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Financial Goals

This Grad Student Worked Multiple Side Jobs to Pay Off Debt

January 31, 2022 by Meryem Ok Leave a Comment

In this episode, Emily interviews Dr. Jeanelle Horcasitas, a PhD in Cultural Studies from UCSD who worked multiple jobs to stay afloat during grad school. Because of some financial events in her childhood and being a first-generation college student, Jeanelle was determined to do her PhD without accumulating any more student loan debt. In fact, she accomplished some major financial goals during graduate school, such as self-funding for a few months leading up to her defense after her dissertation fellowship ended. Don’t miss Jeanelle’s reflections on how her financial goals have changed since finishing grad school and how she’s now resisting hustle culture.

Links Mentioned in the Episode

  • Jeanelle’s Twitter (@jhorcasi)
  • Jeanelle’s LinkedIn
  • Digital Ocean
  • Mint App
  • EveryDollar App
  • PF for PhDs Tax Resources
  • The Total Money Makeover (Book by Dave Ramsey)
  • PF for PhDs: Subscribe to Mailing List (Gain Access to Compiled Advice) 
  • PF for PhDs: Podcast Hub
Image for This Grad Student Worked Multiple Side Jobs to Pay Off Debt

Teaser

00:00 Jeanelle: Before, like I said, I felt very survival mode, hustle mode. Like I’ve just got to work hard, work, hard, work hard. And I was very burned out by the time I finished graduate school. But now I’m more of, you know, I’m doing the smart thing. I’m saving. I’m saving for my future and doing what I need to. So, I’ve backed up a little off of that and given myself more grace.

Introduction

00:23 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 11, Episode 3, and today my guest is Dr. Jeanelle Horcasitas, a PhD in Literature and Cultural Studies from UCSD who worked multiple jobs to stay afloat during grad school. Because of some financial events in her childhood and being a first-generation college student, Jeanelle was determined to do her PhD without accumulating any additional student loan debt. In fact, she accomplished some major financial goals during graduate school, including self-funding for a few months leading up to her defense after her dissertation fellowship ended. Don’t miss Jeanelle’s reflections on how her financial goals have changed since finishing grad school and how she’s now resisting hustle culture.

01:14 Emily: Jeanelle and I first connected way back in 2015 when she was working as the Grad Life intern at UCSD. I had very recently launched Personal Finance for PhDs. I reached out to her cold and pitched her The Graduate Student and Postdoc’s Guide to Personal Finance, which was my only seminar offering at that time. She liked the idea and advocated for it within her office, but it didn’t go forward right away. I actually didn’t work with UCSD for the first time until 2020, but Jeanelle had planted the first seeds all those years before. If you are a fan of this podcast, would you please follow Jeanelle’s lead and request that your Graduate School, Graduate Student Association, Postdoc Office, etc. work with me in 2022? I offer a variety of live and pre-recorded seminars and workshops on topics from taxes to investing to cash flow management. My most popular seminar remains The Graduate Student and Postdoc’s Guide to Personal Finance, and although it’s changed a lot over the years, it still touches on a wide variety of personal finance topics so there’s something for everyone. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. And hey, even if they aren’t able to work with me this year, your recommendation could plant a seed for an engagement in a future year. Thank you very much! Without further ado, here’s my interview with Dr. Jeanelle Horcasitas.

Will You Please Introduce Yourself Further?

02:47 Emily: I am delighted to have joining me on the podcast today, Dr. Jeanelle Horcasitas. She was a graduate student at UCSD and has been finished with her PhD for about two years, moving on to the working world. And so we are going to talk about how graduate school went financially for her, how she funded it and so forth, and then also how her, you know, financial life is going now. So Jeanelle, thank you so much for joining me for the podcast. Thank you for volunteering for this interview. And would you please introduce yourself a little bit further for the audience?

03:13 Jeanelle: Yes! Thank you so much, Emily, for bringing me on. I’m excited to speak with you today. So, I went to undergrad at UCLA for English and I did my PhD at UC San Diego in literature and cultural studies. And, you know, since I’ve received my PhD, I did a multitude of jobs within my time at graduate school, but since graduating, I spent some time in graduate career and professional development for biomedical scientists for about a year and a half. And I’ve recently transitioned into the tech space for a company called Digital Ocean. And, you know, one of my biggest motivations for school and getting through it was the fact that I’m first generation. I also come from a low-income family. So a big part of that was the fact that I had to be the one to get myself through school, to pay for it. I knew that my parents were in a financial situation. And I learned that at about 18 when they got divorced, I experienced bankruptcy, foreclosure at the time. And that was very transformative for me at that age to just recognize the impact of financial decisions. And so part of, you know, why I wanted to complete my PhD completely debt-free was because of those reasons of just knowing what having that burden can do to you and how it can impact your future.

Undergrad Funding and Student Loans

04:51 Emily: Wow. Yeah, that’s such such an impressionable age to be going through something like that. So thank you for sharing that with us. Since you mentioned being 18, when you started college, did you also have that determination to do your undergrad debt-free?

05:06 Jeanelle: So when I was 18, I actually went to community college for a few years beforehand, which was really great because since I was low-income, I was able to receive very generous grants like the Pell Grant. And I did my FAFSA, and at that point I just really wanted to start my undergrad. And I remember saying the only thing I’ll go in debt for will be my student, like education and I’ll do student loans. So, I signed away, didn’t really know what I was doing. I did receive fellowships for my undergrad, but I was living in Westwood in Los Angeles next to Bel-Air. And as you know, the cost of living is very high, especially to live in the dorms. So I was only there for about two years, but I did come out of debt. And so at that moment, I hadn’t really felt you know, I need to do this degree debt-free, but I tried to keep the amount I was taking on pretty minimal. So I feel like I didn’t graduate with too much student loan debt, but I did have some.

06:15 Emily: And did you go directly from undergrad to grad school?

06:19 Jeanelle: No. I took a year off to work full-time and try to pay down some of the student loans. And then I went to graduate school after that for about five and a half years.

06:30 Emily: Okay. So entering graduate school, you have a new perspective and you want to do this whole thing debt-free. Were you still carrying any student loan debt at that point, or had you cleared all of it?

06:40 Jeanelle: No. So at the time of graduate school, I still had most of my student loans from my undergrad, and I also had a car payment and car loans. So I carried those two things, and I think the stress came from the fact that I wasn’t getting any younger. I was about to sign away five and a half to seven years of my life. And I knew that I wouldn’t be making a ton of money. I was given like a pretty decent fellowship, but living in San Diego, it still couldn’t cover everything. And so I think from the very beginning, I knew that I wanted to put some sort of plan into place that I was still going to graduate school, but that I would be paying off these loans simultaneously. So that by the time I graduated, I’d be in a better financial position to buy a home or just to not have that hanging over my head for longer than I would’ve liked it to be.

How Does Funding Work in Your Department?

07:53 Emily: Yeah. Very, very ambitious. But I can see how you got there. Tell me a bit about how your field, your department is typically funded. You mentioned you had a fellowship for two years. Is that something you were seeing offered at like multiple different schools? And how did you end up at UCSD in particular, I guess, and specifically related to the finances?

08:13 Jeanelle: That’s a great question. So for the most part, my specific department, they don’t receive a lot of funding. They actually, most of the graduate students have to do TAships and, you know, find a teaching assistant position. And that’s how they get it paid for. Mine was actually through nomination that someone at the literature department had to do for me, and the graduate school, they were the ones that, you know, went through candidates and selected and made that decision. And so, the reason I chose UCSD is because it was such a generous, like first two years will cover you with this stipend. And then the next two years, you’re kind of guaranteed that TAship. And then you figure it out from there. I had a couple of other offers from two other graduate schools, where one was just offering like a fellowship for one quarter, which wasn’t enough for me.

09:21 Jeanelle: And then the other was I think, just a year. And so, I was like, I don’t want to have to pay for this. And I’m going to choose where the money is for the most part. And it ended up being a good decision for that reason. And just for the folks that I got to work with. So I was happy with that, because it seems like it really varies. It’s interesting because it was all UCs where these offers came from. So they have different ways of, I guess, enticing students to come with what kind of money they might have or available for fellowships.

09:58 Emily: I think that’s a point that prospective graduate students really, really need to hear, like they need to investigate the typical funding path in their field. Is it usually from TAship, so that you know, if someone’s offering you a significant fellowship, that it’s really special and they’re really trying to recruit you. And yeah, you may have to do TAships after that ends, but when does it end? Is it two years? Is it one year? You know, how much money is being directed toward you, especially as a recruiting tool. So love that you were, you know, analyzing that at that point.

Sources of Income Beyond Fellowship

10:28 Emily: So you mentioned earlier that you worked like a lot of different jobs during your PhD. And so, what did you do beyond, okay. I have this fellowship for a couple years. I know that you had a fellowship again at the end. And also the TAing that you mentioned. Did you work other jobs in addition to those? And also were they through the university or like completely independent?

10:49 Jeanelle: I had the first two years covered from the fellowship. And the last two were for the TAship. And then my fifth year I got a dissertation fellowship. However, within that time I was working multiple jobs at different places. So for the first two, two and a half years, even though I was on fellowship and taking my, my graduate courses, I was also a graduate student researcher or GSR for the the Graduate Office at UCSD. And I did some freelance writing as well. And I also worked as a student worker for the county of San Diego’s housing office. And so, you know, some, they weren’t all at the same time, but at one point I think they were all happening at once, which was pretty overwhelming, but it was nice, especially for the county job because I could work full-time during the summer, which was great because the fellowship actually it was nice, but it wasn’t always enough to get you through the summer. And they didn’t offer summer fellowships during that time.

11:57 Jeanelle: They started doing it later on during my time at the program. And then during my TAship, I really wanted to focus on teaching, but I had an opportunity to adjunct at the community college as well. So, in addition to TAing a couple of classes, I also taught one to two classes at the community college, which was a great experience. And then during one summer I did an internship in Washington DC. So there were a lot of different jobs that I was doing both, you know, if I had to go in somewhere, or freelancing, mostly writing or editing with different folks.

Side Hustling Amongst Peers

12:40 Emily: I can totally understand your motivation to take on this extra work for extra money. Because of, you know, mentioning your goals about clearing the student loan debt and the car debt and so forth. If you had not had those extra circumstances in your life, not that they’re that extra, because a lot of people have those things. But was the stipend enough to live on, or was it like no, no, everybody has to be side hustling, even if they don’t have, you know, prior student loan debt or whatever? Like, were your peers all doing this greater degree of work as well?

13:09 Jeanelle: Oh, that’s a great question. I think it really comes down to the individual and, you know, what they can take. Personally, I didn’t feel that the stipend was enough living in San Diego. The only time that it felt like it was livable was my first couple years when I was in the graduate student subsidized housing, because it’s so much cheaper. Once I had to live outside of those bounds, the cost of living is just incredible. And, you know, you’re thinking about how am I going to live, but also how am I going to eat? I have, you know, my car, my gas, my car payment, insurance, all these things. Like I said, if you’re fully independent, which I was from my parents it could be a lot at once.

14:02 Jeanelle: And so, I had a mix of, I guess, observations of folks who, there were some people that were like me that were doing at least a couple of jobs at the same time. But then there were some that were just TAing and that was fine. They seemed to be okay, but they were also in graduate housing or they were living with many roommates, which is something else I didn’t really want, and luckily my partner came to move like halfway through my program. And that actually helped a lot as far as support. So, it really depends on the person, but from what I saw, you know, there was a big group that did have to do extra. And then some that they had to sacrifice in different ways, like living with many people or living really far away and commuting, et cetera.

Money Management and Keeping a Budget

14:56 Emily: Yeah. Thank you for sharing those observations as well. So with all these different sources of income and all the different expenses and goals that you had, how were you doing the money management part of things? Like, were you keeping a budget? How did that work?

15:11 Jeanelle: Yeah, so as far as budgeting, I tried the Mint app. And then I was trying this other app called EveryDollar. The issues with those apps that I found were, it captured like your monthly overview of what you were making, but the cash flow of, you know, when the bills come out versus when you get money in and what you actually have enough to pay for groceries that week, or, you know, gas, whatever it might be, it didn’t always line up. And so this was something that my partner and I, we were struggling a lot with, especially when we combined our finances after we got married. And so we found it easiest to create an Excel spreadsheet and it’s just day by day.

16:01 Jeanelle: And it has the categories to the left. But it’s really nice for us because we can really see where we are in real-time and know, okay, if you’re getting paid this Friday, maybe we could do a little more extra fun this weekend, or we know this is coming up. We have to put aside savings for this so that we can sequence it a bit better than these apps that are just, you have this much money for the month when it’s not necessarily true. You don’t have all that money like next week yet. Especially if you’re getting paid biweekly, which for some of my jobs I was.

16:38 Emily: Yeah, I can imagine working with, like, as you said, you had so many different jobs, all the different pay schedules that you must have been dealing with, and then, you know, like your fellowship stopped over the summer, for example, like you mentioned earlier, like it’s just a lot of moving parts. And I do agree that when you have a lot of moving parts, ultimately building your own spreadsheet is maybe the fastest way to a good solution that works for you. So thank you for sharing that with us.

Final PhD Year Funding

17:02 Emily: So you also mentioned earlier that you were funded in your fifth year by a dissertation fellowship, but you said you took five and a half years to finish graduate school. So let’s square that circle. What was your funding like for the last half year?

17:17 Jeanelle: So my last year was actually my fellowship, that was the highest amount I had received. And so, when I say it was a higher amount, it was only like $5,000, you know, more than what the other years had been. But that little bump did help. But, for that one year, I really wanted to finish my dissertation. And so, I had to say no to a lot of my extra jobs that I had. And, like I said, I have a spouse and it was nice to have you know, that support. He works full-time. And he could help with some of those extra, you know, expenses that couldn’t be covered by my stipend alone or anything like that. However, because I knew that I wanted to finish, I had planned, okay, you know, I’m not going to enroll the next year.

18:19 Jeanelle: I’m going to take leave of absence if I don’t finish at the exact year mark, but I know they’re not going to give me any more money after that. So we planned ahead and I decided to teach for one semester during that time. So, I just taught one class and then the rest of the time was dissertating. But all of that went into like a savings. We knew that that was going to be the gap of whatever time off extra I would need without getting my stipend. And so basically from January to August, or no, January to December, for about a year, I had worked on the dissertation, but the money stopped in the summer. So I didn’t have money coming in for about four months. And so I was able to be covered for about three months, and then I was starting to feel really stressed looking for jobs and seeing what we were going to do. So by that last month, when I knew I had my defense date, all those things, I was doing a lot of freelance extra work because by then the savings had run out. So I would say, from that extra time of teaching, I had saved about like a three month, like emergency fund as I wasn’t working during the summer.

19:41 Emily: That end of graduate school, getting to that defense date is such, such a busy period and such a stressful period. And you did as best you could, it sounds like to, you know, be doing the planning ahead financially, but it’s tough that, you know, at the very end there, when you’re applying for jobs, you’re preparing for the defense and all of that stuff that the financial stress had to come back in at that point. But I’m glad it didn’t go on for too long. You finished up very quickly. Yeah.

Starting Dissertation Debt-Free

20:06 Jeanelle: I just wanted to add one thing. I will say, at that time, like when I started my dissertation fellowship, we were debt-free. We didn’t have any more consumer debt. And we were actively saving for this time I would be off but also saving for our house. So the end of that summer was extra stressful because that’s when we bought our first town home condo. So that was an added layer of I need a job because we need to pay for this new place that we just got.

20:35 Emily: Wow. Yeah, that is a lot to put on one, you know, short few-month period, but it is really good to hear that you were done with the debt, especially the student loans, because you know, you mentioned taking a leave of absence. I would guess that, with not being a student anymore, your payments would’ve kicked back in, had you not already been finished with paying that off so that would’ve been like another thing to pay for during that time.

21:02 Jeanelle: The other thing is health insurance. They stop your health insurance. Like I said, luckily I could get on my spouse’s for that short amount of time, but I know that that’s not always the case for everyone. So I’m always like weary of just like, this is my experience, but that’s not always the case. And to think ahead of things like that, if you’re going to do that, like health insurance costs.

21:22 Emily: Yeah, for sure. I mean, it’s good just to know, like you sort of tick down all these boxes, I have to consider this. I have to consider this so that someone else can, if they don’t make the same decisions as you, they have different situation, whatever, that’s fine. But just the thought process is good to hear.

Commercial

21:37 Emily: Emily here for a brief interlude! Taxes are weirdly, unexpectedly difficult for funded grad students and fellowship recipients at any level of PhD training. Your university might send you strange tax forms or no tax forms at all. They might not withhold income tax from your paychecks, even though you owe it. It’s a mess. I’ve created a ton of free resources to assist you with understanding and preparing your 2021 tax return, which are available at PFforPhDs.com/tax/. I hope you will check them out to ease much of the stress of tax season. If you want to go deeper with the material or have a question for me, please join one of my tax workshops, which are linked from PFforPhDs.com/tax/. I offer one workshop on preparing your annual tax return for graduate students and one workshop on calculating your quarterly estimated tax for fellowship and training grant recipients. The next live Q&A call for the annual tax return workshop, How to Complete Your Grad Student Tax Return (and Understand It, Too!), is coming up on Sunday, February 13th. It would be my pleasure to help you save you time and potentially money this tax season, so don’t hesitate to reach out. Now back to our interview.

