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How to Financially Transition to Grad School as an Underprivileged Student

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In this episode, Emily interviews Rutendo Chabikwa, a first-year PhD student from Zimbabwe at the University of Oxford and the host of the podcast So, You Got A Scholarship? The topic is the financial aspects of transitioning to graduate school. Emily and Rutendo list start-up costs, explore the financial “hidden curriculum” of grad school, and discuss financial habits to establish and how to do so. This episode has a particular focus on underprivileged and/or international students.

Links Mentioned in This Episode

Teaser

00:00 Rutendo: If there’s something that you think somebody might cover, even if you don’t think somebody might go cover it, just ask. That’s definitely something I think underprivileged students can fall behind on simply because some of us have to cover a lot of gaps, not coming from families with people that have done PhDs or some of us who will be first-generation graduates to even begin with.

Book Giveaway Contest

02:19 Emily: Now, onto the book giveaway contest. In May 2021, I’m giving away one copy of Bad with Money: The Imperfect Art of Getting Your Financial Sh*t Together by Gaby Dunn, which is the Personal Finance for PhDs Community book club selection for July 2021. Everyone who enters the contest during May will have a chance to win a copy of this book. I’ve listened to a few episodes of the Bad with Money podcast, and I’m looking forward to reading and discussing this book because Gaby has such a different perspective and approach to personal finance than I do. If you’d like to enter the giveaway contest, please rate and review this podcast on Apple Podcasts, take a screenshot of your review, and email it to me at emily@pfforphds.com. I’ll choose a winner at the end of May from all the entries. You can find full instructions pfforphds.com/podcast. Without further ado, here’s my interview with Rutendo Chabikwa.

Will You Please Introduce Yourself Further?

03:24 Emily: I’m delighted to have joining me on the podcast today Rutendo Chabikwa. She is a first-year PhD student at the University of Oxford. She’s from Zimbabwe. So we are going to discuss in this episode the transition into graduate school, some of the financial stuff that goes on in that time, especially for underprivileged students. This is going to be really great episode. Rutendo and I have actually spoken before because I was on her podcast. She has a podcast called, So, You Got a Scholarship? and my episode of season three, episode one. So we’re doing a swap here. I’m so glad, Rutendo, to have you on my podcast. Welcome. Will you please tell the listeners a little bit more about yourself?

03:58 Rutendo: Thank you so much, Emily. Glad to be here. Glad we could do this. My name is Rutendo. Yes, I am a first-year PhD student, or DPhil as it is called, at the University of Oxford. I’m from Zimbabwe. But basically I have been an international student for the past about 10 years, starting with my two years of high school. Did that in Canada. My undergrad was at upstate New York at St. Lawrence University. So I have a bit of U.S. experience in there with also a couple of study abroads. And then my master’s was in London at the LSE and then now I’m here for my PhD. So it’s a bit, quite of a long trajectory over there, and I am studying information communication and the social sciences. So basically things to do with the internet, digital media, and political participation.

Costs for Anyone Starting Grad School

04:42 Emily: Wow. Okay. Yeah. Fascinating. Thank you so much. So we’re going to jump right in with talking about the financial startup costs for entering graduate students. And obviously you’ve done this before at minimum for your master’s and now again for your PhD. So you’re quite familiar. Let’s talk about this in three layers. One would be for just anyone who’s starting graduate school that didn’t require a move. Two, someone who did need to move to get to graduate school. And then three, someone who had to move internationally to start graduate school. So we’ll layer those on. So what are some costs in that first layer of just anyone who’s starting graduate school?

05:16 Rutendo: Yeah, absolutely. So anybody that is starting, I mean, there’s the obvious in terms of just generally your life in grad school, household items. I know that sounds very minimal, but it can be actually something that builds up and that we underestimate as well as, you know, your working equipment, your laptop. Right now, we’re in a pandemic, so everybody’s sort of working from home, but even outside of pandemic, generally grad students need to have really well stationed, you know, workspaces for your work. Books, and not just books that are not just textbooks as well, because you might have costs to do with like your research topics. Sometimes you might prepare having your own book to highlight or write in, things like that. And obviously we can talk about ways of minimizing those costs later, but definitely anybody going there, your stationary, books. Definitely.

06:07 Emily: Yeah. Well, I’ll add, you know, in the U.S., and you can tell me if you’ve experienced this at LSE and Oxford, but a lot of graduate programs in the U.S. seem to require some fees to be paid upfront. Like even before you ever get your first paycheck as a graduate student, you owe hundreds, maybe a thousand dollars of some kind of fee, which is just, I wish they set the system up differently. But it is that way in many places.

06:33 Rutendo: Absolutely. This is actually, I mean, even before actually getting accepted, right? So these fees, even for applications alone, so there’s that, and then getting accepted, the deposit fees. Sometimes you might be lucky enough to get a waiver. Sometimes not so lucky. They could, you’re right, go from a few hundred dollars to a large sum of your tuition as well. And then I think there are also, depending on your institution, fees, such as for student association fees as well. Those are definitely something to consider and look up how your institution works on that.

07:09 Emily: Yeah, those are the kinds of fees that I was referring to, like a recreation fee or an activity fee, or even sometimes the health insurance premium here, you know, it needs to be paid upfront. That can happen. So that could add up to a sum. The thing about that is that you can know in advance, right? So as soon as you figure out which school you’re going to go to in April, or whenever you do that, you can start asking what is the amount of money that I need to give you before I get my first paycheck? Now, I don’t want to say that everywhere is that way, because it’s not. But it’s definitely something worth figuring out as early as you can.

07:44 Rutendo: Absolutely. And also to find out from the different sort of stages, right. There’s fees, your department might have some type of fee or, I mean, if you come into something, I guess like the Oxford system, you might also try to talk to your college, see if they have any kind of fees or which is a different sort of department or different area. So to make sure that you’re checking boxes with different offices and different levels of the institution to make sure that you have that. Always definitely ask for that.

Startup Costs Associated with a Move for Grad School

08:09 Emily: Hmm. Yes. Okay. So let’s add a move on top of that. If you are moving, what kinds of, you know, startup costs are associated with that?

08:17 Rutendo: Oh, absolutely. Transport for sure. However way you’re getting there. Moving costs, shipping costs. In order to save money, you might have to use money. So in order to save money on buying all new items, for example, let’s say for your house, your desk, it might be cheaper to move with them, but that’s also a cost. So there’s, you know, you need to juggle that and, you know, do your tallies and do your trackings and write that out and see what’s cheaper and what’s easier for you and most convenient. So those moving costs are definitely a thing. Some people, I mean, I guess if you’re moving, then you’d have to consider things such as deposits on rent, rental fees. There might be costs as well for even finding a place to stay if your institution doesn’t provide that. Some people might work through agents. If that’s easier and safer for you, obviously different cities, different countries have different rules and regulations.

09:10 Rutendo: But I’d say that’s definitely a big thing to consider. So, and then the different taxes. Council tax in some places. I know in the UK, council tax is sort of like a big thing, which is one of the bills to do with, you know, your household that you need to consider and that you need to kind of look up at if you know, what’s easier and cheaper for you. If you’re a student, generally, depending on what household you’re living in, you can get a waiver for that. The process on that also requires research. I think the biggest expense is definitely if anybody moving, let’s say cities right now, would be things to do with, with living, added on to what we talked about before.

Different Scales of Moves

09:47 Emily: Yeah. I’m actually thinking back because there are different like scales of moves, right? So I’m thinking back to when I started graduate school, which I was living within a long drive, it was like a four-hour drive from where I was living before to my new graduate student city. So I was just able to drive with my stuff in the back of my car, did not bring any furniture. You know, it was pretty like low-key in terms of the actual transit costs. And then also I got into an apartment complex where they were doing, they didn’t require like a massive upfront deposit. It was some kind of like student special, you know, kind of thing. Like, so I feel like my move, which I did with no savings. I had like my last paycheck that was going to get me through two months, you know, to my first graduate student paycheck.

10:29 Emily: I did that without, you know, any real strain. I didn’t really buy furniture. I kind of lived without furniture for awhile, but that was a really, really low-key, low-scale kind of move. And like there can be, and we haven’t even talked about moving countries yet, but you can go way, way up on that scale. If you have an entire, you know, household, if you have stuffed move, if you’re flying and you have to ship your car, like plus as you just said, you know, I’m thinking about like Boston, where many people go through brokers and have to pay some kind of fee. Like, I don’t know if it’s a month’s rent like upfront just for that plus like the deposit, which could be large. Like, moves can vary so much from, I would say maybe a couple hundred dollars up to like thousands of dollars easily without even going, again, international. So like, that was my experience. I somehow like skated by with very little like actual outlay of money. What was your experience in this most recent move?

Rutendo’s Recent Move: 3 Suitcases

11:20 Rutendo: The most recent move? I could only fly with three suitcases. Somehow Emirates had a really great deal. So I could fly with three suitcases. In that, I made sure that I had my coffee pot because that’s always an essential, I had my bedding and my clothing, including my winter clothes. I knew winter clothes would be actually quite a big expense. So made sure that I had that over here. And then I didn’t have to buy furniture, thankfully, because I’m living in a student flat. So my apartment is actually furnished, so that’s great. But the biggest expenses now came into trying to, I guess, kind of make it feel like a home. Pots and pans, that that was not provided. The couple of basics. So it was a bit costly, but honestly, I guess not as costly as my master’s move, which is a whole different situation because I was not in student accommodation, which we could talk about later, the advantages and disadvantages of that.

12:13 Rutendo: So, this move was definitely slightly easier. But I did have quite some costs. And I did want to say there’s another cost that I think people, not even just internationals, might have to consider. If you’re changing things like your different insurances that you have, your health insurances. If you’re switching, you might need to do a bit more. So that’s also a cost that you need to consider, I guess, talk to your family about, or if you’re by yourself, figure that out how are you going to deal with those.

International Moves for Grad School

12:39 Emily: Yeah, absolutely. Okay. Let’s add that third layer on of now the move is an international move. Anything else you want to add about that particular cost?

12:47 Rutendo: Absolutely. Visa expenses. Sounds like just this one thing that you have to pay for, but then you need to consider the medical expenses within those. You need to consider health insurance within that. Some visas, like for example, the UK visa you have to pay, I think now it’s up to 500 pounds for every year of your visa. And so if you’re getting a five-year visa, it’s quite expensive. So you need to consider that. And then consider obviously things, things like flights you need to consider expenses to do with opening up a new bank account. You can get free bank accounts thankfully, but navigating that system. So, and if you’re going to a new country that you’ve never been to, I would say always make sure that you are able to have money to move around. So transport, to be able to do a couple of things in the first few weeks that you’re there. Add this to everything else that was mentioned before deposits: first month’s rent, household items, textbooks, and all the good stuff.

Challenges for Underprivileged Students Starting Grad School

13:46 Emily: Yeah. Wow. It can be quite a list here. So let’s now focus in particular on underprivileged students. What are the, you know, particular challenges that they’re going to have when they start up grad school?

Challenge #1: Funding

13:57 Rutendo: I’d like to talk about this in four different groups. So the first one is funding. I think this is the biggest thing to even begin with. Sometimes you can have funding for a year. Make sure you understand what your funding structure is as an underprivileged student. You want to know what is included and what is not included. Make sure that when they say it’s just tuition, you’re aware that it’s just tuition and you need to consider how you’re going to live and where that money is going to come from, what opportunities there are for RA ships, TA ships, how much they pay. And so to navigate that, before even I think I would say accepting and finalizing your offer. The different reasons why underprivileged students, you know, can have more difficulty navigating the funding structure, especially if you’re international, there’s that added layer. One of the things is that if you’re from certain countries, for example, I’ll give you the example of myself as a Zimbabwean. I am from a country that was formerly the Commonwealth and is no longer slash officially in the Commonwealth. So there are a lot of funding things that I could qualify for, but I don’t qualify for anymore. And so I needed to understand what I could get and what I couldn’t get. The offer I got, right now it covers tuition. My tuition is covered by the lab that I’m a part of. I’m a part of the computational propaganda lab here. However, there is no stipend. So for me to get a stipend, I need to work my maximum number of hours as an RA. And so that’s something I had to think about. Do I want to not have 20 hours a week to do my research, but to be an RA?

15:21 Rutendo: And so you need to be able to think about the time factor and how that is affecting or adding onto your work. Fortunately, my RA actually allows me to do the work in my research field. So it’s not like I’m spending 20 hours a week doing something that has nothing to do with my research, just so I can pay bills. However, I do need to do this so that I can pay bills. And so there’s that aspect as well of funding. And then one of the things I am consistently aware of is that my funding is pretty much dependent on grants that the lab has. And so that might be perceived as somewhat of a risk. However, it’s a bit of a new situation, not a new situation. It’s something that the lab has done for years. And so this is just how a lot of students in my lab are funded. But just me understanding that it’s not coming from a specific fund, is very useful for me to know what I can do and what I can’t do. So to ask those questions for funding.

16:14 Emily: Yeah, I totally agree. And I think this is, how funding works. It actually varies quite a lot by where you are the field that you’re in the type of university that you’re at. And so like, I am just thinking, Oh wow, I should really create a resource that’s like all just how funding grad school works. And I’m thinking to myself, do I know the full picture? Because I know things very well for certain fields that I’m close to, but like to know the full picture I think is very difficult. So for anyone, really, you do need to understand how funding works in your field, in that school, in that specific situation, where it’s coming from, what you have to do to get it, like you were just saying, how reliable it is, who it’s depending on? You know, if there’s a downturn in enrollment, are TA positions going to go away?

17:01 Emily: If your lab doesn’t get that next grant is like, that, you know, sector of your funding going to go away? Are there any guarantees? You know, guarantees at least in the U.S., they vary quite a lot. Some people get them. Some people don’t. Depends on the field. Depends on the school. Not getting one is not necessarily a bad sign. Although certainly getting one is a great sign. So there’s just a lot of layers to this. And yeah, I think the less versed you are in it, the more, yeah, you’re kind of flying by the seat of your pants, and it’s worth investigating for sure. Probably at an earlier stage than we’re talking about right now, we’re talking to basically rising or matriculating graduate students. And this is something you should ideally try to figure out kind of before you even apply so that you can, you know, know that you’re applying to the right places that have the right funding structure for you.

Challenge #2: Research

17:45 Rutendo: Then the next piece for me is research. Your actual research, but also I do need to say maybe this is in my field as a social scientist. I do not know how things work for sciences or humanities. But generally funding in terms of money and personal finances, there are things that your department, you know, some people can self-fund for a lot of things. So for example, some software that we use, some people in my department will say, Oh yeah, the software is fairly cheap. And I just subscribe this much a year. For me, that takes quite a bit out of my budget, you know? And it is part of research. It is actually part of a research cost. So things like that. However, I guess the best way to go about it is to talk to your department about it and understand what you need for your research.

18:27 Rutendo: If anything, if you think anything at all is tied to your research, talk to your department about it because they should be able to support you through that. But definitely I think as an underprivileged student, if I hadn’t spoken to other people who have navigated the system before, I would be worried about buying such software, for example, or I would be worried about managing the cap on the research fund that I have to be able to do field work and get those needs met as well. And so I think that’s definitely something that, you know, you kind of learn as you navigate the system. Yeah.

19:02 Emily: Yeah. Absolutely totally agree. Ideally, get someone else to pay for everything. And if not, at least you ask and then, you know, well, this is not something that we cover. And then you get to decide, you have to decide if it’s something that you’re willing to do out of your personal funds. But just apply, apply, apply, I would say, for funding. You know, extra grants. A lot of times travel in U.S. institutions sometimes comes down to the student to fund. Like, you know, summer trips to here or there to do their research. Basically, you’re going to get a grant for it, or you’re not going to go. I don’t think that too many people fund those things by themselves, but the smaller costs, like you were saying, like software or some kinds of equipment. Yeah. You should definitely be asking, at least, that your department will do it.

Challenge #3: Professional Development

19:44 Rutendo: For sure. The third one is professional development, and these are things that are not necessarily tied to your work or your research, but you need to do to begin to build up your CV or your presence in the field. And so some of the things might include, some courses offered through either online courses offered through either organizations or sometimes schools do actually offer these, but you still have to pay for them. So I know my library offers different professional development courses and, you know, each of them cost like about 15 pounds, a course. And so imagine taking about, you know, four or five of those a year. For some people, that could add up quite a bit. There could be things like attending conferences as well, that are not necessarily hosted by your school. It could be things like attending events.

20:37 Rutendo: I mean, I know I’m saying attending now, they’re all on online. Some thankfully are free, some still aren’t, which is still a cost for a lot of people. And so even though these things aren’t necessarily tied to your research, these are expenses that some students have actually footed themselves, but I don’t think it’s necessary for you to always do that. And this is, once again, when we talk about applying for assistance. But when it comes to applying, I do want to point out that the information isn’t always out there explicitly to say, Hey, there’s money. You can apply for this. So if there is something that you think somebody might cover, even if you don’t think somebody might cover it, just ask. The chances are that somebody will know where the answer is. Even if it’s not, you know, on the website that says, Hey, we offer professional development funds. But that’s definitely something I think underprivileged students can fall behind on simply because some of us have to cover a lot of gaps, not coming from families with people that have done PhDs, or some of us will be first-generation graduates to even begin with. And so we might have a lot more things and a lot more sessions or professional development work that we need to do but not enough money to actually pay for those things. And so there are a couple of costs entailed in that.

21:52 Emily: Yeah. And when you say ask, I just wanted to point out, who? Who should the people ask?

21:59 Rutendo: A supervisor, I would say start with your supervisor as the first port of call is your supervisor. Your department might have somebody that’s in charge of your program as well. I don’t know how different institutions work, but generally there’s someone that’s not necessarily your supervisor, but oversees your actual program. Those are the people to talk to you. And then if it’s things that are very just professional development focused, career services. I know a lot of schools have career services departments.

22:24 Rutendo: Those places are actually really great, whether you’re an undergrad or a PhD student. They know a lot about what’s going on. And so definitely those three, start off with those three. One of them will be able to assist.

22:36 Emily: Yeah, I would also add older students, students ahead of you. If they’ve done a conference that you want to go to, just ask them if they had it funded from somewhere. If they say, no, that’s not necessarily the final word, but if they say yes, then you’ve gotten a really good lead. And I would say also, you know, the person in charge of the program at my school that was called the Director of Graduate Studies, DGS. That person has an assistant. That is the person who knows everything going on everywhere. So that is the person to befriend to get on your side to advocate for you. That person is going to be an amazing resource just generally, but specifically with respect to funding and knowing how everything works behind the scenes.

23:17 Rutendo: That is definitely true. There is always that one person in administration who’s a great person to know. And I agree with that. Finding those people is very useful.

Commercial

23:28 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 your 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 2020 tax return, which are available at pfforphds.com/tax. I hope you’ll 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 you can find links to from P F F O R P H D S.com/T A X. 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.

Challenge #4: Emergencies

24:34 Emily: Okay. And we had a fourth one, right?

24:38 Rutendo: Now, the last one has nothing to do with all of these other things, but it’s emergencies. These happen. And sometimes, especially as a student, as an underprivileged student, if you’re moving somewhere new, you might have used most of your money for moving in and getting settled, but emergencies do happen. And this actually recently happened to me whereby I needed to go to an emergency room. Thankfully, it was not COVID-related. So just have to say that in a pandemic, just to make sure. However, you know, I ended up being able to talk to my welfare team here at the college and they covered a lot of the costs for a lot of things that I didn’t even know they could be covered for that are emergencies simply because I wasn’t ready then when that happened.

25:25 Rutendo: And so I think it’s really important that we understand that whatever emergencies we face to be able to be open about them, to the best of our abilities and you know, and obviously balance keeping your privacy and your private information private, but also letting letting the right people know to give you assistance. Because while some people might be able to just write their families and, you know, call up home and say, Hey, look, I need an extra, this amount of money. Some people might not be able to. And so to know that most universities will be, there will be some funds somewhere. I know my university has something called hardship funds for things like that. And different levels of it that you can apply for, but definitely the understand that emergencies for underprivileged students can be something difficult to navigate and challenging as well.

26:13 Emily: Absolutely. Absolutely. Could not agree more. I think in the U.S. it’s becoming more common, but I wouldn’t say it’s totally common, that universities or graduate schools have either emergency grants or emergency loans available. It’s not everywhere, but it’s definitely, definitely worth inquiring about because it’s, yeah, it’s becoming more and more popular to set up those kinds of things. As we understand, not everyone has the means to cover an emergency in cash or has access to debt even to finance an emergency or has family to fall back on or whatever the case may be. Yeah, not everywhere, but definitely worth asking about.

People are Your Best Resource: Talk to Them 

26:53 Emily: Okay. Yeah. Anything else you wanted to add about sort of helping, you know, underprivileged graduate students prepare for starting graduate school or, you know, make it to the end? Because finances are a big reasons that people leave PhD programs.

27:08 Rutendo: I mean, I would say that, you know, the most important thing in terms of getting a hold of your finances is also just, you gave the advice of talking to older students in one of the specific categories for professional development. But in general, talking to as many students as you can, once you accept it, try to connect. If there are any people that you see online, if you’re on Twitter, for example, you know, when somebody says I’m doing this program, try to connect with them. I set up a couple of Zoom calls with third years and second years and even people that had just finished their PhDs in my department, just to talk to them, just to hear about their experiences and, you know, students, you know, not just underprivileged students, but everyone just to know about the experiences outside and inside to know what I need to prepare.

27:51 Rutendo: And so I think that’s part of your research and getting so that you really understand your finances. Especially if you’re going to be doing some form of RAing or TAing, it’s important to talk to somebody that has done it so that you understand such as the salary structures as well. Because, you know, sometimes they tell you, this is how much you get paid pro rata, but you don’t even understand what pro rata is, for example. And so it would be useful to talk to people. So I’d say, that your best resource is people that have been through the very same system as well. And just understand the general lifestyle that helps you understand the costs, you know. So just asking them what they do in general, how much things cost, ask people where they go shopping, what things they had to buy, things like that would be very useful as you are preparing to go, and helps you definitely understand your finances, even before you start.

Establishing Good Financial Habits in Grad School

28:40 Emily: So the last thing we wanted to talk about was establishing good financial habits at the start of graduate school. Both what those habits might be, and how to actually go about establishing them, which is really the key. So let’s talk about what habits are great to establish at the beginning of graduate school, and for each one, how people can do that.

Habit #1: Track Your Expenses

28:57 Rutendo: Okay. I think the first habit is to track your expenses.

29:02 Emily: I always say that number one as well.

29:03 Rutendo: Which is, I must actually say, something I got from your podcast. So I listened to this podcast before doing my PhD and honestly like it’s, I went on a binge and it has been very useful for me. And I learned to track, just track. So what I did was I had the first month of not knowing, you know, what is needed or no projections, not knowing how much I might be able to save, just to track everything I bought. It sounds tedious, but you do need to track. And so the how, I think there are different ways of doing this. The way I did it was I used Notion. So I made a table and this sort of like budget looking thing in Notion, even though it wasn’t a budget, it was what I was spending.

