In this episode, Emily interviews Dr. Sarah Birken, a faculty member in the Wake Forest School of Medicine and co-host of the podcast AcaDames. Sarah tells the story of her financial life from her PhD training to her research faculty position at UNC to her new tenured position at Wake Forest, which paralleled the births of her children. She has recently experienced a financial awakening after years of being unaware of her cash flow. Sarah explains the motivation behind some of the financial decisions she’s made, such as working part-time and accepting her position at Wake Forest. Graduate students and PhDs who aspire to become faculty members and/or parents will find this episode fascinating!

Links Mentioned in This Episode

• I Will Teach You to Be Rich (Book by Ramit Sethi)
• [email protected] (E-mail for Book Giveaway)
• PF for PhDs: Podcast Hub (Book Giveaway Instructions)
• @birkensarah (Sarah’s Twitter)
• AcaDames Website
• AcaDames: Sarah Job Search and Transitions Episodes
  • S101: Sarah
  • S304: Is the Growth of Contingent Faculty a Scam?
  • S315: Bonus: Pre-Covid Job Search & Pandemic Partings
  • S410: Bonus: Sarah Job Transition
• How This Graduate Student Financially Manages Daycare Costs, Debt Repayment, Saving, and Side Hustling (Budget Breakdown with Aubrey Jones)
• PF for PhDs: Tax Center
• Personal Capital
• PF for PhDs: Tax Workshop
• PF for PhDs: Subscribe to Mailing List

Teaser

00:00 Sarah: I think I probably would have taken out a loan and, you know, if I could have understood that I would be making an amount of money in the future and really taken that into account and would be able to pay off a reasonable loan, I probably would’ve done that.

Introduction

00:22 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 12, and today my guest is Dr. Sarah Birken, a faculty member in the Wake Forest School of Medicine, and co-host of the podcast AcaDames. Sarah tells the story of her financial life, from her PhD training, to a research faculty position at UNC, to her new tenured position at Wake Forest, which paralleled the births of her children. She has recently experienced a financial awakening after years of being unaware of her cashflow. Sarah explains the motivation behind some of the financial decisions she’s made such as working part-time at UNC and accepting her position at Wake Forest. Graduate students and PhDs who aspire to become faculty members and or parents will find this episode fascinating. On the theme of post-PhD financial life, I thought I would give you another update on my family’s house-hunting process since it’s almost literally all I can think about at the moment. The housing market is wild right now, y’all.

01:29 Emily: My husband and I are trying to buy a single-family home in the San Diego area. We are first-time home buyers, and we are looking for a home we can live in for the next 20 years, at least, which is putting a lot of pressure on the process. We look at every home to see if it can meet not only our immediate needs, such as sufficient indoor and outdoor space for us to weather the rest of the pandemic, but also our anticipated needs when our children are in high school. The cycle that we’ve fallen into just about every week for the last six weeks is to monitor the listings that go up throughout the week and message our real estate agent about any houses we want to see that weekend. On Saturday, we drive from Orange County to San Diego County, leaving our kids with their grandparents.

02:14 Emily: We see between one and four houses and debate the merits of each house for the rest of the weekend. Finally, we submit an offer or not by early in the following week. Then the cycle starts over again, even before we hear back about the offer we submitted. As of the time of this recording, we have submitted three offers on homes, none of which have been accepted. All of the offers were between seven and 12% over the asking price. With the latter two offers, we waived the appraisal contingency, which means that we still intended to buy the home, even if it didn’t appraise for the sale price, and would bring cash to the closing table to make up the difference between the appraisal and sale price. I never knew that was a thing before getting into this process. Our offer was the first runner-up on the latter two homes, which I suppose means we’re offering in the right ballpark.

03:07 Emily: On the second house, we lost out to a buyer who was quote, “willing to beat any other offer,” end quote. And on the third house, we lost out to an all-cash buyer who waived all contingencies. So, on top of California real estate prices always being mindbogglingly high, inventory is very low at the moment. And buyer demand is bidding prices up well over asking. It seems like a very bad time to buy. Yet, here we are trying to, because we are personally and financially more than ready for this step. I’ve been trying to think of advice for future first-time home buyers in my audience, and I might end up doing a whole episode on this process once it’s complete. For now, my advice is to do absolutely the opposite of everything we’re doing.