Setting Financial Goals

23:04 Emily: So you mentioned, you know, by the time you got to the end of graduate school, you had cleared the debt, you’re working on other financial goals. You were then, you got married at some point. And so you and your partner were able to work on these things together. Can you tell me more about those financial goals that you started setting at that point, whether that’s toward the end of graduate school or after graduate school?

23:24 Jeanelle: So when my husband and I got engaged, we were pretty, I would say hesitant to get married for a while because we both had parents that were divorced and a lot of it had to do with financial issues. And so that was a big factor in getting married and figuring out how we were going to do things together. And so before we had gotten engaged, we both were very motivated to pay off our car. We both had car loans and student loans. So at that point, when we got engaged, I had paid off my car, he had paid off his student loans and all we had were basically those reverse things remaining. But now we had this wedding, and these expectations. And so we had to make some pretty hard decisions as far as, you know, this is our budget.

24:17 Jeanelle: We’re not going to go beyond this. We’re going to have a small courthouse wedding, which is what we had with immediate family and we’re gonna have a small get together at a community center. And so, we budgeted at like $10K I would say, and it was probably like $8K that we ended up for everything. And so that was a motivating factor because we wanted to go into our marriage not with anything extra outside of our loan and our cars. And so, I would say like about five months after we got married is when we really combined everything and joined forces and got rid of all of that debt and then started thinking about a house. And so, that was like our main goal is let’s just help each other out.

25:08 Jeanelle: We’re in this together now. Let’s pay these things off, let’s put together what we can for our house. And then start thinking about other things like retirement, because I felt pretty stressed about the fact that I was almost 30. I hadn’t had put anything away for retirement. And they don’t really, they don’t do that for you in graduate school. And it’s just something I didn’t know. I didn’t come from a family that, you know, had made good financial decisions. And so, it felt really tough sometimes to know what was the right thing to do at times.

Internal Motivation for Working on Personal Finance

25:46 Emily: It sounds like you, even though you, you know, were approaching 30 and didn’t have anything in retirement savings, it sounds like you really had your head on straight though about like understanding your own internal motivations for working on personal finance, the budgeting, obviously you’ve been doing, the hustling. So like the elements, right, for financial success, I can easily see were there. And it was like, okay, you clear the debt, you get the house, you’re ready to go, right? You’re ready to hit the ground running. Is that how you felt about it since like getting your post-PhD jobs and the house and how are you doing now, I guess, with these financial goals and dreams?

26:21 Jeanelle: Thank you for that. I like to feel validated because there was just so much I didn’t know. There’s still a lot I don’t know. Since then, I feel like I’ve been able to detach myself a little bit from that tussle and survival mode that I think I’ve been raised on my whole life and experienced just growing up and seeing family struggle and my family struggle. And then just also what’s still happening especially to graduate students and the kind of, you know, these difficult situations that they might be in. So since then, you know, I feel motivated still to do the next thing. So the next thing I’d really love to do is pay off our house. I think that would be really great and would set us up really well.

27:21 Jeanelle: And that’s mostly because I’d to beef up my retirement and just be very aggressive with that because, like I said, I feel like I lost some time for the, you know, those 10 years, I didn’t really do anything since I had turned, you know, 18. And that’s one thing I really wish and regret. But, like I said, because I don’t know much I was a little nervous, but we started talking to a financial advisor and this was something like I said, no one in my family had, and I never really knew what to expect. So we spent some time interviewing folks and figuring out who would actually tell us, like, this is how this is how you invest. This is good because of X reason and someone who would explain those things to us.

28:14 Jeanelle: So I think since then, I feel like I’ve been able to hone in a little bit better on what I want to do financially for my future, in a way that I feel more confident. Before, like I said, I felt very survival mode, hustle mode. Like I’ve just got to work hard, work, hard, work hard. And I was very burned out by the time I finished graduate school. And when I finished, and I defended, I worked right away, and I’ve always been working. And even so, I was still doing freelance stuff. I just felt like I couldn’t say no. I felt like I always needed to keep money flowing in. But now I’m more of, you know, I’m doing the smart thing. I’m saving. I’m saving for my future and doing what I need to do. So, I’ve backed up a little off of that and given myself more grace, because I am making good choices as far as, you know, what the future holds and what I can be doing with investing and retirement and hopefully paying off my home.

29:18 Emily: That’s fantastic to hear. I’m so glad that you’re, you know, on that journey with your money mindset, right? Away from hustling, because it is interesting, like you had to hustle for a long time. It was necessary for survival. It was necessary to meet the sort of just baseline financial goals of getting debt paid off. But now, you know, presumably you’re making a much better income from your primary job. Now you can switch to thinking about investing and how money can be generated and come from work and income you’ve earned in the past and not completely from income you’re earning in the day to day. And eventually of course, when you reach financial independence, when you’re retired or whatever, all of your income will be coming from those, you know, previous investments. So I just love to hear that. Just hearing that transition point is really interesting.

Best Financial Advice for Another Early-Career PhD

30:08 Emily: Well, this has been absolutely fascinating, Jeanelle, and thank you so much for volunteering to come on the podcast. I always end my interviews by asking my guests, what is your best financial advice for another early-career PhD? And that could be something that we have touched on already in the interview, or it could be something completely different.

30:26 Jeanelle: So, this advice I would give especially for folks who are just finishing their PhD, and are not sure, you know, what comes next, or, you know, maybe they have these residual effects or trauma, I would say, and feel like I did. Like you always need to catch up. I felt like all my friends around me were getting promotions. They were buying houses, they had retirement, you know, saved and I felt really behind and it made me feel bad. So I would say, you know, go at your own pace. Everyone is at a different point in their life and you will get there as long as you come up with a plan. And I would say like the most powerful plan you can have is your budget and really reckoning with what you have and what you can do with that.

31:20 Jeanelle: So you know, when I first started, I wasn’t getting a lot of money, but I still made it work within my budget. I lived within my means and what I could do. And now that I have a little bit more flexibility because your income usually goes up a lot more from a grad student stipend, is just to know, just because it’s gone up more, prioritize what you really want for kind of like those future financial goals that you might have. Like think about those things first. Because a lot of times those other things are just temporary satisfaction that we’re trying to get, and it’s okay to do once in a while. You know, it’s nice to splurge once in a while. So I would say, you know, don’t compare yourself. Give yourself some patience with where you’re progressing.

32:13 Jeanelle: And definitely, you know, create that budget. Know that it’s not probably going to work for the first few months. You’re going to have to take some time to get it right. And then once you’re in a place where you feel really good, if you’re like me and you don’t know much, I recommend talking to a financial advisor and expert who can lead you and teach you in a way of, you know, things like investing and what will suit you, and what are good goals to think about. Because if you’ve never learned it, you’ll just never know. And there could be something that unlocks for you. So, that’s what I would say is just, you know, keep going, don’t compare yourself and, you know, go at your own pace. Everyone’s running their own race.

33:02 Emily: I love those thoughts. I actually want to ask you a bonus follow-up question, which is, I really like the advice actually of speaking with a financial advisor once you’re ready for that. I actually am working with a financial advisor myself for the first time in 2021. And it’s actually been really good because I wouldn’t say that I’ve gained necessarily any new knowledge, because of course I am very well informed in this area. Although there have been a few, like really, really detailed questions we’ve asked. What’s been important for me is the behavior change of involving someone else in our picture, asking for advice, and then being like, Ooh, I need to act on this else. Or else this person’s going to follow up with me and I’m going to have to say I didn’t do it. So like, that’s what really, really ultimately matters in finances.

Personal Finance Resources

33:47 Emily: It doesn’t matter actually how much you know, it matters what you do, the action that you take. So like, I love that even though you’re saying, I didn’t know much, I don’t know much. As you’ve learned, you’ve done what you’ve learned about. And that’s really the most important thing, right? Is to just take the action. So, anyway, I love that advice, but the question that I wanted to ask you was, prior maybe to starting to meet with this financial advisor, did you have any personal finance resources, like media, like other podcasts or like books or anything that you consumed that helped you along that way?

34:18 Jeanelle: Yes, you know, one, one of the most helpful books for me was The Total Money Makeover. I don’t know if anyone has heard of Dave Ramsey. I won’t get into like his political stance and some of those problematic things, but I will say the baby step plan that he has is very solid. It’s, you know, I’ve tried to read other books, like How to, I think it’s How to be rich or something like that. And it talks a lot about investing and it just really went over my head. And I liked that it was like, step one, do this step two, do this step three, do this. So that really helped me, at least, and my husband just feel like we could follow a plan that we understood. It was very straightforward. And then later on, when it got to the more complex stuff, like the financial advising and investing, that’s when we were like, okay, let’s get some expertise.

35:13 Jeanelle: There’s no shame. I will say culturally, money just wasn’t talked about in my family. And I wish it was because I feel like that transparency would’ve helped me instead of seeing it in different ways. But you know, it’s nice, like you said, to have that outside person who can give you actionable things that you can do that are really making an impact on your finances and helping you grow you know, to have hopefully a good nest egg. So that was the biggest resource is probably The Total Money Makeover and then the financial advisor. And we have a San Diego financial literacy clinic. I learned about this through working with the county. And so I actually met with a pro bono financial advisor several years ago for that as well. So there are great resources like that too, where you can just talk to someone and have this neutral person listen to you and give you advice.

36:20 Emily: That’s a great, great tip. And it’s great that you found that resource that you knew about through your work. I would say also, you know, of course, anyone listening check for similar resources in your area. Check with like a local credit union. If they don’t offer something like that themselves, they probably know where to refer you for that kind of help. And I’m sure, if you’re below a certain income level, you know, they’ll have some kind of like pro bono sliding scale sort of thing going on. So thank you so much that. Jeanelle, it’s been great catching up with you and thank you again so much for giving this interview.

36:51 Jeanelle: Thank you!

Outtro

36:57 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? I have collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. If you’ve been enjoying the podcast, here are 3 ways you can help it grow: 1. Subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. 2. Share an episode you found particularly valuable on social media, with an email list-serv, or as a link from your website. 3. Recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and increasing cash flow. I also license pre-recorded workshops on taxes. 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 to Pursue FIRE in Graduate School

December 13, 2021 by Emily

In this episode, Emily shares the first section of a written guide she recently added to the Personal Finance for PhDs Community, titled How to Pursue FIRE in Graduate School. FIRE stands for Financial Independence / Retire Early, and it’s a big movement among personal finance enthusiasts right now. At first, Emily didn’t believe graduate school and the pursuit of FIRE were compatible, but the many interviewees she’s had on the podcast who are pursuing a PhD and FIRE simultaneously changed her mind. In the introduction, Emily introduces FIRE and the general ways people pursue it and lists the four biggest levers a graduate student could pull to pursue FIRE right away.

Links Mentioned in the Episode

  • Read the rest of the guide after joining the Personal Finance for PhDs Community
  • PFforPhDs Podcast interview with Dr. Gov Worker
  • PFforPhDs Podcast interview with Dr. 50 of By 50 Journey
  • PFforPhDs Podcast interview with Crista Wathen
  • PFforPhDs Podcast interview with Dr. Sharena Rice
  • PFforPhDs Podcast interview with Dr. Erika Moore Taylor
  • PFforPhDs Podcast interview with Diandra from That Science Couple
  • PFforPhDs Podcast interview with Joumana Altallal
  • PFforPhDs Podcast interview with Dr. Sean Sanders
  • PFforPhDs Podcast interview with Dr. Amanda
  • PFforPhDs Podcast interview with Alina Christenbury

Introduction

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

This is Season 10, Episode 19, and today I’m going to read to you the introduction to a written guide that I recently added to the Personal Finance for PhDs Community, titled How to Pursue FIRE in Graduate School. FIRE stands for Financial Independence / Retire Early, and it’s a big movement among personal finance enthusiasts right now. I have to admit that at first I didn’t think graduate school and the pursuit of FIRE were compatible, but the many interviewees I’ve had on the podcast who are pursuing a PhD and FIRE simultaneously changed my mind. In the introduction, which I’ll read to you momentarily, I introduce FIRE and the general ways people pursue it and list what I think are the four biggest levers a graduate student could pull to pursue FIRE right away.

If you are pursuing FIRE or are interested in it, I’d love to hear from you. Please join the Personal Finance for PhDs Community at PFforPhDs.community right now, today. Once you’re a member, you can do two things:

  1. Read the rest of the guide, which goes into detail about all the financial opportunities graduate students have to pursue FIRE, from increasing their incomes to building assets to mindset work.
  2. Join me and other Community members for a special live discussion and Q&A call on Wednesday, December 15, 2021 at 5:30 PM Pacific Time. We have live calls like this once per month, and this month’s is dedicated to the topic of FIRE. I really want to hear from you. I’m going to continue to expand and edit the guide based on the ideas and experiences of Community members and future podcast interviewees.

In case you’re listening to this after December 2021, no worries. You can still join the Community to read the current incarnation of the guide and chat with us about FIRE in the Forum or the next upcoming monthly call. Again, go to PFforPhDs.community to sign up!

One last note. I reference a bunch of previous podcast episodes in the introduction. All these episodes are linked in the show notes, which you can find linked from PFforPhDs.com/podcast/.
Without further ado, here’s the introduction to How to Pursue FIRE in Graduate School.

How to Pursue FIRE in Graduate School: Introduction

I was in graduate school when the current incarnation of the FIRE movement started picking up steam. At that time, the acronym FIRE (financial independence / retire early) was not yet in use, and people focused mostly on the “retire early” goal—not retiring at 55 like some Boomers had, but retiring by 30 or 40. Pete Adeney of Mr. Money Mustache was one of the leading voices, having achieved early retirement at age 30 by combining a well-paid engineering career with rigorous frugality.

At first, I found the idea of early retirement to be largely unappealing. The chief reason was that graduate school was supposed to be the foundation for a long, meaningful, fulfilling career… Why would I plan to retire early from that already? Why would any PhD (a group I was growing more interested in creating content for)? I couldn’t get behind that idea.

Thankfully, my disinterest in FIRE in my mid-20s didn’t diminish my passion for personal finance writ large, and I still invested, practiced frugality, and attempted to increase my income to the best of my ability and knowledge at that time.

My view is different now, a decade later. While I still don’t consider myself part of the FIRE movement, I do see its appeal, even for PhDs.

1) I’ve changed: I’m ten years older. I have children now. I’ve switched careers, and I’m a business owner. I earn and spend much more money than I did during graduate school. My and my husband’s parents have retired (at a traditional age). I better understand why having the financial ability to downshift, change, or stop active work before age 70 is attractive.

2) The FIRE movement has changed: There’s a greater emphasis on financial independence rather than early retirement. The featured voices are more diverse. There are numerous well-documented paths to achieve FIRE, not just the earn-a-lot/spend-very-little model from Mr. Money Mustache.

3) Most importantly, I’ve met numerous graduate students and PhDs who do identify as part of the FIRE movement. They don’t see a contradiction between pursuing a PhD-type career and financial independence simultaneously. I’ve learned from their philosophies and methods. The Personal Finance for PhDs Podcast interviews I’ve published that touch on FIRE have been with:

  • Dr. Gov Worker
  • Dr. 50 of By 50 Journey
  • Crista Wathen
  • Dr. Sharena Rice
  • Dr. Erika Moore Taylor
  • Diandra from That Science Couple
  • Joumana Altallal
  • Dr. Sean Sanders
  • Dr. Amanda
  • Alina Christenbury

In this guide, I won’t attempt to convince you to pursue FIRE—because I haven’t fully convinced myself. I will show you how you can pursue FIRE as a funded PhD student. We will explore multiple potential strategies, and I am confident that you will be able to adopt at least one of them.

How you pursue FIRE during graduate school will look different than how you pursue it when you have a post-PhD “Real Job,” but you can get started right here, right now.

What is FIRE?

FIRE stands for Financial Independence / Retire Early. FIRE is a movement within the broader personal finance community that has gained popularity in the last decade, roughly coinciding with the long bull stock market post-Great Recession.

Being financially independent (FI) means that you no longer need to work for an income to maintain your lifestyle and that you expect to maintain this status until your death. Once you cease working to generate an income, you have retired. The early part of the name refers to achieving financial independence earlier than the typical retirement age of 70-ish. Some superstars in this movement reach FI by age 30, while others set their sights on age 40 or 50.

Broadly speaking, there are three common ways to achieve FIRE, and some people use a combination:

  1. Purchase a portfolio of paper assets (e.g., stocks and bonds) from which you can draw an income
  2. Buy or build an asset or set of assets that generate income, such as a business or real estate portfolio
  3. Qualify for a pension, e.g., after 20 years of military service

I’m going to omit the option of a pension from the remainder of my discussion because 1) it’s not common for people in my audience to qualify for one, 2) within the FIRE movement it’s typically combined with another strategy as well, and 3) there are other good resources on pensions specifically.

How you determine that you have achieved FI is beyond the scope of this guide. Our focus is on the start of the journey, the pursuit of FI, and how to do it during graduate school.

However, to give you a rough idea, to know that you are FI you must have a good grasp on how much money it takes to sustain your lifestyle, i.e., how much you spend yearly. For example, FatFIRE is considered a yearly spend of $100,000 or more, while LeanFIRE is considered a yearly spend of $40,000 or less.

