PhD with a Real Job

Navigating the Career and Financial Transition Out of Academia

October 7, 2024 by Jill Hoffman 1 Comment

In this episode, Emily interviews Dr. Jill Hoffman, a former assistant professor who left academia to become a stay-at-home parent and part-time business owner supporting academic entrepreneurs (including Emily!). Jill recounts how she decided that academia was no longer the best place for her and how she and her husband planned out how to swap roles as the stay-at-home parent and move cross-country to be closer to family. One of the major themes of this episode is how to prepare financially and in your career for transitions. At the end of the interview, Jill gives not only her best financial advice but also her best advice for someone looking to leave academia and someone starting a side business.

Links mentioned in the Episode

Navigating the Career and Financial Transition Out of Academia

Teaser

Jill (00:00): There are different seasons of life. Um, I think this is a season where like the benefits of, of flexibility, um, with our schedule and our time, um, and having a low stress job, um, they greatly outweigh, um, having that second full-time income right now. Um, and I know that it’s just like this period of time, not forever.

Introduction

Emily (00:31): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (01:01): This is Season 19, Episode 4, and today my guest is Dr. Jill Hoffman, a former assistant professor who left academia to become a stay-at-home parent and part-time business owner supporting academic entrepreneurs—including me! Jill recounts how she decided that academia was no longer the best place for her and how she and her husband planned out how to swap roles as the stay-at-home parent and move cross-country to be closer to family. One of the major themes of this episode is how to prepare financially and in your career for transitions. At the end of the interview, Jill gives not only her best financial advice but also her best advice for someone looking to leave academia and someone starting a side business.

Emily (01:45): I’m looking for interviewees for Season 20 of this podcast! This is your official invitation to volunteer to be interviewed. I love that on this podcast I get to feature PhDs and PhDs-to-be who are almost exclusively regular people and learn and share their real-life stories and strategies. If it’s been in the back of your mind to volunteer, please go to PFforPhDs.com/podcastvolunteer/ and fill out the quick form, and I’ll be in touch over email. I look forward to interviewing you in the coming months! You can find the show notes for this episode at PFforPhDs.com/s19e4/. Without further ado, here’s my interview with Dr. Jill Hoffman.

Will You Please Introduce Yourself Further?

Emily (02:43): Today’s episode is a really special one because I have joining me today as a guest, Dr. Jill Hoffman. Jill is actually a returning podcast guest. She was originally on season three, episode four, and we’re going to use the interview today to just kind of like catch up financially and what’s been going on in Jill’s life overall, um, in the years since she gave us that prior episode. Um, to give you a tiny preview, Jill was a tenure track faculty member at the time of our last interview, and now she’s not <laugh> and she’s doing other things in her life, um, including working with me, uh, in personal finance for PhDs. So that’s what we’ve been doing together for the last about year and a half. Um, yes. So how did Jill get to this point? <laugh>. Um, Jill, please give us, um, a slightly longer introduction, um, and catch us up to where you were when we had that last interview.

Jill (03:32): Yeah, sure thing. So, um, I got my PhD in 2016 in social work. Um, and I worked as an assistant professor for six years. I quit my job right before or right when I was supposed to go up for tenure, um, which was two years ago, so 2022. Um, and then we moved back across the country to be closer to family from Oregon to Virginia. Um, and now, um, I am mainly a stay at home parent. Um, I’ve got one kid in preschool and one in elementary school, and my husband, uh, works full-time. And as you mentioned, um, we, we work together. I also have my own, um, small business providing virtual assistant services for online business owners, especially, um, academic entrepreneurs.

Financial and Personal Life Updates

Emily (04:14): So exciting. Let’s go all the way back to when you were on the podcast before. We talked a lot about student loans, we talked about public service loan forgiveness. Like let’s just kind of close that story first of all.

Jill (04:25): Yeah. So we have taken a, like student loans are on the, the back, back, back burner, um, right now since that time when we were really focused on student loan debt and kind of like figuring out what to do with it. Um, we, with all of the changes that have been going on with student loans, with like the save plan and um, with the covid pause and all those things, we just kind of said, all right, we’re, we’re not, nothing’s really happening with them at this moment. Um, we’re not doing anything with ’em. I got to a point in my, because I was doing public service loan forgiveness, um, I got to a point where I think I have like a little over a year left, um, and until I could potentially get them my loans forgiven. Um, but it, the trade off between staying in my job, um, and, and leaving it just for me personally, didn’t, the payoff wasn’t as, um, um, good as I thought it would be.

Emily (05:30): Anything else would you like to tell us about, you know, that maybe the time between our last interview and when you decided to leave your job?

Jill (05:37): A lot of things have happened, um, since that time and since kind of that when I decided to leave, two kind of big things happened. We had two like family emergencies that happened, um, since we last talked. So at the end of 2019, my dad unexpectedly passed away, and then my mom, um, had multiple major hospitalizations from like 2019 through 2021. And so those two things happened. Um, and then I had, in terms of like life events, not emergencies, I had another baby in 2021. Um, and so it was shortly after my dad passed away that we kind of were like, we’re too far from family. Um, we wanna move back to the east coast. We were on the West coast and, um, I don’t know that this is the job for me. Um, and so we kind of like used that time to figure out like, what do we, what do we do? ’cause we didn’t move until 2022 and I didn’t quit until 2022. Um, so we had a couple of years to like figure out what we were doing, um, in terms of next job, um, and, and where we were moving.

Emily (06:46): Yeah. I’m so sorry about your dad passing, especially unexpectedly, and I can certainly understand why that would cause you to rethink, um, what, you know, how you’ve set up your life and what you wanna be, um, doing with it. But obviously obvious to everyone who’s listening, like the decision to leave a tenure track job is huge. So tell us more about what was going on job wise that made you think wasn’t really the right job for you.

Jill (07:11): Yeah. I, there were a lot of different aspects to it. I think what it boiled down to was what, that I always felt like you have like the, the research, the teaching, the service, the three aspects of the job. And it felt like each of those could be a full-time job in and of themselves. And I felt like I could never do, um, like to the, like I was doing like a mediocre job at all of ’em, <laugh>, and it never felt like I felt like I was doing something unattainable, I guess. Um, and I was doing well and like, you know, I, um, was, had positive reviews, um, up until that point. Um, it just wasn’t, it didn’t feel meaningful enough for me to, to keep kind of working in a job that didn’t feel meaningful. I guess <laugh>, um, for, for me and the teaching aspect, there was a lot of teaching involved in my role and it wasn’t, that was never, um, why I got into academia. I really enjoyed the research part of it. And so, um, while I enjoyed like working with students, especially like one-on-one, um, and kind of like talking about career plans and things like that, I did not enjoy the teaching aspect and it just was so draining. Just like, I can’t, I can’t do this, um, for the rest of my career.

Emily (08:36): Mm-Hmm. <affirmative> and I remember, um, you had, or maybe still have a blog, right? Hmm. Toddler on the tenure track, and I remember that you, you’re into like time management and productivity and those kinds of things. And so obviously you put effort into your job and like trying to do your job as best you can, and you were intentional about that and you had tools at your disposal and so forth. And it, it’s, it’s very obvious to me that the job let you down, you know, like, you know that not the other way around. Right? Um, do you wanna say anything more about that?

Jill (09:11): Yeah, you know, I think the, the blog, starting the blog, um, was my way of like, trying to make it something that I wanted to do. Like it brought like some fun and meaning and like interest to it for me. And so, um, it was almost like, all right, I’m gonna figure out how to do this job in a way that like, allows me to really enjoy it. Um, ’cause how I’m doing it now is not, is not cutting it, I guess. Um, and so like by, I think just kind of like taking more time to reflect on like what I was doing, how I was doing it through the blog was a like my way of, of trying to figure out like, can I do this? Or is like, is this something that I wanna step away from?

Financially Preparing to Leave Academia

Emily (10:00): Mm-Hmm. <affirmative>. And so how did all this work financially, right? Because I also remember from the time of our last interview that I think you had your job but your husband wasn’t working at that time, right? So yeah. Talk about <laugh>, how, how the finances of leaving your position worked.

Jill (10:17): Yeah. Yeah. So this was like, we, um, so my husband was a stay at home dad for, um, pretty much the entire time we were in Oregon, which was about six years. Um, and we kinda slowly made the switch to him working full time and me being at home. When covid hit there were like whispers at my university that faculty might be furloughed a day a week. And I did the math in terms of like what income we would lose and it did not look great <laugh>. Um, and so my husband and I started kicking around the idea of him getting a part-time job, um, to, to boost our income if we needed that. Um, and uh, he ended up getting a, um, remote part-time, um, customer service job with Squarespace, um, that was like incredibly instrumental in helping us get across the country. Um, and just super helpful for making that actually work. Um, and so he started that job in like the fall of 2020. Um, and I can’t remember how many hours a week he was working. It wasn’t a ton, but we would, um, you know, as like most people that time like no childcare, so we would just kind of like switch off. Um, and I did a lot of evening, um, online classes and so, um, I would work in the evening and on the weekend and um, when he wasn’t working during the week, um, and then we’d like switch, um, child childcare or caregiving roles um, when I was done. Was not an ideal, like not an ideal setup. <laugh> as I’m sure lots of people know, um, but we knew it would, would be kind of temporary. I did not, um, end up getting furloughed. Um, so everything that he made, we threw into savings to save up for this move that, like, we weren’t at that time it was like, do I get a job? Do I get another job? Like do I keep my job and do it across the country? Like, what’s gonna happen? Um, but we knew that we likely wouldn’t have an employer paying for our move, so we were saving up for, it’s expensive to move across the country, <laugh>. Um, so we were kind of thinking towards that goal in terms of finances at that time, um, of saving up for this potential move the more like life happened. Um, with my mom being kind of in and out of the hospital and then having a baby and all these things, I was ju- I got so like burnt out and just like exhausted from life that I was like, I just need a break <laugh>, um, from like a, a higher stress career. Um, and so I made that decision to, to step away, um, just to kind of like let myself breathe a little bit, even though there’s like plenty of <laugh>, plenty of stress and all those things that come with caregiving, um, and taking care of family members. But um, not having the added stress of a job on top of that or like a full-time faculty job, um, felt a lot better to me, um, than than trying to stay or to move into another role.

The Two Income Trap

Emily (13:39): We’re going to continue with your story in just a second, but I wanna make an observation. Um, which is that there was this book that I read, actually my husband was assigned this book in college for some class he was taking, I read it afterwards. Uh, it’s called the Two Income Trap and Elizabeth Warren is the author or co-author or something like that. Um, and so it’s about how middle class families fall into what she calls the two income trap, which is we have two full-time jobs between the couple and our lifestyle consumes all of, you know, most all of that income. And so I see in your story, you and your husband intentionally avoiding the two income trap by if ever there was more than a hundred per- Yeah. Let’s say more than, um, one full-time job between the two of you. Like you said, that was going into savings. It was like an intentional like, um, uh, safety plan or like a backup plan, right? To get, have him get that part-time job when you had income uncertainty. And so at the point that one person has to leave a job or chooses to leave a job or whatever, then the other person, that couple can step up, take a full-time job and still be providing completely for the family because you’ve intentionally set your lifestyle so that only one full-time income is needed or something, you know, close to that. Um, so I just wanna make that observation. That’s very unusual actually, it these days. I mean, even since that book was published, it’s become more the case that people fall into and live in the two income trap because cost of living is so high compared to incomes. Um, so I just wanna make that observation and ask you like maybe how intentional that was from the finances side. I certainly understand why you would do it from like a lifestyle perspective, but how about from that financial perspective? ’cause your husband also has at least a master’s degree, right? He’s also like highly educated.

Jill (15:27): Yeah, yeah. He has a master’s degree. Um, I think the, I think when we first decided that he would be a stay at home parent, that was like a, definitely a financial decision there in terms of like childcare is so expensive. Um, and his, he has a master’s degree, but he’s in, um, his background is in counseling. Um, which not to say you can’t have a really high income with a counseling degree, but they’re not necessarily known for like super, super high incomes. Um, and so we figured that like him getting a job when I was working my faculty job, like most of that would be going to childcare, student loans. We don’t- rather him be able to spend, you know, his time with our kid, um, while I’m working, um, than be at a job and, and have our kid in in daycare. I’ve been budgeting for a long time in terms of like looking at what’s coming in, what’s going out. Um, and so we had a good sense for like what we spent in various areas and what we knew obviously what my salary, um, was. And when we moved to Oregon, he didn’t have a job so we were living on just my income and continuing to make it work. And so it stuck. Um, and we like the flexibility that it allows. I think we’ve just gotten so used to that <laugh>, um, that like, I think to have us both working feels like even though financially it would be really helpful, um, from like a logistical perspective, it just feels like, oh, I don’t, I don’t wanna do that. <laugh>.

Emily (17:14): Yeah. I remember thinking when my husband and I bought and moved into our house three years ago, it was the first time we were homeowners that there was just so much work to go around <laugh>. Like he works full-time, I work part-time and we have children and we have a house to take care of. My goodness, what is this? There’s just a lot of work to do and it’s, it is very, very helpful if there’s not in the mix two full-time jobs as well. Right. Um, so let’s pick up back with your story and about, um, you know, gearing up and for that cross-country move.

Financially Preparing to Move Across the Country

Jill (17:46): Yeah, so that, so we moved in 2022 when I, um, when I made the decision that I was not going to look for another job, my husband started talking to people at his work about like, can I, like how can I get to full-time? ’cause we knew that my benefits would not be around forever. Um, and so he was able to move into a full-time position in the, the same role that he was the same like customer service role, um, that he was in. This was like two months before we moved. It was kind of like last minute, last minute switch. Um, it was not, the pay was not great, but it got us benefits and we had a lot in savings. So we knew like we will be okay for a little bit, um, and we can do like a more, um, focused job search when we get to where we’re going if, if needed. Um, he continued to, um, look at open positions within his company and the month we moved, moved into another role with his company, um, higher paying, um, full-time remote position, which is where he is, um, current-, what he does currently. Um, and all of those things like allowed us to make all of this work without having to do too much like of a like major job search and, and um, like taking time off to interview and all these things like it since it was at his, um, employer already. And it was just really, really helpful. <laugh>,

Emily (19:26): Tell me about the cost of living difference between where you are in Oregon and where you live now.

Jill (19:31): Yeah, so in Oregon, um, we were in Portland, which is a high cost of living area. Um, and now we’re in Richmond, Virginia, which I was looking it up, it looks like it’s about average, maybe like a little below average, um, in terms of cost of living. So that was another really helpful move for us. Um, in terms of the house we bought here in Portland would’ve been like way out of our way out of our price range. Um, and so it’s just made some, some things possible that we probably, if we were moving back to like where I’m from in the DC area, I know you’re from there too. Like we wouldn’t have been able to <laugh>, um, buy a house probably at all the income difference. So when I was working as a professor, my highest salary, um, was just under 75,000 for like the 10 months. Um, so not super high. Um, we made it work. Um, and right now our total income is like a little bit above that, like 77,000. So that includes my husband’s salary, my part-time work, and then some interest income. Um, and so we have like roughly the same salary in a lower cost of living area, however, we’ve added one child, um, to our family. And so like we’re not saving anything right now. Um, and we’re not doing anything with student loans, as I mentioned. And I think it’ll probably stay like that until my daughter, my younger daughter is in kindergarten and I can add on like a client or two. Um, but I think like there are different seasons of life. Um, I think this is a season where like the benefits of, of flexibility, um, with our schedule and our time, um, and having a low stress job, um, they really outweigh, um, having that second full-time income right now. Um, and I know that it’s just like this period of time, not forever.

Emily (21:36): I, I think I’ve mentioned to you before, but I’ll say it for the benefit, um, of the listeners who have children or may want to have children in the future. But parenting wise, everything got so much easier. When our youngest got to kindergarten, like I felt like my whole world opened up <laugh> because they’re just so much more independent by that point and being in school and everything. So I can definitely see like just the lifestyle choices that you need to make, you need to make, to get through that like young child period. And like you just said, it’s not gonna last forever. Like things will be different in just a few years. Um, and so you can always make a different career decision. Either one of you can at that point.

Commercial

Emily (22:14): Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, budgeting, investing, and goal-setting, each tailored specifically for graduate students and postdocs? I offer workshops on these topics and more in a variety of formats, and I’m now booking for the 2024-2025 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Ask the potential host to go to PFforPhDs.com/financial-education/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutes enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

Starting a Business While Working in Academia

Emily (23:32): Let’s talk now about your business. Like why did you, um, start it? Was it primarily motivated by money or something to do with your time and your brain? Like, tell us how that got started.

Jill (23:44): The business has had like various iterations over the years. So when I was working as a faculty member, like my role was like community manager, um, for another person in the personal finance space, um, Jamila Souffrant with Journey to Launch. Um, and so I got a taste for like entrepreneurship, um, through working with her. I did that for about a year and a half. Um, and since that time I had like tried out a bunch of different things, just like curious about like, oh, there’s all these people making money online. Like it’s opened up a <laugh> whole new world. Um, to me in terms of like what it just broadened, I guess my perspective on making an income, um, and that it doesn’t have to be the traditional jobs that we, um, think of like doctor, lawyer, professor, all these things. So I kind of was playing around with various things. Um, on my way out of my faculty role, I thought perhaps I’d wanna do some like coaching for, um, faculty who are interested in like leaving their jobs. Um, and I used some of my professional development funds, um, to pay for some training, um, in that area ’cause it was like aligned with what I was doing too with students. So I was able to kinda make a case for using money for that, um, or my professional development money for that. But to like run a business, you also need to fund it. I needed more, um, money to like fund the business, um, that I didn’t want to pull from like our personal income. And so, um, as I was kind of thinking about how to do that, um, I think you emailed your list at one point, um, needing, needing support. Um, and this is after I left my my faculty position. You emailed the list, um, needing some support. ’cause you had somebody who had left and I was like, oh, that fits with, um, like what I, you know, the skills that I have, um, interests that I have, um, I’ll apply. And um, so we started working together and kind of since that time I’ve really enjoyed supporting, um, other like small business owners. Um, and I have moved away from the coaching. Um, I did that for a little bit, but really like I enjoy the, the supporting other entrepreneurs. Um, and so, um, right now I work with you and I have one other client, um, just provide-, like it depends on like the needs of the business. A lot of like backend support once my, I thought about adding another client. Um, and I think once my daughter, um, is in kindergarten, I think I’m, I’m setting my sights on, on that time for expansion. But I think right now, like two is a good <laugh> a good number for the amount of time that I have, um, uh, when my daughter is in preschool ’cause it’s not, not many hours a week <laugh>.

Emily (26:38): Yeah. Well this is, um, just a curiosity on my part because I know that the work that I ask of you is very seasonal. Um, so we have a really busy tax season and then less at the other times of year, but sort of variable from week to week and and month to month based on your interest in like productivity and everything like that. Like do you have any, I don’t know if it’s for me, but strategies for people who go through like busier and less busy, like periods <laugh>?

Jill (27:02): I think what I find at least for myself is like really, I think it can be easy to like try and force yourself to use like, uh, you know, whatever task management tool. Um, because other people are using it or like, it, it could be so easy to get into like, well other people are using this and they say it works. Um, I’m just gonna like force myself to do it. I think using what, um, works best for your brain, um, is helpful. So I just had like, I used to use notion a lot, um, which I still love for like my planning, um, and all those things, but I’ve been finding that like just I needed something a lot more simple. Um, and so now I just have like a notebook where I like keep track of things, um, and write things down and check them off. Um, and so I think really like don’t, if something isn’t working, try something else. Like figure out a system that works for you and your brain and that might change depending on like the time of year it is. Um, and, and what you’re doing. Um, but don’t like, feel like you have to force it to make it work. Um, ’cause that just makes it that much harder. <laugh>.

Emily (28:19): Yeah, I’ve been reflecting. So as you know, we use Asana, um, to keep track of tasks and I find that if I get really busy, I need to go outside of Asana and use paper. Um, because in a task management system like that, I mean, I could blame myself too. It’s not necessarily the tool, it’s the way I use the tool. Um, I find that like everything is given so much equal weight <laugh> when they’re all like different check boxes on the screen and I’m like, actually one of these is much, much, much more important than the other ones. And so the paper helps me clarify like, what are my real priorities for the day or the week or whatnot. Um, not just like, what is my task management software telling me to do? Um, and I think I’ve been listening to a lot of Cal Newport recently and reading his books and stuff, and I feel like this is the difference between, I can’t remember what he has, like some kind of name for it, but basically like checklist productivity versus like actual, like getting things that are important done, uh, productivity. So when things get really busy, I have to draw a distinction between those two and focus on, uh, what’s actually important versus what I’m, I’m being told to do by my software <laugh>. Uh, let’s leave with some words of advice then a little bit more advice than I usually ask my guests because the first sort of person I want you to think of is a person who’s considering leaving a tenure track position or maybe even just maybe even before that point, like someone who was going down that route and maybe is deciding to leave graduate school or not pursue a postdoc or just basically step off of the path that they thought they were on. Um, do you have any advice for, for that person considering a major career shift?

Advice for Major Career Shifts

Jill (29:48): I’m thinking about the things that were helpful for me that I did. Um, I think one of the main things was like creating a plan, um, both financially, logistically on what things could look like. Um, when you leave wherever it is you’re at. Um, I had so many spreadsheets, so many like notion databases of just like different iterations of like what me leaving my job could look like and where we would move would look like. Um, and I think obviously this, like, this will change depending on if you’re going into another job. Um, if you’re, you’re taking a break between jobs, if you’re staying at home, if you’re starting a business, um, if you’re moving, um, I think there’s like a lot of different aspects of that that when you create like a, a detailed plan as as detailed as you’re able to get, um, I think those things can become a little bit clearer for you when you have it all out, all out on paper, um, or the screen or wherever. Um, I remember my, when we were in the process of like our move, we would have move meetings like once a week, my husband and I of like, okay, like what are the things, like here’s this big goal, like what are the things we need to do to get it done? Um, that was very helpful. But, um, yeah, so I think those things were like intertwined, um, in, in this process, especially if you’re tenure track faculty, I can’t speak to like being a postdoc, um, and grad school, this might be a little bit difficult. Um, but I think using the resources that are available at your institution to help support you and figuring out what you wanna do next. Um, so I think I mentioned earlier, um, if you have professional development funds to use, is there a skill you wanna build? Um, do you wanna get some career coaching? Um, do some networking at a conference, buy some books. Um, I think using any and all of the resources that are available to you, if you’re able to kind of make a connection to what you’re doing in your job, um, and it’s relevant to what you wanna do next, um, I think it’d be a helpful way to, to find that extra support.

Emily (32:02): Yeah, we’ve heard that advice actually from several other interviewees on the podcast who have made, whether it’s like a grad student, you know, graduating and moving on to something else or a faculty member. I’ve, I’ve heard that numerous times. It’s, it’s kind of amazing that people can make those connections between what they’re doing now and what they think they’re doing next and, and get training that is supportive of both of those roles.

