podcast

How Finances During Grad School Affected This PhD’s Career Path

July 1, 2019 by Jewel Lipps Leave a Comment

In this episode, Emily interviews Dr. Scott Kennedy, a bioengineering PhD who now works at a start-up in a data science position. During the course of his PhD, Scott got married and had two children. While he hadn’t considered personal finance of great importance when he started grad school, he certainly did by the end. Scott considered pursuing a tenure-track faculty position, but ultimately took an industry position because the salary and location better supported his young family. This conversation around Scott’s reflection on his financial path during grad school is excellent food for thought for an early-career PhD considering different career and family formation options.

Links mentioned in episode

0:00 Introduction

1:20 Please Introduce Yourself

Dr. Scott Kennedy has an undergraduate degree in Mechanical Engineering. He became interested in neuroscience of motor control and the neural basis of body movement. He went to the University of Pittsburgh and received a PhD in Bioengineering. His adviser was in the neuroscience department.

As Scott neared the end of graduate school, he began to explore options outside of academia that made use of his skillset. He took a job as a machine learning engineer at a startup in St. Louis, Missouri. He is enjoying the transition out of academia and into startup culture. Scott adds that you have to be creative about how your skills apply outside of academia, because graduate school training typically funnels you into academic careers.

6:25 Tell us about your family.

Scott got married in 2013, during his third year of graduate school. He says they knew they didn’t want to wait until after graduate school to start their family. They had two daughters while Scott was a PhD student. He says his adviser was supportive and he had examples of other parents in the lab.

8:40 What does your wife do? What was her job while you were in graduate school?

Scott says he met his wife in Pittsburgh when she was finishing her physical therapy degree. His wife started working as a pediatric physical therapist before they got married. Their combined income was enough for them to live comfortably. After they had children, Scott’s wife wanted to stay home but his graduate stipend was not enough money to support the family. His wife started working part time but they had to be very conscious about their finances.

10:11 When you started graduate school, what was your interest in personal finance?

Scott says he was fairly naive but he had interest. He says at the end of undergrad, he developed a spreadsheet to track his spending. Although he kept a budget, he didn’t have any financial goals. He wasn’t thinking about saving for retirement. He had some savings tucked away but for no reason. He was focused on simple living.

Emily shares that she was in a similar place when she was in graduate school. However, she had this sense of “doing the right thing” with her money and that motivated her to learn. Scott shares a story about his friend who was shocked that he didn’t have a Roth IRA yet. Scott thought investing was for people with money, then he learned that he should start during graduate school.

14:40 What was your transformation process into someone who cares about personal finance?

Scott says his first step was saving for retirement. Then, he wanted to purchase an engagement ring and pay for a wedding. He saw that his savings, his safety net, was being drained. He realized that he had to become more serious about budgeting and manage finances in partnership with his wife. He says personal finance is a balance between living your life, having goals, and having security. He adds that childcare was another big factor. Cost of childcare is about the same cost as rent.

17:27 What frugal strategies did you put in place to adjust to the new expenses?

Scott emphasizes that they leaned on their families a lot. They were fortunate to have families willing to support them and help them travel, but their vacations were to go home to see family. At home, they spent time at friends’ houses and chose very low cost entertainment options. They stopped going out to eat and would go for a run instead of having a gym memberships. Scott says that taking little steps adds up in savings in the long run.

20:34 How did finances during graduate school affect your career path?

Scott says two years before he graduated he thought carefully about what he wanted to do. Before he started graduate school, he thought he wanted to work in engineering and rehabilitation. He fell in love with science and could see himself being an academic and working as a professor. He felt like he wanted to go that route until he saw one of the graduate students from his lab defend, work as a postdoc, and apply to jobs while also having a family. He said there was a research faculty member in the lab as well who had a family and was having a hard time getting a faculty job. Scott says there were also stories of professors who got divorces during the tenure process.

Scott says he didn’t feel like he was able to support a family through a postdoc and a search for a faculty position. He says that even if everything worked out for him, his kids would have been in high school by the time he got tenure. He shares that this was difficult for him to comes to term with. After he realized this, he started to look for jobs outside of academia.

25:49 Are you happy in the startup job you have now?

Scott says he’s happy in his position now because he has freedom, flexibility, and autonomy in his work. He feels he works on interesting problems. He can work with leadership and have a more say in the work than you can as a graduate student. The location in St. Louis is closer to his family.

26:54 If you could go back and give yourself financial advice, what would that be?

Scott says he would tell himself to have goals in mind. He would tell himself to have an emergency fund and build it up. He says he would build savings for housing and consider buying a house to build equity. Scott says thinking ahead for childcare options, if at all possible, would have been a gamechanger for them.

Scott admits that as an early graduate student, it’s hard to know what your goals are. He advises that to the extent you can, think a couple years ahead. He says have saving goals and investment goals.

Emily advises that people at least consider buying a house if you’re in a place with a housing market that makes sense for graduate student budgets. She also says that it’s a reasonable assumption that anyone’s financial responsibilities will increase over time. Graduate school is a fairly long period of time and chances are that you will have more responsibilities.

32:17 Final Comments

Scott shares that he didn’t expect the number of weddings and the cost of going to them. He says that he regrets not being able to go to some weddings. Scott advises to find balance between living your life and having savings so that you can have buffers and cushions so you have money for unexpected expenses.

34:45 Conclusion

This Online Entrepreneur Turned His PhD Research into a Thriving Business

June 24, 2019 by Jewel Lipps Leave a Comment

In this episode, Emily interviews Dr. Chris Cloney, an engineering PhD turned online entrepreneur. Chris blogged about his research during graduate school, became recognized as an expert in his field, and subsequently launched his research company. Through Gradblogger, Chris now leverages his vast knowledge of online business practices to help other PhDs start their own blogs and businesses.

