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This PhD Entrepreneur Advocates for Universal Basic Income (Part 2)

May 11, 2020 by Meryem Ok

In this episode, Emily interviews Dr. Jim Pugh, the founder of ShareProgress and co-host of the Basic Income Podcast. Jim defines universal basic income and outlines how it would alleviate poverty and other social ills, including results from research and real-life experiments with basic income. He describes the possible avenues by which universal basic income could be funded and whether it would replace our existing social safety nets. Jim and Emily speculate about how universal basic income might affect higher education funding, including PhD stipends and postdoc salaries, and PhD trainees themselves.

Links Mentioned in the Episode

Teaser

00:00 Jim: You could basically think of this as universal basic fellowships for PhD students because I think that the dynamics that come with it very, very closely would match what it would be if you were getting a fellowship of the same size.

Introduction

00:18 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season six, episode two, and today my guest is Dr. Jim Pugh, the founder of ShareProgress and cohost of The Basic Income Podcast. In this second half of our interview, Jim articulates what basic income is and how it would alleviate poverty in the United States, including results from recent research and experimentation. He describes the possible avenues by which it could be funded and whether it would replace our existing social safety nets. We speculate about how basic income might affect higher education, including PhD stipends and postdoc salaries. Without further ado, here’s the second part of my interview with Dr. Jim Pugh.

Will You Please Introduce Yourself Further?

01:06 Emily: We’re back now with part two of my interview with Dr. Jim Pugh. In part one, he told us all about how he started a business a few years after graduate school, which ultimately allowed him a great deal of time freedom. So, his business pays for his lifestyle, but he only works at this point about five hours a week on the business. And that has allowed him to pivot to his advocacy work around universal basic income, which is what we’re going to be hearing a lot more about today. So, Jim, thank you so much for continuing this interview with me. And we want to start off with a basic question about universal basic income because frankly, I probably would not have really heard about this except that you and I are Facebook friends. And also, we’re recording this in September, 2019 and Andrew Yang is a candidate for the democratic nomination for president. So, between those two things, I’ve kind of heard a little bit about basic income, but I would love to hear a lot more about what it actually is from you.

01:59 Jim: Sure. Well, so, just to start with the definition. A universal basic income is a policy that would provide every single person in the country with unconditional cash payments regularly–most people talk about once a month–that’s actually enough to cover basic needs. And the idea of it is that, if you were to enact this, you eradicate absolute poverty. You’re ensuring that everyone does have enough money to cover the fundamentals. And so, in some ways it’s very, very simple because it’s just giving people some cash. But in other ways, we’re potentially talking about something very radical because we would for the first time be saying, we are fully abolishing absolute poverty. We’re saying that absolutely no one in the country should be poor and that we’re going to structure our systems with that in mind. And so the ramifications of that are pretty profound as far as what does it mean for work? What does it mean for health? What does it mean for people’s general lifestyle if you’re actually establishing that fundamental financial security floor?

Benefits of Universal Basic Income (UBI)

03:12 Emily: Okay, so let’s first take the benefits–the upsides of this–and let’s leave aside, for the moment, the practicalities of it, but just to talk about the vision for what this society might be like. So, what are the benefits that people might experience maybe who are currently in poverty but would be lifted out of that through UBI? You started to talk about this a little bit at the end of the last episode. So, there’s actually been research done in this area and there’s been some experimentation. So, can you talk a little about what we know already about how this might change things for people?

03:43 Jim: Yeah, so I think there are the obvious things that we know when people are poor, they can’t afford food or at least healthy food. They may be having trouble finding somewhere to live. They may not be able to take care of themselves. So, if you’re actually ensuring that everyone is up above the poverty line through just regular cash transfers, those are all things that are addressed, first order of facts. But I think beyond that, that’s where things start to get quite interesting because we have seen more and more evidence around how poverty and financial insecurity, if not causing, are at least are greatly contributing to a lot of other issues that we’re dealing with today. And so, people when they are approaching any aspect of their life, they can either be in an abundance mentality where they think, “Okay, I have enough. I can think bigger picture.” Or a scarcity mentality where they feel constrained, which basically gives people tunnel vision that they’re only thinking about what’s right in front of them.

Abundance Mindset, Higher IQ

04:51 Jim: And that difference has huge impacts on what happens to people. So, first off, there have been studies just looking at general intelligence, and there is a substantial shift in people’s IQ level between those two different headspaces. I think it’s around one standard deviation, so about 10 IQ points, smarter when you’re in an abundance mindset as opposed to a scarcity mindset. So, you’re making better decisions. Second, as I said, when you get that tunnel vision and so it means you’re just thinking about what’s right in front of you, it basically prevents you from longterm planning. You can’t be thinking about, “What is my life going to be even a year, much less, five, 10 years down the road?” if you’re worried about, Oh, how am I going to put food on the table tonight or tomorrow? And so, it allows people and encourages people to plan better, to make better longterm decisions which has big impacts around choices on education, choices around what sort of work they pursue, and ultimately, where they do end up in five, 10 years down the road.

Scarcity Mindset Damages Mental and Physical Health

05:58 Jim: And so, beyond just being able to afford health treatments, there’s also a lot of evidence that when you’re in a scarcity mindset, when you’re in poverty, it’s extremely damaging for mental health. And also for physical health, the stress has an impact on that as well. Crime–strong, strong correlation based on people’s financial security as to whether they’re more or less likely to commit crimes. And so there’s all of these second and third order implications around how things would look in our society if we weren’t to have this absolute poverty. That’s seems incredibly promising. And so, that’s why, again, our typical approach as a society is to, when something’s going wrong, to treat the symptoms of it. And this, instead, is really saying, “Let’s actually try to take a step back, deal with some of the underlying causes, and see how much easier that makes dealing with all the rest of this stuff.”

UBI and Job Flexibility

07:00 Emily: Okay. Sounds amazing. It sounds very, very compelling. I’m wondering a little bit more about what the vision for what this society may look like, should we bring it about. You talked earlier about jobs. And so, is the idea that not as many people would need to work? There wouldn’t necessarily be as many people in jobs? Or is the idea that you would have just more freedom and flexibility around when you want to work and when you went to have further training? How does this relate to the jobs, I guess is what I’m asking?

07:28 Jim: I think much more the latter. So, the idea is not that this is something that’s going to replace jobs wholesale. I think it does allow you to pursue a more general definition of work, I would say. And so, in the sense that “job” right now means a fairly specific thing in those conversations about more like a nine to five, like ongoing, consistent workplace. This does give you additional flexibility to think a bit differently about what is the right form of work for you to be doing. So, whether that’s part-time, whether that’s taking some time to get more of an education in the area that ultimately is going to allow you to do something that you feel better about and maybe much more productive for society. Whether it’s going to give you the flexibility if you want to do some sort of family care or staying home with children or elderly folks.

UBI Facilitates Entrepreneurship

08:25 Jim: Another one is entrepreneurship. If you’re considering starting a company or doing something that, in its early stages, may not be giving you a steady paycheck–having more flexibility around that as well. So, it opens up all these doors that most folks, I would say, don’t really have access to at this point in time. As far as overall impact on how much people are working, there have actually been a number of studies on this. And what it suggests is the results vary. That there are certain situations where, when you give people regular, unconditional cash, they work more. It seems like, either through stimulating the local economy and creating jobs or by giving people that flexibility, they end up doing more work. So, Alaska for the last 40 years has actually had a universal income provided by oil in the state. And recent studies have found that the overall work rate hasn’t changed, but you see a lot more people engaging in part-time work than you have in the past. Or, certain groups, studies have found there is a decrease in work, quite consistently actually across studies. The ones where that’s only really stood out is parents with young children and teenagers, basically. And interviewing folks involved in that, it seems like the former is spending more time staying home with kids, the latter spending more time at school. So, again, it’s not captured as work in how we measure it today, but it actually is work and potentially much more pro-social work than they might otherwise be engaged in.

10:06 Emily: So, this is really reminding me of–so I have not read this book. The book is Your Money or Your Life by Vicky Robin, I want to say. And she has a coauthor. Anyway, I heard a podcast interview with her within the last few weeks and she was talking about how in our current society, like you’re saying, there’s a lot of work that is not inside a job, right? There’s a lot of work that people do in our society to further it. A lot of women do this kind of work and it’s not valued in terms of a paycheck from a job, right? That doesn’t mean it’s not contributing to society. And so, I don’t remember if they specifically talked about basic income on that podcast, but this is a way to sort of reframe what counts as work and what counts as doing something valuable with your time.

UBI and Social Safety Nets

10:51 Emily: Yeah. Okay. So, I think I’m getting you here. I have another question: would this replace the social safety nets that we have currently and expand them, I guess you could say?

11:03 Jim: So, there are mixed opinions on this amongst people who advocate for basic income. I’m actually in the camp saying that this should not initially be treated as a replacement for any social programs. And I think the reasons are: one, is that I think there is widespread recognition across the political spectrum that our social safety net is not working as well as we would like it to. You get very different opinions as to what would allow it to work as well as we would like it to. But no one is satisfied with where it’s at. I think a lot of people have talked about, “Let’s provide basic income and then just cut much, if not all, of other social programs because this will eradicate absolute poverty. Why do we need to worry about anything else?” And there are actually, I would say, a lot of edge cases here where it’s people who are dealing with some specific challenge for which cash on its own is not going to quickly solve it. It will help a lot in many situations. But I think there is the risk that if you say, “All right, we’ll get rid of this other stuff and just give you cash,” you’ve basically taken a problem that requires multiple parts to solve and just replaced one part with another. And, in some cases, maybe they keep people worse off because of that.

Targeted Interventions Beyond UBI

12:25 Emily: Can you be more specific about what is being provided to people now that’s not money?

12:29 Jim: Yeah. So, I think disability being a good one where disabilities can look very different for different sorts of people. And in some cases, the support you would need to actually be able to live with disabilities requires much more than what a basic income would provide. And so, that’s a case where, if someone were to say, “We’re going to wipe everything off the books and just give you that,” a lot of people in that situation are going to be left far worse off. I think there are specific issues around addiction, in some situations, housing assistance where there is obviously there are areas where housing is far, far more expensive. And so, to think that a national UBI would actually be enough for people in the Bay Area to be able to get by, it’s not realistic. And so, that’s a situation where a targeted intervention beyond the UBI is going to be important.

13:22 Jim: And then I think there are other ones where it may be some general challenge where someone’s falling out of the workforce or coming back from deployment abroad where, again, making sure that they have enough cash is important, but there are additional services that come beyond that that also much better set them up to succeed than the cash on its own. And so, I think that that’s a key thing here is to recognize both how transformative and valuable UBI could be, but also that it’s not a panacea. It’s not a silver bullet. It’s something that will need an ecosystem of additional supports if we actually want to have an effective safety net. And so, I don’t think the safety net that we have right now is doing that well enough, and we need to be rethinking that. But I think that there’s a danger when people say, “UBI instead of that,” that we throw the baby out with the bathwater and end up in a situation where people may be much worse off than they are today.

Regional Cost of Living Considerations

14:25 Emily: Yeah. I think because this is, I don’t necessarily want to say it’s a new idea. I mean, you said Alaska has been doing something like this for 40 years, but it’s gained maybe national attention only in recent years. So, this is still an idea that’s being worked out. And at the policy level, if viable, we don’t know exactly what the ultimate solution would look like. And presumably, it would change over decades and generations anyway. So, I’m glad you brought up the cost of living question. Because the U.S. is very diverse in terms of cost of living. Is the ultimate idea still that people would get the same amount of money no matter where they live? Maybe with some additional help, like you were just saying, for certain people in certain areas?

Psychological Implications

15:05 Jim: So yeah, a key part of it is–and I don’t think I said in my original definition, but the idea is–this would be the same amount to everyone. And there are a couple reasons for that. One is logistical that it becomes much easier to manage if it’s the same for everyone. But the other is more psychological. One of the reasons for taking a universal approach is to try to eliminate stigma associated with receiving support, which in our modern age, we all see how much stigma is associated with receiving various forms of welfare. And that, if it’s something that everyone in society is getting, you’re able to get around that. Because why is it wrong for the homeless person on the street to get the check every month if I’m also getting my check every month?

Regional Supplements

15:52 Jim: And so, that’s another reason to have the equal, universal amount. But as you say, what that means is that in particularly different regions across the country, you’re going to see big differences as far as the implications of that. So, there certainly are parts of the country where if you were giving everyone a thousand dollars a month, you can survive without too much difficulty. If you’re in the Bay Area or other places, that does not get you very far. And so, that’s an area where you do need to have something beyond that. There’s been some discussion around regional supplements where you might be able to top up a equal federal amount with something that goes up more for more expensive areas. But I think beyond that, yeah, there may be other targeted interventions that are important.

UBI Increases Mobility

16:46 Jim: I think one question that comes up that we don’t really have a good answer to but people wonder about is, if you’re providing the basic income to everyone, it is going to increase people’s mobility. And so, if you currently feel tied to a certain geography for economic reasons, which may be very expensive, whether that gives you the option to relocate to somewhere that is less expensive. And then that gets very complicated because it goes into community ties and family and things like that where there may be other factors beyond just the economics of it. But it’s something that would be different if we did this and so, potentially, that at least partially would help to mitigate some of those challenges.

Commercial

17:35 Emily: Emily here for a brief interlude. I bet you and your peers are hungry for financial information right now, especially if it’s tailored for your unique PhD experience. I offer seminars, webinars, and workshops on personal finance for early career PhDs that can be billed as professional development or personal wellness programming. My events cover a wide range of personal finance topics or take a deep dive into the financial topics that matter most to PhDs like taxes, investing, career transitions, and frugality. If you’re interested in having me speak to your group or recommending me to a potential host, you can find more information and ways to contact me at pfforphds.com/speaking. We can absolutely find a way to get this great content to you and your peers even while social distancing. Now, back to our interview.

The Basic Income Podcast

18:34 Emily: I feel like I could continue asking you questions about this for quite a long time. It’s a good thing you have a podcast where other people can learn more about this. What is the name of your podcast?

18:45 Jim: Our name is a bit on the nose. We are The Basic Income Podcast. We’ve been introducing weekly episodes for about three years now and exploring both UBI specifically, but also, how it relates and connects to all sorts of other areas.

How to Fund UBI in the U.S.

19:00 Emily: Okay. So, I’m going to hold off on the questions that are still swirling in my head and just say, listeners, if you’re excited about this idea, or skeptical of it, or whatever, go ahead and check out the podcast and I’m sure there are other resources that you refer to from there where people can continue to learn even more. So, one more question around the vision of this, which is should we all, or enough of us in the United States, decide this is a good idea, what actually does it look like to fund this? Maybe post-transition, if there is a transition.