29:50 Rutendo: And I had categories for each thing. So groceries and toiletries. So I knew that week one, this is what I spent. Week two, this is what I spent. So that helped me also see an average about on average per week, what am I spending on this? And then I kept my subscriptions. So knowing what subscriptions, you know, I have, and then during that month also making sure am I actually using them, like I have Spotify premium. Do I actually use it? How important is this feature for me? And then there were miscellaneous as well. Things that I, you know, that I’m spending on this month that I won’t necessarily be spending on next month, but just to understand that how much cushion and move room do I have in my budget for that? So I wasn’t going to be buying pots and pans every month, for example. But I kept that in there. That helped me understand an average. Because there will be some things that I will need to pick up throughout the month that are not in necessary, you know?

30:40 Rutendo: So having all of that. The other way you could do your tracking is to use the budget apps, you know, the ones that you connect your bank accounts to an app. I think in the U.S. it might be mint that most people use. In the UK, I use money dashboard. Personally, I find that to be really good. It has, you know, web interface and app interface, and it’s fairly automatic. And so habit number one is track. Just, you know, just to understand exactly what you’re spending. Don’t try to, and don’t lie about anything. If you spend, if you spend money, I spend money on sparkling water because I love sparkling water and I don’t have a soda stream. I wrote that down just so that I actually understand how much money I’m spending on sparkling water. Things like that.

31:32 Emily: Yeah. Completely could not agree more. And I would say when you’re choosing like this manual method, which as you said, can be tedious. I think there’s a lot of power there in the tedium and staying close to the expenses. But if you know yourself and you know that you’re not going to do it, you know, you’re not going to do this daily or multi times per day or whatever it is, and you decide to use mint or you need a budget or something similar, that’s okay. Know yourself, know what’s sustainable for you. And just choose something that, as you said, can become a habit and it is, you know, less maintenance to use one of these automated systems, yeah. But whatever can become easiest for you to sustain. I know for example, I kind of fall on this manual tracking side of things. My husband will not do that. So for us keeping a joint budget together, it has to be software, or it’s not going to get done. But it is a habit. And when we use software, we do check it. So whatever you think is sustainable for you in the longterm.

Habit #2: Understand Your Expenses

32:22 Rutendo: Right. Absolutely. And then the second habit would be connected to the tracking. So after the tracking comes the budgeting. And that’s something that I have found to be very useful. So I then moved, after understanding my expenses, I then, you know, created like a, okay, so per month here’s how much I want. Here’s, you know, on average how much I think I need for groceries, how much I need, I think, for this and this and that. And then I then moved it into the automated system. The automated system for me was easier simply because there were things that I could grab, let’s say, and sometimes forget to enter. I was afraid I’d forget to enter manually because I was no longer in the tracking phase. I was now in, you know, I’m technically still the tracking phase, but you know what I mean?

33:04 Rutendo: Like in the actual making sure I understand how much I spent of what phase. And so I moved that understanding to money dashboard and had all the different categories. And, you know, it’s been very useful, but like you said, even if you do automate something, it’s a habit. So I do check my money dashboard just to make sure that an expense has gone into the correct category or into the category I want it to go into by the categories I’ve set in my budget. So, and also just to see how far I have, how much do I have left this month for this specific thing?

33:35 Emily: One thing that I think is really valuable about tracking, and also budgeting to an extent, is even if you don’t really think you need to do it right now, you may, six months from now, want to look back at that data and, you know, get some insights from it because of a decision or something you have to make at that point. So, it’s just a good thing to make a habit, you know, make as low maintenance as you possibly can, just so you may want to use that data in the future you’ll have it.

34:03 Rutendo: Absolutely. Yeah, one thing I do understand that because of, I do regret not having had a budget during my master’s degree because it was in the same country, so I really have no excuse. So, I couldn’t actually say how much I spent on groceries on average. You know, now I can say that and now I can. And so I do agree. It is nice to just have that data at some point. You never know what you might do next in a couple of months or a couple of years even.

Habit #3: Save

34:30 Emily: Yeah. What’s the next habit on your list?

34:33 Rutendo: The next habit on my list is to save. This one is a bit, I think people, people go about it different ways. I know that the advice generally is pay yourself first, which I understand is great advice. As somebody who’s not that wealthy, not even, let me not even put a “that.” Who is not wealthy, who is mostly just doing enough to get by, paying myself first is actually quite, quite difficult, even on my budget categories. What I always do know is that I always have some little leftover. So I do this thing that I actually learned again from another guest on this podcast, which is at the end of the month, whatever I have leftover in my checking account, I put into my saving and I start from zero with my new paycheck. That is my saving. And then there’s also the other way that I save, technically kind of like save/invest, is through this app called Moneybox.

35:31 Rutendo: I think the U.S. equivalent might be Acorn. I don’t know if that’s what they do, they round up your expenses and sort of, kind of like quote unquote invest it for you. It’s not like you’re investing in big, very risky, you know, things. You’re not making like $5,000 worth of investments, but it is quite nice to just see that number go up. You know, if I buy something and then there’s 20 pence left, knowing that that 20 pence is going to do something. Because also, at the end of the day, in my head, in my budget, anyway, that was a round figure, right? That was not necessarily 0.8. you know. And so, that sort of save and invest model, I find it to be very useful, to always try and save. And it’s useful to save, even if you’re saving very little, because once again, emergencies do happen.

36:19 Rutendo: And then it also is useful to try and strive towards getting to that three to six months worth of expenses, which is something you don’t always start with. Especially if you’re somebody that’s not coming from a wealthy background. You don’t always start out with being able to have three to six months worth of expenses in your savings account. But that little bit counts. Just that little bit counts, and hoping that emergencies don’t happen. Knock on wood. You will get there through I guess some of the other things we’ll talk about.

36:44 Emily: What I really like about that articulation. Now, of course I am an advocate of pay yourself first. I definitely am. But what I like about how you’ve set things up is that saving is not, even though it’s the last thing you do with your money each month, it’s not the last thing on your mind. You know throughout the month that you have that intention of doing it at the end. And so I’m sure it affects your behavior. Oh, well, I want to be able to save a little bit more this month. So I’m going to really try to come in under budget on this category, because I know that’s going to enable me to save this much more. And so what I like about that is that it’s still an intentional thing that you have throughout the entire month, even though you do the action at the end.

37:20 Emily: And I think that, you know, sometimes that’s just how you need to start. And when you’re living essentially paycheck to paycheck, you know, there’s a possibility you might spend your entire paycheck that month, if something odd came up and you can’t, you really can’t, you know, set anything aside in advance. It’s okay to do that system. As long as it’s working for you most of the time, most of the time that you’re able to save something at the end of the month and increase that savings as you were just talking about. I think, you know, it’s, it’s a way it’s a way to start. It’s a way to start saving,

37:47 Rutendo: Right. Also, just to actually say that that’s what I’m doing now, because I’m just starting out. So my intention right now is, because technically I’m still settling in. So there are still odd expenses that are coming up here and there since I’ve been here for a couple of months, but I don’t think that’s what I’ll be doing, let’s say, next year, this time. By then I will have, you know, very few things that come up and I will now know exactly what I can save, even if I’m still living paycheck to paycheck, which then just becomes something I do first. And so this is definitely something transitionary, but yeah.

38:18 Emily: I think it’s also easier as you learn a new city to become more frugal with time. You know, you mentioned earlier, well, where do you shop? That’s a very key question. Maybe when you first move to a city, you don’t know the least expensive places to shop, or the places that have the sales at this particular day of the week. You don’t have that insight. And so, you know what you’re spending on groceries, for example, in month one, you might be able to spend much less by month 13 because you figured out a few of those tricks. And so don’t think that just because you’re starting out completely paycheck to paycheck, that you’re going to be that way forever, because you will learn over time if you’re, you know, if you’re minded in that way.

38:53 Rutendo: Absolutely.

Habit #4: Learn How to Be Frugal

38:54 Emily: Okay. So do you have another habit on your list?

38:56 Rutendo: Yes. Which you actually kind of got to, which is understanding the best way you can be frugal. I put it in a different category than saving because the saving is something very technical, but the other habit you can do is try to find out how best you can reduce costs. It doesn’t matter how little it sounds. You know, for example, Spotify premium, normal is 9.99 pounds, student is 4.99. You might think, okay, that’s not much, but it is, it sort of adds up. So if you know what, just that extra amount of time it takes for you to sign up to student, if you need that. If you use that. Or knowing exactly where to shop, right? And if you go to the store and we’re like, here, we have reduced shelves where you can get fruits and vegetables that are technically about to go bad, kind of like the shelf date really, saves a bit more, you know, I could buy an avocado for 40 P or I could buy it for two pounds 70.

39:47 Rutendo: So then I get two avocados, instead. You know, something like that, just, just being as frugal as you can. If there are books that you want to buy, trying to get them second hand, instead of getting them new. You know, or if it’s something that you actually don’t need to be writing in and that you just want to browse, consider getting it from your library instead. If you’re fortunate enough to be living in, you know, even in a pandemic, some libraries are doing, you know, click and collects or things like that. So try to do that. So just finding ways to be frugal, no matter how small the amount seems, definitely adds up. And the other technique, and this is cash backs as well. I know that some banks do different cashback things with, you know, different retailers or you could actually sign up for like I think in the UK there’s TopCashback or something I think is also a U.S. thing online.

40:44 Emily: I use Rakuten.

40:46 Rutendo: They do have that. Yes. Yes. So things like that definitely, you know, for things that you’re going to buy anyway, might as well get a percentage of it back it’s really useful. And these things I know they seem very minimal when you think about you’re like, Oh, it’s 5%. It adds up. It adds up, and that 5% could be something that goes into your savings, for example. Fine. If you don’t want to spend it on something new, that’s how you end up getting to your three to six months worth of, you know, expenses of savings. So.

41:16 Emily: I was just going to say, tie any little frugal, you know, tactic that you implement to directly increasing your savings rate. If that’s your top goal at the moment, right? So if you, as you were just saying with Spotify, for example, you know, you reduce it by $5, whatever it is, Hey, why don’t you pay yourself first $5? Because you were spending that anyway. So that’s the way you can kind of transition between these two systems, or save at the end of the month. Hey, my grocery budget was this, but I came in, you know, $10 lower because I’ve learned all these frugal things to do. Okay. Your $10 at the end of the month gets to go into your savings. Yes. I love that idea. Yeah. Did you have another habit?

A Note on Side Hustling

41:52 Rutendo: Well, technically it’s not a habit, I guess, because a habit would have to be things that you do consistently, but then to try and be on, this is the last thing under this question, to try and do like side hustle type of things. I don’t know if I could classify that as a habit or a thing. But also, I mean, obviously you have to consider how much time it takes away from your work, because, you know, first and foremost, you are a student. But if possible, you know, there are different ways. Some people do short-term consulting things. I know for me, the thing that has helped me right now is a short-term consulting gig which I know, you know, at the end of that will help me build up my savings so much faster than, you know, saving the little bits off of my paycheck and things like that.

42:34 Rutendo: And so to find out where your skills lie, if somebody wants help with like a couple of editing, copyrights, things like that, that you could take away just a couple of hours of your time to do. Not necessarily to make that become the focus, but only if possible. And this is something that sometimes is also really a sign of privilege as well, actually, rather than something I’d advise underprivileged students to do, because sometimes you have more things to deal with, honestly, than side hustling. So this is why I’m not saying this is necessarily a habit, but if you feel that you do have that privilege of time and space and mental capacity to do that, then do so. But don’t necessarily, please, if there’s something you can’t do feel obligated to.

43:16 Emily: Yeah, absolutely. I mean, you’re primarily in your degree program to get that degree. So I always say about side hustling, like, don’t do anything that’s going to jeopardize your progress toward that end goal. But if you have the capacity, it can be a really great supplement. And like you were saying, I think that sometimes graduate students you know, they end up devaluing what they’re capable of doing because they’re being paid such a low, you know, rate through their stipend or whatever. If you can do consulting, as you were just saying, or employ your skills in another non-academic capacity, especially, you might be able to command a fairly high pay rate, at least compared to what you’re getting through your primary work as a graduate student. And so don’t think that a side hustle is going to be 20 hours a week or 10 hours a week.

44:03 Emily: It could be, as you said, two hours a week and still make a really big impact on your budget. If you select it very carefully, really employing what makes you unique in the marketplace. Now I will say, because we’ve been talking a lot about international students in this interview, in the U.S., international students are extraordinarily limited in what they’re permitted to do in terms of making money outside of their primary position. That is, they really can’t do anything unless it’s been approved through like CPT, like OPT kind of situation. So I’m not encouraging international students to side hustle to work for money, but there might be ways that you can set up passive income sources that it’s not actually exchanging work for money, but other ways you might be able to make money. You mentioned cash back earlier. Credit card rewards are a thing.

44:51 Emily: They can be fairly lucrative. I’ve had a couple episodes in the past on that. So I’ll link them from the show notes. International students would not be able to do that day one arriving in the U.S. because you have to work on your credit score first. But after a year or two, that might be a possibility as like a passive income source. So you are going to have to be a little bit more creative in your thinking about side generating side income as an international student, but it is still possible. Maybe it’s worth looking into again, if you have the time and the energy to do so.

45:19 Rutendo: Precisely. Yes.

Best Financial Advice for Another Early-Career PhD

45:22 Emily: Okay. Rutendo, thank you so much for this wonderful interview. I think we’ve gotten so many insights out of it. I will ask you for one last one, which is what is your best financial advice for another early-career PhD? And that can be something that we’ve already touched on in the interview, or it can be something completely new.

45:39 Rutendo: I would say, we’ve already talked about this. If there’s a chance that you don’t have to pay for it, don’t. It doesn’t matter what it is. Just ask if there’s a chance that you don’t. Because it doesn’t matter how many times you track something, how many times you budget something, if you can get it from somewhere else, all these other habits, all these other things will be better as a result of you not necessarily having to go out of your way to do this. So that’s the biggest thing for me.

46:04 Emily: Absolutely. I think, you know, maybe a more broad category of term for this is just negotiation. Like you can kind of think about it that way, because you’re just sort of ferreting out, you’re feeling out, is there a possibility that someone else can foot this bill for me? Is there another creative way that I can get this paid for by someone else? I know in the U.S. we don’t have a strong culture of negotiation at all in terms of like sales or anything, but I know that other countries, it’s more of a common thing that you learn in your childhood. And so if that’s your, you know, personality, maybe you can think of it that way as just feeling out what are the possibilities here, financially? What are the parameters of this space? Yeah. And oftentimes that’ll be to your advantage. I mean, you’re not going to get anywhere by not asking. That’s for sure.

46:46 Rutendo: Definitely. And I mean, I do just want to say that, especially for underprivileged students, the one thing I do want to say about the reason I’m giving this advice and I put it, so plainly is because a lot of us it’s about our mindset. A lot of us were, you know, I mean, let me not say a lot of us, but then for me, the problem I had to get over was knowing that I had to work for certain things and then sort of feeling that I am not allowed to have certain things, just the social conditioning, right? That I’ve already come this far as like a Black African woman. Now I have to ask again, if they could pay for this conference. Now I have to ask again, but really just, there are people, you know, once I started talking to people that have been doing this for four years and some people for generations because the families had already navigated the system. This is actually what the system is the afford to support you, to become the best that you can be as a researcher, as a student, as whatever it is that you’re doing.

47:40 Rutendo: And so it’s not necessarily, I hope that a lot of people realize it’s not in sense of entitlement, but really just to understand that there are systems of support that might not be explicitly said, you know or stated that they are there, but they really are there for you. And to help you with your finances. And like you said, Emily, at the beginning of the interview, a lot of people are beginning to understand now that finances really impact underprivileged students’ experiences in these institutions. And they are open to that and open to discussion and negotiation. So.

48:12 Emily: That was so well put. Thank you so much for this interview, Rutendo. It was a pleasure to speak with you again.

48:16 Rutendo: Thank you so much. Thank you for having me. I appreciate it.

Outro

48:23 Emily: 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 episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast and instructions for entering the book giveaway contest and submitting a question for the Q&A segment. 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 Podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me to share an episode you found particularly valuable on social media with an email listserv, or as a link from your website. Three, 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 taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

This PhD Found Financial Peace through Pursuing FIRE

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In this episode, Emily interviews Dr. 50 of By 50 Journey, a federal employee who is pursuing financial independence and early retirement (FIRE). Dr. 50 came to the US after finishing college, but worked minimum wage jobs while she learned English until she could apply to PhD programs. She worked full-time to self-fund her PhD over six years. Ultimately the PhD was a game-changer for Dr. 50’s income, and within three or four years of finishing she was earning a six-figure salary. However, a higher salary was not the solution to her family’s financial problems. Dr. 50 describes her emotions at their financial low point, when they completed their debt repayment journey, and upon discovering the FIRE movement. Dr. 50 concludes the interview with an incredible insight regarding financial struggle and striving.

Links Mentioned in This Episode

PhD FIRE

Teaser

00:00 Dr. 50: And one day I was like, okay, this is it. I am making a six-figure salary and I couldn’t even afford a lunch at the cafeteria. And it’s like a wake-up call. I need to do something. We need to do something.

Introduction

00:21 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 eight, episode 16, and today my guest is Dr. 50 of By 50 Journey, a federal employee who is pursuing financial independence and early retirement: FIRE. Dr. 50 came to the U.S. after finishing college, but worked minimum wage jobs while she learned English until she could apply for PhD programs. She worked full-time to self-fund her PhD over six years. Ultimately, the PhD was a game-changer for Dr. 50’s income, and within three or four years of finishing, she was earning a six-figure salary. However, a higher salary was not the solution to her family’s financial problems. Dr. 50 describes her emotions at their financial low point when they completed their debt repayment journey. And upon discovering the FIRE movement. Listen through to the end for an incredible insight from Dr. 50 regarding financial struggle and striving.

01:28 Emily: We’ve just passed decision day, April 15th, so I’d like to extend a massive congratulations to everyone who committed to a graduate program for fall 2021. This is an incredibly exciting period of time. As you dream about and plan this new phase of your life, keep your finances top of mind. You’ve already made the biggest financial decision of your graduate career by one, choosing to attend graduate school, and two, committing to a specific stipend and location. The next biggest decisions are housing and transportation, which presumably you will lock in over the next few months. Before making those big commitments, I recommend that you sketch a budget to figure out how much you can afford while ideally maintaining some kind of savings rate. If you would like some help with that process, join the Personal Finance for PhDs Community at pfforphds.community. Inside the Community, you’ll find my How to Draft a Budget From a Distance webinar and custom spreadsheet. We also have a forum and monthly live calls where we can chat more about your specific situation. I would love to assist you with this process in any way that I can.

Book Giveaway Contest

02:44 Emily: Now, it’s time for the book giveaway contest. In April, 2021, I’m giving away one copy of Walden on Wheels by Ken Ilgunas, which is the Personal Finance for PhDs Community book club selection for June 2021. Everyone who enters the contest during April will have a chance to win a copy of this book. If you would like to enter the giveaway contest, please rate and review this podcast on Apple Podcasts, take a screenshot of your review, and email it to me at emily@pfforphds.com. I’ll choose a winner at the end of April from all the entries. You can find full instructions at pfforphds.com/podcast. The podcast received a review recently titled exactly what I was looking for. Quote, having read a lot of scattered news articles and attending college workshops, I still felt a need for expert advice on investment strategies for international students. I stumbled upon this podcast while doing my weekly finance research, and I can say that Dr. Roberts does a phenomenal job at it. PF for PhDs is one of the few resources I could find which has got something for every grad student trying to figure out personal finances. Highly recommend it to incoming and current students alike. End quote. Thank you so much for this review. I am focusing more energy in 2021 on serving international students, postdocs, and workers, and I’m so glad that is coming across. Without further ado, here’s my interview with Dr. 50 from By 50 Journey.

Will You Please Introduce Yourself Further?

04:19 Emily: I am delighted to have joining me on the podcast today, Dr. 50. She actually goes by Mrs. 50 on her blog, By 50 Journey, which is a FIRE journey blog. However, she does have a PhD. So, we’re going to call her Dr. 50 today. She has an incredible story to tell us about coming to the U.S. As an immigrant, speaking no English, having no money, and you know, pursuing a PhD and ultimately being on this path to financial independence and early retirement. So, really delighted to get her story today. Dr. 50, welcome to the podcast. And will you please tell us a little bit more about yourself?

04:55 Dr. 50: Thank you so much. That was a really great introduction. Yes. That was a long time ago. I would say like over two decades, I came to this country and I had nothing. I mean, it’s nothing. So, I was trying to get a job, but I didn’t get any, because of course I didn’t speak any English. I couldn’t even answer a simple question like, how are you, what are you doing? Because I could understand, but I couldn’t express myself. So meaning trying to get a job, even a simple job. I couldn’t get it. So I was thinking, ah, this is, this is tougher than I thought it would be to start spending my life in a new country with my new husband. And I was trying, okay, let’s go back to grad school. That way I have friends. I have professor, I have, everybody so I can practice on my English. Because back in the day I didn’t have any friends, I don’t have anybody, except just for my husband. Right?

05:59 Dr. 50: And years later, I got accepted into grad school. I was so happy, but on the back of my mind, Oh well, okay, now here I am, I didn’t have any money. I didn’t have any financial support. And then I was trying to get funding, trying to get an assistantship, fellowship, whatever that was available. I didn’t get it. So, my first semester I used my credit card to pay for the tuition. I was, Oh, this is not going well. I have to do it better. So I was trying to find a job on campus. But as a student, we couldn’t work more than 20 hours. I said, this is not going to be enough to pay for everything. And not even the rent. Finally, in my second year of grad school, I got a full-time job which was wonderful. I was so grateful and I worked my way and then time flies.

07:07 Dr. 50: I got my master’s and PhD in six years because I was like, okay, let’s get this done as soon as possible so I can get a job and make real money. Right after I finished my PhD, I got a very great offer, even though I finished in the year 2008. So, everybody knows 2008 was the financial crisis. So I denied that job offer. I don’t know why, maybe because of the years, years, and the struggle of the grad school, I didn’t want to get that job because it was so stressful. So I accepted, I was a post-doc for a year and a half. During that time I was trying to find a real job. So I got a great job offer again. And then I got that job. And then my income was increased significantly. I would say, like triple. But unfortunately that job, it was in the city and I was traveling 90% of the time.

08:11 Dr. 50: And I just had a baby. I was happy with my job, but the work-life balance was not great. So I quit my dream job and then I had to find a job that’s not in the city. And then I got that with a negotiation that I negotiated with them. I managed to get the same salary that I had in the city, but I would live in the country. So, which is great. So, the struggle that was in grad school and a great job offer and determination and then patience. So I would say this is from, didn’t speak English to have a career that I wanted because of my PhD, and I was really happy. So, I’m ready to go on to the next level.

Pre-Grad School Finances

09:12 Emily: Yeah. I want to tease out a couple other pieces of that stories so that I understand it correctly. And thank you for giving us that like overarching view of how your career has evolved. So, it sounds like when you came to the U.S., it was a few years in between when you first arrived and when you were accepted to graduate school, is that right?

09:33 Dr. 50: That is correct.

09:35 Emily: And so, were you ultimately able to find some kind of job? I know that you said that you struggled at first, but how were the finances for you and your husband during that pre-grad school period?

09:46 Dr. 50: Yeah, I had odd jobs washing dishes. I answered the phone. I worked in a Chinese restaurant. I worked in a factory. I worked night shift. I did everything that I could do to earn money. And back in the day, it was the minimum wage. I believe it was $4.75 an hour. And yes, we were struggling before I got accepted into school. Even though after I accepted into grad school, we were still struggling because okay, now I spend my time studying during the day. I didn’t have time to earn money, so it was zero, but yeah. And using credit cards to pay for living expenses, even to pay for rent.