Links mentioned in episode

0:00 Introduction

1:01 Please Introduce Yourself

Dr. Chris Cloney has two businesses, Dust Safety Science and Gradblogger. Chris did his undergraduate degree in Mechanical Engineering in Halifax, Nova Scotia. He did his PhD in Chemical Engineering and Applied Science, but his focus was Industrial Safety within the subfield of Process Engineering. He worked nearly full time in an engineering company while he was working on his PhD. He left the job to focus full time on getting his PhD.

Chris calls himself a personal development geek, as well as a personal finance geek. When he left his job, he was intending to switch careers. His job was focused on military and explosions, and he wanted to switch to paths to industrial safety.

5:27 Can you give us an overview of your primary business, Dust Safety Science?

Chris says his thesis was on Industrial Safety, specifically fire and explosion safety in industries. He only deals with solid particle fires and explosions. He points to Apple MacBooks, for example, which are coated in aluminum polish. He explains that thousands are made each day in factories and the process generates tons of aluminum dust. The aluminum dust is a fire and explosion hazard if it is not managed properly.

He started blogging in this area at “My Dust Explosion Research” but after a couple years, he changed names to “Dust Safety Science” because it is a little easier to say. The business is online and they have four key pillars: awareness, education, connection, and change. One big motivator is to keep people from being injured, so awareness and education of safety science is important. The goal of Dust Safety Science is zero fatalities over twenty years, so they advocate at an industrial and governmental level worldwide.

7:41 What is the structure of Dust Safety Science?

Chris says Dust Safety Science started as just him, as most online businesses start with just one person. They have a website as a platform to bring people back to. They have an incident database where they track fire and explosions around the world. This is how they create material as a research company to publish on and present on at conferences. They conduct independent research as well. He has a podcast for Dust Safety Science.

Chris brought on his first help in 2017 at one hour a week. The team today is four core members. There is a content manager, virtual research assistant, technical writer, and website designer. Chris says it is a big transition from learning everything about personal branding and business to managing a team. They publish 500 blog posts a year, and this requires a healthy structure to run this research business.

Chris works from home and his businesses are his sole source of income. His team is virtual. He shares that he has a seven month old and his wife is home on maternity leave. He has his office at home.

11:44 Why did your blog turn into your business?

Chris says creating a personal brand, building online business, and being seen as the expert in an area is actually quite available to people who have higher degrees. He says one of the first steps for online marketing is to niche down really small, and Chris says that’s the definition of thesis research. He says six people read your thesis and three might actually care.

Chris was blogging about his PhD research. He says the academics in his field weren’t online and didn’t care for his blog, but industry people were interested so he started to make content for that audience. After six or nine months of blogging, he realized he had a good platform built. He was being invited to speak and he was seen as the expert in this topic. He got several job offers just from blogging about his topic. His goal was to switch careers and that was a success. He decided to focus on his online platform and build an independent research company.

14:13 How do you make money?

Chris says step one is to ask people for money. He says he had a newsletter with 250 people on it. The first time he made money online was by emailing a company and asking them if they’d like to put their logo and description in the newsletter in a sponsor block. He said he sent the email to the company, and he got a quick reply saying yes. He’d forgot to mention there was a fee of $200 per month, so he added that in the next email. The company representative said they’d take a year of sponsorship, and Chris realized that his price was too low.

He says his newsletter is now up to 1500 to 1600 people. Every month they take on a new sponsor. Now the sponsor block space in the newsletter is $600 per month.

Chris says if you have an audience, even if it seems small, there’s a way to monetize that. They have advertising on several outputs, and they have member companies. They are also working on courses for under-served portions of their audience, like firefighters and researchers. They can also make money from consulting and speaking. Ways to monetize start becoming available once you are the biggest source of information on your topic.

18:41 Why do you think that launching a business out of your PhD research is something that should be considered?

Chris acknowledges that it can be scary to put yourself out there. But people should consider blogging because it builds your reputation in your space. It leads to job offers. Chris says he had a lot of contacts just after six months of blogging and bringing on guest posts from experts in his field. He says you build your business by putting out content and being seen as an expert, then people contact you with opportunities. Another option is advertising when others want access to your audience. Chris says he wants people to install the correct safety equipment, so he is happy to work with advertisers.

If you have an entrepreneurial spirit, Chris says this slow process of putting out content and being seen as an expert is way easier than the startup route. Startups seek funding first to get started more quickly. He emphasizes that his business transition was simply asking for sponsors on the newsletter and slowly being recognized as an expert.

22:29 Are there any other business models accessible to PhDs?

Chris says the first model is consulting. Being an academic consultant is usually very lucrative. He also lists speaking, freelance editing and writing, and building courses as other business models. Emily mentions that professors often work as consultants on the side.

25:33 What is Gradblogger?

Chris says Gradblogger is a platform to tell his story of starting an independent research company. Gradblogger is a website, podcast, and online resources. He says the tagline is helping PhDs build their businesses so they can change the world through research and experiences. He wants to have a role in creating superstar academics who make a big difference in their fields but are not tied to a university.

Chris says that through Dust Safety Science, he has independence and security. They will fund a Masters student. He calls himself “self tenured” because he can make his own decisions through his independent research company. Chris presents this as an example of what other PhDs could do if they start blogging to create their own business.

28:48 Do you have any advice for a PhD interested in being seen as an expert by a wider community or in starting their own business?

Chris says getting started now is important. He says getting exposed to different ideas by joining relevant communities is helpful. He recommends taking an accounting class.

Chris recommends creating a virtual mentorship group, or Master Mind group. This idea comes from the book Think and Grow Rich by Napoleon Hill. For his virtual mentorship group, Chris says he picks people who have already done what he wants to do and he learns everything he can about them. When he’s making a decision, he thinks about what his virtual mentor might tell him to do in the next step.

Emily summarizes this as exposure. Being exposed to more ideas and different ways that people do things helps you break out of your silo.