If you have a pension or own a business or real estate portfolio, the amount of income it generates should be more than the amount of money you spend for you to be considered FI. With respect to paper assets, a popular rule of thumb based on the Trinity Study is to have a portfolio of twenty-five times your yearly spend. For example, if you want to live on $40,000 per year indefinitely, adjusted for inflation, your portfolio should be valued at $1,000,000 or more.

How do you pursue FIRE?

How exactly you will pursue FIRE depends a great deal on your personality, career goals, and lifestyle desires.

At some point, you must create or purchase assets of the type I listed above. While you can start on that during grad school, creating or purchasing assets does not have to be the first step on your journey to FIRE, depending on the rest of your financial picture. If you are in debt, your first step may be to repay debt. If you have no savings or little savings, your first step might be to save up cash. If your income is low or unreliable, your first step might be to increase your income so that you don’t rack up any debt.

I recommend following the eight-step Financial Framework that I developed for use by graduate students and early-career PhDs. It will help you decide which financial goal is best to pursue at any given stage in your financial journey. You can find this Framework detailed in several resources inside the Personal Finance for PhDs Community, including the ebook The Wealthy PhD and the recorded workshop Optimized Financial Goal-Setting for Early-Career PhDs.

In brief, the Framework Steps are to:

  1. Save a starter emergency fund
  2. Pay off all high-priority debt
  3. Prepare for irregular expenses
  4. Invest a minimum percent of your income for retirement
  5. Pay off all medium-priority debt
  6. Save a full emergency fund
  7. Invest more for retirement and/or other goals
  8. Pay off all low-priority debt

The Framework is fully compatible with the pursuit of FIRE, though a FIRE adherent will likely move through the Framework steps faster than the average and may pursue additional financial goals such as purchasing real estate.

There are two less tangible but no less important ways that I recommend that you pursue FIRE starting in graduate school, both of which involve your own development.

1) Your career. I am confident that one of the major reasons you entered graduate school was for career development. Using your time in graduate school to set yourself up for a fulfilling and well-paying career is vital. Do not lose sight of this goal in your pursuit of FIRE. Your future, higher income is going to play a major role in how fast you will achieve FIRE. On the flip side, if a PhD no longer figures into your vision for your future, do not stay in graduate school; jump ship for a higher-paying job.

2) Your mindset and systems. To achieve FIRE, you must have a certain kind of money mindset and well-established systems and habits. You will continually develop these in your pursuit of FIRE. Even if you are unable to increase your net worth much during graduate school, pursuing your career and mindset development now is worthwhile to pay major dividends later.

What makes grad school different?

Your pursuit of FIRE during grad school is likely to look quite different from how you would pursue it if you were not in grad school or how you will pursue it post-PhD.

Generally speaking, PhD students accept a low stipend in exchange for training that—we hope—will qualify them for more lucrative jobs later on. They could be making more money right now in another job, but graduate school is a long-term career investment. Blanket personal finance advice to switch jobs or negotiate to increase your income does not apply well for graduate students (although there are many ways to increase your income, which I cover later in this guide).

In non-pandemic times, most graduate students are required to live in close proximity to the university they attend, although some may be permitted to finish their degrees remotely. For the former group, geographic arbitrage is not available. Geographic arbitrage, a common FIRE strategy, is when you choose to live in a low cost-of-living area while maintaining an income more suited for a high cost-of-living area so that you can boost your savings rate.

Finally, graduate school is a major time commitment. Few PhD students consistently cap their work weeks at 40 hours. You may have less time for outside income-increasing or asset-creating pursuits during grad school in comparison with other times of life.

My Personal Favorite Steps

In the second half of this guide, I will explore numerous possible strategies to further your FIRE journey during grad school. Some of them are what I call “big levers,” which are strategies that are virtually guaranteed to greatly increase your available cash flow and are possibly unusual choices for a graduate student. This increased cash flow can then be saved, invested, or used to repay debt. In your pursuit of FIRE during grad school, I think it will be very helpful for your psychology to pull one of these big levers if you’re able to. It will be clear to you that you are serious about your commitment to FIRE, which will help keep you on the path.

I want to give you a quick preview here as to what I believe these big levers are before we go through all the strategies in much more detail.

Big lever #1 is to choose a graduate program that provides a 12-month stipend that is well above the local living wage. If you’re a prospective graduate student, simply don’t consider any offers that fail to meet that bar, even if they are good fit for you otherwise.

Big lever #2 is to commit to applying for awards like it’s your part-time job—everything from multi-year, full-stipend fellowships to small poster competitions.

Big lever #3 is to radically reduce or eliminate your housing expense. Two potential ways you can achieve that are to house hack or serve as a resident advisor.

Big lever #4 is to start a side business with the potential, at least, to pay you a high hourly rate. You’re most likely to generate a high pay rate by employing the skills and knowledge you’ve developed during your graduate program.

If you can’t pull one of these big levers in your remaining time in graduate school, that’s fine. Put in place one of the smaller strategies from this guide, and if possible keep stacking those up throughout your time in graduate school.

Personally, even though I hadn’t committed to FIRE when I was a graduate student, I was putting a lot of effort into my personal finances. I didn’t know about these big levers or most of the other strategies I’ll discuss in the second half of the guide. I pulled just one big lever by accident, which was to attend Duke for my PhD in biomedical engineering. I wasn’t at all considering the stipend when I made that decision, but I realized later what a boon it was. My stipend was approximately 30% higher than the local living wage, which meant that with careful budgeting I could sustain a decent savings rate.

Over our seven years of PhD training, my husband and I increased our combined net worth by over $100,000. You can hear all about how we did that in Season 1 Episode 1 of the Personal Finance for PhDs Podcast. Now, seven years removed from when we defended, I can clearly see that the time value of money continues to honor those early efforts, even though we earn and save much more post-PhD. That money forms the bedrock of our current financial security.

By applying just one of the big levers or a few of the smaller strategies in this guide, I firmly believe that you also will accelerate your progress toward FIRE, even as a graduate student. Many of the people I’ve interviewed on the Personal Finance for PhDs Podcast have far exceeded my own degree of financial success using the strategies I’ll share with you next.

Conclusion

It’s Emily again! That is the end of the introduction to How to Pursue FIRE in Graduate School. If you liked what you heard and want to read about all the strategies and join the live call on Wednesday, December 15, 2021, please join the Personal Finance for PhDs Community at PFforPhDs.community. I look forward to hearing your thoughts!

Outro

Listeners, thank you for joining me for this episode!

pfforphds.com/podcast/ is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episodes’ show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast. I’d love for you to check it out and get more involved!

If you’ve been enjoying the podcast, here are 4 ways you can help it grow:

  1. Subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use.
  2. Share an episode you found particularly valuable on social media, with a email list-serv, or as a link from your website.
  3. Recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and effective budgeting. I also license pre-recorded workshops on taxes.
  4. 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 me, Emily Roberts.

Entering a PhD Program with Significant Debt and Investments

September 6, 2021 by Meryem Ok

In this episode, Emily interviews Alexandra Savinkina, who is starting a PhD program at Yale University after completing a master’s degree and working for several years. She has spent the last few years pursuing Public Service Loan Forgiveness while contributing to retirement accounts and saving and is therefore entering her PhD with significant student loan debt and significant assets. Alexandra and Emily discuss Alexandra’s financial goals during her PhD, including how much to spend on rent, financing a car vs. purchasing it with cash, whether to defer student loans or stay in an income-driven repayment plan, and how to continue to invest for retirement while in grad school.

Links Mentioned in the Episode

  • PF for PhDs S10E2: What to Do at the Start of the Academic Year to Make Next Tax Season Easier (Expert Discourse with Dr. Emily Roberts) 
  • PF for PhDs: Quarterly Estimated Tax Workshop
  • PF for PhDs S7E13: How to Handle Your Student Loans During Grad School and Following (Expert Interview with Meagan Landress) 
  • PF for PhDs S7E8: This Grad Student Travels for Free by Churning Credit Cards (Money Story with Julie Chang) 
  • PF for PhDs S4 Bonus Episode 1: Fellowship Income Is Now Eligible to Be Contributed to an IRA! (Expert Discourse with Dr. Emily Roberts) 
  • PF for PhDs S2E5: Purchasing a Home as a Graduate Student with Fellowship Income (Money Story with Jonathan Sun) 
  • PF for PhDs: Podcast Hub
  • PF for PhDs: Subscribe to Mailing List 
PhD debt and investments

Teaser

00:00 Alexandra: Yeah, I think it will definitely be a lifestyle decrease. A lot of my spending, not in the last year, has gone to things like travel. And I also think that the longer that I’ve had a salary and have, you know, my social circle has been people with salaries.

Introduction

00:20 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 10, episode five, and today my guest is Alexandra Savinkina, who is starting a PhD program at Yale University after completing a master’s degree and working for several years. Alexandra spent the last few years pursuing public service loan forgiveness while contributing to retirement accounts and saving, and is therefore entering her PhD with significant student loan debt and significant assets. We discuss Alexandra’s financial goals during her PhD, including how much is spent on rent, financing a car versus purchasing it with cash, whether to defer student loans or stay in an income-driven repayment plan, and how to continue to invest for retirement while in grad school. This episode will be instructive for anyone anticipating or in the midst of a career transition or financial crossroads.

00:34 Emily: At the start of a new academic year, I always like to bring up tax considerations, especially for new graduate students. If you haven’t yet, go back and listen to season 10 episode two of this podcast titled, “What to Do at the Start of the Academic Year to Make Next Tax Season Easier.” If you have already started or switched onto fellowship funding for your stipend or salary, please take note of the upcoming quarterly estimated tax deadline of September 15th, 2021. To determine whether you are required to pay estimated tax, fill out the estimated tax worksheet on page eight of form 1040ES. If you need any help with the worksheet, consider joining my workshop at PFforPhDs.com/QETax. The live Q&A call for this quarter is this coming Sunday, September 12th. This is the best time to join this workshop to definitively answer whether you are required to pay estimated tax and how much income tax you can expect to pay in 2021. Again, if you’d like my help with figuring this out, the best place to go is P F F O R P H D s.com/Q for quarterly, E for estimated, T A X. Without further ado, here’s my interview with Alexandra Savinkina.

Will You Please Introduce Yourself Further?

02:46 Emily: I have joining me on the podcast today, Alexandra Savinkina. Our topic today is starting a PhD at a slightly older age. So Alexandra is 30 and she’s starting her PhD this upcoming fall in epidemiology. So I’m really excited to have her on. And Alexandra, would you please introduce yourself a little bit further to the audience?

03:04 Alexandra: Sure! Hi, I’m Alexandra. As you know, I’ll be starting my PhD this fall. I’m really excited about it. I got my bachelor’s degree back in 2013 in biology, and then during that time was working in an HIV virology lab and thinking about graduate school, but knew I wanted to go into the sciences. I was pretty sure I didn’t want to do bench work forever, and so instead of making that decision right away, I did a year abroad teaching in the South Pacific. And experiences there as well as past experiences kind of brought me to public health. So I did my Masters in Public Health at Emory University, right after getting back from the south Pacific. And then I worked at the Centers for Disease Control and Prevention for three years. And at that point started thinking more seriously about a PhD, but instead pivoted a little bit, moved to Boston, and have been working in academia for the last couple of years before really making that decision to pursue that PhD program now.

Why is Now the Right Time for the PhD?

04:14 Emily: I love that you’ve been out of undergrad, out of your masters for several years now. You have a really solid start to a career, actually. So why is it that you decided that this was the right time for the PhD?

04:25 Alexandra: Yeah, so I actually did apply to PhD programs to be totally transparent. Two years ago, I got into some programs, I didn’t get into other programs. And when I was weighing my options at that point, there wasn’t really any program that was a perfect fit in terms of both something that financially I was comfortable with in terms of stipend and really excited about the program itself. At the same time, my partner matched into a medical residency program in Boston. And when I was kind of weighing my options in that way, I hadn’t been accepted to any programs on the east coast, but I realized all of the programs I was really excited about were in the Northeast. So I started looking at jobs and ended up just accidentally finding something that when I read the job description was like exactly what I wanted to do.

05:22 Alexandra: But while working in this job and being like very solidly in academia, I think I’ve been able to realize that every single piece of the job that I really like is a piece that if I want to continue that as a career, I’m going to need a higher degree for. And so I think that’s really what’s led me to be like, okay, I definitely want to do this. And the upside is that during the last two years, I’ve really been able to grow my network, grow my skillset, and I was able to get into my first choice PhD program both from two years ago and from applying this around.

05:59 Emily: Amazing! What restraint you have, I feel like, for that application cycle from two years ago to get into some places, but then just to say, no, ultimately. Like, I just feel like you feel you’re so committed to that point, right? To the idea of going to graduate school, that I really commend you for holding out for what you really wanted in and you got it and that’s amazing. Congratulations!

06:21 Alexandra: Thank you. Yeah, it was very scary. It was a scary decision to make. So on this side of it, I’m pretty happy, but when I was kind of waiting to hear back from programs this time around, I think there was kind of that anxiety hanging over me of like, what if I don’t get in anywhere? And I did get in places two years ago, so I’m glad it worked out the way it did.

Tell Us About Your Balance Sheet: Assets and Liabilities

06:43 Emily: Yeah. I really can’t imagine that anybody would be a weaker candidate having, you know, another two years of work experience. Plus, you know, I think we could hear the clarity in what you were just saying about, you know, your career plans at this point. Maybe you didn’t have that or had that to a lesser degree, you know, two years before, but that’s amazing. Again, congratulations. So let’s talk about your money. You have money, and not money, at this point in your life. Your balance sheet is a little bit more complex than maybe when you’re coming right out of undergrad. So yeah. Tell us about, just give us a quick overview of your balance sheet, your assets, your liabilities, then we’ll talk a little bit more about each of them.

07:20 Alexandra: Yeah, so right now my one big liability are my graduate school loans from my master’s program. Yeah. That’s kind of the one big thing hanging over my head. I don’t really have any other debt right now. And then on the asset side, my assets are split mostly between my retirement savings, both from the 403(b) that I have from my current position. And then I’ve maxed out my Roth IRA every year that I’ve been able to. So for the last three years. And then the other half is sort of in standard savings as well as a long-term investment account and a little bit in short-term, like swing investment, which is just kind of fun money at the moment. But I’m living in Boston right now. I’m moving to New Haven. So my one new big liability is going to be a car that I’m going to need to purchase.

08:17 Emily: Gotcha. Okay, well, let’s start on the liability side. So it makes sense to me that you have student loan debt from a master’s in public health degree. And that is that just from the graduate degree or also from undergrad?

08:32 Alexandra: I had a tiny bit of loans from undergrad, but I’ve paid all of those off. So at this point, it’s just the graduate degree.

Paying Off Student Loan Debt

08:41 Emily: So let’s take this out of the context of you’re heading into graduate school just for a second and talk about, okay. You’ve been in the workforce for several years post-master’s degree. Have you been aggressively trying to pay down that student loan debt, or are you using public service loan forgiveness? Or what has been your plan for that debt?

08:59 Alexandra: Yeah, not aggressively paying it off. The first couple of years, I wish that I’d put a little bit more thought into it. I didn’t, I think at that point, my thinking was I’ll pay it off, but without any kind of really exact plan. For the last few years, I’ve really focused that more. And I am going for public service loan forgiveness. My job at the CDC did not qualify because it was a fellowship position, but my current job does. And so I’m about two years in, and I’ve gone through the paperwork. I’ve kind of stayed vigilant with that. And so I’m really hoping, I’m almost certain that any job I’ll take post-PhD will qualify. So I’m really trying to go down that path.

09:46 Emily: Yeah. This makes sense to me with your career plans for, ideally, it sounds like staying in academia, or if not, it seems like there’ll be plenty of nonprofit type work for you after that point. Sorry, did you say you were going to stay in academia? Or planning to?

10:01 Alexandra: Great question. I think right now that’s the plan. I want to kind of use this time in PhD to see if that’s really the course I want to be on. But I do love kind of the freedom that academia offers. I need to see if I’m any good at writing grants.

10:18 Emily: Gotcha. Okay. So plan A, academia, otherwise, probably a PSLF qualifying employer. And did you say approximately what that student loan balance was?

10:29 Alexandra: No, it’s right around $80,000.

10:32 Emily: Yeah. Okay. So I did an episode a season or two ago with Meagan Landress who’s a certified student loan professional. And so she shared with us her rule of thumb that she does with her consulting, which is around one and a half times your full income. So post-PhD income, your expected income. If your student loan debt balances one and a half times or higher, then that, again, it’s a rule of thumb, not super precise, but makes you a good candidate for income-driven repayment programs with forgiveness. Even down to about one times your income would be, if you had an opportunity to use PSLF, that could also be a great option versus paying them off aggressively. And since of course, you know, your ultimate career several years away, you probably don’t have necessarily a good handle on what that salary is going to be. And certainly in the intervening time, your salary is not going to be high during the PhD. So that decision makes sense. And obviously PSLF has a really popular program with academics.