10:33 Emily: Yeah. So, it sounds like you very clearly identified the PhD, having that credential, as the path out of these minimum wage positions, is that correct?

10:44 Dr. 50: Yes. Yes. Definitely.

PhD as a Path to Professorship

10:47 Emily: If you had stayed in your home country, do you think you would have pursued a PhD?

10:53 Dr. 50: Yes, because before I met my husband I had a fellowship lined up for me, which they would pay for my school expenses, tuition, and living expenses. And yeah, I was about to go to doing my masters at the time, but decision between, okay, stay here and pursue my dream of becoming a professor or go there and be with my husband, and the love all my life. So, it’s a life-changing decision.

11:28 Emily: I am glad to hear, though, that you were already oriented in that direction. You were already planning on doing the PhD. It’s just, you decided to do it in a different country and had to take a couple steps back and learn the language and so forth. But you still got to, in terms of doing the PhD, you still got to that same goal.

11:44 Dr. 50: Yes. I always wanted to be a professor. A university professor.

Making Ends Meet in Grad School

11:49 Emily: And one other question I had about kind of the finances during graduate school. You said that you initially started out financing, you know, you weren’t funded, so you were financing it through consumer debt, and ultimately you got, I think you said a full-time job, right? So was it the case that your PhD was never funded? You didn’t have an assistantship or a fellowship, but you worked aside from doing the PhD?

12:10 Dr. 50: Yes. I worked 20 hours at the university dining hall in the morning from 3:30 to eight o’clock. And then during the day I worked as a lab technician for 40 hours. So yeah, my week was full. I would get up at three o’clock and then wouldn’t come home until 11 at night.

12:38 Emily: So you were working 60 hours at jobs plus the PhD work?

12:45 Dr. 50: Yes. And I enrolled full-time because if I did it part-time, it would drag me to eight or 10 years. I couldn’t afford that. That’s too long.

12:57 Emily: Wow. Incredible. I can’t, I can’t even fathom how you got through that. And you said it took six years, right?

13:07 Dr. 50: Yeah. It took six years, a master’s for two years and PhD for four years.

13:11 Emily: And you kept up that, I mean, I’m just like flabbergasted, you kept up that schedule the whole time?

13:16 Dr. 50: Yes. And finally, when I did my research, I quit my dining hall job because it was, Oh, it’s early. And I had that job because I got free meals. So, to save money, so I got free meals for five days. So, that’s awesome. Finally, I didn’t have time to do my research, so I quit that job and then I just kept my full-time job.

Post-PhD Finances

13:45 Emily: Yeah. I think we’re getting a real picture of how your finances were, but what it took, the work it took to keep yourself afloat, you and your husband afloat, during that time. And you know, clearly why you had the motivation to do the PhD. So, I’m really glad to hear that element of the story. Thank you. And so, you told us a little bit earlier about, you know, having the postdoc position and then, you know, taking a couple of different jobs, post-PhD. Did you want to add anything in there about how your income has been or anything like that?

14:20 Dr. 50: Yeah, sure. So, during my grad school years, the part-time one was the dining hall one. That was minimum paid. So, it was like, six or $7 an hour for 20 hours. So, that wasn’t that much. My full-time job, I worked as a lab technician that was $15 an hour. Back in the day, that was, I’d say 15 years ago, that was a lot for me. So, I’d say that I earned the most was $34,000 a year. That was awesome. That’s great money for us. That allowed us to buy a house, this would be our first house, and I didn’t have to worry much about my school tuition. And during that time I was able to talk to my boss, have them pay for a couple of classes. So, that was great. And so, post-PhD I had a postdoc and that doubled my income. I earned $63,000. That was in 2009. I graduated in 2008. So, it was double wage. Our finances were starting to get a lot, a lot better.

15:42 Emily: I just want to ask there, what kind of setting was that postdoc position in? Because that sounds like a pretty well-paid one, especially for that time.

15:52 Dr. 50: I was in the federal agency.

15:55 Emily: Okay. Gotcha.

Money Mindset: Salary Negotiation

Dr. 50 (15:56): And I, again, I negotiated my salary. I always had this mindset, even though with the federal, we have to follow rules and although certain staff follow certain salary level. Yeah. I negotiated. So, actually, it started at, I believe back in the day, was like $51,000 and I was able to get $63,000.

16:23 Emily: I think that’s a really great tip for anyone else who’s looking to apply for federal jobs because you have the, it’s the GS system, is that right?

16:31 Dr. 50: Yeah, it’s the GS system. Even though you’ve been told, okay, this position will give you the GS level this or accept this, you can always negotiate with them. Even though they have the fixed table to follow, you always can negotiate. Yeah. So, after the postdoc, I got a really great job offer in the city. This is in New York city. I was like, Oh my God, New York city, that’s a high cost of living. But it was a job of my dreams. So, I took it and my salary was doubled again. So, I made a six-figure salary. So I came from making minimum wage and then making a six-figure salary within, I would say, three or four years after I got my PhD. So, it was very quick.

17:28 Emily: Yeah. And then you said you maintained that salary even though you didn’t live in New York anymore.

17:33 Dr. 50: Yes.

17:33 Emily: Yeah. That’s fantastic.

17:35 Dr. 50: I came back to the federal, and I negotiated with them again. Different agency. And then they said, yes. I said, Oh my gosh. Yeah. It was so wonderful.

17:46 Emily: And do you still work for the federal government?

17:47 Dr. 50: Yes.

Overcoming a Large Financial Struggle

17:48 Emily: Okay. Yes. Thank you so much. It’s an incredible income trajectory. Also in this period post-PhD, I understand you overcame a large financial struggle. Can you tell us about that?

18:01 Dr. 50: Yes. So, during my graduate school years, I mean, as I already told you guys, we didn’t have much. Plus I supported myself and my family, husband, because he was still trying to finish his college also. So, I’d been using credit cards to pay for my tuition. And I was trying to pay it off every month. Some months I did, and some months I did not. So, it’s accumulated from there. And also, when I got my first real job in the New York City, we had our first child and then baby came and husband still couldn’t find any jobs. So, he was unemployed for a long time. Plus, the daycare cost was like so high. So, it’s better for him to be at home and take care of the baby. And then I’ll take care of the financial side of it.

19:04 Dr. 50: And yes, during this time we have surgeries, hospital, car wreck, and everything you can imagine. So, we accumulated a lot of debt. And one day I was like, okay, this is it. I am making a six-figure salary, and I couldn’t even afford a lunch at the cafeteria. And it’s like a wake up call. I need to do something. We need to do something. So, I say to myself, okay, no more excuses. I don’t want to wait until he got a job or I don’t want to wait until the baby leaves the daycare and goes to school. Let’s start now. Let’s do it. Yeah, all of the frustration. I just made our plan, trying to pay off the debt and made a budget and started doing my excel sheets. And then we go from there. And then in less than six years, all the debt was gone, including the mortgage.

20:04 Emily: Wow. What was the total debt balance then? Between the mortgage and the consumer debt that you were working on?

20:10 Dr. 50: Yeah, we had one car payment that was $18,000 and credit card debt was almost $80,000 and the mortgage was $114,000. So, I would say that 230 to $240,000.

20:26 Emily: Wow. So, within six years you paid off 230, $240,000 of debt on $120k ish, it sounds like, salary. Plus your husband was not working or maybe started working at some point during that period?

20:43 Dr. 50: No.

20:43 Emily: Not working during that period.

20:45 Dr. 50: He was not working yet.

20:45 Emily: Okay. Home with the baby.

20:48 Dr. 50: Yes, home with the baby.

A Shift in Money Mindset

20:48 Emily: Yes, plenty of work there. But it doesn’t sound to me, I want to ask you a little bit more about that transition about that day you couldn’t buy the lunch, you were so frustrated. Because the things that you mentioned, you know, that got you into the debt, the medical bills and the car wreck, none of that was frivolous spending. So, what did change actually at that point?

21:13 Dr. 50: It changed because, it’s kind of embarrassing to say, but I spent hours, hours just to pay a couple of bills. Because I have to think in advance, okay, if we have enough to pay for this and that before the next paycheck comes in. So, basically, we were living paycheck to paycheck. We stressed ourselves financially. Okay, the baby crying, I was trying to pay the bills. And I spent a lot to pay a couple of bills. This is, something’s wrong here. It’s not right. So I was, yeah. From there. Okay. Let’s make a decision to tackle this issue from the cause. Yeah. I was struggling and sad, and then I had nobody else to turn to. And I would say, let’s do this. I don’t want to wait any longer. Let’s do it. Our lifestyle will change, no more shopping, no more eating out. Let’s do this. If we do this, we can do this in under 10 years. In 10 years, we will be a whole new person, a new family, and then life will be much better.

22:29 Emily: And is that how you felt when you, you know, sent off the last payment?

22:33 Dr. 50: I felt relief. Okay, I don’t have to make all these calculations and then try to predict the future if my paycheck will be the same or if we will have any unexpected expenses. But I was like, Oh, well, okay, now we are definitely, the debt is gone. I still, so surprisingly, I still felt the same. It wasn’t the financial that I was looking for. I feel I miss something. We were missing something, but I couldn’t put a word to it until I found the FIRE movement.

Discovering the FIRE Movement

23:16 Emily: Yeah. So FIRE, acronym for financial independence and early retirement or retire early. Would you please explain for my audience, you know, your version of what FIRE is and why that spoke to you, and why you decided to pursue it?

23:31 Dr. 50: Yeah. So, before I knew it was a thing I always, Oh, wait, I don’t want to work. I don’t want to do this for the next 40 years. I mean, I only get one take on this planet. I want to do something that really matters, really matters to me and to my family, and really matters, that I am passionate about. I don’t want to spend my 40 years doing this. So, but I didn’t know what that feeling was until I met the FIRE movement, which you already said stands for financial independence, retire early. So, at this point, I want to be financially independent. The retire early can come back later. So, to me, FIRE means that you don’t have to worry about money anymore, meaning you don’t have to be worried about making a living, making money to support your lifestyle, your life. I mean, you can spend your time doing what really matters. To me, I really have a passion about helping animals in need, dogs and cats at the shelter. So, I really want to pursue that.

Commercial

24:50 Emily: Emily here for a brief interlude. This announcement is for prospective and first-year graduate students. My colleague, Dr. Toyin Alli of The Academic Society, offers a fantastic course just for you called Grad School Prep. The course teaches you Toyin’s four-step Grad Boss method, which is to uncover grad school secrets, transform your mindset, up-level your productivity, and master time management. I contributed a very comprehensive webinar to the course titled Set Yourself Up for Financial Success in Graduate School. It explores the financial norms of grad school and the financial secrets of grad school. I also give you a plan for what to focus on in your finances in each season of the year that you apply to and into your first year of grad school. If this all sounds great to you, please register at theacademicsociety.com/Emily for Toyin’s free masterclass on what to expect in your first semester of grad school, and the three big mistakes that keep grad students stuck in a cycle of anxiety, overwhelm, and procrastination. You’ll also learn more about how to join Grad School Prep, if you’d like to go a step further. Again, that’s theacademic society.com/E M I L Y for my affiliate link for the course. Now, back to our interview.

Striving for Financial Independence

26:18 Emily: It sounds like when you were heavily in consumer debt and you had your mortgage, you were stressed out and you thought that it was because you were playing this paycheck-to-paycheck game, right? Which is super common, that you have to really figure out, you know, when things can be paid so you have money in the bank to do it and all that. But then, once you got out of that level of stress, you said you still kind of felt the same. And so it sounds like you realized that it wasn’t just the paycheck to paycheck game. It was that you had to have a paycheck at all. You wanted to be freed of needing to work to support your lifestyle.

26:53 Dr. 50: Exactly. Yes. I still felt the same. I was surprised. Oh my gosh. I should just be, feel very happy. Definitely I felt relieved, but it wasn’t the happiness that I was looking for. And then, yeah, I just don’t want to have any paychecks at all. I just want to have my money working for me instead of working for the money. I had been working for the money for a long time, and I don’t want to work for the money anymore.

27:19 Emily: I see. Can you give us a little bit of more of the technicalities of how FIRE works, at least in your example? Like, do you have a number that you’re shooting for, and what are the strategies that you’re using to get to that point?

27:31 Dr. 50: Yes. I have several options. So, because my older child and my husband had a chronic disease that the health insurance is the other issue, but yeah, I have a couple options here. So, the first option would be, we accumulate enough money that we can live off the investments, mainly to live off the dividends or the 4% rules. If you Google 4% rules, you will know what it is.

FIRE: The 4% Rule

28:03 Emily: Yeah. I’ll just say for the listener that there’s kind of a rule of thumb in the FIRE movement, which is that if you are supporting yourself through paper assets, stocks and bonds and so forth, the rule is that you save up, invest, 25 times your expected spending level in your retirement, or if that’s what you’re doing, and that you can withdraw 4% per year from your portfolio over the long-term without endangering, you know, that you’re going to draw it down to zero. That’s a really brief explanation. There’s a lot more underneath that, but that’s the gist of the 4% rule.

28:40 Dr. 50: Yes. So, the first option would just live off the 4% rules and everybody will be staying home and taking care of the kids. So, I just had a baby this year, so yeah, the FIRE just came back to me again. And then the second option would be like my husband keeps working. So, we will have the health insurance that we desperately need. And I would be at home and taking care of the baby. And then the third option would be to move to another country that has the universal health insurance. So, we would get that issue covered, and then we’d just live off of the investment.

29:20 Emily: Yeah. So, which one is your plan A?

29:23 Dr. 50: My plan A is the option two. So, have him keep working so we don’t have to move. And then, because by that time they’d be about to get close to the number. The younger one was still be in elementary school. So, would be just like six or seven years old.

29:40 Emily: Okay. And I think this, you know, this health insurance thing that you brought up is something that is such a big conversation in the FIRE movement in the United States, not necessarily elsewhere. And there are plenty of people who are keeping jobs, not because they need the money, but just because health insurance or the risk that you take, if you went on certain kinds of health insurance plans, is so great here. So, it sounds like either your husband will keep working, or maybe at some point we will have a universal option and then that’ll give you a lot more flexibility.

30:11 Dr. 50: Yes, that’s true. Yeah. If you have that flexibility, that would be great. He doesn’t mind working at all. He loves working. So, I’m really grateful for that.

Federal Retirement Benefits

30:21 Emily: Since you’re a federal government employee, do you have a pension? Or do you have like defined contribution plans, or what’s the deal with your retirement?

30:30 Dr. 50: Yes, I do have a pension that is very, very small. So, let’s say if I worked for 30 years plus if you meet MRA, MRA stands for minimal retirement age, if you meet 30 years at your minimum retirement age, you will get 1% of your high three of your salary. The high three is your last three years of your salary. Let’s say, to make the math easier, if you make a hundred thousand a year for the last three years before you resign. So, 1% of that, and times 30 years, so it’s only $30,000 a year, plus tax and all the deduction, it wouldn’t be much. And we have a 401(k), like any other industry, but what we call it TSP. TSP stands for Thrift Savings Plans. So, it works just like 401(k), but it’s just called differently.

Investment Changes Toward  Achieving the FIRE Goal

31:39 Emily: And since you already went through that massive debt payoff journey before discovering the FIRE movement, was there anything that you actually started changing in your finances once you had that identified as your goal?

31:52 Dr. 50: Yes. I’m glad that you asked that question. So, it changed dramatically. So, I’ve always been maxing out my 401(k), or my TSP, every year. Okay. So, we agreed as a family that we’re going to pursue FIRE. Let’s do something different. Because if I keep my job, if I still continue trying to do a traditional retirement, I would work into my MRA at 57 or 60 years. And if you want to pursue FIRE, we need to fill a gap between that because I cannot take the money out until 59 and a half. So that gap, we cannot draw our 401(k) or any retirement account. So, we opened a broker’s account and instead of maxing out my 401(k) and his 401(k), we just contribute to the match just enough to get the match from our employer. And then divert all the money from that into the brokerage account, the taxable account.

33:00 Emily: So, that sounds like you felt like your post-60 retirement was well-funded enough. And I mean, you’re still going to get the match, so there’s still more growth and a little bit more contribution there, but it sounded like you thought that that was well-funded enough. So, now you’re going to focus on those years between whenever you do stop working and when you can start to access those retirement accounts.

33:21 Dr. 50: Yes. It would be about 10 years. So, the “50” came from, I would like to retire by the time I turn 50. Yeah, so, 10 years I calculated it. All the expenses in the future. I came up with the numbers that we have to have at least $600,000, or $600,000 to be okay, that’s the lean FIRE. If you want to get more comfortable, I say $750,000. That will get up to be better than lean FIRE. Lean FIRE is just like, minimal, barely enough to live on.

34:00 Emily: Anything else that you changed aside from the destination of your investments?

34:05 Dr. 50: Yeah, that’s the one thing. And then we also, any leftover money that we can save, any activity that we cannot pass by, like re-doing our budget, do the meal plan. Budget system number one and meal planning, not going out, basically just frugal living. And then I started a side business. Anything that I can sell. And as a family we like, talk, okay, this is the goal that we want to do. And everybody was on board and yeah. Every little thing, side hustles, living frugally, anything will go to the FIRE account.

Lifestyle and Money Mindset Pre- vs. Post-Grad School

34:54 Emily: How does, how you’re living now–you know, frugally and so forth, saving a lot, working hard–how does that compare to that pre-grad school period, or even the time when you were in graduate school, and you had that heavy workload? I guess I’m asking, how does your lifestyle compare, and also how do you feel about your finances now compared to back then?

35:18 Dr. 50: I would say I feel a little bit better. Because back in the day, we were struggling financially trying to put food on the table, trying to pay rent and then trying to pay the mortgage. Right now, we’ve comfortably more than enough to pay all the expenses, living expenses and mortgage, everything is on auto pay. I didn’t have to worry about if we have enough money. If the bill comes in, if we have a roof leak, if we have a broken pipe, we have emergency funds. So yes, my feeling was much better, but financially I was still trying to meet my financial goal, which is the financial independence. So it’s a different feeling, but I would say a different feeling kind of between struggle and the finish line, I would say.

36:14 Emily: So, sort of like struggling to get off the starting blocks. Right? To even make it, you know, to have a tiny bit of financial security, versus now, like you just said, you can see the finish line. You’re striving and you’re racing for that finish line. And yeah, I would imagine that, even if your lifestyle is pretty low, like you’ve tried to like be pretty frugal and stuff, having that financial security of the, you know, X, many hundreds of thousands of dollars, you know, in the bank and the investments, it has to be a massive, massive relief on your mind.

36:49 Dr. 50: Yes. Yeah. It would be a relief because right now we trying, I would say we are in an accumulation phase trying to get as much money into the FIRE as much as possible, as soon as possible. But at the same time, I just don’t want to stress myself out. Because one thing that I learned from our debt-free journey, our debt journey was like, because at the end of the day, you just want to be happy, right? The money doesn’t make you happy. You just need to learn to live in the moment, even though you are trying to achieve something or aim for something, but overall you just want to be happy and just trying to live in the day. I just don’t want to stress out too much because during our debt journey, I was so stressed out. I just wanted to be out of debt so badly. I just didn’t want to spend at all.

37:47 Dr. 50: And I wasn’t happy. And when we were debt-free, I still wasn’t happy. Now, we are on the FIRE path, FIRE journey. I just don’t want to be the same. I just want to enjoy a little bit more of my life. I just want to stop and breathe and enjoy every single day. I just don’t want to wait, because if you wait, you will feel depressed. And if you ever feel like it will never come. So yes, I take it easy and just live in the day. And that day will come before you know it.

Was the PhD Financially Worthwhile?

38:24 Emily: I’m really glad to hear you say that. That’s a message I need to hear. I need to hear that and be able to focus on living in the moment more and not striving. And I’m really glad to hear you say that because I know that some people in the FIRE movement do stay very caught up in the end goal. And even though sort of the philosophy around FIRE would be to be living in the moment both while you’re pursuing it and once you’ve achieved it, a lot of people do fall into just thinking about the future and living for the future and you know, not taking the time to enjoy the time they have at the moment, which is all we have. Right? Really. So, I’m really glad to hear that you’ve, based on your debt free journey, you’ve already learned that lesson. And you’re now, you know, beyond that and into still enjoying your life even while you’re pursuing FIRE. So, I’m really pleased to hear that. Do you think the PhD was financially worthwhile?

39:14 Dr. 50: Oh, yes. In my case, for me. For me, it was worthwhile. I am glad that I made the right decision to pursue a PhD because it’s opened so many doors for us. If I were working at my minimum wage job at a factory, or I was afraid to take the risk of not having any paycheck and then just went straight to grad school without any backup plan. We wouldn’t be here today. Yes. It was very worthwhile. Yeah.

Best Financial Advice for an Early-Career PhD

39:47 Emily: Yes. I can see that clearly from the story now. And so, Dr. 50, I conclude all my interviews by asking my guest what is your best financial advice for an early-career PhD? That could be something we’ve talked about already. It could be something completely different, but would you please share that with us?

40:04 Dr. 50: Yeah, sure. I say, from my past experience as a PhD graduate, you feel like, Oh my gosh, I have a PhD behind my name now. I make a ton of money. Even though it’s not a ton, I would say, it’s increased your income. My one piece of advice would be trying to live the same. Don’t let the life inflation get you. Because if you do that, it will be never enough. I mean, it’s how much you make, how advancing your career brings you. It will not be enough. You just, if you just keep inflating your lifestyle. I’m not saying that you should be conscious as a graduate student, but on the back of your mind, trying to do like other peers are doing. I’m not saying like, you should live this way, but yeah. Lifestyle inflation, it really hurts your financial life.

40:59 Emily: Yeah. And it definitely sounds like you were there, you did that for a little while. I like to say, don’t inflate your lifestyle, but increase your lifestyle. Increase it intentionally, mindfully. But don’t, yeah. Don’t just let it float up to, you know, whatever your salary is.

41:16 Dr. 50: Yes.

41:17 Emily: Yes. I love that advice. Thank you so much. Dr. 50, it’s been a real pleasure talking to you. Thank you so much for joining me on the podcast.

41:22 Dr. 50: Oh, thank you so much. I’m glad to be here. And I’m so honored to be on this podcast. I am. I hope that my life lesson and experience will be helpful to you guys in some way, some small way. Thank you so much for having me here.

Listener Q&A: Financial Independence

41:42 Emily: Now on to the listener question and answer segment. Today’s question was asked in advance of a live webinar I gave recently for a university client. So, it is anonymous. Here is the question. Quote, can you start a journey to financial independence in grad school. End quote. Wow. It is awesome that this person is already thinking about long-term financial independence as a graduate student. The answer is, unequivocally, yes. In fact, if you’d like to think about it this way, you have already started your journey to financial independence in grad school, because you are making a long-term investment in your career, and presumably, your earning potential. While FIRE is achievable in theory by anyone, it’s definitely an easier road if you have a good salary. So, in that sense, if getting a graduate degree is going to put you on a road to a good salary, you’re already pursuing financial independence. Now, what can you do while you’re actually in graduate school to pursue financial independence?