Jill (32:22): Yeah, yeah. Another thing, like another resource, um, I guess that was helpful for me. It was just like I asked so many questions of HR <laugh>, um, and this process just like hypothetical, like if I were to like quit at this point in my contract, like how long will my benefits last? And just kind of getting those logistical pieces that are helpful to know like, okay, my, my husband needs to have his health insurance, um, by this date because mine will no longer be in effect. And if that doesn’t happen, we need to get temporary health insurance and all those things. I think HR can be a really helpful, um, resource, um, if you’re comfortable like talking with them about potentially leaving. So like when my dad died and my mom was hospitalized, um, I was doing all the like estate settlement and then I was considering going back and helping with my mom’s care. Um, and then Covid happened, so didn’t, that didn’t happen, but I talked through with hr, like I think at that point I was kind of considering like, do I wanna quit or do I just need like a, a significant break? And so I talked with HR about like, can I use FMLA to go care for my mom? Like how can I take a break without actually quitting and doing the things I need to do? Um, and I didn’t actually use, um, FMLA for my parents, but did for, um, uh, when my daughter was born. Um, if, um, like family medical stuff is, is, um, any anyone is going through that. Um, I think they’re also a helpful resource to talk through, like what your options are. I think another thing that was so helpful for me is to seek out other people who have done what you’re trying to do, um, and talk to them if possible. I had a lot of Zoom conversations, phone calls, um, just to talk about like how did they, how they made it work, any tips they had. And honestly, just to like, I think when you’re still in the position, it can be, it could feel like impossible. Like, this isn’t ever gonna happen. I’m not gonna be able to find something else, or I’m not gonna be able to make this work. Um, so just seeing o- other people, other examples of, of doing the thing that you wanna do, um, and is so, so helpful. Um, and there are a number of, at least for like leaving academia, um, Facebook groups. Um, if you’re into Facebook, um, Academics say goodbye. The professors out, PhD mamas leaving academia, those were three that I, um, joined and kind of like, um, looked into as I was trying to make that, um, decision. And I think also related to other people like using your network, including family and friends, um, like tell them about what you’re wanting to do. Um, even if they can’t support you directly, they might know somebody who might be able to help you out in some way. Um, whatever it is. And so I think that helped a lot, just kind of like sharing this is what we’re, we’re doing. Um, do you know anyone might that might, um, be able to talk to me about X, y or Z?

Emily (35:36): It’s, it’s not surprising to me that you were able to find so many other examples, um, of people who had left tenure tech positions or those Facebook groups, for example. It’s just a little sad, it’s just a little sad that this profession, people make it their identity so that leaving and they make an academia makes it seem like it’s a one way street, right? You can never get back. It’s a permanent decision. So people put a lot of weight on the decision, right? Um, and yet it’s also such a difficult place to survive <laugh> that a lot of people want to leave <laugh>. Um, it’s not, it’s not everyone’s dream job as it turns out once you’re actually in it. So, um, but that is really, really great. I thank you for mentioning those groups specifically and, and the networking aspect of it. And yeah, there, we’ve had numerous people on the podcast too who have left academia, so I’m pretty sure including Jill, any of those people would be good ones to reach out to. Um, if, uh, you aren’t considering the listeners considering, uh, such a shift. Um, okay. Let’s talk about advice then for another type of person, which is, um, someone who wants to start a business, let’s say on the side, like part-time, the way that you’re doing right now. Um, and they could be at any stage in their career when they wanna do that. Uh, do you have any advice for that person?

Advice for Starting a Part-Time Business

Jill (36:45): Yeah, I think, I mean, I think a lot of the I things that I just shared are, are applicable to, I think also the, the networking and just seeking out other people. There are a lot of people, especially academics who, um, start businesses it seems. Um, and so talking to those people, um, and asking kind of the same, same thing, like how, how did you make this work? Um, or like listening, finding other podcasts that, um, where, where people are talking about kind of these, these types of things. I think too, like if you’re in, especially if you’re in, you’re in a faculty position, like it could be helpful to look at like your university’s policies on having a, um, an outside, outside employment. Um, I know my previous university, because I was in social work, so a lot of people like saw clients outside of, um, outside of our like faculty roles. Um, and so there was definitely language somewhere. I can’t remember exactly what it, what it said, but it essentially like, as long as, if you’re working like during work hours, like no more than eight hours a week or something can go to your, um, like outside business, um, or outside income. Um, and so it’s just making sure that like, honestly no one ever talked to me or asked me about it <laugh>. Um, but I think just so that, you know, um, what the university’s policies are, I think that can be super helpful to, to look into.

Emily (38:19): I noticed something, um, when you were describing the start of your business as well, which was experimentation, um, which I did too. And I think a lot of people who start businesses also do, uh, in terms of like businesses that like make it, maybe they become big or you know, whatever, it’s usually those entrepreneurs like third, fourth, fifth, seventh business, like, it’s usually not the first thing they’ve ever tried and they’ve had either failures in the past or just things they’ve abandoned along the way. And you didn’t necessarily abandon your business, but you just tried different things, different activities, different ways to make a money, different types of clients and figured out what you preferred. And I’ve done that too, even within like personal finance for PhDs, different ways of making money, again, different clients to work with different modalities and like figured out what worked best for me. So don’t, I guess for the listener, like, don’t be surprised <laugh>, if the first thing that you try is not the thing that you end up doing, um, after some time and it’s perfectly natural and, and should be experimented on because you’ll, you’ll find a good fit along the way. Um, it’s not necessarily, even though we were just talking about visioning and planning, like it’s not necessarily that your vision is gonna work out exactly the way that you thought it would from the beginning, but you can get to that point by just taking steps. So just getting started with something is the most, uh, the best thing to do.

Jill (39:30): Absolutely. And you learn so much throughout that journey. Um, I think, yeah, I feel like from where I started, I think I started with doing, um, online, like planning, yearly planning workshops for faculty and, and grad students. Um, and just have learned an incredible amount. <laugh> since those days are just like, oh wow. Like I, this is actually, people are actually paying me to do this. This is, it’s wild. So I think it gives you that confidence and then you learn like what you, like, what you don’t like, and, um, yeah, it’s a journey. <laugh>.

Best Financial Advice for Another Early-Career PhD

Emily (40:02): Yes. Um, okay. Well let’s wrap up with my official last advice question, which is, what is your best financial advice for another early career PhD? And that can be something that we’ve touched on in the course of the interview or it can be something completely new.

Jill (40:16): I think knowing exactly what is coming in and what is going out in terms of finances, um, at least for me has been so impactful. Um, knowledge is so powerful, um, especially about your finances. Um, it allows you to make more informed decisions. Um, and I think there’s something about seeing all that data, um, at least for me, it’s really motivating, um, in terms of like, you know, reaching savings goals or like seeing your retirement funds grow or it, I think it’s, it helps you, makes you wanna do it more. Um, at least I, I found that <laugh>, um, and I think like tracking those, like your expenses and income in a way that works for you. I know there’s like a ton of different budgeting apps and tools. I alway- I’ve used a spreadsheet, um, for a long time, um, and have tried out some apps, but just like I can’t, I always come back to the spreadsheet. Um, and so each year I start out with a new spreadsheet. Um, I have a tab for each month that looks at, um, what we spent, what we earned, um, that I’m updating on a weekly basis. And then I also keep track of like, um, savings, retirement, mortgage, student loans, um, on a monthly basis. Um, but that spreadsheet, um, has so much, it’s, it’s interesting to look at over the years and in preparation for this interview, I was looking back from like 2019 to now and it’s wild. Just like all the changes, um, that have gone on financially for us.

Emily (41:53): Yeah. And I think that the tracking, like you said, knowing your numbers, knowing what’s coming, what’s going out, um, enabled you and your husband to make those big financial decisions about jobs and moves and, and where to live and buying and all the things that have happened in the last few years. Um, because I think that people who sometimes people can get so, um, emotionally, um, intimidated by looking at their numbers that they don’t and they, it becomes an avoidant thing and then they become paralyzed and they’re not able to make those like bold decisions to change their lives because they just really don’t know what’s possible. They can’t do the visioning exercises, they can’t do the planning because they’re just not looking at the numbers. And so that’s just the first, the first step is really just to be able to like open that bank account, you know, um, you know, open it, look at the transactions, like look at the balances and everything and it all kind of like flows from there. Um, I was actually just listening to Ramit Sethi’s podcast. Um, I will teach You to Be Rich just earlier today, and the episode I’m listening to as so many of his episodes are the people he was interviewing, the couple, they were telling themselves a story about their money that was absolutely not true once you actually looked at the numbers. And it’s so clarifying to actually look at the numbers and the answers can come from the numbers. You just have to be like, brave enough to face, you know, the data and, uh, yeah. So I’m, I’m really glad to have this story from you, this example of how, um, your finances and your career and everything have all like played together and how you’ve been able to make those big decisions to do what works for you and your family, um, especially during the, the young kids season, the challenging time of life. Um, yes. So thank you so much Jill for volunteering to come on the podcast. It’s been lovely to speak with you, uh, in a different way than we normally meet

Jill (43:31): <laugh>. Yes. Yeah, thanks so much for having me, having me back on the podcast. It was fun.

Emily (43:36): Absolutely.

Outtro

Emily (43:36): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

Your Side Hustle Really Is a Business and Other Tax Insights with Hannah Cole of Sunlight Tax

September 23, 2024 by Jill Hoffman

In this episode, Emily interviews Hannah Cole, an artist and the founder of Sunlight Tax. Sunlight Tax primarily serves artists and creatives in their business tax needs, but there are many overlaps between artists and the academic community. Hannah and Emily discuss the best practices and insights that graduate students, postdocs, and PhDs with side businesses need to stay on the IRS’s good side. Hannah clarifies exactly when a business starts, the first step you must take with your finances, and how to calculate and pay your additional tax liability.

Links mentioned in the Episode

Your Side Hustle Really Is a Business and Other Tax Insights with Hannah Cole of Sunlight Tax

Teaser

Hannah (00:00): You know, we have a whole tax industry out there trying to, you know, its marketing is based around making us all hate and fear our taxes and actually kind of implicitly training us not to even look at it, to just feel so fearful. And so, like, hands off that we don’t even look at it. And I’m just here to say I hate that. I disagree with it.

Introduction

Emily (00:29): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (00:58): This is Season 19, Episode 3, and today my guest is Hannah Cole, an artist and the founder of Sunlight Tax. Sunlight Tax primarily serves artists and creatives in their business tax needs, but there are many overlaps between artists and the academic community. Hannah and I discuss the best practices and insights that graduate students, postdocs, and PhDs with side businesses need to stay on the IRS’s good side. Hannah clarifies exactly when a business starts, the first step you must take with your finances, and how to calculate and pay your additional tax liability. This whole episode is devoted to business taxes, but before we get started I want to ask you if you or your peers need help figuring out taxes on your academic income, your graduate student stipend or postdoc salary and the attendant benefits. Now is actually the best time to start the conversation with your graduate school, postdoc office, graduate student association, etc. about bringing my tax content to your university in the upcoming tax season—so that they have time to plan their budgets. In this upcoming tax season I’m offering live workshops that I will tailor to your university and state and also pre-recorded workshops that are widely applicable. I would be very grateful if you would issue a recommendation to a potentially appropriate host at your university. You can find links to more information from PFforPhDs.com/financial-education/. Thank you! You can find the show notes for this episode at PFforPhDs.com/s19e3/. Without further ado, here’s my interview with Hannah Cole of Sunlight Tax.

Will You Please Introduce Yourself Further?

Emily (02:56): I have a really special guest on the podcast today, Hannah Cole of Sunlight Tax. I have been listening to Hannah’s podcast, Sunlight, the Sunlight podcast for, I don’t know, definitely more than a year now, maybe closer to two. And she is an amazing, uh, podcaster and practitioner in her field because she teaches about taxes to her community. I’m gonna have her introduce her community to you, but I see a lot of overlap between Hannah’s community and our community of academics and PhDs and graduate students and so forth. So Hannah is really gonna be able to bring her insight into taxes and specifically self-employment taxes to our conversation today. Um, which is going to focus on self-employment situations that grad students and postdocs are typically in, which is like a self-employment side hustle. So Hannah, thank you so much for agreeing to come on the podcast. I’m really excited. Will you please introduce yourself a little bit further for our audience.

Hannah (03:48): Sure. Um, thank you so much, Emily. I appreciate it. Um, yeah, so I am an artist first. I, I went and got my MFA in painting. Um, and I have a degree in art history and, uh, started my life as a professional artist and was so upset at how I was treated by the world of accounting <laugh> by my dad’s accountant that eventually I, you know, went out to get the information on my own. I went all the way back to school for accounting and studied taxes. Um, ’cause I live with a, you know, artists are solitary creatures. You know, you, when you’re a painter like me, you’re in the studio for long, long hours alone. And the only way to build your career is through a network. So, you know, we are like, uh, super networkers and my community of artists was deeply in need of the same information that I was. And I, I like, knew there was a need out there, and I was like, I’m so upset by the way that this has been delivered to me, if at all. Um, there’s, there’s a market here. Um, so I started my business Sunlight Tax. Um, and that’s my mission is to, it’s much, it’s much bigger of an audience than just creative people, but it is really kind of for people who maybe where money is not the sole interest that they have when they do the thing they do. Right. And I think as academics, you can probably relate to that because most people who go into academics have a passion for their field. Right. They’re trying to do some research, and that probably is a little bit primary over money. And so, you know, that’s very similar to artists that’s very similar to sort of mission-driven people. So it’s kind of a big group of people where money is not the only thing, but these people need to do their taxes too.

Similarities Between Academics and Creatives

Emily (05:37): Yes. I see so much of an overlap between how you described your journey to what you do today, uh, in the tax world, at any rate, and what I do with, uh, as being a financial educator. Yeah. Um, I love you sort of got started comparing the community that you come from the artist community with the academic community. I totally agree about those, um, overlaps. Are there any, would you like to elaborate on that in any way? Specifically? I’m thinking of are there like mindsets or like skills that you’ve observed or perhaps lack of skills among your community, um, perhaps that overlap with ours that either are, um, helpful or not so helpful when it comes to running a business, which some academics end up doing.

Hannah (06:16): Yeah. Well, I’m, the, the world of academia is not foreign to me. I mean, I taught, I was a professor, uh, at Boston University for a brief moment, <laugh> before I realized that I, I, uh, the, the strictures of academia were not, not for me. I think for people like us, when you’re, when your identity is formed around a passion for a thing, um, money can become the enemy by accident. Not really on purpose usually. But I think, um, I see a parallel between people in creative fields where, you know, there’s no artist in the world who’s gonna tell you that they do anything except make the best possible art they can. Right. And I think the same is true in academia. You’re gonna do the best, highest quality research you possibly can. You’re gonna, you know, whether that’s the most innovative or, you know, you’ve got the best ideas, the best protocols, whatever, however you’re doing it. And I think when that’s the case, you can kind of lose, you know, what you focus on is what does well, and if your focus comes off of money, too much money can get, uh, it can atrophy, right? Your skills in it can atrophy. Um, when your attention is not there, you just, uh, it can kind of get away from you. Right? And so I think that that is a sort of similar issue that, um, people in academia have to people in the creative world. Um, and I think just, you know, we’re busy, right? We’re busy doing the thing, we’re doing <laugh>, and this is one of the reasons I didn’t wanna be in academia ’cause of how busy you get <laugh>. Like, I was like, I, I’m never gonna be in the studio again if I do this. Um, and, and you just, it’s hard to check like, you know, self-employment, you know, when you’re talking about like grant income or the types of income that, that we’re talking about here, like track doing, doing, setting up bookkeeping, paying estimated quarterly taxes, like things like that. You know, they are a little bit complex and they do require some ongoing attention. So that’s, that’s a challenge.

Emily (08:23): Totally agree with everything you just said. Underline that. Um, in addition, I wonder if you could speak to, because I think another commonality between these communities is a percep- a perception among ourselves that our work is undervalued by other people and then we end up undervaluing ourselves in some cases, um, which is really dangerous when it comes to business ownership

Hannah (08:45): Very much. Yeah. And I think it’s, it, it’s easy to get into a mindset like that, especially if people around you in your daily life have a mindset like that. You tend to absorb the attitudes of the people you are with all day. Um, and so yeah, if you have people around you who feel like, uh, you know, the good ideas are over here and the money is over here and they’re in opposite directions, you’re gonna start getting outta balance where with, where money is in your life, like, I, I like to think of it this way, that money is neutral, right? Money is a tool. It’s like a hammer. You can do good things with it. You can do bad things with it, right? Like it’s amplifying the power of the person who has it. So if you’re doing good work, if you’re an ethical person, you can do amazing things and you can do more of them when you have more money. I don’t know. Think, um, think Oprah, think, um, Dolly Parton, you know, these are people who have great amounts of wealth and who do truly world changing wonderful things with their money, right? Uh, we could also probably think of quite a few examples of people who do not so great things with their money <laugh>. But I think the problem is when you go from thinking of money as neutral, right? Money as just being an amplifier of your agency to being negative, that that’s where you start getting problems. You start getting in a sort of stuck space around it. Because if you think of money as negative, or if you think that somehow your motives or ethics will be corrupted, if you simply have money more of this tool, you won’t advocate for yourself properly, right? Um, you cannot walk into a job interview and really nail it, um, nail the salary negotiation part of it specifically. Um, you’re not gonna advocate the way with the fierceness in that interview that you would if you believed that money was good, right? Or, or money in your hands was a good thing. If you fundamentally think, you know, having a fully funded retirement is makes you kind of a yucky person, you’re not gonna ever fund your retirement. You know, these things are related.

How Do You Know When You’ve Actually Started a Business?

Emily (10:55): Mm-Hmm. That is so interesting. I’m really, I really like the way you put that. I haven’t thought about it quite that way before. So thank you so much. Um, okay. I wanna narrow down to talking about like business ownership for, again, my community, which has many similarities with yours. Uh, they’re gonna be doing this as a, we’re gonna say a side income though, right? They have their primary thing as being a graduate student or being a postdoc, and they’re pursuing that, but they have a self-employment side hustle as well. Oftentimes what I see is people acting as like consultants, for example. Um, or maybe they’re a writer or an editor in, in this kind of world. So these, these kinds of side hustles, whether maybe, or data science. They’re employing some skills perhaps that they have developed as an academic, but outside of that academic context as a business owner. So, and I love that you’ve talked about this extensively on your podcast, but the question to you is how does someone know when they’ve actually started a business? Because especially when it’s something on the side, it may be a little vague at first.

Hannah (11:50): Yeah. This gets really confusing if you start thinking of the other organizations that think of your business start time as different. Um, and I, I do have a whole podcast episode about specifically when each one thinks you start. Um, so if you want me to, you know, link to that in your show notes, I would be happy to send that link. Um, but, you know, that’s on the Sunlight podcast. So to the IRS and this, you know, I’m a tax person, so I’m orienting towards that. When it comes to when you report the income, when you report the expenses, um, to the IRS, your, your business begins the moment you advertise. And that actually makes a lot of sense if you understand what makes you a business. The IRS says that you’re a business versus being a hobby. Um, so your side hustle is a business and not a hobby. If you have a profit motive, if you are trying to make money with it, right? It doesn’t mean that money has to be, you know, you worship at the altar of money and there’s nothing else in your life and you throw all your ethics and your, you know, value and, and your amazing work out the window. Not that, but it has to be in there, has to be in the mix, and it has to be, you know, strong. Um, and so if you think about that, having an intent to make a profit, which is the IRS definition of you being a business that happens before you make a profit, that happens before you make money. And I think this is where people get confused. They think, I I, I, I only get to report it once I’m making money, but actually no, because you start that business with expenses, right? You have expenses first. Then once you’ve built something, um, let’s use an example of like a pizzeria. ’cause it’s very tangible and we’ve all been to one. Um, you don’t start generating income from that pizzeria day one, right? The pizzeria has to exist first. Like, you can’t sell a slice of pizza if you don’t have an oven <laugh>. You have to install the oven, you have to have a bakery, you have to have flour, right? So you’re gonna have a lot of expenses before you ever can even bring a dollar in the door. And I think it’s really important to get your head around that concept. You are not broken because that’s how your business is working. That’s actually normal, right? And we have in business school, they teach this concept called the break even point. Well, what is that? The break even point is the magical moment when you go from negative income, AKA, AKA spending <laugh> and, and, um, it’s that magical moment when you go from negative income to zero, right? And then over the zero, then the number starts getting positive. That’s the moment you become profitable, right? When your, when your income rises above the amount of your expenses for the first time, and you know what, there is no guarantee or promise that that will ever happen or that it will happen on a certain timeline. That’s all within your control and your profit motive should be driving that bus. But, uh, it’s, it’s good to know that it’s normal to have expenses first. And in fact, you’re entitled to file a Schedule C that is where you put this stuff on your tax return. You’re entitled to file one before you have a profit. So the title of the Schedule C is profit or loss from business. So one, you have to be a business, it’s in the title, but also you don’t have to have a profit that’s also in the title. So that’s kind of a good baseline. So remember, the moment you advertise, and if you think about it is, is the moment that you start that your business starts. And if you think about it, that makes sense. ’cause advertising says hello world, hello clients, I’m open, I have this thing available. If you’re the right person, if this will work for you, come and get it. Right? But also, you know, to somebody who is, let’s say, doing some freelance editing on the side, advertising is not gonna look the way it does for Coca-Cola, right? Advertising for you is probably gonna be an email to a couple of friends and family. You’re still advertising. You probably aren’t thinking of that as advertising, but whatever you do that’s signaling, Hey, hey, I do this thing, are you interested? So maybe that’s an Instagram post. Maybe it’s an email to friends and family. Um, maybe it’s a website going live. Those are all your moment when you started advertising.

Emily (16:14): I’m so glad you gave that example because as I said earlier, I see a lot of like service-based businesses as side hustles, um, for this community. And so just when you were describing that, I was like, yeah, if you put something up on LinkedIn, if you put your services out there on, um, whatever the current version of Upwork is, um, or like you said, an email to a friend putting up a website, Hey, it costs money to host a website. So like, you’re probably having your first expense when you do that. Um, or maybe you’re starting to pay for software to like get client scheduling set up or whatever it might be. Um, I think part of the confusion when people are asking this question is they think somehow it’s like a, a bad or like an onerous thing to be considered a business and have the attendant tax filing, uh, requirements along with it.

Emily (16:57): But what I really learned from your podcast and your attitude around it is no, this is a great thing to be considered a business, especially as you were just saying, when it takes some time to get to that turning point where you actually have profit. So like, if you have a whole year when you have some, some loss, even though you’ve started advertising, maybe you have some expenses, the income isn’t there yet. Um, you can use that to reduce your tax liability, actually. And so it’s not, it’s not a bad thing to be considered a business earlier. It does have some complications, but it’s, it’s, it’s actually a very positive thing to realize that you have a business

Hannah (17:29): Very much. I mean, and it, it tangibly lowers your taxes. <laugh>. I mean, we in this country are supporting business not out of a charitable purpose, but because it’s good for the u- US economy, right? Like when we support us small businesses and, and we count, you and me, Emily, we count <laugh>. Um, when you support a small business, you are, you are helping the US GDP grow, right? That’s in the interest of the nation we live in. Um, ultimately, you know, you’re gonna spend a lot of money, you get business deduction, you get business expenses, they are deductible on your tax return. That’s a incredible benefit given to you by Uncle Sam. I mean, I, I don’t think we all appreciate that quite as much as we should. Um, but that’s, that’s huge. Um, and yeah, and so you’re, you’re getting this subsidy <laugh> and it’s nice to take advantage of. It’s nice to know what your rights are and take advantage of it. Um, and of course, if you weren’t a business, if you were operating as a hobby, instead you wouldn’t get those deductions. So there’s a real difference.

Emily (18:38): Yeah. Thank you.

Commercial

Emily (18:41): Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, budgeting, investing, and goal-setting, each tailored specifically for graduate students and postdocs? I offer workshops on these topics and more in a variety of formats, and I’m now booking for the 2024-2025 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Ask the potential host to go to PFforPhDs.com/financial-education/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutes enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

Best Financial Practices for Early Career Academics With Businesses

Emily (19:59): Okay. So I’m thinking still about this grad student or postdoc or early career PhD who’s, has this business now they know they’re starting it on the side. What are some best practices that they should implement in their finances from day one to make things easier or like totally above board going forward?