Enact Changes to the Tax Code

19:32 Jim: Yeah, so that’s another area where people have very different opinions around. Because, I mean, if we’re looking at it on its face saying, “All right, everyone in the country gets a thousand dollars a month,” that’s about $4 trillion, which is the size of our current governmental spending, which seems insane. But there are various caveats, I would say, that make it much more achievable than it may seem at a glance. My preferred approach to financing is first to recognize that, if you’re going to enact universal basic income, it means you need to make some significant differences in the tax code. And specifically, as a starting point, I think income tax. At its core, the goal of UBI is to provide people with financial security. And so, what that means is that, knowing you’re always going to get your check every month is important because who knows what may happen to you. And having it always there gives you that security.

20:31 Jim: But, if you’re earning a good paycheck, there’s no reason why you should be coming out net ahead, necessarily. And so, to basically update our income tax brackets such that, once people make above a certain point, their UBI is effectively being taxed away. So, maybe that’s four times the poverty level. So, if you as an individual are earning more than 50 or $60,000 a year, basically, you’d be getting your check every month and then you’d be paying a bit more in taxes to cover that expense. If you do it that way and look at what’s eventually the net cost, it drops to somewhere between 500 billion and a trillion dollars a year, which is still a lot, but a lot less than the four trillion we started with.

Shift Tax Programs and Brackets

21:18 Jim: And so, then there are different ideas as to how do you pay for that. That’s much more in line with other somewhat ambitious governmental programs. You can couple together some combination of a carbon tax, the financial transaction tax, a wealth tax. And sort of talking more about that, Elizabeth Warren wrote it up in her campaign where you’re able to raise that amount of money to cover that difference. And also, I think potentially looking at adding a few tax brackets at the top of the income level. If we were to go back to the taxation we had pre-Reagan, that would be bringing in a substantial amount there. So, with those things combined, you can relatively easily actually be able to cover the cost.

UBI and Graduate Training

22:02 Emily: Okay. Very, very interesting. So, I wanted to pivot a little bit to tie this really into more of our PhD audience because we haven’t brought that up so far really. I mean, you mentioned earlier that you know, having a basic income could afford people the flexibility to do more training. Of course, PhDs have a lot of that. Have you given any thought, or has there been any discussion around this, how basic income–I’m sure it’s been discussed at the undergraduate level, how that would affect people pursuing college degrees? You can speak about that a little bit if you like, but I am curious about what you think about how it might affect PhD training in the United States. And specifically, you know, you brought up earlier the scarcity mindset and how that prevented people from thinking longterm and it caused an effective IQ drop.

22:45 Emily: And in season four of this podcast, I published a two-part interview with Dr. Lucie Bland and she talked about her scarcity mindset that she developed during her PhD because she was living in poverty during her PhD. She was funded at a very low level. She lives in a very expensive city, and it’s something that a lot of people can relate to during their graduate training. Although you wouldn’t necessarily think about graduate students, a relatively privileged bunch, I would expect, necessarily being beneficiaries of basic income. But maybe during that training period, they are. So, can you just speak a little bit about that?

UBI and Financial Security

23:18 Jim: Well, I would actually just add on to that. What we’re seeing in the Bay Area right now is not only at the graduate student level, but actually the assistant professor level, in some places, that people are homeless. They can’t afford to live here. So, they’re living out of their cars. Yeah, I mean I think that it’s giving you that layer of financial security, which should help with that. I think, not just because it’s some extra money, but because it would be extra money not tied your employment education situation. And obviously this is not everyone, hopefully a small minority, but if you’re having some bad power dynamics with your professor and feeling like you don’t want to be working with him or her but are not able to step away because of finances you’re receiving from there, it gives you kind of that out knowing that, regardless of what you decide there, you have that income coming in otherwise.

Parallel: UBI and Fellowship Income

24:15 Emily: So, there’s actually a slight parallel there, actually with fellowship income, right? And you did your PhD outside of the state, so, maybe it’s a little bit different there. But here with fellowship income, you know, it’s an award that you receive as an individual. It’s based on your own merits. And so, it’s not necessarily tied to you staying in one person’s lab. And so, I again, I publish an interview in season four where someone was able to switch labs, did not have a good relationship with their first advisor, was able to switch labs partially because she received an NSF graduate research fellowship. And so, similar situation, right? If, you know you can go a few months and transition without a paycheck coming from your advisor, it gives you more freedom there to really seek out the situation that is going to support you best as a developing researcher. So, yeah. Excellent point there. Please continue.

24:59 Jim: Yeah. Well, I was going to say, I think you just nailed it. You could basically think of this as universal basic fellowships for PhD students because I think that, yeah, I think the dynamics that come with it very, very closely with match what it would be if you were getting a fellowship of the same size. I mean obviously with the added flexibility that you could leave a PhD program and still have it. But as far as the context within graduate school, I think that that’s basically what it would be.

25:27 Emily: Just to explore that a little bit further. Because I do think it’s a good analogy. So, one of the great things about fellowship income is that it gives you more freedom in your research, right? So, if you’re not beholden to working on a specific grant for your advisor, like you often are in STEM fields if you have a research assistantship. The fellowship allows you more intellectual flexibility and pursuing projects that are more in line with your own goals. It allows you to pursue collaborations. It’s just a greater degree of freedom. Now, some advisors exact more or less control when they do have people on a grant for research assistantships. That’s sort of up to their discretion. But yeah, the flexibility there in terms of your intellectual pursuits would then translate in terms of UBI into your general career pursuits, life pursuits. It would just be a much broader funding of that.

26:14 Jim: Yeah, I think that’s right. I think I could imagine there would also be kind of a trade-off on that versus greater financial security. Because one of the questions would be, if everyone were getting a basic income, would you still have PhD student stipends and outside fellowships at a similar level? If you would, okay, everyone’s going to be much more economically stable.

Final Thoughts on UBI and Academia

26:40 Emily: You said earlier as like a touch point that, in your vision of this, around 50 or $60,000 of income, that’s when the UBI would kind of phase out. And for the graduate student level, graduate students don’t reach that point. A lot of postdocs don’t reach that point. So, in some sense, if nothing changed on the grant side of things, then it would boost your income. But yes, the question is whether people would still be funded to the same degree given that they have that baseline. So, if the idea right now in academia is we give people just enough money to live on so they don’t have to have other jobs that distract from their PhD research, well then maybe they would just decrease that funding. So, yeah. Any other thoughts around that? I’m sure this has not been very fully explored because it’s a very niche interest.

27:24 Jim: Well, no, I think that this is a specific example of something that is much broader, which is basically, if we were to have UBI, what does that do to wages? And the theory is that it depends a lot on what type of work you’re talking about and how much there is the internal versus external motivation around doing that work. Because if someone’s only doing the work because they’re getting paid to do it, UBI actually has the potential to then increase wages because it basically gives them more leverage to say, “Oh, well I don’t actually like this work. I’m going to go pursue other options.” And a company might then have to say, “Oh, well instead of $8 an hour, we’re going to pay you $15 an hour.” On the flip side, if it’s something that people just want to be doing for other reasons, like perhaps going to graduate school since not too many people go to graduate school to get rich, then there’s the opposite potential where, if someone is basically willing to do it, assuming that they won’t be starving, then universities may say, “Okay, well you’re UBI now instead of giving you $18,000 a year, we’re going to give you six.

28:43 Jim: So, I mean, it’s a whole other topic, but I would say that that’s where unions might come in handy. But yeah, I think it’s one of those areas that it’s very, very difficult to answer and know exactly what will happen until we actually do it. So, we can hypothesize around it. But yeah, that’s an open question.

Value of Teaching and Shifting Landscape in Education

29:07 Emily: Yeah, I guess I’m also thinking about sort of we’re having larger debates and angst in academia around the value of teaching, right? Because there’s this huge adjunct workforce that is, you know, severely underpaid. They don’t have job security and yet such a huge percentage of the classes that undergraduates and graduate students take are being taught by people who are not full-time employees of the institution that they work for or institutions. And it’s just such a difficult area right now. I can definitely see how UBI would help people in that situation, right? Because they are also experiencing poverty or near poverty-like situations, many of them. But, yeah. I mean, we’re in a transition point for education broadly. Like, if we’re moving to massive online courses and so forth, maybe if your teachers are needed. I don’t know. There are just a lot of transition here. I guess when we’re talking about maybe some kinds of jobs disappearing or transitioning, teaching at the higher education level, is one of those jobs that is sort of in transition in the workforces. And so, yeah. UBI is just kind of another element to kind of throw into the mix here that we don’t really know how it’s going to play out entirely.

30:13 Jim: Yeah, I think that’s right. And this applies less, I would say. I would expect it to still apply to some degree, but on the flip side, as far as what is the responsibility of the teacher versus the student? I think, certainly at the elementary and high school level, there’s ample evidence that financial stability of the family that the students are coming from makes a big difference as far as how well they’re able to learn. And so, that’s, I would say, another wrinkle that gets thrown in here as well, where if you are ensuring that everyone who is in the class is in more of an abundance mindset, what implications does that have to what is the most effective way of educating?

Tell Us More About Your Podcast

30:55 Emily: Such an interesting topic, Jim. I think that people will definitely want to follow up with you and learn more about this. Maybe have more discussions with you around what does the potential of UBI look like in affecting higher education and graduate students and postdocs and trainees. Again, tell us a little bit more about what you do. We have the name of it, but what do you do on your podcast?

31:14 Jim: Yeah, so we cover a lot of different areas. Most of the episodes, I think like yours, feature or are centered around a guest interview on some topic. And so, we’ve covered everything from, yeah what does UBI do with the disability community, to what’s happening in Canada with UBI to digging in on some of the modern control pilots that are being done in the U.S. and abroad to what is the connection between UBI and housing? And so, it really covers a lot of different areas, but generally we bring on an expert, we chat with them, and then we talk through what are the ramifications of what they said. And so, really try to dig in a little bit on many different areas.

UBI and Healthcare, Education

32:03 Emily: So, actually one follow-up question that goes maybe more back to our earlier conversation with what does this vision look like? Does the implementation of UBI come with it or depend on a revolution within healthcare and also in higher education? You know, paying for higher education.

32:21 Jim: Yeah. So, I would say healthcare comes up a lot. And in my view, UBI can only truly be successful if we actually have truly universal healthcare because it basically counts on the assumption that you can somewhat reasonably project what is the cost of living for people across the country. In our current system. If you don’t actually have universal coverage, that is impossible. I mean we see all the time, all these cases of people having insane bills for services. And as long as that continues to happen, there’s no way to actually guarantee universal financial security. And so, I see those two things as very, very complementary and part of a whole package that we should be fighting for. And education, perhaps not quite as closely coupled, but I think if we’re talking about what is beyond just financial security, what is really setting people up for longterm success, it seems obvious that we want to make that as accessible as possible. And so, a model where everyone in society has access to higher education is certainly the way to go.

Best Financial Advice for Another PhD

33:29 Emily: Gotcha. Okay. Standard question as we wrap up here that I ask all of my guests which is what is your best financial advice for another PhD? And that could be related to something that we’ve talked about in these two episodes, or it could be something entirely new.

33:44 Jim: I mean, I think it’s just like figuring out your sustainability. So, I mean, thinking about where you’ll be going with your PhD and what is your cost of living then, but just trying to set yourself up so that you’re not heading towards a cliff somewhere, which yeah, I feel like it would look very, very different depending on your specifics.

34:06 Emily: Yeah, definitely. It’s something I talk about a lot for people who are sort of in transition, right, out of graduate school, out of the postdoc into other positions, especially when they’re moving. Make sure you understand the cost of living. As you brought up earlier, you know, in San Francisco, make sure you understand the cost of living that you’re getting into and that the salary that you’ve been offered is is appropriate for that area and negotiate if that is not your initial offer. So, thank you so much for that advice. Jim, this has been a fascinating conversation, really just the tip of the iceberg on this topic, and so thank you so much for joining me.

34:38 Jim: Yeah, I really enjoyed the conversation as well.

Outtro

34:40 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. There you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind the scenes commentary about each episode. Register at pfforphds.com/subscribe. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

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

May 4, 2020 by Meryem Ok

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

Links Mentioned in This Episode

Teaser

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

Introduction

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

Will You Please Introduce Yourself Further?

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

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

What Role Did Your PhD Have in Starting Your Business?

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

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

Jim’s Entrepreneurship Journey

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

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

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

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

Relevant Technical Skills Gained During PhD

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

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

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

Inspiration While Working for the Democratic National Convention

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

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

How to Gain a Wide-Reaching Audience

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

Evolution of ShareProgress

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

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

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

Consulting as a Stage of Growth

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

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

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

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

San Francisco Venture Capital (VC) Environment

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

15:50 Jim: Yes, that’s right.

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

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

Current Role in the Business

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

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

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

18:16 Jim: That’s right, yes.

Financial Independence and Early Retirement (FIRE) Movement

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

Business Advice for Early-Career PhDs

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

Advice #1: Talk to People

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

Advice #2: Find Your Focus

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

Commercial

21:07 Emily: Emily here, for a brief interlude. I bet you and your peers are hungry for financial information right now, especially if it’s tailored for your unique PhD experience. I offer seminars, webinars, and workshops on personal finance for early-career PhDs that can be billed as professional development or personal wellness programming. My events cover a wide range of personal finance topics or take a deep dive into the financial topics that matter most to PhDs like taxes, investing, career transitions, and frugality. If you’re interested in having me speak to your group or recommending me to a potential host, you can find more information and ways to contact me at pfforphds.com/speaking. We can absolutely find a way to get this great content to you and your peers even while social distancing. Now, back to our interview.

Should Entrepreneurs Move to San Francisco?

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

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

Advocacy for Universal Basic Income

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

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

Small Business is the New “Big”

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

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

27:20 Jim: Yeah.

27:21 Emily: Gotcha.

Changing Mindset Around Universal Basic Income

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

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

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

Outtro

29:40 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind-the-scenes commentary about each episode. Register at pfforphds.com/subscribe. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

How to Qualify for a Mortgage as a Graduate Student or PhD, Even with Non-W-2 Fellowship Income

April 27, 2020 by Lourdes Bobbio

In this episode, Emily interviews her brother, Sam Hogan, a mortgage originator with Prime Lending (Note: Sam now works at USA Mortgage) who specializes in PhDs and PhD students, particularly those receiving fellowship income. Sam relays what it takes to qualify for a mortgage in terms of credit score, income, and debt load, including the special way deferred student loans play into the calculation. He details the unusual strategies he has learned over the past year of working with PhD clients to help them get approved for mortgages, even with non-W-2 fellowship income. At the end of the interview, Sam shares why he loves working with PhD home buyers. Over the past year, Personal Finance for PhDs has referred so much business to Sam that he has become an advertiser on the podcast.