42:46 Emily: No matter what your income, you can work on your mindset. You can learn more about personal finance. You can put strong habits into place, which you’ll definitely need during graduate school, like budgeting and frugality. Your income is always going to be rather low during grad school, but that’s not the only side of the equation when it comes to financial independence. Your expenses matter a lot as well. I would say, during this period of time, when your income is suppressed, you should take the time to master the controlling expenses side of the equation. But that’s not all. Even with a lower income during grad school, you can work on increasing your net worth. This is what I put a lot of focus on when I was in graduate school. Tactically, once you have your budget set up and hopefully a bit of free cashflow, you can put that towards saving, debt repayment, or investing, following, like I’ve talked about in recent weeks, the financial framework that I developed for PhDs.

43:43 Emily: Now, here’s one key concept that might not have occurred to you yet. While you’re in graduate school and you have this lower income, you also have a lower tax rate. Graduate students tend to, unless they’re married to someone with a much higher income, top out in the 12% federal marginal tax bracket or lower. And that means that it is a perfect time to use a Roth IRA for your retirement investments. Especially, again, if you anticipate a large income increase postgraduate school, this is probably the most optimal time in your life to be using a Roth IRA. And presumably it’s also the earliest investing you’ll do, so it has the longest timeline to compound and grow. People are crazy for the Roth IRA, and they will contribute even when they’re in incredibly high tax bracket. So, you really have, if you think about it, a great opportunity to be able to contribute to the Roth IRA without paying a high tax rate. And five years or so investing in a Roth IRA and then decades compounding after that, this will be a very big portion of your portfolio, ultimately, even if you don’t contribute in absolute numbers a lot of money during grad school. Thank you so much for this question, Anonymous, and I’m so glad to learn that you are already on your journey to financial independence. If you’d like to submit a question to be answered in a future episode, please go to pfforphds.com/podcast and follow the instructions you find there. I love answering questions, so please submit yours.

Outtro

45:18 Emily: 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 episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast, and instructions for entering the book giveaway contest and submitting a question for the Q&A segment. 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 Podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, 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 taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

Can I Make Extra Money as a Funded Graduate Student on an F-1 Visa?

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In this episode, Emily interviews Frank Alvillar, an immigration attorney at Alvillar Law in San Antonio, Texas, and Sheena Connell, a designated school official and the assistant director of International Student and Scholar Services at the University of the Incarnate Word. International students are sometimes in a very tough financial situation in graduate school, even if they are fully funded, and may desire to increase their incomes. But what kinds of additional income are allowed on an F-1 visa if a graduate student already receives a stipend? Frank and Sheena share their frameworks for thinking through what is and is not permissible. Emily asks them how these frameworks apply to specific income-generating activities such as self-employment, working remotely for an employer outside the US, investing, rental income, credit card rewards, and more. This episode is a must-listen for any prospective or current international graduate student!

Links Mentioned in this Episode

Teaser

00:00 Sheena: I think there is a kind of an idea that that students can work around it. I think culturally, I find a lot of our students come from a lot more…there are a lot more countries that has a lot more ingenuity and that’s appreciated, of going outside the bounds of law, but in US immigration law, there’s just not a lot of wiggle room. And the, “I didn’t know excuse” doesn’t really work that well.

Introduction

00:33 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 eight, episode 13, and today my guests are Frank Alvillar an immigration attorney at Alvillar Law in San Antonio, Texas, and Sheena Connell, a designated school official and the assistant director of international student and scholar services at the University of the Incarnate Word.

01:00 Emily: In this episode, we discuss what kinds of income generating activities are allowed and not allowed for funded graduate students on F1 visas. I have been asked variations on this question by international students in tough financial situations for many years and I finally found two experts who are able to give us a full answer. Frank and Sheena share their frameworks for thinking through what is and is not permissible. I asked them how these frameworks apply to specific income generating activities international students have proposed to me, such as self-employment working remotely for an employer outside the US, investing, rental real estate, credit card rewards, and more. This episode is a must listen for any prospective or current international graduate student in the US. Even if you’re not in a tight financial situation right now, things may be different down the line and it’s best to be prepared.

01:53 Emily: This podcast episode kicks off a season for my business of publishing in-depth content for graduate students, post-doc and PhD workers who are in the US on visas. The three big topic areas I plan to publish content in are this podcast episode on work options, an at your own pace workshop on taxes, and at least one video course on investing. That last course will be taught by Hui-chin Chen, who we heard from in season four, episode 17. If any of these subjects sounds interesting to you, please sign up for the Personal Finance for PhDs mailing list at pfforphds.com/international to learn when the new content becomes available, which I expect to be in the next six months. I’m really pleased to be able to serve this segment of the PhD population in more depth and I hope you’ll join me on this journey.

Book Giveaway

02:42 Emily: Now it’s time for the book giveaway contest. In March, 2021 I’m giving away one copy of, I Will Teach You to Be Rich by Ramit Sethi, which is the Personal Finance for PhDs Community book club selection for May, 2021. Everyone who enters the contest during March will have a chance to win a copy of this book. I Will Teach You to Be Rich has come up in two previous podcast episodes with Dr. Amanda in season five, episode 15 and Laura Frater in season eight, episode two. In both episodes, my interviewees is say that while they were initially turned off by the books title, it eventually inspired them to execute dramatic financial turnarounds. After listening through either one of those episodes, you will definitely want to read this book and participate in the book club. If you would like to enter the giveaway contest, please rate and review this podcast on Apple podcasts, take a screenshot of your review and email it to me emily@pfforphds.com. I’ll choose a winner at the end of March, from all the entries. You can find full instructions pfforphds.com/podcast. Without further ado, here’s my interview with Frank Alvillar and Sheena Connell.

Would You Please Introduce Yourself Further?

03:59 Emily: This is a really special episode. I’m so glad that you all have joined today. I have with me Sheena Connell and Frank Alvillar. We are talking today about graduate students on F-1 visas and what their possible options are for adding to their incomes. Can they work? Can they not work? Can they get an income without working? These are the kinds of questions that we’re going to be asking today. I’m so glad to have these two experts with us. So Sheena, will you please tell us a little bit more about who you are, where you work and so forth?

04:30 Sheena: Yeah, sure. I’ve worked with international students for almost 15 years now. I’ve worked at public research institutions, at private schools, secondary schools, intensive English language programs — kind of the whole gambit of the F-1 world. I am currently serving as assistant director for international students scholar services at University of the Incarnate Word in San Antonio, Texas. And I’m also the designated school official for their F-1 program and alternative responsible officer for the J-1 program. I’ve served as the co-chair for San Antonio Forum for International Educators. And currently, just started this position, serving on the national team for NAFSA, which is the Association of International Educators as the chair elect for international student and scholar services knowledge community, and we’re kind of responsible for cutting edge international advisor resources and trends. I’m not a tax expert. I’m not a Department of Labor expert but I am a certified trainer in F-1 and J-1 advising.

05:32 Emily: Thank you so much. We are so lucky to have you on today. And will you please explain what this role DSO is? Because I know this is going to come up more later and it was not one that I was familiar with.

05:41 Sheena: Yeah. We have this acronym, designated school official, that is a designation given by Department of Homeland Security to a person or a group of people at a university who control F-1 student records and then alternative responsible officer is the equivalent on the J-1 side.

06:01 Emily: Thank you so much, Sheena. And Frank, will you please introduce yourself?

06:04 Frank: My name is Francisco Alvillar, I go by Frank. I am an immigration attorney. I have been practicing since 2007. I’m board certified in immigration nationality law. I practice in every area of immigration law and that runs the gambit from processing visas at consulates, to defending people in deportation court, to simple green cards, simple citizenship cases, as well as federal litigation, which involves suing the US government.

06:37 Emily: We are so fortunate to have you as well. And Frank, you are the one who I initially reached out to about doing this interview because you have recently started a fabulous website. And will you please tell us more about that?

06:48 Frank: Sure. It’s immigrationcases.org. A friend of mine and myself, we found that a lot of our clients had what we referred to as pain points. Those were things that individuals didn’t necessarily need legal representation for, but they were pieces of information that they couldn’t get online, that we knew because we had been through the process with our clients. Things from delays in cases, to general processes, to just little nuance things, delays in receiving receipts, what to do when you have a court case. What we’ve done is trying to find those pain points and create pages for each and every single one and that’s how we got connected because one of the pain points for F-1 international students is knowing what their options are to work because it’s expensive to go to school here in the US. We found a lot of people calling our offices asking for options where they didn’t necessarily need representation, but they just wanted to be informed before they made a mistake and jeopardized their immigration status.

08:01 Emily: Yeah, I think that’s going to be the case for a lot of people listening to this episode. I was just googling F-1 work options as I do every few months, because I had not really found a satisfying article until I did this a month or two ago, and found your website ranked on the first page of Google. Really, really wonderful article and I immediately reached out and proposed this podcast episode. That’s kind of the background for this.

Disclaimer

08:25 Emily: I know that, Frank, you had a disclaimer you had to say upfront and also just kind of explaining the different perspectives that you and Sheena come from. Let’s talk through that.

08:34 Frank: As a primary disclaimer, the information that we provide should not be construed as any type of legal or direct advice for your case. You may hear something that sounds extremely similar to your situation, but don’t take it for granted that you could have things or aspects of your situation that could make the outcome markedly different than what we’re describing here. It’s always important to get that information for your specific situation and to not rely necessarily on just what the descriptions we’re giving here. That’s number one.

09:11 Frank: Number two is that we’re going to be talking about this from two perspectives. One is the legal perspective, what the law says. We’re able to give you a description of what the regulations tell you you can and can’t do. But I think that the more important thing, which is perspective, number two is the practical application, because one of the things that you have to realize is that it’s people who are applying the law and immigration law is complicated because it’s so voluminous and you can’t expect every single immigration official to know every single regulation. It’s important to understand that the way these things are applied aren’t necessarily just based on what the regulation says. It’s based on the individuals. You want your case to make sense to individuals within the framework of the law, but you should never rely strictly on this is what the law says, and then you almost argue with an immigration official that they’re wrong. You never want to be in that situation. Think practically when we’re giving you this advice, because that’s the way — or not advice, but practically what we’re giving you this information, because that’s really, what’s most important here.

10:25 Emily: Okay. Thank you for providing that perspective, but I guess I’m still a little bit confused. Let’s say we go through the course of this episode and we’ve identified something that according to law would be a perfectly fine income generating activity for an F-1 visa student. Does that mean because this practical application other lens that they shouldn’t pursue an activity that does seem to be in accordance with the law?

10:50 Frank: Not necessarily. I think that what I would tell them to use is the Frankie five second rule. And the Frankie five second rule is that if an immigration officer can’t understand what you’re doing within five seconds, it’s probably a bad idea because anytime they’re confused or it’s unclear the activities that you engaged in, they’re going to err on the side that you did something wrong. As an example would be, let’s say, and we’ll talk about this later, but credit card rewards shows up as income on your tax returns. If they were to ask you to see your tax returns, it would look like you worked here in the US from some individual’s perspectives. You would need to be able to, let’s say, as a practical matter show, those credit card rewards statements, show the amounts, maybe even make a spreadsheet, showing that they add up to the amount that’s declared on your taxes. It’s not that you don’t want to do it. It’s just that you want to make sure that it’s clear what you’re doing. And like I said, I even use this with my clients — the five second rule, and it’s not for when the food falls on the floor, it’s for when an immigration officer gets confused, you never want to be in that situation.

Work that is Permissible with an F-1 Visa

12:01 Emily: Okay. I think that’s a super helpful rule of thumb, so thank you so much for clarifying that. I want to go over here the perspective that I’m trying to ask these questions from, which is the one that you know, I was not an international student myself, but I speak with international students on a very regular basis through the podcast, through the speaking engagements that I do through people who email me, and I hear quite often about the financial pressure that international graduate students are under because in all too many universities in the US graduate students are underpaid. International students lack the pressure release valves that some domestic students have, like being able to take out student loans without like a guarantor in the US. Maybe right away when they arrive in the US they don’t have credit scores yet, so they don’t even have the option of like consumer debt immediately. And then there’s of course the work issue, which we’re going to be talking about in much more detail.

12:53 Emily: When I hear from international students, sometimes they are in very, very dire financial straits. Some have dependents here in the US that they aren’t able to support properly, and they are looking for any kind of solution, any kind of way out of this rock and hard place that they’re in. A lot of times I get these questions about, well, what kind of income generating activities are permissible? I’m using that term very carefully, because I’m not necessarily talking about work, and we’ll try to distinguish between these two things later. That’s kind of the perspective that I’m coming from, that I’m asking these questions from. Let’s start off with what kind of work is definitely, definitely allowed on F1 visa. Like it is what they’re doing that they are in the US to be doing. What kind of work is definitely, definitely allowed?

13:36 Sheena: I would start, I guess, to preface all of that is that the F-1 visa is a student visa, so the primary purpose is to study and work is not really at the forefront, unfortunately. I also think that the US in general kind of underestimates the cost of education when students are coming. F-1 students are supposed to prove a certain amount of money to survive in the US before they’re even allowed to enter, but I think that schools could do a better job on estimating what the real cost is. Talking to students before you arrive is probably pretty helpful on that.

14:14 Sheena: As far as what’s allowed on campus, of course is naturally allowed. Now on campus can come into quite a different few forms. For graduate students, research assistant fellowship, teaching, and whole gambit. And those can be different things, hourly pay tuition, waivers, stipends, more combination. I would say anything that takes place on your institution and is paid by your institution, definitely allowed, unless it’s under federal work study or sensitive fields with specific grants that wouldn’t allow non-citizens to work there. There’s also on pick campus employment, commercial, or contracted businesses that provide direct student services. That would be your bookstore or sometimes your student cafeteria if it it’s run by a different company. What would not be is probably construction. So let’s say that there’s a company that’s contracted to do construction on campus, that definitely wouldn’t be allowed because it’s not providing that direct student services.

15:13 Sheena: Off campus, this is a tricky one, which a lot of students don’t know about, but the off-campus/on-campus employment or educational affiliate sites. You’ll see this with a lot of the researchers where maybe they’re not actually on the campus, but they’re at a place that’s contractually, I guess put together by funded research projects. They’re not on campus, but they’re at a lab somewhere, something similar to that. The practical training world — hopefully all of our F1 listeners know about CPT and OPT, so I won’t go into that too much.

15:47 Sheena: And then there’s the rare kind of off-campus authorization. And all of those require that you apply with your international advisors with the form I-765 for employment authorization document, for severe economic hardship. And that we’ve seen has been very difficult over the last few years to get approved. Usually these are unforeseen circumstances, well beyond the student’s control. That could mean like a death of a family member, or there’s a war going at home, major surgery, or the currency plummeting for some reason, which at this time it’s kind of worldwide, so I don’t know the trends right now of economic hardship, how that’s going to look in the post COVID world, but it’s worth a try, I would say if, if you feel like you’re in that situation. However, you’ll usually have to be in your program for one year before you can apply for those, because again, as an F-1 student, you had to prove that you had enough money to come here to begin with.

16:47 Sheena: And then the employment with international organizations. That’s any organization under the IO Immunities Act, meaning like International Monetary Fund or World Bank, that’s also a type of work authorization you can get to work for those companies. So those are the allowable work worlds that we see most often.

17:05 Emily: Okay, let me ask a follow-up around that, because the situation that I see most often is PhD students who are funded, like you said, through assistantships or potentially through fellowships, which in the case of fellowship technically wouldn’t be work, it’s kind of like a scholarship award sort of thing. But anyway, with assistantships, what I typically see is that the appointment is limited to 20 hours per week. And so I’m just thinking of a person who is thinking, “Okay, oh, wow, Sheena you just listed all these options for different places I could work on campus, but I already have a 20 hour week assistantship.” Is it possible to add on to a job that you already have that already is a halftime employment deal?

17:45 Sheena: I think that’s going to range per institution. Graduate students do have a little leeway at some institutions about the 20 hour work week, if it’s CPT and a research assistantship combined. Now that’s not all institution. Some institutions interpret it very strictly and say, nope, 20 hours is 20 hours. Others consider it if it’s CPT, if it’s part of your coursework, it shouldn’t be counted against the 20 hours. Now, I would say USCIS has been very strict about tallying up those numbers over the past three years that we’ve seen. We didn’t see that under the previous administration. I don’t know if we’re going to see it under this administration, Frank might be able to talk more to that, but you do have to realize that your institution’s interpretation, if it’s more lenient, you’re still at some point taking a risk if you’re going more than 20 hours. And that’s from my point of view, I’m a very conservative advisor on these types of things. But you also have to remember during spring break, you have a little bit more leeway during winter break, and then also during summer break, you can go more than that 20 hours without a lot of issue. Now, finding the job, that’s an additional pain point, as Frank was saying.

19:07 Emily: Okay, Frank, do you have anything that you want to add onto this point about the straightforwardly allowable activities?

19:13 Frank: Yeah. I think that what Sheena touched on and I think more generally from the 30,000 foot view is these DSO’s are quasi-immigration attorneys and one of the things that a lot of F-1 students don’t realize, and perhaps it’s different with PhDs because I deal more with undergrads than graduate students, but that the institutions are reliant on immigration giving them permission to accept these F-1 students and it’s a big deal to these institutions. They’re required by regulation, by law to report violations to make sure that they’re doing everything properly. One of the things that’s very important is to really go and speak to the DSO and that you understand that there are perhaps options that are institution specific. Because again, the institution is the one who has to report back to CIS. In other words, the institution going to okay, it, and then CIS is going to okay it, or immigration is going to okay it, so it’s important that you go have that conversation.

20:14 Frank: And you shouldn’t be having that conversation right before you’re in economic dire straits. You should be having it the minute that you arrive at a university. If I need to work, if something happens, what are my options? Can we talk to people? Can we figure something out? Just in case so you have it in your back pocket, because the big takeaway is that these decisions, and this is what I described it to Sheena before podcast and I think she agrees with the metaphor is that these students come and they’re in the immigration system or the US is a dark room and all they have flashlight. And so you need to light that room up as much as you can. And it starts first and foremost with the conversations with the DSO, because it’s a mutually beneficial relationship. They get to accept you as students and recruit from around the world, and you get an education from them. That’s going to be the first starting point for you, and it should happen before you need it.

21:24 Emily: Yeah. Thank you so much for saying that. I think just to pick up on a point that you made earlier Sheena. If you have spoken with other graduate students, let’s say, especially, you would be valuable as other graduate students from your same home country, and they’re telling you, “Ooh, it’s really tight on the stipend.” You know you have to have that conversation with the DSO right away. What are my options here? And not to wait, like you said, Frank, until you really get into trouble before having the conversation. Now, if students are telling you, “Oh, no, that’s no problem. Don’t worry about it.” Well, maybe you can skip out on that for the moment because you’re not really anticipating having any difficulties with the stipend.

22:02 Sheena: I would also add that DSOs, we care a lot, sometimes to a fault, but if we see a student struggling and they’ve come up to us and said, “Hey, I’m really having a hard time.” We might not have an immediate solution, but we might have a scholarship that comes in later this semester. We might have an additional grant that we find out about. And if we have those students in our mind, we know this kid’s not doing great, the student might need help — we keep that in the back of our mind, I would say the majority of DSOs that I work with.

22:32 Emily: Great, great tip. Thank you.

Consequences of Violating the Work Restrictions of an F-1 Visa

22:34 Emily: Okay, so we talked about what is like straightforwardly permissible on an F-1 visa. Before we get into like maybe more borderline or creative solutions, what is the potential consequence of violating this work aspect of your visa?

22:50 Sheena: As Frank mentioned, we definitely have a legal obligation as advisors to report violations. If we don’t report it, not only are we jeopardizing that student we’re jeopardizing every F-1 student, our ability to host it, our institution’s reputation, everything. So working beyond F-1 regulations or working within regular F-1 regulations, but without prior approval, those are the big violations I would say most DSOs see. Those have severe consequences.

22:23 Sheena: Number one, automatic termination of your F-1 status. Your SEVIS record is no longer valid, your I-20 is no longer valid, your I-94 loses validity because it’s tied to your I-20. Your visa is essentially canceled. Frank can go more into the weeds of what happens once that happens. We actually are automatically immediately notifying DHS. DHS, or Department of Homeland Security, they have access to SEVIS. We’ve worked with ICE officials that come in and educate our students about the negative consequences, and they’ll say, once that file hits my desk, it’s kind of game over, particularly for work violations. Those are the most serious violations of your F-1 visa. There’s a lot of forgiveness, I think in F-1 violations. You can apply for reinstatement, but work, that’s not one of those violations that you can apply for reinstatement.

24:20 Emily: Okay. Thank you. I was just thinking the same thing as you said, game over. What do you say, Frank?

24:25 Frank: Yeah, I think that the big thing is that anytime somebody is trying to get over, visit the US or come to the US, they’ll ask about a visitor visa first, and then I recommend, if they need to study, to find a program here, a short term program, and the reason why is that I say that the consulate officer is a lot more willing to give you an F-1 visa or a student visa because they know that that school will report you when you don’t do what you’re supposed to. To pick up on what Sheena said and talk about ICE, which is immigration and customs enforcement, which is the police arm of immigration, they have, and they will, and I’m sure continue to show up at people’s door when their SEVIS record is terminated. It doesn’t happen a hundred percent of the time. I can’t give you a percentage of what it is, but you’re playing with fire when you commit a violation. And when they come to visit you, it doesn’t necessarily indicate an arrest. They’ll normally give you, what’s called a notice to appear, which is how they initiate deportation proceedings against you. That’s one consequence.

25:33 Emily: The second one is simpler and straightforward is that if you fall out of status here and you have to go back to your home country and try to reapply. You can’t do what Sheena said, a reinstatement. They just don’t treat violators, they don’t give them a lot of latitude. What I mean by that is the immigration system, when we’re talking about everything other than a green card, is designed for you to come for a specific purpose for a specific time. They are giving you this visa with that in mind. When you violate that, you essentially lose the trust of the consulate officer or the consulate. When that happens, it’s very, very difficult to get that back. How do you prove that you’re not going to do something in the future after you’ve done it. You can’t prove a negative Just having that stain on your record, which in a lot of cases can be really unfair, why you have it, but that goes back to the, you have to talk to your DSO and be fully informed because as Sheena said, the consequences can be fairly, fairly high for mistakes that you intended to make or didn’t intend to make.

26:46 Emily: Yeah. Thank you for that. And I think, just to put a really fine point on it, if you lose your visa, I’m guessing you’re going to be kicked out of your program. I’m sure it’s going to vary by program and there’s been a lot of leniency during 2020 for people working remotely and still being in their programs, even if they’re in another country or whatever. But I would imagine that you’re going to be terminated from your program if you lose your visa for most cases.

27:09 Sheena: That’s going to depend on the institution, but I would say you’ll definitely lose your assistantship. You’ll definitely lose the ability to work on campus specifically. If your entire education is based on campus funding by an assistantship or something like that, that will no longer be an option.

27:30 Emily: Yeah. Gotcha.

27:31 Frank: Yeah. One of the things just to follow up on that is the non-immigrant visa system works based on this idea of continuity since their last entry. Violations break that continuity and so going from step to step, getting the permission or going from the student to an OPT, I taught an immigration law class and I would always talk to students or teach them this way, that when you’re talking about a change of status, you can’t go from nothing to something. If you have no status because you made a mistake or because there was a violation, then you have to do as Sheena said, a reinstatement, but you do jeopardize the ability to be able to move on in the system because it breaks that continuity.

28:14 Emily: Got it. Thank you.