Hannah (20:16): Sure. Um, the first is to open a separate bank account. Um, you wanna keep your business income and expenses separated from your personal bank account and personal expenses. Um, there’s many reasons why this is a good idea. All of it is a good idea. <laugh>, there is no negative, um, except that you have to go through the effort of opening an account. Um, but the magic that that separation does is now when you have that business bank account and you deposit all the money you earn from that freelance side hustle, you know, that gig, whatever it is, now you are creating a record of everything into and out of your business. That record becomes the backbone of your bookkeeping. So now from there, setting up bookkeeping, setting up tracking becomes far simpler. Um, Emily, when I started out as a professional artist, before I knew to do all this stuff, I was printing out bank statements going through, you know, like three days before tax time, going through my bank statement, line by line with a highlighter, trying to, trying to recall if that trip I made back in February last year to Lowe’s was for business or for my home, right? <laugh>, Like we don’t want that <laugh>. If you have a dedicated business account and you keep a mindset of I only spend this money on business expenses, then everything in there is deductible. You just have to sort out what category of deduction it goes into. So man, it makes your life simple. And then, you know, once your business grows, this is a thing that grows with you. Um, you can automate that bank feed into bookkeeping software. That’s a next step thing. You don’t have to do that day one, but it gives you the, you know, the easy option. Um, also if you one day create an LLC for liability protection, your LLC will be instantly invalidated if you don’t have a separate business bank account, you, when you have a liability, uh, limited liability corporation, the whole thing you’ve done legally is to separate your business and personal selves. And if you then don’t actually do it in the background, a court of law can say you don’t have an LLC, you don’t have any liability protection, and basically your LLC is thrown out, you’ve wasted all that money. Um, so <laugh>, there’s no downside, in other words, to a business bank account. PS it doesn’t actually have to be technically a business account according to your bank’s rules. It can just be a personal account. That’s another separate account. It’s the separation that’s important. So it can be, you know, technically a personal account according to the bank. That’s fine. Just use it like it’s your business account.

Emily (23:05): Thank you so much for that. Um, that clarification, and actually you threw out a couple of terms there. So I just want to, this is partially some things I’ve learned from you, clarify for the listener. Um, this, this term LLC, the limited liability company, this is a legal status and it’s not, it doesn’t necessarily confer a specific tax status. So when you’re first starting out out, when you’re first starting out with a, a side business or something, you’re likely gonna be operating as a sole proprietor. Then maybe for the entire lifetime of the business, you’ll be a sole proprietor. Whether or not you open an LLC as well, your tax status will stay a sole proprietor. That is, unless you decide that you want to grow your business to the point where becoming a different kind of tax status would make sense, like an S selection, et cetera. But for people who keep businesses on the side, I would imagine many of them continue to operate as sole proprietors indefinitely.

Hannah (23:55): Yep. I would say that’s probably true. Yeah.

Preparing for Tax Season as a Business Owner

Emily (23:58): So you just mentioned this core first step, which is to open a separate bank account, and I totally agree with it. You know, when I first started out my very first side hustle, I didn’t have that, but I knew by the time I started this business that it was important. So that was the first thing that I did when I started this, um, this business, even though I’ve been a sole proprietor the whole time as we were just talking about. So is there anything else that someone should do, um, like at this point in the year, you know, we’re sitting in September when we’re recording this. Is there anyone, anything that, uh, business owners should do outside of their actions during tax season to set themselves up to, you know, prepare a tax to return easily to minimize their tax liability beyond this core, as you said, the backbone of having a separate account?

Hannah (24:39): I mean, there’s a whole world of year-end tax planning. I would say independent of year-end tax planning, which is coming up, we are coming upon that time of year. But independent of that, I would say from your separate business bank account, just setting up some basic bookkeeping is a good idea. Having the separate bank account isn’t bookkeeping itself, though. It forms a basis for it. So if you don’t love the idea of like sitting with your bank statements and pulling everything into a category, you know, before tax time, doing that in advance is quite nice and quite helpful. <laugh>. And I actually think if it’s at the level of a gig or a side hustle, I actually think you don’t need bookkeeping software at all. I think bookkeeping software, if I’m just being totally honest with you, it’s very easy to make very expensive mistakes that compound and, uh, that you can only get undone with very expensive accounting help. Um, so I actually don’t really think people with very, very small like side hustle level businesses maybe even should have software for bookkeeping at all. Um, but that doesn’t mean you do bookkeeping. You can just do it on a spreadsheet. So have a spreadsheet, lay out your expense categories, track your income, and just do the tallies. Um, because knowing if that will help, you know, in an ongoing way if you’re profitable or not, which is a, a big deal, it’s also what your taxes are based on. So, um, paying estimated quarterly taxes, for example, if you need to, is only going to be possible when you know what the number is, <laugh>. Um, so you wanna be able to know what your profit was for the quarter. So you can do a little calculation about what percentage of that you need to pay to the IRS and to your state for taxes.

Side Hustles and Estimated Tax

Emily (26:29): This is a little bit nuanced. Um, what I’d like to specifically talk about is how to like sort of add the estimated tax process on top of an existing salary, right? Because this is a side hustle business, so. What would you tell someone who’s, uh, who has that situation, how they should handle their estimated tax?

Hannah (26:50): Yeah, I might tell them to avoid it altogether. Um, honestly, because human behavior being what it is, estimated taxes are manual. You have to do the calculation, you have to make the payment. And we just know from data, you know, from behavioral science that people don’t do things like the, they do the default more often than not. So if you can default your taxes, that’s what you wanna do. So if you’re in the side hustle zone, the thing you wanna understand is that your taxes are holistic. They are all of your income lumped together and your spouses lumped all together and put onto one tax return with one number of what you owe, or you know, what you got a refund for if you overpaid. So if three quarters of your income comes from a job, you know, where you’re an employee and you have payroll withholding your taxes throughout the year, and one quarter of your income is coming from this gig or side hustle, you have enough proportionally money that you could take out of your W2 to never have to pay quarterly taxes. But what you need to do, the action you do need to take is to file a new W four with your employer to adjust your withholding at your day job to over withhold. In other words, you don’t wanna withhold only enough taxes to cover the tax obligation formed by the employment. You wanna overdo it and go into taking enough taxes to account for your self-employment. Um, your gig, your side hustle income that is considered self-employment income. FYI, um, and the taxes on that are always higher than you think because self-employment tax applies to self-employed income. So your employer is paying one half of that amount. It’s one of your wonderful benefits as an employee. You pay both halves when you’re self-employed because you legit are the boss <laugh>. You pay the employee and the boss half of Medicare and social security. And we call that self-employment tax. So my tip there is pull a W 4 off the internet, go to irs.gov, grab yourself a W 4, fill it out. You might need some old pay stubs. You might want last year’s tax return. If you have any bookkeeping from your business year to date, that’s great. Um, or just last year’s tax return. Um, hopefully if that gig was going already last year. And then you just wanna fill out the little, um, paycheck checkup tool on the IRS website that will help you, um, adjust your withholding to essentially give you, you know, the refund level that you wanna have. Um, I recommend zero <laugh>

Emily (29:34): I, it’s the same way I would approach things. That’s how I also teach. Um, anyone, anyone who has a fellowship income, which does not have withholding on it, but who also has W2 income, their spouse or them, that’s the same thing. I say, make this easier on yourself, just fill out a new W 4. But let’s add the added wrinkle of they don’t have the W2 position. Let’s say they’re receiving a fellowship, it already doesn’t have tax withholding on it. Maybe they’re already doing estimated tax because they have that fellowship. Um mm-Hmm. How should they incorporate the self, the self-employed income and, and the income and the self-employment tax from that, um, in with their ongoing like fellowship type income, uh, calculations?

Hannah (30:12): Yeah, well they’re gonna, you’re gonna need to do some degree of bookkeeping or else it’s gonna be a very stressful moment before the tax deadline. Um, and you will, you know, you’ll need to pay quarterly taxes every single quarter that that’s your legal obligation. So under US tax law, if on last year’s tax return you owed more than a thousand dollars, then you have to pay quarterly taxes this year or else you’ll get penalties and interest. Um, and you can pull out last year’s tax return and you can check if you’re in this category. So line 37 of your 1040 personal income tax return is gonna tell you what you owed last year. And if you see a number on there and it’s greater than a thousand, you gotta be paying quarterly taxes this year. Um, PS line 38, the line just below that is your estimated tax penalty <laugh>. So you can look at that line to see if you’re already being punished for not doing this. Um, I think that people, you know, we have a whole tax industry out there trying to, you know, its marketing is based around making us all hate and fear our taxes and actually kind of implicitly training us not to even look at it to just feel so fearful. And so, like hands off that we don’t even look at it. And I’m just here to say, I hate that I disagree with it. Your taxes are yours. Your 1040 is your information and you can, you know, the first two pages of it summarize every single thing that is in that big tax packet. And if you just look at every line on the first two pages, you have massive power. You know what’s happening. Um, and I just told you two lines, the power in those two lines, line 37 and line 38 and that, you know, that will, that will help you kind of get your head around <laugh> whether you have to pay quarterly or not. If you do, um, you know, if you think about what line 37 tax, you know, what you owe, like owing something at tax time is not supposed to happen, right? It does happen. It’s okay. It’s a reconciliation document where we reconcile the actual amount paid versus the expected amount, um, and we settle up the difference. But essentially owing anything means you underpaid your taxes throughout the year. ’cause we live in a pay as you go tax system. You’re supposed to pay your taxes as you go through the year, not all on April 15th.

Emily (32:40): I think what I would say, in addition to what you just said, um, the, the form form 1040, ES, the estimated tax worksheet is a very helpful document in calculating your estimated tax due. Um, people in the audience listening may already be familiar with this for their fellowship income, but you just have to add in a few more lines relevant to the business income and so forth. But if they don’t wanna do more calculations, I think I would tell them just to kind of, as a rule of thumb, set aside an additional 15.3% of their business profit. If there is a profit for that self-employment tax pay, that plus whatever their marginal tax rate is, let’s say it’s 12% usually for graduate students, maybe 22% for some postdocs. Um, if they’re single and just doing that much, if you don’t wanna do like a full calculation is gonna get you, that’s an 80 20 <laugh> on that is to add mm-hmm, that additional amount of money in with either your W 4 or your estimated tax payments if you’re doing it on your fellowship already. Um, but doing the detailed calculation is always gonna be the most, uh, thorough and the most accurate way to go. But Hannah, uh, when you were.

Hannah (33:46): Sure, although keep in, keep in mind ’cause it’s stressful for people. I think like especially if you’re coming to this and you’ve not learned about how estimated quarterly taxes work, um, it’s really important to remember the first word. It is an estimate and you’re not gonna know, like fundamentally you can look at your tax rate from last year, but last year’s tax rate does not guarantee this year’s tax rate, right? So even if you do it in good faith and you did the best possible job, you could, you can still be wrong. And so really, I just encourage you like 80 20 is a good attitude on this because it is called an estimate because you don’t have a crystal ball, like the law cannot compel you to accurately predict a future. So we can all just breathe a sigh of relief and just estimate and that’s okay.

Emily (34:35): The other good thing about paying those quarterly taxes, um, as you go, as you were saying is that, um, there’s never gonna be such a huge balance built up. Like something that often happens in our community with fellowship income is that people get to tax season and they realize they owe three, four, $5,000 because they never paid estimated tax or had tax withholding during the year. And that is a huge shock on like this level of income that we’re talking about. And it can happen with business income too, um, especially if you’re taking distributions from your business and then you’re spending that money. Um, so either keep the money in your business account and don’t take the distributions or as you take the distributions, make sure you’re putting aside something for either your quarterly or your annual tax bill so it doesn’t, doesn’t get away from you <laugh>.

Hannah (35:17): Absolutely. Yeah.

Sunlight Tax and the Sunlight Podcast

Emily (35:19): So just a few minutes ago when you were talking about how, um, you know, our, our system, mostly the tax industry that’s built up around our regulations, they want you to feel a certain way about taxes and in fact you should be empowered about this, et cetera, et cetera. This is a taste of what people can get on your podcast. So I would love you to take a minute and just tell everybody where they can find you, what you put out there, what you do in your business, and if they want to learn more from you or work with you in some way, how they can do that.

Hannah (35:46): Sure. Thanks Emily. Um, well, so my business is Sunlight Tax. If you go to sunlighttax.com, you’ll find everything there. So if you miss something, sunlighttax.com, I have my podcast, which comes out every Tuesday, Sunlight, um, you can find that on my website, sunlighttax.com. Um, I also have a bunch of free resources like, uh, deductions guide, a visual Guide to Tax Deductions, which you can also find on my website. Um, I offer a lot of free courses, including a recent one about, um, LLCs. If you go to sunlighttax.com/llc, if you happen to have formed an LLC for your side hustle or your business, um, there’s a mandatory, a mandatory new report required, um, from the US Treasury <laugh>. Um, but also I have a program called Money Bootcamp where I teach, um, people how to set up very simple systems to track your taxes, um, pay your estimates and fund your retirement using tax advantage accounts. So, um, all of that you can find @ sunlighttax.com and,

Emily (36:51): Excellent.

Hannah (36:51): Yeah.

Best Financial Advice for Another Early-Career PhD

Emily (36:52): Yes, and I will definitely personally vouch for the podcast because I am a listener every single week and I learn something new every week and I think it’s great. Um, okay, Hannah, I’m gonna end by asking you the question that I ask all my guests, which is, what is your best financial advice for an early career PhD? A grad student, a postdoc, someone recently out of their PhD training? Um, and that can be something that we’ve touched on already that’s related to tax, or it could be something completely aside from what we’ve discussed.

Hannah (37:19): Sure. Um, I’ll say this, it’s a bit of my personal religion, but, um, if you have never played with a compound interest calculator and seeing what the power of your money is when it is invested, um, please do yourself that favor, <laugh>. Um, and I would say do not just write yourself off. Say, I am broke right now. I will wait to put money in an IRA I really highly encourage you, if you do nothing else, maintaining an annual habit of maxing out your IRA will put you in a better position. Um, it, it will, you know, you invest the money inside the IRA so it will grow with compound interest and tax sheltered. So it’s really a wonderful thing that works when you start young <laugh>. You don’t wanna miss five years of compounding because you’re in grad school. Um, if you can, you know, just make it your religion to do it every single year without skipping, I think that is my best piece of advice. And believe you as a 45-year-old woman, woman, <laugh> talking to you, I, I wish for everyone here that we could all have started at the age that you are now. Um, and the age you are now is only it, you know, the best time to start this investments your investments was 20 years ago, but the second best time is now.

Emily (38:41): Love that advice. You touched on my two favorite topics today, taxes and investing. So it’s amazing. <laugh>. I will also just say, I mean, I love the goal of maxing out an IRA, but that’s not gonna be possible for many people. So even if it’s just, um, $50 a month, a hundred, 200, whatever you can do, be in the habit of it. And do as much as you can. And then absolutely, once you get that higher income from your lovely post-PhD job, then you can really ramp it up and use your 401k and use everything else. But having that habit of doing it from earlier and having sort of developing the identity of I am an investor and understanding things like compound interest that is gonna serve you so well later on, um, not just the dollars and the numbers, but all that psychology that comes along with it.

Hannah (39:24): Absolutely. Yeah. They, they show that even very, very poor people who have a savings account save more because just having it there helps you do it. So if you haven’t opened an IRA yet, I encourage you to do it this year. Even if it, even if you put 10 bucks in <laugh>, like open it. The fact that it’s there is setting up the infrastructure to make it easier to do that, you know, thing. And really saving, savings and investing is a muscle. So think of it as like a muscle that you have to get in some reps to get good at.

Emily (39:55): I love it. Hannah, thank you so much for joining me today. It’s been a wonderful episode and thanks again.

Hannah (40:02): Thanks so much, Emily. I really loved joining you today.

Outtro

Emily (40:15): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

Investing 101 for Your Post-PhD Job

August 26, 2024 by Jill Hoffman 2 Comments

In this episode, Emily interviews Dr. Scott Grissom, a full professor of computer science at Grand Valley State University and Certified Financial Planner with Socrates Financial Planning. Scott and Emily talk through the health insurance and retirement benefits options that may be available to PhDs in their first post-PhD jobs. Scott explains the tax benefits of investing via an HSA and/or a 401(k) or 403(b) and the factors that affect the choice of a Roth or traditional option. He also helps the listener overcome potential analysis paralysis by detailing the benefits of a target date retirement account.

Links mentioned in the Episode

Teaser

Scott (00:00): From day one. Let’s get that match and figure everything else around that. ‘Cause otherwise, as we know, we’re gonna be, have some inertia put in place and we say, I’ll do it later. I’ll do it next year. You probably won’t. So day one, do whatever you can to get that match would be what I recommend.

Introduction

Emily (00:27): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (00:57): This is Season 19, Episode 1, and today my guest is Dr. Scott Grissom, a full professor of computer science at Grand Valley State University and Certified Financial Planner with Socrates Financial Planning. Scott and I talk through the health insurance and retirement benefits options that may be available to PhDs in their first post-PhD jobs. Scott explains the tax benefits of investing via an HSA and/or a 401(k) or 403(b) and the factors that affect the choice of a Roth or traditional option. He will also help you overcome potential analysis paralysis by detailing the benefits of a target date retirement account.

Emily (01:37): My colleague, Dr. Toyin Alli, recently launched a new community called GRADBOSS. Toyin is an expert teacher of grad school productivity and time management through The Academic Society in addition to being a lecturer at an R1 university, so she knows of which she speaks! I’m honored that Toyin has invited me to facilitate a workshop within the community this month! Join the GRADBOSS community to attend my workshop Your Financial Orientation to Graduate School on Tuesday, August 27, 2024 at 4 PM PT as well as access all the other incredible resources! Go to theacademicsociety.com/gradboss/ to learn more and join the community. I hope to see you tomorrow at the workshop! You can find the show notes for this episode at PFforPhDs.com/s19e1/. Without further ado, here’s my interview with Dr. Scott Grissom of Socrates Financial Planning.

Will You Please Introduce Yourself Further?

Emily (02:48): I am delighted have joining me on the podcast today, Dr. Scott Grissom, who is at a really interesting point in his career where he has two jobs right now. He’s a full professor at Grand Valley State University and also a CFP with Socrates Financial Planning, his financial planning firm. So we’re gonna talk all things investing today, which is really exciting. So Scott, thank you so much for volunteering to come on the podcast, and would you please introduce yourself a little bit further?

Scott (03:11): Sure. Excited to be here. Um, so Scott Grissom, a little academic background for the PhD folks, if that’s okay. So, for my whole life, I wanted to be an architect. So I went to college at Texas a and m University, all set to be an architect and be the next Frank Lloyd Wright. And by the junior year or so, I had, uh, discovered two things. One is that I didn’t like architecture as much as I thought I did, and two is I discovered these new things at the time called computers. So I got enamored with computers and one of the professors that I admired a lot, I had taken several courses from him. I still remember where I was standing at the time. He says, Scott, have you ever considered graduate school? I’ve seen the way that you work with your fellow students and you tutor them and you help them, I think you’d be really good as a professor. Well, I had not considered that at all until that moment, but the light switch went off, changed my career path, went to graduate school for computer science with the sole purpose of getting a job as a professor. And 32 years later, I am still a professor. So it, it’s been a great choice. Highly recommend being a professor for the rest of your life, if, if that’s an option for you.

Emily (04:25): And yet you’ve decided to embark on an, an encore career. And so can you tell us how personal finance, how money became a passion for you alongside of your career as a, as a professor in computer science?

Scott (04:41): Yeah, so as long as I can remember, I’ve been interested in my own personal finances, whether it be investing and reading books. When I was in college myself, uh, I used to get this thing called a magazine in the mail each month on this physical piece of Paper magazine, uh, called Kiplinger’s. And I would read the, I would be so excited every month waiting to see what information they would have about saving and investing and all sorts of stuff. And one, one week there was this article about this designation called the Certified Financial Planner Planner, CFP. Ooh, that would be fun, at least for my own self education. I would like to take those two years of courses and see where that leads. So that was around 2005. And after taking classes for two years and then passing a pretty exhaustive exam, uh, I earned the CFP designation mainly as a hobby. Didn’t really, really know where that would go, but then I started helping friends and family with their financial questions and then started to work occasionally with some small financial planning firms. But, and that passion sort of peaked and valleyed through my, my 25 year career as a professor. And now I’m to the point where I’m ready to move on. I’ve enjoyed being a professor, but for the next x years of my life, I’m ready to transition to probably just part-time, uh, helping, educating others much like you do in terms of, of their finances and especially as they get close to retirement, uh, what changes do they need to make? What adjustments, what questions do they have? So I’ve got another year as a professor, and then I’ll be transitioning to this firm that I just created about, uh, six months ago called Socrates Financial Planning, Socrates building on the way that I like to teach in the classroom using the Socratic method. So I thought that was a fun, playful, uh, name for me.

Finance Related Employee Benefits

Emily (06:31): Yes, very eye-catching as well. I love it. Um, so we have a real, um, treat today, which is to employ your teaching skills in the subject of investing. And even though you just said that, you know, your typical financial planning client would be closer to retirement, you know, when we were prepping for this episode, we talked about how, um, the typical listener for this podcast is gonna be very early on in their career, maybe currently in graduate school, currently a postdoc, uh, maybe in in their first job post PhD. And so we were thinking it would be really great for them to have some insight into how to set up those initial investments with their new employer when they finally get that 401k or the 4 0 3 B or similar type of retirement account, um, access. So let’s go into it. So very good for that newly hired employee. Looking at the benefits package for the first time, it can be overwhelming. What are they probably looking at in terms of potential benefits related to their finances?

Scott (07:26): Yeah, so probably the, the biggest benefit most people have to struggle with initially is the health insurance. Now that applies to us because if they have an option for what’s called a high deductible plan, which mostly they do nowadays, uh, that will have an important financial option available for you called a health savings account. So maybe we’ll come back to that a moment. And then the second one is what kind of retirement account do you have? And in the private workplace, that’s generally called a 401k, uh, in the public space, whether it’s hospitals or my case a, a university, they’re called 4 0 3 Bs, pretty interchangeable. Uh, and then just personally you might have a thing called an IRA. So all three of these retirement accounts are virtually the same. They’re a place for you to invest for the future, and there are generally some tax advantages to each of those, depending on what choices you’re trying to make.

High Deductible Health Insurance Plans

Emily (08:19): Okay, let’s dive into that a little bit more. Let’s start with the health insurance component of it. Who is a good candidate for choosing a high deductible health plan versus like a PPO is probably gonna be their other option, I would imagine. Um, and, and for also using that HSA if it can come with that H-H-D-H-P

Scott (08:38): <laugh>. Yeah. So hard to de- describe o- over, over this broadcast on, on what makes the best choice. Uh, just recognize with a high deductible plan, depending on whether you’re single or a part of a family, you’re agreeing to pay the first $2,000 of your medical care, maybe the first 4,000 thousand that’s called the deductible. So you need to have, uh, an emergency fund I guess, or enough, uh, fees also depends on your, um, your health. So if you’re somebody that’s pretty healthy and don’t anticipate seeing the doctor much, therefore you don’t need to worry about paying that deductible, that might be a good rationale, justification for getting the high deductible plan. Uh, and then it also just depends on locally and you, if you’re moving to a new city, you may not know, but picking what, uh, doctor option doctor networks that you have sometimes make a difference. So there, I would say talk with your, uh, human resources department or a colleague that you’re about to work with or a supervisor to see what choices they’ve made and why.

Emily (09:38): Yeah. So the trade off there for those who don’t know is gonna be a, a premium difference. So the monthly premium that you pay for like a PPO plan, for example, is gonna be higher or at least let’s say the overall portion. We don’t know, uh, how much the employer is paying versus the employee in, in, you know, general. But that overall premium is gonna be higher for like a PPO. It’s gonna be lower for that high deductible health plan. But like you said, you have to be prepared to pay out of pocket for a higher deductible, $2,000, $4,000 versus maybe the PPO is 500 or a thousand, something lower than that. Um, and so you have to have some savings available to, uh, to do that in your own finances, should you need to access medical care. And that’s kind of where the idea of the HSA comes in. It, it sort of, um, nudges you in the direction of, oh, you have that high deductible health plan, well you better be saving in this HSA. But tell us more about how the HSA works.

