A new school year brings the sense of a fresh start, even for those of us who are largely unmoored from the academic calendar. Even with a PhD trainee’s limited income, we can harness our renewed optimism for our finances each September. If you are willing, there are steps you can take this week, this month, and this year to improve your relationship with money, your money management skills, and your net worth.
A version of this post was first published on GradHacker.
Improve Your Finances This Week
Identify your life values
There is no single right way that everyone should use their money; your own individual best practices will be based on your life values. Your values are the concepts that you hold most dear; examples include freedom, fun, family, health, excellence, and so on. Identifying what is most important to you will bring great clarity to your financial decisions. You can choose to spend more resources fulfilling your values and dispense with things and activities that do not.
Further reading: Determining Your Values and Financial Goals in Graduate School [A Personal Finance for PhDs Guide]
For example, when my husband and I identified ‘community’ as one of our top values, we knew we wanted to allocate more money for traveling to visit our families and attend weddings. To enable that, we cancelled our cable TV and stopped eating out for convenience, as those areas of spending did not correspond to any of our values.
Create a balance sheet
A balance sheet is a snapshot of your entire financial life – every asset and every debt listed by type, financial institution, balance, etc. If you have any confusion or disorganization in your finances – or the tendency to bury your head in the sand – a balance sheet will help you see your whole situation at a glance. If you have debts, you can also include the minimum payments and interest rates so that you can easily decide which payoff to tackle first. Your balance sheet may reveal vestigial accounts or other duplications that you can clear up this week.
Start tracking your spending
My top financial ‘tip’ for grad students newly interested in their finances is to implement a tracking system for all their financial transactions. The simple act of tracking is often enough to start optimizing behavior. You can do this manually with anything from a notebook and pen to an app such as Wally or automatically with software that links to your accounts such as Mint or Mvelopes.
Create a prioritized goal list
Taking your values and balance sheet into consideration, list the current financial goals you would like to reach. You may be able to work on some of those goals simultaneously. For the goals that should be tackled sequentially, choose the order in which you will focus on them so that you can make quick progress. For example, if you have multiple debts you want to pay off, use the debt snowball or debt avalanche method to create your prioritized list.
Improve Your Finances This Month
Implement a frugal strategy
Trying out a new frugal strategy is a great way to unblock what can feel like an impossibly tight financial situation. You don’t have to commit to it forever – just give it a test run so that you can evaluate how much money you save and how it affects your life. (Bonus points if the frugal strategy you choose reduces a fixed expense!) You can find tons of suggestions online (example: 66 Ways to Save Money in New York City) or among your peers.
Further viewing/reading: A Month of Frugal Tip for PhDs-in-Training by PhDs(-in-Training)
Join the Mailing List to Download Frugal Tips for PhDs-in-Training
The download includes 30+ frugal tips for PhDs-in-Training with links to video and additional written content.
You'll receive 1-2 emails per week to help you make the most of your money during your PhD training.
Optimize your food spending
Food spending is a prime target when you are trying to free up more money, as it’s among the largest variable expenses in a grad student’s budget. Check out these articles on how to get the most for your money:
- Give Yourself a Raise: Prepare Your Own Food Even with a Busy Schedule
- Fueling Grad School
- Make Your Stipend Go Further: Bring Your Lunch to School
- Eating Well on a Grad Student Stipend
- Frugal Strategies: Food
Add to your emergency fund
Even a small amount of available cash can save your bacon in the case of an emergency. If you have nothing put aside for emergencies right now (46% of Americans surveyed couldn’t even cover a $400 emergency), set a goal of saving $1,000 for that purpose. If you already have $1,000, consider setting a larger goal based on your current monthly expenses or your insurance policy deductibles. You can add to your emergency fund with a monthly savings goal or in dribs and drabs as you free up cash.
Improve Your Finances This Year
Right-size your housing and transportation
As housing and transportation eat up a huge fraction of a grad student’s income, it’s important to pay only what you can afford or – in some high cost-of-living areas – as little as is feasible. If you realize that you are overspending on rent or your car, it will take some time and doing but you can correct the situation by moving, getting a roommate, selling your car, switching to cycling for your commute, etc.
Develop a side income
There are two ways to free up more money each month: spend less or earn more. Grad students tend to focus on the “spend less” side of that equation, forgetting that “earn more” is sometimes also an option, depending on the source of your funding and your department’s culture. A judiciously chosen side job can advance your career as well as generate income, providing you with opportunities far beyond what your program can.
Increase Your Income
Join the mailing list to receive our 7-part video series, "How to Increase Your Income as a Graduate Student," including side hustles and passive income.
Regularly invest and/or pay off debt
In some situations, the best a grad student can do is keep his head above water financially in grad school, but in others it is possible for a grad student to increase her wealth. The best way to increase your net worth is to make saving, investing, and/or paying down debt regular and automatic (pay yourself first). Don’t only use frugality or a side income to free up cash flow that is then lost to the ether. Commit that cash flow to working for you through automatic monthly transfers to your savings account, investments, or loans.
Free Email Course: Investing for Early-Career PhDs
Sign up for the mailing list to receive the free 10,000-word email course designed for graduate students, postdocs, and PhDs in their first Real Jobs.
What are you doing this week, month, or year to improve your finances?