Work That Is Not Allowed on an F-1 Visa

28:16 Emily: Okay, so we talked about what is straightforwardly allowed now let’s talk about what is definitely not allowed. We know for sure that these are not going to be permitted. Sheenna, this is just the negative of what we talked about earlier, but let’s go over it again. What can you not do?

28:31 Sheena: I would reiterate anything outside of the description that I had for the different work authorizations. And then anything without prior approval. I would say, this is the biggest issue.There are some things you can actually do, but if you’re not asking and getting permission or figuring out a creative way to make it work for you, either with your DSO or an immigration attorney, then you can’t do it or you shouldn’t be doing it. I would say employment not authorized by your international office, of course, is not allowed. And then we would also go so far as to saying working or any thing that generates active income. And there’s a bright line rule, which most DSOs will subscribe to. And you’ll talk to an attorney, they might have a different perspective. But for us is if you’re doing any work on us, soil for anyone or any company located anywhere on earth, you are violating your immigration status. That’s, if you are doing that work on us soil, then you are violating your immigration status. And that’s, even if you’re working in the USA online for foreign company, you’re paid in your foreign bank account, you’re paid in foreign currency, that’s still in most DSOs definition is a violation of your immigration status.

29:52 Emily: Okay. What you said there was so insightful, and I’m so glad that this came out early on in the interview, because I have been asked this question of, “okay, I get that I can’t have a second job off campus. I can’t be a W-2 employee for some American employer.” People understand that, but I have had multiple people say to me, “Oh, well, I work for such and such a foreign employer. Not a problem, right?” And I’m like, “I don’t know.” That’s why I got you guys on here. So you’re saying that your definition, your bright line is you’re in the U S you’re doing active work, doesn’t matter where the money is, who the employer is, you’re in the US you’re doing the active work — that’s not allowed. Am I hearing that correctly?

30:34 Sheena: That is probably 99.999% of DSOs interpretation because we’re beholden not just to the US government, not just to our students, but also to our institution. We’re not jeopardizing any student just for, oh, maybe there’s a little wiggle room. That’s where you go and talk to an immigration attorney and they might have a different perspective.

30:55 Emily: Okay Frank, let’s hear your perspective.

30:56 Frank: This is where the whole idea of what the law says and the practical application. I would, as the late great RBG would say, I respectfully dissent. I think that you can probably think of a situation that wouldn’t be too crazy of a hypothetical where let’s say somebody working in a foreign online, but the companies outside the US, they’ve hired them because they have work authorization in the country of origin. They’re getting paid in that bank account, whatever the case may be. I think the law probably…You’re not taking any job away from any US worker.

31:44 Frank: That said you just had a conversation with a DSO who said that there’s a problem with that. So despite what I’m telling you the law says, from a practical standpoint, you can see where this can be an issue with your institution, and that’s going to be the first stop that you make. Those are going to be the first conversations you’re going to have, because if a DSO has that perspective, the perspective that Sheena described, and they get wind of you working, they could terminate your status. Again it different. What the law says, the argument you can make, you can make that argument all day long to your DSO, but they’re worried about their status possibly to be terminated where they can’t, for a willful violation, where they wouldn’t be able to accept F-1 students anymore. When you do that, you have to realize I’m asking permission from somebody who their perspective is going to be wholly different from mine. Again, my legal perspective, I don’t think that’s unauthorized employment, but in terms of the practical application, I think a DSO would disagree, like Sheena said.

32:53 Frank: I also think that it’s likely that immigration would disagree with me. If we’re working by Frankie’s five second rule, and I can explain why I’m working in my home, in the US while I’m on an F-1, if it doesn’t make sense within five seconds, you probably don’t want to get into that legal chess match or more of a checkers match with a CBP officer or USCIS by mail or somebody else, trying to argue that, well, that’s not what the law says. That that should be, that’s only your point of last resort. I think that you’re probably going to get pinged with it, even if I disagree that that is actually unauthorized employment. My opinion only matters so much. It’s how they apply the law.

33;38 Emily: Okay. I’m so glad that we got right away to an example of this difference between the theory and the practical applications.

What if No One Finds Out About my Unauthorized Employment on an F-1 Visa?

33:46 Emily: I’m going to ask a question that I hope probably no international student would actually ask you Sheena, which is what if you never find out? What if my DSO never finds out about this online work that I’m doing for someone else? And how likely also is it that immigration would find out? I feel like we’re treading into dangerous territory here, but yeah. What if you never found out?

34:07 Sheena: We actually have whole sessions about this. I love this conversation. So that’s risk you’re going to have to take. And I would say, I am not paid by Department of Homeland Security to go knock on your door and see if you have all this nice stuff that you bought with this job that was off-campus. My job is not to hunt you down. My job is if something comes in front of me and I have evidence, I have to take action. B,ut I would also say just because I don’t catch you or I don’t know doesn’t mean you’re not going to get burned later on in line. We saw this a lot in this last administration, because the way the agencies were implementing some of the rules that had been standing for years, were all of a sudden more strict or more intense, or they scrutinized applications harder. What looked like a normal case maybe five years ago, over the last three years, they were either denied or they were asked for more information. You don’t know what you’re risking in the future. Especially for a lot of our students, they do plan to work in the United States. Some of them may plan to immigrate on down the line. And just because I’m not finding out doesn’t mean they’re not shooting themselves in the foot years from now. Frank, you probably have a lot more content for that one.

35:30 Frank: I think that one of the things that the past administration implemented was that the forms changed. The net that before had the holes that were a little bit bigger, the holes shrunk. The information that could get you in trouble that was slipping through that net, it was getting caught. I think that that’s where you see that the officials and the rules and the forms are catching up with the understanding of what people are doing. What people would say, “I did this and I didn’t get caught, or they didn’t ask about it, so I didn’t get in trouble,” that’s no longer 100% true. We see that a lot, not just with F-1 students, but just in general, because as Sheena said, an example would be your reported income on your 1040, on your tax returns. Let’s say in the future that you have to prove that you maintain status since your last entry. CIS could look closer at that if you have a green card application. As I mentioned before, if you break the continuity, there could be huge consequences. Let’s say as an example, you were present in the US for five years and you messed up in year three, and then you applied in year five for your green card and they say, you have to prove that since your last entry, you maintain status, well, that status would have been broken when you may have committed that violation in year three. And they can catch it, let’s say on the application for a green card, but maybe they didn’t catch it on the application for the student visa. As Sheena said, just because you can do it or get away with it, and I put that in air quotes, doesn’t mean that there won’t be consequences down the road.

Commercial

37:27 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 your 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 2020 tax return, which are available pfforphds.com/tax. I hope you’ll check them out to ease much of the stress of tax season. If you want to go deeper with the, or have a question for me. Please join one of my tax workshops, which you can find links to from pfforphds.com/tax. 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.

Creative Solutions for Working with and F-1 Visa

38:33 Emily: Okay. So we’ve talked about, what’s definitely straightforwardly allowed, what is not allowed in each of your opinions. Getting in between those two, how do we thread the needle? What are some activities that may be permissible to generate income and Sheen I think you used a really key word before, which was active income. So now let’s think about like passive income. Is that such a thing? What are each of your perspectives on that question? Like if it’s not work, not active work, what kinds of ways can an F-1 student generate income that would not be raising any flags?

Active vs. Passive Income

39:06 Sheena: I think understanding income, understanding what employment means, understanding what working means, and understanding tax law, I think to some degree. I put that disclaimer up front, I am not a tax expert, but there are tax experts out there specifically for non-residents, which is a majority of the students that we work with. Remember that your intent is to study, that’s what the visa is for, and anything that’s passive, shouldn’t be a lot. Anything that’s passive can bring you under, but it’s worth, I think it’s $5,000, something around there, again, not a tax expert, could bring you under more scrutiny. If you’re making money in your sleep because you’re investing and all you’re doing is investing like four hours a week, not an exorbitant amount of money of time, then I, as a DSO, we don’t see any problem with that. If you want to invest, that’s great.

40:09 Sheena: But the problem is, again, like Francisco was saying, is that at some point it’s going to get noticed. And so for us passive income, isn’t that big of a deal. I would never probably know about the passive income you’re making, but you do have to arm yourself as a student and know your own boundaries or understanding tax law, understanding immigration law more than what a DSO would do, because again, your immigration status is your immigration status. We’re there to help you, we’re there to bring you along, but if you’re doing something outside of the normal DSO realm…I’ve worked a lot in this because we get a lot of these questions, but if you’re working outside of that, you need to hire somebody, in my opinion, or at least take advantage of as many free resources as possible to understand what’s really going on it when it comes to passive income.

41:04 Sheena: I think there is a kind of an idea that students can work around it. I think culturally, I find a lot of our students come from a lot more…there are a lot more countries that have a lot more ingenuity and that’s appreciated, of going outside the bounds of law, but in US immigration law, there’s just not a lot of wiggle room. And the, “I didn’t know, excuse doesn’t really work that well,” so making sure that you are becoming that mini-immigration or that mini-tax expert before you go into any of these passive income realms is really important.

41:41 Emily: Okay, Frank, I want to get your answer to this in just a moment, but especially because Sheena, you mentioned if you’re not doing that much of it, and I’m wondering if you meant time or money or both, like the income is above a certain threshold or the number of hours is above a certain threshold, but before I throw it over to you, Frank, for to get your answer, what are some other examples, Sheena, of passive income types of activities that you’ve seen that you think are permissible if they fall within this “not too much” definition that we’re trying to get to. For instance, you mentioned investing, what about being a landlord? Is that passive rental income?

42:18 Sheena: It’s going to depend on how much work you do, and again, this is my advice as a DSO, working with students in a framework that they can understand, or that I can explain, would be, if you’re doing something more than 500 hours a week (a year), it’s no longer a hobby. It’s no longer just for fun. You’re doing something that’s taking a significant amount of time. I believe that there’s actually a rule that we let our immigration attorneys explain in our workshops.

42:59 Emily: Let’s go over to Frank, then to get the definition here of what is passive.

43:04 Frank: Yeah. I think that we’re looking at what Sheena was referring to is that when the Department of Labor defines, if it’s less than 500 hours a year, then it’s considered a hobby. But passive income, I think that for simple terms is as Sheena put, it is money that you’re making while you’re asleep. You’re not getting your hands dirty doing anything. You mentioned rental properties to me, that would be fine. And I’ll tell you why in the context of F-1 by giving an example of other visas, which is for example, there are a lot of Mexican nationals. We live on the border here in Texas, and a lot of them own properties and a lot of them have somebody who manage it, and collect rent and they have income and they’re not considered to be violating their non-immigrant visa status.

43:56 Frank: I think that rental properties are probably okay, but again, I’m going to defer to, or hark back to the Frankie five-second rule, which is if somebody asks you, can you explain that income? And I mean, show a statement that says this is purely, you know, I have a management company who collects rent, here’s a letter from them that amount of collection minus the expenses is what’s reported, so I don’t really do anything. I just invested in real estate, but I’m here to study. That’s all I’m here to do. And so if you’re able to explain that within five seconds and it makes sense to the officer, then I think that you’re going to be okay.

44:34 Frank: Again, it’s the practical versus the legal. You have to realize that when you come, let’s say for example to the border that I mentioned, if you’re coming from an international flight, you have CBP officers who have been sitting there all day. You’ve been on a flight all day and they’re seeing people over and over and over again, it’s a heavy to make them sit there and listen to you meander through an explanation. So just be prepared with documentation to show that you’re really not actively getting your hands dirty to do something. You always want to err on the side of caution. So rental property probably just higher, there’s tons in every city of people who will manage the rental properties for you. You don’t have to do anything. That’s a perfect example of where you say, well, I have a rental property, but I don’t touch it. It’s a management company that handles everything. I think that would be a great example, but I think that what you need to do is you need to think in practical terms to be able to explain it to somebody who has no idea, who is you meeting you for the first time and be able to do it in a simple and straightforward way so that they’re comfortable that you’re not taking a job from a US worker.

Investment Income

45:47 Emily: Okay, I’m going to throw another idea at you Frank. So Sheena mentioned investing earlier, but also you just said, the 500 hour per year guideline — what about, what I might call day trading or active investing? How about that? How does that play?

46:03 Frank: Right. I think that I looked up what the common definition of day trading is, and it’s making four more trades a week. And I think, again, we’re getting to the practical application of this because as Sheena mentioned, a couple of times during this podcast, the administrations can strictly enforce rules. Also, people coming from different countries, and I think the way where enforcement is different. I think she mentioned flexibility or the approach is different, but I think ultimately how laws are enforced really, really matters. And for us in the US, the president or the executive branch has the exclusive authority to enforce immigration laws.

46:43 Frank: Related to that, if you have an administration that’s tightening the screws, then you probably don’t even want to be called a day trader. We have yet to see how the Biden administration is going to do it, but let’s work on the assumption that they’re going to be a little more laxed about this. I think that the approach should be that if you’re trading in a way to support yourself, that it’s almost a necessity, you’re doing it in that type of volume where you can pay your rent, your groceries, you pay all your bills with day trading, even if you don’t need to, but you’re making enough money to do all that, it’s probably not going to be okay. Say that you are buying stocks, four or less a week. You’re trading, just something dropped and you’re doing the investment, then I think that that’s probably okay.

47:33 Frank: Being able to explain it, these trading platforms will issue a form 1099 that’s fairly detailed, and as long as that matches your taxes and you say I invested when the market dropped. I don’t need it to support myself and I’m doing it in a volume that’s very low frequency, here’s the statement, you’ll probably be okay. But again, that’s my perspective. You’re going to have to ask, or you should ask your DSO and be prepared to explain it. But in terms of day trading, I think that unless you’re doing it in this high volume every day, trying to move and really just make enough money to pay for every expense here, school included, living expenses, I think that you probably okay, if you don’t do it in that type of volume.

Credit Card Rewards

48:27 Emily: I have another scenario for you, which is one you’ve already mentioned, I think at least once in the interview, which has credit card rewards, which to me seems one of the more accessible forms of generating a side income is that also considered making money while you sleep? And is it easy enough to explain to an immigration officer?

48:44 Sheena: I would chime in about documentation. So of course we’re concerned about documentation and so tax documentation, what that looks like, is what you’re going to have to pay attention to. Then also realize we’re working with the IRS, we’re working with the Department of Labor, we’re working with Department of Homeland Security. All of these are factoring into what the reality of the situation is and factoring into how they’re enforcing it at that specific time.

49:14 Frank: Yeah, that was one of the things that we talked about before the podcast, is that not only different departments, but different sub-agencies within the Department of Homeland Security, their perspectives can be different. The Department of State, when they’re processing your visa, abroad could be different than USCIS. I’ve seen it, where something is okay here and then all of a sudden it’s not okay abroad. It comes as a shock to the client because they were asking how can one sub-agency say yes, and the other one say no, and that’s why it is important to have that documentation.

49:51 Frank: You asked about credit card rewards, so let’s take just a hard example. Let’s say you made $1,000 or $2,000 in credit card rewards, which means that you’re using your credit card quite a bit, but that’s money, that’s considered income. But I think that if you’re able to know that if anybody asks you, you could have that spreadsheet, you could have those statements, you can show the totals and show that you’re not working. You’re simply getting rewarded for using American Express, Visa or MasterCard. I think you’re going to be okay, because again, the practical application of laws, you have to remember that you’re dealing with a human being, so a human being will understand if you can show them that you didn’t go and apply for a job anywhere. You’re not actively doing anything. I’m sure that almost every credit card offers some sort of reward points at this moment. Those are things that an immigration officer can understand, as long as you can show them that that’s what’s reflected in your tax forms or that’s what’s reflected in whatever official document you have to present them.

51:01 Sheena: Yeah. And we actually found a pretty good article about it talking that some rewards, if it’s per dollar you spend, it’s more like a rebate, whereas if you’re actually opening an account and that’s the incentive, then that can be considered more like income.

51:16 Emily: Oh, interesting.

51:17 Sheena: And that’s what might get you the 1099 miscellaneous.

51:20 Emily: Okay. So kind of a difference between ongoing credit card rewards and credit card churning, which is opening new accounts for the sign up bonuses. Interesting. I will have to look into that distinction further.

Self-Employment

51:30 Emily: I think we’ve probably already covered this, but I just want to throw out one last scenario, which is essentially self-employment. Again, maybe sort of not taking work maybe from an American, but how does self-employment fall into this whole framework?

51:47 Sheena: For what’s already allowable, OPT definitely go for it. It’s encouraged. It’s one of the seven allowable types of employment, as long as it’s directly related to your degree programs so it’s giving you practical experience in your, in your program.

52:04 Emily: I’m wondering how common or how practical of a solution that is for again, the people who I serve are generally PhDs, so they’re in a PhD program and that’s supposed to be taking up pretty much all of their energy, and maybe they’re only allowed a little bit of time for themselves or hobbies or whatever on the side. When I was thinking about self-employment or starting a business, again, a lot of students don’t have a lot of capital either. I’m thinking more about tutoring, freelancing, like wr,iting, like editing these kinds of services that I think would be a little bit more analogous to having a job rather than owning a business where you could outsource the work. Does that make sense? I would think that those kinds of activities would probably fall under, no, this looks too much like work.

52:46 Sheena: Yeah. If you register your company, if you obtain the license, those kind of aren’t operating the business. I think planning the business, especially depending on your major could be okay. I think who’s doing the services. Who’s controlling the money. If you’re involved in any of that process, it’s not a good thing. Using the institutional address. So if it’s part of your program, we have a lot of MBA students, if it’s using your program and it’s part of CPT, or if it’s part of, I guess, pre completion OPT is the more common, then you could possibly try that one. I think it comes down to how dirty your hands get, as far as how much are you in. I will tell you, your DSO will rarely have an exact perfect answer for this. They’re going to tell you to talk to an attorney so they can help you set it up because if you’re really interested in doing that, you’re going to have to invest some money to do it properly. It’s not just, “Oh, here are the five points and you’re fine.” It is about the documentation. It’s making sure that if all those agencies, look at it, they’re going not going to determine that you’re working.

54:03 Frank: Yeah. Self-employment is going to be the same as just having somebody hire you, if you’re just working, but only working for yourself. If it looks like that, if you could do the same thing that you’re doing for yourself for an employer, then I would tell you, even me who tries to navigate along the lines of edges of immigration law, I would say you can’t do that because they’re going to accuse you of working here or violating your status. I think what you have to remember is, as Sheena said, your F-1 is given to you to study, and so if it’s not obvious that you can do it CPT, OPT, on-campus employment, economic hardship, then you really have to understand the decisions you make sometimes will toe the line and you need to mitigate the possibility of being accused of violating your status. And the only way to do that is conversations with your DSO, conversations with an immigration attorney. A lot of attorneys offer free consultations. Even if you have to spend $100 to $200 to speak to an attorney, I know that you’re doing it because it’s already a difficult situation, but just come armed with some questions and that $200, if it saves your status, I think will be well worth it.

55:31 Emily: Yeah. Thank you so much for mentioning that as the next step, when you’re thinking about is this kind of activity okay or not. Those two resources — speak to a DSO, speak to an immigration attorney — I’m glad you threw out that number because yeah, $100-$200 is a significant amount of money, but it’s not $1,000 it’s not $10,000. I’m glad to get that sort of order of magnitude.

Additional Workarounds, Advice, and Resources

55:51 Emily: Are there any other workarounds that we have not already brought up? Because we’ve already brought up the economic hardship, which there’s different trends in that, may not be as viable as before. Sheena, you brought up CPT, OPT, maybe there’s some creative solution there. And also both of you mentioned changing visa types just away from the F-1. Any other workarounds that we haven’t mentioned so far?

56:15 Sheena: I would push for scholarships. We have a pretty extensive workshop on how to apply for scholarships. There’s so much money out there that actually doesn’t get used and I think a lot of students, especially if they’re on a full ride or like a full tuition waiver, they’re not necessarily thinking of how else can I get a scholarship or grant. There are outside ways I think to get a little bit of extra money without even touching the work world. And I think on top of that with COVID and with everything going on right now, a lot of institutions do have emergency funds. So if it really is a matter of, “Hey, I may not be able to afford rent this month” or “Hey, I, I need groceries,” I think reaching out to your institution, they are aware that students are struggling right now, particularly now, so having that conversation again with your DSO or with your financial aid office, or even your campus ministry. There’s a lot of different resources on campus that are meant to help to support students. If you find that you’re, you’re kind of on that cusp, then that’s what I would recommend.

57:23 Sheena: I also want to put a plugin for stay away from Instagram. I’ve had this question billions of times I feel like. The product placement, being a brand ambassador, getting a few things, even only fans — all of those, that free merch, a lot of times it’s not free merch. Those product placements, a lot of times if they’re mailing you something, they’re going to 1099 you later on. Just be very, very wary if you’re messing around with any of those social media platforms. Those companies that are trying to get people to be influencers, they do not care how they’re taxing you. They will burn you hard if you’re not paying attention and asking questions before you accept something free.

58:09 Emily: Okay. I’m so glad you brought that up as like a potential other, the influencer model for gaining what is normally called passive income, but there’s certainly a lot of work as well that goes into that. Are you saying it’s more of a problem on the tax front or more of a problem on the hours you spend doing it front?

58:26 Sheena: Our interpretation is on the tax front. You may be getting four bathing suits for free or something, or I don’t know, whatever anybody gets these days. But it may not actually be free. They may actually send you tax documents or their HR may be considering it, that you’re an employee or that you’re a contract worker, when in actuality you just thought you were getting free stuff for posting something. I think you really have to, again, not to make everyone go and hire an attorney, but I think in this realm, in the F-1 world, you cannot be too safe when it comes to planning ahead and doing your research before you jump into something. I think some of the students that I’ve seen gotten in trouble, haven’t asked ahead of time. They haven’t done their research. Or they trusted a friend’s advice who was very well-meaning but may have been from a different country or completely different circumstances, or maybe didn’t have as much to risk or to lose as they do.

59:31 Emily: Okay. Thank you. And Frank final workarounds, or just final other examples and thoughts?

59:36 Frank: Congress just passed a $1.9 trillion package. A lot of that money is going to local governments. The local governments don’t necessarily always make a distinction between the status of the individual. They just want to help the local economy. They’ll do a hold evictions in abeyance rent programs, local programs, and if they don’t make a distinction between it and you don’t have to do anything to obtain the money, then it’s probably okay. I would say, as Sheena mentioned, but just generally speaking, why work if you can get the money for free?

1:00:14 Emily: Yeah. I’m glad we got around to those solutions that are even outside the scope of really our conversation today.

01:00:19 Emily: Okay, so someone listening may be left with more questions than they had at the beginning of the podcast. This is just an introduction to the material. Where would each of you recommend that people go next? Obviously we’ve already talked about talk with your own DSO at your own institution. How does one find an immigration attorney, Frank? Where do people go next?

01:00:39 Frank: Right. So in finding an immigration attorney, my recommendation is to go to aila.org. That stands for American Immigration Lawyers Association. They are the largest immigration lawyer institution in the country. They have over 3000 attorneys or 2,500 members, rather. That is anyone who’s a serious immigration attorney will be a member. You can do that. That’s number one. Each state bar will have board certification lists or people who have to take exams, take classes, practice immigration law, and they’ve been certified by their state bar association. You can look for that particular to your state, wherever you are, but it’s also important to keep in mind that immigration is federal, so you can actually look at any state for a board certified immigration attorney. I would say those two would be two places. You can go to our website, immigrationcases.org. You can follow me on Twitter @alvillarlawpc, and you can post something and I’ll try to give you some general advice and see if I can answer the question. But I think that if you’re going to schedule something with an immigration attorney, aila.org, or looking for a board certified immigration attorney through the state bar website, or the state board of legal specialization would be a great place to start.