Scott (10:26): Yeah, so it’s, it’s one of, it’s a very unique, um, savings plan in terms of what the federal government allows for you. So it allows you to save money going into the account, uh, tax free going in, but it’s also tax free coming out, which is highly unusual. So that doesn’t apply to the 4 0 1 Ks and the IRAs or even the Roths. So I really like the HSAs, the potential advantage, advantage that you have to save on your taxes from day one in your career. And so what that means is for every dollar that you put into this account, and it’s earmarked to be used for medical, so for healthcare to be spent this year or next year or 10 years from now, but all of that money is tax deductible off of your current income. And as we know, every dollar that you can shave off of your current income is gonna reduce your taxes. So that’s great for now, which is the way a lot of the retirement accounts work. But then later on, when you start to pull money out to pay for those qualified medical expenses, it’s not taxed there either. And that’s what’s different about the HSA. So HSA saves you now, it saves you later. It’s just a, a win win win when it comes to taxes at least. And as you said, there is this sort of incentive to put that money into this account because you know you’re going to have to spend it at some point this year, next year, five years from now on those deductible expenses. And so that’s why the federal government requires you to tie together. You first have to have this high deductible plan and then that allows you, it’s optional, but I would strongly encourage it to create this health savings account.

Emily (12:02): I’ve not had the, uh, reasonable option of signing up for a high deductible health plan with an HSA ever. So I’m, I’m sort of excited about this in a theoretical way. But, uh, my understanding is that if this comes through your employer, um, you actually save, not only on income tax going in, but also your, your FICA taxes, your payroll taxes, which is like, there’s like almost no other way you can reduce your payroll taxes. So that’s like really exciting as well. Um, in terms of more money in your pocket, more money in that account.

Scott (12:29): Yep. Once again. And you’re saving now and never taxed again on it, assuming you pull it out for medical expenses and it rolls over each year. So there, there’s another kind of a medical account called a flexible savings or flexible spending account that you might have options for. They’re probably a little antiquated now, but the potential concern with them used to be you had to spend it or lose it at the end of the year. So back in, in December then people started getting dental care and eye care and so forth to try to, to spend that money. But the HSA, you can literally, it let it run for 30 years. And so that’s why some financial advisors think of this as sort of a third retirement plan. ’cause we’re always going to have healthcare expenses. And so the longer you can invest it and let that build tax free, the more money in your pocket.

Emily (13:20): Yeah, I wanna kind of underline that point that you just made about the potential for the money inside the health savings account being invested for the long term, because that’s not something that I think people really did maybe 10 years ago with those flexible spending accounts that wasn’t an option. This is unique to the HSA, um, and so elaborate on that a little bit more, the power of of that option.

Scott (13:40): Yeah, and it’s something that I suspect a lot of people don’t take advantage of. So generally by default, you’re gonna put this into an HSA and it’s gonna be treated like a savings account or a checking account and probably not pay you much at all if, if even 1% and for money that you’re gonna spend three months from now, that makes perfect sense. You wouldn’t want to invest it because with investing, and let’s just generally talk about investing in stocks, there’s the concern that that money’s gonna go down in the short term. So, but if you are investing for the longer term, 4, 5, 8 years down the road, you’re convinced that you don’t really need that money out of the HSA that you can pay for these, these medical expenses out of pocket, then the longer horizon that you have, the more options it gives you. And then you can now invest in stocks and mutual funds in your HSA, just like you would in these other accounts such as the 4 0 3 B and 401k.

Emily (14:40): Yeah, it’s really like, I think you mentioned this earlier, like a supercharged form of an IRA, like an even better form of an IRA. But you have to be prepared to pay for those medical expenses and save it to the HSA on top of that. So it’s really a personal finance and budgeting kind of challenge, but a very, very powerful tool if you can harness it,

Scott (15:00): Right? So at the very least you would want to contribute enough for your deductible each year. So even if you don’t wanna invest in the future and your little leery of building a large account of 15, 20, $30,000 in this HSA, if nothing else, remember that very first dollar that you save is saving you permanently on taxes. So if you’ve got a, a deductible of $2,000 and you’re pretty predictable that you’re probably gonna spend about $2,000 this year on healthcare, then at least put that much into your HSA and if it hovers above and around close to zero because you’re putting money in it and taking money out, you’re still getting a great tax advantage from that.

Traditional Retirement Savings Vehicles: 401Ks and 403Bs

Emily (15:41): Yeah, I love it. Well let’s talk about those more traditional retirement savings vehicles, the 401k, the 4 0 3 B. Can you tell us generally like what’s the advantage of investing for your retirement through your employer? And then we’ll talk a little more about traditional versus Roth.

Scott (15:57): Okay. Uh, so as I said, 4 0 1 Ks are just the names generally for private companies and 4 0 3 Bs for public companies slash universities and healthcare. Uh, historically they’ve been what we call pre-tax. So I put money in and I get to remove that from my salary this year, which is gonna save on taxes this particular year. So let’s suppose I’m in the 20% tax bracket and I put in a thousand dollars. Well that’s gonna save me $200 this year on taxes, but eventually I’m gonna take that money out presumably during retirement and then it will be taxed then. So that’s one of the, the advantages is the tax advantage is that we’re going to have a tax advantage this year. It’s gonna build tax deferred and then eventually we pay our taxes. But one of the new features that these companies now are allowed to provide somewhat new is a Roth component to this 401k. And now we have the option of do we pay taxes now and put that into what’s called a Roth account or a 401k Roth, but it’s never taxed again, much like the HSA, so you can let that ride for the next 30 years and hopefully make lots and lots of money off of your investments and then they come out tax free. So that’s one of the choices you’re just gonna have to make is if I have a Roth option for my 401k, do I put my money in there now or do I use the more traditional approach? The second key I think, um, question is, is your employer providing a match or not? And they often do, uh, and it’s often tied to how much you put in. So they might say, we’re gonna match the first 2%. If you put in 2%, we’ll put in 2% or we’ll put in 50% of how much ever you put in of the first 6,000. So either way, whether you’re gonna put 2000 in on your behalf or 3000 or 8,000, you really wanna take advantage of that ’cause that’s in the business we call that free money. And then you’re going to invest that going forward. You’re not paying taxes on it now. Um, the employer’s putting the money in so it’s not coming outta your paycheck. So if your employer does provide a match, be aware of, put as much money as you can in that affects that match.

Emily (18:17): I have also noticed sometimes with these employer provided plans that have a match or maybe not even a match, but a baseline amount that they’ll put in for you. Sometimes universities do that sort of thing. Um, they’ll have like a vesting schedule. Can you explain how people should understand the vesting schedule?

Scott (18:33): Yeah, so normally what that means and, and it’s case of as you said, it’s the employer putting money in on your behalf less so of the money that you put in. And they’re going to as a way to try to keep you employed there as long as possible. Say we’re gonna put $10,000 in each year for you, but you can’t pull all that money out if you were to leave employment. So over the next four or five, six years, uh, on a sort of degrading uh, feature, we’re gonna decide how much of that money do you get. So you’ll have employers say, this year I’m vested. Well that means that this year if I were to leave or get fired or whatnot, then I would at least get all the money that’s in my account. Up until that point it might look like I’ve got $50,000, but 20,000 of that might not leave with me if I choose to leave. And general, as you said, it’s generally the what, the money that the employer puts in any money that you put in is generally what we would say 100% vested immediately.

Should You Ever Pass Up On The Employer Match?

Emily (19:34): Okay. And so I’m thinking about a person who is just starting out and they’re looking at this benefits package and they see that they have a match available to them, so exciting. Um, but maybe their personal finances are not totally in great shape yet. When should they pass up that free money and work on other areas of their finances? Is there ever a situation where that, where you would advise that?

Scott (19:57): I wouldn’t think so. I mean, so let’s suppose you’ve gotta put in 4% of your brand new paycheck that you’re excited to get and that’s going to entitle you to matching and you’re leery to say, but could I use that 4% for something else paying off student loans or paying off credit card debt? Well that might be an appropriate use of it, but I would be more inclined from the psychological perspective is let’s just commit to that 4% and then learn how to carve out additional savings from our new paycheck to pay for that other debt. I mean, debt would be the only reason. I could see why you wouldn’t want to get that initial match. And even then I would really encourage you to, from day one, let’s get that match and figure everything else around that. ’cause otherwise, as we know we’re gonna be have some inertia put in place and we say, I’ll do it later, I’ll do it next year, you probably won’t. So day one, do whatever you can to get that match would be what I recommend.

Emily (20:52): Yeah, I really like that advice. A great point about the inertia, like when are you really going to make that change if you don’t make it right from day one? Um, and if you are really excited about getting that match and you’re really hating, let’s say the credit card debt that you’re in, maybe because of your move to your new job or whatever the case is, um, just use all those, uh, well, they’re probably negative feelings, but use them to energize you <laugh> to get that debt paid off while you’re still contributing to that retirement account and getting the match. And hey, then once the debt is paid off, you can increase that retirement contribution rate above the match level, let’s say

Scott (21:26): After celebrating and going out to dinner or, or something that you paid off your debt. So

Roth Vs. Traditional Retirement Accounts

Emily (21:31): Yeah, that’s awesome. Okay, still thinking about that new post PhD employee, um, let’s say they have a Roth option and a traditional option within their retirement accounts, what are the factors that go into making that decision? Which way to go?

Scott (21:46): So it generally comes down to taxes. And so as we said that traditional, um, contributions to 401k are tax, um, deducted this year. So you save on taxes this year, let’s suppose 20%, whereas the Roth contribution, you don’t save on taxes this year, but it goes in and you never pay taxes again. So the question becomes do I wanna save on taxes this year, maybe saving 20% depending on where my income is or at the, when I start to retire and I pull money out, do I want to pay taxes then do I have any insight 30 years from now that I’m gonna be paying less or more tax rates than I am now? And we don’t have a crystal ball, so we don’t know that for sure. But the general understanding is that the lower your tax rate is now probably a pretty good chances 30 years from now when you start pulling money out, your tax rate’s gonna be higher. So that puts you in favor of using a Roth. Now, uh, it’s less like, it’s less helpful to you to save 15% on taxes now, which is the Roth scenario, rather than to wait 30 years from now and pay 2020 5% coming out, which is the 401k option or the traditional 401k option. So I would say, what’s the general recommendation when you’re starting off, that’s generally the best time to do a Roth because you’re generally making less income than you will in the future. And it also give you a much longer runway the next 30, 40 years to invest that money and have it accrue, uh, tax free, which is a, a really great option.

Commercial

Emily (23:24): Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, budgeting, investing, and goal-setting, each tailored specifically for graduate students and postdocs? I offer workshops on these topics and more in a variety of formats, and I’m now booking for the 2024-2025 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Ask the potential host to go to PFforPhDs.com/financial-education/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutes enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

Roth Vs. Traditional Retirement Accounts

Emily (24:42): Let’s project forward a few years, maybe 10 years. So this person is no longer a fresh new PhD graduate in their first job, but they have increased their income somewhat over time. Is there a tipping point that you would say or is it just for every individual? Where do you see your income potential going?

Scott (24:58): Yeah, that’s a much trickier. Um, but let, let’s play that, that scenario. So some, some of my colleagues will say, um, if collectively, because we’re talking about, I’ve been saying federal tax rates, but it also applies to state income tax, if that’s indeed, um, it, it, uh, applies to your state. So in my state of Michigan I pay about 4% and if I’m in the 24% tax right rate for a federal plus the four is 28% combined. That’s where I’m wondering am I gonna pay more or less than that when I retire 20 years now or 30 years from now? And so I hear people talk about this magic, not magic number, but just sort of rule of thumb about 30%, anything less than 30% taxes. Now it’s probably a pretty good bet that when you’re pulling money out later, you’re gonna end up paying more than that. So somewhere in that range, 25 to 30% is, is sort of this borderline category. Anything more than 30%. So if you’re very high income earner right now, you probably want to take advantage of saving taxes now because you might be in the, the 34% tax bracket or even higher and you’ll likely be taxed less than that 30 years from now. But we don’t know for sure. So all these choices, it just sort of depends. You make the best decision you can at the time and then don’t look back, don’t worry, you made your decision, it’s over and what happens, happens.

Emily (26:22): Yeah, definitely don’t use the uncertainty around where will my tax rate be in retirement as a reason to not get started, right? Like just jump in with whatever option you think is best at the moment. That’s okay, keep going at that. And my philosophy around it is kind of to want to get to retirement with a mix of Roth and traditional so that I can do some tax optimization on the backend. So as long as I have big pools of money in both of those types of accounts, by that point I’ll be pretty happy. I’ll add in one other anecdote, um, sort of about how I made this decision earlier on in my career when I could see, um, where my tax rates were going. So I post PhD was living in the state of Washington, which has no state income tax, but I knew that I aspired to move to California, which has could be a high state income tax rate. And so I used that view into my own personal aspirations in my future to say, okay, when I’m living in Washington, that’s a great time to use the Roth. And when I move to California, that’s a great time to switch to traditional assuming no other changes in my, you know, overall income.

Scott (27:22): Very good, good idea. Now let’s talk about those, that bucket that you mentioned. So when people retire, it’s nice to have options and so there’s considered, there’s sometimes considered three buckets of Roth, which has already been taxed, 4 0 1 Ks which have not yet been taxed. And then there’s a third category that we haven’t talked about. We call that a taxable account. And that’s just where you’re doing extra savings. So out aside from these retirement accounts, and if you have sizable amounts in all three of these buckets, they’re probably not gonna be equal and nor should you necessarily aspire to that. But if, if you’ve got some money in each of those, as you start to pull money out during retirement, as you said, that gives you some flexibility, uh, to control your tax rates so you can start pulling some money out of a Roth because it’s not gonna be taxed at all, some money out of your 401k ’cause it is gonna be taxed and then have some money in your taxable. So how do you manage that? How do you end up with three buckets? Well, we’ve talked about early on maybe you start with a Roth for retirement and then throughout your career maybe you start to transition it, there’s gonna be perhaps some tipping point, maybe not, maybe you just wanna do Roth all in and that’s perfectly fine as well. But in that mid category, that 15 years that we were talking about, you could get to the point where you put half in Roth and half in a 401k, so there is no right or wrong or it’s not a binary decision. And that would allow you to con uh, to continue to build in all three of those buckets.

What Exactly Should I Invest In?

Emily (28:49): Perfect. Let’s talk about another decision that has to be made when you’re contributing to that 401k or 4 0 3 B, which is what should I actually be invested in <laugh>? Because the 401k or the 4 0 3 B is not synonymous with the investments that could be inside of it, there’s gonna be some choice about what exactly you wanna be invested in. So help that you know, fresh PhD with that first job, help them think through that choice of what exactly should they be invested in.

Scott (29:17): Uh, well still first and foremost when we come to talk about investing, uh, the golden rule is called, um, diversification. So we don’t wanna put all of our eggs in one basket. So although it’d be really tempting to, to buy as much apple stock as you possibly could or as much Nvidia stock as you possibly could, uh, because that’s currently what’s hot, you want the risk of losing a lot as well. So how do we do diversification is we mainly, or most of us buy things called mutual funds, which are collections hundreds if not thousands of individual stocks for different companies. So that provides you that diversification and that’s what you will generally be given as an option. So for your 401k, normally you’re given a limited collection of choices for yourself. Those are often gonna be what we call mutual funds. And so you still have to make choices. So maybe it’s a choice outta 10 or it’s a choice out of 50, that can be pretty overwhelming. Uh, so my approach is to pick mutual funds that buy a little bit of everything. So these are called index funds and I know Emily, you’re, you’re a fan of passive investing as well. And so look for, uh, titles of these mutual funds that perhaps include index in the name, probably don’t call it passive, but they might say index. Uh, one of the keys when you’re picking out mutual funds is the expenses that they cost. So most people don’t realize, but you invest money in a mutual fund and each and every year the uh, management company takes a little bit out of that. Maybe it’s 1%, which would be super high or maybe it’s 0.1%, which would be pretty low. Sounds like pretty sounds like the same thing to most of us. 0.1% and 1%. What’s the difference? Well, it turns out 30 years from now, those build on themselves a lot. So when we’re given a choice of mutual funds, back to the original question is I wanna look for something that is an index slash called passive investing. And those generally have lower fees, which might be 0.1% or even less, uh, which is more money in your pocket, less money in their pocket, more money in your pocket. And that’s the win-win. So first choice, pick mutual funds that are indexes and then you might have to choose between, uh, do you want to buy stocks or do you wanna buy fixed income, which is, which is often called bonds. That’s probably a whole nother podcast. But, but the quick answer is most of us now have an option called a target date fund. And a target fund. Target date fund is perfect for somebody just getting started ’cause they don’t need to worry about the ins and outs of picking what percentage of stocks and what percentage of bonds someone else is doing that for you generally at a low cost. So if you have an option for a target date fund, they’re gonna have names associated with the year that you plan to retire. Now there’s nothing magical about it and nothing significant about it, but if you’re just getting into your career now and you’ve got at least another 30 years to work, 35 years to work, so adding that to 2025. So 2060 would be the name of a target fund that you might look for. Vanguard has these fidelity, uh, Schwab has all of these and all that tells you is somebody has decided what percentage of stocks and bonds. So I just looked up Vanguard’s 2060 target date fund and 90% is in stocks and 10% is in bonds. The longer that you have to invest the, uh, more volatility or the more ups and downs you might be able to stomach mentally stomach. So if you recognize, yeah, the stock market went down this year, it’s gonna go down. I can guarantee you that. I don’t know if it’s this year, I don’t know if it’s next year, but at some point the stock market’s gonna go down again. And if you’re okay with that, if you’re mentally prepared to say, I knew that was gonna happen, I’m gonna keep letting it ride, then because you have the luxury of going for the next 30 years, then it’s okay to have 90% in stocks. But as you get closer, uh, and this is what those target date funds do for you, is they start to reduce the stocks and increase the fixed income so that as you get closer to closer it might be a 60 40 split. So long-winded answer, sorry my professor is coming out on me, but what are your choices as a new employee? If you’ve got a target date fund, generally pick that.

“Safe” Investing Options

Emily (33:40): So sometimes I get questions when I teach about investing where the questionnaire says I want to start investing and I wanna use something safe. If one of your clients said that to you, I I’m nervous about the stock market, I wanna pick something safe, how, how would you coach them?

Scott (34:01): So safe generally means, um, lower return. So whether you’re buying bonds or treasury bonds, so safe means less likely to lose money, which is something that none of us want to do, but also less likely that you’re going to make much money. So over the next 10, 15, 30 years. Question is, can you afford to be conservative? Maybe you can, but I think there’s a bigger risk, a long term risk that if you’re too conservative, you put all your money. I mean the extreme would be you put all your money in a savings account making 0.1% and that’s gonna make you feel very safe. But 20 years from now, you’re gonna regret that because your money has not even kept up with inflation. So if inflation’s rising, if 3% every year, so it’s really a mental game, I understand that the concern about potentially losing money, but hopefully you overcome that and recognize that over the next 15, 20, 30 years you’re likely not going to lose money and you’re going to stay ahead of the game by investing in more what we would call more aggressive, not completely aggressive, but more aggressive investments as as, um, you pointed out.

Different Fee Structures of Financial Advisors

Emily (35:14): So something that I learned in our prep for this interview, um, is in your financial planning practice, how your fee structure works, which I really appreciated, but I want you to explain it, um, and explain why you think it’s advantageous both for you and for your clients.

Scott (35:30): Okay, well let’s back up and recognize that there are hundreds of thousands of people that call themselves financial advisors in the us. Uh, that’s not a regulated term. And so almost anybody can call themselves a financial advisor and they generally make money from three ways. Now we all need to make money so there’s no harm in that. Uh, one of them is that they make commissions. So they sell you products whether they be what are called annuities or insurance or stock plans and they make a commission off of that, whether that be 2% or 3% or 10%, perfectly fine, assuming that they disclose that to you and they’re recognizing, you know, I’m gonna make 10% off of you buying this $100,000 investment, but I think it’s best for you and that very well may be best for you. Then there’s a category called called fee only advisors. So they wanna avoid commissions with the potential of there being a conflict or at least the perception that there might be a conflict. And they’re generally gonna charge you for ongoing what we call asset management. And so the going rate is generally 1%. Now these are people that already have established accounts, maybe a million dollars. And so they’re going to pay their, um, fee only advisor 1% of that each and every year to manage their money and give them good advice and, and keep them on the straight and narrow. And then there’s a relatively new category that we call flat fee planning where we’re not interested in managing the money for that client, but we want to just give them some objective solid education advice and then the person can go back on their own for the next 2, 3, 5 years and then maybe come back for a refresher and say, how am I doing? What advice do you have me now? So I’m in that category, it’s called flat fee. So for a particular fee I offer a financial plan to clients that says if they’re starting out and or getting close to retirement and says, let’s take a look at all your finances, not just your investments, but let’s take a look at your insurance and your estate planning documents and a variety of other aspects. Let’s take a look at your goals and just do an assessment and objective assessment to see if you’re on track or not. So, so flat fee advising or flat fee expenses is the way I model my business useful for people especially just getting into investing because they don’t have a lot of money yet. And so the fee only advisors that charge 1% probably aren’t going to see you anyways. So that would be an advantage.

Emily (38:06): Hmm, yeah, especially if, um, you may have zero in assets under management to offer if you only have your 401k plan, for example, if you don’t even have an IRA that, that an advisor could even work with. So I really appreciate that flat fee, um, model. It’s actually when I sought out financial advising a few years ago, that’s the model that I went with for the advisor that I chose. So, um, I’m a believer in it now. It’s a little harder to stomach maybe upfront because you have to come up with hundreds or a couple thousand dollars maybe, depending on the advisor and the type of, um, package that you’re getting versus going to someone who makes money off commissions. Well, it seems like it’s free, but it’s really not free. And so just to recognize as you said that everybody in this industry is getting paid in some way or another, as long as you’re upfront about it, fine, then the client can choose how they want to pay for the service that they’re getting and their advantages and disadvantages to each of those models. But I really appreciate the model that you’ve chosen, so it’s great.

Socrates Financial Planning

Emily (39:01): And if someone listening, um, really likes your style, likes how you’ve taught us through this episode, wants to work with you or maybe wants to recommend you to someone else, how would they get in contact with you?

Scott (39:12): Yeah, so the name of the company is Socrates Financial Planning. So Socrates, because that’s the way I always taught in the classroom using the Socratic method. So Socrates financial planning, socratesfp.com is the website address and from there you can get an email or schedule a call with me or, or find more information about me, but socratesfp.com is the place to go.

Best Financial Advice for Another Early-Career PhD

Emily (39:36): Well thank you so much Scott, and I wanna conclude by asking you the question that I ask of all of my guests, which is, what is your best financial advice for an early career PhD? And that could be something that we’ve touched on already in the interview or it could be something completely new.

Scott (39:50): Yeah, I would come back to that notion of day one, start contributing to whatever plan you have, whether it’s the Roth or or the, the traditional plan certainly to, um, achieve that employer match that we talked about. 10% might sound like a lot to start saving right away, but I would recommend you, you strive for that if not higher, set that up from day one so that you just learn to get by on 90% of your salary. And that’s gonna do such wonders for you. 30 years from now, you will be so glad looking back that that was the best decision you ever made.

Emily (40:26): Well, Thank you so much Scott for volunteering to come on the podcast. It’s been a pleasure speaking with you.

Scott (40:31): Very good. Thank you very much.