Retirement Contributions, Investing, and Savings

11:30 Emily: Okay. So we have the student loan debt balance, but instead of paying that down aggressively, you’ve instead, it sounds like, been focusing on building up the assets side of the balance sheet. So you mentioned, you know, some retirement with your employer, Roth IRA contributions, and also taxable investments and cash savings, which sounds like a great sort of mix to have at this point. Is there anything that you want to share with us about how you’ve built that up or why you focused on that in the meantime?

11:57 Alexandra: Yeah, I think honestly coming straight out of my master’s program, it wasn’t especially difficult because, while I wasn’t making like a huge salary, it was hugely more than I’ve ever made before in my entire life. And so I think I’d been so used to living really frugally that it was easy to kind of save some money. And once I started and I started learning a little bit more about investment and about the value of money, I think I just made it a priority. So one thing I do is I just automatically have money transfer from my checking account to my savings account every single time I’ve a paycheck. And then I have money transferred directly from my savings account to an investment account as well. So it’s not even something that I think about. Like, it just happens automatically. I know that it’s going to happen. It happens when I know I have money in the account, so I don’t have to worry about like overdrafting. And so I think that’s been one of the best ways for me to do it is just kind of consistency.

Financial Predictions for Graduate School

13:05 Emily: Yeah. I love that strategy, obviously, automating as much as you can with your finances. So let’s shift now to talking about graduate school again, what I guess financial predictions have you made? So we’re recording this in June, 2021. So you’re still, it sounds like probably a couple months away from moving and starting your program. Can you share with us like what your stipend is going to be, and have you put together any of those big rock expenses? Like, do you have your housing set already? You mentioned a car that you’re going to purchase. Yeah. Can you give us kind of a picture there?

13:38 Alexandra: Yeah. So my stipend is $38,000. So my housing I do have set. My rent will be $800, and I’ll be living with a couple of other PhD students. I made the decision to live with people to save a little bit of money and also on the personal end, my boyfriend’s still in Boston. So I do plan on kind of going back and forth. So it didn’t make financial sense to necessarily put more money into living by myself. And then the other big thing will be the car. I’m planning on buying a used car, but I want something that will last me a little bit of time, and I’m a little bit anxious on the car side. I haven’t really owned a car in a long time. Haven’t really had to take care of one. So I want something that’s not too old and too unreliable. So I’m looking at about 10 to $15,000 on that. And I’m still sort of going back and forth between just paying it out right from my savings or financing to just have that monthly payment, which should be affordable.

14:41 Emily: Yeah. I mean, it sounds like with the stipend as relatively high, that’s among the higher stipends that I hear right now. Which is awesome. Congratulations. And then yeah, the rent being pretty reasonable for that level of income. Yeah. It sounds like you could afford the debt payment if you wanted to. But it also sounds like you have the option of paying in cash. So yeah. What are your thoughts there? So, in general, I kind of don’t love the idea of graduate students holding debt that they don’t need to. That is to say, debt that like, they need to actually be making payments on like a car payment. But, you know, you could do it. The other thing about that car purchase is I think it’s a lot more painful to part with cash than it is to finance something. And so you might end up with a lower-priced purchase if you told yourself it has to be in cash. So I don’t know. Where do you think you’re going to come down on that?

15:35 Alexandra: I’m really torn on it. I think part of it is almost mental. I think I know that if I have a car payment I need to pay, that money will go towards that car payment. I think I’m a little bit less certain that if I don’t have that car payment, that same amount of money will go into savings. And so I think that’s the one place where, and I don’t think that’s necessarily a good financial decision. But I think mentally that’s one of the reasons why I’m considering financing. But I agree with you. I am a little bit nervous about taking on more debt. And so I’m still sort of on the fence about it. I have been slowly putting away money. So I will have the cash kind of handy outside of investments if I do choose to do it out in cash.

16:27 Emily: And if you end up financing the car, will you keep that money in cash or will you invest it?

16:33 Alexandra: That’s the other thing. I would most likely transfer that into investments. And so there is some question about kind of where that money would be making the best value.

16:42 Emily: Yeah. So it’s more about like maybe leveraging debt, not just yeah, having cash, but also paying debt at the same time.

Commercial

16:52 Emily: Emily here for a brief interlude. These action items are for you if you recently switched or will soon switch onto non-W2 fellowship income as a grad student, postdoc, or post-bacc and are not having income tax withheld from your stipend or salary. Action item number one: Fill out the estimated tax worksheet in form 1040ES. This worksheet will estimate how much income tax you will owe in 2021 and tell you whether you’re required to make manual tax payments on a quarterly basis. The next quarterly estimated tax due date is September 15th, 2021. Action item number two: Whether you are required to make estimated tax payments or pay a lump sum at tax time, open a separate named savings account for your future tax payments, calculate the fraction of each paycheck that will ultimately go toward tax, and set up an automated recurring transfer from your checking account to your tax savings account to prepare for that bill. This is what I call a system of self-withholding, and I suggest putting it in place starting with your very first fellowship paycheck so that you don’t get into a financial bind when the payment deadline arrives. If you need some help with the estimated tax worksheet, or want to ask me a question, please join my workshop, Quarterly Estimated Tax for fellowship recipients. It explains every line of the worksheet and answers common questions that PhD trainees have about estimated tax. Go to PFforPhDs.com/QETax to learn more about and join the workshop. Now, back to our interview.

Expected Expenses and Lifestyle Changes

18:31 Emily: Do you have any idea about the rest of your expenses? It sounds like maybe you’re sort of a more naturally frugal person. So have you made any predictions on that front about like, you know, general spending money or like groceries? Or I guess what I’m asking is, do you think you will be able to keep a similar lifestyle to what you’ve been living the last few years, or will you actually have to take a lifestyle decrease and be a little bit more frugal on the lower salary?

18:57 Alexandra: Yeah, I think it will definitely be a lifestyle decrease. A lot of my spending, not in the last year, has gone to things like travel. And I also think that the longer that I’ve had a salary and, you know, my social circle has been people with salaries, eating out has become more expensive, trips have become more expensive. And that’s one of the things I think I’m going to need to be more careful of because, you know, most of my social circle aren’t grad students, but I will be, which is different than the last time I was a grad student where my entire social circle also made no money. So I think it’ll definitely be a little bit of cutting back on some of, kind of more of the luxury items I’ve gotten more used to. I’ve always been pretty frugal in terms of big expenses. Things like rent, bigger kind of monthly payments. But I have kind of splurged on some things which I’ll need to be a little bit more careful on, I think.

20:03 Emily: So, when you move, you’ll have a whole new cohort of peers. So, they will be making probably exactly the same amount of money as you, right? The people in your program, or more or less. So, you’re really talking about your partner and your friends in Boston and maybe other places around the country. Is that right?

20:19 Alexandra: Yeah. Yeah.

20:20 Emily: Yeah. So I’m thinking that it may be fairly easy for you to keep those day-to-day or month-to-month expenses on the lower side, since that will be, you know, the people you’re interacting with there in New Haven. But yeah, you may have to be pretty intentional about budgeting for travel, for example, or whatever are things you might be doing with these like older friends.

20:40 Alexandra: Yeah, definitely. And I think, you know, I really don’t want to be dipping into my savings for any kind of normal life expenses. So, I think I will just need to be a little bit more strict and careful about that. I do think it’s very doable. It is a very decent stipend comparatively, so that’s really nice.

21:05 Emily: Yeah. In the grad student world, it’s a great stipend. In the working world, it’s a low salary.

21:11 Alexandra: Yeah.

Travel Hacking and Asset Building

21:12 Emily: Yeah. Well, have you gotten into travel hacking at all? Is that something you practiced earlier on?

21:18 Alexandra: I’m not sure what that is.

21:19 Emily: Oh, okay. Yeah, so travel hacking is basically just sort of structuring credit card rewards to figure out how to pay for travel, either get it for free or super inexpensively. So like, it sounds like you haven’t gotten into that game yet.

21:35 Alexandra: I actually do have one really great travel credit card, and it is the card that I use for almost all of my purchases and it does purchase a good amount of my plane tickets, which is nice. So yeah, I guess I just didn’t know there was a term for it, so a little bit. Yeah. And that helps.

21:55 Emily: Yeah. I’m thinking that, as a graduate student, it might be a way to enhance that travel aspect of your life without necessarily spending much more money. Although it is difficult to turn credit cards as a graduate student because your spending is going to be on the lower side. So like meeting signup bonuses. Anyway, if you’re interested, we’ll link in the show notes, I’ve done a couple of different interviews with people who have travel hacked as graduate students through credit card reward accumulation. So anyway, only a strategy good for someone who is really strict about their credit card usage, but very on top of things. So it sounds like you are that way anyway. Okay. So what financial goals do you think you’ll pursue during your PhD? You already stated one which is not dip into savings, so live off of the stipend on an ongoing basis. Yeah. Anything else that you think you might want to do either in terms of building assets or the step that you’ll have maybe during grad school?

22:49 Alexandra: Yeah. So in terms of assets, yeah, my biggest one is not to dip into my savings. I think beyond that, if possible, I would really like to keep funding a Roth. I don’t know if I’ll be able to, I’m not sure what the mechanism of my stipend will be yet. I know I’ll be able to find one for 2021. But if I’m able to, after that, I would like to do that.

Non-W2 Income Eligible for IRA

23:13 Emily: Actually, let me pause there for a second. So, are you referring to having W2 income versus fellowship income?

23:22 Alexandra: Yeah.

23:22 Emily: So the good news, and this may be different from the last time you were in grad school, is that fellowship income, non-W2 income, is eligible to be contributed to an IRA as of 2020. So that’s a new like law change. So we’ll link in the show notes the podcast episode where I discuss that. But yeah it changed with the SECURE Act, which was passed at the end of 2019. So, going forward, whatever type of stipend you in grad school, you would be eligible for the IRA all the way through.

23:49 Alexandra: Oh, that’s excellent. Okay. So I think that would be one of my goals. But it sort of ties to the second part of, I am trying to decide what to do with my loans a little bit. Right now, I’m in income-based repayment, and I could stay in income-based repayment and make very low payments monthly, or I could pause my payments completely during graduate school. And I haven’t made the decision of sort of what’s the right move.

Public Service Loan Forgiveness (PSLF) Eligibility

24:20 Emily: Yeah. So, I’ve looked into this before. So, I want to ask you, I thought that you had to work full-time, or let’s just say like 30 hours a week or more, to be eligible for a PSLF. Is that not the case?

24:34 Alexandra: Yeah, it is. So I would not be eligible for PSLF during that time, unfortunately. I would, I think, if I stay in income-based repayment, be eligible for like the 20-year forgiveness. So it keeps me on track for that, I guess.

24:52 Emily: But I think, what we’re talking about then is you making, however long your PhD is, five years or whatever it is, five years of payments, that you wouldn’t need to make if PSLF ends up working out. Is that right?

25:06 Alexandra: Yeah. I think the only reason I’m sort of considering it is it does make me nervous that, you know, the balance is going to go up and up and up while I’m in grad school. At the same time, you’re right. It doesn’t make a lot of sense because I’m just paying in money that I don’t need to. So most likely, my thinking was, especially now that I know I can fund a Roth IRA, would be to put my money there.

25:33 Emily: Yeah. I mean, unless your payment was zero, which, I mean, I guess that’s possible. I don’t know exactly how that would work on precisely what your stipend is, but if it was a zero payment, it’s like, oh, well, why not? You know, keep it going. But if it’s anything above zero, yeah, because, well, it’s a gamble, right? Because either PSLF is going to end up working out and you’ll make ultimately, whatever it was, eight more years of payments after your PhD, or it’s not and it would have been a good idea, I guess, to make those payments during your low-earning graduate school years. So yeah, it sounds like you would either be doubling down on PSLF being the route for you, or deciding that that’s too risky and that you want some other backup options.

26:20 Alexandra: Exactly, exactly. So that’s kind of where my thinking is, as well. That said, I think the amount of payment I would be able to make or would need to make in income-based repayment wouldn’t be that high enough to make a huge difference, I don’t think.

Keep Within the Rules of the Game

26:36 Emily: So, it sounds like you’d be sort of like purchasing an insurance policy. Like I’m going to make whatever this low payment is, which is manageable for me on my grad student stipend, as a backup plan to have five more years or whatever it is of payments if PSLF doesn’t work out. Yeah, I guess it depends on how risk-averse you are, right? And how much you believe in the program. Yeah, I haven’t heard anyone propose that strategy to me. So, you may be more risk-averse than other people I’ve spoken to about PSLF, potentially. But I encourage you to go and listen to that interview with Meagan Landress, because it may make you feel a little bit more comfortable with that ballooning payoff balance. Because the way that she talks about it, and the way that people who work in this area and are, you know, strategic about it, it’s just, it’s like playing a game.

27:31 Emily: Like you just have to keep within the rules of the game. And you know, as you said, you’ve been really on top of like getting your income, you know, your employment certified and all of that, so like, it sounds like you have the practice of like complying with PSLF already, so that probably wouldn’t end up being an issue. But yeah, it’s just about like playing the game and manipulating the numbers. And like we talked about with the debt, you know, whether to take out a car loan or whether it be cash and maybe you could invest, it’s a little bit of a leverage situation. You know, keep this student loan debt that ideally would be in part forgiven later on so that you can fund the IRA and do all these things on the asset-building side. So yeah, that episode might make you feel a little bit more comfortable with this, I’m just going to compartmentalize this debt, it is what it is, you know, that kind of approach.

28:19 Alexandra: Yeah, definitely. I do always do better when I don’t really look at it. So yeah, I think I will listen to that episode for sure. And I think even this conversation kind of makes me feel a little bit better about just letting that go for now.

Consider Projected Asset Growth

28:35 Emily: Yeah. And you know, we’re, again, I’m recording this in June, 2021. So you’ve had over a year now of having payments paused. So you’ve had over a year of credit toward your PSLF time and you haven’t been making payments, right? Yeah. So good. You’ve been building up the asset side of the balance sheet, which is exactly, you know, the intention of the program to give people some relief there. So when you volunteered for this episode, you said that you were, you know, a bit nervous about this income decrease, and then also correspondingly not being able to invest as much. So you want to keep the IRA going some level or perhaps even maxing it out if you’re able to, but have you looked at all into how much your existing assets are projected to grow over that five-year period?

29:23 Alexandra: No, I’ve not looked at the five-year. I use Wealthfront for my long-term investment, so I can see like projected growth to retirement, but I haven’t really looked into it over five years at all.

29:38 Emily: Yeah. I think that is another just element add into this, as you’re thinking about whether to invest the money you would spend on a car versus, you know, paying for it in cash versus financing, that kind of decision. And also, as you’re thinking through, you know, your ballooning student loan balance, you thought about those liabilities growing, but yeah. I encourage you to look at how much your assets are expected to grow, because yes, it is a disadvantage in some capacity to be having this, you know, salary decrease to be going to the PhD program, but you already have assets in your corner. You already have what I say is sort of a tailwind at your back in terms of your net worth growing throughout graduate school. So, the income for you is not as important because you know, of course we’re assuming that like the stock market, for example, will go up over five years. Maybe it won’t, it’s a short period of time. But you at least have that possibility of that happening, the likelihood of that happening over a five-year period. So it may make you feel a little bit better about the student loans to see how much the assets are potentially going to grow.

30:40 Alexandra: Yeah. That’s a really, really great point.

Have You Thought About Purchasing a Home?

30:42 Emily: So, I’ll just ask you one more question. Have you thought about purchasing a house, or rather to say, a home?

30:49 Alexandra: No, I am also a little bit commitment-phobic and purchasing a house sounds very frightening to me. That said, my partner just purchased a house in Boston.

31:03 Emily: So you are familiar with the process. Well then, I have one other podcast episode to recommend to you which is way back in season two, I think. So I did an interview with Jonathan Sun who was going into his second-year PhD at Yale, and he purchased a house. And so we talk about the process of doing that and some of the difficulties that he ran into with his fellowship income, which has since we’ve done a lot more work in that area. And it’s a little bit less of an issue now, but anyway, I just mentioned it because having a very decent stipend and New Haven real estate being like maybe approachable. We’ll see, I know everything’s been in a big, like run-up recently, so maybe not, but it’s the kind of market where like, sometimes it’s possible for a grad student to buy. Now that may be not be a good fit for you personally, for whatever reason, but in terms of like, you know, upleveling your finances during graduate school, purchasing a home, and then having as you already plan to, roommates in that house would be a very strong financial move, but not the right fit for everyone.

32:06 Alexandra: Yeah. I think I would be thinking about all of this a little bit differently were I not in a relationship. I think right now my plan is actually to move to New Haven for about a year. And then, the way that the PhD program works is you take courses for the first year and then you’re pretty much working on your dissertation. So I’m hoping to be able to pop back over to Boston for kind of the next few years and just commute into Yale when I need to be there. The pros of which is I probably will save on living expenses after that first year.

32:42 Emily: Yeah. That makes sense. Yeah. If it’s a one-year stint in New Haven, then absolutely. I mean, you wouldn’t even be able to like purchase because it takes months and months to set that sort of thing up. Yeah, that makes sense if you’re not actually planning on living there. Yeah, very good. Well, I’m really glad to hear this, like, long-term plan from you.

Best Financial Advice for Another Early-Career PhD

33:01 Emily: Well Alexandra, I end my interviews by asking my guests, what is your best financial advice for another early-career PhD? And it could be something that we’ve touched on in the interview or it could be something completely new.