Links Mentioned

Contact Sam Hogan via phone: (540) 478-5803; or email: [email protected]
Listen to a previous episode with Sam Hogan: Purchasing a Home as a Graduate Student with Fellowship Income
Related episode: “This Grad Student Defrayed His Housing Costs By Renting Rooms to His Peers”
Personal Finance for PhDs: Financial Coaching
Personal Finance for PhDs: Podcast Hub
Personal Finance for PhDs: Subscribe to the mailing list

Teaser

00:00 Sam: It’s always best for a PhD student to be as proactive as possible. I’ve seen letters with three years of continuance, but they’ve reached out to me after one semester has passed. Now they only have two and a half years of continuance, where someone, if they had reached out a year earlier about their future, and how they’re planning to purchase home when they were in a new area, that is the perfect slam dunk way to do it.

Introduction

0:33 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is Season 5, Episode 17. And today, my guest is Sam Hogan, a mortgage originator with Prime Lending (Note: Sam now works at Movement Mortgage) who specializes in PhDs and PhD students, particularly those receiving fellowship income. Sam relays what it takes to qualify for a mortgage in terms of credit score, and debt load, including the special way deferred student loans play into the calculation. Sam details the unusual strategies he has learned over the past year of working with PhD clients to help them get approved for mortgages, even with non-W-2 fellowship income. At the end of the interview, Sam shares why he loves working with PhD home-buyers. Over the past year, Personal Finance for PhDs has referred so much business to Sam that he has become an advertiser on the podcast. Without further ado, here’s my interview with my brother Sam Hogan.

Will You Please Introduce Yourself Further?

01:34 Emily: I’m welcoming back to the podcast today. My brother Sam Hogan, who is mortgage originator. He sells mortgages. And Sam was actually on the podcast before in Season Two, Episode Five. It was while we’re recording this on April 12, 2020 and he was last on about a year ago. At that time, we were talking about how someone with fellowship income can actually get a mortgage — non-W-2 fellowship income because tis is a tricky thing that we talked about in that episode. So now, as I said, it’s been a year since that time, Sam’s handled a lot more mortgages of this type and so he knows a lot more about this process now. So I thought we’d have him back on for an update, basically, and a little more background on getting a mortgage as a graduate student or postdoc or PhD. So, Sam, welcome back to the podcast. Thank you so much for coming back on. Will you please just tell the listeners a couple words about yourself?

02:28 Sam: Thank you for having me, Emily, and Happy Easter from the east coast. Yeah, I’ve been working with PhD students now pretty heavily over the last 12 months. The company I work for, Prime Lending (Note: Sam now works at Movement Mortgage), is licensed in all 50 states. I’ve had the opportunity to read, review, approve, sometimes deny, these special candidates while they’re looking for their options for home-ownership.

[Sam’s Nationwide Mortgage Licensing System and Registry number: 1491786]

Basics for First Time Home-Buyers

02:52 Emily: Thinking about someone who is probably probably a first time home-buyer doesn’t necessarily know a whole lot about the process of getting a mortgage, and of course is concerned maybe about their their income, and are they really going to qualify and all these factors — what are the factors that go into a mortgage application? And what are the the ranges, that would be acceptable for those different factors?

03:16 Sam: Okay, so generally speaking, we’re looking at a risk profile and the ability to repay. For the borrower, having a over 700 credit scores for conventional, now about over 640 or 660 for FHA loans.

Different Types of Home Loans

03:32 Emily: Okay, you just dropped the terms conventional and FHA — what’s the difference between those two?

03:37 Sam: Yeah, so FHA is your original first time homebuyer program. It’s backed by the government and it’s designed for everyone to qualify for it, if you have decent credit and decent income. Conventional is preferred because it’s going to have a lower monthly payment, and the private mortgage insurance will drop off automatically. You should have over 680 or higher credit scores to go conventional and the income ratios are a little tighter. So it’s the better loan to qualify for and it has better terms throughout the whole 30 years, or whatever your loan term is.

04:16 Emily: Okay, so FHA is a little bit easier to qualify for, because it’s sort of designed for first time home-buyers, but it’s a less preferable loan in the long term. And so if I remember correctly, a lot of people who have FHA loans for a while they then end up refinancing to a conventional type of loan a little bit later on, to get rid of that private mortgage insurance.

04:38 Sam: That is correct.

04:39 Emily: Okay, great. Okay, so going back to the the lending standards you just mentioned, like credit scores, what else goes into an application package?

04:49 Sam: Yeah, I want to just touch on our current world situation and the lending standards are changing right now. And they’re changing because everyone is in the same boat regarding a possible change or disruption in income, slowing income for a certain amount of time, so be sure to talk with an expert and their specific requirements because this will change from bank to mortgage company to a larger credit union or financial institution. These are uncertain times, so you’re going to have some fluctuation and differences from lender to lender, but you want to work just as we said before, you want to work with someone who’s keeping you in mind and your goals in mind.

How Credit Scores and Debt Impact Home Loans

05:32 Emily: Yeah, okay, great. I totally agree and we should re-emphasize that like we’re recording this in mid April, things could be different by the time we publish it, things could be different a couple months down the line, so definitely just talk with someone right away. You mentioned credit scores, but I know also, your income, of course, plays into how much of a mortgage you can qualify for. Can you talk about that a little bit?

05:53 Sam: The common rule of thumb is people will qualify for four to five times their annual income. Now that will depend also on how much debt they’re carrying, and how much they’re putting from their savings into downpayment. But that’s a pretty safe estimate. Some people who are completely debt free will qualify six times their annual income, up to. Something else lenders experience a lot is, um, people doing their own due diligence and crunching the numbers, but we have systems and practices that do this quickly, more accurately, and can give you better results, so I would say talk with someone early and have them do the work. And then after you get their feedback, run your numbers to double check and maybe have some questions for them. We want to be able to work for you, and there’s no obligation to just have a few conversations and have someone explore your options.

06:48 Emily: Yeah, that sounds good. How does that play into that because I know a lot of PhD students do have significant debt loads from maybe undergrad or a master’s degree or something like that. How does debt affect the package?

07:03 Sam: Debt is not bad. It’s good to have things on your credit that have positive history, whether that’s a student loan you’ve paid off or currently paying off, revolving credit cards. You will run into issues, if you have absolutely no debt or debt history. I strongly recommend everyone, even against their pride, get a credit card. Don’t exploit it but use it regularly, pay off regularly. You want to have established credit, especially for a young homebuyer, because they might not have the 10 or 15 years of other types or forms of debt that someone who’s in their 30s or 40s might have.

07:49 Emily: Yeah, I definitely agree with establishing a credit score and having a strong credit history. But I’m just wondering, you mentioned earlier about the size of the mortgage and how debt can affect that. Solet’s say there’s someone who’s holding a good amount of debt. Does that affect like the ratio of the amount of mortgage they can take out?

08:06 Sam: Absolutely. Let me put it in some simpler numbers. If you’re bringing in $3,000 a month, all your credit cards, new house payment, maybe your car payment or gym membership, all that cannot add up to more than $1500 dollars of your income, We take your gross income and if you’re over 50% of that debt ratio, that’s a “Hey, better luck next time.” Even better situation is to be under 43%. Under 43% of your monthly income to debt ratio, is what Freddie Mac and Fannie Mae require, currently. Now this could be used to change, sometimes annually, sometimes quicker than that, but under 43% and better is a very good place to be in.

08:55 Emily: That makes sense. Yeah, so the total amount of debt payments you can have per month is limited and the mortgage has to fit in. To be approved for a mortgage, it has to kind of fit in around those other debt obligations that you already have.

09:09 Sam: Correct.

09:09 Emily: Okay, yeah, that definitely gives us something to kind of get our hands around when someone’s deciding, like, is it even worthwhile for me to approach Sam or another lender about possibly applying for a mortgage? I know you said earlier, just ask, that’s the best thing to do, because you guys can run the numbers better than than we can outside of the industry. I had one more question about student loans, because while student loans are in deferment, how does that play into that 43% that you just said. Because if they don’t make payments, does that just like not count at all? Or how does that work?

09:43 Sam: This a very specific guideline detail that changes, just letting you know Emily, and for conventional loans, and FHA loans, it’s both different. A rule of thumb: if your student loans are in deferment, you have to take the remaining balances and calculate 1% of that, and we factor that into your debt to income ratio. So if you have $100,000 in student debt, and we’re about to calculate a potential thousand dollar payment, even though you’re not making payments on them, that could stop your deal. Okay, so brings me back to letting an expert look at it.

10:19 Sam: Also, sometimes when the lender pulls credit, the way the credit populates, it looks like they’re making payments on their student loans. But really, they’re in deferment, so all those payments have to be switched. This is why when people run the numbers themselves, they might think, “Oh, no, I can’t do it.” But lenders know what it takes to get it approved. And I did want to touch back on the debt to income, it’s best for people to know first that you want to be under 43%. If that’s 42.98%, that’s still two thumbs up. But as soon as you’re over the 43%, some of the loan terms can change and make it stricter for you to buy.

10:56 Emily: Gotcha. And I also want to emphasize that just because you qualify for a mortgage of a certain size, or just because your debt-to-income ratio fits onto that 42% or whatever, that doesn’t mean you have to buy a house that that’s expensive. So these standards are for the lending industry, they’re not necessarily the advisable thing on the personal finance side. So just keep that in mind. We’re talking about basically how to qualify, not whether this is a good idea for your finances overall to have that high of a, an amount of debt per month. I just want to add that in there from the personal finance side.

What If You Don’t Have a Typical Situation?

11:33 Emily: Okay, Sam, so thanks for running down those broad strokes criteria. If someone doesn’t meet one of these, is there any recourse? Is there anything else that can be done if they still want to go through with a purchase?

11:47 Sam: Don’t give up lenders in general, we’re in the process of approving loans. We’re not in the business of denying people we would be out of business. So try and try again, I would say, because I have had PhDs students who have finalized their transactions with me been denied by two other lenders. The tip I can give to some of these people exploring their options is be willing to over document things for any uncertainty the lender might have. If there’s some variables in your income, explain to them that “Hey, this is all under the same advisor. I’m working in different areas, different years, but it’s under the direct supervision of x and he can provide you a letter saying that I’m here for five years under his supervision and it’s common for students in my place to continue to receive their funding. Please let me know if you need any other confirmation from my supervisor.” But yeah, recourse I would just validate how good of a borrower you are: I have great credit. I have the downpayment. I have guaranteed funding.

12:52 Sam: And you always can strengthen a file with obviously a cosigner. You can have a non occupant co bar family member, even a friend, who also is hopefully in good credit standing and has income to cosign on the loan for you. That’s not a forever thing, you can refinance them off the loan. But what I’ve found out in my years in this business is, there’s always a way to make it work if you keep working at it. Some people run out of options, and while they’re in school, it’s a funky time in their life, but that doesn’t mean that you’re not going to be a homeowner in a year or two years.

13:33 Emily: Yeah, gotcha. I actually was thinking specifically about co-borrowers because that was another example that we had on the podcast. My interview with Matt Hotze, he bought a home in Durham, North Carolina when he was at Duke and he bought his first year there and he had his parents, or maybe one of his parents, as his co signers and that enabled him, because his income was, low — one graduate student stipend. He was able to get into a larger house than he would have qualified for on his own. He actually had a three bedroom house. And then he rented out two of the bedrooms. So he was able to house hack, had no problem paying the mortgage because he had reliable renters. And yeah, it all worked out really well for him. So he just needed that little bit of help at the beginning. His parents, very fortunately, were able to provide that to him, and it was kind of a rosy story after that point, but that’s what he had to do to qualify for the mortgage.

14:27 Sam: A cosigner, sometimes can solve everything, except for poor credit. But strength in numbers. You can have up to four people on conventional loan application. Have I done that ever? No. But is it possible? Yes. So yeah, I mean, if you’re having some difficulty, your loan officer, if you’re brainstorming with them, one of their first solutions is have a cosigner. A cosigner is a very simple fix. If you have to pivot your approval because you have gone through the process, you didn’t get approved on your own and your adding a cosigner on your contract, I would say give your lender about 10 days and you should be in good shape.

15:08 Emily: Gotcha. I’ll add in one more time. This is the “how to qualify for a mortgage” talk, not “is it a good idea to be a cosigner or to have a cosigner”. Totally separate conversation.

15:19 Sam: A client of mine that’s closing this month who listened to your podcast…I don’t want to reveal too much about his purchase, but we’ve been given the approval and at the start, we ran the numbers a few different ways. He was like “With a cosigner, what’s my payment? Without a cosigner how much is my cash to close?” And we were on the fence for a little bit but we were still in the process. So while he was under contract, I was still able to give him scenarios and options. We eventually decided with his deposits and everything that was already being credited, his cash to close was low enough that he wouldn’t need to have a cosigner. So it’s not set in stone at the start. Yes, it’s always better to have your ducks in a row. But the lender is flexible. We always can pivot for the buyers needs. And I also say that in the buyers defense. If something’s going wrong with the house, the lender can help you get out of the loan on your finance contingency, maybe if your home inspection is past. So there’s different ways we’re always here willing to help.

16:25 Emily: Yeah, that sounds really good.

Commercial

16:30 Emily: Hey, social distancers, Emily here. I hope you’re doing okay. It took a few weeks, but I think I have my bearings about me in my new normal. There is a lot of uncertainty and fear right now about our public and personal health and our economy. I would like to help you feel more secure in your personal finances and plan and prepare for whatever financial future may come. You can schedule a free 15 minute call with me at PFforPhDs.com/coaching to determine if financial coaching with me is right for you at this time, I hope you will reach out, if only to speak with someone new for a few minutes. Take care. Now back to our interview.

Tips for Home Loans with Non-W-2 Income

17:15 Emily: Okay, so let’s narrow down to the the scenario that we talked about the last time we did an interview, which is about a graduate student or postdoc with fellowship income, with non-W-2 income, and that a lot of lenders don’t understand how to deal with that. You’ve been working with these types of clients quite a bit over the last year. And so you have really figured out some things that how to make these loans work in some cases and what will not work in other cases and maybe in those cases, a co-borrower or something like that would be needed. Can you just tell me a little bit about, you know, this particular weirdness of non-W-2 fellowship income and how you make it work?

17:54 Sam: It’s definitely a tricky income. How I help make it work is I support all the variables within the fellowship income. I show that it’s the same field of study or field of work that they previously in. Especially in the offer letters, they usually always contain a phrase if the student remains in good standing, and the underwriter can say, well, that’s too much of a variable, we can’t accept this income because there’s too many variables. Well, I say well look at her transcripts, look at his transcripts. They’ve always been in good standing, literally forever. That’s why they were one of five students selected out of 400 applicants to get into this program. Yeah, it takes a little bit of storytelling, and the presentation is important, so it’s okay if someone who doesn’t have W-2 income, we treat other incomes just as fairly, but you have to know how to present it, how to over-document it, and if it’s too uncertain at the start, most lenders have a scenario desk you can reach out to who will give you some early feedback without going completely through the application process, completely through the loan process, and still having a little bit of a question mark about if you’re really approved. I’ve had our scenario desk, give me pushback on certain files, and I just asked, How can I support that variation or the uncertainty that you’re seeing in this letter because I can provide what you’re looking for most likely, I just need to know what that is.