Emily’s Home-Buying Advice

03:50 Emily: One, don’t buy in a sellers market. Two, don’t buy in a pandemic. Three, don’t buy from a distance. That is, unless it’s the right time to buy, like it is for us. My one actionable piece of advice right now for future buyers is to regularly go to open houses, starting well in advance of when you actually want to buy. In California during the pandemic open houses aren’t allowed. So we missed out on seeing lots of houses casually. We only see a very small number of houses seriously. The problem is that we didn’t really know everything that we were looking for when we started the process and we’ve become more specific in our vision as we’ve seen more homes. We’ve probably doubled our list of must-have and nice-to-have features since including minimum square footages for various areas of the home and lot. It’s the kind of stuff we never paid attention to when simply visiting other people’s homes. We’ve also learned about sort of California-specific things like unpermitted additions and Mello-Roos. So, there is a big learning curve for first-time home buyers. And that open house phase, I think would have been really helpful. Wish us luck to get a house soon so we are put out of our misery.

Book Giveaway Contest

05:06 Emily: Now, it’s time for the book giveaway contest. In March, 2021, I’m giving away one copy of I Will Teach You to Be Rich by Ramit Sethi, which is the Personal Finance for PhDs Community book club selection for May, 2021. Everyone who enters the contest during March will have a chance to win a copy of this book. I’m personally really looking forward to reading I Will Teach You to Be Rich for the first time. I have recommended this book and given it as a gift before, but never read it. I do know, however, from reading Ramit’s website and listening to interviews with him that in some ways he has a very different approach to personal finance than I do, such as putting a big emphasis on earning more. So, I think I’ll really benefit from reading a full book from his viewpoint. 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 [email protected]. I’ll choose a winner at the end of March from all the entries. You can find full instructions at pfforphds.com/podcast. Without further ado, here’s my interview with Dr. Sarah Birken of AcaDames.

Will You Please Introduce Yourself Further?

06:17 Emily: I have a really special guest joining me on the podcast today. It’s Dr. Sarah Birken, you know her from AcaDames where she’s a co-host. She also recently became a faculty member at the Wake Forest School of Medicine. So congrats to Sarah for that. And we are going to be talking today about finances through career transition points. And it’s a real pleasure for me to get to speak with someone, interview someone on the podcast who has been through a few transitions, you know, post-graduate school. So I think she’s going to have some really great lessons for us who are a little younger on in our career to to take from it. So, Sarah, thank you so much for joining me on the podcast. And will you please introduce yourself a little bit further for the listeners?

07:00 Sarah: Yeah, sure. Thank you so much for having me. It’s a real pleasure. And I’ve been getting some friendly joking from friends and family that I’m on a personal finance, finance podcast. But yeah, so Sarah Birken, I am an Associate Professor in the Department of Implementation Science at the Wake Forest School of Medicine Division of Public Health Sciences. And as you mentioned, AcaDames co-host. I have been in the field of implementation science since the end of my PhD where I found out that that was in fact what I was doing. My post-doctoral fellowship was in cancer prevention and control. And as we’ll talk a little bit more about, I started out in a half-time research faculty position after my post-doc then moved to full-time and just in July 2020 transitioned to a tenure-track position at Wake Forest.

Sarah’s Finances and Money Mindset in Grad School

08:00 Emily: Yeah, it’s fantastic. And I know you covered that very well on your podcast. So, we’ll link to, in the show notes, a few of those episodes. So let’s start, you know, way back during graduate school and tell us what your finances were like at that time and whether you were aware of them working on them at all? Maybe not?

08:18 Sarah: Yeah. I mean, I have the benefit of having been partnered with somebody who was always very on top of finances. And I started graduate school after having made very, very little money as an administrator at a community health center. And when I applied for graduate school, I had like a vague sense that I wanted to make more money than I was making at the community health center. It would’ve been hard to make too much less than that, but I mostly, my objectives were not to be in a ton of debt and to be able to pay for graduate school, period. And when I applied for graduate schools and I did all over the country and got a full ride to UNC, that was so much of a blessing. I didn’t even, I mean, I knew that I was really lucky and I knew how wonderful it was that I wasn’t going to have to pay for graduate school, but I didn’t fully understand it at the time because I was pretty irresponsible with money.

09:31 Emily: Did anything regarding like your money mindset start to change during graduate school? And were you making more money, by the way, than you were from your prior job?

09:40 Sarah: Yeah. I was making not an appreciable amount more once I was in graduate school, right? Because I had, you know, my tuition and health insurance paid for, and I had a stipend through graduate school, but it was peanuts. It was really very little money. And so I just got accustomed to spending very little. I didn’t take out any loans because I didn’t have to, but I didn’t spend very much because I didn’t have very much to spend. So my, you know, modus operandi was just spend as little as possible, which I think in retrospect was not a great idea because instead of thinking of how much do I have to spend, it was just head in the sand. Don’t spend too much.

10:32 Emily: Yeah. So it sounds like you were, yeah, sort of in denial about, or like not wanting to deal with money very much.

10:39 Sarah: Oh yeah. Correct.

