alright, well how do we facilitate, and how do we amplify this?” So, that was really the motivation for my company, which was, “Let’s build some software tools that make this more effective and easier to do.”

How to Gain a Wide-Reaching Audience

10:10 Jim: And so, basically we had a plug and play solution where organizations, as they were doing this sort of advocacy work, they could be encouraging their supporters to be reaching out to their friends through various digital social channels. So, social media, Facebook, Twitter, but also just getting people to email folks they knew and say, “Hey, I’m involved in this really important thing. Will you be involved as well?” And that’s proved very, very effective at bringing in new people, particularly in high-energy moments. And then we allowed organizations to track the analytics on what was happening there. And so they really understood what was going on and actually allowed them to do controlled testing around what sort of messaging they could give to their supporters that made them more convincing, basically, to people they knew. So, when their supporters post on Facebook they could have a couple of different headlines, a couple of different thumbnail images and the system would be able to measure, “Okay, well how effective are those different pieces of content at getting their friends to say, ‘Oh, I’m interested,’ and click through it and get involved.”

Evolution of ShareProgress

11:16 Emily: Yeah. Super scientific approach to that. Right? I’m sure your background helped with that, the design of it. Okay, so that’s around the product that you created. I think you said when you introduced yourself that this was maybe six, seven years ago that you started the company. Two years ago, you transitioned more to doing this advocacy around universal basic income. So, I’m curious about how your role within the company, and in particular the time that you put into it, evolved over that, five-ish-year period.

11:44 Jim: Yeah. So, at the start, the software that I just described, the plan was for that to be the company. That was what we were going to do. I realized relatively early on about six months in that the growth that we were seeing from that wasn’t going to allow us to sustain. And in exploring different investment strategies, the type of company I was looking to build, which very much had a social mission, wasn’t looking to make as much money as possible, as quickly as possible if that compromising that, wasn’t actually a great target for traditional investment routes with startups. And so, what I decided to do was to couple on with that a consulting arm where we would actually work with the same sorts of organizations that we were providing the software to, but a system with either data analysis work or some sort of web design development work, which is similar to what I had been doing out in D.C. prior to that.

12:42 Jim: And so, that actually ended up being the bulk of what the company did for most of its existence. We were able to find clients there. I was able to scale up our staff with that sort of work. And so, while we were doing the software, we were continuing to grow the consulting side of the company. And so, our peak was I think early 2017 we were nine people and most on the consulting side. But it was around that time I had realized–I had known pretty early on, I didn’t really want to start a consulting company. That seemed like where the path to profitability was. But around that time, my interests had started to shift to more of the advocacy work around universal basic income. And we went through some tough periods as far as expectations around business and profits and not matching reality. So, we had to do some downsizing. And so, at that point I actually decided, “This isn’t where I want to be investing my time and effort for the future. So, let’s just ramp down the consultant product company.” And at that point, our software was making enough money that I could support a much smaller staff. And so, over the course of 2017 I went through a process around that. That ended with, at the end of the year, I was having more of a skeleton crew and requiring not very much of my time in order to just keep our software running, or the clients that we had there.

Consulting as a Stage of Growth

14:20 Emily: So, I’m curious, with the evolution of adding the consulting aspect and then winding it down, are you happy that you did that, or do you think that you should have just stuck with the software product kind of throughout that whole time and come to this point where you are now maybe a little bit sooner?

14:36 Jim: Well, it honestly wasn’t an option to do exactly that because we did need the consulting early on in order to make payroll. So, it took a while for us to build up enough of a client base and the software where that was an option at all.

14:49 Emily: So, it’s a stage of growth, then.

14:51 Jim: It was a stage of growth. Whether or not I would have invested as much as I did in that, I think looking at it solely from a business perspective, I think that was probably a mistake. I think that it would have been a better approach to say, “Let’s keep focused on the software. Let’s do this as much as we need to, but let’s not really invest in growing that as the company.” Because I think that in most cases, when you’re trying to do more than one thing, you’re not going to do either of them as well. And so, that would have been the better business decision. As far as from a personal perspective, I think I certainly learned a lot through the whole process. So, I wouldn’t say it was a bad decision from that. It certainly was stressful at times, but I think that it’s hard for me to make a valuative judgment on it.

San Francisco Venture Capital (VC) Environment

15:40 Emily: Sure. I want to say for the context, for the listeners, that you live in San Francisco right now, and you mentioned living in D.C. before that. Did you start the company when you were living in San Francisco?

15:50 Jim: Yes, that’s right.

15:51 Emily: So, you’re in a very different environment than probably most of the listeners who are maybe still on academic campuses, you know, spread throughout the U.S. and other places. So, anyway, I just want to say that because you probably had a lot of exposure just from your environment in things like how to approach for VC funding, whether that’s actually a good idea for your business. You decided that the values that they’re going for are not exactly the values that you were going for. And so it wasn’t a good match there. This is actually something I’ve heard about quite a bit that people elect not to go the VC funding route for various, I guess, “vision” reasons.

16:23 Jim: Well, I should clarify that I did attempt to raise funds for the company with already knowing that there would be certain people I wouldn’t accept money from, certain types of investment that I wouldn’t be comfortable with. But, I was hoping to be able to do it in some capacity and was not successful at it. So, that was part of it. Maybe had I met the right people, those things could have looked differently. But I will say, both prior to that and since then, having observed the dynamics in that space, I see how that would be a challenge for many, many people who are attempting to do something similar. But it wasn’t as though I was equipped to know upfront, “Oh, there’s no way this is going to work.” It was very much a learning experience for me.

Current Role in the Business

17:11 Emily: Yeah, that sounds really great, actually. And you’re still living in San Francisco, so you’re still exposed to all of that stuff. But I’m curious about this decision that you said around two years ago, you wanted to focus more on the UBI stuff and you restructured the business. And now, how much time do you spend working on the business now, maybe per week or per month? And what is your role in it now, exactly?

17:32 Jim: Yeah. Well, I’m still CEO of the business, but to be honest, it probably averages about five hours a week at this point because we want to keep running, we want to keep our clients happy there. The idea is really to have it be maintaining the service rather than doing new things. And so, that just doesn’t require that much work. So, I have an employee who is, basically, like any sort of support we need to provide, is dealing with that, keeping an eye on things, and then myself overseeing things. And that allows us to keep going with that.

18:06 Emily: And to ask kind of a more pointed financial question, but you are supporting yourself entirely off of your business income for which you’re only putting in about five hours a week at this point?

18:16 Jim: That’s right, yes.

Financial Independence and Early Retirement (FIRE) Movement

18:17 Emily: Wonderful. Wonderful set up for you. So, we’ll talk about this a little bit more in the upcoming UBI conversation. But the reason I was kind of interested in your story and sharing it on the podcast is because there’s this big movement in the personal finance community called the FIRE movement, Financial Independence and Early Retirement. In season three, I released a pair of interviews with someone on that subject. And your story, while the FIRE community might not call you financially independent by their definition, a lot of what they’re going for, financial freedom, you have bought for yourself with your business, right? So, there’s a lot of overlap there between the goals of the FIRE movement and what you’ve done for yourself. So, I was really interested in having you on the podcast for that reason.

Business Advice for Early-Career PhDs

18:59 Emily: So, okay, now that we’re going to transition to sort of the universal basic income aspect of our conversation, I kind of wanted to wrap up the aspect of our conversation about the business by just asking if you had to give some advice, if another early-career PhD asked you advice around starting a business, what would you tell that person now?