19:38 Emily: Yeah. So I think if I can kind of zoom out from that a little bit. First of all, one of the things that you talked about in the last interview was that non-W-2 fellowship income is not going to qualify for an FHA loan. It’s just completely off the table. It’s only going to be a conventional loan. And what you’re talking about now is saying, okay, you know, PhD student or postdoc, you’re showing me your offer letter and you are looking for certain things that offer letter, like the income and also the number of years of guarantee, sometimes that’s in there as well. And then you’re saying, Okay, well for all the things in the offer letter that are maybe a question mark to the underwriter, you have now learned how to recognize some of those things, and you can start providing additional supportive documentation, that is asking the student or postdoc, okay, well send me your transcripts. Okay, well send me whatever it is, your work history. I don’t know what those things are. Can you talk a little bit about that guarantee? Because I know the guarantee is a very important factor when we’re talking about non-W-2 income.

Loan Types for Non-W-2 Income

20:41 Sam: Yes. So I want to answer your questions in the right order. One of the main critical points for this type of income is that it’s not recognized by the VA, Veterans Administration, FHA. It’s not recognized by USDA, and it’s not recognized by Fannie Mae. Your most successful application and loan approval is going to come from a Freddie Mac conventional loan, okay. Now you can do as little as 3% down for that conventional loan. But this is the key point that only Freddie Mac recognizes this income, per the lenders approval. Why these PhD students are not going to approved their first attempt with their lender is because it’s per the lenders approval, the lender can’t document it and approve it with their underwriter, then Freddie Mac will not take the loan.

21:40 Emily: So what you’re just saying there is that you now know having worked this type of income, this mortgage type is off the table. This mortgage type is off the table. This is the one that is potentially successful. And what you have to do is get your underwriters that you work with to approve that loan and then Freddie Mac will take it on, will approved it. What you have figured out is these little tricks and document support and so forth that need to happen for the underwriters that you work with, which presumably would be the same elsewhere, except they’re not necessarily as knowledgeable about this particular type of income.

The Importance of Offer Letters for Non-W-2 Income

22:15 Emily: Let’s talk more about that. I know that you’ve mentioned to me before, I think you mentioned in the last interview, that for this non-W-2 income, normally underwriters, lenders for W-2 income, they presume it’s going to continue for at least a while, even though we all know you can lose a job at any point. But for the fellowship income, they for some reason, don’t presume that it’s going to continue and they want to see a certain length of guaranteed fellowship time.

22:41 Sam: Yes. For conventional loans, we’re looking for three years of continuance of income. Now, I know it’s not fair because my job doesn’t guarantee me three years of employment in the future. That’s not the typical contract for all employment, its employment will usually. For conventional loans we want to see three years. I actually have a example that I’ve written up. It’s a mix of a few different approval letters that worked, that I had some success with clients in the past year. And I will say briefly that if your approval letter is more than three pages, there might be too many variables in your offer to get an approval.

23:36 Emily: You’re saying an offer letter, like the offer letter you get when you start grad school or start a postdoc position. This is going to be your stipend this along goes on for. This is a typical document, like instead of having a Form W-2, this is what a fellowship recipient would send to you. They would send you their offer letter and so what are you looking at in that offer letter that is like yeah, this is going to go forward or no, this might be a problem.

24:00 Sam: Yes, so what we’re looking for is the continuance of income, we want to have three years. We want it to state that you’re being provided health insurance, because that’s a really good sign shown you’re actually an employee, you’re not just a student. It’s okay for it to have a few variables in it, like remaining in good standing or making satisfactory progress towards their doctoral degree. That’s a good phrase in there, that’s fine. But when you have layers and layers of variables, like you know, making satisfactory progress towards our doctorate, you must take these courses or get this exact GPA or higher in these courses, must have approval from their supervisor for a continuance into a fifth year. Those are things I’ve had to get more information on because the more variables, the more uncertainty it makes the underwriter feel. And so that’s where it comes back to the presentation of the loan.

An Example of An Offer Letter

24:58 Sam: “I’m pleased to inform that you been awarded a fellowship in the first academic year beginning September 2019. In subsequent years, you’ll be supported by research and teaching assistantship. This Fellowship Award gives you deserved recognition for your accomplishments to date, as well as added independence to stipend and exploring your research interests for the first year. For the academic year 19-20, the stipend will be $3,345 for nine months. For Summer 2020, the stipend will be $3,475 for three months. This means you receive an annual stipend of $40,530. In addition, the award pays your tuition health insurance and health services fee. We are committed to continue this financial support for for up to five years, as long as you remain a PhD student in good academic standing.

25:51 Emily: Yeah, so what I’m hearing and I think what the listeners will hear is, that’s first year fellowship followed by W-2 income for the remainder, four years guaranteed.

26:02 Sam: Right.

26:03 Emily: That’s great. So that means in your world, that person would qualify for a mortgage during that first year, even though it’s fellowship, because their letter says, Yeah, it’s one year of fellowship, but you’re going to have after that this W-2 type income,

26:17 Sam: Correct. The most success I’ve seen with the PhD community are the simple letters that are less than two pages with little variable, that will show more than three years of continuance. And that’s a very simple approval for us.

26:35 Emily: And that’s whether that is fellowship income, or W-2 or a combination. If that’s what the offer letter says three years or more. That’s straightforward for you.

26:46 Sam: Correct. And that is where I’ve seen the most success with these doctoral candidates.

26:53 Emily: But still going back to your earlier point of if that’s not what a particular individuals letter looks like, still reach out to you, or another lender, because maybe with enough supplementary documentation, it could still go through, but it’s just going to be a little bit more of a process.

27:09 Sam: Correct. And, I mean, when I get connected with some of these department supervisors, I let them know, “Hey, this is what we’re looking for. Can you simplify this offer ladder for me, because we’re looking for something a little less complicated?” And I do like to tell my PhD applicants that, “Hey, I would love a shortened version of your personal statement. I want to be able to know a little bit more about where you’ve been, where you’re going.” And it always helps to tell a little bit of a story.

27:40 Emily: That is really interesting. That adds a little more detail to what you said earlier about the story and the presentation being what matters. That’s really interesting to me that you that you might include something like a version of a personal statement in this package that goes to the underwriter, that’s really interesting.

27:59 Sam: At the end of the day, I know I said this in the last episode, the last time I chirped in, but it does come down to one person’s decision. If the underwriter is comfortable, they’re going to approve you. If they’re not comfortable, they’re gonna want more documentation, or a cosigner, or something else to make it, you know, aboveboard.

28:20 Emily: Yeah, that clarifies. Thank you.

Final Words of Advice

28:23 Emily: Sam, is there anything else that you’ve learned about this fellowship type income that would be helpful to the listeners, with respect to getting approved for a mortgage?

28:32 Sam: I’ve learned that working with the PhD community are some of the best clients I’ve ever had.

28:38 Emily: Yeah, you’ve told me that before, and I really love to hear it!

28:42 Sam: Yeah. It’s really nice to work with people who are planning. It’s always best for a PhD student to be as proactive as possible. I’ve seen letters with three years of continuance, but they’ve reached out to me after one semester has passed, so now they only have two and a half years of continuanc, and that is a big problem. Whereas someone, if they have reached out a year earlier about their future, and how they’re planning to purchase a home when they were in a new area, that is the perfect slam dunk way to do it. Unfortunately, I’ve had to let some PhD students know that it’s not going to work out because their continuance, they’re under three years. And that’s going to be one of the major roadblocks. So talk to someone early, tell them you’re interested in a Freddie Mac, conventional loan. If they can find the right way to document their income and approve them. It’s happened more often in the last two months, I would say, with clients reaching out at this time of the year, when, if I had been talking to them six months ago, I could have had them approved.

29:52 Emily: Yeah, so actually at this time of the year, April 15 is decision day. Everyone has to decide what grad school they’re going to, or they’re supposed to decide. So if a PhD student is looking at that fellowship income in their offer letter, it says three years, they need to reach out to you sooner rather than later before that clock starts ticking, if they’re interested in purchasing within that first few months or first year or whatever, of being in graduate school. They need to reach out earlier. Thank you for saying that.

How To Reach Sam Hogan

30:21 Emily: Sam, you have not been particularly self promotional during this interview, and I appreciate that but I do want to say that you have been working with this type of client — people receiving fellowship income, also other types of PhD clients over the past year. I think you’re working really hard for them and that they should go to you, at least among getting a few different voices in their life, they should come to you. So will you please tell them the best way to contact you?

30:46 Sam: The best way to reach me is definitely by cell phone. Text is preferred right now because there’s a lot of volume going through the industry. My cell phone number is (540) 478-5803. And then my work email is a great line of communication, also. It’s [email protected].

31:15 Emily: Yeah. And we’ll have all that contact information in the show notes, as well. Sam just mentioned, I was surprised to learn, but even during this social distancing period, the mortgage industry is hopping, because interest rates are so low. People are really refinancing a lot right now, even if they’re not doing necessarily new purchases at the moment or not going into that process at the moment. But, you know, maybe in a few months or a year, whatever things will return to a more normal time and you’ll be able to move forward with lots more purchases.

31:47 Emily: Sam, thank you so much for coming on the podcast. And thank you so much for working with this population and being willing to, as a personal favor to me, to investigate this and take this on. I think it’s really fruitful and it’s been really great for my audience, so I really appreciate you

32:00 Sam: Thank you for having me on Emily. Always a pleasure to work with you and the PhD community. I’m just here to help, so if you need help text me, call me bother me on the weekend. It’s all good. I just want to make sure you all are seeing some success here while you’re getting your doctorates.

32:16 Emily: Excellent. Thank you, Sam.

Outtro

32:18 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the personal finance for PhDs podcast. There you can find links to all the episode show notes, and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind the scenes commentary about each episode. Register at PFforPhDs.com/subscribe. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is stages of awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC podcast editing and show notes creation by Lourdes Bobbio.

The Financial and Career Opportunities Available to National Science Foundation Graduate Research Fellows

April 20, 2020 by Meryem Ok

In this episode, Emily interviews Kelsey Wood, a National Science Foundation (NSF) Graduate Research Fellow who now teaches others how to write competitive applications for the Graduate Research Fellowship Program (GRFP). They discuss the decisions that new fellows have to make regarding when to start receiving the funding and the internship opportunities available. Kelsey also issues a warning regarding paying quarterly estimated tax and gives great insights from her course for GRFP applicants. At the end of the interview, Kelsey shares her best financial advice for current graduate students and postdocs.

Links Mentioned in This Episode:

Teaser

00:00 Kelsey: I think that a lot of times the graduate groups or the administration will attempt to get as much free labor out of graduate students as they can, but there is actually a lot of money there to pay people, so I think a lot of times grad students need to be proactive in asking for money for things like leading workshops or teaching classes, TA-ing, et cetera.

Introduction

00:26 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season five, episode 16, and today my guest is Kelsey Wood, a graduate student at UC Davis and National Science Foundation Graduate Research Fellow. We discuss the decisions that new NSF fellows have to make regarding when to start receiving the funding and the internship opportunities available. Kelsey also issues a warning regarding paying quarterly estimated tax. Throughout the interview, she shares her insights into how to best manage your finances as a fellowship recipient. Kelsey now teaches others how to write competitive GRFP applications, and she details some excellent strategies from the online course she developed. Without further ado, here’s my interview with Kelsey Wood.

Will You Please Introduce Yourself Further?

01:15 Emily: I am so delighted to be joined on the podcast today by Kelsey Wood. She is currently a graduate student at UC Davis, and she is also a former NSF GRFP fellow. And she’s going to be talking to us about that program and also the advice that she gives people in her course regarding applying successfully for the application. So, Kelsey, I’m so glad to have you. Welcome! Will you please tell the audience a little bit about yourself?

01:39 Kelsey: Sure. Thanks for having me on. I am a PhD student about to graduate in integrated genetics and genomics at UC Davis and I currently am studying plant pathogen interactions. I got my bachelor’s in biology from Reed College where I studied animal behavior and then I happened to get a job in the biotechnology industry working on potato disease resistance. And I really liked my time in industry, but I found that I was frustrated that I couldn’t pursue my own independent research questions. So, I realized I needed to go to graduate school.

02:14 Kelsey: And so, I applied for the NSF GRFP during my first year. Mostly due to peer pressure from a senior grad student who was a GRFP fellow, and he actually gave a workshop on the fellowship where he basically convinced everyone to apply. And I’m glad I did because I actually got it. And then after I received the fellowship, I decided take over that workshop and also encourage other people to apply and give them tips on how they can actually get it. So, I’ve offered a variation of that workshop for the last five years, and I did an online version last year. I held some free webinars that were attended by over 200 people all across the U.S., and then I also offered an intensive workshop with additional webinars, one-on-one and personalized editing services. Participants said that was really helpful in preparing their applications. And actually, out of the 10 people who submitted in the workshop, three of them got it this year and one honorable mention. So, I’m really proud of them and happy that I kind of helped people to get it.

Kelsey’s NSF GFRP Workshop Updates

03:18 Emily: That’s incredible. Oh my gosh. I would have loved to participate in something like that when I was early on in graduate school. Tell people right up front where can they go to find more information about that course?

03:27 Kelsey: Right now, the best place to probably get updates on what I’m going to be offering it–and I’ll also be posting a lot of the materials–is my Twitter. It’s @klsywd (Kelsey Wood), but without any vowels. So, K L S Y W D.

03:42 Emily: So, it sounds like you were a fellow between your second and fourth years of graduate school. Is that right?

03:49 Kelsey: Let’s see. I started the fellowship–it would have been in June, 2014–the summer before my second year. Yeah.

Major Decision Points for NSF GRFP Recipients

03:58 Emily: Okay. And so, what are the decisions? Okay, so let’s say we’re speaking to one of the people who has just found out that they received the GRF. Amazing, congratulations! But they’re faced with a few decisions either right away or during the course of their tenure. So, can you talk through–kind of give them a little preview, what are those decisions that they need to make, and what are some things they should consider as they’re making them?

When To Start Receiving the Stipend

04:23 Kelsey: Sure. So, I mean the first one is when to start receiving the fellowship stipend. So, you’re technically a fellow for five years, but you’re only receiving the stipend for three of those years and then the other two years you’re on tenure–you’re either on tenure or on reserve. Anyways, you only get paid for three years and then the other two years you just you have additional benefits that you can receive from the fellowship, but you’re not paid any longer. And you can start that at any time. What you really want to consider is potentially what other funding sources you might be encountering during graduate school. For example, there are a number of fellowships that you can get after you’ve passed your qualifying exams, which usually happen second or third year. So, if you think you’re going to be applying and getting those fellowships, it can be really good just to start the GRFP right away.