01:02:08 Emily: Yes. Thank you. And Sheena, do you have any recommendations for further resources?

01:02:11 Sheena: Yeah, so Study In The States, that’s Department of Homeland Security website. They do have a lot of nitty gritty stuff about your immigration status that your DSO is probably telling you, but just to double-check them, you’re more than welcome to. I would be very wary of forums. De COPT I think is one of the more reputable ones, but they do get some stuff wrong. Quora is absolutely terrible. Yahoo answers, absolutely terrible. Don’t trust your immigration life to that. I think avvo.com, I think it’s where attorneys answer questions, that’s pretty decent. When it comes to investment, I didn’t mention this resource, but our campus uses Sprint Tax. They actually came out with a great blog about investment income for F-1 students and how to file those on taxes. I would definitely work on that one. And immigrationcases.org, Francisco’s website actually has really great content.

01:03:10 Frank: I would also, Sheena mentioned this earlier, but go to your DSO and ask them to reach out to local attorneys or even attorneys from out of town who can do video presentations. That’s an easy marketing tool for attorneys, so a lot of them will jump at it and it can be really helpful to have that perspective because it’s a group setting where maybe there are questions that you haven’t thought of, that one of your classmates can bring up. Reaching out to your DSO to see if they can bring in an attorney or have an attorney present at your college or university.

01:03:43 Emily: Yeah. That’s a wonderful idea.

01:03:44 Sheena: There are great attorneys, as well as Francisco that lots of campuses can reach out to that are more than willing to give their time to talk about all of these topics for free to a group of students.

01:03:59 Emily: Yeah, I think that’s an awesome next step to help, not only you, the listener, but the other people on your campus. Well, this has been just an incredible interview. Thank you both so much for your time. This has been really enlightening for me. I know it has for many of the listeners. I hope it helps be well, see solutions, avoid pitfalls, and yeah. Thank you so much for joining me.

01:04:17 Sheena: Thank you, yes.

01:04:17 Frank: Thanks for having us.

Listener Q&A: Estimated Tax Payments

Question

01:04:26 Emily: Now onto the listener question and answer segment. Today’s question was asked in advance of a live webinar I gave recently for a university client so it is anonymous.

01:04:36 Emily: Here is the question: “I heard that there is a penalty for not having income tax taken automatically from fellowship paychecks. Is there any way for me to withhold some of my pay to cover taxes and avoid the penalty?”

Answer

01:04:50 Emily: Thank you anonymous for this question. It is excellent and you are exactly right. The IRS does expect to receive tax payments throughout the calendar year. And when you’re an employee that’s typically taken care of by your employer through income tax withholding. However, when you’re not an employee, like if you’re on fellowship, most universities do not offer income tax withholding as a benefit. Yet the IRS still expects those payments.

01:05:18 Emily: So what’s the best way to go about getting those payments to the IRS? So, first of all, you should check if your university offers this benefit to non-employees, to fellowship or training grant recipients. While rare, some universities do such as Duke and Johns Hopkins. This most commonly happens when fellowship paychecks are processed through payroll rather than through financial aid. So if your university does process your paychecks through payroll, you can inquire if you’re able to submit a W-4 and have them withhold income tax on your behalf. Now, like I said, that solution is simple, but it’s not that common.

01:05:56 Emily: Next consideration after that is whether you or your spouse has any W-2 income that continues throughout the entire calendar year. So for example, some graduate students have a combination of W2 income, or employee income and fellowship income, or some other kind of award on top of that. If you have that kind of combination income throughout the whole year, all you have to do is submit an updated form W-4 to payroll and request that they withhold more than they had been before out of your W-2 income. How exactly you calculate, how much more they should withhold, we’ll get back to in a moment. This strategy also works well. If you have a spouse who has W2 income, because what the IRS cares about is whether your entire household sent sufficient tax payments into the IRS throughout the year, not whether you did as an individual. So likewise, your spouse could submit an updated form W-4, that indicates a slightly higher withholding rate.

01:06:56 Emily: Now, how do you calculate what you should put on a W-4? And also what do you do if those options are not available to you? Well, really the main way that graduate students and post-docs get their income tax into the IRS if they’re on fellowship and they’re at university doesn’t offer this kind of benefit is through the estimated tax system. The estimated tax system exists to collect income tax payments throughout the year from individuals who don’t have employers withholding income tax for them, such as fellowship recipients, but also such as self-employed people or people who have passive income.

01:07:31 Emily: What you need to do is pull up form 1040-ES go to page eight, which is the estimated tax worksheet, and fill out that worksheet for your income for the entire calendar year. Basically you are going to do kind of a high level draft of your tax return in this one-page form. When you get down to the end of the form, it will tell you, this is how much income tax you can expect to owe this year and whether or not that rises to the level that the IRS requires you to make estimated tax payments.

01:08:05 Emily: My kind of rule of thumb is if you’re on fellowship and you have no W-2 withholding or anything like that, if you’re on fellowship for an entire calendar year and you’re a grad student, or post-doc, it’s pretty likely that you’re going to be required to make quarterly estimated tax payments, but the worksheet will tell you for sure. If you have fellowship income for only part of the year, like you switched funding sources mid year, then a little bit more borderline, you definitely need to fill out the worksheet to see whether or not it would be required of you.

01:08:31 Emily: If quarterly estimated tax is required of you after you fill the worksheet, it will tell you what the amount of your payment should be up to four times per year. So you can manually go right before the due dates and make those payments. They’re in mid-April, mid-June, mid-September, and mid-January. Or near the beginning of the year, you can set up automated payments for all four of those payments throughout the year, if you know, it’s going to be consistent. Form 1040-ES will give you various payment options, but personally, I think the easiest one is just to go to irs.gov/payments.

01:09:03 Emily: Now, if the worksheet tells you that you’re not required to make quarterly estimated tax payments what’s going to happen is you’re going to make the full tax payment that you owe when you file your tax return in the next year. So you do need to be prepared because you may owe quite a large lump sum at that time. The best practice for preparing to make these payments, whether once per quarter or once per year is to set aside the money that you expect to pay in tax from each one of the paychecks that you receive. I recommend using a separate, dedicated savings account.

01:09:34 Emily: Now, what if you’re looking at the estimated tax worksheet, and you’re really not clear about how to fill it out — looks pretty complicated to you, you’re not sure how to answer all the questions, you don’t know how it applies to your specific unique fellowship situation. I have a resource for you go to pfforphds.com/qetax. That page will tell you about an asynchronous workshop that I created. It’s a bunch of videos, a spreadsheet, and an opportunity to attend a live Q and A call. And I’ve included in the videos answers to a lot of the common questions I receive about fellowship income and quarterly estimate tax, such as how to handle things when you switch on or off a fellowship during the course of the year. So that resource is there for you, if you need it.

01:10:20 Emily: By the way, the last part of the question about the penalty, if you are required to pay your income tax quarterly and you do not do so, yes, the IRS might assess a penalty to you. It’s not necessarily anything to freak out about. It’s probably going to be on the order of dozens of dollars, not hundreds of dollars, but still, I think it’s best to avoid that. If you’re required to pay quarterly estimated tax, just go ahead and make those payments, even though it’s a little bit of a pain. Better to do that than to be hit with a fine, in my opinion. All right. Thank you again to anonymous for that question. If you would like to submit a question to be answered in a future episode, please go to pfforphds.com/podcast and follow the instructions you find there. I love answering questions, so please submit yours.

Outtro

01:11:04 Emily: 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 and instructions for entering the book giveaway contest, and submitting a question for the Q&A segment. 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 podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media, with an email list serve, or as a link from your website. Three, 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 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. 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.

This Two-Time International Graduate Student Gives Excellent Advice to Her Prospective Peers

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In this episode, Emily interviews Josephine Shikongo-Asino, a second-year PhD student at Oklahoma State University from Namibia. This is Josephine’s second stint as an international graduate student in the US, having completed a Fulbright fellowship about ten years ago. She has great advice for prospective and rising international graduate students in the US about the financial transition into graduate school. Josephine and Emily discuss funding models, the importance of saving and debt reduction prior to matriculating, researching cost of living, visa restrictions on working, credit and debt, budgeting, remittances, and more. Josephine’s excellent advice nearly always applies to prospective and rising domestic graduate students as well; this episode is for everyone!

Links Mentioned in this Episode

international grad student

Teaser

00:00 Josephine: If anyone is considering to come, I would say before you hand in that resignation letter, really do an inventory analysis in terms of your financial needs and maybe also pay off any loans, if you can. If you have any loans, you can pay them off. If you have a car, sell it, you weren’t needed at least for a year. So yeah, that’s really doing a financial inventory to make sure that you are in the right place.

Introduction

00:34 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts.

00:42 Emily: This is Season 8, Episode 5, and my guest today is Josephine Shikongo-Asino, a second-year PhD student at Oklahoma State University from Namibia. This is Josephine’s second stint as an international graduate student in the US, having completed a Fulbright fellowship about ten years ago. She has great advice for prospective and rising international graduate students in the US about the financial transition into graduate school. We discuss funding models, the importance of saving and debt reduction prior to matriculating, researching cost of living, visa restrictions on working, credit and debt, budgeting, remittances, and more. Josephine’s excellent advice nearly always applies to prospective and rising domestic graduate students as well; this episode is for everyone!

01:32 Emily: It’s always a pleasure for me to create content for international graduate students, postdocs, and PhDs with Real Jobs, and I’m really grateful to Josephine and everyone who has donated their time to help me and my audience learn more about how to navigate finances while in the US on a visa.

01:48 Emily: Some other episodes in which I’ve covered this topic are S4E17 Can and Should an International Student, Scholar, or Worker Invest in the US?, S2E6 Making Ends Meet on a Graduate Student Stipend in Los Angeles, and S6E3 The Financial Hurdles of Moving to the US as a Postdoc.

02:08 Emily: I’m actually working on some tax content specifically for international graduate students this spring, so if you aren’t already on my mailing list, please join to hear more! You can do so at PFforPhDs.com/subscribe/.

Giveaway

02:21 Emily: Now it’s time for the book giveaway contest! In February 2021, I’m giving away one copy of The Simple Path to Wealth by J L Collins, which is the Personal Finance for PhDs Community Book Club selection for April 2021. Everyone who enters the contest during February will have a chance to win a copy of this book.

02:42 Emily: If you would like to enter the giveaway contest, please rate AND REVIEW this podcast on Apple Podcasts, take a screenshot of your review, and email it to me at emily@PFforPhDs.com. I’ll choose a winner at the end of February from all the entries. You can find full instructions at PFforPhDs.com/podcast/.

03:03 Emily: The podcast received a review this week titled “Crucial knowledge for a first year PhD student”. The review reads: “I started listening to this podcast a couple months ago, and the tricks I have learned have increased my confidence in personal finance has tremendously. As an international student. Not all advice work for me, but I especially enjoyed episode two in season eight, when Laura was sharing her experience as an international student. In general, this podcast have taught me to manage my new monthly stipend the best way. I now know that it’s okay not to prioritize paying down my student loans, I’m not crazy to be checking my bank account on a daily basis, in fact, it’s encouraged, and I’m now putting together a 50/30/20 budget. My goal is to one day be managing my personal finances in a way that I could be a guest on Dr. Robert’s podcast”.

03:51 Emily: Thank you for this a wonderful review and I can’t wait to have you on the podcast without further ado. Here’s my interview with Josephine Shikongo-Asino.

Will You Please Introduce Yourself Further

04:02 Emily: I am delighted to have joining me on the podcast today. Josephine Shikongo-Asino. She is a second year graduate student at Oklahoma State University. And she’s here to talk with us about international students and their transition to the US, particularly the financial aspects of their transition. This is a subject I’m highly interested in. I hope you are as well. I’m interested in for all types of graduate students, both domestic in the US and international, but I’m really, really happy to have the focus on international students on the podcast today, because it’s a group that is highly in need of more information about this. So Josephine, I’m really pleased that you suggested this topic and that you’re joining me on the podcast today. Will you please tell the audience a little bit about yourself?

04:42 Josephine: Thank you, Emily. Thank you for having me. I’m Joseph Shikongo-Asino. I am originally from Namibia, which is in Southern Africa. We are just above South Africa. I’m sure many people know where that is. My background — I’m a certified accountant. I have a master’s in strategy as well, which I did here in the US. And then I’ve spent about 10 years working in the financial sector, including financial services, banking, and investments. But currently I’m a second year PhD student at Oklahoma State University with my research interests, really more on higher-ed finance and policy.

05:20 Emily: Wow. What a great fit for this podcast. I’m so glad you’re joining us. And between your master’s and starting your PhD, did you stay in the US that whole time, or did you live back in Namibia, or elsewhere?

05:31 Josephine: No. I had to go back home because with my master’s, I was sponsored by the Fulbright program. They require you to work two years at home once you finish your program so that you can give back, which is the purpose of the Fulbright program. I had to serve two years in my country and then come back to proceed with my PhD.

05:49 Emily: Gotcha. So you really have the perspective of having transitioned into the US twice?

05:54 Josephine: Yes.

Similarities and Differences Between Finances in Home Country and the US

05:54 Emily: Perfect. So tell us a little bit about, maybe before that first time that you came to the US, a little bit more about the finances in your home country, and how they are similar or dissimilar to the US.

06:07 Josephine: Namibia is classified as an upper middle income country by the World Bank. So it is actually, one of the better performing economies on the continent. And even when I came here, I realized that there’s not much of a difference in terms of salaries back home and being in the US, other than currency exchange, obviously. But, because I had to quit my job, I did not have a backup, I did not have any cushion, that could keep me in case something happens. In case I have an emergency, I did not have, um, any backup. And also because I’m coming from a low income family, I did not have any other backing, other than the sponsorship, which I go through the Fulbright program. I really had to do to survive on my own. I took a decision to leave my job because I thought that I would come to a better situation, which will give me better opportunities afterwards. Looking back, maybe I would have made a different decision after the two years were over. I don’t know if I would have necessarily quit my job had I known what I was signing up.

Advice for Prospective International Grad Students

07:24 Emily: I see. Okay. So I think we’re going to get a little bit more of those stories as the interview proceeds. First of all, you just mentioned that you quit your job, no savings, no backup before you came here. What’s your advice for another international student planning to come to the US? We’re recording this in December, 2020. I think it will be out sometime in the early spring, so people are receiving decisions about their admission to grad programs, but they still have a bit of time before they actually need to matriculate. What is your advice for that time period?

07:59 Josephine: I think the first question really is can you afford to quit your job. For me, that’s the first question you should ask yourself. Do you have expenses such as maybe dependents at home that depend on you on you solely, financially? Do you have a home loan? Do you have a personal loan, that needs continued financing from you?

08:20 Emily: Okay, so you mentioned paying off debt earlier, but what about generating savings? You know, I imagine a degree of savings is helpful for anyone who is moving, but more so when that move is international. So can you speak to that a little bit?

08:34 Josephine: Yes. I mean, most people plan their international studies way ahead before they happen, because you even go through the process of first researching the institution’s, researching where to go. So when you start thinking about going to study internationally, I think you should start at nest. You should start putting money that you can have in case, even if you don’t get a full tuition waiver, even if you don’t get a full scholarship, to have something that you can either supplement yourself, or you can just supplement your expenses, or you can keep paying off the debt back home with that. It’s very important to definitely start the saving nest the moment you start looking into going to study international, and as you really want to have a cushion to land on

09:22 Emily: One other thing to point out here is in this process of researching where are you going to be moving, I find this the idea very daunting of figuring out what is the cost of living in a country that I’ve never lived in, in a city that I’ve never lived in. The US is obviously very diverse in terms of cost of living, and some places I’m thinking about bringing savings, like to a place where if you’re going to rent somewhere it requires, first month, last month deposit all upfront, that can be thousands of dollars easily, as well as just the actual transit, the transitioning costs. Plus sometimes there are fees to be paid to universities upfront. It depends on how your university structures things, but sometimes there could be over a thousand dollars, multi-hundreds of dollars in fees to pay near the start of the semester, that are not like prorated over time. So all of these things have to go into the research of where you’re going to be living.

10:23 Josephine: Yes, they definitely have to and I always advise people that do not look at the big cities. It’s very tempting to want to go to the big cities, because that’s what you’ve seen on TV all your life. And that’s where maybe some of the most universities that you’ve heard of are, but smaller cities actually have just as good universities, but their cost of living is lower. When you’re in a smaller city, your cost of living could really be low, which could then make it easier for you, but as you do the research, look at programs that offer graduate assistantships, if you can, if they offer full graduate assistantships. And like you said, some of them include fees and others don’t, so if you can get a program that pays for fees, pays for health insurance, and a stipend at least close to the cost of living in the town, because those are available online; you can look up the cost of living. That could make really your life more manageable, if you can get an assistantship that can give you full tuition, including fees, health insurance, and a stipend. Otherwise, fellowships or scholarships, because all of these are really, they’re not just readily available, they are competitive. It’s important to look out. Some of them are not even advertised, so sometimes you might have to just write to people at the university and say, “Hey, I’m looking at coming into your program, can you talk to me about the funding structures of your program?” Because some things are not advertise, and if you don’t ask, you wouldn’t know. So it’s really, it’s an investment into just looking into deciding where to go to ensure that you are not under financial strain while you are in your studies.

12:15 Emily: I totally agree. This is the same process, again, that domestic students need to go through is figuring out what the funding structure is. I would say most primarily in your field, because this is oftentimes very field dependent, like whether funding typically comes from fellowships or training grants, or whether funding typically comes from research assistantships versus teaching assistantships. Versus other fields, maybe the funding is very spotty. Sometimes it’s here. Sometimes it’s not. And all that you need to be going in with your eyes wide open as to what that situation is. I usually suggest a bit of networking and informational interviewing, not necessarily with the faculty, but rather with anyone you have a connection with who’s already at a university in particular, if you have one in mind or even just your field more generally. Like alumni associations, for example, is a great way to reach out to people. You don’t know who they are, but they have some kind of connection with you and maybe they’ll be willing to have a conversation with you because you can really get the best insights, I think from current students. Faculty, sometimes they might paint a little bit too rosy of a picture about the finances in a graduate program, because well, one, they may not be aware of some of the difficulties that students are going through. And two, they may want to recruit you and so they might be a little more optimistic than things really are. So I would say talk to with current students. Of course you do eventually need to connect with faculty members as you’re in the application process, but maybe when you’re just getting more information, just trying to narrow down the field, students are really great resource.

13:46 Josephine: Oh yeah. Students will give you the true picture without needing to paint it any rosey, because they have gone through it and some of them might not have had the same guidance. They will tell you the truth, so the reaching out to current students is definitely a must, I would say.

14:03 Emily: Yeah. And the extra wrinkle there for international graduate students, you can correct me if I’m wrong about this, but the extra wrinkle there is, well, really please do talk with other international students, and even particularly if there are some from your own country that would be especially helpful, because a lot of times programs don’t pay very well, like you just mentioned pay at least equivalent to the cost of living in a certain city. The resource that I really like to point to is the living wage database at MIT, livingwage.mit.edu. That’s an awesome resource for telling you in every county in the US or every metro area, what is the baseline amount of money that this research points to as needing to just get by just necessary expenses.

14:48 Emily: Okay, so speak with other international students, because I know what happens a lot on the domestic side is that if universities are not paying well enough, domestic students will side hustle. They will have outside jobs. And that is, as we discussed earlier, at least for jobs originating in the US, not an option for international students. Also debt is almost completely not an option because you have to have a US guarantor and that’s a whole big hurdle to get over. And so pretty much student loans are not accessible to international students unless you already have connections in the country. The fallbacks that domestic students have — the safety pressure release valves on their finances — are not necessarily available, usually not available to international students. That’s something really important to consider that if a domestic student is telling you, “Oh yeah, it’s okay, but I work 5-10 hours a week tutoring or whatever outside of my primary appointment,” please know that that option is not available to you and you’re going to have to make the finances work another way.

15:48 Josephine: Yeah, absolutely. And I would say that you would also need to just manage the little that you have when you get it. If you manage to get an assistantship, if you have a scholarship, if you somehow have an assistantship, even if it’s outside of your department, in the university, really try to stick to a budget. Draw up a monthly budget, stick to it, your income is fixed, so your expenses should be. Those really include things such as like sharing an apartment, to reduce the rent costs, just keeping your expenses low, using campus resources, such as buses to get around, instead of buying a car. If the university has a good bus system, you can use that to get around, you don’t need to get a car. Medical expenses, try to minimize those. Use the university campus health facilities, because medical expenses can be really high. I’ve had experiences in both times. When I was here the first time, there was a time I had to get an ambulance, and that cost me a lot of money. And this time I also had to go to an ER and that, again, cost me a lot of money that I had to continue to pay off. So try to minimize those. Save every month. If you have a stipend that you receive, even if it’s just $20, just put away something, you never know when you might need it, especially when you’re in a country where you might not have a network at all, not anyone that you can just call up. If you don’t have obligations at home, you will manage somehow. Try to stick to your budget and save every month, if you can.

17:42 Emily: Totally, totally agree with all of that. Especially about not committing yourself to higher fixed living expenses, right away. Yes, definitely find a place that’s on a bus line. I do remember, so I went to graduate school at Duke, so Durham, North Carolina. At the time, it was a very car dependent town, so moving there as a domestic student, I was like, “Oh, I have to buy a car.” I was living actually car-free before that point, but I was like, “Oh, Durham, I have to buy a car there.” But once I moved, I noticed that a lot of the international students who were my peers did not have a car yet because, there’s a process to go through. They had to get a license. They had to be able to get credit, to qualify for a loan. It took six months or 12 months for them to buy cars. So I was realizing, “Oh, well, they’re managing to get around okay. Yeah, they have to bum an occasional ride, but mostly they’re using the buses” and it’s actually pretty manageable. Try to set your life up that way, at least in the first year. You can reevaluate in subsequent years if that’s working for you or not, but really try to get those baseline expenses low until you have kind of your bearings in your new city.

Commercial

18:54 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 your 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 2020 tax return, which are available pfforphds.com/tax. I hope you’ll check them out to ease much of the stress of tax season. If you want to go deeper with the, or have a question for me. Please join one of my tax workshops, which you can find links to from pfforphds.com/tax. 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.

US Funding Models and How They Impact International Grad Students

20:00 Emily: Was there anything else that you wanted to add about funding models in the US. We mentioned a few of them — assistantships, fellowships and scholarships. I did notice I’ll add here, in my own graduate program, a lot of international students did come with funding from their own home countries. So they were sponsored by their own federal government, so that is an option you can investigate in whatever your home country is, but I noticed that as another possibility.

20:27 Josephine: Yes. There are some countries that would have scholarships within their own funding structures, so if those are available in your country, that’s great. Some companies within the country could also sponsor you, or maybe even your employer, they might be able to sponsor something so that if you have those options, that is great. But the one thing that I also wanted to mention on the funding structure is that as you review an offer for an assistantship, for example, they usually do not include summer. That’s another aspect that you need to look at — what will you be doing in the summer? Will you be able to survive during the summer? Will you have an option to work? Would you be able to get an exception to work, or would you be able to have your assistantship extended to cover the summer? Because most assistantships do not include summer and many international students find themselves over the summer, really stranded and not having any funds. And it can be tragic.