Outtro

Emily (40:41): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

This PhD Promotes DEI with a Focus on Finances

July 1, 2024 by Jill Hoffman

In this episode, Emily interviews Dr. Carolina Mendoza Cavazos, who holds a PhD in microbiology from the University of Wisconsin-Madison and currently works in industry. Carolina has long been interested in and open about personal finances, and she focused her DEI efforts while in graduate school around finances, including starting a money club and creating clear communications regarding pay and benefits. Carolina shares her insights into the kinds of financial issues graduate students face and how universities should back up their recruitment of diverse candidates with sufficient financial support and communication. Finally, Carolina and Emily discuss the financial goals and lifestyle upgrades Carolina has enjoyed since starting her job in industry.

Links mentioned in the Episode

PhD Promotes Diversity, Equity, and Inclusion with a Focus on Finances

Teaser

Carolina (00:00): Basically like who, who can afford to go to graduate school and how the people that have made it to graduate school, how can we support them during? There’s a lot of focus on the DEI efforts within recruiting. I also think that if there is not a support system for the students that are coming in and staying, I think that is a disservice to the minorities that you recruited. While it’s really great to get a fellowship, if the school can get to brag about the funding that you have, the schools should also support you through the issues that may arise due to that funding.

Introduction

Emily (00:55): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (01:24): This is Season 18, Episode 3, and today my guest is Dr. Carolina Mendoza Cavazos, who holds a PhD in microbiology from the University of Wisconsin-Madison and currently works in industry. Carolina has long been interested in and open about personal finances, and she focused her DEI efforts while in graduate school around finances, including starting a money club and creating clear communications regarding pay and benefits. Carolina shares her insights into the kinds of financial issues graduate students face and how universities should back up their recruitment of diverse candidates with sufficient financial support and communication. Finally, Carolina and I discuss the financial goals and lifestyle upgrades she has enjoyed since starting her job in industry.

Emily (02:10): When I teach budgeting, I emphasize that it actually consists of two components, budgeting aka telling your money what to do and tracking aka checking that your money did what you told it to do. While I love and use automated tracking software, in my opinion nothing beats manual tracking, which naturally keeps you accountable to yourself for your spending. In fact, last year I made a custom expense tracking spreadsheet for my own use. If you would like to try out manual expense tracking, feel free to take my spreadsheet and use it as is or build it out however you like. I built in a couple of budgeting principles that I like to follow and teach to PhDs. There’s a companion video available explaining those principles. If you’d like to grab the spreadsheet, it’s totally free, simply sign up through PFforPhDs.com/tracker/. You can find the show notes for this episode at PFforPhDs.com/s18e3/. Without further ado, here’s my interview with Dr. Carolina Mendoza Cavazos of Finances with Carolina.

Will You Please Introduce Yourself Further?

Emily (03:29): I am delighted to have joining me on the podcast today Dr. Carolina Mendoza Cavazos. She is a scientist working in the private sector. She finished her PhD about two years ago, and like me, Carolina is also really, really into personal finance and also she has a special focus on DEI, efforts related to personal finance. And Carolina has a website called FinancesWithCarolina.com, and I first came across her, it must have been several years ago on Twitter, and I’ve been keeping my eye on her for a while. We finally had reason to connect recently and set up this podcast interview, which I’m really excited about. So Carolina, would you please go ahead and introduce yourself further for the audience?

Carolina (04:04): Sure thing, Emily. Hi everyone, my name is Carolina and I obtained my PhD at the University of Wisconsin Madison. I’m currently a scientist in the r and d department at Promega, and um, I’m very excited to be here today.

Finances During Childhood, College, and Beyond

Emily (04:21): Yeah, let’s go back, um, even further because I want to hear about, uh, your background, especially with respect to finances starting kind of in your childhood. You can give us a brief overview of how things were, um, financially growing up and then through college and graduate school and I’m, I’m interested both in kind of materially what was going on and also how that affected your mindset through that period.

Carolina (04:41): My family and I moved to United States in 2011 and I finished my senior year of high school, then applied to college and I obtained my undergrad at California State University Fullerton. My dad is an accountant, so he talked about money quite often. I would say that being an immigrant, we did have certain like mindset that came with that and frugality was a really important one. I would say that from the both sides of my family, either one or two generations broke the cycle of poverty and I grew up in a family with two college educated parents and we were able to migrate here to the United States, um, due to a job opportunity for my mom. So that was kinda um, how we got here. I would say I was always interested in finances in general in college. The first time I got a paycheck was through a program called MARC Maximizing Access to Career Research and is a pipeline for like graduate school program. So that’s kind of where my budgeting journey started. I lived at home, uh, during college and receiving that paycheck was the first time that I was, you know, making all my budgeting spreadsheets and stuff like that.

Emily (05:58): Yeah. So let’s kind of turn to graduate school now. It actually seems like you were set up pretty well to understand maybe the finance of graduate school having been in that program, the MARC program during undergrad. Um, so tell us about like that transition and maybe the kinds of offers you got and whether you considered, you know, finances. It sounds like you probably would in your selection of which university to attend.

Carolina (06:17): I don’t think I looked at the stipend as carefully as I would today. I gravitated towards the Midwest because the Midwest had awesome microbiology and I knew I was gonna end up somewhere in the Midwest. Um, my last two top school choices, like were between UW Madison where I ended up attending and um, Wash U. So those were my two offers. And in general, stipend wise, they were pretty similar. However, UW Madison had a program similar to MARC called SciMed, shout out to SciMed, it’s called Science and Science and Medicine Scholars. And basically it was a community that I could plug into that I did not see at any other universities and I felt that that was, uh, a good fit for me. So that’s kind of why I decided to go to UW Madison.

Emily (07:16): So tell us a little bit more about how finances were going for you during graduate school. You said that you had, you know, uh, a frugal and a debt averse kind of background with your family. Um, you’re in the Midwest. Yeah. Was the stipend livable? Were you able to save? How are things going for you personally?

Carolina (07:33): Yeah, in terms of finances, I did move here to Madison with a partner at the time, now my husband and we, that’s kind of when we started not fully merging our finances, but we’re definitely operating as a household at the moment and basically we were like kind of equally splitting everything. So that was definitely helpful and I would say that the stipend was livable, however, having a partner was definitely helpful. And one interesting thing is that I was funded the whole time during graduate school, so the five years I had different grants, fellowships, things like that. So I was fortunate that I didn’t have to pay segregated fees or like the student fees for that. Um, I ended up working as an hourly for assignment and that was, um, a workaround in order to get retirement benefits like a 403B or something like that.

Carolina (08:35): I definitely think that my husband and I had like different mindsets about finances and it was interesting to kind of get into that. But I would say in graduate school I found your podcast through Hello PhD and I think the, the thing that really caught my attention was the use of, um, buckets for like high yield savings accounts. So I think that that was like one of the first things that I did in order to get the same service but like in a cheaper way. Like for example, like car insurance, I faced a lot of issues with funding transitions that ended up being, in my opinion, DEI issues in terms that I don’t know, I, I saw a lot of the times like the same pe- people in the program doing the same jobs and being funded differently would still face different issues. And in terms for advanced opportunity fellowships like for, um, minorities like me and things like that, I would say like that was like a double whammy of you might have a surprise tax bill and things like that. And like how, how do you deal with that? Do you, do you have your emergency fund set up? Do you rely on a network? Is there network that you can rely? Do you incur debt? And things like that. Issues that I encounter with my funding, I always wonder and through the grapevine have heard that other people that were funded had this issues. So I think that that was my first step to get into using personal finance and deed efforts during graduate school.

Financial Challenges During Grad School

Emily (10:15): Hmm. Yeah, I definitely wanna hear about more about that in a minute. Um, can you expand at all on the, the issues you were just talking about with like the funding? So like quarterly estimated tax bills. We talk about that a lot in the podcast, hopefully the listeners familiar with that. Um, anything else? Like, just tell me what, what the issues were that you either experienced or that you observed.

Carolina (10:35): Yes, so one of the issues right off the bat was taxes obviously. And um, I definitely had a tax bill that I wasn’t expecting and I wasn’t aware of the fellowship, um, quarterly estimated taxes on my first year or something like that, the Kiddie tax. Why not? One of the things that I would say is that access to benefits was a little different. So for example, there was no, someone in my lab and me, the other peop- the other person could contribute to an FSA account or they would be able to and eligible to open a 403B. Um, what else? Gaps in insurance or, um, what are they called? Potential gaps in insurance. For example, some of my friends that were in the NSF were getting COBRA letters when they were having their funding transitions because you might have lost insurance and they were not aware of this and it was just because some paperwork was delayed and things like that.

Carolina (11:46): Personally, I did a, an internship during my fourth year summer, somewhere between fourth and fifth, and I had to take a short leave of absence for that. I had to prepay my insurance and there was a lot of issues with that. Um, I, I think I was the first one to do this and the program that was receiving a stipend that, that was receiving a stipend and had to pause that in order to go into the private sector and get, um, private sector money. Usually if you were in your, I don’t know, a W2 route, I don’t know how they would have handled it, but there was miscommunication on that. Uh, one point I wasn’t sure if I was gonna have insurance over the summer and access to healthcare is definitely something that everybody should have. And, um, I had some health issues during graduate school, so that was a very scary time for me.

Carolina (12:45): And through the grapevine again when that happened, I started documenting if other people have faced this within the, the fellowships during, within the T32s and stuff like that. So when I was working as an hourly for assignment, some of my job was to write down what should you do if you are going to into a internship, what are the, um, I also implemented, I was part of the DEI committee in my program and I also proposed and implemented a funding transition form to pinpoint where is your money coming from in this semester? Where is your money gonna come from next time? Do these people know each other? Should we introduce everybody? Do they know that you’re coming or that you’re leaving the, the fellowship training grant, et cetera. And I found a lot of people that were having trouble with this things and it wasn’t just me. So I think that there is, there, there is a very powerful thing in community and I was trying to find the people that were having these issues and try to play safety nets for when people did face them because they’re bound to happen sometimes. They knew what to do, who to contact and things like that.

Emily (14:10): So helpful. I mean, it’s amazing that you, you know, worked along with your peers to put that resource together, um, through SciMed. It sounds like it was kind of part of your job, but to the extent, yes, you were doing it and it wasn’t part of your job, uh, amazing community service, but probably should have been taken up by the university. Um, obviously they’re the ones providing these benefits or facilitating the benefits, so like, yeah, they should be taking charge and making sure the transitions are seamless. I think about some this sometimes with respect to the tax questions of, you know, calculating, filing quarterly estimated tax or dealing with stuff during tax season. Um, like I know it’s really normal in the US for your employer to be very hands off about taxes. Like yeah, we’ll do withholding, that’s it, that’s the extent of what we’ll handle. But like universities aren’t even doing that much in most cases for fellowship recipients. And I do think they should be a little bit more proactive and, and thank you so much to the ones that work with me and are proactive about this, but be proactive about at least communicating right when the students, um, about what’s gonna happen. And it sounds like not, not only in the tax realm, but it extends with all these other benefits like you were just talking about. So I’m really glad you kind of gave us that overview. Um, so it sounds like you were working with, you know, SciMed and also talking with your peers. Can you tell me a little bit more about kind of what you learned or observed about how your peers were handling this stuff financially? Not just with, with respect to the benefits issues that we just spoke about, but maybe more generally what they needed to know or what they needed to apply, um, in their personal finances during graduate school?

The Birth of the Money Club

Carolina (15:36): Yeah, I, I think a lot of my peers were either, I don’t know, like I would say like there was like two categories. People that were in the category of like, you know what, I don’t wanna think about it. I am, I’m gonna take a pause on this while I’m in graduate school and once I figure out what my career path is gonna be, I’m gonna pick it up. And there was a small subset, small but mighty that was interested on talking about this and was sort of like, I think the taxes are the foot in the door for everybody that they’re just want to learn a little bit more of how to handle those. But once they’re in and then you just start chatting and like, where do you put your tax money before the thing is due? How are you, um, self withholding and things like that. I think that was kind of like the natural birth of the, the, the money club that we developed. And I really can’t remember if that was part of the SciMed job or eventually we kind intertwined it or something like that. The SciMed job was basically really help your community, how can you do this? Obviously there was like events and food ordering or flyer making and stuff like that, but I, at one point I was trying to explore student services as a career, so I think that that was my in, um, with that position. And then it turned into a way for me to look at this DEI issues and try to create resources for the people that were within the fellowship where in the fellowship were gonna come into the fellowship and things like that.

Emily (17:22): I totally agree with you that the taxes are the way to most, uh, you know, getting most people’s attention into personal finances. Yeah. Uh, where did it go after that? You know, you already mentioned using targeted savings or sinking funds as a helpful sort of addendum to your budgeting. Did you all talk about that or what other topics did ended up being of interest to this group?

Carolina (17:42): One of the topics definitely people were interested in investing. I think that that was one of the other ones that we’re kind of popular and, um, I don’t know, mystified a little bit and people wanted to ask around. I think, I think the money club really started getting around going like in 2021 after the summer of 2020, um, when George Floyd was murdered the entire a a group in the program started writing a letter to our admins and our professors and things like that in which we were quote unquote demanding changes in our program and whatever. So I was involved in that effort and I do remember putting some personal finance stuff in there and, um, I think when the whole program read it and they knew that there was like some of the things that I was requesting, like for example, um, I had recommended you to, to our program. I don’t know if they ended up hiring you or not. Basically like in the program then I, I became known as the person that talked about money and then people that wanted to talk about money found me. And, um, the other topics that I would say not so much as investing, but I kinda wrapped it around with investing was retirement and some of the benefits that the university was offering for students that did have access to those. The majority of my program was not like brought partners or anything like that. I, I don’t remember, but sometimes there was students that had in their budget a, a way to invest and they just wanted to start.

Emily (19:22): Absolutely. For me, I always say taxes and investing are my two favorite topics to discuss. And it’s lucky because those are the two top, um, most popular topics that get requested, which is really fun for me. Um, it’s so interesting too being in an environment where some people have access to that 403B, um, and even the other, well you mentioned FSA not an HSA, um, through the university, but perhaps other benefits that’d be relevant, you know, for investing. Um, and obviously if you’re on fellowship or, and if you’re not an employee, you’re not gonna have access to that, but it sounds like a subset of people would, and you and you also had access to <crosstalk>.

Carolina (19:55): So I found a loophole

Emily (19:57): Yeah. To be, um, a proper W2 employee at least for a few hours enough to give you that benefit.

Carolina (20:03): And I made it automatic that all a hundred percent of my hours with SciMed would go to the 403B.

Emily (20:10): Well, that’s kind of cool that they let you do that. I know sometimes employers that have like a restriction like no more than 50% of your paycheck or 25 or something, but obviously since it was just part-time for you, if that makes sense. Um, yeah. Anything else you wanna tell us about the money club?

Carolina (20:25): I think people just need safe spaces to talk about money, and I think it’s one of the cases that if you create it, people will come. I, I personally feel that a lot of people wanted to start working on their finances and they just didn’t have the language, the space, sometimes the resources or like the, the uh, uh, closed mindset of, well, I’m not making enough money so I, how can I work on this? And I think that’s my main, one of the things that I try to help people with is that your personal finance, like, and starting to work in your personal finance, it doesn’t have to be this ginormous thing that you have to put thousands of dollars into it. I think it’s small actions that just kind of add up and, um, my whole spiel is that I, I would like to create systems that you later edit when you get a different job and there’s a lot of things that you can do in order to work in your personal finance that don’t cost money or they can be a $2 thing and, and it’s more of like flexing that muscle as a lot of people say in the community. I think it’s true.

Emily (21:51): I totally agree. Um, and I, going back to kind of what you said earlier about, you know, the, you sort of encounter two kinds of people, like some people who wanted to engage, but some people just wanna say, you know, I’m not making that much money, it’s not the right time to be working my finances. I will pick this up later. And they are overlooking that benefit of, as you said, flexing the muscle of learning a few skills, of getting a little bit of extra knowledge, um, whether that can be applied during grad school or whether it’s just gonna be something that’s practiced a bit or set aside for later. Um, all of that does help you set up for financial success in your next post PhD career when you have that higher salary coming in. And of course it will be easier in some sense when you have, when you’re making more money, but if you’ve never practiced budgeting, if you’ve never really thought about what’s important to you in your spending, if you’ve never opened an IRA before, well that’s stuff you’re gonna have to learn, um, when the stakes are a little bit higher later on. So of course you know that I’m a proponent of working on that stuff during graduate school, you know, if at all possible, and as you said, it doesn’t have to, you don’t have to be able to save necessarily to have a savings rate to do positive things, um, in your personal finance, there’s lots of cost neutral things that you could do. Um, and hopefully you can get to a point where you’re able to save.

Commercial

Emily (23:05): Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, goal-setting, investing, frugality, increasing income, or student loans, each tailored specifically for graduate students and postdocs? I offer seminars and workshops on these topics and more in a variety of formats, and I’m now booking for the 2024-2025 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Orientations or very close to the start of the academic year would be a perfect time for tax education or general personal finance content. Ask the potential host to go to PFforPhDs.com/financial-education/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

DEI and Personal Finance

Emily (24:32): I wanna get back to this point about how you, um, use the topic of personal finance within your own DEI efforts. And it’s something you’ve mentioned a few different aspects of it until now, but I just wanted you to just make it really explicit, like how do you view this and how do you work in this area?

Carolina (24:47): So I think DEI efforts are sometimes in some spaces, and this is not particularly about my university or my program or anything like that, but they get a little bit performative and they can get into, uh, check a box. We have a DEI committee and that’s it. That’s it. So I was involved in the DEI committee since this founding at, um, my program after the letter that I mentioned that we wrote. So through that there was two representatives for the students in this committee and we’ll bring issues forward regarding whatever our, our peers had brought up. And a lot of those ones sometimes were personal finance related, for example, there was one time that our paycheck schedule changed from a monthly to a biweekly time and a lot of the students were like, how am I gonna make rent if the biweekly paycheck is happening and then that I’m receiving that in this amount of time. I don’t have a safety net to just make that payment at the beginning of the, of the month if this happens. Um, so trying to make explicit what type of resources are available in the university for, uh, emergency hardship and stuff like that. That was one thing I definitely always advocated for more clarity on funding transitions as well as the fellowship letter. For example, I know that that one or my specific university came in March while your W2 came in January. So we had a case in which a student basically submitted their tax return after they got a W2 and they then they got the fellowship letter and they had to amend it. So basically being more transparent and proactive about the types of issues that funded students might face having I, I know one of my, um, one of the other representatives really advocated for having the, the number of the stipend for our incoming students instead of just kind being this nebulous number that you kind of hear there when you’re already in the interview.

Carolina (27:24): During the time that I was there, another person, not myself, but they got my full support, was really trying to start the conversation of a livable wage. So what is that? Like, how do we compare to other programs? And um, she did a tremendous effort, um, in order to look at the cost of living and how is that going and how, you know, it might not be our stipend might not be keeping up with this, what are we gonna do about that? So I would say that I definitely advocated for transparency in my, um, dei position from the program for the university. And I basically started spreading the information and just kinda reporting back to the committee and say like, this is what I did and I had my, my PI’s full support. I was very fortunate that she had my back. And um, there was instances in which I think if my PI was not supportive, like maybe they could have been like some issues and um, in terms of just like, hey, I think that what we’re doing is wrong, not wrong, but like not having the stipend number really there.

Emily (28:46): Yeah. Sort of obfuscating. Yeah.

Carolina (28:49): Yeah, I didn’t like that as much. My main issue was the medical coverage and I, I did as much as I could in order to create as much documentation and as much process safety nets for people to not receive that letter, um, of the COBRA Fellowship, um, not have to pay out of pocket for necessary prescriptions. If you have a lacking coverage, you cannot even make an a, a doctor’s appointment. It’s not like you can make it for later when you have coverage, they’re just not gonna talk to you. I had a back injury during graduate school and um, other chronic conditions that access to healthcare was, is necessary for everyone, but for me was particularly scary not to, and just the threat of not having it, it’s sometimes it was just that the, some deadline was occurring and like you’d really never had a lack of care. But just having that big thing in your brain that you might not have it, I think you, that takes you away from science and then you’re worrying about that instead of your experiment.

Emily (30:04): That’s exactly what I was thinking when you were going through, um, that response is that if we want to keep graduate students and postdocs, um, focused on their research, focused on progressing in their programs, successful in their academics, academia has to materially support them properly so they aren’t one distracted by the things like the benefit issues and all the, all the one things that we’ve talked about so far. Um, but then also by financial stress overall, um, having to be super, super frugal or having to make very extreme sacrifices in what your expenses are. Or on the flip side, you know, maybe spending a lot of time side hustling because your stipend is just not sufficient. And as a DEI issue, I mean if we want <laugh> more diversity in academia, um, and more people being successful across the board, we have to support them in a way that we’re assuming that they’re not gonna have to depend on family members or partners or other people who might or might not be able to contribute financially to them. Um, and frankly, a lot of people, you know, now have caregiving responsibilities. They have to contribute to the finances, other families too. And so again, you can’t even assume it’s just like a single person and all we have to do is provide for your basic living expenses and that should be enough for you because even these small bumps in the road, like you’ve been talking about these small emergencies or something medical comes up or I have to take an unexpected flight, these irregular expenses that you mentioned earlier, um, that can completely throw off your budget if you’re living with very little margin very close to the edge in the first place. So the way that I see it, we just have to fund graduate students, um, more than the baseline, right? Like not even the living wage. We gotta go beyond the living wage because you, to really be financially secure, you have to have a savings rate because these things will ease emergencies, these things will come up and it’s so much easier to recover from them and get back to being focused on your program and on your work, um, when you have the finances there and you don’t have to scramble and be stressed about it. So <laugh> that’s my part of the soapbox there. Um, yeah, anything more that you’d like to say about your, like the way that you do these DEI efforts?

Carolina (32:13): What, what I, I currently try to do and what I tried to do during graduate school was really providing the information that some people might not have. Basically like who, who can afford to go to graduate school and how the people that have made it to graduate school, how can we support them during, I believe that there are, there’s a lot of focus on the DEI efforts within recruiting and being like, yes, come to our university and having admissions numbers. And I think that that is very important. I also think that if there is not a support system for the students that are coming in and staying, I think that is a disservice to the minorities that you recruited. So while it’s really great to get a fellowship and it’s really good to be a funded student and that opens the doors for you to go into a lab that you might not have access before or gives you more research freedom and things like that, I think that if, if the school can get to brag about the funding that you have, the schools should also support you through the issues that may arise due to that funding.

Emily (33:48): Very good point. Thank you so much for adding that. Let’s turn our attention back to you in your post PhD life with your proper job, with your proper, uh, salary, which sounds amazing. So how are you pursuing financial goals these days and how are you doing with your, um, spending and just like, what’s going on in your finances now?

Post-PhD Finances

Carolina (34:08): Well, the private industry pays very well and as we know, our equation for our budgeting income is one of the biggest, um, in there. So I would say that for the first six months that I was at my full-time employment, I didn’t give myself a raise and I threw everything into retirement. So I think I started in the end of August, so I tried to get as close as the max as I could for the employee sponsored 401k and um, that, that was really great because, um, we were used to living in a given stipend and we didn’t really change much during those six months. Then after that I would say that my husband and I made a list of things that we wanted to upgrade in our house and one of them was a new bed <laugh>, one of them was a new fridge and, you know, things that we were like, it’s large expenses and is, I don’t know, it just felt like it was definitely a, a pivotal moment in an income that we could just buy this and not really like budget for it or something like that. And I, I think we bought the fridge for like a bonus or something <laugh> my sign up bonus or something like that. And I would say right now, because in graduate school I faced some medical issues, I would say that I really became a quote unquote vaulist that I was really trying to find what adds value to my life and the things that I really care about. And I think when people get sick or something like that, they really turn inward and, and start thinking of like, what is important in life. And I really started seeing like, okay, what in my budget reflects my values? What doesn’t and how can we reconcile those? So for example, family is very important to me and my husband, so I am happy that travel is a big category in my budget and we, we ran the numbers for the last year and I think like that was like our third category that we spend money on because our families are not here, so we have to travel to see them and we are pursuing fire. I think right now we don’t have responsibilities that are really sinking funds at the moment. So, um, I think I’m, we’re just kinda understanding what this new income can do and where can we put it into the long term retirement plans. And I’m also focusing on trying to live the life that I, I want. And I feel like during graduate school sometimes people really throw themselves into work and they’re like, they’re passionate about their stuff and they kind of like sometimes like don’t have like outside things. I definitely was guilty of that. So I’m trying to course correct and really focus on things that bring me joy in my every day today and spend on those ones I wouldn’t say previously, but definitely spend on, on the things that bring me joy and the things that I don’t care about, like my cell phone plan to definitely cut it as much as I can.