Consider Timing (and Adequate Payment) for TAships

05:14 Kelsey: And then the other fellowship will take over once your GRFP funding runs out. Some really lucky people got multiple fellowships, actually, right at the beginning. Somebody I knew got the GRFP and the Ford fellowship this year, actually. So, they need to decide which ones, what order to get those because you can’t get them both at the same time. But that’s a pretty lucky problem to have. I would say that. And then the other thing is, some people have to do TAships in order to satisfy a degree requirement. And you can’t do a 50% TAship while you’re doing the GRFP. That’s not allowed. So, you might want to maybe get that out of the way first so you can pass your qualifying exams and have that TA under the thing. What I did is I actually TA-ed for free. But in retrospect, I don’t know if I would make that same decision again because it was a lot of work, and I don’t know. I’ve kind of changed my feelings on just doing things like volunteering and for free because there actually is–I think that a lot of times the graduate groups or the administration will attempt to get as much free labor out of graduate students as they can. But there is actually a lot of money there to pay people. So, I think a lot of times grad students need to be proactive in asking for money for things like leading workshops or teaching classes, TA-ing, et cetera. So, that’s what I found. I started asking for stipends for my workshop and I got them. I started asking for stipends for TA-ing grad level classes. They weren’t offering them before, and I started to get them. So, I think in retrospect I maybe would have tried to get paid for a TAship to meet my degree requirements and then taking the GRFP.

07:09 Emily: It is kind of strange that universities have different policies around who gets paid for doing what exactly, because TA-ing–sort of similar to your situation, but–in the department that I was in, in graduate school, we had what they called, a graduation requirement to TA for two semesters, and it was not tied to our stipend. So, we were all being paid in some manner, either research assistantship or on fellowship or something, but we just had to do this TA work on top of it during a couple of semesters. So, that was the way they structured it. It wasn’t tied to our income. But in other places, of course there are some people who are TAs and that’s their stipend and that’s their funding and that’s the source of it. But then there is even another option that I’ve heard of which is essentially sort of being hired as an adjunct, as a graduate student. So, it doesn’t have to do with your base stipend. That could still come from a fellowship or research assistantship or whatever else. But if you take on an additional class as a TA or even as the lead instructor, you could be paid like an adjunct would be paid. So, different places do things different ways.

Check with Your Advisor About Research Grant Cycles

08:11 Emily: But I think to your original point about deciding, “Okay, when do you want to be paid for these three years when you’re in those three years of having the GRF?” You said that you should think about, “Are you going to be applying for different kinds of fellowships post-quals or post-prelims? Are you going to need this TA thing?” You could potentially get it out of the way first and have your funding come from there, initially. I would also want to throw in there, maybe ask your advisor about research grants, and are they at the end of a grant cycle, the beginning of a grant cycle? Because that could also play into it. You don’t want to take the fellowship when your PI has tons of money and then, you know, three years later, maybe there is no funding there for you. So, that’s a potential risk too. So, it’s just kind of being open about what are all these financial factors within your department, within your group, that could play into this.

09:03 Kelsey: Yeah. And actually, that’s a really good point. Because for a lot of people, getting the GRFP actually influences what lab they can join because you’re coming in with your own funding. So, you might be able to join a lab that you wouldn’t have been able to join otherwise. And in that case, you’d probably want to start using your funding right away. And then, you know, you can essentially help your PI get other grants that will take over once the funding runs out. So, that’s a big benefit.

Are You Listed as a Dependent on Your Parents’ Tax Return?

09:33 Emily: I wanted to add one more point. It’s tax season right now. So, I’m thinking a lot about taxes. And so, this weird thing happens with fellowship funding when you’re under the age of 24. I don’t know how old you were when you first started, were you under 24?

09:48 Kelsey: No, I don’t think so.

09:49 Emily: Okay. Yeah. Because you had had at least one year of work experience. But if you’re starting when you’re 22 or 23, anytime that you have fellowship income in a year when you’re age 23 or younger, some weird stuff can happen with your tax return. Namely, your parents might be able to have more of a claim on you as a potential dependent on their tax return, which is not good for you if it turns out that way. And secondly, you might be hit with this weird high tax called the “Kiddie Tax.”

10:16 Emily: And so, I don’t want to go into all that right now, but if you go to my website, pfforphds.com/tax, there are articles there about both of these issues. But my point is just when you have fellowship income and you’re under the age of 24, sometimes it can have these weird effects of making you pay a lot more in tax than you would normally if you were over the age of 24. So, to me that’s just another factor that I want to throw in there of, “Hey, if you’re under the age of 24, maybe consider delaying a year until you actually turn 24, and then take the fellowship if your alternative is having a research assistantship instead, which is W2 income, which is treated somewhat differently tax-wise. So, more details about that if you want to talk with me about it or read about it more, but I’ll just throw that in there for those of you on the younger side.

25% TAships Possible During GRFP

11:00 Kelsey: That’s a really good point. Oh, and I actually thought of one more thing regarding TAships, which I think a lot of people don’t know–or I didn’t realize at first–is that it usually is possible to get a 25% TAship while getting the GRFP. So, that might be an option if that will satisfy your degree requirement. And the other benefit is that you actually get paid on top of the GRFP additional money for the 25% TAship, and that’s allowed within the GRFP rules. So, it’s just something to consider. I did that for one quarter, and it was really nice.

Financial and Career Opportunities for GRFP Recipients

11:34 Emily: Yeah, I love hearing all of these different ideas. Okay. So again, speaking with a new fellowship recipient, what are some of the financial and career opportunities that come along with receiving the fellowship?

11:46 Kelsey: Well, probably the biggest one is just the fact that the stipend is a lot higher than most standard stipends offered for grad students. And so, that makes a really big difference to be able to afford cost of living, which has really gone up in a lot of places, especially in California. I’m sure other places as well. And then another benefit for your career is that winning one fellowship usually leads to winning additional fellowships and awards. And I think one reason for this is that the reviewers look at your CV and they’re like impressed that you have the GRFP so they are more likely to give you these other awards. And then the other reason is that I think that just the practice of writing the fellowship in grants, you become better and better at it. And so you’re able to write more convincing applications.

12:35 Kelsey: So, for me personally, after I got the GRFP, I won research funds from UC Davis. I got like three or four travel awards for conferences. I got the USDA predoctoral fellowship. And then I also applied for a Dean’s award for mentorship and got that. And I’m pretty sure the GRFP helped me a lot in that. And also writing these and teaching classes on fellowship writing probably helped me also become a lot more convincing. So, that’s a huge benefit for your career.

Get the Snowball Rolling, Start Early

13:05 Emily: I’ll actually add in there that I think it makes a ton of sense, like what you’re doing with your course, or the students in your course, it makes a ton of sense to focus and put so much effort into these really early funding applications like before you enter graduate school in your first, maybe second year of graduate school. You don’t have to say, “Okay, this is going to be my bar for every application I’ll ever do.” But as you said, if you can get that snowball rolling of receiving awards right away in the start, it does make the rest of it easier and is very impressive. It’s a wonderful fellowship to win. So, I’ll just say, go take Kelsey’s course. Or somebody else’s. Just get these resources and make sure that you are putting as much effort as you possibly can into these early applications. And like you said, the skill of writing the application itself, that is something that carries over into the future. So, yeah, when you have your time before you’re deep into your research and you’re still doing your classes or whatever, make time for this. Make it almost like a course in your schedule in that semester that you’re applying. Because it really is worthwhile to put in the effort.

14:08 Kelsey: Yeah. And a lot of people don’t want to apply, for example, because they just don’t think they’re going to get it, for various reasons. And I encourage them just to do it anyways as an exercise. And usually by the end of it, I always ask my students during the course evaluation if they thought that the class was worth it, even if they don’t get the fellowship. And like 95% of them say yes, just because it’s the skill, it’s writing about your research. A lot of times if you’re actually writing about your real research, you can use that GRFP application in other grants or your qualifying exams, which is really useful. So yeah, definitely a good skill to get and to get early. And then if you get it, like you said, it’s just a snowball effect.

Internship and International Travel Opportunities

14:54 Kelsey: I was going to mention just the internship and the international travel opportunities that GRFP fellows are able to apply for. So, I didn’t actually apply to either of these, but I have known people who have done the Graduate Research Opportunities Worldwide, the GROW program, and that just allows you to do like three to six months research abroad. You identify a host in another country and then you apply for it. And I heard it has around like a 50% acceptance rate, and they fully fund your travel and living expenses abroad. So, it’s just a nice way to kind of get some international experience, maybe learn a new technique, or use some instrumentation that’s not available at your home lab. And it’s just another fellowship you can add to your CV.

15:49 Emily: I’m also thinking that that’s just an incredible thing to be able to talk about in future job interviews, or whatever. Just having a different kind of experience that broke up graduate school a little bit. Expanding your network, you know, seeing things from another perspective. It’s in the name, right? It’s a real growth opportunity.

Even Without the GRFP, Talk to Your PI About Collaborations

16:08 Kelsey: And I mean, something to consider too is even if you don’t have the GRFP, if your PI does have enough funding, this is something you could probably set up on your own basically doing research in a collaborator’s lab internationally or in the U.S. So, I think it’s something to consider just to diversify the experience that you get and you can talk to your PI about it and it might be something they go for.

16:34 Emily: Yeah. I know actually one of my labmates while I was in graduate school did the Whitaker Fellowship. I don’t know how subject matter-specific that is, but he was able to spend nine months in East Asia. And yeah, I think it was a great experience.

16:48 Kelsey: Yeah. The NSF has another one too that I think is open to all, not just GRFP fellows, that’s just a travel abroad or research abroad fellowship. There are other ones out there too. So, it’s definitely something to look out for and apply for.

17:03 Emily: Okay. So, that was the GROW fellowship, but there’s another internship program, right?

17:07 Kelsey: Yeah. So, there’s the GRIP program. So, it’s the Graduate Research Internship Program, and that one you do research at a federal agency. I don’t know all the ones, but I know like you can do research in the Smithsonian for example, any of the agencies, basically the governmental agencies.

17:28 Emily: That also sounds like an incredible career opportunity.

17:32 Kelsey: Especially if you want to go into government research. You know, I think that nowadays more and more graduate students are realizing that the academic path of being a professor–there are so few opportunities for that and so many graduate students trying to get those, that a lot of people are considering alternative career paths like industry or government jobs. I had a lot of people who took my class who really wanted their end goal to be to work for a governmental agency and do research in that respect. And actually the NSF really encourages that for GRP applicants. So, I tell people, if that’s their career goal, to write about that in their application.

Timing of Internship Programs During Fellowship

18:16 Emily: Just to add on to that, I think having outside work experience before you actually finish your PhD is incredible for finding whatever your next job is. Even if you decide to stay within academia. Again, it gives you multiple perspectives, broader network. But a question I have about the internship programs, is that something that you have to do during your funded years or is that something you can still do on the remaining two years?

18:39 Kelsey: Yeah, that’s a good question. So, both the international program–the GROW program–and the internship program can be done while you’re on reserve. So, while you’re not receiving the stipend. So, it has to be done within the five-year period of when you first start the fellowship. But yeah, that’s really one of the benefits. And I think the GROW is really something you’d probably want to do towards the end of your graduate career–probably both programs–because one, it’s additional funding? So, maybe your GRFP funding has run out and now you can get some more funding for your travel and living expenses.

Design a Custom Internship

19:16 Kelsey: And then the other thing is that you really are probably better able to identify a lab or a governmental agency that would be a right fit for your research at that point. And actually something else regarding internships is, you know, there was a program at UC Davis that’s like the biotechnology program. It’s like a degree, an “emphasis,” and they require that you do an internship as part of the emphasis. But one thing I realized is, even if you’re not in a program like that or even if you’re not a GRFP fellow, you can a lot of times arrange an internship in industry towards the end of your graduate career. Potentially, the company will fund you to do that, too. And it can be a really good chance to explore these career opportunities.

20:07 Kelsey: A lot of times, if you end up doing a good job, the company will be really excited to hire you and it kind of lets you trial industry or trial a company and maybe contribute something else to your research, too. So, I just have realized that a lot of times you can kind of design your own programs. Obviously, you want your advisor to be on board with this, but a lot of times, especially if you can get funding from the company, then they’re going to be very happy about that and they also want to see you grow in your career. So, I think that’s something that people should consider. Even if you’re not a fellow or even if you don’t have an official program, you can kind of craft your own internships during graduate school.

20:51 Emily: Yeah, I totally agree. I think it’s one of the most powerful things you can do for your career, prior to finishing your PhD, while you know you have something to go back to after the summer ends, or whatever. I actually did a science policy fellowship that was three months, the Christine Mirzayan policy fellowship. It’s at the National Academies. And I did it after I finished my PhD. I applied basically around the same time that I was defending, but it’s open to current graduate students as well. In retrospect, sort of like you, I wish I had done it while I was still in my program and I think it would have informed some of the decisions that I made as I was finishing up. So, internships, great for everyone. I know not everyone thinks that internships are for them. I’m from an engineering field, so it’s sort of more normal to think about doing an internship. And of course in computer science or similar fields like that. But I think it’s expanding and it should expand more to other disciplines where it hasn’t been a traditional part of the PhD path.

Commercial

21:50 Emily: Hey social distancers, Emily here. I hope you’re doing okay. It took a few weeks, but I think I have my bearings about me in my new normal. There is a lot of uncertainty and fear right now about our public and personal health and our economy. I would like to help you feel more secure in your personal finances and plan and prepare for whatever financial future may come. You can schedule a free 15-minute call with me at pfforphds.com/coaching to determine if financial coaching with me is right for you at this time. I hope you will reach out, if only to speak with someone new for a few minutes. Take care. Now, back to our interview.

Financial Advice for Fellowship Recipients

22:36 Emily: So, let’s broaden this line of questioning a little bit. Not just for people who have just received the NSF GRFP, but people who have received it in previous years who are still receiving that higher stipend. And maybe other people who’ve received outside fellowships that also have some stipend augmentation based on that. What’s your financial advice for people who have received one of these lucrative outside fellowships?

File Estimated Quarterly Taxes (NOT Yearly)

23:00 Kelsey: Yeah, so I think the biggest pieces of advice I have are regarding taxes and savings. And so, the thing you should do immediately is start to file your taxes quarterly instead of yearly. And you can estimate how much taxes you’re going to have to pay quarterly so you can start to save up. My personal sob story is that I did not do this the first year and I ended up filing my taxes and I owed about $5,000, which I didn’t have saved up. So, I ended up having to do a payment plan with the IRS which charges interest, actually quite a bit of interest. So, I ended up having to pay way more in taxes than I would have if I had just started filing quarterly. So, do that right away. I know taxes are not fun, but it’s actually not too hard to calculate if you’re only getting the stipend income, and that’s way better than having to owe it.

23:56 Emily: Actually, let me pause there because this is one of my big areas, right? It’s tax for fellowship recipients. So, was that $5,000 just the IRS or was that split between California and federal?

24:08 Kelsey: Oh, yeah, it was California and federal, split.