33:12 Alexandra: Yeah. So I think one thing is that I already kind of touched on, I think it really helps me to have all of my savings and investment money automatically taken out of my account. So that it’s just something that happens that I don’t have to think about. I think another thing that has always helped me, especially when moving from one position to another or from one place to another, is I do a line budget for like a month or a couple months where I’ll write down every single thing that I buy and where that falls into my budget. And that has really, I think, helped me stay within my budget as salaries have shifted or locations have shifted. And I plan to do the same again when I start my PhD to make sure that I’m living within my means and able to make those savings payments.

34:03 Emily: Yeah. That’s an awesome, awesome tip. Well, it was a delight to have you on Alexandra. Thank you so much for sharing like your thoughts about this upcoming period. I think it’s going to be really relatable to other people who have been in the workforce for several years, and definitely other people who have had, you know, debt from previous degrees and heading back into graduate school. So thank you so much for being so open about this and best of luck to you this fall.

34:25 Alexandra: No problem. Thank you so much. This was really great and really helpful.

Outtro

34:35 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the Personal Finance for PhDs Podcast. On that page are links to all the episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and effective budgeting. I also license prerecorded workshops on 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 by Lourdes Bobbio and show notes creation by Meryem Ok.

How This Non-Budgeting PhD Accomplishes Major Financial Goals

August 30, 2021 by Meryem Ok

In this episode, Emily interviews Dr. Alana Rister, a PhD in chemistry and the founder of the Science Grad School Coach. Alana and Emily discuss two major aspects of Alana’s finances from grad school and her postdoc: student loans and a condo purchase. Alana’s main financial goal during grad school was paying down her variable interest rate private student loans, and the strategies she used will be very accessible to grad students who, like her, don’t budget. Alana and her partner took a gamble in purchasing a condo when they moved for her postdoc, and then sold it less than a year later when she left that position. Listen through to the end of the interview to learn the connection between that condo purchase and the Science Grad School Coach!

Links Mentioned in this Episode

  • PF for PhDs: Speaking
  • Emily’s E-mail for Speaking Engagements
  • PF for PhDs: Quarterly Estimated Tax for Fellowship Recipients Workshop
  • BiggerPockets (Real Estate Investing Website)
  • BiggerPockets Podcast
  • PF for PhDs, S1E1: Our $100,000+ Net Worth Increase During Graduate School
  • Science Grad School Coach (YouTube Channel)
  • Science Grad School Coach (Twitter, @scigradcoach)
  • Science Grad School Coach Resources
  • Science Grad School Coach Podcast
  • PF for PhDs: Podcast Hub
  • PF for PhDs: Subscribe to Mailing List
accomplish major financial goals

Teaser

00:00 Alana: Let’s preface this with I am not a budgeter. I’m really, it very much stresses me out because I’ve never been at a point where I’m really financially secure. So I’ve never been at a point where I’ve made a reasonable budget and there’s been a positive at the end.

Introduction

00:24 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 10, episode four, and today my guest is Dr. Alana Rister, a PhD in chemistry and the founder of the Science Grad School Coach. We discuss two major aspects of Elena’s finances from grad school and her postdoc: student loans and a condo purchase. Alana’s main financial goal during grad school was paying down her variable interest rate private student loans, and the strategies she used will be very accessible to grad students who, like her, don’t budget. Alana and her partner took a gamble in purchasing a condo when they moved for her postdoc, and then sold it less than a year later when she left that position. Listen through to the end of the interview to learn the connection between that condo purchase and the Science Grad School Coach.

01:19 Emily: I have my first two speaking engagements of the 2021-2022 academic year coming up this week. Speaking live to and with graduate students and PhDs is my absolute favorite activity within my business, even in a remote format. I’ve built out a slate of offerings this year that I’m incredibly proud of. My flagship seminar is the graduate student and postdoc’s guide to personal finance. And it’s typically what I recommend to first-time hosts, as it covers a broad array of personal finance topics, which of course I discuss through the lens of the PhD experience. I also have four deep-dive seminars on financial goals, investing, debt repayment, and cashflow. I offer these in three formats, which is new for me this year. I can deliver this material as a one-hour live lecture and Q&A, a two-hour live workshop, or a flipped classroom model in which I give access to the workshop videos and individual exercises in advance, and then hold a live call exclusively for discussion and Q&A. I’m really pleased to be able to work with grad students and PhD is to create actionable steps to improve their finances in each of these areas.

02:31 Emily: These four deep-dive seminars work very well as a series, but can also be booked individually. If any of those seminars sound interesting to you, please recommend me as a speaker to your university, graduate school, graduate student association, postdoc office, or department. It’s super easy and relatively inexpensive to arrange a remote event with me. Ask the potential host to go to PFforPhds.com/speaking, or simply email me at emily@pfforphds.com to start the process. I really, really appreciate these recommendations. They go very far to support Personal Finance for PhDs so I can continue to provide great content, like this podcast, for free. Without further ado, here’s my interview with Dr. Alana Rister.

Will You Please Introduce Yourself Further?

03:23 Emily: I am delighted to have joining me on the podcast today, Dr. Alana Rister of Science Grad School Coach. And it’s really exciting that she volunteered to be on the podcast. We are going to talk about some of her financial decisions from the past, a decision from grad school, a decision up from her postdoc, and I hope we are all going to learn a lot from her stories. So Alana, thank you so much for joining me. And will you introduce yourself a little bit further to the audience?

03:45 Alana: Yeah. So thank you so much for having me. I’m so excited to be here. As you said, I’m Dr. Alana Rister. I am the founder of the Science Grad School Coach. And I got my PhD in chemistry in 2019 from the University of Nebraska. And since then, went on to a postdoc at East Carolina University, and have since taken a few months off to you found the Science Grad School Coach. And that’s kind of where I am today.

04:16 Emily: Yeah. And, by the time this airs, you will be in a new position. Do you want to tell us more about that?

04:21 Alana: I will. So I’m actually going back to where I got my PhD from, and I’m going to be a metabolomics and proteomics research specialist. So I’m getting to go back into research. I’m basically doing a lot of working on doing metabolomics and proteomics for other professors. So I’m going to be a predominantly lab position getting to do fun research.

04:45 Emily: That sounds awesome. I always thought when I was going through my PhD process that I would love to be, I would call it a staff scientist. Is that a fair term? Yeah, I would like to be a staff scientist somewhere. Of course my career went in a different direction, but I find that kind of position to be really attractive. So congratulations!

05:02 Alana: Thank you!

Student Loan Situation at the Start of Grad School

05:03 Emily: Alright. So the first subject we’re talking about today is student loans. Everyone’s favorite. We’re actually going to focus on your private student loans, and we’ll get into why in a moment, but give us the full kind of picture of what your student loan situation was coming into grad school.

05:20 Alana: Yeah, so I actually went to a private undergraduate university. And I did that because it was actually the same for me to go there as my in-state public university, because I got a bunch of scholarships to the private and no scholarships to the public. So I went there, but I still had to rack up a lot in student loans, unfortunately. So when I entered graduate school, I have the numbers here. So I had $15,539 in subsidized loans, $35,418 in unsubsidized loans, and then a $13,000 private loan. So my freshman year was the only year I took out private loans in undergrad. And that was that $13,000 private loan. So altogether, if I did my math right, it comes out to $63,957 that I had in student loans going into graduate school.

06:22 Emily: Yeah. And how did you feel about that at the time?

06:27 Alana: So I was not great. I was really worried because I knew that I had all this kind of loan built up. And when you get to graduate school, you might not be thinking about your loans because they’re generally deferred. And so it’s something, oh, I don’t need to make this payment. I don’t need to worry about it, but I knew that that bill was going to come due and I knew when it was going to come due, I wasn’t going to really have the financial security to pay it off. So I was constantly looking for ways to figure out, you know, how can I pay these things off quicker? One, just because of trying to not pay as much interest, but then two, so that when I did get out of graduate school, I didn’t have, because I think if I would’ve left graduate school with all of that money, it would have been almost $800 a month that I would have had to pay back using like the government’s extended repayment. It would have been over a thousand if I like tried to pay it all back in 10 years. And I was like, looking at what postdocs got paid and what other things got paid. I was like, there’s no way I’m going to be able to afford this. So I was really worried in graduate school about how I was going to navigate after graduate school, even though it wasn’t a payment I needed to make at that time.

Which Loan Did You Target First?

07:48 Emily: That is so interesting that you were more concerned about your future self when the deferment was over, than you were about maybe how were you going to do it in the meantime, right? I mean, I think it’s really forward thinking, but I think it’s unusual, right? Because many of us, I think within our finances have a very like optimistic view. Like, my income is going to be so much higher later, and that we hope of course that’s true. But also don’t necessarily, when we’re younger, think about, well, yeah, my income might be higher, but also I might have some expenses that are higher when I’m older also. So, so interesting, but you, you noted, there were three different buckets of student loans for you, federal subsidized, federal unsubsidized, and private. And so was there like one of those that you were going to target first or that bothered you the most?

08:39 Alana: Yes. So my private loan definitely bothered me the most. And that is because it had the highest interest rate, is the first reason it bothered me. The second reason is, so COVID-19 has apparently happened. And through that time we’ve had a forbearance on student loans. That doesn’t apply to private student loans. And so I knew that private student loans generally aren’t as nice as well when it comes to, you know, forbearances or deferments for your situation. And so when I got my student loan, my interest rate was at 7%. And by the time I paid off that student loan, because I had a variable interest rate, because someone told me that was smart to do back then. It was at 11% interest rate. Yeah. It was literally going up every month in the interest that I was paying.

09:35 Emily: Wow. What a great note of warning for the listener regarding variable student loans. First of all, to have it at 7%, 7%, it’s like, okay. Yeah, it’s kind of a going rate, like, but to get up to 11? Wow. In an overall low interest rate environment. I actually also had a variable interest rate student loan, a federal one, actually. It might’ve even, yeah, it was subsidized, and then became this variable rate student loan once I came out of deferment. But because of the time period, and I think because it was federal and not private like yours, the interest rate, I think it was like at two-something percent, three-something percent. When it got up to four, I was like, you got to go, and we just paid it off. So I’m just like really balking at 11. So it was really, really good foresight again for you to say, to target that as like, oh, wow, this is variable. I don’t know which direction this is going. Like let’s work on this first. So was that like your main financial goal during graduate school is working on paying down that private student loan?

10:35 Alana: Yeah, so that was definitely the main thing I wanted to do was pay that off and then have that off my chest. Because I mean, I still had, you know, several tens of thousands more student loans that I needed to work on. So that became kind of my main goal and what I was putting money towards. I still did like other things as well. I planned for trips and stuff like that that I could go do. But that was definitely, my goal was I wanted to pay off all $13,000 by the end of my PhD. I didn’t get to that. I did $10,000, mainly because I graduated a year and a half early in my PhD, so I graduated in three and a half years. So I ended up paying it off by what would have been the end of my fourth year.

Strategies to Pay Off the Private Loan

11:23 Emily: Oh, wow. Well, that’s a great financial decision all on its own. Just get out of grad school faster. That’s awesome. I love that you identified paying off the loan in its entirety as like an ambitious goal. It’s the kind of thing that like, you know that phrase like, shoot for the moon, and even if you miss you’ll end up among the stars? Like paying off $10K, like you’re among the stars, like that’s amazing in three and a half years. That’s amazing. So let’s hear more about how you mechanically did that. Like what strategies were you using?

11:50 Alana: So I think there were probably like three, okay, let’s preface this with I am not a budgeter. I’m really, it very much stresses me out because I’ve never been at a point where I’m really financially secure. So I’ve never been at a point where I’ve made a reasonable budget and there’s been a positive at the end. So it like always stresses me out to just make a budget. So I’m just like in general, very conscious of spending money, and every time I’m spending money, I’m kind of like, is this really worth spending or not? So that’s kind of, I don’t know if that’s really a strategy, but that’s just kind of how I am.

12:27 Emily: Yeah. It’s like a predisposition, kind of.

12:30 Alana: Yeah. So probably the biggest thing that helped me to be able to do it was that I went to a graduate program in Lincoln, Nebraska. So location is a big thing when you’re choosing a graduate school, and I really wanted to go to a big city. Fortunately, I think, I didn’t get into programs in big cities. And so I came here and you can get, so my first apartment, I shared it with two other people. It was, you know, fairly new apartments, very modern. It was a $400 rent. So it’s just so much cheaper to live in a place like Lincoln. So I think my monthly stipend was $1,700 after taxes. And so that goes a lot further when your rent is only $400 of that 1700. So I think that’s a major factor is the fact that I was living in a much lower cost-of-living area.

13:29 Alana: And then what I would do is, so whenever my like bank account gets below $1,500, I like start freaking out. So I plan to every month to try and put $500 towards my student loan. So we get paid once a month at the end of the month. So right before my paycheck would hit, I would look at my bank account and I would say, okay, there’s this much. And if, you know, I had $2,000 left, I would pay $500 if I had below that I would pay until I hit that $1,500 mark. And so that was kind of my strategy in paying that loan off.

14:09 Emily: Yeah. I really like the way you articulated that and think it is probably really relatable for people who, as you said, are not budgeters or are not into that, but like you are kind of have a predisposition of, okay, I’m really going to kind of carefully weigh my spending and you have this target of $500 per month in mind. Yeah. Maybe you don’t hit that every month, but you’re going to be, when you’re drawing close to that and you’re starting to eat into that balance, you’re aware of it. So yeah, I think that strategy can be really relatable.

Take Advantage of Research Award Opportunities

14:36 Alana: The third one I did is I actually worked on getting a bunch of research awards. So I got a research fellowship that I think was right around $3,000 that was paid out over two years. And I put all of that money towards that private loan. I got multiple research poster awards. There was actually one poster session that was done every year that I literally just went to it to try and get the award so that I could put it towards my student loans. And I think I won like first or second place every year, which was like a 200 to 250 or $300 award. So it’s a nice, you know, amount of cash coming in. So I would do things like that, looking for fellowships, research awards, poster sessions, talk sessions and trying to do things like that, to be able to get some extra income and probably about $3,000 to $5,000 of what I paid towards my student loans probably came from the research awards and fellowships that I got.

15:42 Emily: That’s incredible. And what a boost for your CV, too, like so nice to have that double benefit if, you know, whatever your motivation is for going, you know, going after these things, going after awards, the outcome is great if you actually get it. And even if you don’t, it’s still worthwhile. So yeah, that’s great to hear. And so those awards, when you mentioned your stipend earlier, that’s all on top of that stipend. So you just kind of had a plan of like any windfall money, like that would go straight towards the student loans.

16:09 Alana: Yep.

16:10 Emily: Alright. Yeah. Anything else you want to share with us about how you made that work?

16:15 Alana: I don’t think so. I mean, those were kind of my biggest things. It wasn’t a very planned thing, but it was a thing that was like always on the front of my mind. Anytime I would look at my finances, I kept thinking, is there a way I can put more money to get this, you know, student loan paid down?

Current Status of Loans

16:31 Emily: Yeah. Well, let’s hear current updates. So you said you finished in 2019, we’re now in 2021. We’re recording this in April, 2021. So yeah. Where are your private student loans now? Where do they stand?

16:45 Alana: Yeah, so I paid off, so it was just one private student loan. I paid off all $13,000 March of last year. So three months after I graduated, I had the last $3,000 paid off on that one.

17:01 Emily: Incredible, congratulations!

17:04 Alana: Thank you!

17:05 Emily: Then, regarding the federal loans, we know what happened, just starting in March, 2020, administrative forbearance. What are your kind of plans around your payoff for that? Like, are you going to stick with an income-driven payment plan? Are you going to do it more aggressively?

17:19 Alana: So right now I’m on the standard, but the extended standard. So, because I had, I think it’s $25,000. Because I had over the 25,000, there’s an extended where they give you 25 years to pay it off instead of 10 years. So I’m on that right now. And my plan is that, once I start my new job and I have, you know, a little bit more money coming in, I paid some off as I’ve had, you know, extra cash in, but as I start this one, I’m going to start more heavily putting it on to those student loans. So I’m not going to change the actual plan I’m on because there’s no penalty for paying things off early. I’m just going to, you know, put extra income that I get towards my student loans to be able to pay those off more quickly, if that makes sense.

18:11 Emily: Yeah, it totally does. So you’re keeping that minimum payment low just for flexibility, but you still have that as kind of a primary goal. And you’ll still be doing aggressively and just because we are in April, 2021, what do you think about the possibility of student loan cancellation to any degree? Are you factoring that into your plan?

18:32 Alana: So I am not, I am a plan for the worst, hope for the best kind of person. So I’m not, I would be very thankful and appreciative if there was any form of cancellation because, you know, I have a partner who also comes with their student loans, but I’m not banking on it. I think that’s been in talks for a very long time with not really much coming of it. So the forbearance that happened in 2020 was actually a huge benefit to me and has allowed me to make a lot of decisions that I wouldn’t have been able to make had I not had the COVID forbearance. So I’m thankful for that, but I’m not going to, you know, make a plan that, you know, student loans will get canceled or partially forgiven.