Emily (38:00): I just hope that, um, the listeners who are still in graduate school and are looking forward to the transition that you, um, have com- have, um, completed, can remember this example when they’re in your shoes because in, in my view, you have executed this like just perfectly <laugh>, um, which is kind of a combination of live like a grad student, like okay, don’t make any major changes right away. You, it sounds like you didn’t have to move or anything. So like there was some stability and it was, uh, easier in a sense to continue on with your previous level of spending, but in combination with that sort of as a default, okay, we’re not gonna, we’re gonna default to not changing anything, but then as you said, be so intentional about thinking through where you do want to spend more or where you wanna save more, um, to reach your financial goals and your lifestyle goals and everything and just add money to those buckets and to those places, um, and really get, as you said, like introspective about what’s important to you and apply that to your budget and reconcile them as best you can. Um, I just think it’s a wonderful, wonderful example, especially for someone who, who doesn’t right immediately after graduate school because the moving process brings in like more variables and more opportunities for like chaos in your budget when you have those kinds of transitions. That was the one that I went through personally. But yeah, I just think it’s so wonderful and awesome job. Of course, given the background that we heard, we knew that you were gonna do an awesome job with this, but it’s just amazing to like hear some more details about that.

Financial Mindsets, Skills, and Habits That Help With Post-PhD Life

Emily (39:22): Were there any skills or mindsets that you developed during graduate school with respect to your finances that you found useful in this post PhD, uh, life that you haven’t already brought up?

Carolina (39:34): I think making things automatic was something that I am still doing and I’m glad that I started before and I think like going back to the beginning about the savings accounts and we, we had a lot of transactions being automatic and right now I feel like we’re just kind of coasting. Like it, it’s something that we, we have developed already and I think that I’m never gonna pay my car insurance by month. I think that that is something that, um, I started doing in grad school because it was cheaper and now we, we just kind of continue with that. I think the frugal mindset of, of graduate students and like finding fun things to do for free, that is something that I have continued. Just yesterday I went to the library because they had a craft cafe and I made a craft and I had a blast and, and it cost $0. So I, I think a graduate student is good at finding those things around and taking the opportunity to, you know, have fun with a free activity when you, when your stipend is not as large, you sometimes like you really try to find the things that you care about and spend money on those. Like for example, I have a friend that he was willing to bike in and he bought a rather expensive bike, but it brought him a lot of joy and that was something that he did during graduate school and biking was his like stress reliever. So that was very worth it for him. And I think finding the things that are worth it for you, I think graduate school is a great time because you are sort of like tied on the money side and then sort of like continue those things and cut merci- mercifully, um, in the rest.

Finances with Carolina

Emily (41:37): Mm-Hmm <affirmative>, that’s Ramit Sethi <laugh>. I know that quote. Yeah. Um, well it was so great. It was so wonderful talking with you Carolina. Can you tell the listeners more about Finances with Carolina and what you do through your business?

Carolina (41:48): Sure. This business started out of the money club and I, I wanted to have a space in which I can help graduate students that are facing similar challenges to the ones that I faced or that my peers faced. And I would say that right now I do a lot of coaching calls in which students fill out a questionnaire that I have for them and that covers things, uh, as I mentioned, what brings you joy in your life and uh, I’m not gonna ask them to cut in their budget if that thing brings them joy <laugh> and, um, we go all over debt repayment and, um, trying to set up those high yield savings account, what are irregular expenses that they are gonna face. Retirement a lot of people are interested in that. And I would say personally from my community, I think finding someone that went through graduate school is just helpful that they can relate to you. I think that that is something that you and I bring to our communities that we, we know what it was like and we know what the problems might have been and, and heard about certain solutions or know someone that might have gone into that. So I would say the network that we, that I developed during graduate school, I have been using that for my clients as well. If someone is, and, and right now I would say coaching like just once on ones are my main focus and the way that I try to get funded is basically making the program, uh, cover those so the grad student doesn’t have to pay. Yeah, anything from budgeting to debt repayment. And I really like the one-on-one conversation. I I don’t think that’s scalable, but uh, I’m having a lot of fun with that. So, and I do like having an impact on someone’s life directly. So I think that’s why I am, I’m keeping it on the one-on-ones at the moment and I do have one digital product in which I have put like just kind of like stuff together in which, what the most common questions are and things like that. And I understand that not everybody likes the, the chatty, um, the chattiness that comes with like one-on-one coaching. So that’s, um, why I developed that one. In the future I hope to develop one that is not focused on graduate students and just in general because now I have been finding at work that some people that I did not find them in graduate school and they’re now starting their careers and they’re in their first full-time job with benefits and things like that, they’re a little bit lost. So that is another digital product that I wanna develop but is not ready yet. <laugh>.

Emily (44:38): Yeah, sounds like you’re repeating, repeating what you did during graduate school. You’re, you’re just a person that is open about money that people can feel comfortable talking to you and you find other people who are interested and you find other people who need your help at every single stage. So that’s just wonderful. And tell the listeners where they can find you.

Carolina (44:55): Yes, listeners can find me at financeswithcarolina.com and in there there’s uh, there’s a link to the digital product that I talked about. Um, there’s a link to the coaching services and things like that. So if you find me relatable and you wanna chat about money, schedule something <laugh>.

Best Financial Advice for Another Early-Career PhD

Emily (45:16): Beautiful. Okay, let’s finish up with the last question that I ask of all my guests, which is, what is your best financial advice for another early career PhD? And that could be something that we’ve already touched on in the interview or it could be something completely new.

Carolina (45:29): My best financial advice. The, it’s, it’s a marathon, not a sprint. And I think that if you start flexing the muscle of working on your personal finances with small changes that are sustainable in realistic for you, you’re more likely to stick to those goals. I would also say that in order to keep that momentum going and that inspiration that you sometimes need on, on personal finance, I really would like to encourage the listeners to find content creators that speak with relative, like speak to you in experiences that you relate to in experiences that you might have aspirational in things. And, and overall really find the content that is gonna keep you motivated. And the content is the same, it’s just the delivery, it’s the, the, the experiences that the people that are delivering the content, the network of those people. So overall, find someone that does inspire you and keep you motivated and slow and steady.

Emily (46:46): All right. Name your top few content creators that you love to follow for, for yourself personally.

Carolina (46:52): Yes. Um, well of course your podcast. I think that was one of the ones that Hello PhD. You you did a cross interview with them and that’s how I find you and I was just mesmerized of all the things that I could do with my stipend <laugh>. Um, so that’s one definitely related to graduate school in terms of minorities, I I really like the podcast Brown ambition. There’s two ladies in there and they have everything about career questions, entrepreneurship, money stuff and how that relates to one another. They’re in different stages of their careers and lives and just very interesting to see where they’re coming from and where they’re going. Uh, popcorn Finance is another one that is very nice and um, it has a lot of investing. I love their investing series. I referred everyone to that one because they have a lot of content of like, what is an ETF, what is an index fund, what is a lot of what is and and when you start reading all these things,

Emily (48:01): I didn’t know about that series. I’m gonna check that out.

Carolina (48:03): It’s really good. Um, journey to Launch is another one, that I follow, she definitely has like really cool interviews and just a lot of inspirational stories. Afford anything by Paula Pant. Yeah, those, those ones are the ones that like I probably listen like yesterday or today.

Emily (48:27): Yeah, every single one of those podcasts is also on my feed except for Popcorn Finance. I’ve only listened on and off to Popcorn Finance, but the rest of ’em, I’m a regular listener. I love all of them, especially, um, Afford Anything is like taking the podcast medium to like the next level with like journalism, um, around finances, which is so amazing. Paula Pant doing an amazing job. Um, okay. Well Carolina, thank you so much for giving this interview. It’s been really insightful and it’s been lovely talking with you. Um, thank you so much for agreeing to come on.

Carolina (48:55): Of course.

Outtro

Emily (49:06): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

How This Life Sciences PhD Fosters Entrepreneurship

June 3, 2024 by Jill Hoffman Leave a Comment

In this episode, Emily interviews Dr. Marquicia Pierce, who holds a PhD in molecular physiology and biophysics from Vanderbilt University and an MBA from Northwood University. In the ten years since finishing her PhD, Marquicia has worked in various capacities to foster life science start-ups and small businesses, and she is now the owner and principal consultant for Ruby Leaf Media, a science communication company for people who want to turn their tech story into a business story. Marquicia recounts the courses and projects she pursued during graduate school that set her up for her post-PhD career and how she balanced her advisor and committee’s expectations with her career ambitions. She also details the multitude of government, academic, and private sector resources that are available to founders and inventors and the skills and mindsets that a PhD can bring to entrepreneurship.

Links mentioned in the Episode

How This Life Sciences PhD Fosters Entrepreneurship

Teaser

Marquicia (00:00): Get in a great habit of, um, not only just looking at the numbers, but what is the story behind the numbers? If I was to say, have a narrative around this, what did, what did it mean? And it’ll help you uncover what your priorities are. Something that’s not working. Like I, I spent so much money on this, but I don’t know if it’s really working. You’re kind of already gut checking and doing like an audit, if you will.

Introduction

Emily (01:00): This is Season 18, Episode 1, and today my guest is Dr. Marquicia Pierce, who holds a PhD in molecular physiology and biophysics from Vanderbilt University and an MBA from Northwood University. In the ten years since finishing her PhD, Marquicia has worked in various capacities to foster life science start-ups and small businesses, and she is now the owner and principal consultant for Ruby Leaf Media, a science communication company for people who want to turn their tech story into a business story. Marquicia recounts the courses and projects she pursued during graduate school that set her up for her post-PhD career and how she balanced her advisor and committee’s expectations with her career ambitions. She also details the multitude of government, academic, and private sector resources that are available to founders and inventors and the skills and mindsets that a PhD can bring to entrepreneurship.

Emily (01:52): I’m looking for a couple more interviewees to round out Season 18 of this podcast! If it’s been in the back of your mind to do so, this is your official invitation to please volunteer to be interviewed. I love that on this podcast I get to feature PhDs and PhDs-to-be who are almost exclusively regular people and learn and share their real-life stories and strategies. Please go to PFforPhDs.com/podcastvolunteer/ and fill out the quick form, and I’ll be in touch over email. I look forward to interviewing you in the coming months! You can find the show notes for this episode at PFforPhDs.com/s18e1/. Without further ado, here’s my interview with Dr. Marquicia Pierce of Ruby Leaf Media.

Will You Please Introduce Yourself Further?

Emily (02:51): I am delighted to have joining me on the podcast today, Dr. Marquicia Pierce of Ruby Leaf Media, she’s the owner there. And Ruby Leaf Media, as she described to me, is a science communication company for people who want to turn their tech story into a business story. And just in our pre-interview chat that Marquicia and I had, it was so fascinating to hear about her career journey. I know you’re gonna get a lot from this as well. So, Marquicia, welcome to the podcast. Would you please introduce yourself and your company for our listeners?

Marquicia (03:18): Thank you so much, Emily, for having me. This is such a great opportunity, um, just to chat, sit down and chat with you. You’ve been providing such great valuable resources for, uh, a lot of my colleagues, so I appreciate the opportunity. Um, so yes, so my name is, um, Dr. Marquicia Pierce. I am a life scientist by training. My, uh, training was in molecular physiology and biophysics. And, uh, ever since my time in the lab, I, I found that I really enjoyed being able to take those concepts from the lab and bring them out to the community. So, um, as we’ll get into, uh, some of the, the context here, um, my background includes, um, being a military brat who, who knows that community can be, uh, made and you have an obligation to, to bring something to that community. And so, um, I’ve just been able to fortunately, have been able to do that for a lot of different, uh, high tech companies that are started by PhDs and they’re trying to cross over from the lab to, uh, bringing value to, to their community, wherever that is.

Experiences During Grad School That Went Beyond Basic Research

Emily (04:20): And this is gonna be a really fascinating interview, um, on just all the opportunities there are in front of graduate students and PhDs for doing just that, for, um, advancing their careers and translating their work. And this is gonna be amazing, but I wanna hear more about your kind of personal journey as well. So going back to graduate school, can you tell us a little bit about like the, um, the things you did that were above and beyond just your basic, basic, you know, research as a graduate student that were like side hustles or like, like extra projects that you did just experience that you gained that helped you, that helped you along in your career path?

Marquicia (04:54): Absolutely. I love this question. Um, so I did my PhD at Vanderbilt University in Nashville, Tennessee. And during that time, I knew two things for certain. I knew I wanted to incorporate some type of business into what I was, um, what I, what I was studying at the time. I was looking at how vitamin C moves in the brain, uh, on a molecular level. We were looking at different proteins that made that po- possible, if there were any, uh, phenotypes or if there’s any characteristics when you didn’t have these nutrition, um, in your, in your diet. And I love that I could connect that to and translate that to my family, like, Hey, if you don’t eat these particular nutrition, these things might happen. Um, and, uh, I remember very specifically, my, my grandmother had major symptoms of diabetes during the time that I was, um, getting my graduate program, uh, completed. And I distinctly remember one day thinking through, I know down to the molecular level what’s happening with her symptoms and her disease progression, what would happen. But I feel so useless and helpless ’cause I don’t know if there’s a particular innovation or something that could, that could help. And that I think that kind of solidified for me that there has to be a way to take what we’re learning and translate. Um, many people have done that, but that’s when it clicked for me. And so, um, I knew I wanted to incorporate business. Uh, I wanted to get an MBA, but at the time, there wasn’t really a great place to insert that into my, my program. So I ended up, um, auditing engineering, a lot of engineering management courses in the undergrad engineer engineering school, and being able to work with them on their marketing, their tech management courses.

Marquicia (06:39): Uh, I was able to be involved with one of their capstone day for seniors where they were, um, trying to put together a research project, um, around a particular technology. We were working with a small businesses in the ecosystem. Um, uh, I had a fantastic member, uh, mentor around that, Dr. John Beers who, who facilitated that connection. And so in the lab we were doing what we needed to do, but I was auditing courses, um, around that particular thing. I was involved with, uh, tech, tech Venture Challenge where we were tasked with we being other students from the medical school, the graduate school, the law school, the business school. We were all trying to get behind a particular Vanderbilt, um, or small business in Nashville invention and make a case for this could be a business that could be sustainable and provide value to the community. Um, those are, those are things that I think were pivotal to add on. You always wanna have science plus something that you, you, uh, enjoy. And also like creative graphic design types of things. So I was, uh, a lot of those art science, um, classes as well. Uh, but yeah, definitely had a lot of projects while I was getting my PhD that helped spark that fodder, if you will, for, you know, what do I do after I get my PhD.

Entrepreneurial Opportunities for Grad Students

Emily (08:02): And in your, outside of just your own personal experience in graduate school, can you think of other like, types of opportunities that graduate students might encounter that would provide similar benefits?

Marquicia (08:13): Sure. So, um, a lot of the student competitions are a great place to start. If you just want to, to dip your, your foot in. How do I work with other interdisciplinary teams, law students, business students on a project? These could be anything from a hackathon to, uh, which, you know, you spend a weekend trying to figure out a business proposal to, um, auditing a course that even, even though they’re undergraduates, that’s, that’s a great opportunity to kind of bring in some of those concepts that are complementary to your PhD. Um, we had a, we had a, uh, academic alliance that was between, uh, Vanderbilt and the entrepreneur community as a whole that, um, it was called Life Science, Tennessee Academic Alliance, where you could get involved as a, a mentor or you could, you can bring in speakers to your, your class. You could, uh, host this tech venture challenge.

Marquicia (09:08): Um, those are great opportunities if you just wanna see if that, that opportunity is for you. Um, a lot of, a lot of times now that was, that was 10 years ago, uh, I’m seeing a lot more, uh, fellowships or courses that you can take while you’re doing your, your, your PhD that will incorporate, Hey, here’s a small business proposal, a market research, um, uh, project, uh, at, at in Michigan, there is a group called My Lead. It is graduate students, postdoc students that do just that. They work as a small boutique consulting agency where they put together, uh, a market research plan. They dig into the de the details and the data both on the science side and the business side and be, and are able to work with other companies in that way. So, um, those smaller projects, six, three to six months or a semester long, uh, is a, is a great way to kind of get your feet feet wet. With that.

Pushback For Participating in Activities Outside of the Lab

Emily (10:05): I’m wondering, um, did you encounter any cultural in terms of, uh, the field that you’re in, the life sciences, any, uh, pushback to you participating in these outside of the lab activities? I’ve just noticed that the life sciences, um, among the STEM fields would probably be the most resistant, um, to those kinds of things. But it sounds like Vanderbilt itself was pretty well set up to facilitate this. I’m just wondering what your observations were around that sort of like, culture of do we engage with business, do we engage with startups, like from, you know, the research side of things?

Marquicia (10:41): That’s a great question. So I know that there were, there were parts of, um, the community that really was open to, you know, there’s, there’s opportunities to kind of engage in these particular ways. We very often had that same conversation, like, how, how much do I say? I don’t want to necessarily, um, have an update about this in my committee meeting, uh, <laugh>. It could very well in that particular case be, um, seen as a distraction. You know, you’re, you’re here for getting your graduate studies done, you stay in the lab, especially if things aren’t working, it’s very hard to justify, you know, um, yeah, well, I won’t be able to work on it, you know, I’m, I’m trying to do this particular class. Um, I think that’s why auditing the class was really helpful. And, um, uh, the way Vanderbilt was set up, it was, uh, their IGP or the interdisciplinary program was very used to these different departments had courses that was as attached to it that we were, depending on our specific route, able to go to.

Marquicia (11:47): Um, and so there was a little bit more set up for if you wanna audit a class, um, we can, we could help that. But I still have to get permission through the graduate school to audit an undergrad class. And that included a conversation with my PI and my director of graduate studies who very, at the beginning, very naively, I said, you know, Hey, I, I think I would like to get my MBA. They were really open to, that’s a, that’s a great thought, uh, in theory, <laugh>, you know, but not necessarily having a pathway for to, to that happen. But yeah, it was very much, uh, I felt like I’m living two lives, and if, if you’re going over to the dark side of consulting or industry or management of, uh, investment banking, something that in, in included that, it was, it was kind of, um, you have to be very careful and impactful of how, how you were able to ex explain that. Um, you know, this is a class that I’m taking, it will be over at this particular time, uh, for one of the projects, uh, as intern, I have to say, well, I, I would be willing to take a pay decrease because I’m not, I’m not putting in the same amount of hours per week. So it, there were, and whether or not that that’s discouraged or encouraged, um, especially if you’re going on year six, six of your PhD, it, those can be very awkward <laugh> conversations, to say the least.

Resources for Academics Who Want to Start a Business

Emily (13:09): Well, thank you so much for sharing kind of your experience in that area. I hope it’s, I hope it’s encouraging to people who are facing similar like questions of, it’s, it’s worth pushing it through. It’s worth having these conversations. Maybe you don’t need to tell them everything that’s going, you know, tell them what they need to know, but, you know, get your work done and, and still, because these, these, these extra quote unquote experiences are the ones that are the most valuable for your career. I, I would say, we’ll see in your own story how this, um, develops. So can you say anything more about, um, the, the resources that are available for, let’s say, graduate students or postdocs or people who are still associated with academia who want to start a business, how, how the, how academia can be set up to help them do that. Um, and what are like the pros and cons of accessing those resources?

Marquicia (13:54): That’s a really good question. Um, if you are in academia, you do have a lot of resources that say if you were not, and you were trying to get something, uh, into, into the marketplace on your own that you might not be aware of. So first of all, if you’re a student or a faculty member, um, the things that you would want to be on the lookout for is if there are any, uh, connections you have with your tech transfer office. Because first and foremost, you’ve probably signed some contract or you have something spelled out with your, your place of employment that any intellectual property or even idea or anything that you work on is, is owned by the university point blank period. So you’re, the process for being able to, um, if, if it’s connected with your research, bring that into a business, they, they have a process for doing that.

Marquicia (14:47): They usually, the tech transfer office will, will, uh, facilitate. Um, it includes, Hey, I have this idea. It is just here, I’m disclosing it to you. I haven’t formed a company. I have this idea. It’s, it’s outside of my research scope. What information or what types of resources do you have, uh, for, for this particular setup? Um, at Michigan State University where I did my postdoc, there was actually a research foundation that, um, helped if you were a student, a faculty member, or even a staff person that was at, at the, OR alumni that was affiliated with the university, and you want to start a company, they were there for you to provide resources like, uh, entrepreneur and residents would be a person who’s gone through that process. They will help you build out a business plan, build out your value proposition, which basically says, how do I, how do I make a business that creates value for other people?

Marquicia (15:39): How do I monetize it and sustain it? There will also be your guide for, here’s some state resources, here’s some academic resources in terms of money <laugh> to fund either other students, undergraduates or postdocs that can help you work through this idea. And they will actually be the, um, work in tandem with the tech transfer office, um, to say, Hey, this, this is related. This could be something that we would need the university to continue to help fund the research for think medical devices, therapeutics, um, things that it takes a university and maybe a team to research. They, they work together. Anything that has to do with clinical trials, you would have to need, you would have to use a village <laugh> that, that EIR or the entrepreneur residents can help guide you through. Um, so there’s academic ins, uh, resources, so tech transfer office, student entrepreneurship groups.

Marquicia (16:36): Um, I’ve had a lot of students that I’ve worked with that are working with a family company, they’ve been able to go through with their student, um, business groups, the, the business schools there. They have pitch competitions that give very real money, 10, $20,000 sometimes. And then also connections around that. How do you get your marketing out, your packaging, your, um, your, your story for pitching to other investors? Hey, you have this food company, Hey, you have this idea. Who in your alumni network can help bring some of, uh, some insights to this? So there’s, there’s resources there, uh, at the school. And then in the, um, community, you have, um, state resources that wanna see particularly life science, high tech innovations, push their economy forward. So there’s grants on that particular side for, uh, if you’re just in this particular region working on a high, high tech, high growth company, scalable company, which a lot of life science companies are, um, here’s what we can offer to you.

Marquicia (17:38): Here’s the connections, market research, um, legal consultants, regulatory consultants, um, how do you put together a website? Those are, those are resources that are available on that end. And then one last thing, I know I need to be brief, brief about this. There are, uh, government particular, uh, outside of the different accelerate accelerators for those things, there are government funding. It’s called, uh, small Business Innovation research, or S-B-I-R-S-T-T-R grants that can specifically, if you’re connected with the university, they, um, would provide high risk, um, uh, financial, financial resources to high risk, um, innovations. Those take a little bit longer to do, and you definitely want a team to help guide you through that. But those are also, that’s also money that you don’t have to give up equity or parts of your company to access. And I’ll, I’ll pause there.