Advice #1: Talk to People

19:20 Jim: I think just go and talk to a lot of people who’ve been through the process because I think part of the challenge is it does look very different in different situations. And that was something I struggled with early is thinking, “Okay, well, there’s going to be standards around this. And so did a bunch of Googling online for like, “Okay, what is the standard, whether it’s around the equity or whether it’s around other aspects of the business.” And I found some stuff but not as much as I expected. And so, I think that, if you can just talk to a lot of people who have gone through the process, you get a sense of the diversity of ways that can work. And so I think it can give you a better idea as to what the trajectories may seem to be. That was something I know I struggle a lot with, and I think may have delayed me deciding to start a business, is that it just felt too amorphous and scary. Alright, what does it look to get something like this off the ground? And in hindsight, it’s such a simpler process than so much of the work I had done before, but I think that there is that opacity and then those unknowns that make it difficult. I feel like I was not unique in having that perspective.

Advice #2: Find Your Focus

20:33 Jim: And then I think focus is another big thing that I continually struggle with frankly, but I see many, many people struggle with. There’s many great things to do and, as you’re doing something, you’ll see many other, adjacent great things to do as well, but that can so easily be a distraction from actually figuring out, “Alright, what is the core of this successful business going to look like?” And if you let yourself be pulled in that direction, it can really detract from your chance of building something big.

Commercial

21:07 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.

Should Entrepreneurs Move to San Francisco?

22:06 Emily: I’m trying to think about for someone who is, let’s say still affiliated with the university, I would imagine there are some people to talk to there, networking, especially universities that have incubators or something from launching a business out of. But I asked you before about living in San Francisco, what do you think about moving to a place like San Francisco where you can just run into other people who are on a similar path? What do you think about that idea?

22:31 Jim: I mean, I think it’s a very double-edged sword because certainly the density of that happening is a significant asset for a lot of this sort of work. And it is so expensive here that if you’re looking to hire locally, you’re gonna be paying, sometimes easily two, three, four times as much as you’d be paying, not too far away. And so, I think it’s a question of balancing those sorts of things. I mean, I think there are ways, like either if you live somewhere not too far away, where you can go into the city and have those easy conversations in-person with folks, but still be in a place where it doesn’t cost you thousands and thousands of dollars every month to pay for your rent. That could be your compromise. Or, just take the occasional trip out here. Assuming you can afford whatever the travel costs are. And then I think there are other areas where you’re starting to see better density. I don’t really have a great sense for what it actually looks like yet. And I do think that there is a cultural component to why Silicon Valley is Silicon Valley because there’s kind of a pay-it-forward mentality, pretty broadly, where people who have done well are eager to help new people coming in, which I think has made a big difference. But yeah, you get both sides of it.

Advocacy for Universal Basic Income

23:54 Emily: I see. Okay. So, now that you pay for your life based on your business, which you only work in a few hours per week now, I’m curious about this transition that you made two years ago. I mean, you said it was kind of like you became more interested in universal basic income and that movement. You then structured your life so that you didn’t have to work so much. So, I guess the question is, how has your experience of having that business and having that source of income that requires only a very small amount of work at this point or small amount of time, how did that lead you into your advocacy for universal basic income?

24:34 Jim: So, I think there are a couple of different ways that I can answer that. So, as far as what first got me interested in universal basic income, a big part of it was the process of starting my company because I had certain expectations coming in around staffing related to operations, to payroll, to HR services, and expecting that, assuming things at all got off the ground pretty quickly, I would need to be hiring at least part-time help to assist with that. And what I found is that there were all these new online services that automated a lot of that. And so, from the beginning for payroll in the company, we use Gusto. It used to be called ZenPayroll, which you have to plug in the information to start with people’s where they live, their bank account transfer information, what the unemployment insurance rate is in the state. But then every twice a month you just say, “Okay, go,” and it pays them and files their taxes and that’s it. And costs not very much money to do it. And so, that being one example of how technology is allowing us, not just to replace jobs because I think you lose something when you describe it just that way, but is A) definitely changing the way that that work is being done, and B) and this is the thing that really stood out for me, is allowing much smaller groups of people to be able to do far, far more than was true before.

Small Business is the New “Big”

26:14 Jim: Because in the past, if you wanted to start a big company, or I shouldn’t say big, I should say a company that was going to generate a lot of income and wealth, kind of inherent to the process is you would need to involve a lot of other people. And it’s far less true now. You can have a team, I mean if you look at I think, what was it, the WhatsApp team, which is like half a dozen, a dozen people who then sell a company for multiple billions of dollars. Never in human history before could something like that happen. And so I think that was an A-ha moment for me and realizing that things are already starting to and will continue to look very differently than they have in the past and we need to stop assuming that the economic solutions that have been effective before are necessarily the right ones going forward.

27:06 Emily: So, it’s not necessarily just jobs are going away, but maybe some jobs are going away, some other jobs are popping up, the people that create the companies and the software and so forth. Are you also speaking about wealth concentration?

27:20 Jim: Yeah.

27:21 Emily: Gotcha.

Changing Mindset Around Universal Basic Income

27:22 Jim: Yeah. And I think for me, that was as much of a factor as jobs are not. I think we’re used to thinking about the jobs thing, so it’s more clear why that would be problematic if we had only a requirement that 10% of the people have a job. But I think that, particularly as I’ve worked on the issue more, that piece more clearly is a big issue that I think as our systems are structured now is really incompatible with having a fully-functioning society, I would say. Anyway, so that was kind of how I first started to think about UBI, universal basic income. And I don’t even remember where I first heard about the idea. I think I read maybe some piece about the referendum that Switzerland was pursuing.

28:18 Jim: It started back in 2013. But my initial reaction was, “This seems dumb, frankly.” I was like, “Oh, this seems like an oversimplification. Just thinking you can give people money and that will solve things. And then I started to look more into it and look at the research and understanding what are the actual, both economic and psychological ramifications when you do this. And it turns out it was incredibly positive that this is something where we have, at this point, a lot of evidence that unconditional cash–people take that and use it for whatever they actually need to use it for. And that, in fact, it confers a sense of agency to people that they might not otherwise have. And that in itself is hugely beneficial because it encourages people to think more longer term in terms of sensing more responsibility for a situation, all things that are actually very valuable in sending people out for their own longterm success.

29:15 Emily: I want to leave this for part two of this interview. Where we’ll be talking less about your personal story and more about, well, maybe what you’ve been learning over the last few years. We’re going to take a step back and define universal basic income because we haven’t done that yet. So, listeners, if the next part of this conversation sounds like it’s going to be really interesting to you, please tune in next week. For the second part of the interview, we’ll be talking a lot more about universal basic income with the expert, Dr. Jim Pugh.

Outtro

29:40 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.

Healthy, Wealthy, and Wise: Choose a PhD Program That Will Support Your Personal and Professional Development

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This episode comprises seven audio clips from PhDs and PhD students who are advocates for PhD students’ professional and personal development. They each answer the prompt: “What aspects of a PhD program – beyond academics and research – should a prospective graduate student consider when deciding among offers of admission and why? How should they investigate and evaluate the strength of a program in this area?” The contributors are Dr. Emily Roberts of Personal Finance for PhDs on finances, Mr. Kevin Bird on unionization and advocacy, Dr. Emily Myers on unionization and advocacy, Dr. Jen Polk of Beyond the Professoriate on career development, Dr. Katy Peplin of Thrive PhD on mental health, Ms. Susanna Harris of PhD Balance on mental health, and Dr. Katie Wedemeyer-Strombel on work-life balance. Please share this episode with all the prospective PhD students in your life!