34:06 Conclusion

This Postdoc Epitomizes Side Hustling to Get Out from Under $100,000 of Debt

June 3, 2019 by Jewel Lipps Leave a Comment

In this episode, Emily interviews Dr. Shana Green, a postdoc at the Centers for Disease Control and Prevention in Atlanta. Shana finished her PhD with $108,000 of debt, and she decided to side hustle to pay it off as fast as she could. After trying several academic and non-academic side hustles, she is currently chiefly working as a driver for GrubHub. She’s on track to be completely debt free in less than four years total. We discuss the strategies she’s used to optimize her side hustle, how she feels about side hustling as a driver, and her goals for her YouTube channel, The Wealth Vibe.

Links mentioned in episode

0:00 Introduction

1:09 Please Introduce Yourself

Dr. Shana Green is a Gates Millennium Scholar. This program funded all of her undergraduate education, and provided some funds for graduate education. Shana went to Howard University for her bachelors of arts in Anthropology. She got a Masters of Public Health at Columbia University, where she had to take out student loans for rent, food and living expenses. She went to the University of South Florida for her PhD in Public Health, where most of her education was funded but she had to take out some loans for her fifth year. She graduated in 2017 and worked as a postdoc at the Centers for Disease Control and Prevention (CDC). She recently got a new position as a contractor for the CDC.

4:54 What was the total of your debt when you finished your PhD?

Shana was aware of her debt before she finished her PhD. She had $108,000 in debt when she graduated with her PhD. She says about $56,000 is from student loans. She took out about $40,000 from student loans, but she has accrued over $10,000 in interest. She had car debt, IRS debt, medical bills, and credit cards. One of her credit cards had $14,000 of debt.

She didn’t have to go into repayment for her student loans during her postdoc because she qualified for graduate fellowship deferment. She wanted to tackle her other debt first. Now she has about $63,000 in debt remaining. She paid off the credit card, IRS debt, and medical bills. She is very close to paying off her car. She will only have her student loans remaining after two years of he repayment journey.

Shana says that when she moved to Atlanta, she started side hustling right away. She couldn’t afford to go out and meet people and get to know the city. She went straight to the grind and working hard to pay off her debt.

8:50 How does your postdoc salary affect your debt repayment journey?

Shana is grateful she has a higher stipend than many postdocs. She was making about $70,000 gross annual pay from her postdoc stipend at the CDC. This is in contrast to the National Institutes of Health minimum stipend that was just below $50,000 annual stipend. She was in an Oak Ridge Institute for Science and Education (ORISE) funded postdoc, which compensates based on education and work experience. She received about $5200, then she had to pay quarterly taxes. Her take home was somewhere around $4,000.

Shana says while this was a good stipend, it wasn’t enough to cover her debt payments. She calculated she needed to make another $1,500 to $2,000 more each month for her debt payments. Her goal was to be debt free by February 2021.

11:38 What are the different side hustles that you’ve tried since moving to Atlanta?

Shana says the first side hustle she tried was Instacart. In this job, she shopped for groceries and delivered them. She started that in October 2017. When Instacart changed their system so she made less money, she tried other jobs. She tried virtual assistance, Upwork, and local food delivery service. Since April 2018, she has worked for GrubHub and still does Instacart every now and then. She also does freelance research through Upwork. She says GrubHub is her “bread and butter” as a side hustle.

13:17 How does a GrubHub side hustle work?

Shana explains that when a customer places an order, she gets a ping on her phone. GrubHub provides the details up front to help her decide if she wants to accept it. She is free to reject orders. If she accepts, she goes to the restaurant to pick up the food and bring it to the customer. She contrasts this to Instacart, where she had to put together the order herself instead of just picking it up.

She makes about $20 per hour with GrubHub. The least amount she makes is $15 per hour, and the most is $25 per hour. She spends about four hours a night doing GrubHub. On the weekends nights she works 5 hours. She works at minimum three days during the week. There were several weeks that she worked every day of the week. After her work at the CDC for the day, she almost immediately started her GrubHub work.

17:34 How do you decide which GrubHub orders to take?

Shana keeps three things in mind: the payout, the distance, and whether the person tips. GrubHub pays a minimum of $3 base pay, a mileage contribution, and tips if the customer chooses. She says if the person has not tipped through the app, they won’t tip in person. She tries to take orders $8 or $10 or more. She also tries to do orders within a four mile radius. She maximizes the base pay and the tips, not the mileage. Shana mentions some restaurants are unreliable, which she learned through trial and error, and she factors that into her decision.

22:12 Has anything really bad or really good happened to you as you worked for Instacart and GrubHub?

Shana says she had unpleasant interactions with Instacart customers. She tells stories about customers that insult her and imply that she is “lesser” for working these side hustles. These customers have no idea that she has a PhD and works as an epidemiologist. Shana shares that she has felt down about having to work side hustles that are not using her expertise, but she gives herself pep talks and reminds herself this is temporary.

25:08 Why didn’t you limit your side hustles to PhD type of work?

Shana explains that she tried through Upwork to offer data analysis and research consultation services, but she didn’t get any clients. She realized that this wasn’t going to work, because she needs quick money. She wanted to be able to make money like an Uber or Lyft driver could.

She was a little ashamed of doing this at first, and she didn’t tell anyone except for her mother and her boyfriend. She felt like she had reached a level of success, like she was “Dr. Green” and she used to teach at a university. She worried that people would view her work at Instacart and GrubHub as a step back. Now she wants to inspire people to take on their debt and work hard for their financial goals. This is why she started her YouTube channel “The Wealth Vibe.”

Emily says that if anyone speaks negatively about this work, as if this work is “beneath them,” that speaks poorly of that person. She also says that Shana is on a great career trajectory, but the work for many PhDs is more limited and many have to be in adjunct position, which typically does not pay well. Emily says Shana is living like no one else like now because she is working hard, but in two years Shana will be debt free and living like no one else in the positive sense.