21:32 Emily: Yeah. I would say that goes into the research that you need to be doing into how your field, and then how specifically the programs that you’re looking into are funded. Because as you said, many places do not offer summer funding, or at least the funding might be different. Like maybe you have an assistantship during the year, but then summer it’s on you to go and apply for fellowships and when win of them., so that could be the expectation. Other places do have 12 month, year round funding. It really just depends and so it’s something you have to go in your eyes wide open and aware of. Again, I’ll repeat, the same advice for domestic students read that offer letter really, really carefully, because I’ve read many that just say what your funding is for nine months, then just stop talking about what happens next. You really need to ask those follow-up questions — what’s typical, what’s on the table? If they just say, “Oh, well, yeah, you’re definitely going to be funded, we just don’t know exactly how, we don’t know exactly what the mechanism is, but don’t worry about it, you’re definitely gonna be funded.” That’s a great answer to hear, but if you hear, “Oh, well, right, summer’s on your own, you need to figure that out,” then, okay, you need to know that going in.

Money Management Tips for International Grad Students

22:34 Emily: Now in terms of strategies for money management, you already mentioned budgeting. You mentioned saving even if a small amount. Are there any other strategies that you particularly want to point out for international graduate students?

22:48 Josephine: It’s really more looking at what you can bring in from home and this simple things such as watching…I don’t know, some countries have exchange rates that really fluctuate a lot, so if you have some money at home, for example, and something your currency just suddenly became favorable in comparison to the dollar, you should set up the money transfer from home in that way to say, “Oh, look at my currency — if I transfer right now, I’ll get double the money then I would get some other time.” I mean, obviously it’s something you need to actively do, and maybe it needs a special skill, but it can benefit you if you transfer money at times when your currency is not too weak against the dollar. For me, that’s something you can, you can as well look at. Again, leaving no obligations at home, I think that that can really leave you free and be able to focus on your studies, because if you have a debt back home that keeps needing money from you, it will weigh on you and you will need to accommodate it in your budget here in the US, and that can just kind of set you back up.

24:13 Josephine: Try to find really people that you can share expenses with, like whatever you do, if you’re able to share expenses with people — I loved to travel, when I was here for my masters, because I had the time, unlike now, and I would find friends and we would go to visit a state that we have never seen before. And when we are in a big group, you are able to share that cost without necessarily breaking a bank and you you’re able to kind of also have a good time, so that you’re not just focused on your studies. You have a good time as well on a budget, but when you have friends that you can share with it keeps your expenses down. Phones, again are another thing where if you have a friend who you can share, who can maybe help you put on their family plan, which are cheaper, instead of subscribing for your own phone directly.

25:21 Josephine: Don’t get yourself into things such as getting cable and do what you can stream online. Books for school — there are many used books out there that are cheaper. There are rental options. You can also stick to just maybe borrowing books from the library and really checking which book do you really need to buy in the end, instead of just buying all the books that are required. Books can be really expensive, so I had worked with the library for the most part. At the beginning of the semester, what books do I need? Check the library. Are they available? And then if I see that it’s a book that is really important for my future, then I will actually I’ll actually go and buy it, but otherwise I just borrow, use it and take it back. That way I keep my expenses low.

26:16 Emily: I’ll add a note on the textbooks there. I ended up borrowing textbooks from other students who had taken the course the previous year or whatever. Sometimes there might be an edition change, but sometimes not. And so I found that to be really useful because yeah, some people do invest in books and they want them available to them long-term but yeah, they can part with them for a semester, especially when they know where to find you. So that’s another good resource is just students who took that class last year.

26:41 Josephine: Yeah.

26:43 Emily: I do want to bring up remittances. You mentioned earlier supporting maybe dependence back in your home country, but that could extend not just to your children, but maybe your parents or other family members. So you have any suggestions for people who are expected to help continue to support family members or the like?

27:04 Josephine: Yes. I think there’s many tools online that actually charge really, really low fees to transfer money back home and are easy and fast. If you have a bank account, which for the most part, you would probably have, there’s ways that you can send money through your bank to your country, but that tends to be more on the expensive side, in terms of the international wire fees. There are online tools, financial apps that you can use to send money back home, as long as the person back home is able to receive it, and you can track it, that’s okay. But for me, I found those services cheaper compared to doing it through my bank, because the bank is obviously to involve the process that you have to go through. The money might not be available as soon as you needed, if the people need emergency money. It’s better to use the international wire tools that are available online. I think, I don’t know if I should mention any of them, but there’s WorldRemit, there’s MoneyGram, and the likes. There’s this many of them. One really just has to look and see which one offers the lower cost for sending money to your country, because the cost also varies depending on where you’re sending the money. So check which one has a low cost of sending money to your country and a fast one as well, because often people at home are not going to wait a week if they need the funds. So find the ones that it’s cheaper and faster to send money back home instead of doing it through your bank.

28:55 Emily: Yes. Thank you so much for making those suggestions. That’s something that I hadn’t thought about, like the mechanics. And I know a lot of people hear about building credit in the US when they first move here. Can you make a couple comments about your experience with that, or the best way to do that?

29:11 Josephine: Credit card companies here just give you unsolicited credit offers. And for me, I would say resist them if you can. It’s important to build a credit if obviously you plan to stay here, and maybe eventually get a job. But credit needs discipline. And as a student who might not necessarily have the means to always service your credit, my main advice is to stay away from the credit, but if you find yourself not able to, and you would like to take on some credit, either for credit building, or just really to make up some gaps that you need, then make sure that you do pay it off. Do not take away anything that you are not able to settle within that the month. Or if you really need, if it’s an emergency, then you have to set up a fixed repayment plan to make sure that you pay back because you also don’t want to leave the country with debt. I would advise against getting debt. If you’re going to get a job, just wait until you have a job. But if you want to access the credit that’s available and you have some offers then make sure that you do pay them off.

30:44 Emily: Yeah, I think my perspective on that question is it is helpful to have a credit score, a good credit score, in terms of actually just finding rentals. And this also depends on the housing market that you’re in, so it might be different, you know, cities versus smaller cities. Go ahead and build the credit, but like you said, don’t actually use it by carrying debt or carrying balances or paying interest. Do it in a way that you don’t have to pay any fees, essentially, but you can still build your credit score for the point that you need it. And like you said, maybe you won’t really need a credit score until you need to get a job or take out, like I mentioned car loans earlier. That could be a possibility if you feel you can support the debt. It’s a funny thing because credit scores seem like they should only be useful when you’re taking out debt, but in fact, they creep into other areas of life as well. It’s like a helpful thing, although not maybe like strictly necessary depending on your housing market.

31:43 Josephine: Yeah. I mean, yes, you do get kind of penalized if you don’t have any credit history, like you have never taken out credit, they penalize you on that. But yeah, build as little as you can for what you need, but don’t get into it because you probably come across friends who have used debt to pay off their studies, especially the domestic students, but it’s different. I would say as an international student do not take on any credit that you are not able to service immediately.

31:17 Emily: I totally agree. And we talked about the dangers of having debt earlier, when you’re obligating a portion of your already very small stipend, already completely limited stipend. It’s a tool you have to be really, really careful with because it’s very easy to get in trouble.

32:33 Josephine: Oh yeah, and they just send you, sometimes the moment they have the address, they just send you offers — “you qualify for a hundred thousand”, “you qualify for a credit line and you also get this airline miles” and you’ll still have to pay for them, so just stay away from it.

The Financial Culture Shock for International Grad Students

32:50 Emily: Absolutely. Is there anything that has struck you about the financial culture in the US that you think international students need to know about before arriving?

33:01 Josephine: I think for me, what was shocking is really the 20 hours a week that that is really strict. I think when we come, sometimes we think, ah, I’ll be able to make my way around this. I’ll be able to find a job. I’ll be able to make extra money. You really can’t. So you are only allowed to work 20 hours a week and it’s important to keep that in mind, That that 20 hours a week is the only income you will have. Life is expensive. Just buying bread itself, I was shocked at how much bread cost around here. The culture of eating out for the most part and really not, not cooking at home. So you would have to resist always being out, because obviously you won’t be able to probably fund it, and find ways to really cook at home. For me, the credit card offers were the most shocking, because I’m like, “Do they know how much I earn? Why are they offering me this credit?” Because in my country getting credit is very difficult. You only get credit if you earn a certain salary and you can prove that you have a good credit history of paying off any loan that you have had before. So getting offers from companies to just say, you qualify for credit, without me doing anything, was what was kind of surprising.

34:40 Josephine: Big cities, again, very, very expensive, every little thing costs you money, so it’s better to stay maybe in like a rural town, which is very close to a big city where you can take and one hour train to a big city, for example, that takes off a lot. If you can stay in a smaller town, which has a train that goes into a big city for one hour, that kind of gives you the best of both worlds. But yeah, the financial culture in the US is just, it’s a spending culture. It’s obviously about revolving money in the economy and supporting the businesses. So it is just, we have to keep spending there’s always holidays that have different things that you need to spend on. You really need to be able to manage your spending within such a culture.

35:39 Emily: I agree. I think from what I’ve read about, let’s say permanent immigrants to the US, they come with certain, I’m generalizing, obviously the world is very diverse, but oftentimes the US is more consumeristic and then the countries that they come from. And so, maybe that first-generation keeps some of the mindsets from their home country, original culture, but it gets diluted, and within two, three generations, the descendants of those people are just totally in the thick of the consumerism of the US and completely Americanized in that way. I would imagine it can be quite shocking, and a lot of pressure to spend once you’re here.

36:24 Josephine: I think the other thing is also to pay your taxes. Obviously in many countries, people still pay taxes, especially if you’re in a salary, your employer has an obligation to deduct that, but the deadlines on when to file and all that could be like flexible. But here it’s really, I feel it’s important to keep to the deadlines and ensure that you file the taxes and don’t do anything to feel maybe, “Oh, okay. If I say this, then I can claim more.: Don’t do it. It will ruin your life and it will ruin your chances to ever be in the US, so do pay what is due to the tax man and do not claim anything you are not entitled to.

37:18 Emily: Yeah. So I think what I’m hearing you say between the rules about visas and then the tax stuff is, there’s not flexibility here. The rules are the rules, and you need to follow them. You need to toe the line, because especially as you said, if you eventually want to get a green card and stay in the US, there could be things that come up in your history, your record, that torpedo that application, if you’ve made any missteps early on. So really, really keep to the rules. I have corresponded with international graduate students who have skirted the rules and worked extra or whatever, and they got away with it, I guess, for the time being, but I always say don’t chance it.

38:01 Josephine: No, because then you walk around looking over your shoulder, wondering if someone will come after you at some point. So I think just live, you’re in another country, just live according to their rules.

Financial Advice for Early Career PhDs

38:12 Emily: Okay. Josephine, as we wrap up, what is the best financial advice that you have for another early career? PhD could be an emphasis of something we’ve already talked about today, or it could be something completely different.

38:24 Josephine: I think there’s a few things that I just need to emphasize, which is seek funding. There are options out there. Don’t up on your dream thinking, there’s no way I can study in the US, I don’t have the money. There are options. There are funds out there that sometimes go unclaimed. Talk to as many people as possible that can help you to give you the information on where to find funding, because there are ways for you to be able to fund your PhD dream. Again, avoid debt. Live modestly. The rewards will obviously come later, hopefully.

39:04 Josephine: And then just make sure that you do it for the right reason. As you make your decision to pursue a PhD, it’s not like a master’s program where you do it, you finish maybe within two years or one year, and you can go and get a job. It takes time. So at some point it will get tough. Whether it’s financially or just the coursework, it will get tough. But if you have a clear motivation, if you have a “why” you’re doing it, you will remain on track. Don’t come to do a PhD as a way to just be in the US because when it gets tough, you will find it hard to keep motivating yourself. When the stipend is much less than the salary you used to get back home before you resigned, there will come a day when you are like, why am I even doing this? Why did I have to give up my job to come and do this thing, which is now going to take me four years to finish, but if you have a clear motivation on why you’re doing it, I think it will keep you going., when you can keep going back to your why.

40:15 Emily: Beautiful, beautiful advice. Thank you so much for adding that. For the international listeners, I will add a few links in the show notes of previous interviews I’ve done, some articles I’ve written specifically for international students. There’s one especially, we didn’t touch on investing in this interview, but if you’re interested in investing as international student, I have an interview on how you can make that happen, so that could be of interest as well. Josephine, thank you so much for joining me on the podcast and giving me this wonderful interview.

40:45 Josephine: Thank you. Thank you, Emily.

Listener Q&A: Credit Cards

Question

40:47 Emily: Now it’s time for the listener question and answer segment! This week’s question is one I ran across on Twitter from Jake Thrasher, who gave me permission to answer it in this segment. Here is Jake’s Tweet: “Does anyone have good credit card recommendations for grad students? I’ve never had a credit card before, and I have no clue what I’m doing.”

Answer

41:08 Emily: Jake got a lot of great answers to this question on Twitter, and I’ll link to it from the show notes.

41:13 Emily: I’m going to answer this question not with respect to what might be the best credit card for a grad student right now, but rather how to find a first credit card no matter when you may want one.

41:23 Emily: First, you should determine what characteristics you’re looking for in a first credit card. It is recommended that you keep your first credit card open indefinitely because having a higher average age of credit boosts your credit score. So even if you open and close other cards later, ideally you would keep this one open for many years. Given that, I recommend that you sign up for a card with no annual fee and also with a creditor who has a reputation for good customer service. Some other features that are nice-to-haves but not must-haves, in my opinion, are ongoing rewards, a sign-up bonus, and waived foreign transaction fees.

42:03 Emily: If you have any inkling in your mind that you might carry a balance on this card in the future, look for a card with the lowest interest rate that you can find. I did this when I signed up for my first credit card because I didn’t 100% trust myself to pay it off completely every statement period. I ended up creating a track record of paying my cards off completely and on time, so now when I open credit cards, I don’t even look at the interest rate. But if you’re just starting out with credit cards, that’s reasonable to take into account.

42:34 Emily: Finally, to avoid applying for cards that you won’t get approved for, you should take into consideration your current credit score. If you’re new to credit you might not have a credit score or it might be not very high yet. You can search for cards that don’t have a credit score requirement in that case. For anyone new to the US, it’s typical to apply for a secured credit card as your first one.

42:57 Emily: Once you have your lists of must-haves and nice-to-haves, it’s time to start searching for current offers. You can definitely Google “best first credit card” or some variation on that and see what you get. I also like to use the sites bankrate.com and Nerdwallet.com. Those sites typically set up categories of cards for you to peruse, such as student cards, no annual fee cards, cards for bad credit, etc. However, please note that probably any credit card review you run across online has an affiliate or commission structure in place. That means that if you click through a review to open one of the cards, the site hosting the review will get paid, and that can bias their reviews. Look across a few sources to see if some cards commonly pop up within the criteria you’re searching for.

43:46 Emily: For example, when I’m doing this exercise in January 2021, I’m seeing that Discover offers a student card that probably fits the bill. Many of the people who responded to Jake’s prompt said they used Discover cards when they were starting out. I read Discover’s policy, and apparently after you are no longer a student they reclassify the card to a non-student card with the same benefits structure, so you keep the longevity of that account going. While I’ve never had a Discover card myself, they are one of the major players in the credit card space and their online reviews seem to be solid, which leads me to believe it will be easy to keep the card open for a long time.

44:22 Emily: Another great suggestion from the Twitter responses is to open your first card at a local credit union because they are likely to be less predatory than a bank. So that’s a great approach as well, provided that you will still be able to use the card with ease if and when you move away from the area that the credit union serves.

44:40 Emily: One final suggestion for Jake since he said he has no clue what he’s doing: Read my article titled Perfect Use of a Credit Card, which is linked from the show notes, and follow its advice to the letter. It’s super, super easy to slip up with a credit card and quickly get in over your head with the high interest rate. I’m very strict about how I use credit cards, which I explain in the article, and I suggest you set up rigid rules for yourself as well, such as treating your credit card exactly like a debit card.

45:11 Emily: Thank you, Jake, for posing this question on Twitter and permitting me to answer it here!

45:16 Emily: If you would like to submit a question to be answered in a future episode, please go to PFforPhDs.com/podcast and follow the instructions you find there. I love answering questions so please submit yours!

Outtro

45:29 Emily: 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 and instructions for entering the book giveaway contest, and submitting a question for the Q&A segment. 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 podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media, with an email list serve, or as a link from your website. Three, 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 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. 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.

Can and Should an International Student, Scholar, or Worker Invest in the US?

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In this episode, Emily interviews Hui-chin Chen, a Certified Financial Planner specializing in advising globally mobile professionals through her business, Pavlov Financial Planning. In the interview, Hui-chin answers the questions: Is it permissible for an international student, postdoc, or worker to invest while in the US, and if permissible, is it advisable? Hui-chin and Emily discuss several factors that could impact the answers to these questions: whether the person desires to stay in the US long-term, the type of visa they are on, what type of income they have (W-2 vs. fellowship/training grant), and whether they have access to a tax-advantaged retirement account, such as a 401(k), 403(b), or IRA. Listeners to this episode should come away with clear next steps to further evaluate whether and where to invest while living in the US.

Links Mentioned in This Episode

international investing in US

Teaser

00:00 Hui-chin: I would actually recommend the default is think about, well, if I had the extra money I can invest for the long term, I don’t really need the money — why not? So there has to be a really good reason why you don’t do it.

Introduction

00:21 Emily: Welcome to the Personal Finance for PhDs Podcast for higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season 4 episode 17 and today my guest is Hui-chin Chen, a certified financial planner specializing in advising globally mobile professionals through her business, Pavlov Financial Planning. In this interview, Hui-chin answers the questions: Is it permissible for an international student, postdoc, or worker to invest while in the US and if permissible, is it advisable? We discussed several factors that could impact the answers to these questions. One, whether the person desires to stay in the US long-term. Two, the type of visa they’re on, F-1, J-1 or H-1B. Three, what type of income they have, that is W2 versus fellowship or training grant. And four, whether they have access to a tax advantage retirement account such as a 403B, 401k, or IRA. I’ve wanted to help the international graduate students in PhDs in my audience think through these questions and scenarios for a long time and I’m so grateful to Hui-chin for giving us her expertise in this area today. Please consider sharing this episode with your friends and peers. Without further ado, here’s my interview with Hui-chin Chen.

Will You Please Introduce Yourself Further?

01:42 Emily: I am so delighted to have joining me on the podcast today Hui-chin Chen. She is a CFP. Her business is Pavlov Financial Planning. She is an expert in this area of international students, postdocs, workers living in the US and what can we do investment wise? I know this is a question of high, high interest in my audience. I get this question every single seminar I deliver at universities. Can I invest in the us? Should I invest in the US. What kinds of accounts can I use? So Hui-chin is here to help us answer these questions as best we can. It’s a very complicated and detailed area, but you know, we’re going to work through it over the next 30 minutes or so. So Hui-chin, thank you so much for, for joining on the podcast and please tell us more about yourself and your business.

02:29 Hui-chin: Well, thank you for having me Emily and I think you covered like all the high levels. Like you said, I’m a CFP, a certified financial planner and I focus my work on clients and international planning needs, whether they’re immigrants to the US, people who are temporarily working in the US that migh leave or US citizens that become expats. So sort of like your listeners who are technically expats from other countries. So I deal with international complexities day in and day out for my clients, so I’m happy to answer any questions you might pose today.

03:05 Emily: Yeah, I mean I have been searching high and low for an expert, just like you. Will you please mention your blog name, your website name.

03:12 Hui-chin: Yes. You can read more about just in general financial planning topics for global and mobile people on moneymattersforglobetrotters.com and if you want to learn more about my business or working with me, it will be on pavlovfp.com.

03:29 Emily: Great. And you have a YouTube channel as well, right? What’s the name of that?

03:32 Hui-chin: Yes. Well there’s no name because I just record more like a series of different topics. The most recent one I recorded, I call it “Welcome to the USA: personal finance edition”. I think some of you might be interested or your spouses who accompan you to the US while you study or work and they may or may not be able to. So it goes through a lot of the different steps of understanding the US system that will be helpful if you eventually do want to stay in the US.

04:04 Emily: Yeah, perfect. Tell me just a little bit more about yourself — when did you arrive in the US, where are you from, why did you come here and those kinds of things.

04:12 Hui-chin: I first arrived full time in the US in 2004 for my graduate degree in public policy and management. I did consider going into a PhD, but I did not eventually and I basically stayed. Since then, I found a job in the US, I continued my work and then I met my husband in grad school, but after working separately for a few years, decided to get married and he got a job posting overseas in different countries. So I also have a very personal interest in working with people from all over the world because, for example, right now, I’m actually not physically in the US, we’re somewhere else. So.

Investing in the US as an International Student

04:58 Emily: Okay. Yeah. Fascinating. Oh my gosh. I really hope people follow up with you about this. So what we decided to do with this interview was to answer two broad questions, which are the ones that hear during seminars. The first is am I allowed to invest in the U S is this permissible? Secondly, is it advisable for me to invest in the U,S while I live here? Now the second question is a lot thornier than the first, I understand, so we’ll kind of go through a few different, aspects of this question that might affect the first question or the second.

Is it permissible? Yes!

05:33 Hui-chin: All right, so you’ll have to prompt me later for all these different questions. I’m going to answer the easiest one which is whether, as an international student who is not a US citizen or a green card holder, can I invest through a US based account? The answer is yes. And the United States is one of the few countries that’s very friendly to foreign investors investing directly in the stock markets and the US also has one of the largest stock markets. A lot of foreign companies come to list in the U S. dot. Markets. So really, even if you were not in the US, even if you were just like live in your home country and you want to open a US brokerage account, you can actually do it.

06:24 Hui-chin: It’s not only permissible, it’s actually a sometimes recommended way to invest, especially if your home country gives you very little access directly to investing equity on your own. A lot of countries don’t even have what we call retail access, like in the US. In a lot of places you have to invest through insurance contracts or very expensive mutual funds. So investing directly as a retail investor, that means that you’re as an individual, not going through an advisor, just like open your own account and start investing, it’s actually a great opportunity to do so. Now you’re in the US, it’s a lot easier. It’s easier for you to find information like that instead of doing it in your home country and tried to find those kinds of information. So that’s the long answer. But the short answer is it’s definitely permissible to do so. Right now you’re in the US and you can invest no matter what kind of income that you have. We’re talking about just a normal broker brokerage account, so it doesn’t give you any tax advantages. It’s just for somebody who wants to buy some ETFs or even just stocks. For example, if you really like Apple, you want to buy Apple stocks, you’re totally permissible to open a brokerage account online and pressures that Apple stocks with whatever money you have, either from your work in the US, from your grants, from your fellowships, or from your wealthy uncle back home who wired you some money. Those are all possible ways to invest.

Opening a Brokerage Account

08:06 Emily: So I think there may be, you can tell me if this is the case, I think there may be a distinction between something being permissible under the law and being, will I actually find a brokerage firm who will work with me? Because what I hear from international students and scholars is, and I never know if this is the rumor mill or if it’s actually their own experience is, “well it’s difficult to find a brokerage firm to approach who will work with me.” Is that the case? Is it, I can walk up to any brokerage firm and you know, as an international student or scholar or worker and open whatever. Or is it like, Oh well some of them might, by policy, be excluding certain types of people from you know, opening accounts.