Links Mentioned in This Episode

PhD personal professional development

Introduction

00:05 Emily R.: 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 two and today I have a very special episode for you. I have invited six other PhD advocates to contribute their voices to this episode and you’ll hear from myself and each one of them in turn. The questions I’ve asked each of these contributors to answer are: what aspect of a PhD program, beyond academics and research should a prospective graduate student consider when deciding among offers of admission, and why? How should they investigate and evaluate the strength of a program in this area?

00:45 Emily R.: If you’ve already matriculated into or completed a PhD program, you probably appreciate what an important topic this is. Will you take a minute to please share this episode with prospective PhD students in your sphere of influence? Please tweet your thoughts on the episode using the hashtag #PhDfactors. In this episode, we’re going to hear from me, Dr. Emily Roberts of Personal Finance for PhDs on finances, Mr. Kevin Byrd on unionization and advocacy, Dr. Emily Myers on unionization and advocacy, Dr. Jen Polk of beyond the professoriate on career development, Dr. Katie Pepin of thrive PhD on mental health, Ms. Susanna Harris of PhD balance on mental health and Dr. Katie Wedemeyer-Strombel on work life balance. Without further ado, let’s hear from our contributors.

Finances with Dr. Emily Roberts

01:43 Emily R.: Naturally, my contribution to this episode revolves around your finances, specifically how to evaluate whether you will be sufficiently supported by the stipend or salary provided by the program. You may or may not end up using this factor when you choose your PhD program, but either way you should go into graduate school well aware of the financial realities. When I was applying to PhD programs, I didn’t pay much attention to the stipends in the offer letters. I naively trusted that every program I was accepted to would support me financially to a reasonable degree. The PhD program I picked based on only the research opportunities and location actually did pay a decent stipend, but that was blind luck on my part. I know now that graduate students often do experience a great degree of financial stress and ill effects. Approximately 50% of PhD students take out student loans, prior to graduation and many also accumulate credit card and other types of consumer debt. Some PhD students qualify for snap benefits and a few experience food insecurity. Think about the difference it would make to your mental health alone to attend a graduate program with a stipend that allows for a comfortable standard of living versus a program where you have to pinch every penny, side hustle like mad, and still be in the red every month. Do you think you will be able to perform well academically if you’re experiencing chronic financial stress?

03:08 Emily R.: There are long-term financial effects to think about as well. If you currently have student loans, will your stipend allow you to start to repay them? If they are un-subsidized, they will accrue interest all through your graduate school deferment period and you’ll have an even larger balance to tackle post-PhD. What if you were able to start investing with your stipend? If you’ve never played around with a compound interest calculator, pause this episode and spend a few minutes doing so now. With reasonable assumptions, investing $250 per month throughout only five years of graduate school can turn into nearly $1 million in your retirement years. That’s $1 million of wealth in retirement that would not exist if you accepted a stipend that didn’t afford you that ability to save.

03:56 Emily R.: Are you sufficiently motivated to pay attention to the stipends in your offer letters? Good. I’m going to tell you how to evaluate the single most important factor in your funding package. The number that I want you to find in each of your offer letters is your stipend or salary net of fees. Some of your offer letters might state this number clearly and some might obfuscate it. To compare apples to apples across all your offers, you need to know how much money is actually going to end up in your bank account after your tuition, insurance premiums, and all fees have been paid. If your offer letter doesn’t make it clear to you what financial obligations you will have to pay to the university from your stipend, it’s worth a follow-up email to clarify.

04:39 Emily R.: Next, we need to put this net stipend number in the context of the local cost of living for the university. I like to use the MIT living wage database for this. The living wage is basically the amount of money it takes to pay for basic living expenses like housing and food in that local area. It doesn’t include discretionary expenses like travel or putting money toward financial goals. Go to livingwage.mit.edu and click on the state and county of the university you’re considering scroll until you see the amount of money that constitutes a living wage, including income taxes for a single person. If you have a child, or someone else who depends on your income, you may need to scan over to the amounts for larger family sizes. Take the living wage number you found and compare it to the stipend after all education related expenses have been paid. Ideally, your stipend will be higher than the local living wage. Personally, I felt I was able to live comfortably during grad school and save a good amount of money and my stipend was about one third higher than the local living wage. The number that represents your stipend, net of fees divided by the local living wage is the number that you can compare across all of your offer letters.

05:54 Emily R.: Now, what should you do with this information? My advice, which you can take or leave, is to eliminate from consideration all of the PhD programs that will pay you less than the local living wage. If you choose to go to a program that pays you poorly, steel yourself for the likelihood that you will take out student loans or consumer debt during your PhD or have to devote a lot of time to side hustling. You may decide that this is worthwhile, but at least now you’ll go in with your eyes open. If you have two or more offers that are above the local living wage, if you like, you can continue to factor in financial considerations as you make your decision. In fact, I’ve made a list of a dozen additional factors you should evaluate before committing to a PhD program. The stipend divided by the local living wage actually just scratches the surface. You can download the PDF of the full list by going to pfforphds.com/offerletter and signing up for my mailing list.

Further reading: 10 Ways to Combat Financial Fragility Beyond Grad School

Unionization and Advocacy with Mr. Kevin Bird

07:00 Kevin: Hi, my name is Kevin Byrd. I’m a PhD candidate in the department of horticulture at Michigan State University and I’m also the current president of the graduate employees union in Michigan State and I’ll be covering how and why to take graduate unions into account for your graduate school decision. Graduate unions are important to consider because I think they’re central to a safe, secure, and equitable experience in graduate school. If you have a graduate union, it means there’s a system in place to combat harassment, discrimination, overwork, and other workplace mistreatments, independent from these university institutions. It also means there’s more power to pushing universities to provide living wages, comprehensive health insurance to all graduate assistants and to keep university fees low. When we were looking at other universities at Michigan State for our last contract campaign, we found a pretty stark pattern that the highest stipends in terms of cost of living were held by unionize universities and the lowest by non-unionized. In fact the only universities that had stipends less than half the cost of living were non-unionized universities.

08:03 Kevin: Additionally, through collective bargaining, there is something that holds institutions to their word and maintains benefits and services graduate assistants are entitled to receive. When I was an undergraduate at the University of Missouri, there was a moment when graduate assistants lost their health insurance with two days notice. Without a binding collective bargaining agreement, these students were largely left powerless to get back the benefits they were promised upon signing. Meanwhile, at Michigan State after several contract campaigns, we have some of the most comprehensive health care on campus with low deductibles and low co-pays, even after the university tried to reduce those benefits in the last contract cycle. It’s this sort of stability and progress that unions help maintain and build upon year after year. Hopefully the benefits of unions are at least partially clear right now and we can move on to how to evaluate unions at universities that you’re looking at.

08:52 Kevin: One of the first things to look at is whether the university is public, private, public universities are governed by state labor law, while private universities are governed by federal labor law. Given the latest ruling by the national labor review board, most private university unions are fighting for a struggle to be recognized by universities, whereas many state labor laws allow for graduate students to be unionized. Knowing whether university is public or private is one of the easiest ways to figure out if there is an established union or if there is a union currently fighting for recognition. Right now at Harvard University, the University of Chicago, and Loyola, all private universities, there are unions but they are not officially recognized by the university and they have not been able to participate in collective bargaining.