Shana shares that she also teaches an online course in Epidemiology. This pays $3,000 per semester. She says she makes way more money through GrubHub than she does as an adjunct. Shana says she found that PhD work does not pay well. Emily adds that there’s not enough volume, or demand, for side jobs for PhDs.

35:08 What is your YouTube Channel about?

Shana’s YouTube Channel is called The Wealth Vibe. She creates videos to help people increase their income, help them budget, so that people can build their wealth. She posts monthly videos about making her budget and paying off her debt. She also makes videos about her side hustles and how to maximize money you make. She has made videos about taxes, because her taxes are not withheld and she has to save for tax payments. She says she reaches a broad audience of people who are GrubHub drivers as well as who have PhDs.

39:40 Conclusion

How to Make Money without Working: Credit Card Rewards and 529s

May 13, 2019 by Jewel Lipps Leave a Comment

In this episode, Emily interviews Seonwoo Lee, a PhD student in electrical engineering at Georgia Tech. Seonwoo has mastered two methods to earn extra money without “working.” Emily and Seonwoo discuss in detail their experiences with garnering credit card rewards and give both beginner and advanced tips. Seonwoo also explains a 529 hack he discovered to reduce his state tax bill that is applicable in as many as 30 states. They also briefly touch on several other methods to make money without working that are readily accessible for early-career PhDs.

Links mentioned in episode

0:00 Introduction

1:14 Please Introduce Yourself

Seonwoo Lee is a PhD student in electrical engineering at Georgia Tech. He did his undergraduate at Cornell. He pursued a number of ways to make money without actually having a second job.

1:48 Why have you tried to make money without working?

Seonwoo says that if you do it right, you can make more money per hour than working a traditional job. He says it gives you more flexibility, since you can do as much or as little as you want.

There is some effort involved in pursuing these strategies, but it’s not as much time you would put into working if you had a second job. Additionally, some people are prevented from officially working in other capacities, either by the terms of their contract or by their student visa. The strategies they’ll talk about are probably available to any PhD student or postdoc.

3:07 What are the two topics that we’ll go into detail discussing? What are some other strategies?

Seonwoo will discuss credit card rewards as well as banking sign up bonuses. Second, he’ll talk about the 529 trick to save money on your state taxes.

Emily mentions other ways to make money without working.

Emily has sold items when she’s moved as part of a downsizing process. She has sold items on craigslist.
Another option is Ebates *. Here, you make purchases through the Ebates platform and you are selling your information in exchange for money.
Emily presents short term investing in taxable accounts as an option to make money without working. She and her husband paid off student loans through mid-term investing.
Other options are receipt apps like Ibotta, where you upload your receipts and you sell your information to get cash back.
Also, there is the strategy of “car wrapping,” which is wrapping your car in an advertisement and you receive money based on how much you drive. Emily recommends listening to the How to Money podcast for more information on car wrapping.

* This is a referral link. If you sign up and spend $25 through Ebates, you’ll receive a $10 bonus to your account and I’ll receive a referral fee. Thank you for supporting Personal Finance for PhDs!

7:19 How do the credit card rewards and sign up bonuses work?

Seonwoo begins with the caveat that if you can’t manage credit cards responsibly, you should not pursue credit card rewards in any form. If you pay any interest at all when you do this, you are likely not going to reap the benefits of rewards. Emily adds that you already need a good or excellent credit score to pursue these strategies. If you carry a balance on your credit card, this strategy is not for you. Emily says make sure you are using your credit card like a debit card, and if you are you can consider this strategy.

Further reading: Perfect Use of a Credit Card

Seonwoo says that plenty of credit cards offer sign up bonuses. These require you to spend between $500 and $4,000 within the first three months of signing. The bonuses will vary from credit card points to straight cash. The offers will range from $100 to $500 in cash or 30,000 to 100,000 points. Seonwoo says there are ways to meet these minimum spending requirements without spending more than you normally would.

Emily talks about fitting these credit cards into your normal spending. She signed up for a credit card with a minimum spending requirement of $3,000 over three months. She had to put everything she was purchasing on that one card. She picked a time of year when she had to pay for car insurance and flights. She timed signing up for the credit card with when she knew she had above average expenses. Reaching the minimum spend requirements is a hurdle for people with lower income.

Seonwoo says you can see if you can pay your rent with a credit card. He says the fee may be 3%. If that is the only thing stopping you from pursuing a sign up bonus, do the math to see if the rewards are worth it. You can see if you can put tuition or fee charges on the credit card. You can see if you can pay your bills months ahead of time. He says you can buy grocery gift cards to get the charge on the credit card, but then you can spend that gift card over a longer period of time.

Emily says that someone new to this can try it with existing spending, then they can try manipulating their spending.

13:00 Is cash back or points more valuable to a graduate student?

Seonwoo says that cash back is much easier to start with and understand. There are only so many cash sign up bonuses. If you like to optimize things, credit card rewards will be more valuable if you use the rewards for travel.

Emily says that there are cards with a regular cash back rate, like 1-2% back on spending. She says that is a good way to start. Then the next level would be switching to actively pursuing credit card rewards. To make rewards lucrative, you have to be able to redeem them. She explains that in Durham, North Carolina, she couldn’t be loyal to any one airline. But in Seattle, Washington, she makes use of the Alaska Airlines credit card and its reward system.

16:18 What are the pros and cons of the annual fee situation?

Seonwoo says a lot of cards that have sign up bonuses waive the annual fee in the first year. Seonwoo’s strategy is that he signs up for the card, meets the minimum spend requirement, and by month 11 he has decided he won’t pay the annual fee and he will close the card. He says some cards are worth the annual fee, but he wouldn’t recommend keeping the annual fee card to people with lower income.

Seonwoo says that if you cancel within 30 days of being charged the fee, you can often get a refund. Ideally, set up a spreadsheet and reminders to track your credit cards.

18:54 How much money have you made using this strategy?

In his best year for strictly cash, Seonwoo has made about $2,200 to $2,500 from sign up bonuses. He says he has more credit cards and points than he knows what to do with. Most of his rewards have been in credit card points.