24:10 Emily: Okay. That’s within the more reasonable realm. Okay. Yeah, definitely. I mean I’ve actually had, I think, two other people interviewed on the podcast who have also set up payment plans with the IRS based on this exact same situation. So, this is not at all uncommon, and it’s one of my big areas of focus is to get this information in front of new fellowship recipients. No longer is income tax–this is the case at almost all universities–no longer is income tax going to be automatically taken out of your paychecks. It’s something you now have to take responsibility for, like you were just saying.

Personal Finance for PhDs Tax Center

24:43 Emily: So, most likely you are going to be required to pay quarterly estimated tax. And I have a ton of materials about this. Again, if you go to pfforphds.com/tax there’s an article there. And in particular, I have actually a workshop for people in just this exact situation. If you go to pfforphds.com/qetax for quarterly estimated tax, it will forward you to my most recent workshop. And probably similar to yours, Kelsey, I have prerecorded videos for that, and I also do live Q&A calls to help people with questions as they come up through tax season. So, just because of when we’re recording this though, I want to add in that part of the response to the coronavirus crisis actually has been to delay the first, like the Q1 payment for 2020. So, just like with your annual tax return, right now, this year in 2020, it’s no longer April 15th, but rather it’s July 15th.

25:34 Emily: So, for those fellows out there, you have a little bit extra time to figure out what’s going on in 2020 regarding your quarterly estimated tax and making those payments. So, the first payment as of this recording is actually due [July] 15th, which is the quarter two payment. But yeah, totally a common story, like you were just saying, Kelsey, is just to not realize the change that had gone on with your income tax and catching up with it when you actually file your annual return and realizing, “Gosh, now I have all this money that I owe to the IRS.” So, how did that payment plan go for you? Like was the increase in stipend more manageable, or what were your tips around saving I guess?

Start Saving Immediately

26:11 Kelsey: Yeah, so I think I’m still paying off some of my taxes monthly for that. So, anyway, just do it ahead of time and you won’t have to worry about it. And then in terms of saving, the other thing is that, because the GRFP stipend is a lot higher than the normal grad student stipend, you can kind of get used to a certain style of living. Like you’re able to go out to eat more or buy more expensive groceries. And then as soon as the stipend stops, it can be kind of a shock. So, what I’d advise doing is actually just start saving almost immediately. And I use automatic monthly withdrawals to a mutual fund. And the benefit there is I don’t see the money. Like it’s just automatic.

27:02 Kelsey: The savings are out of sight, out of mind. And then when I actually really need it I can go and be like, “Okay, here’s how much I have.” And I’ve done that a few times. I used that to fund a vacation to Europe. And so I advise just like setting something up right away and make sure you can’t see the money. Save up for when the GRFP ends, and also just because you have all this extra money that you wouldn’t be getting otherwise, so you might as well save part of it and not just spend it all.

27:33 Emily: Yeah, I definitely echo what you’re saying. And I think especially where you’re living, it’s a high cost of living area. It’s probably already challenging to live just on that GRFP stipend and it’s certainly less than we’d be making if you were having a regular job. But, think about your peers who are somehow probably managing to survive, hopefully without debt, on that lower stipend level and see if you can maybe keep your fixed expenses, like your housing, your transportation, at that lower level, so that if your income does drop after the fellowship ends, you don’t have to move or you don’t have to sell your car. Or you can adjust the groceries and adjust the restaurant spending. And it’s much easier and more palatable than having to go through those more major upheavals. So, I totally agree with what you’re saying.

Stipend Negotiations and Bonuses for Fellowship Recipients

28:19 Emily: So, something I know that some fellowship recipients do–and it sounds like maybe you didn’t or maybe it wasn’t possible for you–is that once they know that they’re receiving the fellowship, they actually negotiate to have their stipend stay at that fellowship level. Even after it ends, instead of going back down to the baseline level. Or, alternatively, sometimes programs give out one-time bonuses to fellowship winners. Have you heard about that or have any experience in that area?

28:47 Kelsey: It’s something I thought about asking my PI, because after the fellowship ended, I was struggling a little bit, financially. I ended up doing the 25% TAship to recover that income. But I do think that, I mean it’s really going to depend on your PI and their sources of funding, but it is something that is possible, potentially.

29:15 Emily: Yeah. I think it’s kind of a “no harm in asking” situation. And actually, if you happen to receive this fellowship when you’re not yet committed to a program, so prior to starting your first year of graduate school, that is something I would take to every program that you’re heavily, heavily considering, saying, “Okay, I got this fellowship. Can you augment, can you extend the guarantee?” Like what more negotiation room is there now that you’re bringing in all this money for them, right?

29:46 Kelsey: I mean, exactly. You’re bringing in just about a hundred thousand in your stipend dollars alone, not to mention tuition and fees. So, it is pretty lucrative. It’s lucrative for a program and a lab to want to accept you because you’re coming in with all this money and you just asking like, “Oh hey, can I get an extra $5,000 a year?” When you’re bringing in $100,000, it’s really still a pretty good deal for them. So, I definitely encourage people to do it. I’d love to hear if anyone is successful at this.

Details on Kelsey’s NSF GRFP Course

30:17 Emily: Yeah, I always want to hear negotiation stories. Absolutely. Email or tweet me those. So, let’s hear more about your course and the content that you create there. You said the best place to find out more about that is your Twitter, could you repeat your handle?

30:34 Kelsey: Sure. It’s @ K L S Y W D (@klsywd). So, it’s my name without any vowels. It’s pronounced Kelsey Wood.

30:41 Emily: So, tell us a little bit more about the structure of the course. I know you’ve mentioned this a little bit upfront, but last year for example, you ran it between what month and what month and you know, what goes on in that time period?

30:53 Kelsey: Yeah, so one of my biggest pieces of advice for the GRFP is to start it early. So, it’s due in like October now. And if you’re on the quarter system, like UC Davis, classes start at the end of September. So, it’s basically due during the first month of classes and it’s also your first month of grad school. So, you’re either just starting in a lab or doing rotations, and that month is just crazy. So, if you don’t start the fellowship early, it’s going to be really hard to do it all and do it well. So, my course actually starts in August, so then you have kind of a full month to start to think about stuff, outline it.

31:35 Kelsey: And then you have September to really refine it before classes start. And then we do all the final drafting and editing in October. So yeah, my course is a three-month thing. And that’s one of the benefits of doing it online. I wasn’t able to start in August at UC Davis because not everyone had come to Davis yet because it was still summer. So, doing it online, I was able to get people just at least starting to think about it and getting ideas rolling. And so, what I do is I had four different webinars on different topics. So, I covered the two NSF criteria, which are intellectual merit and broader impacts. Basically like a full 45-minute webinar on both of those topics. And I think that’s really important because especially the broader impacts one is really confusing to a lot of people.

Focus on Broader Impacts, Know Your Audience

32:27 Kelsey: It’s something that you pretty much probably have never heard of until the NSF fellowship. And it’s a really important part of that fellowship, too. So, I really emphasize the importance of that. And also, it’s really important that you get broader impacts experience before you apply. And if you’re starting the application early or even people who are listening to this, thinking about applying for next year, should basically right now find some activity that you can do that you can write about in your broader impacts section. So, volunteering, outreach, teaching, et cetera. Because if you don’t have any experience, you’re not going to get it. And then I also do a webinar on writing tips. The biggest one that I’ve learned in all my years of writing is probably just like really knowing your audience and writing for them.

33:21 Kelsey: So, you really want to just imagine who’s reading it and who they want to fund, and you really want to just be that person that they want to fund. I help people do that in their essays. Something else that’s really interesting, and it actually might be a regional difference, is in the way that you want to sell yourself in these essays. So, a lot of people are really understated or humble, and I’m like, “No, you have got to really come off like a rock star and show off all the awesome things that you’ve done.” And apparently, somebody told me that that’s actually frowned upon in the UK or in Europe to do that in your grants.

34:10 Kelsey: But in the U.S., at least, it seems to be more popular or more of a winning technique. And so, the other part of the course is that I read people’s essays and give them a ton of tips and just help them write it and rewrite it to just have a better chance of getting the fellowship. And I also set up peer editing groups, too. And I do think that that’s something you want to do, if you take a class or not. Just find somebody who, especially who’s experienced with the NSF, and have them read your proposal and give you feedback. So, for example, when I applied, I was really lucky to have a former NSF reviewer read my application and give me feedback. And he pretty much destroyed my initial draft. It was red everywhere and he’s like, “Get to the point. Be more concise. This is too vague.” And so, I kind of have internalized his feedback and I use that now when I’m editing people’s essays.

35:13 Emily: Yeah, that sounds incredible. Thanks so much for telling us about the course. And were there any other tips you wanted to add in? I know you just gave several already, but any others?

35:23 Kelsey: I guess the last one would also just be to read a lot of example essays, too, for inspiration. And there are a lot out there. I have my own personal collection. I actually have quite a few in my personal collection that I share with people in the course. And then the ones that are okay to share publicly, I’ll probably be posting on my Twitter or on my website once I get that up.

Best Financial Advice for Early-Career PhDs

35:46 Emily: Yeah, that sounds great. Well, Kelsey, thank you so much for joining me for the interview today. And final question that I ask of all my guests is what is your best financial advice for another early-career PhD?

35:59 Kelsey: Well, I think the number one is to apply for fellowships and you know, cast a wide net and apply for anything that you’re eligible for, pretty much. I think it’s totally worth it. I have a quote that’s from that previous grad student who helped with the NSF workshop, which is, “You win 0% of the fellowships you don’t apply for.” So, I think it’s worth it. You can do it. And I guess the other thing is that I think it is important to consider the cost of living and the stipend amount when you are choosing a graduate school. I don’t know. This wasn’t really made apparent to me. And you know, you’re just like, “Oh no, you just choose the best school or the best lab.” But there is kind of a range in stipends across the U.S. and cost of living. So, I think it’s something to really consider because your finances are a part of your happiness in grad school. So, apply for fellowships, and consider that.

36:58 Emily: Totally, totally concur. Absolutely. Well, Kelsey, thank you so much for joining me today and telling us more about these decisions that come up for GRFP recipients and your own experience and about this fabulous course. Thank you.

37:10 Kelsey: Yeah. Thank you.

Outtro

37:12 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind-the-scenes commentary about each episode. Register at pfforphds.com/subscribe. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

How and When Will I Receive My Stimulus Check?

April 16, 2020 by Emily

In this episode, Emily explains how and when the stimulus checks from the CARES Act will be sent to qualifying individuals. She points to new IRS tools to help you track your payment and ensure that your payment arrives in a timely fashion. A minority of citizens and residents may need to submit their 2019 tax returns or other information prior to receiving their checks.

Links Mentioned in the Episode

Welcome to the Personal Finance for PhDs Podcast: a higher education in personal finance. I’m your host, Dr. Emily Roberts.

This is Season 5 Bonus Episode 2, and in this episode I will answer the question: How and when will I receive my stimulus check?

I’m recording this on April 15, 2020. The Coronavirus Aid, Relief, and Economic Security Act aka the CARES Act was signed into law a little less than three weeks ago, and one of the major components of the bill was economic impact payments aka stimulus checks sent to qualifying individuals.

Stimulus checks have just started arriving in people’s bank accounts this week. In fact, my family’s stimulus check showed up this morning.

If you are expecting a stimulus check but it hasn’t arrived yet, you are probably quite anxious to know when it will come and if there is anything that you need to do to hasten the process, so that is the subject of this podcast episode.

For most Americans, the stimulus check will be delivered automatically, without having to take any action. However, some people do need to take steps to receive the payment or to receive it sooner.

While you’re listening to this episode, I suggest you go to the URL IRS.gov/coronavirus/economic-impact-payments. That link will be in the show notes for this episode as well.

On that page you will find a link to the Get My Payment tool, which was launched earlier today. That is where you can check on the status of your stimulus check so you know when it will arrive. You can also provide the IRS with your banking information to enable direct deposit.

If you received a tax refund last year by paper check, chances are the IRS does not have the ability to directly deposit your stimulus check into your bank account. The same goes for if in the last two years you paid additional tax along with your tax return, which is common for fellowship recipients who don’t have automatic income tax withholding. In that case, you should use the Get My Payment tool to submit that information. If you’re eligible for a stimulus check but don’t have that direct deposit information on file, you’ll likely wait several months to receive your paper check rather than just days or weeks for the direct deposit.

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

If you were not required to file a tax return in 2019 or 2018, you should go to the other link on the webpage I referenced, which is called Non-Filers: Enter Payment Info Here and fill out the application. It is a very short form to collect your information so that IRS can issue the payment. You do not need to take this step if you receive Social Security retirement, disability, or survivor benefits or Railroad Retirement and Survivor Benefits.

For some of the younger members of my audience, perhaps 2019 was the first year in which you were ever required to file a tax return. In that case, according to the Get My Payment webpage, you do have to file your 2019 tax return to get your stimulus check. If you need help doing that, you can find all my best resources at PFforPhDs.com/tax.

Now, let’s say you qualify for a stimulus check but for some reason you don’t receive it or the one you receive is not as large as it should have been. You can rectify this on your 2020 tax return.

The stimulus money is technically a new refundable credit for 2020 paid out in advance of the tax filing season. Therefore, on your 2020 tax return, you can show that you should have received more of this stimulus money, and the IRS can add the missing money to the tax refund you receive in spring 2021.

If you are not sure if you are eligible for a stimulus check or have other CARES Act-related questions, I recommend purchasing the webinar I gave last Saturday, April 11. You can find the webinar page at PFforPhDs.com/CARES.

I’ll leave you with one final note about scams. IRS scams have run rampant in recent years, and the stimulus checks are an enormous opportunity for scammers. Please be vigilant against phishing or scam attempts both for yourself and your elderly loved ones, who are particularly vulnerable. The IRS will not ask you for your personal information via phone, text, email, or social media. Don’t open unexpected emails that appear to be from the IRS. Please report phishing attempts directly to the IRS.

That’s it for this episode! I’ll catch you again on Monday for our next regularly scheduled interview.

Listeners, thank you for joining me for this episode!

pfforphds.com/podcast/ is the hub for the Personal Finance for PhDs podcast. There you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved!

If you’ve been enjoying the podcast, please consider joining my mailing list for my behind-the-scenes commentary about each episode. Register at PFforPhDs.com/subscribe/.

See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps!

The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC.

How a Book Inspired This PhD’s Financial Turnaround

April 13, 2020 by Lourdes Bobbio

In this episode, Emily interviews Dr. Amanda, a tenure-track professor at a small college in the midwest. At the start graduate school, Amanda was disengaged from her finances and considered grad school to be a financial continuation of undergrad. She had resigned herself to being a “poor graduate student” until she read Ramit Sethi’s book, I Will Teach You to Be Rich. Slowly, the financial messages in that book replaced the limiting beliefs she had absorbed from academia. Amanda took small steps to improve her finances, starting with her bank accounts and opening a Roth IRA, and over time her strides with her finances became bigger and bigger. At the end of the episode, Amanda summarizes the financial success she is now experiences and connects it to the hard and slow work she did on her finances during grad school and her postdoc.