09:33 Kevin: The next move would be some internet sleuthing to look at the website of the union at the university you’re looking at first see if they have their last collective bargaining agreement posted. This would tell you the benefits that graduate assistants currently have with the university, especially important things like the minimum stipend the university can pay you, the pay increases every year, and the current health insurance plan the graduate students currently enjoy.

09:54 Kevin: Next, would be the current campaigns the union’s currently working on. What sort of things need to be addressed in the university? What’s the union doing to address them? And what does progress look like over the last few years? All of these things will help you get a landscape of what issues are facing a campus and how a union is working to address them and how successful they’ve been in the past. Additionally, you can look at media presence to see how the news covered the last bargaining cycle that a union undertook. Did they have to shut down streets with a march? Did the hold rallies? What sort of actions were they able to take that eventually led to the progress that they got in their latest contract? These things in particular can tell you how well organized a union is and how they can use their power to make changes on progress for graduate assistance.

10:34 Kevin: You can also look for other benefits that unions provide to their members. At Michigan State, we have something called the solidarity grant where members can apply to the union in times of financial need and receive a couple of hundred dollars or a thousand dollars to address major crises that have occurred in their life, from a flat tire to burst pipes. One final thing to consider is whether the university website talks about the union on it. This could be an indication of labor relations between the union and the university. It’s probably best to be at a university that acknowledges and at least recognizes the union and works to distribute information about contract benefits to prospective and current students.

11:07 Kevin: All these things considered, I would personally recommend prioritizing universities with strong unions in your decision. A graduate degree can take many years and the political and economic landscape can change rapidly. An established union is capable of increasing and maintaining current benefits, while also fighting off rash decisions by university administrations. If you’re committing to live somewhere for five years and you’re embarking on an ambitious academic project, it’s good to have someone on your side fighting for your benefits and maintaining a quality of life that you deserve while you’re working on this degree. While these conditions may exist anywhere, I think they’re much more likely to occur in universities with strong graduate unions.

Unionization and Advocacy with Dr. Emily Myers

11:50 Emily M.: Hi, my name is Dr. Emily Myers. I, very recently, as of last week, have a PhD in pharmacology from the University of Washington, here in Seattle. I am also an executive board member with UAW 4121, which is the union that represents about 6,000 postdocs and academic student employees, like teaching and research assistants, here at the University of Washington. I am going to give some insights into what I wish I had known when I was looking for a PhD program, and how important unions can be for your graduate student experience beyond stipends and student fees, which unions have also won major victories for graduate students.

12:31 Emily M.: So I chose my program for my science interests and because I loved Seattle, but I really didn’t have the depth of knowledge about how institutions work that I do now that I’m on the other side of my PhD. I was fortunate that I chose a university where the graduate students had been unionized and had been building power since 2001 and we had stronger workplace protections than most other schools, because academia is a strict hierarchy, with power dynamics that do not favor trainees, like grad students. In tandem with these power structures are institutional structures, where harassment and discrimination are widespread. In fact, the National Academies of Science, Engineering, and Medicine put out a report last year showing that women in science face rates of harassment second only to the military, and that this was for white women, and so fails to capture any sort of intersecting identities. And it’s important to understand that harassment and discrimination are about power, and who has power, and who maintains access to that power. Unions are a fundamental way to change power structures, through bottom up grassroots organizing, and gives graduate students and other trainees more of a voice in their workplace. As union members, we have access to third party neutral arbitration, which is the only scenario where the university does not have final control over the outcome of a harassment claim. This is a huge step in rebalancing power and that’s one of the top things that grad students at Harvard are on strike over and are fighting for right now.

14:07 Emily M.: In addition, unions can be a phenomenal source of community in graduate school, because graduate school can be extremely isolating. And so finding folks outside of your discipline is huge and the unions can also offer resources that are not dependent on university approval, which can be critical for international students on visas. And I think that enthusiasm and recognition for the need to change these power structures is reflected in how we are seeing a huge spike in graduate students and postdocs forming unions across the country at all kinds of schools.

14:43 Emily M.: So to give an example of this, towards the end of my time as a PhD student, I made a complaint about a professor in my department who notorious for making sexual jokes for harassing young women and saying racist things. And the university investigated and said while they believed us, but it wasn’t bad enough, meaning it didn’t cross the legal definition of harassment, and so the university was not liable and would not take further action. And it was through working with my union, we were able to get this professor removed from supervision of grad students, even after the university failed to take action. So I am not sure that without my union community and allies, I would have felt safe enough to say anything in the first place, let alone get results from speaking out about harassment.

15:32 Emily M.: As always, I hope anyone listening here won’t face harassment and discrimination in their time as a graduate student or in general. But I also strongly encourage anyone who comes from a marginalized background or is concerned about their future work environments to consider the status of a graduate student union in their decisions about choosing a program. So you can find out if a university has a union by either asking current graduate students. Or universities typically will have a labor relations office and you can check their webpage to see what workers are unionized on campus and you’ll want to look for a name and local number. Like for example, UAW 4121 is United Auto Workers four one two one. Because student senates and associations are not the same thing. And you can always reach out to current graduate unions like mine at UAW4121.org for more resources or resources or information. Or for example, if you’re in California, it would be UAW2865.org. And with that I just want to say congratulations on your PhD programs and good luck.

Career Development with Dr. Jennifer Polk

16:50 Jennifer: My name is Jennifer Polk and I’m co-founder of Beyond The Professoriate. I earned my PhD in history from the University of Toronto and now work full-time helping graduate students and doctoral degree holders build awesome careers. It’s crucial to actively attend to your career while pursuing a PhD. This might seem counterintuitive. After all, isn’t the PhD itself the thing that will help your career? While that may occasionally be true, it’s only true if you build into your experience activities and accomplishments that matter to employers, both within and beyond academia. That building is usually something you need to do for yourself. You can’t rely on your advisor or graduate program to do it for you.

17:44 Jennifer: Most PhD students live on minimal stipends and it’s common for folks to take additional paid work, if they’re able, to pay their way. An awful lot of folks have significant student loans too, of course, and if you’re a regular listener of this podcast, you know all this very well. All of that is to say that you might need a decent paying job pretty quickly once you graduate. Since it could take months to find work, even for the most successful among us, you’ll need to put in the groundwork over the years of your PhD to build experiences, gain skills, and cultivate a professional network that spans a variety of fields. That’s so you’ll be in a good position to get hired when it’s time to start applying for jobs. Ideally, your advisor will be supportive of your career no matter where it takes you. A good match with your primary advisor is incredibly important. That’s true beyond career concerns, of course. Advisors have a lot of influence over your experience, much more than you might expect, and there are academic studies that show this. I’m not just making it up.

19:01 Jennifer: Beyond your advisor, ideally, your department and the graduate program specifically will actively create opportunities for you and your fellow students to gain professional experience and grow your networks. Maybe you can do an internship with the full support of your department or attend regular lunch and learn or other networking events that they organize. Pay attention to academic and nonacademic resources. The default in many academic disciplines is to privilege scholarly careers above all others. Avoid, please, avoid departments that give you that vibe. They are not living in reality and you very much will be.

19:46 Jennifer: The bottom line here is to make sure your advisor will treat you with respect always and support you doing what you need to do to build career-relevant experiences and skills for both academic and nonacademic careers. You can absolutely ask your prospective advisors pointed questions about what kinds of career support you can expect. This is your career, your life, and you want to make sure you’ll get the support and resources you need for success during and after your studies. Graduate school is hard enough without all this added stress.