19:23 Emily: Yeah. Well, this is a really exciting time. I’m so glad that we caught you right here at the cusp of your new job in that new phase. But again, congratulations on killing the private student loans, having them be completely gone.

19:34 Alana: Thank you.

Commercial

19:36 Emily: Emily here for a brief interlude. These action items are for you if you recently switched or will soon switch on to non-W2 fellowship income as a grad student, postdoc, or postbac and are not having income tax withheld from your stipend or salary. Action item number one: fill out the estimated tax worksheet in form 1040ES. This worksheet will estimate how much income tax you will owe in 2021 and tell you whether you’re required to make manual tax payments on a quarterly basis. The next quarterly estimated tax due date is September 15th, 2021. Action item number two: whether you are required to make estimated tax payments or pay a lump sum at tax time, open a separate named savings count for your future tax payments, calculate the fraction of each paycheck that will ultimately go toward tax, and set up an automated recurring transfer from your checking account into your tax savings account to prepare for that bill. This is what I call a system of self-withholding, and I suggest putting it in place starting with your very first fellowship paycheck so that you don’t get into a financial bind when the payment deadline arrives. If you need some help with the estimated tax worksheet, or want to ask me a question, please join my workshop, Quarterly Estimated Tax for Fellowship Recipients. It explains every line of the worksheet and answers common questions that PhD trainees have about estimated tax. Go to PFforPhds.com/QETax to learn more about and join the workshop. Now, back to our interview.

Real Estate Purchase During Postdoc

21:15 Emily: Okay, let’s talk about the next topic you wanted to bring up, which is about your real estate purchase during your postdoc. So let’s hear the whole story around that.

21:23 Alana: So I met my partner in graduate school, actually, the day before I started graduate school, I met my partner. And so he had a house. He had bought a house years before we met, and when we moved, he sold the house. So we had some money come in from that. And when I took a postdoc, I took a postdoc in Greenville, North Carolina. And it is kind of interesting because when I was looking for housing options, I had the option of paying around a thousand dollars a month for a one-bedroom, one-bath apartment, or I could buy a condo that I could pay $650 a month for a two-bed, two-bath condo.

22:12 Emily: Those numbers are very surprising.

22:14 Alana: Yeah. So real estate was really, really cheap there. And to get into a decent apartment that, you know, wasn’t bug-infested and had other problems, it was very expensive to do there. So we decided to invest and we bought a $85,000 condo, two-bed, two-bath condo. And you know, my partner comes from a family that has constantly flipped homes. So this condo looked very bad. It kind of looked like it had been run down from the seventies, but was built in the nineties. So it was kind of interesting, it had been a rental for years and we kind of transformed it. I think one of my friends said it looked like a modern New York City apartment by the time we were done with it. So it was kind of interesting because we worked a lot on the condo and made it look a lot nicer, but our main driving factor for buying it was primarily because it was so much cheaper. And it was going save us so much money in the long-run. Both because we were investing in something, and then also just because the monthly payment was so much lower when we bought something versus renting a place.

23:36 Emily: How did you fit such major renovation projects around your research schedule?

Renovations and Research

23:44 Alana: I think there’s like a couple things. So one, I didn’t do most of the work. I’m going to be honest. So my partner, Greenville’s a really small town, so my partner actually had difficulty finding jobs there. So he was unemployed for about half the time we were in Greenville, and he spent a lot of his time working on it. I was more the design person. So I was like, this is what we’re going to do. And then I did some of the renovations and it kind of became like our hobby. So I took a week off at the end of my PhD, went down to Greenville, and we did the initial renovation. So we redid the floors, painted the walls, made it at least livable. And that was kind of the bulk. And then we did one more bulk right before we sold the place.

24:30 Alana: That kind of put us over the edge on getting a higher price back. But I think kind of knowing what you’re doing helped because like some things we really didn’t know what we were doing and Googling a lot of things. But I think having someone that, you know, my partner knew a lot more what they were doing when coming to a construction project and then, you know, it kind of ends up being fun after a while. And so that kind of became where we put our free time when we worked on it together around my research schedule.

25:05 Emily: Yeah. That’s really good to hear. I always kind of wonder about how like sort of logistically that works. Anyway, so my husband and I just closed on our first house. It’s very turnkey, but there are like a few things we wanted to change. So we’re kind of in the midst of like this, how much do we outsource? How much do we DIY? What kind of capacity do we have to actually work on this house? Or, you know, those kinds of questions are kind of circling in my mind right now. So I’m just really glad to hear how you did it. So I have been consuming more real estate investing content recently, a little bit from BiggerPockets, and I know Mindy Jensen, who’s the co-host of the BiggerPockets money podcast calls, what you described, a live-in flip. So that’s what she does, like serially, she does live-in flips, one after the other. But that’s great. So you had that initial experience. Now, I think you said that your postdoc was pretty short term, is that right?

25:58 Alana: Yeah, so it wasn’t supposed to be. So I started January 3rd, I think 2020, and I ended it October 31st, 2020. So it was about a 10-month long postdoc. The initial contract was until March of 2021, and then I was supposed to extend it for like another year, but I ended up kind of cutting it short and actually moving back to Lincoln, Nebraska.

Is a Real Estate Purchase Worthwhile?

26:28 Emily: Yeah. And so I think this is something that’s really on the minds of people when they move for grad school, move for a postdoc, move for a first job is, how long am I actually going to be here, and is a real estate purchase worthwhile? So can you tell us your thoughts on that? Like, did you have that thought you first moved there? I mean, obviously the numbers made a lot of sense, but over what time period did the numbers make sense?

26:49 Alana: Yeah, so I definitely had that thought, especially because when you’re looking at buying or selling, there are a couple of things you have to, so I said, you know, it was $650 per month, you know, versus a thousand. So that’s like what, a $350 difference that I probably would have been paying. But then you look at your down payment. So my down payment on the condo was just under $5,000, which was a lot cheaper than a lot of real estate down payments. But if you spread that out through time, you would realize that that’s a lot more than the thousand dollars a month. And so there were a lot of questions that we had on whether this was going to be a smart purchase or not. We were expecting me to stay for about two years. And generally you want, you know, for, I think the advice usually given is five years to make a real estate purchase. You want to be there for about five years. But I think the biggest thing was just our comfort level. And especially with the lack of really good landlords in Greenville, we felt like we were more suited, we knew the real estate market. We knew how to sell houses. We knew how to do that stuff. So we kind of took a gamble. And we went that direction instead. And we were like, we might come out at a loss in the end, but we think our experience there is going be a lot better. And so it might be worth that loss in the end.

28:21 Emily: Yeah. I was going to ask how did it end up turning out?

28:25 Alana: Yes. So actually it was really good. One, we did flip it, so we bought it for $85,000. We sold it for $99,500. So a pretty nice, we actually got an offer for like $104K, but it didn’t appraise for that. So it was a pretty big, you know, good chunk of change, I think after all the sales commissions and everything, we came out, because we also sold all the furniture with the house. So we came out with about $15,000 in the end. But the biggest thing was, that we didn’t think about, is because we had bought real estate, we weren’t hooked into a lease. So we sold our place, we went under contract in September, which means we could leave, where if we had started a lease in January, by the time, you know, October came around, which is when we left, we left October 1st. So by the time that came around, we would have had three months left on our lease. So we have had to end up paying a lot more to get nothing just to break our lease. So ultimately it was kind of a good decision in that we were able to, you know, leave without having to worry about paying, you know, penalty fees.

29:36 Emily: Yeah. I’m really glad that, you know, you’re here to tell this story because I think, for me anyway, my mind more naturally goes to like the downsides of taking, you know, risky decisions. And I think everyone should of course be aware of the potential downsides, but just know that there are upsides also that you might experience that are just as, or maybe even more likely, than the downside. So like, yeah, clearly it was a risk, it was a risk at two years, it was more of a risk at 10 months or nine months or whatever. But it did work out, and the thing is, you didn’t have to sell. If that was not going to work out financially for you, you were not required to sell, you could have moved and rented it out. You had other options. Right. It’s just that, oh, selling did make sense. And so you went through with it.

30:21 Alana: Yeah. So we actually considered that. We were looking at actually either doing Airbnbs for it or doing a long-term rental. And we actually looked into it, and like right as that was happening, there was kind of a real estate bubble. Because of COVID, nobody was selling real estate. So there was a scarcity on the market, and suddenly condos that were usually priced at the 60 to 80,000 range were starting to go near a hundred thousand. And like, so we were like, okay, this seems like it’s a good decision. And we could have always denied a contract if we were like, okay, we’re not going to get enough out of it. And we kind of just wanted the peace of mind. We didn’t really ever want to go back to Greenville. So we didn’t want to have a place that we knew we would have to take care of, but it was definitely something we looked into. And if we stayed closer to the area, we probably would have done it for short-term rental or something.

Real Estate Flip Funded Science Grad School Coach 

31:16 Emily: Yeah. Well this is so interesting. I’m really glad to like kind of learn that it did work out positively in your case. And so when you volunteered for this, you said you wanted to tell how that real estate flip funded your Science Grad School Coach endeavor. So tell us about that.

31:34 Alana: So that $15,000 that we got from the sale of the condo, which knowing for like me and my partner, if it hadn’t been in the condo, because we, you know, put $5,000 down, it probably wouldn’t have been around by the time we got, because again, we’re not budgeters. So the fact that it was there and we had that money, it allowed me to kind of make the decision. My partner finally got like his dream job back in Lincoln. So we made the decision for me to go unemployed and work on building this business and for him to come here, and his job was not fully going to support us here. So the money that we got from the sale of our house actually made up for at least a year. We would have been fine for at least a year between the savings and then also, you know, his income.

32:30 Alana: And so that kind of started me having the freedom to really pursue starting the Science Grad School Coach and work on it. And then on the side, I kind of looked at applying to jobs and things like that. Because I was kind of sad to leave research. I still wasn’t exactly sure what I wanted to do. And now kind of right as things are starting to come into play with the Science Grad School Coach, I’m also starting a new job. So like in the end, it was a risky decision. And the only reason we could have taken that decision was because we bought a house and sold it and had that extra money leftover to then come here and have that time. And now I am employed, starting Monday, I will be employed. And so that’s going to give me the opportunity to kind of do both. Both the Science Grad School Coach, and then also go back into research.

33:24 Emily: Yeah, this just, you know, is another example of what I like to say is money gives you options, right? The option to pursue fun employment. The option to wait for a great job opportunity to come and not try to force yourself into one that’s not a great fit, et cetera, et cetera, et cetera. And I also had, I guess, somewhat of a similar story when I started Personal Finance for PhDs, which just in the sense that my husband and I focused a lot of our energy and our finances on retirement investing when we were in graduate school. And so by the time we finished, and I talk about this in season one episode one, by the time we finished, we had quite a good nest egg, and that made us feel comfortable to take risks with our careers. So he took a job at a startup, which we were very concerned about.

Where to Learn More About Science Grad School Coach

34:09 Emily: It happens to be that he’s still at that same position six years later, but we did not know at the time that it would be around for six years. So he took a job at a startup and I started my business, which, you know, low revenue, you know, initially. So yeah, it was risky, but we felt confident, not because we had a bolus of cash savings as you did, but just because generally we were doing pretty well on the retirement front and we, you know, felt like it was okay to take a risk. So just so interesting, like I’d just love to hear another example of how your finances, like, we all know that our careers can affect our finances, right? By what job we choose and so forth, but how your finances affect your career as well. And for you, your ability to start your side business. So yeah, I’m just, I’m really glad to hear that. If people are intrigued by Science Grad School Coach, where can they find you and you know, what are you doing there?

34:59 Alana: Yeah. So the Science Grad School Coach is kind of the business I developed to help people with pursuing research. So like I said, one of the ways I was able to pay off, you know, a lot of my student loans was because of getting research awards and research posters. And something I realized is I’m actually good at doing research. But I didn’t start out that way. When I started in graduate school, I was really frustrated because I felt like everyone expected me to know things, but nobody ever taught me those things. So I had to kind of, over time figure all these different things out from how do I create a research idea, to how do I write a paper, to how do I put a poster together? And so what I’ve done is basically I want to share that knowledge with other people.

35:50 Alana: And that’s what the Science Grad School Coach is. So if you’re interested, I do have a YouTube channel which is the Science Grad School Coach. And there’s where I share a lot of, kind of shorter videos on different topics around research and how to get better at research and do things like that. You can also find me on Twitter at @scigradcoach. And then I also have a full resource pages if you’re interested that I have several different resources on there from how to create ideas, how to write a paper, how to do your dissertation. And you can find that at sciencegradschoolcoach.com/resources. And so those are kind of three different places where you can connect with me and hopefully get to learn some of the things that I’m trying to share. And hopefully it’s helpful.

36:43 Emily: Yeah. I love that impulse and I wish that I had run across a few of those resources back when I was in graduate school. Maybe the information was there. I don’t know. I didn’t, I was not plugged into it if it was.

36:54 Alana: Yeah, I definitely wasn’t either. And I think people don’t realize that research can be easy, and then it’s just because we’re not taught how to do it and we’re just expected to, and then we have to deal with the frustration of being like, I don’t know what I’m doing, but I feel like I’m supposed to know. So I did something wrong. And it’s not that you ever did anything wrong. It’s just how the system is set up is not set up for researchers to do well, I guess. It’s set up to make you struggle when you don’t need to. Because like I ended up writing or publishing seven papers in my three years as a graduate student, but it didn’t start out that way, right? Because I like really struggled. And then I started learning where I can write a research paper. Once I have the data, I can write it, you know, in a day or two. And that’s just because now I know how to do it. And so that’s what I’m trying to share with other people.

Best Financial Advice for Another Early-Career PhD

37:47 Emily: Yeah. Excellent. Very worthwhile endeavor. Love it. Okay. I’ll ask you the question that I end all my interviews with, which is what is your best financial advice for another early-career PhD?

37:59 Alana: So this is probably not the best advice, but I think my best advice is to think a lot about the location you’re going to. That’s one of the reasons why I came to the university I came to was because I started looking up rent prices and saw how cheap it was. But something that you may not know is before, so I came back to Lincoln after my postdoc. But I actually got two different job offers before I came back to Lincoln. I got an industry job that was going to pay me $85,000 that was in a middle, kind of a higher than Lincoln, cost-of-living, but it was just not the right job for me. But then I got my dream job, which was a postdoc. It was doing the dream research I wanted to do in Seattle. And I looked at the living cost, and I said, I’m going to have to take on debt to go work a job.

38:56 Alana: And I refuse to do that. And so I actually went for unemployment because it was cheaper for me to come to Lincoln and be unemployed than it was for me to go to Seattle and work a job. And so that was a really hard decision for me to make, because I really wanted to do that research. But I think it’s important to think about the fact that even as an early PhD, like you are worth something, and if you’re not going to be netting positive while working a job, you really may want to reconsider taking those jobs because that really shouldn’t be a thing, especially after you have a PhD.

39:40 Emily: What an indictment, you know, of the salaries that we pay, both graduate students and postdocs. Absolutely. And it’s so unfortunate. I mean, it’s the academic loss, the research engine’s loss that you did that calculus and came on the side of, I can’t take this job because you simply don’t pay me enough. You made a rational decision in the face of that, you know, situation, but it’s just so unfortunate that things are set up that way. In any case, you have another wonderful job coming up now in Lincoln. And yeah, I totally agree with you. You have to be very careful about examining the cost-of-living versus salaries. You know, the salary numbers, if you’re coming from a lower or a middle, you know, cost-of-living city, moving to a high-cost living city, like maybe that initial postdoc salary looked to you like, Hmm, not bad, but then you had to actually look into it and say, oh no, Seattle, quite expensive. It’s not going to work. So I totally agree with you do that at every single, you know, any job you’re trying to take going forward. Is there anything else you wanted to add on that?

40:40 Alana: I think that’s the main thing. Yeah, and like Seattle, like that was my dream city too. Like that is where like I want to go retire. So it was like so tempting to take it. And then just to realize that you’re literally not paying me enough to even afford rent, really. And so this new job I’m taking is just slightly over that same salary, but it’s so much more livable because Lincoln is literally less than half the cost-of-living of Seattle. So making that kind of decision, I think it’s so tempting to think that if I take this dream job, it’s going to propel me to the next dream thing. And kind of after different situations in my life, I realized that that’s not always true, and it’s not worth either going through a toxic situation or a situation where you’re not making enough money to live for a hope of the next thing, because if you don’t get that next thing, you’ve screwed yourself.

41:41 Emily: Yes. Such an important message. I mean, we all know the abysmal hiring rates for of course faculty positions, but even as I said earlier, like we tend to be really optimistic about the whole salary situation in research. And Hey, we all hope it comes about, but you’ve got to look at the downsides, too. So it’s interesting that you’ve sort of illustrated in your story, a couple different gambles that we’ve been talking about and how you’ve made different decisions, you know, in the face of these. So yeah, I love that, you know, you illustrated those points. Thank you so much for joining me today. It was a pleasure to have you and to get to know you.

42:14 Alana: Yeah. Thank you so much for having me. And I hope that my story can be helpful to other people especially about, you know, thinking about student loans while you’re in grad school. Because the other thing is, unless you have subsidized loans, your interest is still building while you’re doing that. So just, you know, thinking about that and then kind of making smart decisions when it comes to, you know, gambles. So I’m actually, I’m not a risk taker. I realize that this sounds like I’m a risk taker. I’m really not. Like I weigh through the pros and cons of everything I do. And you know, there are some risks you have to take in life, but I try to limit those to those that are just absolutely necessary. So I hope that this can help people that sometimes it works well. And sometimes not taking an opportunity also works well in the end.