Commercial

Emily (18:35): Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, goal-setting, investing, frugality, increasing income, or student loans, each tailored specifically for graduate students and postdocs? I offer seminars and workshops on these topics and more in a variety of formats, and I’m now booking for the 2024-2025 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Orientations or very close to the start of the academic year would be a perfect time for tax education or general personal finance content. Ask the potential host to go to PFforPhDs.com/financial-education/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

Ownership of Ideas and Technology Created With and Without University Resources

Emily (20:02): Yeah, I think that you led right into kinda the next question, which is like the more, um, I guess aside from technology that was developed under your employment with the university, that would then be, you know, co-owned with the university. Let’s say you had an idea outside of it, not related to directly your work, the university wouldn’t own it. Um, the more kind of help you reach out for, depending on the type of help that you get, you may be giving up, um, ownership in your idea. Is that right? Can you speak a little bit about that? I mean, maybe there’s different, you know, giving up equity is different than getting a grant, for example. Can you talk about some distinctions there?

Marquicia (20:39): Sure. So at the very, um, at the very early stage in early stage in life sciences are, um, say you have a device, a medical device, you have a prototype for that device, but you haven’t tested it out on humans. You haven’t done a clinical trial or you have a therapeutic that you, you’ve maybe tested it out on mice, um, but you haven’t, you haven’t moved it towards, um, seeing if it holds up in, in humans. Most of the time you’re doing that stuff with the university. But, uh, if you, if you aren’t and you’re still in that early stage, um, the, the choices that you have are, you can go for grants and in kind services they call this non-dilutive funding, where you don’t dilute your ownership. And, um, there’s regional and government funding for that. And then sometimes accelerators or, uh, venture venture groups will have a program in which they are developing something or they’re developing co-developing with you something that can fast track that time to the market.

Marquicia (21:42): So some examples of this could be like Y Combinator or, you know, um, uh, Techstars or something where in order to have access to this, this great structure that they put in, uh, and maybe even some funds to get together, they would require a percentage of your company small, it could be many that are between five to 12% of that company. Um, the thing is, if you are, if in, if you’re in the life science space and you’re that early stage and you’re already giving up equity, you have a very long runway <laugh> to go to where every, at every milestone the company gets a little bit more valuable. And if you, you’re already given up equity at those earlier stages, you don’t have as much for the, the really heavy duty milestones, a clinical trial, uh, you know, a a distributor agreement to also incorporate or leverage giving up some of your equity. Um, so it’s, it is a very different, uh, thing for the life sciences or an academic project to, to kind of evaluate these options. Uh, if you’re really early on, you haven’t gotten a lot of the feedback or regulatory spot you could consider yourself early and the latest you can push off giving off a pa- piece of your company, the better because it’ll be valuable hopefully later on. And, um, you’ll still have that, you’ll retain that, um, that ownership.

Common Skillsets and Mindsets Between PhDs and Entrepreneurs

Emily (23:09): Well, thank you so much for giving the listeners kind of a taste of that, um, those decisions that need to be made earlier on. It, it sounds like, um, being, you know, having an academic affiliation can be so helpful because you are in many ways still considered like a learner no matter, no matter what stage you’re at. And so there’s so many resources available to help you along that path. So I’m, I’m curious now about your personal journey and also the journeys you’ve observed in others, um, from, I believe you mentioned earlier that you started your company sort of out around the time that you finished graduate school. You’ve also had a lot of other positions along the way that have, you know, added to your career. Um, and so I’m wondering for you as an entrepreneur and someone who works with entrepreneurs, what kinds of, um, skill sets, maybe mindsets are common between PhDs and people who start and run businesses? Um, like what’s help? What did we learn in the PhD that’s helpful for later entrepreneurship, those kinds of things. And that could be from your personal experience or the people you’ve known.

Marquicia (24:09): Sure. I’ll start with my personal experience. So the very first time I was introduced to like, we have to set up a company around this technology was during my postdoc. So after I left Vanderbilt, I went to Michigan State University under a, a industrial postdoc position where, um, the goal was I was working with two academic re- tenure track professors, <laugh>, trying to get a company up and going and started. And so, um, the skillset that I brought to the table and that I was trying to hone, um, was, was interesting. ’cause I was, while I was getting my PhD, I was also getting my MBA, so I was learning what were some of the frameworks that business people used, how do they talk about how they use a process, and then how do, how does that work in the lab? Or, um, how do I need to translate that from what we were doing in the lab?

Marquicia (25:00): And so, um, I would also often go back to the framework for problem solving and commu- and gr- and great communication were, um, very much similar. They just were talking about different things. So I’ll, I’ll explain. So, um, in the lab I’m working through, okay, is a small molecule, uh, useful. We do a battery of tests to distinguish why, um, based off a couple of characteristics. It might be this one is, um, it works well with cells, it’s less toxic and, you know, um, it’s, it’s easy to make. I’m being arbitrary. The way I would translate that story, um, going through my, my MBA type of framework would be, well, what value are we creating and, and specifically, who is it for? So the molecule, these, these features that we have that we were very, um, we’re trying to, trying to point out and be distinct about, now I have to turn them into benefits.

Marquicia (26:01): Well, uh, it, it’s this type of molecule that means that it’s, it’s less toxic. What does that mean to our business uh, story? Um, the people who would use it, the physicians or even the patient themselves. Well, that means that if we can keep it within the cell, it’s not messing around with your, your gut and causing you nauseous or, you know, killing other healthy cells, that means that you could take less of it. And, you know, that means for the physicians, they might adhere to the, to the drug cadence a little bit better for the patient. It means that I’m not getting upset stomachs as as often, I don’t have to, you know, get as many injections. Those are the types of communication skills where you, you are working through the same rigorous process, but you’re just trying to communicate it in a little bit different way. Um, that you, that you see when you’re filling out that story as a, as a PhD, well, I’m doing this study who, who’s in my audience? Or who’s, who’s my audience? Usually it’s your community members, right? So they wanna say they wanna see what happened, what are you doing next? And then, you know, what, what can we help you with? Same thing with a, a VC <laugh> or a, a grant writer. You have to say, what was the background, um, in their particular words, what are you working on? What is, what’s the value that you’re creating? And then where can we go from next? What’s the big milestone? So you’re, you’re able to think through a structure, uh, that’s very similar. It’s, it just needs to be translated a little bit different. Um, but being able to communicate that is, is a strength. Uh, being able to work with multiple teams that are very bright people, but they don’t work where in the same lab and the same methods and tools that you work with, you need to be able to talk their language.

Marquicia (27:41): You have to do that in, in the business world as well. And the scientists and engineers who are able to cross that gap or the ones and coachable for doing that, understanding that, okay, this is a different language. You can apply the, the practice of it, but you have to say it in a certain way. The ones that are open to learning that those are the ones that can convince other people that this is something of value. Get on our team, give us funding, give us resources, uh, that, that helps them to move that, that tech forward.

Emily (28:10): That’s fascinating. Thank you so much. Was there anything else you wanted to add on that question about skills or mindsets that transfer?

Marquicia (28:18): Um, the only other thing is that, uh, usually when I talk about my PhD and I, and I hear other people’s story and they, it comes off very linearly. We can only say one thing at a time. We did this and then we did this, and then we did this. But in reality, your, your skillset that you’re picking up with these different experiences, they aren’t a straight line. They look more like a Gantt chart. It’s like, I was trying this and then I got, I got into graphic design by being the newspaper editor for the department or something like this. And then I, that kind of went to see what policy was doing. So I volunteered a semester at this and you know, you don’t really know if they overlap or if it will lead to that big next step, if you will. But, um, that’s okay.

Marquicia (29:00): It’s, that’s what makes the journey yours is how you find out what’s create, um, how, uh, what you resonate with and the skills that you learn and these offset project or offshoot products or something that you, I was just interested in. Those are the ones that, that when you’re talking to a hiring manager or a, a program manager for that next big gig, those are the things that will resonate with them too. So, um, uh, just know that it won’t be a straight line. You’re not gonna be able to line up, uh, everything until you’ve kind of stay taken a step back and said, well, well actually, that set me up really well for this. I didn’t even know I liked doing this particular thing. So that’s, that’s all I would say for that.

Ruby Leaf Media

Emily (29:42): Absolutely. It’s just a great encouragement to, um, devote I would say a certain amount of time, a certain consistent amount of time throughout your PhD to these, like outside of the lab type activities, um, just so you can explore yourself and explore your environment and figure out what you like. And, um, as you said, you don’t know where it’s going to lead, but that’s a reason to just experiment. And I certainly did this, I didn’t do this as much in my earlier years of my PhD, but certainly by the last couple of years I was more like actively reaching out and trying different things, including the things that led to personal finance for PhDs. Um, because I wanted to figure out where I wanted to go next, and I knew I wasn’t gonna get there by just like keeping my head down and like staying in the lab all the time. Um, that wasn’t where, uh, I was gonna be headed, so. Okay. Would you please tell us a little bit more about Ruby Leaf Media and how people can get in touch with you if they would like to follow up?

Marquicia (30:31): Sure. So I, I started Ruby Leaf Media, um, shortly, like around the time I was finishing up graduate school because I wanted to continue doing these small projects around market research or, you know, putting together a, a industry report and getting paid for it <laugh>. So, uh, basically I, I started Ruby Leaf Media to, um, have that vehicle for that and I really wanted a place to infuse some creativity. Uh, at the time I was really, um, interested in how can you turn, uh, something that’s really technical into something that could be very beautiful and inspiring to your, the people that are closest to you, your family, your, your, uh, community. And so, uh, create creativity versus, um, you know, just being very defensive and, and, um, tactical about what you’re saying. I wanted to kind of merge the two. And so being able to have my own company that worked at that intersection of, uh, storytelling that businesses usually will have to do in some type of, some shape of way was my, my reason for getting started.

Marquicia (31:41): Um, today I work with, uh, a lot of ecosystem partners, accelerators, um, academic universities or academic institutions, I to, I should say, that are trying to instill some of these ideas, um, in some of these concepts and just some of this creative, um, mentor learning or peer group learning, if you will, uh, with their, with their portfolio companies or with their, with their founders. And so, um, being able to, to provide structure for that, either through a program or being able to give them tips on how do you pitch, uh, for a particular funding opportunity, how do you put that story together? That’s what, that’s, um, what my team and myself are, are really interested in doing. And we’re really interested in being able to do that for a lot of different, um, providers so that you can get that group learning experience. Um, right now, uh, the best way to look to, to figure out and see all of the different companies that I’ve worked with actually is actually my LinkedIn profile. <laugh>.

Best Financial Advice for Another Early-Career PhD

Emily (32:48): Very good, thank you. The last question that I ask of all my guests is, what is your best financial advice for another early career PhD? And that could be something that we’ve touched on already in the interview, or it could be something completely new.

Marquicia (33:01): Um, the advice part, uh, it kind of goes around budgeting. So graduate students, uh, well, when I was a graduate student, we got paid once a month and, um, I think probably a lot of graduate students started doing this. They’re doing something similar, but it really helped me got get into the idea of, um, a little bit longer term planning than two weeks or, or even one week, like what are some of the goals that we have for this particular month? IE what bills do we have to pay? What are we trying to get, get done? And, um, it set the habit of budgeting month by month and then, um, being able to bring that over to my business. Budgeting is absolutely one of the, I mean, I feel like a lot of your resources kind of talk, talk, talk through this, but, um, just getting a great habit of, um, not only just looking at the numbers, but what is the story behind the numbers?

Marquicia (33:59): Uh, just kind of walk through. I I, I kind of like when I go through my budget, like, okay, if I was to say, have a narrative around this, what did, what did it mean? And it’ll help you uncover what your priorities are. Something that’s not working. Like I, I spent so much money on this, but I don’t know if it’s really working. You’re kind of already gut checking and doing like an audit, if you will. Uh, and, and it’s, and it’s really helpful with business ’cause it’s like, I’m paying for all these subscription services, or I’m trying, I’m trying to get this marketing campaign off the, off the ground. I think it’ll be done with this quarter, but I’m already 15% into the budget. Did we do what we needed? Just kind of talk it out, <laugh>, just have a narrative around, around your finances and just, just say it out loud. We’ll help you uncover, you know, what’s, what’s working, what’s not working, what are some of your plans? Like, if you find yourself saying things over and over, it’s like, that’s, I keep saying this, uh, that’s, that’s been helpful for me.

Emily (34:55): You know, I, I don’t think I’ve ever heard that suggestion before. Like, not only within the podcast, but like in all the personal finance, you know, material that I read. I don’t think I’ve ever heard someone say, you know, in the budgeting reflection process to tell yourself a story and to create a narrative around how did this period of time go? Did I accomplish what I wanted to accomplish? And I find that to be such a good suggestion and I think I’m gonna start doing this <laugh>, um, because it feels very like non-judgmental. Like it’s, it’s just this is how things went. I’m gonna review that. I’m gonna tell myself the story of it, and next month I have the chance to start over again and make a different story next month if I want to or tell the same one if I thought it went really well.

Emily (35:37): And so, yeah. Yeah, that’s so creative and, and I obviously it plays back into this whole interview that we’ve had and the importance of communication and what you do now. So like, it shouldn’t surprise me that this advice, uh, you know, came from you in particular, but I think it’s, that was, that was really amazing. Thank you so much. Um, Marquicia, this has been such a fascinating interview. Um, thank you so much for volunteering to come on the podcast and to share kind of all of these wonderful, you know, experiences you’ve had and the resources you’ve been able to, um, tap into and just suggestions for other people who want to go on a similar path. Thank you.

Marquicia (36:08): Thank you so much for having me. I really appreciate what you’re doing and this is great. I wish I had been listening to your podcast when I was a grad student.

Outtro

Emily (36:24): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

This PhD Works Part-Time After Reaching Financial Independence in Austin Texas

April 29, 2024 by Jill Hoffman

In this episode, Emily interview Dr. Corwin Olson, who completed his PhD in aerospace engineering and achieved financial independence (FI) just a handful of years later. Corwin argues that using a traditional IRA is typically advantageous over a Roth IRA, even for a grad student, if they have aspirations to retire early in the 0% marginal income tax bracket. Corwin and Emily walk step-by-step through his family’s finances and his money mindset from the time he finished his master’s in 2009 with a “$0 net worth” to when they reached FI in 2021. Corwin tried out unemployment during the pandemic, but ultimately returned to work a part-time schedule because he still wanted to use his engineering skills professionally. Corwin’s story highlights how a PhD can achieve a highly satisfying job and work-life balance through a combination of financial freedom and career capital.

Links mentioned in the Episode

This PhD Works Part-Time After Reaching Financial Independence in Austin Texas

Teaser

Corwin (00:00): It’s not about not working. This is what I tell everyone I meet who has not heard about FIRE or FI much before. It is not about not working. It is about control over your life. If you are financially independent, then you get to dictate what you do, like broadly across your entire life. I really wanted that control over my life, especially since we wanted to have another kid and we did. Uh, and so when, uh, our kid number two came along, my wife dropped down to halftime and then, uh, about six months later, I also dropped to zero time. And then I went back to work halftime this spring. It’s a perfect, um, application of FI. We decided that we were gonna do something different and that gave us the ability to do so without stressing about money.

Introduction

Emily (01:24): This is Season 17, Episode 9, and today my guest is Dr. Corwin Olson, who completed his PhD in aerospace engineering and achieved financial independence (FI) just a handful of years later. Corwin argues that using a traditional IRA is typically advantageous over a Roth IRA, even for a grad student, if they have aspirations to retire early in the 0% marginal income tax bracket. Corwin and I walk step-by-step through his family’s finances and his money mindset from the time he finished his master’s in 2009 with a “$0 net worth” to when they reached FI in 2021. Corwin tried out unemployment during the pandemic, but ultimately returned to work a part-time schedule because he still wanted to use his engineering skills professionally. Corwin’s story highlights how a PhD can achieve a highly satisfying job and work-life balance through a combination of financial freedom and career capital.

Emily (02:21): This spring, I’m bringing back my 15-minute introductory calls! This is a chance for you and I to meet one-on-one. I want to hear your current financial questions and challenges. If I can provide some quick value by answering a question or pointing you to a resource I absolutely will. These calls are a way for me to keep a pulse on what’s going on financially in our community so that I can address whatever comes up through my seminars for universities and the free content I create. I used to offer these calls years ago to everyone who joined my mailing list, and they were so fun and valuable to both of us! I would love to meet you, so please sign up today at PFforPhDs.com/intro/. By the way, we’re taking a short break from publishing podcast episodes between Season 17 and Season 18. You can expect the next episode to drop on June 3, 2024. You can find the show notes for this episode at PFforPhDs.com/s17e9/. Without further ado, here’s my interview with Dr. Corwin Olson.

Will You Please Introduce Yourself Further?

Emily (03:35): I am delighted to have joining me on the podcast today, Dr. Corwin Olson of Engineering Your FI. Corwin is a PhD in aerospace engineering and he is now financially independent. And we met just a couple weeks ago. We’re recording this in November, 2023. We met at FinCon 2023, which happened in late October, and we ran into each other first at the taxes subgroup interest area, and I saw, um, his name and he saw mine and we knew we had to connect further. Um, so I’m just really excited to have a fellow engineer PhD on the podcast who is excited about personal finance and specifically fire. We’re gonna learn a lot from Corwin today. Um, so Corwin, will you please just introduce yourself, um, and your family to us a little bit further?

Corwin (04:20): Sure. Uh, married family, uh, two kids young on <inaudible>, two and seven. Uh, born in Dallas, Texas. Uh, but I’ve lived in Texas most of my life. So I’m currently in Austin, Texas. Uh, got my bachelor’s and master’s at UT Austin, university of Texas at Austin Aerospace Engineering back in the aughts. And uh, I also was fortunate enough as an undergraduate to become a certified NASA instructor, so that was a lot of fun. I got a lot of good leadership and speaking skills from that. Uh, worked to Washington DC for a few years and worked a company that did navigation for a big NASA mission, which was a lot of fun. Went back for my PhD in 2012. Uh, same school UT Austin and I worked on autonomous optical navigation around small bodies like asteroids and comets. Uh, then finished up my PhD in 2016 and continued on with UT as a researcher in one of the labs here at ut. And it was towards the second half of my PhD program. And then after getting my PhD that I got a lot more interested in personal finance and fire and discovered that whole community

Defining Financial Terms

Emily (05:24): Emily here breaking in during the editing process. Since Corwin and I about to jump into some heavy financial nerd-speak, I want to take a second here to define terms for new listeners. 1) FIRE stands for financial independence retire early and FI stands for financial independence. People in the FIRE movement strive for early financial independence so that they have the option to stop working, and by early I mean perhaps in your 30s or 40s. 2) An IRA is an individual retirement arrangement, and it is a tax break that the federal government offers to incentive investing for retirement. In 2024, you can invest up to $7,000 in an IRA if you’re under age 50 and have taxable compensation. When you open an IRA, you can choose a traditional version or a Roth version or both. With a traditional IRA, you get an income tax break on the money you contribute in the year of your contribution. The money then grows tax-free, and you pay ordinary income tax on the withdrawals in retirement. With a Roth IRA, you pay your full income tax on your contribution, and then the money grows income tax-free and you withdraw it income tax-free in retirement. The standard advice is to contribute to Roth accounts when you are in your lower-earning years and a relatively low income tax bracket and switch to traditional when in your higher-earning years and a relatively high income tax bracket. Corwin is going to argue that people who want to retire early should really prefer to contribute to traditional accounts, and that includes grad students in the 12% federal marginal tax bracket. OK back to the interview.

Contributing to a Traditional IRA vs a Roth IRA in Grad School

Emily (06:49): Now, you said something very provocative to me at FinCon, which was that I, I may butcher what you said, but it was something on the lines of pretty much everybody should just be using traditional retirement accounts. And maybe you were saying that in the context of people who are interested in pursuing FI. Can you re restate what, what caught my attention during our conversation?

Corwin (07:07): Well, I think my main motivation was to emphasize how much better traditional is than a lot of people think. They think, oh, I wanna pay my taxes now, might be larger later. And from everything I’ve read for lots of different places, especially in the fire community, if you do the math, it consistently shows that traditional seems to come out on top.

Emily (07:30): Of course, my follow up question to you at that time was what about the grad students Corwin? Mm-Hmm <affirmative>. So that is what you have worked on in the few weeks since we left FinCon preparing for this interview. So let’s talk now about a grad student kind of specific scenario. So we’re talking about someone who’s in graduate school, we’re gonna make the assumption that they’re in the 12% marginal tax bracket. I’ve always kinda said, uh, virtually every grad student I’ve ever spoken with, if they’re investing in an in an IRA, they’re using a Roth. It’s just like the popular option by far and there’s reasons for that which we’ll go into. Um, but you we’re just gonna do the math for us. So yeah, please tell us now like the scenarios that you were looking at and kind of the outcomes and where people can read your full post about this.

Corwin (08:13): Sure. So, uh, I did this most recent blog post on engineeringyourfi.com, traditional Roth versus traditional IRA contributions in grad school. And I put the Python code that I used to generate all these results in the post. You can go download it, take a look. I know a lot of grad students know Python, so that’s good <laugh>. Um, the broad strokes conclusion is generally, you know what people have said for many, many years. It all depends on your input versus output tax rates, right? So if you are a hundred percent confident that you’re gonna be withdrawing your money in a 24% marginal tax bracket later in life and you’re in grad school now and you’re in the 12% tax bracket, then yeah you should just put it into Roth if you’re totally sure of that, right? But I think what I like to push for is that actually, especially if you’re at all interested in financial independence at an early age, retiring early, taking sabbaticals, um, then actually it can make a lot more sense to go after traditional because it is actually a lot more feasible to have a 0% tax bracket is a FIREd person, early retired person, uh, by taking a advantage of the standard deduction and the really large typically, um, 0% long-term capital gains bracket. So I did a lot of plots and I showed, you know, not just the values of the traditional versus Roth, which is deceptive, right? ’cause you haven’t paid taxes on the traditional but also the cash out value of each. And there’s some really cool nuances and fluctuations after you hit 60 or 59 and a half, things simplify a lot, right? There’s no 10% penalty. But in general, um, I still would prefer traditional because I think with our expense levels we can very easily have a 0% tax bracket and it’s quite beneficial for us to go do that. So a lot more detail in the post though.

Emily (10:00): Yeah. So what I was kind of thinking through when I was looking at these results here, which are basically like, well, okay, you’re looking at your 12% current marginal tax bracket that you would presumably be paying as a graduate student versus when you want to withdraw from this account. Maybe that’s before retirement age, maybe that’s after, um, what is your marginal tax rate going to be? Then you looked at three assumptions, which was zero, as you’ve just been mentioning 24% and also 12%. Um, and once you actually pay the tax on this money, once you get it outta the traditional account, um, it was sort of, it was even right just as good if you were withdrawing it in the 12% tax bracket, right? Same, same. Um, if you manage to get down at that 0% tax bracket, then there’s a clear advantage for the traditional and if you’re a managing to be withdrawing money in the 24% tax bracket, there’s an advantage for the Roth. But what I was thinking about and maybe what could be a thought exercise for the listener is what is your tax bracket going to be in retirement? Because when you say something like 24%, like that might be your tax bracket in your, your peak, you know, earning years, working years for your family, something in that range. But a lot of people live on much less money in retirement. That is to say they have to withdraw much less money than they were earning because maybe they had a high savings rate going on. Maybe their expenses have dropped later in life because their kids are outta the house or whatever the reason is. Um, so it’s very hard to sort of predict what, what is your tax bracket going to be later in life? Is it gonna be as high as it is in your working years? Is it definitely going to be lower? Um, and especially sitting from the position of a grad student when you don’t really know what your career is going to be. So definitely like for those of you who want to nerd out about tax rates and would be open to the possibility of maybe not doing a Roth IRA during grad school, maybe doing the traditional, definitely check out Corwin’s post at Engineering Your FI. Um, but I want to talk further now about your personal story and why for you that 0% tax bracket, oh, the traditional would’ve been the better choice, um, was is something that you have, have, you know, achieved in this at a relatively early age. So yeah, let’s talk more about your like personal story. So you told us earlier that you worked for several years before pursuing your PhD. You weren’t into the fire movement at that time. Um, so were you doing things like contributing to your tax advantage retirement accounts? Like or was it something you didn’t even think about at that time?