Emily says when she was in graduate school and pursuing cash sign up bonuses, she and her husband together made about $1,000. This can alleviate budgetary stress.

20:38 Anything else you want to add on this topic?

Seonwoo brings up how this affects your credit score. In general, when you apply for a credit card, there is a small hit because you have an inquiry on your report. He emphasizes that the point of your credit score is to help you get low interest rate loans or good rewards credit cards. If you’re not applying for a loan in the near future, you can use the credit score for new credit cards. He applied for cards until he started getting denied. He waited a few months, then tried again and got approved. He says people stress out a bit too much about their credit score. He says people should recognize the point of the credit score.

Emily points out that there are positive affects of having several credit cards. She also mentions some cases where you need to keep your credit score high, like when you apply for a new residence or take out a mortgage.

Further reading: How to Establish Credit in the US

24:24 How do banking sign up bonuses work?

Seonwoo says that the main difference is that instead of requiring you to spend money, banking sign up bonuses require you to already have money. You sign up for a new checking account, get a couple of direct deposits in there and keep it open for at least six months, and sometimes make some transactions. You can get between $100 or $350 for signing up for that account. Some have fees, but the bank may waive the fee for students or on other terms.

Emily mentions minimum balances, and Seonwoo clarifies that high balances requirements are usually for savings accounts. Checking accounts have minimum balance between $1500 and $3000, and the percent return is 10% to 20% in six months. This is a good option for your emergency fund.

Seonwoo recommends the blog Doctor of Credit, who has several blogs on these topics.

28:54 What is a 529? What are the benefits of it?

Seonwoo explains that there are two types of 529 plans. One is a prepaid tuition plan, which he is not talking about. The other type is an investment plan. At both the state and federal level, it is not taxed when you withdraw it for education expenses. Emily compares this to an IRA, where you are not taxed on the growth of the money if you use it for retirement. Seonwoo calls it a Roth IRA for education.

Seonwoo says 30 states and the District of Columbia offer a state income tax deduction for contributing to your 529 plan. Most states require that you have a plan with that state, but they don’t require a net contribution for the year. He says you can contribute the money to get a deduction, then pull it out to pay for your expenses.

Emily says cost of living expenses can be considered qualified education expenses for the 529 plan. She explains that you can put money into a 529, then take it out to pay rent, and then you get a state tax deduction or credit. Seonwoo says even if your living expenses are $0, you can still do this. The amount is set by the university’s financial aid office room and board estimate of the cost of attendance.

Seonwoo explains his specific example at Georgia Tech. The financial aid office lists the cost of attendance estimate for room and board as more than $10,000. In Georgia, a single taxpayer can deduct up to $2,000 of a 529 contribution. His marginal tax rate is 6%, so a deduction of $2,000 saves him $120 per year in state taxes. So, he contributes $2,000 to the 529 plan and leaves it in there for 10 days, then he takes it out. This is all it takes to get the tax deduction.

36:37 Where can we go for more resources?

Seonwoo says he learned about this by going through his state tax return to look for deductions. On his blog, he has a college tag and he has a post about the 529. The site Saving for College is a good resource for 529 plans.

Emily says this is a strategy that you need to investigate for your own state. Seonwoo mentions that there are other education credits and deductions available, but you can’t double count expenses. This 529 trick makes use of the living expenses, because this is unique to this tax benefit.

Seonwoo recommends printing to PDF the page from the financial aid office that documents the cost of attendance. This is documentation to keep if you’re audited.

40:50 Final Comments

This episode is about ways to alleviate budgetary stress by leveraging your assets and optimizing your usage of financial accounts.

41:17 Conclusion

How to Successfully Plan for Retirement Before and After Obtaining Your PhD

April 8, 2019 by Jewel Lipps Leave a Comment

In this episode, Emily interviews Dr. Brandon Renfro, a finance professor and financial advisor. Brandon shares the tortuous path that led him to his current faculty position at East Texas Baptist University and side business in retirement advising. They discuss the long-term financial effects of doing a PhD – both positive and negative – and how to have a successful retirement even if you can’t save (much) during your PhD training.

Links mentioned in episode

0:00 Introduction

1:05 Please Introduce Yourself

Dr. Brandon Renfro has a PhD in Finance. He is both an academic and a practitioner. He advises retirement advising for individuals. He does financial planning while being a tenure track professor.

2:02 What was your career trajectory?

Brandon says that he “walked backwards” or stumbled into his PhD. As an undergraduate, he planned to go to law school. He was advised to major in business in preparation for law school. He took an American enterprise course and saw a presentation about the time value of money in the retirement planning context. This presentation inspired him, so he majored in finance and loved it. He went to law school but says he crashed and burned. He was in the military and had GI bill benefits. He decided to use his GI bill benefits for an Master of Business Administration (MBA). He asked his MBA advisor about adjunct teaching. He had to have 18 graduate hours in the discipline to teach a course. He discovered he loved teaching. He decided he wanted to teach full time. He feels fortunate that he got a tenure track position at a liberal arts college in Louisiana, where he worked for three semesters. Now he is in his third semester at East Texas Baptist.

Emily points out that Brandon tried stuff and saw what stuck. Brandon agrees that this is important to explain to students today. He says many students set a goal and stick to it no matter what, even if the path isn’t right for them. He says there is a time when you should recognize if you don’t love what you’re doing and you should try something different. Brandon says he would tell his 18 year old self to major in finance, but at the time it didn’t occur to him.

Emily asks how Brandon handled the sunk costs of going to law school. Brandon clarifies that he didn’t meet the GPA requirements to continue law school but he wasn’t sad about it. He says he was miserable in law school. He had taken out loans to pay for the year in law school. He says it was $20,000 that he spent to learn that he didn’t want to be an attorney. He says if he looks at it like it’s money he spent to learn that he loves being a finance professor, it was worth it.