43:07 Emily: Yeah. Thank you so much for sharing these stories and for joining me.

43:09 Alana: Yeah. Thank you!

Outtro

43:11 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/Podcast is the hub for the Personal Finance for PhDs Podcast. On that page are links to all the episode show notes, which includes full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and effective budgeting. I also license prerecorded workshops on 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 by Lourdes Bobbio, and show notes creation by Meryem Ok.

How This Grad Student Plans to Contribute to His Roth IRA Using 529 Money

August 9, 2021 by Meryem Ok

In this episode, Emily interviews Ben Wills, who is starting a master’s of science at Georgia Tech at age 29. They discuss the interesting jobs and experiences that Ben had in his 20s and why he is now pursuing a graduate degree. Ben’s main financial goals for graduate school are to not accumulate any debt and to max out his Roth IRA each year, and he shares how those goals align with his values. Ben and Emily discuss how to remove money from Ben’s 529 account without penalty to supplement his stipend and keep him on track to reach his financial goals while living in Atlanta.

Links Mentioned In This Episode

  • PF for PhDs: Podcast Guest Submission 
  • Maguire Fellowship at Vassar
  • Delusions of Gender (Book by Cordelia Fine) 
  • The Hastings Center
  • 529 Plan
  • PF for PhDs: Quarterly Estimated Tax
  • PF for PhDs: How to Make Money without Working: Credit Card Rewards and 529s (Interview with Seonwoo Lee) 
  • PF for PhDs: Podcast Hub
  • PF for PhDs: Subscribe to Mailing List
529 Roth IRA grad school

Teaser

00:00 Ben: Have a little kind of metacognitive experience and, you know, watch your feelings, watch the stories that are in your head and just have, you know, a sense of curiosity like, oh, where did this come from? And how is this helping?

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 10, Episode 1, and today my guest is Ben Wills, who is starting a master’s of science at Georgia Tech at age 29. Ben relays the interesting jobs and experiences that he had in his 20s and why he is now pursuing a graduate degree. Ben’s main financial goals for graduate school are to not accumulate any debt and to max out his Roth IRA each year, and he shares how those goals align with his values. We discuss how to remove money from his 529 account without penalty to supplement his stipend and keep him on track to reach his financial goals while living in Atlanta.

01:05 Emily: I’m excited to announce that with Season 10, we’re resuming a once-per-week publication schedule! Lots of great interviews are coming your way… which means I have to record lots of great interviews. If you are interested in being a guest on this podcast, you can do exactly what Ben did, which is to go to PFforPhDs.com/podcastvolunteer/ and submit your info there. I highly encourage you to volunteer now as I will batch record interviews over the next few months that will be published through April 2022.

01:37 Emily: If you’ve listened to at least a couple of interviews you know that they are pretty low-key and casual. Many of my guests have told me that this was their first podcast interview ever and that the had a great time! Don’t worry if you’re not super sure of the topic of your interview. A lot of volunteers type a few ideas into the form and then we settle on one over email. Again, now is the time to volunteer! Go to PFforPhDs.com/podcastvolunteer/. I can’t wait to speak with you! Without further ado, here’s my interview with Ben Wills.

Will You Please Introduce Yourself Further?

02:13 Emily: I am delighted to have joining me on the podcast today Ben Wills. He is entering graduate school in fall 2021. He’s going to be a master student, and is not quite a traditional student. He’s actually 29. And so we are going to be talking about his career-to-date, why he’s pursuing graduate school, and what his financial goals are going to be as a person with a little bit more financial experience than someone coming into graduate school right out of college. So, Ben, thank you so much for volunteering to be on the podcast. And will you please introduce yourself a little bit further?

02:42 Ben: Sure thing, thanks for having me. Ben Wills, again, I use he/him pronouns as you got right. I am 29. I studied cognitive science as an undergrad way back when, at this point, and basically since undergrad, I’ve done kind of a potpourri of fun, like life-building, resume-building sorts of experiences as I’ve kind of approached it. So I spent an AmeriCorps year in Juneau, Alaska working with men who committed domestic violence and betters intervention programs. Then I worked at a law firm doing disability law for a couple of years, and I got funding from my Alma mater to do some research in Australia with a research mentor. And then I got my current job, which is, I’m a project manager and research assistant at a bioethics think tank in New York. And I’ve been here for almost three years and coming to the end of my tenure.

03:34 Emily: Wow. Let’s discuss that further in a minute. That was exciting. What is the program that you’re going into and where will you be?

03:40 Ben: Yeah, I am going to be starting a master’s in science in the history and sociology of technology and science at Georgia tech.

Work Experiences Prior to Master’s

03:49 Emily: All right. Congrats. And that is a mouthful. My graduate degree has many syllables as well and many words that sort of trip people up who aren’t in the field. So that’s fun. Well, yeah. Tell us more about these work experiences and like maybe was there a direction you were going in or you were just kind of looking for that like interesting, fun, next thing? Like how did that go?

04:09 Ben: Yeah, I basically knew that I will probably end up in a career where it’s kind of my career. You know, right now I’m looking at kind of going into a law or public policy sort of space after this degree. And if I get really sucked into, maybe academia. I kind of saw opportunities and did what felt right at the time. So for the AmeriCorps program, I was in college, I was working on a senior thesis, and I was just so focused on me and my work that I really felt like I needed to kind of turn my attention outwards. And so doing a year where it’s called a service year and the particular program I was in we were living in an intentional community, all like working in social service organizations, and we had a very kind of structured experience. And it was really perfect for me.

05:00 Ben: After focusing on magnetic resonance imaging of people and researching what the self is with a neuro imaging scanner, such a thing can be done, to focusing on, you know, humans and what people’s needs are and kind of like social context. So that was really important and generative for me. And then after that, I moved back home to my folks and I’ve been interested in law for a while, and I was fortunate enough to be connected to someone who was looking for a legal assistant. And so I started working at a law firm downtown. And then yeah, my Alma mater has this kind of pocket of money that you can apply to called the Maguire Fellowship. And you can basically use it to, it’s a competitive fellowship, but you can use it to fund study or independent research abroad.

05:51 Ben: And I had read a book called Delusions of Gender by Cordelia Fine in college that was really cool to me because she was one of the first people that I had read who within science talked about, kind of like, the social construct of science. And, you know, if you have scientists with, you know, gendered expectations of what, you know, men and women and other people’s kind of reality is, then those expectations will be born out in their research methods and their results. And that kind of blew my mind and I wanted to work with her. And so, you know, I just emailed her and said, Hey, if I get some money, can I come work with you? And she said, sure. So I applied for it and got it. So I was in Melbourne, Australia for a year.

06:29 Ben: Then, yeah, I was kind of testing what does law look like? What does academia look like? What is the intersection of the two kind of in a public policy sort of facing academic sort of situation? That’s where I am now, which is a place called the Hastings Center. And I’d actually taken a class with one of the scholars at my school, Vassar. He had adjuncted there, and his name is Erik Parens, and I took a class with him on the post-human future which is all about, you know, gene editing humans and all this sort of wild cool stuff. And I thought it was great. And I kept that kind of organization in the back of my mind when I was in Australia, applied to a project manager research assistant position there and got it. So I flew back to Oregon, bought a car, and 10 days later, I was in New York, starting up a new job.

Decision to Pursue Master’s in Science

07:20 Emily: Wow. This is so exciting. And what brought you specifically to the decision to pursue the master’s in science over maybe a law degree or some other kind of further education that you might do?

07:31 Ben: Yeah, so I think, you know, at this point I’m really interested in kind of doing more of an applied kind of work. So, you know, compared to the kind of academic environment that I’m interested in, which is, you know, a little bit more social science, humanities, I’m interested, you know, in terms of topic areas that I’m interested in. I was interested in doing more of an applied thing and, you know, when you’re going to law school, when you’re doing a terminal master’s in public policy, for example, those are kind of like, you know, they’re vocational schools basically. You’re getting a degree and you’re learning skills, and you’re learning a way of thinking. And I still had questions that I want to answer and kind of ways of thinking and topics of exploring. I’m particularly interested in direct consumer telemedicine like Hims and Hers and Roman.

08:15 Ben: If you’ve ever seen subway ads with phallic cacti or on your Instagram feed, those are advertisements from these direct to consumer telemedicine startups that I’m interested in kind of researching their kind of ethical implications. And I want to explore this more and you can’t really do that, you know, in law school. But I didn’t want to commit to a whole PhD, and Georgia Tech’s program is interdisciplinary. They have people who are coming from history of technology, coming from sociology of technology, also medical sociology. They have folks, faculty there, and it seemed like a great opportunity to kind of learn more about what I’m interested in without having to commit to a whole PhD to do it. And also, I was lucky enough to get funding to do that, which was a real difference maker.

09:03 Emily: Yeah, I was just going to say, I think the funding, like it’s clear from your work history. Like you’ve had some, not really jobs, but they come with money, right? Like the AmeriCorps thing, the fellowship that you did, or whatever it was, in Australia. So you have found a way to get money, at least some, while you’re still exploring these different areas. And the masters seems to be an extension of that as well.

09:25 Ben: I think that’s fair to say. Yeah, I definitely wouldn’t have done this program if I hadn’t gotten funding. I’m only going to take on debt for something that has a little bit more kind of monetizable potential.

Shifts in Money Mindset: From College to Present

09:38 Emily: Well, yeah, let’s talk more about the money stuff then. Through these various different jobs and experiences that you had since college, or maybe even before then, you know, what do you know about money or what is your money mindset right now that you think is different than what it was for you coming out of college or going into college?

09:57 Ben: Yeah, that’s a great question. I think college is a really weird time for finances. If you have the privilege that I did going to school, you know, I had to go to a school that had really good need-based financial aid, but I wasn’t financially independent. I didn’t have to make sure that I could afford rent and stuff. I was living on campus. And so I didn’t quite know how money worked really. So, and then living in Alaska, we all kind of shared expenses. Everything was very structured. So it was kind of, you know, the kiddie pool version of understanding what it is like to be a person who lives in a world where everything costs something. And so I think it was about the time I was 24 that I started living on my own for the first time, got a lease with a friend, and I started learning how things work. But of course I had some kind of money mindsets that I came up with.

10:48 Ben: And some of those were things like, my folks are very frugal and they went through a pretty lean time when I was in middle school. And so I definitely have a frugal kind of ethic. And I don’t spend money that I don’t need to. And I, you know, learned things like, you know, take advantage of credit card intro offers, but don’t carry a balance ever, ever, ever, or it’s not worth it. You know? So I was really lucky to learn some pretty smart ways of thinking about money from my folks. And also my mom does kind of investing almost as a hobby. She gets really into, you know, managing my dad’s and hers, you know, retirement finances, and, you know, thinking about how, you know, the best way to kind of help them to retire. She’s 10 years older than my dad and close to retirement. So this is something that’s very much on her mind and I’ve learned a lot from what she’s been able to learn, which I consider myself very lucky. Because I think, you know, this kind of, what you don’t know costs you. And that’s not fair, but I’m glad that I know what I know.

11:47 Emily: I’m really interested in hearing more about your AmeriCorps experience in particular, because I don’t think I’ve interviewed anyone on the podcast who did AmeriCorps, we haven’t had a detailed discussion about it. But I, as a person who didn’t do it, kind of think about AmeriCorps as even more financially difficult than your average grad student situation, like living on less. And I understand a lot of it is like, it has to be subsidized like your housing and your food and so forth in many places. So how do you think that you having had an AmeriCorps experience in your past, how do you think that specifically affects how you’re thinking about graduate school and your finances in graduate school?

12:25 Ben: Yeah. Great question. I think, so the interesting thing is, so it’s an AmeriCorps program, but it was AmeriCorps-funded to an organization called Jesuit Volunteer Corps Northwest, which has existed since before AmeriCorps existed. And so they take funding from the federal government for that, but they, you know, they already have a house where I lived, you know, they put me with these other people. And you know, the house’s rent is like prearranged with the landlord. So there’s a lot of that sort of stuff, which is so stressful about moving to a new place and expensive about moving to a new place. You know, it’s already furnished. The house just gets, you know, new people every year. So that was great. But you’re right. We had very little money. You know, we had, I think like $180 a month for fun, a hundred dollars a month for fun total. That’s if you want a burger, if you want a beer, if you want to, you know, take an Uber, whatever. You know, and we were challenged to not access any money that we had saved, but to actually try to live within our means.

13:27 Ben: And so I know, you know, preparing me for grad school. I know that I can live leanly. We, I think our whole house lived, we were six people and we spent $80 a week on food. Like we ate a lot of rice and beans, and if it’s beans and rice then that’s two dishes. You know, so I don’t intend to be living quite as lean, but I know that like, you know, I know that I can do that. And I definitely have some kind of ethic about like, do I really, is it going to be that much worse to do the easier option and save a lot of money, you know, for any particular thing? One example of that ethic is, you know, when I flew from Australia back to Portland at the end of my tenure, it was like $400 cheaper to fly to Seattle and then take a train down.

14:13 Ben: And so I did that. And you know, it’s kind of looking for that sort of thing. I think that’s a little bit of a mindset that I’ve picked up with my family. It was reinforced with AmeriCorps. And just one more thing quickly on that, you know, there’s definitely some negative sides to, you know, I think I still have a little bit of kind of a food scarcity mindset, you know, I’m always like, Hmm, this fridge is looking a little bare. You know, because we did run lean, you know, so there’s positives and negatives as well, but that was all part of it. And I’m, I’m really glad for the experience.

Financial Goals for Graduate School

14:40 Emily: I can’t remember where I heard this from, but it was recently and it was some well-known personal finance personality who phrased it something like spending money, like this is this person’s default mindset. Spending money is a failure of creativity. Like you can get anything or just about anything for no money, little money. And it’s only a matter of, do you want to put in the effort to be creative and you know, maybe take some extra time or something? Or do you want to go, as you were just saying, the easy route, which is spending a little bit more money to get, you know, the convenient option. So I’m not, I mean, that’s a very extreme view, but I can see a little bit of that, you know, in, in what you were describing. So going into graduate school again with your stipend, do you want to share what your stipend is by the way?

15:28 Ben: Yeah, so the standard graduate stipend is about $18,000. I have a little internal fellowship on top of that. That brings me up to about 22 or 23. And then I can also work as a research assistant for a faculty member and also work a little bit over the summer. So my understanding is that I can make between 30 and up to $36,000 a year, most likely.

15:57 Emily: And are you, have you already arranged for that assistantship or do you know that’s coming or is it like a possibility?

16:04 Ben: It sounds like an “everybody who wants one can get one” kind of a thing, is my understanding. So I haven’t started that process yet.

16:13 Emily: Okay. I feel a little bit relieved because when you said 18, I was going, oh no, Atlanta. Wow. Okay. But no 30. Yeah. Okay. We’re getting into a reasonable range there for, you know, for a graduate student. And so knowing that stipend or that range that you’ll be receiving, you know, looking at that, looking at the cost of living and so forth, what are your financial goals, if any, for graduate school?

16:35 Ben: Yeah, I think I have two big goals, which is to not go into debt, and continue to try to fully fund my retirement. I think that’s maybe a big thing that sets me apart from just people who are just coming out of undergrad is I’ve realized and, you know, thanks to folks in my life who have impressed this upon me, how important it is to, you know, save for retirement. And if literally, if all you do is max out your Roth IRA from the time you’re like 19 or 20, you can probably retire comfortably. You know, if you just do that, or comfortably enough. And that’s huge. And I know, you know, that what I wasn’t contributing as a 20 or 21-year-old, it’s all the more important that I, you know, max out my Roth IRA contributions now. So when I talked about that with the graduate advisor, that was, you know, that’s something that certainly wasn’t on her mind for us. And maybe a lot of graduate students aren’t thinking about that, you know, but for me, I’m not expecting to come into a lot of money later in life, and I want to be financially stable, and I don’t want to work until I’m 95. So those are the two main things, I think. Also have little fun maybe.

Retirement Savings History

17:45 Emily: Yeah, well, fun can be frugal, but if you want to max out that Roth IRA, there’s a definite dollar sign attached to that. What’s been your history with retirement investing through these various different jobs? Have you been able to do some or has it been kind of patchy?

17:59 Ben: Hmm. Yeah, I think it’s depended. I have typically, I think after the AmeriCorps year, I have contributed at least some to my Roth IRA. With my current job, they have a fantastic 403(b) program, which is like a 401(k) for nonprofits, I think. And they do a match, too. So what I do is I do the minimum for the full match from them. And then I contribute because I like Vanguard better than TIAA-CREF. I contribute to my Roth IRA separately. So I’m doing the best now that I’ve ever done as far as that’s concerned, but I have been contributing you know, anywhere from a couple thousand to the cap for the past five years or so.