08:51 Hui-chin: That’s a good question. Sort of at the practically, how does that work? So the first scenario is that if you have, for example, if you actually pay social security, now you have a social security number and you’re technically getting your income and you’re an employee of your university, then, for example, if you go onto Vanguard, that’s all the information they ask for. So at Vanguard, if you provide those two types of information, you will be able to open the account and plus you have a US address because you’re currently living in the US, so you actually do not need to already be a green card holder or something in order to have it processed through it. It doesn’t mean that if you eventually decide to leave the U S and if Vanguard finds out, they will want to close the account. So that’s one scenario.

09:43 Hui-chin: The other scenario is that I know some people because their totalization agreements, they don’t even have a social security number or they choose not to have one in the US and so in that case, even though you’re physically in the US and you have a US address through your apartment or on campus, it’s basically you’re considered a foreign, like how you file taxes as a nonresident alien, you can be a foreigner. So in that case, if you still have pretty close ties with your home country and you do decide to go back, you can actually open an account like your just a person living overseas, but in that case it is pretty much dependent on the brokerage company being willing to work with you because every brokerage company, like Schwab or Fidelity or TD Ameritrade, it’ll have their own internal list of which countries residents they were willing to do business with. So you’re basically declaring to them, I am a resident of some other country, would you would do business with me? And then they may or may not. So that’s another way to go about it.

10:59 Emily: Got it. So, okay, an international student or scholar who does not have an SSN, when they actually try to go and open a taxable brokerage account, what should they say to customer service? I’m a resident of X country, but I’m living in the US currently, will you work with me? Is that the question that they need to pose?

11:22 Hui-chin: Yeah, the question will really be, I’m a resident of another country, because if that’s the case, you’re providing an address of that country. You may be able to provide a us mailing address, but that’s not the address that’s associate with the account. So if they know that you are foreign customer, they will have different tax reporting, different tax withholding. Instead of filling out a W9, you fill out W8-BEN, all the different things, so it’s whether you want to be considered as a foreigner to the US institution or somebody who’s a US resident.

12:01 Emily: Got it. So in the case where someone does have an SSN, probably because they’ve been employed W2 employee for at least part of the time that they’re here, would you say that it’s totally fine to then present yourself as a US person? Even if you’re still technically a non resident alien for tax purposes, even though you have the SSN, but let’s say you’re a nonresident alien for tax purposes, is it okay to go ahead and use that SSN and be like, I’m a US person?

12:26 Hui-chin: Well, that’s the tricky part because you are still for tax purpose, like your dividend capital gains interest will be taxed differently. So you do need to report, you need to write a W8-BEN instead of W9. So I would just give an example on how easy it is to actually open an account. For example, on TD Ameritrade’s website they actually ask what kind of visa you have. So I’m just saying that usually in those kinds of applications, if you have a SSN, you have a US address, you have a US employer, it’s most likely those online retail brokerage account, they will allow you to open the account. But you also need to make sure that they know that for tax purposes you need to fill out a tax form as a non resident alien.

Investing during Short-term vs. Long-term Stays in the US

13:17 Emily: Got it. Okay. I think that’s very clear now. Than you so much for going through that in detail. Okay. So then let’s go back to the scenario of “I plan to stay in the US long term, or hope to, not sure if it’s gonna work out” versus “I don’t plan to stay in the US long term”. We now know what’s permissible, but then what is advisable? Should a person who hopes to stay in the US long-term, has the ability to invest right now — is there any reason for them to shy away from doing that because they’re not sure about the longterm status? Let’s start with that question.

13:50 Hui-chin: So like I mentioned, I guess, eluded to earlier, because the US is such an attractive market, not in terms of return or performance, but in terms of access, you can invest in a broad index in so many different countries, so many different companies with such little cost, and it’s really hard to beat if you tried to do it in some other country. Usually there’s more brokerage fees more commission, there are more hurdles to jump through as an individual investor. So I would actually recommend the default is think about well if I have the extra money I can invest for the long term, I don’t really need the money — why not? So there has to be a really good reason why you don’t do it upon the US perspective.

14:38 Emily: Got it. And so maybe that person in that situation is thinking, “well, is it a good reason that I might eventually leave?” How would the investments that are in the US for the moment, do they to exit the country with that person? If the person ends up leaving, how does that work and how’s that handled?

14:57 Hui-chin: Yeah. So as I mentioned earlier, even for somebody who’s never been to the US, some custodians will be willing to open account for a foreign customer. So if you’re thinking about, “Oh, I’m just leaving after I finished my grad degree in three years,” if the country you’re likely going to is on whatever list that custodian posts, like it’s European EU country or it’s a relatively developed country or it’s a safe country, it’s not like a terrorist country that may be on the treasury list of “do not do business with”, then you’re probably safe to assume that you can continue to hold the account. But of course do your own research on the specific countries. It’s impossible for me to go into every single country.

15:46 Emily: We’ll link to a reference if you can provide a reference of that treasury list. We’ll put that in the show notes and check to see if your country appears on this list, in that case, okay, we need to tread more carefully. But let’s say, okay the country is not on that list, go ahead.

16:04 Hui-chin: Yeah, so basically what will happen is that for example, if you went the first route when we’re talking about opening an account, you open account with the U S address and everything, and let’s say you actually end up staying over five years or you actually got a job at under H-1B then leave, right? So you actually went from nonresident alien for tax purpose to a US person tax role, and then you’re leaving, so you’re going back to a non resident alien textual. So you do need to report to the custodian that you’re leaving this is my W8-BEN, this my new address. So of course you want to make sure the custodian does business with people at that address. And there is some other complexity in terms of what you can invest in. Some people from the EU countries might know there are some new regulations saying that the custodian is not supposed to sell ETFs that’s not registered in the EU to their residents. So that’s one type of complexity that may come up that whatever you invested in, you may or may not be able to add more to it once you leave. But whatever you have already invested in, there shouldn’t be any issue with keeping it there, as long as the custodian is willing to keep you as a customer.

17:30 Emily: Got it. So let’s say then that the custodian is not willing to keep you as a customer, for whatever reason. What happens in that scenario?

17:39 Hui-chin: It does happen. Over the last 5 to 10 years, even some US citizens are experiencing that, living overseas, it used to be okay that custodians know that they live overseas and now they’re not okay and custodians say please close your account. For normal brokerage account, of course the first step was if you want to keep your investment in the US, you can always find a different custodian to move your investment to. You actually do not need to sell those investments. You can do a transfer. It’s just whoever’s holding those stocks will transfer the certificate electronically to another custodian. It’s not like you’re selling and getting the money back. But if because where you’re going next or because of personal reasons, after investing in the US for five years, you’re willing to take the money and leave, you can go ahead and sell your investments, close the account, taking the money and leave. There’s no problem with that. There’s also some tax considerations there. For people who are considered a nonresident alien, getting capital gains while they stay in the US for over 183 days versus they do not. Because if, for example, if there is a tax year when you have a US based account and you have a lot of capital gains on your Apple stock because it increases in value a lot, but if you already finish your study and you’ve moved back to your country for two years you’re just wondering, well, will I be taxed on the capital gains? The question is, you actually do not get taxed on the capital gains, in the US. There could be also tax treaties that differs between the US and your country, but in general, the rule is the US does not tax and your country may or may not tax that. So that’s actually a good–

19:34 Emily: It sounds like in that situation, where you’re planning on moving the money out of the US, it sounds like that’s the time to consult a tax advisor in the country that you’ve moved to, right? How to execute this, when to execute this and the tax implications. Is that right?

19:51 Hui-chin: Yeah. So you’re definitely thinking about tax strategy, because, as opposed to the situation I talked about, if you sell the day you leave the U S for example, like “I’m just closing everything down, I’m moving back home.” And if you sell the stocks as somebody who has lived in US, even though you’re a nonresident alien but you were in the US as a tax home, when you sell the stocks, the capital gain is actually taxed at 30%, unless their treaty dictates differently as well. Like you said. So definitely talk to your tax advisor in your home country, as well to understand how the tax coordination works.

Taxable vs. Tax-Advantaged Accounts

20:33 Emily: Got it. And now, you mentioned earlier that all of that was for a taxable brokerage account. So let’s also throw in the scenario that the person has been using a tax advantaged retirement account — IRA, 401k, 403B — and they’re not going to leave it in the US, they’re are going to be moving the money out, what are the tax implications of making a withdrawal from whichever account type.

20:56 Hui-chin: Yeah, in that scenario, basically first of all, you should know that there is a penalty that applies if you take money out of and IRA, 401K, 403B. You should have known it before you put money in, but that’s the same rule that applies broadly to everyone, whether you’re a US person or not. Right? Because the reason is that the government gave you a tax benefit and it’s the incentive for you to keep the money there for retirement. They don’t want you to take the money out. So, if you need the money obviously and you think closing the account, paying the penalty and income taxes is still better going back home and doing it in a few years because of the different tax situation, of course that’s something you can consider. But knowing, with a penalty if you are not not going to need the money and it is eventually going to pay for retirement, one thing you also can consider is to leave the account open for a very long time and let it grow. Of course, you cannot keep putting money into it, but whatever is in there can continue to grow and you can consider taking the money when your income is lower and take the penalty, so the income and the penalty together is less of a hit, or you can take it out when you are 59 and a half, which is the current law of when you can take it out and then there won’t be a penalty but there is going to be taxes in the US and withholding as well.

22:42 Emily: It sounds to me, and this may be painting with too broad of a brush, but it sounds to me like you know, if you end up having investments in the US, if you’re eligible to keep them in the US, and you do leave, sounds like it’s a good idea to keep the accounts open. You won’t be contributing anymore, at least to the tax advantage ones, but it doesn’t sound like there’s a big reason to be closing accounts and moving the money out, unless it is that you are not permitted to keep the accounts open based on the custodian and the rules of the country that you’re going to, and how they deal with the US, is that right? It sounds to me like that’s the pattern. Like go ahead and keep the money here and then when you’re of retirement age in the country that you’re residing and then you can work on doing the withdrawals and dealing with taxes at that time. Is that kind of broadly what you recommend?

23:32 Hui-chin: I think that’s generally correct. Like I said, the main reason for that is because the US is such a individual investor friendly country to allow you to invest that way, so like I said, I would ask the question of why not. Of course everybody’s situation is different. If there is a legit reason that you think that you shouldn’t be keeping the investment in US, of course, you just need to understand the tax implications. Otherwise, keeping investing long-term in the US, not just — let me clarify this, not investing in US companies only, but using a US based account and custodian, who charges you basically right now no commission to buy and sell anything and with very low mutual fund costs, very low ETF costs, it’s a really good bargain compared to the other alternatives.

24:34 Emily: Yeah. So it sounds like whether an individual in the US, not on a green card yet, not sure if they’re gonna be able to stay long-term or planning to not stay long-term, if they have the ability to invest at the time that they’re living in the US, as you said, why not? Why not go ahead and open the taxable brokerage account or the IRA or the 401k or whatever it is and use it, because it’s sort of, as we know — we don’t have to go into about the power of compound interest — starting to invest earlier is fantastic. So basically don’t a waste or fritter away the time that you may be in the US, it might be longer than you expect. Go ahead and start investing and then deal with either moving the money out or keeping here or whatever later, once you know where exactly are you going to be living. I like that approach of why not. So whether the intention is to stay in the US long-term or to not, go ahead and use the time while you’re here. Use your access. Go ahead and open the accounts, again if you’re able to be able to invest.

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25:37 Emily: Emily here for a brief interlude. As a listener of this podcast, every week you hear strategies that another PhD has used to improve their financial picture. But listening and learning does not automatically translate into action in your own financial life. If you are ready to change how you think about and handle your money, but need some help getting started, I can be of service. There are two main ways you can work with me to create and implement a financial plan tailored for you. First, I offer one-on-one financial coaching, either as a single session or a series, as you make changes over the long term. You can find out more at PFforPhDs.com/coaching. Second, I offer a group program called The Wealthy PhD that is part coaching, part course, and part community. You can find out more and join the wait list for the next time I open the program at PFforPhDs.com/wealthyPhD. I believe it’s possible to succeed with your finances at every stage of PhD training and throughout your career. Let’s figure out together how to make that happen for you. Now, back to the interview.

Investing Under Different Visas

26:52 Emily: Okay. That was the first scenario to talk about. And then the second one was about visa types. So F-1, J-1 and H-1B. You’ve already said broadly it is permissible, but is it advisable? Are there any differences among people holding each one of those different visas that they should be thinking about? Or is it like, “no, the general consensus of it’s permissible, why not?” still applies no matter what visa type?

27:17 Hui-chin: I think that it’s not really only based on visa type, but the idea of combination of visa type, how long are you staying in the US — as, you know, F1 can turn from NRA to US person, J-1 as well, with different time frames. I would think about it as just, it’s very similar to what we were talking about before, like longterm or short term. Eventually, the main difference is tax treatment of if you’re staying, if you’re becoming a us person long-term, or even becoming a US citizen and we’re just going to pay US taxes forever versus at some point, in the future, it’s possible you will sever tax ties with the US, other than whatever investment you kept in the US. So overall investing in both scenarios are great. You just need to know the tax implication and the tax strategies, because if you’re switching from one to the other, there may be some opportunities for you to reduce taxes. And if you don’t think about it clearly or get the correct advice, you might find out, well I could have been taxed zero but now I’m getting taxed 30%.

28:28 Emily: Got it. So it’s not so much about the particular visa type, but rather at what point it flips to you being a resident alien for tax purposes, which is different on the different visa types. Okay, great! Quick one there.

Investing for Different Income Types

28:41 Emily: Third point that I wanted to talk about was the income type. So having W2 type income, or even self-employment type income, if that’s permissible, versus having this weird fellowship, training grant, non W2 type of income. This is very common for graduate students and also for postdocs. And so the general rule that certainly applies for US citizens and residents is if you have the W2 type of income that is taxable compensation for the purposes of contributing to an IRA. So let’s say in the scenario where the person does not have access to a workplace-based retirement account, they’re looking at can I open an IRA or not? Taxable compensation would be the W2 type of income. They can open an IRA and use that income towards it. If you go an entire calendar year and don’t have the W2 type of income, not taxable compensation, it’s all fellowship or training grant, and of course for international students, scholars, they’re not permitted to side hustle, they can’t have the second jobs and so forth, so there would be no possibility of having taxable compensation type of income. I guess the question is, whether they had access to an IRA or not, does it change the, we know it’s permissible, but does it change the advisable recommendation on whether to be investing at this time or not, knowing that in the one case with fellowship and training grant type income they wouldn’t be able to use an IRA but could be using a taxable brokerage account as we discussed earlier.

30:09 Hui-chin: I think that’s actually something we can just combine with the fourth one, so the tax-advantaged one. Like you said, eventually the main question is whether I have taxable compensation or I do not have taxable compensation.

30:23 Emily: Now, I want to jump in just to note that we’re recording this in November 2019 so the SECURE Act has not passed the Senate, yet. I am certainly hopeful that it will because what it does is it changes the definition of taxable compensation to include fellowship and training grant type of income, non-W2 income for graduate students and postdocs. So maybe when you’re listening to this, that law would have changed, and so certainly keep that in mind that we’re discussing this as what is the definition of taxable compensation. Basically, right now it does not include fellowship and training grant and come perhaps in the future it will, but right now it doesn’t. Okay, go ahead.

31:02 Hui-chin: I think at the very beginning you mentioned the whole connection to your personal service, right? So the idea of you can contribute to areas that you need to have taxable compensation and that’s related to the idea of it’s not just that it’s taxable, but it is a compensation for performing a service. If we’re just really thinking about why we’re using IRA, it is for the tax advantages. So even before you think about that, it’s like what would be the tax consequences or how much you save by using that kind of account and is that really helpful in your situation? I know, one question, you posed before is well, everybody wants a Roth IRA because they’re like, well, I’ll never get taxed in the future. I want to be able to contribute to that.” But a Roth IRA and traditional IRA have the same rule: the compensation needs to be taxable. So if it’s already not taxable, the government wouldn’t allow you to put money into something that’s never been taxed before. The Roth IRA is for the government to tax you up front, so it doesn’t tax you it in the future when you take it out.

32:26 Emily: Okay, let me, I just want to clarify this. This is a little bit new information to me. So when we have the two words, taxable and compensation, you have to have taxable compensation to contribute to an IRA. The compensation part of it is this, is it non-W2, fellowship and training grant type income? Okay, that’s not compensation. But now we’re also talking about the “taxable”, the first word there in taxable compensation. Your income has to be taxable in the US in the first place to be eligible to be contributed to an IRA. So maybe under certain tax treaties, your income for a time is not taxable in the US, that income would not be eligible to be contributed to an IRA. Correct?

33:05 Hui-chin: Yes.

33:06 Emily: Okay, great. Go ahead.

33:07 Hui-chin: Yeah, and the second one, we use compensation, but on the US-person side it’s called earned income. So if you look at IRS publications it’s always referred to earned income for US person related publications on contributing to IRA. Those two are equally important. It has to be earned income, so your compensation from service, and it’s taxable. The idea is that you will know whether you have that kind of income or not and if you have that income, meaning you’re getting tax in current year, so you’re thinking about, “Oh, if I contribute to an IRA or 401K, or 403B, I get taxed less. Or you contribute to it and now we get taxed, but in the future it won’t get taxed, which is the Roth side. In the first one, just the pretax contribution, it makes sense if you’re really high income. I think for the students, because if you’re on a 1040-NR, depending on the level of your compensation, because you may not have standard deduction, you may only have itemized deduction, some people can be at the zero percent, some people can be twelve percent or above, so you have to look at your tax situation of which bracket you’re going to be in to give you an idea of, well, maybe I want to do pretax instead. And the second one is, okay, so if I’m at a really low bracket, how about I just do Roths, but then the idea is you want the tax benefit in the future, right? But if you are going to move away from the US, how much more is that tax benefit versus simply using a taxable brokerage account, if you don’t get current year tax benefits. So those are the analysis that you need to go through, in terms of whether or not to use a tax advantage account, if you have the income type to do so.

35:20 Emily: Okay. Yeah. Let me see if I can summarize that. If you don’t have taxable compensation, can’t use a tax advantage account anyway, so go through the brokerage firm and go for the taxable brokerage account, if you’re able to use it, if you can set up that kind of cap. Okay. On the other side, we have eligibility for the 401K, the 403B, the IRA. If you want the tax deduction today for contributing to a traditional version of each of those accounts, great. Go ahead and take it and get a tax deduction today. Awesome. The money grows tax deferred, you’ll deal with the taxes in retirement or whenever you move the money out or whatever. For the Roth option, because of any of those kinds of accounts, because you don’t have the immediate tax advantage today, you really have to be asking yourself, does it make sense to put my money into a Roth IRA, no immediate tax advantage, but it will grow income tax free and then I can withdraw it income tax free in retirement versus can I just use a taxable brokerage firm, which is more flexible. And I think maybe the answer to that question, of course it will depend on the math in any individual’s scenario, but might come down to, again, what we talked about earlier, the expectation of staying in the US long-term or the hope, because really over the long, long term it is very advantageous to be using an IRA of any kind, Roth or traditional. But maybe if the time that you see yourself being in the US is on the shorter side, not to retirement or only five years or the length of your degree, then maybe it’s like, well why bother with the whole Roth IRA scenario? Let’s just go for the taxable brokerage account because if you are expecting to move the money out, for example, it’s kind of more of a pain to do so with a Roth IRA, because while you can withdraw your contributions, whatever gains have been in the account, if you try to withdraw those, then then the penalty comes into play. Is that correct?

37:12 Hui-chin: Yeah. And one big difference for people who eventually just move away from US and no ties in the US, I think I mentioned that before, you could qualify for 0% capital gains tax rate if you sell it, so it’s almost like the same, but the only difference is the dividend. So dividends are taxed at a flat 30% if your a NRA living outside of the US, but over the long term, if you’re investing in, for example tech companies, they don’t pay dividends anyway, and your main goal is for that capital gain growth for the next 30 years, then investing in Roth and investing in a taxable brokerage as an NRA living somewhere else is the same.

37:53 Emily: Gotcha.

37:53 Hui-chin: Why give yourself more ties to a Roth type account you can’t access and there’s more complexity.

38:01 Emily: I see. So really your investing strategy might change based on the tax treatment, if you’re no longer living in the US, of capital gains versus dividends. I actually do want to also add in for people who, I think this is still the case under post-tax custom jobs act, people who are the 12% marginal tax bracket or less, they have 0% federal tax on long-term capital gains and qualified dividends. So if you have a very tax efficient strategy, if you’re buying and holding, generally, as long as you stay in those lower tax brackets, you’re really going to see much or any income tax anyway. So why bother with the IRA, when you could be using a taxable account and not really having that much in the way of actual tax burden. Is that correct?

38:47 Hui-chin: Yeah. And just going back to definitely understand the tax treaty if you already know where you’re going to. Of course, most of the time you might think, well I’m just moving back to my home country, but then you get a job somewhere else and then you know, your life is not really as predictable, but at least understand the tax treaty between us and your home country, if you think it’s very likely you might end up there at retirement age when there would be IRA, 401k distribution consequences and compare that to, if I simply use a taxable brokerage, how does that change my dual country tax liability.

39:31 Emily: Got it. I think what I’m hearing mostly from this interview and the point that you just made about life being sort of unpredictable is, okay, here’s what you know. You know you’re in the U S right now. You have to be in the US for a few years, several years, maybe longer. Deal with what you know about right now, make the best decision you can for right now, and then if the situation changes later, you have to pivot. It’s possible to pivot. You’re not going to be losing your investments just because you’re leaving the country or whatever. It’s something that you can move with you, so you can adapt and change depending on, you know, the next step that you take. And hey, if you end up, if you do end up living in the US long-term, like until retirement age, it will be awesome if you started investing earlier and had started using an IRA or a 403B or a 401K earlier, as soon as you have access. Is that fair?

40:22 Hui-chin: Yeah. And I think those more specific questions and people questioning whether they should have account here. I think in my experience, I really mostly hear it from people from EU countries, Australia, Canada, because they feel like they have the same access when they move back. They don’t want the complexity of dealing with cross border things. And I totally understand that. And if you have good access to invest when you go back home, of course. But I think, what I know is being from a developing country myself is that most of the people who come to US see it as an opportunity and if you can have an investment in the US and don’t have to deal with turmoil that may be happening in your home country, most people jump on the opportunity. I don’t know that many people would say it’s a bad idea to open an account in the US.

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Where to Find More Information

41:26 Emily: Got it. I think we’ll leave it there. This has been fantastic. Thank you so much for joining me. Tell us again where people, can find you — your website, your business name and so forth.

41:35 Hui-chin: Yeah, sure. If you want to read more about what I just talked about, and this also how Emily found me, is on moneymattersforglobetrotters.com. It’s just a blog for reading. And if you’re interested in working with me, you can go directly to pavlovfp.com. That’s Pavlov Financial Planning.

41:54 Emily: Thank you so much for joining me today Hui-chin.

41:57 Hui-chin: You’re welcome.

41:58 Emily: Listeners, thank you for joining me for this episode. PFforPphDs.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcast, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media or with your PhD peers. Three, recommend me as a speaker to your university or association. My seminars covered the personal finance topics PhDs are most interested in, like investing, debt repayment, and taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.