7:47 Given that a person has decided to do a PhD and maybe a postdoc, what are the effects of their financial outlook?

Emily starts by explaining that graduate students, postdocs, and early career PhDs have a lot of anxiety around saving for retirement. Most of these people are in their 20s or 30s and they know they are supposed to be investing for retirement. But planning for retirement feels overwhelming in the context of their competing financial demands, like student loan payments or saving for a house down payment, coupled with their suppressed income for an extended period of time.

Brandon says that if you put off starting a career to do a PhD, this will make saving and preparing for retirement a little more challenging. These are foregone years of savings. However, academics have the ability to work past typical retirement age. As a professor, you can work longer and save money for retirement for more years, even if you start work and start saving a little later in life. Emily clarifies that PhDs can add years on the back end, instead of on the front end, to the total years that they can work to save for retirement. PhDs can do this because their work is fairly intellectual, and hopefully they get better with time. It’s less daunting to add years at the end in these career paths than others. Brandon says it’s (physically) easier to talk about what you know than it is to work on a factory floor, and you can prolong the years you do this kind of work. Even as PhDs reach retirement age, they have options to be an instructor, lecturer, adjunct, or consultant. You can work less than a full time load, and still capitalize on your years of experience.

Brandon says even while you’re working in your 30s or 40s, you have the ability to leverage expertise outside the classroom. Even if you are working a full time tenure track position, you have a lot of knowledge that you can leverage in industry, even while you’re teaching. Emily shares that when she was an engineering PhD student at Duke University, she saw plenty of professors had consulting businesses or wrote books. In academia, there are many ways to step outside your primary role and leverage your expertise. Emily says that there are plenty of opportunities to have side hustles all through your career. She is part of a community of self employed PhDs, and many people’s self employed job is on the side of their full time job. Brandon believes there is a lot of potential for academics to be self employed. He says even if you were the lowest ranked student in the lowest ranked PhD program, you still have knowledge and you are already part of a select group. Emily says any PhD can find a market where their skills are valuable. They give examples of formatting and copy-editing and tutoring.

17:13 How can someone handle the income jump after the suppressed income period of being a trainee in a PhD or postdoc?

Brandon says in one phrase, avoid “lifestyle creep.” When you suddenly go from an undergraduate or PhD student lifestyle based on lower income to receiving a full time income, you need to be mindful to not immediately start living at the new income. He says you don’t need to be extremely frugal, but use a moderate amount of your new income to build your emergency savings, pay down consumer debt, and pay down student loans in order to be much better off in the long run.

Emily shares the standard personal finance advice to commit a large percentage of your raise to your financial goals. Either all of the raise or as much of the raise as you can, put it towards goals instead of your consumption spending. She says it applies even more when you have a large income jump. Most of it should be used to accelerate financial goals. When Emily and her husband finished their PhD programs, they applied this concept to their new “real jobs” income. They had several financial goals that they focused on and avoided lifestyle creep.

Brandon shares his story about buying a house. He was unsure where he would get his tenure track position, but he wanted to build equity without committing his family to a large mortgage payment. He bought a small rent house before they bought a house to live in. Emily brings up that some people rent their properties as they move, in contrast to how Brandon purchased the property purely as a rental property.

23:40 Grad students and some postdocs don’t pay into the social security system. What are the long term effects of missing out on these years of contributions?

Brandon explains that social security benefits are based on 35 years of covered earnings. Essentially, it’s an average of your highest 35 years of earnings. If you’re starting to contribute later, do the math. If you’re in your early 30s, you may be in your late 60s before you have 35 years of covered earnings. The issue is that your benefit will be calculated with some zeros in the 35 year average, which skews down your average. When you’re on the back end of your career, this may influence your decision to work for a few more years to replace some of the years where you contributed zero dollars to social security.

26:59 What steps can someone who’s in or recently been in PhD training do to mitigate negative effects of lower income and not contributing to retirement?

Brandon brings up the psychological benefit of being used to living on a small income. He says to continue to live like that for a couple of years so that you can build yourself a financial cushion and start saving for retirement. He says eventually the feeling goes away and you get used to the new level of income. Psychologically, it’s harder to start saving for financial goals later.

Emily says that this is classic personal finance advice. Sometimes the lifestyles of PhD students are lower than those of college students. She says it’s difficult to deflate lifestyle. You might see the higher paycheck from your first real job, then you lock yourself into higher housing costs or buy a new car. It’s difficult to take a step back, but it’s much easier to keep a similar lifestyle and put the new income to your financial goals and slowly work up your lifestyle.

30:16 If a person starts saving during graduate school, what kind of effect can that have on retirement?

Brandon explains the first presentation that he saw on the effect of compound interest. If you started when you were 18 years old and you saved just $2,000 per year in a retirement account, you would have a million dollars for retirement if you simply earned the average market return. He says the same is still true if you start at 30 or 32, but there are a few less years for compounding to take effect.

Emily says that even during graduate school, saving a couple hundred dollars a month is accessible. It’s not a thousand dollars every month that you need to save. The earlier you take these steps, the more and more impact it can make. It really does make a difference to take these steps earlier.

Brandon adds that at least, don’t make negative steps. Buying a cheaper car or cheaper clothes can go a long way. Emily says that the professional students, like law students, were living a higher lifestyle even though they were living on loans. She says the smallest amount of debt that you have to take on during training will make it easier for you in a few years.

35:50 What do you do for clients?

Brandon can help with anything within realm of retirement planning. He can help someone starting out. He can help graduate students and postdocs sort through their different options for retirement plans. He can help with decisions about how to invest within retirement plans. Brandon encourages you to take retirement very seriously and to think very hard about putting off retirement. He says it’s really hard to make a strong case against contributing to a plan with an employer match. He says employer match is essentially free money. Emily says an employer match is a 50% or 100% return on investment.