Pre-FIRE Finances

Corwin (12:15): Yeah, so I was fortunate to get my master’s in 2009. Went down to a net worth of $0 <laugh> because I spent all my savings going through a big backpacking trip. But my uncle sent me this article, snail mail of course, you know, back in 2009 and it’s my Uncle <laugh> and it was this money article about how you should invest in index funds. And I’m like, Hmm, okay, what are these things? The markets had just crashed, you know, they were very low valuations. So I was like, you know, I should probably do this. At the very least, I uh, wanted to match my 401k for my employer, right. And my wife had started working around the same time. So we did that, but we also had to save for a wedding and we lived in Washington DC very expensive. So at the time we were not focused on maxing out our savings rate, but we did know we needed to start investing and that paid off quite heavily because the markets were so down. We started our careers. We were lucky to get jobs <laugh> in 2009, right when the market, the economy was, uh, suffering heavily. So yeah, we were fortunate

Emily (13:12): So you had a savings rate.

Corwin (13:14): Yeah, right. I don’t even know what it was. It was definitely under 50% <laugh>.

Emily (13:19): So. Okay. So let’s kind of fast forward to when you started your PhD. I think you said that was 2012, right? Yes. And so what was your mindset like at that time around, I mean, I’m presuming you took a pay cut, right? Uh, but maybe your wife maintained her income. Like just talk us through kind of the, the shift in household finances that occurred when you started your PhD.

Corwin (13:37): Sure. So I was very fortunate that because of my work experience and grades and all that, I was able to get this really nice NASA fellowship and I also was able to get a really nice UT fellowship. So I made a pretty nice salary in graduate school, 45K a year. Uh, so it is possible to do that <laugh> for the, uh, the folks who are listening out there. Uh, it’s, you know, not super common. Usually you’re looking at close to 20k, although maybe that number’s higher now because of inflation, you know? Um, but you can make a bit more money with these fellowships. That’s why I strongly encourage all grad students to go after them. Um, but yeah, I, uh, I was more into minimalism back then ’cause I didn’t know about fire and so I thought, okay, maybe this is how I need to, to live my life, be minimalist <laugh>. But yeah, it was still, you know, finances were not, were always on the back burner still at that point.

Emily (14:28): So you were still saving, but it was not a, a major focus until a few years later, is that right?

Corwin (14:32): Right, right, right.

Post-PhD Finances and the Financial Independence Movement

Emily (14:33): Okay. So let’s talk about when you were finishing your PhD. Um, what was going on with your family overall and then how your finances changed when you got that post PhD job?

Corwin (14:42): We were pregnant with my first child. Uh, and so he was born three months before my dissertation <laugh>, which was quite rough. And you know, my wife and I are thinking about what we wanted to do after I got my degree and she was enjoying her job. She wanted to continue there. I was thinking about the business, small business, thought I might do something entrepreneurial. And it was when I discovered the FI movement, it was a Mr. Money Mustache article as it is for so many people. Uh, that really launched me down that, uh, community path, uh, to find out about all of that. And then I realized, actually I think that’s what I want most out of life right now, <laugh>. So I was fortunate that there, um, was a high paying engineering job that I could take here in Austin, a a really good lab here. So, uh, I decided, well, I think that’s what I want. Also, we have a baby coming and this would be nice to have that stability for that. Maybe a little less stress <laugh> a few less hours. I always told people my easy job was going into the office, right? Uh, so that was where we decided, okay, let’s just do two full-time jobs and let’s really ramp up our savings rate. So we ramped it up to, I think on average about 70%. Um, and one of the reasons I was able to do that is I was very fortunate that I had access to an additional retirement account, 457B, which hopefully some of your listeners are familiar with. So we maxed out that we maxed out my 403B, my wife’s 401k. That helped a tremendous amount with getting that kind of savings, right? So, yeah.

Emily (16:17): Wow. I just, I wanna probe a little bit further on like, okay, you, you’ve had this career already, you’ve just finished your PhD and you decide I don’t wanna work anymore. Or like, I don’t wanna have to work anymore in a, in a relatively short period of time, right? ’cause most people, you finish a PhD, you’re looking at 30, 40, 50 year career after that point. But that is very antithetical to like the MMM like mindset. So what exactly was your goal and what was your motivation for pursuing that goal?

Corwin (16:45): So it was really about the latter thing you just said and not the former thing. You said it’s not about not working. This is what I tell everyone I meet who has not heard about fire or fi much before. It is not about not working. It is about control over your life. If you are financially independent, then you get to dictate what you do like broadly across your entire life. So my wife took advantage of that by essentially creating a new role within our company. She’s like, I’m not as enjoying this as much, but I would like to stay with y’all. I like the people I’m working with. I’d rather do this. And they said, oh, okay, well let’s say yeah, <laugh>. So she’s continued to do that and she really likes it. And I also really wanted that control over my life, especially since we wanted to have another kid. And we did. Uh, and so when, uh, our kid number two came along, my wife dropped down to halftime, and then, uh, about six months later, I also dropped to zero time. And then I went back to work halftime this spring and we could talk a lot more about that <laugh> as well. But it’s really just the, I mean, it’s a perfect, um, application of FI. We decided that we were gonna do something different and that gave us the ability to do so without stressing about money.

Emily (17:59): So this is just a very short timeline and I know you, you know, you had been saving since like 2009 at a lower rate, but really we’re talking like 2016 when you started your post PhD job, um, to, it sounds like about 2021 when you were able to really change like your work lives. Um, I mean that’s only five years. Like even the most aggressive, like fire people talk about 10 years, right? Not starting from zero. Um, yeah, so like this is just, it’s just amazing. I mean, I know the 70% savings rate, like that’s what did it, right? That’s a really, really high savings rate.

Corwin (18:31): Well, market the markets too-

Emily (18:32): But I’m just marveling over this short timeline. Mm-Hmm,

Corwin (18:34): <affirmative> Yeah, the market’s really exploded. If it had been a bad or even mediocre market during that time, we, we would not have done that. I mean, it was just because the stock market, we didn’t do anything other than bland vanilla total stock market index funds. So we didn’t pick stocks or anything like that to try to get lucky with, you know, which ones we’ve chose. So it was good fortune as well, big time.

Emily (18:57): I think in some ways your story is relatable, like you just said, using index funds. No crazy inaccessible investing strategies. Uh, furthermore, as you mentioned earlier, you took a straight W2 job, you didn’t, you know, strike out on your own and start the business. There can be upside to that. There can also be downside. Um, and so in, in that way it’s relatable, but come on, a 70% savings rate, like that’s the part that’s like, how are you doing this? So I want you to give me a couple of like structural things like how, how your life is that helps you achieve or at that time, right from, from those incomes you had then that 70% savings rate. I know you mentioned you use the pre-tax retirement accounts, that’s awesome. But it doesn’t, uh, change your actual spending. So like how are you keeping the spending down? Like where do you live, what do you drive? Like these kinds of things. Yeah, right.

Expenses with a 70% Savings Rate

Corwin (19:40): So we’re fortunate that we live in Austin, Texas, which historically has been a lower cost of living. Now it’s changing. We bought our house in 2013, which at the time we thought, oh, this is way too late. You know, we’re gonna pay so much more money than we would’ve a year ago or whatever. But our house is doubled in value since then. Our mortgage is so much lower than it would be if we bought in Austin now. Um, and we’ve also been consistently frugal. We were both raised pretty frugally, so you know, our five year spending inflation adjusted is around 50K ish. So now, uh, that does not include daycare. Uh, daycare is something that we do pay for, but that’s gonna end in like two or three years. So we kind of set that as a lump that together on the side kind of deal.

Corwin (20:28): Um, but it’s been primarily keeping expenses down. Uh, we do a lot of things like travel hacking, which I love, you know, figuring out ways to pay for travel without, ’cause if we didn’t do that, our spending would be a significantly higher. Um, and just, you know, variety of things. I’m always optimizing perhaps obsessively <laugh>. Uh, so yeah, it’s, it was something that we were able to uh, just continue to work at. We got Mint mobile for example, and that slashed our cell phone bill dramatically. We never even knew about it beforehand. And so it was just consistent, you know, inflation things go up. But every year we kind of go down for us a bit as we found optimizations for various things. Now I think we’ve pretty plateaued essentially. Um, we just bought a new roof, so <laugh> that brought up our spending quite a bit.

Corwin (21:20): Uh, but yeah, I mean it’s, I think that a lot of people are scared by the 50% or higher numbers and I’m always telling people, you should save at least 50% of your income. And I usually get eye rolls or stares or okay, this guy’s like off the wall. I dunno, I’m not listening to him anymore, but, which is bad, right? <laugh>. But I think it’s still something that I love to see people achieve or at least work to achieve. Because if you do the math, you’ve seen it probably before these various plots, like from zero, how long it takes to get financial independence. If you’re at 50% it’s 15 years. So, and higher percentages don’t shave that many more years off ’cause of that exponential growth. So I feel like that’s a nice sweet spot done with mandatory work in a decade and a half, I feel like that really gets, speaks to a lot of people.

Corwin (22:09): So I’m always pushing that, you know, try to get to 50% even if you’re not there, try to get there because you’ll gain so much more power over your life so much faster as a result. And that was really what was important to us. That’s what motivated us this entire time before we discovered fire. You know, my wife and I would be like, well is this important or not? We didn’t have like a unifying goal, so, you know, that caught us on the same page so much better. So fire’s good for your marriage for a lot of reasons. I think <laugh> also, I think, you know, money conflicts are one of the big things that drive a lot of marital stress. So that was another thing that was important to us. So, yeah, I don’t know if I really answered your question, but we just try to keep expenses down general.

Emily (22:48): Yeah, I think the key answer in there was the home purchase in 2013, but yeah, furthermore not upgrading, right? Because I know, you know, this is the temptation when you have your first baby or your second baby is we have to live in a bigger place. We have to drive a bigger car, a newer car, like there’s lifestyle inflation that’s, that’s baked into those like sort of um, life transition points, family transition points. And so at least with respect to your home, you’ve clearly, um, avoided that temptation of of lifestyle inflation.

Corwin (23:15): It’s hard though. We wish we had another room in this house all the time. <laugh>, especially when grandparents come to visit. This is my office slash guest room. So you know, when uh, when uh, we’ve got visitors, I lose my office and that’s annoying. But you know, it’s okay.

Emily (23:32): Do you think you’re gonna stay?

Corwin (23:36): Probably. Uh, so our son’s in elementary school now and I think if we were to buy a new house, we would probably need to move to a different neighborhood, different area. He’d have to change schools and it doesn’t seem like it’s worth it. We’ve thought about doing an add-on as well, so especially with interest rates the way they are now. So we’re, we’re camp mortgage. We’re team mortgage, so, uh, we’ve got a pretty low mortgage as well, so, yeah.

Benefits of Financial Independence

Emily (24:00): Yeah, so it sounds like you’re gonna try to find a way to stick it out in the same house and, and keep that mortgage. That’s amazing. Um, okay, well I wanna talk more about like the, the benefits you’ve experienced of the, the degree of fire that you have now, which was, you mentioned that you, your wife went to half time, you left your job for time, now you’re back working part-time. Can you just talk about how, um, this FI achievement slash the mindset stuff enabled you to find that like satisfaction with your work and the control over how you work?

Corwin (24:26): Yeah, so I, I was not, I was an unemployed bum for a year and a half and, uh, <laugh>

Emily (24:27): Stay home dad <laugh>.

Corwin (24:33): <laugh> I prefer an unemployed bum because it gets people like what, uh, but I think that after a while I also realized, you know, I spent close to 20 years developing all these engineering skills and it’s like I was doing a lot of other projects that were fun. I worked on this site engineering your FI and that was fun, but I also felt like it just felt so, uh, wasteful, I guess is the best word. Like not use those skills anymore. I missed a lot of the friends I had at the lab that I worked at. And so, um, I had lunch with my boss slash friend, a former boss slash friend from the lab. And you know, he told me there’s some really cool stuff going on, you know, would you be interested in maybe come back? So I spoke with him, I spoke with some of the other management and we greeted on this really nice halftime deal where I always get to leave by two o’clock.

Corwin (25:19): I always leave by two o’clock to, to pick up my son from school. We bike home from school. That was something I always wanted when I was a kid to be able to, you know, go home with my parents bike home, whatever, right? So I was like, that’s very, very important to me. And uh, it’s allowed me to continue working on my site. Other things, projects, just logistics at home. So it’s been really, really nice. My wife is same. She gets to volunteer at the school a lot because she’s working halftime. So it’s been a really nice balance. I wrote a whole blog post about the pros and cons of halftime part-time after fire because, you know, mathematically you don’t need to <laugh>. Um, so I tried to uh, lay out those ’cause I wrote so many pros and cons list <laugh> before I went back, so yeah.

Emily (26:06): Yeah, I have a similar work schedule. My business allows me to work about halftime same as you. I work kind of while my kid is in school and then we get the late, you know, the latter part of the afternoon together. Um, which I mean that flexibility is, is kind of like invaluable as a parent, honestly. Like, um, it’s, it’s very, very difficult once your kids get into elementary school to figure out how you’re gonna run everything if you have like two traditional nine to five like schedules. So I definitely see the appeal there, but like I was just saying, there’s multiple ways you can achieve this, right? Business ownership, working part-time being totally fi, um, maybe just having an alternative kind of work schedule. Like all these different possibilities are there, but the more, as you were saying earlier, the more kind of confidence you have that you don’t need your job <laugh> in exactly the format that you have it right now, the more that gives you the ability to negotiate for what would really work for you, which is so beautiful. So you don’t have to be all the way FI to get there. Um, you happen to be, but you can just be like on the path and be secure enough that, you know, you can take a risk with that kind of ask.

Corwin (27:07): Yeah, yeah. I talked, one of the other articles on my site is, uh, something called Flamingo Fire Flamingo Fi, which I was a big fan that first time I heard of it. It originally came from a blogger in Australia actually. And when I first encountered that, I thought this is a great balance of FI versus, uh, not being so aggressive with your savings. Early on, their philosophy was save up to halfway to the FI point and then, uh, work however much you need to to cover expenses. And then about a decade or so you’ll be traditional FI. So it’s more aggressive than coast fi, less aggressive than standard fi. Mm. And so I thought that’s a really nice balance. And so I feel like we’re kind of the fat flamingo fi version because we’re at standard fire closer to that. But with these halftime jobs, we more than cover our expenses and we expect, you know, probably within, you know, half a decade or so, something like that, we’ll probably be more of the fat FI level, whatever that means. So, uh, yeah, it’s, it’s nice to have these different levels and different ways to have power over your life. Big time.

Emily (28:12): I’m thinking about the phrase live like a grad student, live like a resident, you know, that like, um, live like you’re still a trainee even afterwards. Now. I think that really applies in your case because you had the very nice stipend. I mean, 45K in 2012 is like really, really, I was making like 28 K in 2012. Um, you have that like nicer sort of level of income while you were in graduate school plus your wife’s job and everything. Uh, but it sounds like you probably about maintained your lifestyle, um, even with increases in income aside from the additional expenses for childcare and so forth that come with the kids. Does that sound about right?

Corwin (28:44): Yeah, yeah. Roughly, if anything, we lowered it. Mm-Hmm. Because we found various ways to stop wasting money <laugh> on things like cell phone bills and other things. I found that you could call these companies that could compare your insurance rates across a whole bunch of different companies and, you know, always found it’s the lowest rate, et cetera, et cetera. You know, it’s like the more you know, knowledge you gain the, the faster the snowball starts, right? So that was a, you know, a big thing that we, you know, I always try to keep it in mind inflation <laugh> as well, because sometimes it’s going up, but you’re still going, you’re still doing good compared to inflation, especially recently. But, uh, but yeah, we definitely strove to not inflate after the PhD for sure.

Commercial

Emily (29:31): Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, goal-setting, investing, frugality, increasing income, or student loans, each tailored specifically for graduate students and postdocs? I offer seminars and workshops on these topics and more in a variety of formats, and I’m now booking for the 2024-2025 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Orientations or very close to the start of the academic year would be a perfect time for tax education or general personal finance content. Ask the potential host to go to PFforPhDs.com/financial-education/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

Corwin’s Book: Engineering Your PhD

Emily (30:58): Since you were just mentioning, we were just talking about your excellent stipend and so forth, you have a book, right? That’s relevant to graduate students. Can you tell us about that?

Corwin (31:06): Sure. Uh, so this is something I wrote back in 2019. Uh, it’s called Engineering Your PhD, an Actionable Guide to Earning Your Graduate Degree in Engineering. I had looked around online and I found books that were designed, written for PhDs and how to get your PhD the best <laugh>, but not a lot for engineering. There’s like maybe one or two others. And I had all this knowledge in my brain from when I got my PhD about how to do various things that I really wished I’d known before I started graduate school. So it was really more of like a passion project, like let’s get this into a more permanent form. Something I can hand to my kids one day if they wanna go to graduate school and say, Hey, engineering, at least you know, this is the collection of things that I thought were important when I finished up. So yeah, it’s on Amazon now and uh, um, I will say it’s not really my focus anymore to focus on academia. I’m much more interested in FI and fire and personal finance and things like that. It’s been a while since I was in academia. Now that’s hard to believe, but, uh, yeah, it’s still I think a well-written book according to my very biased opinion <laugh>. So if anyone interested in, uh, joining, uh, interested in checking that out, you’re certainly welcome to.

Emily (32:20): Editing Emily breaking in again! Corwin very generously is offering Engineering Your PhD free for download for five days after the publication of this interview. If you’d like to grab it, please go to PFforPhDs.com/S17E9/ and you’ll see the Amazon link in the list of links near the starts of the show notes. OK back to the interview.

The Future of Corwin’s FI Journey

Emily (32:43): So thanks for telling us about the book. Um, I wanted to ask one more question before we get to our final one, which is what, what does the future look like, right? You’re, you’re, you’re at FI, maybe you’re gonna continue building towards a fatter version of FI. You, you have your halftime work schedule. Like do you anticipate making any changes or are you just gonna cruise to a traditional retirement age at this? Like what do you think?

Corwin (33:04): I don’t know. That’s a good question. So for the foreseeable future, we’re gonna continue doing our part-time roles. I think that’s a good balance for us with young kids right now. But things could change in the future. Maybe we decide we wanna actually ramp up, we want to strengthen our careers, we wanna get more into what we’re doing in our jobs. Maybe we wanna go the opposite direction and do less or focus on entrepreneurial activities. You know, we live here in Austin, Texas where it gets very warm in the summertime. So I think we’ve toyed around with the idea of living elsewhere during the summer times when the kids are out of school. Uh, so that’s something that might be of interest to us, but that’s, you know, more like the summertime versus the rest of the entire year. So, you know, we could take sabbaticals from our, uh, part-time roles for a couple months, get outta the heat and then come back. That sounds really nice. Uh, and then who knows, you know, once my daughter graduates from high school, uh, in 16 years <laugh>, then, you know, the world’s our oyster. We might go elsewhere, we might go to Colorado or depending how hot the earth is at that point we may have to go further north <laugh>. Um, so yeah, we’ll, uh, we’ll have to see what happens.

Emily (34:15): Okay. I just love how like calm and like chill that answer was just like, I don’t know, we’re doing FI. We’ll see where it goes. We’ll do what we want. Um, and that’s really what fire affords you. Um, especially fire in, you know, professional fields like you have where you have so much career capital as Cal Newport would say by this point, right? You can deploy it in different ways, right? Um, so I love that.

Best Financial Advice for Another Early-Career PhD

Emily (34:36): Okay, so let’s get to our standard question. What is your best financial advice for another early career PhD? It could be something that we’ve touched on already in the interview or it could be something completely new.

Corwin (34:47): So a few things that are very standard boilerplate pieces of advice. Well, maybe one’s not so much. First thing is track your expenses. I mean, if you’re not tracking your expenses, that is the foundation for everything. If you have no idea how much you’re spending, then you’re not going to be able to make almost any progress on lots of different things, especially if you wanna pursue financial independence. ’cause that’s gonna tell you how much money you need to save. That’s gonna tell you your savings rate is all kinds of things. Uh, and you’re not gonna be able to reduce it if you don’t know how much you’re spending. Uh, another thing is, like I mentioned earlier, I’m always pushing for a 50% savings rate, if not currently, then aspirationally trying to get there because it’s such a powerful thing for your finances and getting to financial independence within a couple decades.

Corwin (35:30): Uh, also a big fan of not getting complicated with investments. Put everything into a low cost stock market index fund, like V-T-S-A-X. First thing I do when I look at a fund is go straight to the expense ratio. <laugh>, it’s the first thing I do. But the last thing I would say is maybe a little less, um, uh, traditional, which is I encourage people to build their own tracking systems, their own financial tracking systems. There’s so many tools out there, just an infinite number of tools you can pop your numbers into and get all these different things. But I feel like if you do your own thing, you’re building the skills up to track your finances that you have that ultimate customization for what you actually want, right? Even if it’s just spreadsheets, you know, that’s, that’s perfectly fine. It’s usually free. You’re not paying anything. Again, that’s good for your savings rate, right? Um, but I do recommend trying out some other tools as well, uh, to see if the numbers line at least closely or roughly <laugh>. So yeah, that’s be my top pieces of finance advice for grad students.

Emily (36:35): I really love. Well, but the first and the last one, right track and also build your own, um, tool for doing so and, and doing more than just tracking because at the moment that we’re recording this finance internet is a buzz because Mint has announced they’re shutting down their, uh, budgeting feature and they’re kind of transitioning over, I think completely to Credit Karma stuff. So I’ve been a mint user for like, I don’t know, like 13 or 14 years now. And not that I’ve been completely reliant on it, but to the degree that I have my own stuff going on, I’m really happy for that now. ’cause now I’m like, okay, what do I do? I have to like download all this data. It’s gonna be like unusable CSV files, like what is going to happen with this like track record? So, but as you were saying, like there’s other great tools out there. Like you need a budget, it’s so popular, but there is a yearly fee to it. And so if you don’t want to have that kind of subscription, build your own stuff, it’s not, I don’t know, it’s not that complicated. I guess it depends on how great you are with like, you know, spreadsheets and stuff. But, um, so I love that advice of just like, be ready for these services to shut down on you. It’s literally happening to me at this moment. Yeah. So don’t be totally reliant on outside, you know, um, apps and so forth.

Corwin (37:40): Yeah, I think if you’re smart enough to get into a decent graduates program, then I think you’re smart enough to create a spreadsheet that can track your finances at least at a crude level that you can be fully in control of <laugh>. So yeah.

Emily (37:54): Yeah. Um, I’ll take the opportunity to plug something of mine in the show notes. I’ve literally not announced this on the podcast yet, uh, as of this recording. But I made an a simple Excel spending tracker that incorporates a couple of my like philosophies about how to manage money, which are to, um, spend what you earned last month, <laugh>, like don’t spend what just came in, like wait until the next month to spend it. Hmm. Um, and also to incorporate, um, sinking funds or targeted savings like into that, that system. So I don’t know, people ask me for a long time, like if I could just send them a simple spending tracker and I finally made one a few weeks ago in response to someone at a speaking engagement who wanted it. So go to PFforPhDs.com/tracker if you wanna download that and take it and make it your own and build it out and have it do other things and take my ideas, discard my ideas, whatever you like. But if you want a starting point, like there’s a starting point for you Corwin, um, it’s been a such a fascinating conversation. I’m so excited for how your life has unfolding and how the PhD has played a role in that. Um, it’s so excellent and thank you so much for sharing your story with the audience and coming on the podcast.

Corwin (38:57): Thank you very much.

Outtro

Emily (39:08): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.