20:21 Jennifer: As you’re exploring your options, learn about programming and other opportunities available to you via the institution’s career center or graduate school. Look, for example, for a robust series of workshops, for career consultants, you can make one on one appointments with. Maybe they focus specifically on graduate students, even just PhD students. That’s awesome. You can also investigate what’s being done at the association level, so to check on what your academic discipline is up to. For example, some of the larger scientific societies host regular webinars and program multiple career-related sessions during their annual meetings. That’s great. Do take a proactive approach before you accept an offer and enroll. This is not the time to be shy. If you don’t find a good fit, you might be better off not doing a PhD at all or not this year. Your bachelor’s or master’s degrees are absolutely good enough to help you create an awesome career and life for yourself. One filled with all the creativity, intellectual rigor and challenging problem solving that drew you to want to do a PhD in the first place.

21:36 Jennifer: Learn more about Beyond the Professoriate on our website beyondprof.com and you can find us on social media too. You can also follow me, Jen, on Twitter at @FromPhDtoLife. I’d love to see you there. Thank you.

Mental Health with Dr. Katy Peplin

21:58 Katy: Hello, my name is Dr. Katy Pepin and I am the founder and head coach of Thrive PhD. Thrive PhD is a community for graduate students. It’s also individual coaching, courses, a Twitter presence, and Instagram all at that handle. Why I care about this aspect, mental health, of PhD programs is because it was one of the things that was so hard for me when I was a grad student. I have been dealing with a brain that tends toward anxiety, that can have some depression issues. My diagnoses aren’t as important as the fact that I knew early on in my PhD program that if I didn’t take care of my brain, as well as my career and my publications, I wasn’t gonna make it through.

22:48 Katy: So some of the things that I think it’s important to consider when you’re looking at a PhD program are first of all, the resources that are available for your mental health, through the university and hopefully at no cost or little cost to you. Some questions to ask: are grad students allowed to be seen in the on-campus mental health facilities? Sometimes those are undergraduate student only, so that’s important to know. Whether or not the health insurance that you’ll be offered covers mental health services or medications? If so, is there a limit to how many sessions you can have per year or per semester? Do you have the ability to be seen by providers outside of that insurance network or are you limited to a handful of people inside of the area? All really good questions to ask for your insurance.

23:41 Katy: Secondly, it’s important to kind of ask some questions around the mental health culture in the department. Some of the sure sign tells for me are: one, do graduate students stay enrolled? Do they have a high dropout rate? Sometimes that can indicate a mental health climate problem. Do people openly and excitedly talk about their non-PhD, non-grad school lives in the program? Do they talk about how they go rock climbing? Is it encouraged to work out? Do people have the ability to flex their schedules based on how they’re feeling on any given day? Is the opportunity available for you to work remotely? And if people are struggling, do people feel comfortable asking for help around those areas?

24:29 Katy: It can be really difficult to find that out on a prospective visit or even from an email as you’re evaluating, as you’re not a student. But it can be very important to find ways to ask that question. So some of the questions that I have asked to get around the mental health climate without directly saying, does your faculty support or not support the idea of graduate students having robust mental health resources and support, are to ask things like, do people feel comfortable talking about their personal lives? Do any graduate students have different family structures? Do graduate students have kids? Is anybody a parent? Is anyone a caretaker? What kind of relationships do people have? And are those things supported? Another great question to ask are how are the boundaries around breaks? One of the sure fire tells of a department that has a kind of problematic culture around mental health is that students either don’t feel comfortable taking breaks or they only take them in between the semester when their grading is finished or when the university is otherwise shut down. So ask graduate students, you know, what are the PI’s policies around weekends and evening work? What are the policies if you need to go home unexpectedly or if you’re not from here? Is it flexible enough for you to work remotely if you need to? Are there opportunities for graduate students to tweak the conditions of their work in order to best support themselves?

26:02 Katy: It can be really hard to ask those questions and it definitely can be worrying to say, I want to know what these resources are in advance because some graduate students might feel like that makes them seem like they’re already a problem and they’re not even there. So I would embolden you and encourage you to ask as many questions as you feel comfortable, but know that there are always ways to build support around yourself, whether that is through what the university provides or supplementing it from an outside perspective or place. I’m wishing you a happy new year. And again, my name is Katy Paplin. I am the founder of thrive PhD. You can find me on Twitter or Instagram @ThrivePhD or thrive-phd.com

Mental Health with Ms. Susanna Harris

26:58 Susanna: Hi everyone. My name is Susanna Harris and I am a PhD candidate at the University of North Carolina in Chapel Hill. I am also the founder and CEO of the PhD Balance. PhD Balance is an online community dedicated to talking about those difficult challenges and problems we face while we’re in our graduate programs. I founded this group because we really wanted to make a space to talk about certain things like dealing with difficult advisers or understanding what to do after graduation, but most importantly we wanted to talk about the struggles that students have with their mental health and with dealing with mental illness throughout their programs. I really care about this because I myself have depression and anxiety and I realized that a lot of other people around me did as well, but we just didn’t talk about it.

27:48 Susanna: For this reason, I think it’s really important to look at graduate programs and understand how they will support students’ mental health. You can get a good idea of this based on what kind of resources they have, as in, can you go to campus health? How long does it take to get an appointment? What kind of treatments are covered and can you see a therapist outside of those treatment options? This might include how does the department respond to when there is a mental health crisis or when a student divulges to someone that they are struggling with some sort of mental illness. You can even understand what is the culture surrounding the discussion of mental illness. Does the department actively provide resources? Will the lab group that you’re joining be open and accepting of someone having a difficult time? Does the university provide mental health days or access to other kinds of literature? This is really important because although a lot of us, myself included, go into graduate school thinking we are prepared and we will somehow get through it faster and easier than the average, we have to remember that the average is made up of people just like us and I’ve quickly realized that the challenges I faced in the PhD were just as hard as people before me had said.

29:06 Susanna: So what are the best ways to go about seeing if your new program or your new lab will take care of your mental health, no matter what kind of challenges arise? The best way to do this is to just ask people directly. Say, “this is something that is commonly talked about. I know that others have expressed difficulties with dealing with their mental health. How does it work in where you are?” It’s better to ask things about how or what or when rather than just asking, “is the mental health culture good or is mental health supported?” You can ask things like what has happened in the past when someone has talked about these things or you can say, are you aware of what resources there are and can you show me where to find them? Even understanding if a faculty member or a lab member or department has or knows about these resources tells you a lot about how important this topic is to them.

29:57 Susanna: If you want to understand more about my perspective, you can find me on Instagram and Twitter at @SusannaLHarris and I would love for you to check out PhD Balance. We have a website that’s www.phdbalance.com or you can follow us on Twitter and Instagram to hear other people’s stories of dealing with these really hard challenges in graduate schools and sharing resources about how to get through a program. That’s at @PhD_balance. So thank you so much. Bye.

Work-Life Balance with Dr. Katie Wedemeyer-Strombel

30:39 Katie: Hi, I’m Dr. Katie Wedemeyer-Strombel and if you follow me on Twitter it will be no surprise that I’m here to talk about the importance of considering work-life balance when choosing a PhD program. This is a subject I’m passionate about because I chose a PhD program without considering things like departmental culture and the recreational opportunities in the area. Both of these ended up being a pretty bad fit for me and in hindsight I wish I would have more strongly considered the nonacademic factors as seriously as I considered the academic ones. As a PhD student, it’s very easy to lose yourself to your program, to your work, and it’s critical that you’re able to rest and recreate regularly in ways that fuel you. As I say frequently, rest is not just a reward for hard work, but a critical component to working hard. Making sure that the university you attend and the surrounding area can provide enough resources for your well-rounded life and interests is important.