Emily clarifies that someone looking at different options can ask Brandon for help considering which option to prioritize. Brandon can help overcome “analysis paralysis.” Brandon says something is almost always better than nothing, and you need to just do something. He encourages you to envision your retirement and what your financial goal looks like.

40:03 Final Comments

Brandon’s contact information is at brandonrenfro.com. If anyone has a question about something that he hasn’t published an article about on his website, send him an email and he will write about it!

41:15 Conclusion

Purchasing a Home as a Graduate Student with Fellowship Income

March 11, 2019 by Jewel Lipps 1 Comment

In this episode, Emily interviews Jonathan Sun, a second-year PhD student at Yale University. Jonathan purchased a house in New Haven after his first year in graduate school. He shares the process he used to search for and ultimately go under contract on a home, including applying for various incentive programs. But his home ownership goal was nearly derailed; his original mortgage lender pulled out because his fellowship income isn’t reported on a W-2, and he had to scramble to find another lender at the last second.

Links mentioned in episode

0:00 Introduction

1:02 Please Introduce Yourself

Jonathan Sun is a second year PhD student in Pathology at Yale University in New Haven, Connecticut. His stipend is $35,000 and it increases annually. When he moved to New Haven, he started by renting a two bedroom, one bathroom apartment with his girlfriend. He was paying about $1,500 monthly for rent.

3:10 What made you think that it would be a good idea to buy a home as a graduate student?

When he began his PhD program, Jonathan had in mind that he would want to buy a home. He thought between his first and second year would be the ideal time to buy. At this point in his PhD, he would know if he would be staying there for five or six years. Emily mentions that it’s a good idea to learn about the neighborhoods before buying a house. Jonathan agrees that it was a good idea to get to know the city and neighborhoods. He shares that if he had bought a home when he first moved to New Haven, he would have chosen a less convenient or less desirable neighborhood.

Further reading: Should I Buy a Home During Grad School?

5:11 Was your interest in buying a home specific to New Haven or anywhere you moved to for your PhD?

The idea of buying a home occurred to Jonathan when he was interviewing at Johns Hopkins. He saw that homes were affordable near Johns Hopkins. He realized that homes could be affordable even on a graduate stipend. When he chose to attend Yale, he did some housing market research on New Haven and saw he could afford homes there.

When Jonathan was interviewing for PhD positions, he met a current graduate student at Johns Hopkins who owned their house. He didn’t meet any graduate student at Yale who bought a home. Jonathan says owning a home as a graduate student is not that common in New Haven. Emily shares that when she was a PhD student at Duke University, it was fairly common for grad students to own home.

7:20 How did you prepare your finances in the months leading up to buying a home?

Jonathan worked on improving his credit. He says that good credit is definitely important. To get a mortgage at a decent rate, or even to get a mortgage at all, he had to have good credit. Jonathan also searched for incentive programs around New Haven. He says he saved about $10,000 with incentive programs. He shares that while Yale University offered incentive programs for employees, he could not qualify for them as a PhD student. He relied on incentive programs instead of savings because he was paying expensive rent in New Haven.

To research incentive programs, Jonathan talked to a real estate agent who pointed him to incentive programs. Shortly after Jonathan arrived in New Haven, he started working with an agent. Jonathan didn’t have connections to an agent when he started to process. He simply dropped into a real estate office and met an agent there.

9:54 What were the steps you went through to buy a home?

Jonathan started looking for houses with agents about three months after he moved to New Haven. He didn’t start seriously looking until six months after his move. He says that even if you don’t have intention to buy right away, it is important to familiarize yourself with the neighborhoods. He was looking at four different neighborhoods around Yale University. He got an idea of price range for homes and who are the neighbors. This process gave him a firm idea of whether he wanted to rent or buy. Most of the time, he looked at houses through private showings with his agent. He went to just a few open houses without his agent.

During Christmas break, Jonathan thought carefully about whether he should pursue buying a home or not. He talked to his friends and family, and it seemed like the right thing to do. He asked his family if they could help with his downpayent, and made sure to have open communication with his family.

Buying a home took at least two months of seriously looking. Jonathan went through some experiences of making an offer but not getting the hoouse. He recalls three homes that he made an offer for, and there were some other situations where he almost made an offer. He didn’t want to settle for a house that he wasn’t satisfied with. However, his offers were outbid or made too late, and this added to the challenge of buying a home. Emily shares that in Seattle, she hears stories about bidding wars and people struggling to get the house they want, then they end up settling for a home that wasn’t all that they wanted.

13:54 How did you balance the process of buying a home with your first year of graduate work?

After his offers on homes were rejected multiple times, Jonathan felt demoralized. He had lowered his standards for a home. But then when he was browsing an online resource, he found a house that looked perfect. This house ended up being the one he bought. He says it was challenging to balance his graduate work with buying a home, but he was glad he did this in his first year rather than in his second year. He shares the example that on the day that he gave his offer, he was giving a presentation on a paper. He barely read the paper because he was so tired, but he still managed to give a compelling presentation. Right after he finished the presentation, he ran off to give an offer on the house. Much of the stressful part of home buying is waiting to get a response on the offer.

16:01 Tell us about the house that you ultimately purchased and live in now.

Jonathan was browsing online on the day before his presentation. He noticed the house was ten minutes away from where he was living. The house had just gone on the market that day. He pushed his agent to get a showing the very next morning. He got to meet the owner and exchanged contact information directly. The owner was a Masters student, and they had a connection. About two hours after the tour of the house, Jonathan gave an offer of $2,000 over the asking price. This was right after his presentation. He asked to receive a response in one day. The next day, someone else made an offer of $5,000 over the asking price with full cash. Jonathan raised the offer to $2,000 over the other offer. Jonathan’s offer was accepted, and he says that meeting the owner in person helped him get the house.

19:06 How was the process of getting a mortgage?