10:40 Emily: Thankfully the good part of that is you were erring on the side of not overspending, but underspending, but had you been in a little bit of a different headspace, you would have loosened the purse strings a little bit.

10:50 Sarah: Yep, yep. Exactly.

How Having a Child in Grad School Shifted Finances

10:52 Emily: What else happened in graduate school that affected your finances?

10:55 Sarah: Yeah, so I transitioned from the master’s program into the PhD program. So I completed the master’s and then started the PhD. And the stipend situation was really the same. I again had the tuition remission and the health insurance covered and the stipend, and I was kind of, you know, rocking and rolling doing the graduate school thing. And then I became pregnant with my first child in my second year of graduate school. And kind of, that was a big wake up call. Like I can, I can certainly continue to try to spend as little as possible, but I’m going to have a whole new creature to take care of. And some immediate things that became clear were that I needed to not live next to the drug dealer who I was living next door to anymore. I didn’t feel like I was in imminent danger, but certainly it was not a setting, it was a ton of graduate students and just not the sort of place where you want to raise a child if at all possible. So, I decided to find a single-family home and moved a little bit farther away from the university and found a job that was 30 hours a week, in addition to graduate school, that would pay a little bit more. So I went from making probably around $20,000 to making about $40,000 overnight. Which at the time felt very luxurious.

12:31 Emily: Wow, I don’t know that I’ve interviewed anyone else who’s made that kind of decision. So you took a 30-hour per week job. Does that mean you gave up the job you had, like if it was an assistantship, or how did that work combined with the, you know, the funding of graduate school?

12:46 Sarah: Yeah, that’s an important nuance. So, in the first two years of my PhD program, we were guaranteed some sort of position that would include a stipend. So that was a research assistantship or a teaching assistantship. And then a lot of students find a fellowship that will, you know, a pre-doctoral fellowship that will cover the cost of their schooling, their dissertation writing. And I had applied for maybe one or two, maybe it was even just one fellowship, didn’t get it, and was really worried. Like, what am I going to do next? And so I emailed faculty who were doing research in my area and they didn’t have any funding. And so I emailed the chair of the department and said, here’s my situation. Do you have any suggestions? And she said, actually there is a coordinator position for the reaccreditation of the school of public health. It is 30 hours a week. It is a real 30 hours a week. So it’s not like an assistantship where you might work, you know, 10 hours one week, you know, 25, the next. It was going to be a full 30-hour week position, but it made double what I did before. So that’s how I ended up in that position.

14:00 Emily: Okay. And was your funding still, that is for like the tuition and fees and so forth, was that still provided by your program?

14:08 Sarah: Yes, it was.

Housing Expenses and Saving on Childcare 

14:09 Emily: Okay. Yeah. That’s, that’s really interesting. Of course I know sometimes people who get into the ABD stage have different work arrangements, but I’m really glad to hear how that worked out in particular for you. Okay, so you’re making more money but you have the child, so what’s the next stage in the finances?

14:26 Sarah: Yeah, so we had bought this house and it was very inexpensive and I think it felt comfortable because where I live in North Carolina, really, the market is such that it was as affordable to buy a home as it was to rent a home. And that way, you know, I was building equity and I, you know, I had been for teaching spin classes on the side just to kind of make some extra money and fill in gaps for fees, for example, were not covered by the tuition remission. Which, you know, sometimes they were like $700, nothing to sneeze at. So my partner did start making a little bit more money, but in the meantime there was a gap where he wasn’t making very much money. So we, again, were just really trying to keep things as inexpensive as possible. So one of the decisions I made, it was primarily for kind of personal reasons, but also financial. I had minimal childcare, which was pretty stressful because I was doing, you know, my dissertation, I was working 30 hours a week, and I had an infant. But it was important to me to kind of keep things as limited as possible in terms of expenses and childcare is extremely expensive around here. Probably no more expensive than elsewhere, but it was like a second mortgage to have full-time childcare.

15:56 Emily: Yeah. I was going to ask you about that next because yeah, childcare is, I’ve definitely spoken with other graduate students who have, because the flexible schedule, like tried to make it work and not having at least full-time childcare, maybe just part-time or something. How do you feel about that decision now?

16:14 Sarah: You know, I have reflected on it because I do know of graduate students who have children who have gotten childcare. And in retrospect, I do wish I had given myself the grace of having a little bit more help than I did, because it was just a lot. I remember being extremely sleep deprived. I don’t regret anything because I really savored that time with my daughter, but it was stressful in a way that I don’t think I would want my child to do for themselves if they were in that situation. So I think I probably would have taken out a loan and, you know, if I could have understood that I would be making an amount of money in the future and really taken that into account and would be able to pay off a reasonable loan, I probably would have done that.