31:33 Katie: When you become a PhD student, generally you will work for the university as a teaching or research assistant in addition to conducting your own research and while will take up a lot of your time and energy, it should not and does not have to be all that you are. You are allowed to be a whole person, not just a research robot and finding a departmental culture and location that fit your interests is important.

31:57 Katie: Let’s first talk about departmental culture. What do I mean by this? Let’s say for example, if you don’t drink alcohol but learn that a department you’re considering regularly encourages binge drinking as a reward for working hard, then perhaps that’s not a great fit for you. If it’s important for you to see your family for certain holidays, make sure that the department you’ll be joining encourages or at the very least does not reprimand students for taking time to spend with loved ones.

32:25 Katie: Now about location of the program. This is something, again, I mistakenly did not consider when choosing my program and it made falling into the bad habits of overwork and over-drinking too easy, as my usual hobbies and recreational activities were hard to come by in the area. For example, do you like to hike and camp? Then a university in a flat state with few nature exploration opportunities may not be a good fit. Do you enjoy seeing or performing in live theater? Google the area and make sure there’s an outlet for this nearby. Does seeing the ocean or other body of water help calm you down when you’re stressed out? If so, maybe only consider schools that have natural features that fit these needs.

33:04 Katie: So how can you look into the work life balance factors as a perspective student? Well, the best thing you can do is ask current students in the department, preferably over the phone or in person, questions about the local culture within the department and the recreational opportunities nearby. Preferably, you’ll be able to talk to this current students over the phone or in person, and I specifically recommend asking over the phone or in person so that the current students will feel more open to answering honestly, as they don’t have a written record of their answers. If you are unable to ask in person, say on a recruiting trip, you can email and ask for a quick phone call. In my experience as both the perspective student and the current student in this scenario, most folks are happy to chat and share their own experiences. Some questions that I recommend asking are: are current students able to comfortably take time to spend with loved ones? Can they travel for holidays? Are they encouraged or reprimanded for working reasonable hours and taking time away when needed? What do they do for fun that’s not related to their work? What do they like most about the location of their program? And what do they like most about the departmental culture that they’re in? If you’re a minority, I’d also recommend asking others who share similar backgrounds with you if they feel that their way of life feels welcomed and safe within their department and local culture. And one of the most important questions I think you can ask is if the current student would choose the same program again, knowing what they know now about it.

32:42 Katie: So now that you’ve talked with the current students about the departmental culture and the location of the university, what do you do with this information? Seriously consider their answers and allow those answers to help you decide between programs. If you get an off feeling from a program’s culture or worry that you won’t be able to do your favorite hobby, trust your gut and find a program that best suits your needs, both the academic and your personal work life balance needs. As my amazing advisor, Dr. Tarla Rai Peterson once told me, “We are all better off when we give ourselves permission to know one another as whole people.” Your PhD research is going to be important, but who you are as a person is even more important and I encourage you to consider your own personal needs in addition to your academic ones in choosing a program. For more on work life balance as a graduate student, you can read some articles I have in the Chronicle of Higher Education or follow me on Twitter at @krwedermeyer. Thanks for listening and best of luck as you choose your program.

Outtro

35:58 Emily R.: It’s Emily again as we close out this episode. I’d like to emphasize two themes I heard from the contributors. First, grad school is your real life. It’s not reasonable to try to ignore or suppress your personal life or what makes you happy and healthy for the five or so years you’ll spend in your PhD program. Choose a PhD program that enables you to live a full life and succeed academically. Second, you can find a good amount of information online, but nothing can replace personal real time conversations with current graduate students. The best time and place for those conversations, and your other observations, is during campus visits. I encourage you to attend as many of those as you possibly can and participate in them fully, asking all the questions the contributors suggested in this episode. You can follow up over the phone, as needed, as decision day approaches. I wish you all the best in choosing the PhD program that will foster both your professional and personal development. Please share this episode with all of the prospective PhD students in your life.

37:12 Emily R.: 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 Poddington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio

Weird Tax Situations for Fellowship and Training Grant Recipients

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One of the most puzzling tax scenarios that is common in academia but almost unheard of outside of it is fellowship or training grant funding because it is neither a wage nor self-employment income. Fellowships and training grants, which I call “awarded income” frequently pay the stipends and salaries of graduate students and postdocs, but also apply to some other kinds of trainees that aren’t considered students or called postdocs. This post explains the weird tax situations for fellowship and training grant recipients and how to address them. I’ll clarify right up front that you do need to incorporate your awarded income into the gross income you report on your tax return, and you almost certainly will end up paying tax on it (unless your total income is very low or you have lots of other deductions/credits).

weird tax fellowship

This article was last updated on 1/25/2022. It is intended for US citizens, permanent residents, and residents for tax purposes. It is not tax, legal, or financial advice.

Further reading/viewing:

I have to define my terms up front here because “fellowship” is used variously inside and outside of academic research, and these weird tax situations don’t always apply. What I’m talking about is when your income from your academic/research role is not reported on a Form W-2 (and you’re not self-employed).

Often, though not always, winning an external or internal fellowship generates this kind of income. The NSF GRFP and DoD NDSEG are probably the most well-known examples of this type of income at the graduate level for STEM fields. Basically, you’re being paid because you won an award, not because you are directly trading work or time for money. This kind of income can also come from training grants, such as the NIH T32, and in those cases you might or might not be labeled a fellow by your institution.

If your income is reported on a Form W-2, whether it’s called a fellowship or not, this post doesn’t apply to you!

Personally, over my time in/near academia, I received awarded income on five occasions:

  • I was postbaccalaureate fellow at the NIH for a year between undergrad and grad school, and my income was reported on a 1099-G.
  • I was on a training grant in my first year of grad school, and my income was reported on a 1099-MISC in Box 3.
  • I won an internal fellowship for my second year of grad school, and my income was reported on a 1099-MISC in Box 3.
  • I was paid from my advisor’s discretionary funds in my sixth year of grad school, and my income was reported on a 1099-MISC in Box 3.
  • I was a Christine Mirzayan Science and Technology Policy Fellow at the National Academy of Engineering, and my income was reported on a 1099-MISC in Box 3.

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Receiving Unusual Tax Forms

The way to definitively tell that you’re receiving awarded income is that you don’t receive a Form W-2 at tax time for your income, which was likely paid similarly to a regular salary or perhaps in a lump sum per term. Instead, you might see your income reported on some other strange tax form:

  • Form 1098-T
  • Form 1099-MISC
  • Form 1099-NEC

There are other possible mechanism for this reporting; these are the three most commonly used by universities and funding agencies.

None of these forms was designed for reporting awarded income and none do it very well, but they do get the job done if you know what you’re looking for.

Form 1098-T

Form 1098-T, which is issued to some students depending on your university’s policies, is sort of a clearinghouse form for the sum of your fellowships/scholarships/grants received (in Box 5) and also the sum of the qualified tuition and related expenses that were paid (Box 1) to your student account. Your fellowship income might be lumped in with your scholarships in Box 5, which makes them a little hard to parse, or Box 5 might only include your scholarships (see next section if so).

The good thing about Form 1098-T if it includes your fellowship income is that it does put front and center two of the important numbers you’ll need to work with when you prepare your tax return, the sum of your awarded (fellowship, scholarship, and grant) income (Box 5) and a subset of your Qualified Education Expenses (Box 1). You don’t really need to know what your fellowship income was independent of your additional scholarship/grant income See Weird Tax Situations for Fully Funded Grad Students for more details about working with Form 1098-T.