18:45 Emily: Yeah. That’s great. And I love that you have these two goals that you articulated, don’t go into debt and max out the Roth IRA. I mean, as you said, like just those two things alone, you’re going to be in such good shape. You know, if you can do that through your master’s program or if you decide to go on for the PhD as well. Those are two very, very strong goals. How do you think you’re going to make it happen? Like, have you done any projections about cost of living in Atlanta? And you said you’re moving from New York there, right? So it’s going to be a big cost of living difference.

19:14 Ben: Yeah, actually it’s interesting. So I’m in Beacon, New York right now, which is in the mid-Hudson Valley. And Beacon is not cheap. My current living situation with utilities is probably $750, $800 a month, a room in a house. And so I think it’s realistic to get about that in Atlanta, just from the little bit of Craigslist slewthing that I’ve done so far. So I haven’t done a lot of planning. For all the stuff that I know about what you’re supposed to do with money, I’m not very good at actually budgeting for, for worse. But I think my mindset is assuming that expenses are not going to be that much different.

19:55 Emily: Okay. And when is your, when are you planning on moving?

20:01 Ben: My family is going camping in mid-August. And so I think I’m going to try to move right after that, which will mean that I’ll be like moving into a place and starting school in like five days, or something like that, in the mid-August heat and humidity which will be a heck of a time. But that’s what I’m thinking about right now.

529 Tax-Advantaged Savings Account

20:20 Emily: Yeah, that’s great. We’re recording this in April, 2021. So you still have quite a bit of time to be planning and finding a place and finding that assistantship and so forth. And I understand as well that you have a 529 that you wanted to talk about. And so for the listeners who do not know what that is, do you want to explain briefly what a 529 is and how you got one?

20:42 Ben: Yeah. Correct me if I’m wrong, but my understanding of a 529 is it’s a tax-advantaged savings account specifically for qualified educational expenses. So you can put money in there and then, you know, there are tax advantages that I think depends on the state at least to what the tax advantages are, but then you can spend that money on things like tuition, room and board, fees, other sorts of things.

21:11 Emily: That’s exactly right. But just to add onto it, so the growth, so money that’s contributed to a 529, similar to an IRA, typically if you invest it, it’s going to grow. And that growth is tax-free as long as when you end up withdrawing it, it’s for, as you said, the 529 definition of qualified education expenses, which is like tuition and also living expenses for a full-time student. And it depends on what state you live in, whether or not there is a tax advantage on the contributions. So there’s no federal like deduction the way you could have for like a traditional IRA, but your state, depending on what state you live in, when you do the contribution, they might give you a tax break on their state tax for doing the contributions. And it’s most common for parents to do this for their children or their grandchildren or something like that. So it’s something that often people start when their children are very young, so there’s lots of time for the investments to grow.

22:02 Ben: Yeah. And to the second part of your question, in my particular case, my folks did this great thing where, you know, I was expected to contribute two or $3,000 a year to my education in undergrad that I made from working over the summers. And my folks said, we’re going to take that money, instead of sending it to Vassar, basically, I think, we’ll cover that. And we’ll just hold it in a 529. And so when you go to grad school, you better go to grad school, when you go to grad school, that’ll be there and have grown and be there waiting for you.

Commercial

22:39 Emily: Emily here for a brief interlude. These action items are for you if you recently switched or will soon switch onto non-W2 fellowship income as a grad student, postdoc, or post-bac and are not having income tax withheld from your stipend or salary. Action item number one: fill out the estimated tax worksheet in form 1040ES. This worksheet will estimate how much income tax you will owe in 2021 and tell you whether you are required to make manual tax payments on a quarterly basis. The next quarterly estimated tax due date is September 15th, 2021. Action item number two: whether you are required to make estimated tax payments or pay a lump sum at tax time, open a separate named savings account for your future tax payments, calculate the fraction of each paycheck that will ultimately go toward tax, and set up an automated recurring transfer from your checking account to your tax savings account and to prepare for that bill. This is what I call a system of self-withholding, and I suggest putting it in place starting with your very first fellowship paycheck so that you don’t get into a financial bind when the payment deadline arrives. If you need some help with the estimated tax worksheet, or want to ask me a question, please join my workshop, Quarterly Estimated Tax for Fellowship Recipients. It explains every line of the worksheet and answers common questions that PhD trainees have about estimated tax. Go to PFforPhds.com/QETax, to learn more about and join the workshop. Now, back to our interview.

529: To Use or Not to Use?

24:19 Emily: Yeah, so you have this nice little nest egg that’s available to you but is kind of specifically tied for education expenses. So what are your thoughts about that? Like, is it something that you want to draw on during graduate school or that you feel you have to, or what are your thoughts?

24:35 Ben: Yeah, well, it’s kind of a use it, or it just sits there sort of thing. So I guess if I didn’t use it, then I would have to be doing something like giving it to my sister if she just needs it or giving it to a cousin or something like that, I suppose. So I definitely want to use it. And one of the questions in my head is like, does it make sense to use it now? Or if I’m probably, but not definitely, going to something like law school or a public policy program or even a PhD, you know, I could definitely use it for those. So would it make more sense to use it now or later, is one question I have. That’s kind of what I’m thinking about. And the way I’ve thought it is, basically, it would be really hard to max out my Roth IRA while earning between 30 and $36,000 a year at the most. But if I have, you know, the 529 is worth about $12,000. If I pull $6,000 a year from the Roth IRA, or excuse me from the 529, that covers my Roth IRA contribution. So it would be as if I was making 36 to $42,000 a year and maxing my Roth IRA contribution. And that sounds pretty good to me. That sounds doable. So that’s kind of how I’m thinking about it is making that possible.

25:56 Emily: Yeah, I was thinking kind of the same thing, because you were phrasing it just now as like using the money in the 529, but I’m thinking about it more as getting the money out of the 529 in a reasonable way where you’re not going to be taxed and all the growth and so forth. Just getting it out so that you can use it for whatever, if that is your Roth IRA contribution, I mean, money is fungible, right? So it could be the Roth IRA. It could be anything else. It doesn’t really matter. But yeah, to give you that extra cushion, and then let’s say it was sort of a, it feels like almost direct, like withdrawal from the 529 and a contribution $6,000 to the IRA. All you’re doing then is making the money more flexible actually, right? Because in the first case, it can only be used for these well, without penalty, can only be used for these qualified education expenses, versus with the Roth IRA, well, you can withdraw your contributions at any time or you can leave it and let it grow for the decades and, you know, withdraw it tax-free and so forth.

26:50 Emily: So yeah, I really see it more of it as not using the money, but just transferring the money to some other place in an indirect way, which you can only do without taxes and penalties and so forth when you have qualified education expenses as you do in this upcoming phase of life. Another thing to think about, another twist in this is, and I don’t know, I haven’t looked it up for Georgia Tech, but some, especially public, universities do allow their graduate students who are employees to contribute to the university’s 403(b) or 457. So that’s also something to look into before you, again, make a final decision about what to do with the 529 is, do I have access not only to a Roth IRA, but also a 403(b) or 457? And could I even supercharge my retirement savings above that $6K per year level? Yeah. So something else to think about.

457 Retirement Plan

27:39 Ben: What’s a 457?

27:42 Emily: 457 is another tax-advantaged retirement account. It’s a little bit similar to a 401(k). So 401(k) and 403(b) are very similar to one another, as you said. One is in the private sector, one is in the nonprofit sector. A 457 was originally constructed, I guess, for like highly-compensated employees. And so it’s available usually in addition to a 403(b) or something similar. But in some cases, at universities, it seems that it’s often, if they have one, it’s sometimes available to any employee, not just, you know, C-suite or whatever. So just something to look into whether or not there is one, whether or not you’re eligible for it. And the 457 has some slightly different benefits than a 403(b) does. If I remember correctly, you can actually access the money more easily than you can in a 403(b), like you don’t have to be like retirement age necessarily to do it. So I’m speaking a little bit out of my like zone of competency here, but yes, it’s sometimes available to graduate student employees.

28:43 Ben: Cool. Thanks.

What Are Qualified Education Expenses?

28:46 Emily: The other thing that I wanted to hit on with this discussion of 529s is what are qualified education expenses. And, you know, longtime listeners of the podcast or readers of my other material know that that term, qualified education expenses, is something that we talk about a lot with respect to figuring out your income tax as a graduate student. Now, and if you have dived really deep into my material, you know that there’s a different definition of qualified education expense for each different tax benefit that you might be talking about. And so it turns out that 529s, or qualified tuition programs, have their own definition of qualified education expenses that is vastly different from the other ones. So you mentioned earlier that qualified education expenses include tuition fees. You know, we’re, we’re accustomed to those things being qualified education expenses, but in the case of 529s, that also includes your expected living expenses.

29:38 Emily: I can’t remember what’s the exact term the universities use, like cost of attendance, I think, which is inclusive of both the educational expenses and also reasonable living expenses, whether you would be living on campus or off campus. Cost of attendance is something that I think comes up a lot for undergrads, but not so much for funded graduate students, but it’s really relevant for our conversation of getting money out of a 529. And one really good episode to listen to which I did previously on the podcast is season two, episode nine, with Seonwoo Lee. And we’re talking about 529s in that episode as well, but it’s from a different, a little bit of a different perspective, but it’s still a conversation about what is a qualified education expense and what are the anticipated educational expenses that you can use to remove money from a 529 without penalty. And so in your case, have you calculated like how much you would be able to get out of the 529 per year using that anticipated cost of attendance?

30:34 Ben: Yeah, so I think the, you know, again I have about 12 and change thousand dollars in there. And the estimated cost of attendance I think is about just by happenstance, Seonwoo also goes to Georgia Tech. So he mentioned that it was about $10,000. So if those numbers are still good, then, tell me if I’m wrong, but I feel like I’m pretty in the clear. You know, I’ll probably take about half of the 529 out each of the two years I’m in the program and that’ll go underneath the $10,000. And even if I do the thing that he was talking about, contribute $2,000 into a Georgia state 529 and pull it out for the tax advantage, credit deduction, whatever it is that’ll still be under the total of $10,000. I don’t know if that’s how it works. I assumed that I couldn’t like, yeah, like pull $10,000 out and then add $2,000 at the Georgia one and then be over my cost of attendance. I don’t know, but I don’t think I would do that anyway.

31:35 Emily: Yeah, that sounds right to me. So the way that you calculate how much money you could get out of a 529 each year is you have to take the total cost of attendance, and then you have to subtract from that all of your tax-free money. So in your case, if you’re fully funded, it would be like tuition and fees and so forth. So the cost of attendance is going to be reduced to, again, if you’re fully funded, it’s essentially just the portion of the cost of attendance that is like your living expenses. And so, I don’t know, $10,000 per year sounds really low to me, but I would have to look at the numbers too. So whatever it is, as long as you don’t have tax-free funding that is already paying for that, then that’s your cap for removing money from the 529 for that given year. And anyway, all of this, I was just reviewing it before our conversation. All of this is in publication 970 chapter eight, which is called qualified tuition program.

529 is Typically NOT in the Name of the Student

32:30 Emily: Yeah. Anything else you want to talk about regarding 529s? It’s an interesting and unusual topic for me.

32:36 Ben: Maybe just, this might be useful for listeners is I just remember that my mom did something kind of tricky or clever with 529s where she had it like, in her name, not in my name, because if it was in my name for undergrad, they would’ve taken all that money. And if it was in her name, I guess they, you know, the financial aid office looked at it differently or something like that. I never got the full story from her, but is that right? Is that how that works?

33:08 Emily: I don’t know exactly the mechanics of it, but it is recommended that 529 money be in the name of the parent or the grandparent, whoever’s doing the contributing, not in the name of the student. And I do think it’s for those FAFSA type calculations that it’s again, weighted less heavily in the assets of the family if it’s held technically by the parent. And in a 529, you have to designate a beneficiary. So you’re presumably the designated beneficiary on this particular 529, but it’s very easy to switch the beneficiary. So the money still belongs to your parents, so they could, you know, yoinks it away from you if they wanted to, because it’s theirs until it’s actually, you know, removed for your qualified education expenses and so forth. But that’s why it’s really easy to just choose a different beneficiary and move the money from, you know, let’s say in the case of like my family. So I’m about to start 529s for my two children. And I don’t really care whose beneficiary name is on it because I’m just considering it for either child. And if the oldest one has some leftover, I would just switch it to the younger one because I’m thinking of it as my money, right? Until later on in life. So yeah, so it’s really easy to switch the beneficiary and it does make sense for the contributor or the parent or whoever to hold it.

34:20 Ben: Okay.

Best Financial Advice for Another Early-Career Grad Student

34:22 Emily: Yeah. Well, it’s been so much fun to talk with you, Ben, and it’s a very kind of different story for the podcast listeners. So I’m excited about that. The question that I end all my interviews with is what is your best financial advice for another early-career PhD or graduate student perhaps in your case?

34:40 Ben: I think of two things. One is to remember that like, money is real. And sometimes you feel like you can plug your ears and shut your eyes and it’s less real, but it’s still sitting there or not sitting there. So for me, it’s really helpful to try to develop a relationship with my money where I’m not, you know, checking my balance on my phone and going, you know, I just, I don’t want to have a contentious emotional relationship with money. You know, like, the world is structured to make us feel nervous about money. And I don’t think that it’s a healthy relationship to have if you have the ability to not be nervous about it in that way. So, you know, I try to check it more often, just, you know, just so I know what’s going on and there’s no mysteries, because it’s all internal to me, it’s all my own money.

35:33 Ben: And the other thing is there’s this really insidious idea that like, in order to feel like, like we’re told that we need to buy things for ourselves because we deserve it or because we need to like treat ourselves. And so people, you know, like I just saw this person who was like living in her parents’ house, not a lot of money, she’s like, should I buy like the iPhone, like 12, actually the iPhone 12, you know, gajillion or something like that. And like, you know, you do what you want with your money. I’m not here to like make moral judgements, but she was doing it in kind of the mindset of like, I want to treat myself or I deserve it or that sort of thing. And that is just a load of bologna that like marketers have worked really hard on for the past 20 years to be like, you deserve this meal, you deserve this trip, you know?

36:20 Ben: And like the more we can extract ourselves from like taking in that, like marketing lingo of like what we deserve and don’t deserve based on you know, like what is expensive or not expensive, if we can kind of like, you know, develop a more internal sense of like, you know, rewarding ourselves and not have it be based on how expensive something is. Like, you know, I love myself a lot. So I’m spending, you know, more on myself to get the nicer thing or whatever, you know, it’s like, I don’t know, it just makes me kind of sad. And so I guess my advice is to like, you know, kind of have a little kind of metacognitive experience and, you know, watch your feelings, watch the stories that are in your head, and just have, you know, a sense of curiosity, like, oh, where did this come from? And how is this helping me?

37:10 Emily: Wow. Yeah. I find both of those points to be super insightful. And actually we could probably do a whole other episode just on what you just mentioned about like observing feelings that arise in yourself when you think about money and so forth. I love that point, but it’s a great one to end on. And Ben, thank you so much for joining me today. It was really fun to talk with you.

37:28 Ben: Yeah, it was a pleasure. Thank you.

Outtro

37:31 Emily: Listeners. Thank you for joining me for this episode. PFforPhds.com/podcast is the hub for the Personal Finance for PhDs Podcast. On that page are links to all the episodes show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and effective budgeting. I also license prerecorded workshops on taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

This PhD Found Financial Peace through Pursuing FIRE

April 19, 2021 by Meryem Ok

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

Links Mentioned in This Episode

  • PF for PhDs: Community
  • Walden on Wheels (Book by Ken Ilgunas)
  • E-mail Emily (for Book Giveaway Contest)
  • PF for PhDs: Podcast Hub
  • By 50 Journey Website
  • General Schedule (GS)
  • The Academic Society Website 
  • Toyin’s Free Masterclass (Emily’s Affiliate Link)
  • PF for PhDs: Subscribe to Mailing List
PhD FIRE

Teaser

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

Introduction

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

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

Book Giveaway Contest

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

Will You Please Introduce Yourself Further?

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

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

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

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

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

Pre-Grad School Finances

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

09:33 Dr. 50: That is correct.

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

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

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

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

PhD as a Path to Professorship

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

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

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

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

Making Ends Meet in Grad School

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

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

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

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

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

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

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

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

Post-PhD Finances

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

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

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

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

15:55 Emily: Okay. Gotcha.

Money Mindset: Salary Negotiation

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

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

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

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

17:33 Dr. 50: Yes.

17:33 Emily: Yeah. That’s fantastic.

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

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

17:47 Dr. 50: Yes.

Overcoming a Large Financial Struggle

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

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

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

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

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

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

20:43 Dr. 50: No.

20:43 Emily: Not working during that period.

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

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

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

A Shift in Money Mindset

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

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

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

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

Discovering the FIRE Movement

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

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

Commercial

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

Striving for Financial Independence

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

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

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

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

FIRE: The 4% Rule

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

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

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

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

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

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

Federal Retirement Benefits

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

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

Investment Changes Toward  Achieving the FIRE Goal

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

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

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

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

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

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

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

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

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

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

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

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

Was the PhD Financially Worthwhile?

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

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

Best Financial Advice for an Early-Career PhD

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

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

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

41:16 Dr. 50: Yes.

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

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

Listener Q&A: Financial Independence

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

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

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

Outtro

45:18 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs Podcast. On that page are links to all the episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast, and instructions for entering the book giveaway contest and submitting a question for the Q&A segment. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

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