This is post contains affiliate links. Thank you for supporting PF for PhDs!

Links Mentioned

Find Dr. Amanda on her website and on Twitter
Listen to a previous episode with Dr. Amanda: “This Prof Used Geographic Arbitrage to Design Her Ideal Career and Personal Life”
I Will Teach You to Be Rich by Ramit Sethi
This PhD Government Scientist Is Pursuing Financial Independence: Part 1
Personal Finance for PhDs: Tax Center
Personal Finance for PhDs: Podcast Hub
Personal Finance for PhDs: Subscribe to the mailing list

Teaser

00:00 Amanda: I was initially a little bit resistant and I had the, “Oh, I’m a poor grad student” identity, I definitely did. I thought of myself as a poor graduate student and thought, well, all grad students are poor, that’s what it’s supposed to be, and I hadn’t challenged that at all at that point.

Introduction

00:19 Emily: Welcome to the Personal Finance for PhDs podcast, higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season five, episode 15. And today, my guest is Dr. Amanda, a tenure track professor at a small college in the Midwest. When she started graduate school, Amanda was disengaged from her finances. She had resigned herself to being a poor graduate student, until she encountered Ramit Sethi’s book, I Will Teach You to Be Rich. Slowly, the financial messages in that book replaced the limiting beliefs she had absorbed from academia. Amanda took small steps to improve her finances starting with her bank accounts and over time, her strides with her finances became bigger and bigger. At the end of the episode, we get a glimpse at how the hard and slow work she did on her finances during grad school and her postdoc is now paying off in spades. Without further ado, here’s my interview with Dr. Amanda.

Will You Please Introduce Yourself Further?

01:16 Emily: I’m so glad to have Dr. Amanda joining me on the podcast again today. She was first on in season one, episode 11 talking about geographic arbitrage, and her career transition from her postdoc into her academic job. And anyway, if you didn’t listen to that episode, and you have time right now, go back and listen to it. But today we’re going to pick up and talk about something that she briefly mentioned in that first interview that I thought was fascinating enough that I wanted a whole interview devoted to it, which is her financial turnaround story. We would definitely say that Dr. Amanda is financially successful today, but she’s not always identify that way, so we’re gonna explore that story in a lot more depth. Amanda, thank you so much for coming back on the podcast and being willing to share this aspect of your story.

02:01 Amanda: Thanks for having me.

02:02 Emily: So would you please tell us a little bit more about yourself, maybe for those of you who didn’t listen to the first episode?

02:08 Amanda: Sure. I am an assistant professor in a college of education. And I work primarily with doctoral level students. I teach courses on research, writing, qualitative methods. And then I also teach a course on information and information literacy and innovation. My background is in digital media and learning, and specifically video games and learning. A lot of my research has been around the digital games industry, and then how people learn from playing video games, both games designed to be educational, but also commercial games and game communities.

Life Before the Financial Turnaround

02:45 Emily: Great. And tell us briefly about where you went to graduate school where you did your postdoc and about your family, how that formed along the way.

02:53 Amanda: Sure. I guess the first thing is, after I graduated from college, I moved out to the San Francisco Bay area for a short time, and worked as an editor in the games industry. And that’s how I developed an interest in video games and doing work on games. But I was always a school person and I had intended to go back to school to attend graduate school. And so I decided at that time that I wanted to do something with games. When I was looking for graduate programs, really my criteria was I want to work with people who are doing interesting things with video games. I felt like there was a lot of emphasis on games research, on games and obesity, games and violence, really negative things. And I thought, you know, there are a lot of great things happening in this industry. And I felt like there was a lot of potential for games to be used for a more positive impact. And so my search for graduate programs was really just who’s doing stuff around games in their potential.

Amanda: I found a group of people at the University of Wisconsin, Madison called the games learning society group, and they were a group of scholars doing really fascinating work from games and learning perspective. These were people looking at games like Civilization and World of Warcraft and how are students learning about history from a systemic point of view from Civilization, and how are high school boys, who are really disengaged with school, acquiring literacy skills and critical thinking skills and math skills from playing World of Warcraft. That was graduate school. And then following, that I did a postdoc at USC, the University of Southern California in Los Angeles, where I worked on a project where we were looking at using a game to teach first generation, low-income students about the process of applying for college.

04:43 Emily: Wow, that is so fascinating. And I think along the way you met your husband, is that right?

04:48 Amanda: I did. So I met my husband Dennis in graduate school. His advisor was actually married to my advisor.

04:55 Emily: Oh, wow. Incestuous relationship.

04:58 Amanda: Yeah, and I was I think resistant to dating him for a little while because of that, but he just turned out to be too awesome of a person, and so we started dating in grad school. Then we ended up getting married during the postdoc, and he went out to Los Angeles with me.

05:14 Emily: Was he doing a postdoc during that time as well? Or did he have a different type of job?

05:16 Amanda: He was working for the University. I’m blanking on his job title. But he was working with the USC games group, teaching courses, and then also helping manage their tech program. So he was working more with students who are learning to be game developers. And then I was in the College of Education, doing work – it was a large grant with the US Department of Education is what I was working on.

05:38 Emily: Okay, yeah. And going back to that first interview, the transition out of your postdoc, deciding where to apply for academic jobs, all that we covered in the previous interview. So if people are interested in your subsequent career path, they can go back and listen to that. But today we’re going to be talking about your financial journey during that whole time. Can you start with kind of the before, when you weren’t feeling so financially successful? What was your financial life like at that time and what were your financial attitudes?

06:11 Amanda: I think it wasn’t even that I wasn’t feeling financially successful. I wasn’t financially engaged. I had this narrative in my head, you know what, I’m good at school, as long as I do well in school, and I work hard, I will be successful and that is something that I worry about when I’m done with school. Later on, when I’m an adult, even though of course, if you get a PhD you end up spending a good amount of time in school as an adult. But I had this attitude that money was something that I would worry about later.

06:40 Emily: I’m curious how that actually plays in because you had work experience prior to starting your PhD. Is that the same attitude you had at that time? Or did it actually switch when you entered graduate school?

06:51 Amanda: Yeah, so I was working. I did work full time as an editor after my undergrad, and so I started paying off my student loans. I didn’t have a huge number of student loans, but I had taken out some loans, particularly I took two classes abroad when I was an undergrad, and so I had borrowed some money beyond scholarships for that. So I started making the payments, and I just sent in whatever the minimum expected payment amount was, and wasn’t really thinking about it. I mean, I did pretty well in that I was an English major, who at least managed to pay my rent and make a living in San Francisco. And this was right around the time of the beginning of the financial crisis, too, so there was a lot of anxiety and I knew a lot of people who are laid off at that time. I kind of felt like, “Oh, well, I have a job and I’m paying the rent and it’s San Francisco, so I must be doing just fine or even really great.” Things like investing for the long term or bigger goals weren’t really on my radar. I was just sort of paying the rent and paying the student loans.

07:57 Emily: Yeah, well, given the the time and the place that you were in I actually think you probably were doing very well. But in graduate school, you had that same attitude of just kind of going along and school is your primary focus. Is that right?

08:10 Amanda: Yeah. I hadn’t really had a good understanding of how graduate school was different from undergraduate, and so I borrowed money my first year of grad school. I took out whatever loans were offered as a part of the FAFSA, even though I had a project assistantship that year. And it wasn’t until I was kind of well into that first year that I understood, “Oh, you can work as a project assistant or research assistant, a teaching assistant and throughout grad school, I had each of those roles. And that can be enough to live on.” It’s not an exciting lifestyle, but I hadn’t realized at first that I didn’t need to be taking out those loans. So I took them out, and then I just didn’t do anything mindful with them. I probably did a little bit of travel, I ate out probably more than I needed to, and just that money sort of trickled through. I didn’t blow through it right away or anything like that, or need to take out additional loans, but I just didn’t understand the ways that you could avoid taking on additional debt in grad school. I sort of treated it like undergrad, just not knowing how that system worked until I was further along.

What Sparked the Financial Turnaround

09:16 Emily: I see. Yeah, that kind of makes sense, actually, because you were thinking about yourself as a student again. I guess that’s part of what this podcast is about, right? Making a wider awareness known that graduate school should be handled financially completely differently than you’ve handled your undergraduate degree. So when did this start to change? When did you start to have a greater degree of engagement or awareness around your finances?

09:40 Amanda: Sure. So my boyfriend at the time, now husband, had started reading, I Will Teach You to Be Rich, a book by Ramit Sethi. And if you’re not familiar with it, it’s really a book that just sort of walks you through how to set up a financial framework tohelp you be successful. He talks about how to use credit cards strategically how to set up the right sorts of bank accounts — checking savings, how to get started investing. He was reading that book and we just decided to read it together. We worked through it chapter by chapter. And from there, we started feeling really motivated by by that book, in particular.

10:23 Emily: This is really interesting to me, because this may be a better question for your husband, but the title of Ramit’s book, I Will Teach You to Be Rich — how did you even have the idea that that book was for you, because rich was nowhere near what was going on for you at that time?

10:40 Amanda: Not even close.

10:41 Emily: Maybe it was the teach you, like you were a learner, you wanted to be taught?

10:45 Amanda: I remember being really resistant to the book because I hated the title. I remember actually making fun of it or just saying, wow, it seems really cocky. And there were parts of the writing style where I felt like it was a little more aggressive than really appealed to me. But I also found I was just kind of drawn in by some of the message. I was initially a little bit resistant. And I had the, “Oh, I’m a poor grad student” identity I definitely did. I thought of myself as a poor graduate student and thought, “well, all grad students are poor. That’s what it’s supposed to be.” And I hadn’t challenged that at all at that point. But I do remember being actually turned off by the title of the book, so it’s funny that you mentioned that. But he was reading it and it was fun to be reading a book together too, and having that partner to talk things through and bounce ideas off of, and then we were able to hold each other accountable to actually doing something once we had read through the book.

11:42 Emily: Yeah. So did you encounter any other resistance to that identity as a poor graduate student? Was that pushing back at all against the messaging you’re receiving from the book?

Mindset Shift

11:55 Amanda: Yeah. I came up against some limiting beliefs at that point. As I was reading the book, I started having these feelings that “oh, well, I feel like I’m starting too late” or “as a graduate student, I don’t make enough money for financial planning to be worthwhile, that that’s still not something I can do.” I was simultaneously feeling like I had waited too long and like I still needed to wait longer. And that was really frustrating for me, because I have the type of personality where once I decide I want to do something, I want to act on it right now, or yesterday. It was frustrating to me to start learning about all these things, but not really feel like I had the means to put everything that I wanted to into place right away.

12:38 Emily: Yeah, I can imagine that a lot of people starting to learn about personal finance in graduate school, from whatever source, can feel that way. And it’s to your credit that you kept engaging with the material, instead of just totally turning off and say, “Oh, I have to pick up this book again in a few years later on.” I can definitely understand why hearing the message, while maybe this is not what he intended, but to you interpreting as I’m already starting too late when you were probably in what your mid-20s or so?

13:07 Amanda: Yeah.

13:09 Emily: Yeah, it’s not like objectively actually that late, but when you understand that people who did not go to graduate school route can be working on this right away when they finish their bachelor’s or even potentially earlier, that can be really frustrating. And like you said, you have all these great ideas once you start accepting the messages, but still, nothing has really changed in terms of your means and ability to work on them.But still, you were able to start making some changes. Once you started accepting the messages, what did you do right away even while you were still in graduate school?

Small Steps Make a Difference

13:47 Amanda: The book actually had really specific instructions about how to set up — I don’t think he frames it this way, but it’s essentially setting up a framework for yourself. One of the things that Sethi talks about is getting away from high-fee brick and mortar banks. A lot of banks charge to have a checking account if you don’t have a certain amount of money in it. And for most graduate graduate students, those minimums aren’t necessarily realistic. ATM fees are things that just can kind of bleed through. He had recommended switching to an online bank, and at the time, he had specifically, I think, recommended the Charles Schwab high yield investor checking. And so we both switched over our banks, because I think one of us was with Wells Fargo at the time, the other was with Bank of America. We were with exactly those banks that he was saying, “you know what, these are just set up to make you fail. They’re never going to do you any favors, get out.”

14:42 Emily: I don’t think anything has changed in the 10 or so years since that point. I would still say anyone who’s a Bank of America and Wells Fargo, get out of that relationship ASAP.

14:53 Amanda: Exactly. And one of the things that I love about the Charles Schwab account and that I think is really good for grad students, especially if you’re presenting research, is you get reimbursed ATM fees from anywhere in the world. Any ATM fees that you end up paying while you’re at a conference, it can even be an international conference where those can be really steep fees, at the end of the month, you will get a deposit in your checking account that reimburses you for all of those fees. That’s a feature that I just really like, and it’s not a lot of money, but over you know, several years that does start to add up.

15:25 Emily: And I think that on a graduate students stipend, those $3 or $5 here and there — it’s a higher percentage of the money that you’re working with as a graduate student that it would be for Ramit’s general audience. Like maybe that tip is “okay, it’s a good thing for them to do, but it doesn’t make that big of an impact,” but for graduate students, coming up at the end of month with 20 extra dollars or so like that can make a decent difference in your life, especially if your savings goal starts out at that $10, $20, $50 level. That can really help you meet that

15:58 Amanda: Yeah and it’s okay if that’s where you’re starting. Another thing that we did is we set up higher interest savings accounts. This was when interest rates were really low. Right now it’s realistic to maybe get, at the time of this recording anyway, 2% or a little over 2% on a savings account. At that time, I believe 1% was the absolute most you’re going to get, and so we weren’t talking a lot of money, but it was the same principle. I was with one of those banks where I think the interest was under 0.5%, so even with a lot of money, you’re not going to be earning anything. And so, you know, with the amount of money that I that we had in savings at that time, 1% was still only earning us, maybe pennies, but a few more pennies. But over time, as we started saving more and built up an emergency fund, those pennies became a latte every month. Now it looks a little bit more like a dinner out, maybe a modest dinner out, but it’s something. I think it’s important if you can aggregate those kinds of small gains across a bunch of areas, then they do start to make a difference. It’s changing your attitude from I don’t care that I’m bleeding money a little bit here and there on fees and interests that I could be earning. It’s saying, I’m taking control of this and I am mindful of where all of those dollars go and how I can now be in control of my financial situation.

17:26 Emily: Yeah, I can see how this example of changing where you bank can be a really impactful psychological when at the start of a financial journey, like what you’re talking about, because it’s not like you’ve set a savings goal and that you’re feeling discouraged about that, because you know, you only make X amount of money. It’s something that you do have complete control over and it doesn’t cost you any money. In fact, it’s going to be bringing money back into your account, a few dollars at a time. I can definitely see how this can be a wonderful first step to take when you’re starting to take in your financial life. You actually just mentioned a term I wonder, based on our last interview, if you also listen to the Choose FI podcast?

18:07 Amanda: Definitely. What was the term that I used?