Form 1099-MISC

Form 1099-MISC is a super confusing form to receive for fellowship income.

First, any non-academic who hears/sees that you have income reported on a 1099-MISC is going to think you’re self-employed. Self-employment and contractor income used to be reported in Box 7, which no longer exists following the creation of Form 1099-NEC (see next). Fellowship income usually shows up in Box 3, “Other income.” If you are a grad student or postdoc, you are not self-employed; do not pay self-employment tax!

Second, the instructions for the 1099-MISC tell you to (“generally”) report your Box 3 “Other income” in the “Other income” line on your Form 1040 Schedule 1 Line 21. You can do it that way and your tax calculation will turn out correctly in a lot of situations, but it’s more correct to report the income explicitly as fellowship/scholarship income. It’s less confusing for the IRS and will enable you to take an educational tax break.

Form 1099-NEC

The IRS resurrected Form 1099-NEC, which stands for “non-employee compensation,” for tax year 2020. All self-employment and contractor income is now supposed to be reported in Box 1.

Unfortunately, a minority of funding agencies are also reporting awarded income on Form 1099-NEC Box 1. Similar to Form 1099-MISC, if you are certain that this income is fellowship or training grant income and not self-employment income, you should report it as fellowship income on your tax return. If you erroneously report it as self-employment income, you will pay self-employment tax (15.3%) and exclude yourself from taking a higher education tax break.

Further reading:

Receiving No Tax Forms

Going along with the theme of not receiving a Form W-2 at tax time, you might very well not receive any tax form at all! It’s very common for there to be zero communication between the organization that pays the fellowship and the fellowship recipient. Other times, the fellow might receive what I call a “courtesy letter,” which is just a short, informal letter stating the amount of fellowship money paid.

Further reading: What Is a Courtesy Letter?

Fellows who don’t receive tax forms or whose institutions and funding agencies don’t communicate with them at all about their personal taxes may feel completely adrift. They have no idea where to even start with preparing their tax returns. Many pay no taxes at all (if you know someone like that, send them this article!) since it takes a certain level of awareness of your tax responsibility to even wonder if you need to pay income tax. Even those who suspect they need to report and pay tax on their fellowship income might be daunted by the task of figuring out from scratch exactly how to do that.

Further listening: Do I Owe Income Tax on My Fellowship?

But it’s really a simple process to carry out if you know what to do! You should be able to find the amount of fellowship or training grant income you were paid for the whole year from your bank records. If you’re not a student, you just straight report that number in Form 1040 Line 1 with “SCH” and the amount of taxable awarded income written next to it. If you are a student, you have to work with your other scholarships and qualified education expenses a bit before reporting a number for your awarded income; see Weird Tax Situations for Fully Funded Grad Students for more details.

Further reading: Where to Report Your PhD Trainee Income on Your Tax Return

Quarterly Estimated Tax

In my observation, most awarded income recipients have the responsibility of paying quarterly estimated tax, and many, many, many neglect to do so. If you need one level of awareness to even understand you’re supposed to pay tax on your fellowship income, you need an even higher level of awareness before you follow through on paying quarterly estimated tax. In fact, if the organization providing you the fellowship didn’t mention this, it’s not a water cooler topic around your department, and/or you’ve never been self-employed, you almost certainly wouldn’t know to do it.

The basic principle here is that the IRS expects to receive tax payments throughout the year, not just in April when your tax return is due. If you owe enough additional tax at the end of the year (and don’t qualify for an exception), the IRS is going to demand not only your tax payment but late fees and interest as well.

The main system for sending tax in to the IRS is tax withholding on a normal paycheck. If you don’t do that or your withholding isn’t sufficient, you’re supposed to file quarterly estimated tax. Basically, you send in a payment (no forms need to be filed) to the IRS four times per year to make sure you don’t have too much extra tax due when you file your yearly tax return. You should work through the estimated tax worksheet in Form 1040-ES to figure out if you are required to pay quarterly estimated tax and in what amount; you can also find the instructions for filing it in that form.

Further reading: The Complete Guide to Quarterly Estimated Tax for Fellowship Recipients

Taxable Compensation and Earned Income Tax Breaks

Some of the tax breaks the IRS offers are contingent on the type of income you have, and fellowship income (not reported on From W-2) does not necessarily qualify.

Individual Retirement Arrangement

To contribute to an Individual Retirement Arrangement (IRA), you (or your spouse) must have “taxable compensation.”

Through 2019, the definition of “taxable compensation” did not include fellowship and training grant income not reported on Form W-2. However, starting in 2020, the definition of “taxable compensation” changed for graduate students and postdocs to include fellowship and training grant income even if not reported on From W-2.

Therefore, all types of graduate student and postdoc taxable income, whether reported on a Form W-2 or not, is eligible to be contributed to an IRA starting in 2020.

Further reading:

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) or Earned Income Credit (EIC) is a credit extended to low-income individuals and families. If your household income is quite low and/or you have one or more children, you might be able to receive the credit. As the name implies, you need “earned income” to qualify for the EITC. Unfortunately, fellowship/scholarship income is not considered “earned income” (Publication 596 p. 18). Puzzlingly, having zero earned income disqualifies you from the credit, but having too much non-earned income also disqualifies you from the credit. The definition of earned income also plays into the calculations for the Child Tax Credit and Additional Child Tax Credit.

Further reading: Grad Student Tax Lie #8: You Can Claim the Earned Income Tax Credit

Dependent Status

When you are trying to determine if you should file a tax return as an independent adult vs. a dependent of your parents, it is more difficult to qualify as independent with fellowship income rather than an equal amount of W-2 income. (This only applies to students under age 24.) While education expenses count as part of the amount of money that goes toward your “support,” scholarships and fellowships that you won do not count as you providing your own support.

Kiddie Tax

Fellowship income counts as unearned income for the purposes of being subject to the Kiddie Tax. If you are under the age of 24 on December 31 and a student, your “unearned” income exceeding $2,200 may be subject to a higher tax rate than the ordinary rate.

Further reading: Fellowship Income Can Trigger the Kiddie Tax

Weird Tax Situations for Fully Funded Grad Students

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“Actually, I get paid to go to school.” How many times have you said that to distant relatives and new acquaintances? If you look at it that way, being a funded grad student is a pretty sweet gig. But there are definitely downsides, like the low pay, sub-par benefits, and the weird tax situations that come with getting paid to be a grad student in the US. Receiving a 1098-T that has seemingly no basis in reality and having to incorporate it into your tax return – or worse, not receiving one – can become a real time- and energy-suck. The whole tax return support system seems to have been set up to help people who are in the red with their universities, not people who are in the black. Fortunately, there are solutions to these weird tax situations for fully funded grad students, and I’ve brought them to light for you in this point.

weird tax fully funded grad student

The points covered in this post are strictly to do with being a funded graduate student at a university.

Further reading:

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You Might or Might Not Receive a 1098-T

Form 1098-T looks like a super official tax form, rather like Form W-2. However, I like to think of it as a communication between the university and the IRS that you, the grad student, have only been cc’d on. It’s not issued to help you properly report your income to the IRS. Its primary purpose is to let the IRS know that a student (or a student’s parents) might try to take an education tax break so that it can check the amount of the tax break claimed.

But fully funded grad students often do not claim net educational tax breaks. And if a tax break isn’t in order, it’s actually optional for the universities to even create a 1098-T for a student. So as a fully funded graduate student, you might receive a 1098-T or you might not; the choice belongs to your university.