Jonathan didn’t have his mortgage ready until after his offer was accepted. He did have a pre-approval, but this didn’t work out for him. The lenders didn’t understand his financial situation as a graduate student with a stipend. The pre-approval came from a lender with connections to multiple banks. When you make an offer on a house, it is important for the seller to know that you can afford the house. For a pre-approval, the lender does a very brief credit check on you. The pre-approval shows that you can take out a loan of a certain amount. The pre-approval shows the seller that you can take out a loan for the house. Pre-approvals are very superficial, since they do not ask for a W-2. The lender asks for monthly income and proof that you reliably pay rent.

After his offer was accepted, Jonathan first explored incentive programs. He found an incentive program that stipulated if he stayed at least five years in New Haven, the program would pay at least $2,000 per year and contribute to the downpayment. The application for the incentive program took a while. Jonathan says that ideally the application should be done before submitting an offer. The seller wanted to move out three months after the sale, so this gave Jonathan the right amount of time to sort out the finances.

Jonathan qualified for two incentive programs, but he was happy to get just one because the programs were slow to respond. The incentive programs have a list of lenders that you have to use for a loan. The lenders were local banks in Connecticut. Everything seemed like it would work. He submitted all his documents, but about three weeks before closing, he got a phone call saying that they couldn’t pre-approve of his mortgage because the university wouldn’t be able to provide W-2. The university wouldn’t submit a form indicating that his stipend is guaranteed for 3 or 4 years.

Emily explains that there are different types of pay for graduate students. The W-2 is provided for assistantships and this represents a more typical employment situation. Jonathan says he doesn’t know the name of his pay. He gets the 1098-T, and he simply calls his pay a graduate stipend. Emily says that the 1098-T usually means you are funded through an award or outside fellowship. Lenders get confused by fellowship income. Jonathan says his acceptance letter from Yale says his stipend is guaranteed for several years, but the lender wanted the university to sign a form. The university was unwilling to compromise on signing that form that indicated the stipend is guaranteed. Emily says this “guarantee” of income is strange, because even with a W-2, the typical job is not guaranteed for multiple years.

28:15 How did you resolve the problems with the lender?

Jonathan was calling Yale’s financial office daily. He asked for help from the Dean. He started looking at the other banks on the incentive program’s list, because he had a feeling it wouldn’t work with this bank. There were a few banks around the university, so he went in person to the bank. He talked to a mortgage broker in person. They sat down together, and Jonathan filled out the form during the meeting with the mortgage broker at the new bank near the university. Jonathan resolved the situation because he found someone who was willing to work with him through his unique financial situation.

Jonathan said that this bank offered their own portfolio mortgage with their own requirements. It was harder to qualify for, but it came with a lower interest rates. He had little debt and good credit so he could qualify. It was a different type of mortgage than the first lender offered.

Jonathan was really caught of guard by the phone call from the first lender. It seemed fine, then suddenly he got the call, with no easy way to resolve the issue. Closing got delayed from Friday to Monday, but the closing went very smoothly with the new lender.

32:29 How does it feel to be a homeowner and to be a graduate student?

Jonathan says it feels good to come back to his own house. He can rent out some of the rooms. If he rents out two bedrooms of the three bedroom house, he can cover a good chunk of monthly mortgage. He says this is a great financial decision for him. The mortgage is less than what he paid in rent, plus he has the potential to rent out rooms. Two months after he moved in, he started renting out the rooms. He has two tenants and they are covering good fraction of mortgage payment.

Jonathan has to stay in the house for at least five years. He says that in five years, he will definitely be in a better financial situation from buying instead of renting. He bought in a very good location, in the up and coming neighborhood near Yale. He thinks the market value of the home will increase.

35:25 Have you thought about what you will do when you finish your program?

Jonathan says he has two different options after he finishes his PhD. First, if there’s a good market value to sell the home, he can sell it. Second, the location near Yale University will make it very easy to continue to rent the rooms in the house. He doesn’t see himself working in New Haven after his PhD unless it’s for an academic position.

36:24 Final Comments

Jonathan shares that he had a huge budget for his move, but he didn’t spend very much. He estimates he spent less than $1,000 to move into the house. He moved during the summer, so everyone was getting rid of furniture for free. He used his Toyota Corolla to pick up furniture, and hardly spent any money to furnish the house. He is replacing pieces over time as he saves money. He recommends overestimating expenses for a move.

38:44 BONUS INTERVIEW with Sam Hogan, mortgage industry professional.

Emily chats with her brother, Sam Hogan, who works in the mortgage industry. She asks him about solutions for graduate students and postdocs who are receiving fellowship income but want to buy a house.

Sam Hogan is based out of Northern Virginia. He works for PrimeLending and he is licensed in all 50 states. He explains what lenders look for in the risk profile. They are looking for the ability to repay, and to see verification of history of the type of employment as well as the likelihood of employment to continue. Sam says that ten years ago, anyone could get a no document loan. This meant anyone could verbally verify their finances, but this practice led to many foreclosures. Now, lenders require written verification of employment.

Sam explains that in Jonathan’s case, the lenders sent a form for verification of employment to the university. On the form, there is a tiny check box that asks if employment is likely to continue. It is a yes/no checkbox. Universities won’t check this box because technically a PhD candidate could discontinue their PhD by going into the workforce or transferring institutions.

Sam shares that the best approach is to document likelihood of continuation of income. This may be in the fellowship offer letter. Conventional loans look for at least three years of guaranteed income. When it comes to approving loans, it is all about the presentation of the buyer. Sam says to work with someone goal-oriented like yourself, who will be able to over-document your income. For example, you can write a letter about why you got the fellowship, and include that even after your PhD you will have income. This approach ensures you have good presentation to the underwriter. Loan approval comes down to one person’s decision, a human’s opinion. He says to work with underwriters who are flexible and will give you personalized attention.

Emily recommends that PhD students and postdocs work with Sam because he understands fellowship income situations. Sam can be contacted by cell phone at 540-478-5803. He can be emailed at samhogan03@gmail.com. His national licensing number is 1491786. He has a Zillow profile under Sam Hogan.