18:08 Emily: You didn’t quite say it the way they did — aggregation of marginal gains. I’ll explain that for the audience. This Choose FI podcast is about the financial independence movement. We’ve had a pair of interviews on that with Gov Worker in season three, so if you want to learn more about the FIRE movement, financial independence and retire early, you can listen that one. We also touched on it in Amanda’s first interview. But anyway, on this Choose FI podcast, they have this term that they’ve come up with throughout their episodes, the aggregation of marginal gains, which is when you just make a tiny little change in your financial life, like the one that Amanda just mentioned, of stopping to pay ATM fees or stopping to pay fees just to hold a small balance in a checking or savings account. Those are very, very small things to do. But once you add up ten small things or hundred small things, that aggregation becomes really significant in your finances. This can be that step one for your aggregation of marginal gains. So yeah, thank you so much that example Amanda.

Commercial

19:09 Emily: Emily here for a brief interlude. Tax season is upon us and while no one loves this time of year, it’s particularly difficult for post-bac fellows, funded grad students, and postdoc fellows. Even professional tax preparers are often thrown for a loop by our unique tax situation. And don’t get me started on tax software. I provide tons of support at this time of year for PhD trainees preparing their tax returns. From free articles and videos, to paid at-your-own-pace workshops, to live seminars and webinars for universities and research institutes. The best place to go to check out all of this material is pfforphds.com/tax that’s P F F O R P H D dot com slash T A X. Don’t struggle through tax season on your own. Visit my website for the exact information you need in the most efficient form available. Now back to the interview.

Long-Term Changes

20:17 Emily: Anything else structurally that you changed around your finances at that time when you first started following the I Will Teach You to Be Rich framework?

20:24 Amanda: One other account that I got set up, which I think in the long run is going to have been really important, is taking control of getting started with retirement savings. Because I had opened the checking account with Charles Schwab, which is an investment firm, I also then opened a Roth IRA and I forced myself to remember that I had had some 401k savings from that editorial job that I had had before, but I wasn’t paying any attention to it. I couldn’t have told you how much I had saved. I sort of knew where it was. I still to this day today do not know how I had had that money invested at that time. So what I did is I opened up an IRA and I rolled that 401k over. And it was not much money, because I had not been — at the time I had been in San Francisco, I was proud to be paying my rent, I wasn’t worried about saving for decades out in the future. But what I did is I got that money to where now I knew where it was and then I had it on my radar to when I had windfall money from contract work or side projects that I was doing, I was like, “You know what, I can start to invest in a Roth IRA.” And that’s something that, sure, it would have been great to start at 18, but I can start right now and that’s still going to be really good for me over time.

21:41 Emily: Yeah, that’s amazing. I love that you specifically tied any windfall money or any extra side hustle money or whatever it was, you then had a place to put it. There wasn’t the extra hurdle of, “Oh, I have an extra $50 in my account right now. What do I do with it? I’m not sure” and it ends up just floating away somewhere you don’t even know where it went. You had then a place to put it. This is another great first step to take, is just to open an account, just to set it up, as long as there’s no minimum, or you can meet the minimum required to open it, just so you have a place about money to go. I think it makes such a huge difference that once you have that goal in mind, okay, any money extra money that comes in, this is where it goes. And it’s really easy to follow through on that once you’ve gotten over the activation barrier of setting up setting up the account.

22:31 Amanda: And both my husband and I, throughout the years have split that money between Roth IRAs and then that’s how we made substantial payments to our student loans. Both of us have done side projects where we might get a couple thousand dollars here and there, for consulting work or book projects or other things. We were very mindful that 100% of that money, we would just take it and allocate it toward one of those two goals. We had actually paid off a good chunk of student loans while we were still in school or within that first year, just because we were really consistent about taking that extra money and putting all of it towards either long term investments or towards the student loans with the highest interest rates, because at that point, we had pooled together all of those loans and actually started tracking, “Okay, what are the interest rates on each of these and which do we need to tackle first?”

23:28 Emily: Is that something else you learned from I Will Teach You to Be Rich, how to handle the debt? Were you following that part of earnings plan as well?

23:37 Amanda: Yes. And we were big fans. It was it was obvious for us that we wanted to tackle highest interest rate first. I know some people will start with the smallest loans, just to get those those wins, that sort of dopamine hit from getting a loan paid off. But for us even if the higher interest rate loans were bigger, we started with those.

23:57 Emily: So you’re going through the remainder of your graduate degree and you had this system for living off of your stipend for your budget and then pushing forward your finances with the extra money that was coming in. That’s how you finished out graduate school. Was there anything you did to keep yourself on this path of sticking to your goals and sticking to this idea of financial improvement through that time?

24:20 Amanda: Yeah. I mentioned that I have an “I want to do things now, now, now” sort of personality. As we transitioned from graduate school to the postdoc phase, we were in a higher cost of living area, but we are making more money. I felt like “okay, now we can start to do some more things.” There are things that we couldn’t do as students that now we can really tackle. One of the things we did, we were in Los Angeles, which means we spent a good amount of time in traffic. We were fortunate enough that we both were working at USC, at the same university. That meant we had a good chunk of time every day in the car and so we started listening to podcasts at that time.

Amanda: Really there’s a handful of podcasts that we had started listening to. We started listening to Afford Anything, Paula Pant’s podcast. We listened to The Mad Fientist, which is another financial independence podcast. We started listening to some entrepreneurial and side hustle podcasts. We were really just looking for ideas for things we could do and those podcasts really kind of helped keep us looking for new improvements that we could make and kept us motivated too. Sometimes the smart thing is not to change your goals, but just keep doing what you’re doing, but for me, I needed that motivation. I needed to be constantly learning new things and assimilating new information, and then making little tweaks along the way.

25:55 Emily: Yeah, I think those are all fantastic suggestions. I also love listening to podcasts. Not surprising, having my own podcast, I love the medium and listen to a lot of different ones. All the ones that you mentioned are excellent. We’ve already mentioned Choose FI, that could be another one to throw into the mix for the listener. Of course mine has a completely different audience than many of these other ones. If you’re already a listener, please stick with it, because I think this will help motivate you as well. And then the other one that I really like for motivation is Dave Ramsey’s podcast/radio show. You probably have to be in a debt repayment phase of life to really appreciate it, but he is very motivational, I will say that. That’s another idea if you’re looking for motivational podcasts.

Life after a Financial Turnaround

Emily: Let’s take the last couple minutes here, Amanda, and just give us some highlights of what’s been going on. What did you hit? You eventually paid off your student loans. What would have been the financial highlights of years, finishing out your postdoc, and then since then?

26:54 Amanda: We were fortunate enough to really get our loans paid off within a couple years of us graduating. That was a huge win for us. But of course, I wanted to keep that momentum going. Every time we complete a goal, I say, “okay, but we can’t lose momentum. So what are we going to do next?” And so we, we paid off the student loans and then we were kind of in that transition to a lower cost of living area, which I covered in that other podcasts, so I won’t talk about it. But that was another thing we wanted to do. My family’s in the Midwest, I had wanted to get back to the Midwest. That was something that we felt was important before we started a family.

Amanda: We started transitioning from high cost of living area to a lower cost of living area and that made home-ownership really feasible for us. We saved up and at the end of the last year — we weren’t planning to buy a house until this year, but we just ended up finding the right house in the right neighborhood, and we we had enough saved where we were able to make that happen. That was one of the latest things we did and now we just had our first child. I had a daughter in June, and so we’re wanting to get a little bit put away for her college already, too. We’re working on that and we’re kind of hoping to make a purchase of a rental property in the next couple years, so that’s another goal that we’re working on right now.

28:14 Emily: I think this is an amazing example of how much your financial progress accelerates once you have the higher income to be working with, and you can’t expect that to necessarily happen if you haven’t laid the groundwork earlier. If you do have the attitude of, “well, I’m still in graduate school, I’m still in my postdoc, I just have to worry about money later,” It’s not necessarily all going to turn on a dime for you when your income changes. But for you, Amanda, because you guys have been working so diligently on these various goals with whatever means you had for all those years, once you had the higher incomes, it was just like, boom, you knew exactly what to do with it. You knew where to funnel your money. You could make really, really quick progress and that’s the same thing that happened my finances as well — laying the groundwork during graduate school, once the income changed, the winds just come faster and faster and faster, even though they were really slow and hard fought in the beginning years. I really appreciate hearing this more about that “after” aspect of your story, after the financial transformation.

29:17 Amanda: I’ve heard that the first $100,000 is the hardest, for net worth. And I do believe that that’s probably true. I don’t know how well documented that is, but that’s something that I’ve heard before on podcasts and on blogs. It does seem like, it doesn’t really matter if it’s $100,000 or whatever it is, the beginning is the hardest to make progress because your money isn’t making much money, you probably aren’t making much money, because otherwise you could be making things move a lot faster. But it is true that if you’re just consistent about it, and have a framework set up and have goals that you’re working towards, it does really feel like your ability to do things does you know pick up pace a little bit.

30:01 Emily: Yeah, I would agree with that. I can definitely attest in my own life, the first $100,000, which I documented, actually, it’s in season one, episode one, of how we got to our first $100,000 of net worth, that was a long journey and it’s the next iterations that have come a lot faster, obviously. Now, I didn’t start very much in debt, we had sort of a slightly negative net worth, not huge. But if you have like a very negative net worth, maybe you’re working on over $100,000 of student loan debt to pay off, there’s sort of two phases to that journey — there’s getting to zero and then there’s getting to the first $100,000, and your first $100,000 of positive net worth will be easier than when you’re working to get to zero. It’ll be easier than that, but it will not be totally as easy as someone who started at zero, if that makes sense, just because of the way compound interest work.

30:54 Amanda: When we first calculated our net worth it was negative. It wasn’t significantly negative. And I do agree that if you are one of those people who happens to have six figures of student loan debt, you’ve got a different process to go through. Hopefully a soon to be future income that will help you tackle that with pretty good pace. When we first calculated it, it was below zero, and that was frustrating. That was definitely something for us that didn’t feel good. But we knew that we couldn’t get to zero and above zero without just tackling it. We were fortunate enough, right around the time we got married, we calculated and we were at zero when we got married, and we had a very, very modest tiny family only wedding in order to keep it that way. We didn’t want the wedding to drag us further down, but I think when we got married we are right around zero. So that was kind of a neat place because symbolically It was like okay, you know, we’re married and now we have nowhere to go but up. Let’s get moving on that.

31:57 Emily: Yeah, that sounds amazing.

Final Words of Advice

32:00 Emily: Final question here, Amanda, which is one that I asked all of my guests. Now, we’ve already heard you say a lot of financial advice during this entire podcast, but it was mostly you following the advice of others. I’m curious now that you’ve been through this whole process, what you would turn around and say to another early career PhD, in terms of your best financial advice for that person?

32:18 Amanda: Sure. So something that we do, and I guess this applies for people who have a partner, something that my husband and I do is we do a monthly finance update. It’s really just a spreadsheet where we keep track of our debts, and our savings and investments. We just go through and update the balances of all of those accounts every month. It doesn’t really take long, but it’s something that I look forward to because it means that we have a conversation around money and it means that at least once a month, probably more often just because it’s become a hobby of mine. But you know, if it’s not something you’re that interested in scheduling a regular check in, like once a month, it’s just a good way to make sure that you’re communicating financially. And I feel like that’s been really good for us because it means we’re making sure we’re still on the same page about our goals. And if we are starting to have different ideas, then we have a conversation about Okay, do we want to prioritize this thing or this other thing first?

33:18 Emily: Yeah, that’s a fantastic suggestion. Again, for anyone who is in a relationship with another person, however you handle your finances, you know, joint separate or Yours, Mine and Ours. I think that monthly check in can serve any one of those models really well.

Emily: Amanda, it’s been an absolute delight to have you back on the podcast. I’m so glad that you made time for this. Congratulations on the new addition to your family, both the baby and the house and the potential next rental property, all of it. It sounds wonderful, and it was really great to catch up with you today.

33:47 Amanda: Yeah, you too. It was good to talk to you, Emily. And thanks for having me on.

Outtro

33:51 Emily: Listeners, thank you for joining me for this episode. PFforPphDs.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcast, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media or with your PhD peers. Three, recommend me as a speaker to your university or association. My seminars covered the personal finance topics PhDs are most interested in, like investing, debt repayment, and taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.

Blog

Links Mentioned in the Episode

Introduction

Will You Please Introduce Yourself Further?

Benefits of Universal Basic Income (UBI)

Abundance Mindset, Higher IQ

Scarcity Mindset Damages Mental and Physical Health

UBI and Job Flexibility

UBI Facilitates Entrepreneurship

UBI and Social Safety Nets

Targeted Interventions Beyond UBI

Regional Cost of Living Considerations

Psychological Implications

Regional Supplements

UBI Increases Mobility

Commercial

The Basic Income Podcast

How to Fund UBI in the U.S.

Enact Changes to the Tax Code

Shift Tax Programs and Brackets

UBI and Graduate Training

UBI and Financial Security

Parallel: UBI and Fellowship Income

Final Thoughts on UBI and Academia

Value of Teaching and Shifting Landscape in Education

Tell Us More About Your Podcast

UBI and Healthcare, Education

Best Financial Advice for Another PhD

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Links Mentioned in This Episode

Teaser

Introduction

Will You Please Introduce Yourself Further?

What Role Did Your PhD Have in Starting Your Business?

Jim’s Entrepreneurship Journey

Relevant Technical Skills Gained During PhD

Inspiration While Working for the Democratic National Convention

How to Gain a Wide-Reaching Audience

Evolution of ShareProgress

Consulting as a Stage of Growth

San Francisco Venture Capital (VC) Environment

Current Role in the Business

Financial Independence and Early Retirement (FIRE) Movement

Business Advice for Early-Career PhDs

Advice #1: Talk to People

Advice #2: Find Your Focus

Commercial

Should Entrepreneurs Move to San Francisco?

Advocacy for Universal Basic Income

Small Business is the New “Big”

Changing Mindset Around Universal Basic Income

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Links Mentioned

Teaser

Introduction

Will You Please Introduce Yourself Further?

Basics for First Time Home-Buyers

Different Types of Home Loans

How Credit Scores and Debt Impact Home Loans

What If You Don’t Have a Typical Situation?

Commercial

Tips for Home Loans with Non-W-2 Income

Loan Types for Non-W-2 Income

The Importance of Offer Letters for Non-W-2 Income

An Example of An Offer Letter

Final Words of Advice

How To Reach Sam Hogan

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Links Mentioned in This Episode:

Further Reading:

Teaser

Introduction

Will You Please Introduce Yourself Further?

Kelsey’s NSF GFRP Workshop Updates

Major Decision Points for NSF GRFP Recipients

When To Start Receiving the Stipend

Consider Timing (and Adequate Payment) for TAships

Check with Your Advisor About Research Grant Cycles

Are You Listed as a Dependent on Your Parents’ Tax Return?

25% TAships Possible During GRFP