Further reading: What Is a 1098-T?

Your 1098-T Might Mislead You

The only thing worse than not receiving a 1098-T is receiving one that is misleading.

Further reading: Form 1098-T: Still Causing Trouble for Funded Graduate Students

When a 1098-T is issued, it is supposed to contain all of the scholarships and grants that were processed through the graduate student’s account (Box 5) as well as the payments received (Box 1) for qualified tuition and related expenses. If Box 1 is greater than Box 5, an education tax break is likely in order, and if Box 5 is greater than Box 1, you may have some excess income to report.

Box 7

But wait! It’s not always that simple. See Box 7? If that is checked, we’ve run into a calendar year/academic year issue. Sometimes the tuition, etc. for a winter or spring semester/trimester (beginning in January through March) is charged in or before December of the prior year.

However, are the corresponding scholarships that pay those charges posted at the same time? They are supposed to be since Form 1098-T’s update for 2018, but in actuality some might be posted in that January to March window. In that case, the charges end up on the 1098-T for one calendar year while the corresponding scholarships end up on the 1098-T for the subsequent calendar year.

It’s not a good idea to take a tax break in one year only to have to pay a boatload of extra tax in the next year. The solution is to pair the charge with the scholarship that is earmarked for it. You do this by pulling the charge forward into the calendar year when the scholarship shows up.

Let Box 7 be a warning to you that you should double-check in which calendar year the charges and payments show up.

Box 1

In addition, your 1098-T might not list in Box 1 all the qualified education expenses you are eligible to claim… More on that later!

If You Have Scholarships and Qualified Education Expenses, You Can Choose between a Deduction and a Credit

When you have qualified education expenses such as tuition, you get to use them for some kind of tax break. That’s good news. The bad or at least complicating news is that you have to make a choice about how to use them. With some limitations, you get to choose being using them for a deduction and using them for a credit.

A quick review on deductions vs. credits: Deductions reduce your taxable income, while credits reduce your tax due.

How much a credit is worth to you is pretty easy to calculate. If it’s a $1,000 credit, you knock $1,000 off your tax due. (Be a bit careful because some credits are non-refundable, meaning that they stop working when your tax due hits $0.) If it’s a 20% credit for up to $1,000, if you take the full credit you’re knocking $200 off your tax.

How much a deduction is worth to you depends on your marginal tax rate. You have to multiply the amount of the deduction by your top marginal tax rate (or two tax rates, if the deduction makes you cross tax brackets). If your top tax bracket is the 10% tax bracket, a $2,000 deduction takes $200 off your federal tax due. You also should factor in your state marginal tax bracket if your state honors the deduction.

Further reading: Marginal Tax Brackets, Deductions, and Credits Explained Graphically

With your qualified education expenses, at the graduate level you will choose between ways to use them to reduce your tax burden, and ultimately you may use both. (I’m leaving out some limitations such as what qualifies as an educational institution, income ceilings, and what the scholarships can be used for, so look those up before you make a final decision.) You can:

  • Make some or all of your scholarship/grant income tax-free (i.e., take a deduction), or
  • Use the Lifetime Learning Credit (20% credit up to $10,000 for tax year 2017).

Please note that you can’t use the same qualified education expenses for more than one tax break.

You can find a complete discussion of how to choose among these three educational tax benefits in How to Prepare Your Grad Student Tax Return.

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You Have to Figure Out Your Own Qualified Education Expenses

Oh, and did I mention yet that the definition of a Qualified Education Expense is slightly different depending on the tax break you’re trying to take? Yeah, that’s another weird tax situation for fully funded grad students.

IRS Publication 970 p. 4:

“Even though the same term, such as qualified education expenses, is used to label a basic component of many of the education benefits, the same expenses aren’t necessarily allowed for each benefit.”

Tuition is considered a qualified education expense for both of the education tax benefits I listed above, but some additional expenses sometimes qualify, such as required fees and course-related expenses, e.g., books and supplies. These types of expenses might or might not appear on your 1098-T in Box 1. You should refer to Publication 970 for the full definitions of qualified education expenses under the three different education benefits.

Further reading: What Are Qualified Education Expenses?

One controversial point is whether your student health insurance premium is a required fee/qualified education expense for the purpose of making the scholarship that pays it tax-free. Insurance and student health fees, along with some other expenses, are explicitly disallowed as qualified education expenses for the Lifetime Learning Credit, but not for making scholarships tax-free.

You Have to Report Excess Scholarship Income

Funded graduate students with net fellowship/scholarship income have to report it on their tax returns. This is a weird tax situation because it’s uncommon at the undergraduate level, so many people, even professional tax preparers, don’t know that you’re supposed to do it. But now that you know, it’s actually quite easy to do.

You report your net scholarship/fellowship income in the same line on your tax return as you report your wages, e.g., Form 1040 Line 1. You also need to print SCH next to the line so the IRS knows part or all of your income is not reported on your W-2.

Further reading: Where to Report Your PhD Trainee Income on Your Tax Return

You Might or Might Not Be a Dependent of Your Parents

Because graduate students are students, they might be considered dependents of their parents (or another relative) for tax purposes. Many parents (and their tax preparers) try to claim their children as dependents without referencing the relevant definitions. If your parents assume you are a dependent but you believe you are not, together you can go through the definition carefully to make the final determination.

The conditions for being considered a dependent of your parent are:

  • You are age 23 or younger at the end of the calendar year.
  • You were enrolled as a student in at least 5 calendar months (doesn’t have to be consecutive).
  • You lived with your parents for at least half the year (being away for educational reasons can count as living with them).
  • You are not filing a joint return (with a caveat).
  • You must meet the “Support Test”: You did not provide more than half of your own support in the calendar year (see Publication 17 Worksheet 3-1).

For any years that the first three points above apply to you, you should fill out the Support Test to determine if you provided enough of your own support to qualify as independent. Keep in mind that education expenses count as “support” that you needed, but scholarships and fellowships that paid that support don’t count as being provided by you, the student.

You’re (Mostly) Not Paying FICA Tax

FICA (Social Security and Medicare) taxes seem like an unavoidable burden for employees and self-employed people. But even if you’re an employee of your university/graduate school (i.e., you receive a W-2 at tax time), you’re most likely not paying FICA tax because you have a student exemption. This exemption depends on both the primary function of the organization that employs you (i.e., educational) and your primary relationship with the organization (i.e., as a student rather than an employee).

The student exemption is almost universal for graduate students, but I have come across two exceptions that depend heavily on the exact wording of the exemption:

1) Graduate students at research institutions that are not primarily universities might not receive the exemption.

2) Graduate students, even at universities, whose primary relationship with their employer is as an employee rather than a student may pay FICA tax. For example, this might occur during the summer vs. during the academic year, and could happen without the student even perceiving a difference in roles. (This is not common; I’ve seen one example and it was for a senior graduate student at a public university.)

Graduate students receiving fellowships also do not pay FICA tax, but that is because they are not receiving wages rather than due to their student status.

You Cannot Take the Saver’s Credit

The Saver’s Credit is a very valuable credit that low-income earners can take if they contribute to a retirement account, such as an IRA. However, full-time students are not eligible for the credit.

Yes, there are a lot of weird tax situations for fully funded grad students. You have to do a bit of legwork instead of just blindly entering numbers from your 1098-T into tax software or ignoring your excess scholarship income. But if you break the issues down one by one, it’s actually straightforward to determine how to resolve them.