17:09 Emily: Yeah. I’ll link in the show notes to another episode where I interviewed a graduate student who is currently taking out student loans for daycare and also side hustling and doing all the things on top of it. Do you feel like you still finished in good form or maybe you took a little bit longer or how do you think that worked out?

17:26 Sarah: You know, I took three years to finish my dissertation. So, it was two years for the master’s program, two years for the predoctoral coursework, and then three years of writing my dissertation. And honestly, I think, you know, a lot of people finish their dissertation in two years in my program. For me, I think it was less about having a child and more about like data issues as, you know, these things go. But yeah, I felt like I was in a pretty good position when I graduated.

Decision to Do a Postdoc After Grad School

17:58 Emily: Okay. And so you did a postdoc after graduate school, is that right?

18:01 Sarah: Yes, I did a postdoc, but I did go on the job market in a very limited way, mostly because I wanted my dissertation chair to read my dissertation. And I knew that if I were on the job market, he would read my dissertation, and it worked. And so I very seriously considered a faculty position that I was offered. And the salary that was offered, it was a nine-month tenure-track faculty position. And I was considering also two different postdocs that I had been offered in North Carolina. The faculty position was outside of North Carolina. And you know, postdocs didn’t make, there was one postdoc that made not terribly far off from the faculty position. And then another post-doc that was just very little money. It was a T32 and it had no research support. And the postdoc that I ended up taking, it was an R25, which at the time you could do a post-doc, they funded them that way. And it was a much more generous salary than the T32. It had research funding. I hadn’t even been counseled about thinking about a startup package for a faculty position. And I don’t know if that was on the table. I’m not sure I remember, I don’t remember talking about it. And so again, in retrospect, it was really smart of me to take the generous post-doc that had research funding that had a little bit more generous salary than the other one. And I did that for three years. And for each of the two years subsequent to the first, I got a $5,000 raise.

19:43 Emily: Yeah, not bad. It’s very curious though, because you don’t hear about people turning down tenure-track positions too often. So what was it that tipped things in favor of doing the postdoc?

19:53 Sarah: Primarily, my partner was not super excited about moving, and I felt like I wanted to make sure that he was comfortable with our next life stage, our next, you know, career decision. And also I did get advice from somebody at the institution where I had gotten the tenure-track offer that I should do a post-doc. And part of that, I think for her, the reason she recommended that was because I would have time off of the tenure-track clock, the tenure clock to publish, to get some preliminary data for a career development award. And so taking those things together, it was a pretty clear decision.

20:40 Emily: So, your idea then at that point was to go on the job market again, after the conclusion of the postdoc and be a stronger position for winning funding and getting a position at that time.

20:51 Sarah: Exactly.

Sarah’s Finances and Money Mindset During the Postdoc

20:52 Emily: Gotcha. Okay. So let’s talk about the finances during the postdoc. How much were you making approximately at that time and you know, what was going on?

21:00 Sarah: So, I started at, I want to say $50,000, which is pretty good for a postdoc back in 2011. And then the next year I made 55 and then the final year I made 60, which was really pretty sweet.

21:16 Emily: Yeah. That raise schedule is, yeah, that’s pretty good.

21:19 Sarah: Yes. I finally felt like I was able to breathe a little bit. I mean, I wasn’t exactly like going on fancy vacations and buying a new car which, you know, I hadn’t done. I think, you know, my husband and I went on our very extravagant honeymoon. We went to New Zealand six months after we got married. But other than that, we really weren’t doing anything extravagant. I was driving the same car I had gotten right after college which was used anyway. And so, I think that I just was able to feel like I didn’t have to scrimp and save at every turn making $60,000 a year, which is pretty good.

22:02 Emily: Yeah. And regarding, you know, your child as well, how were you spending money in that respect?

22:09 Sarah: And at this point, I had two children. So in October of my first year of the postdoc, three years after my first child was born, I had a second child. And so, at this point, my daughter was in preschool about half-time. And then my son, I stayed home with exclusively for quite a while, maybe six months, again, kind of fitting my work around the edges, having a little bit of in-home daycare. Somebody would come into my home and watch him while my daughter was at preschool and I would get some work done. And I was doing a lot of work at night and on the weekends.

22:51 Emily: Yeah. So, you had your full-time job, but it was fit into the margins around the children’s schedule.

22:57 Sarah: Exactly. It’s the double-edged sword of that flexible job situation. And I don’t do bench science, so I really was on my own schedule for the most part.

Retrospective Reflections on the Affordability of Childcare

23:07 Emily: Yeah. And I’ll ask you the same question again. How do you feel about that arrangement now, looking back on it?

23:13 Sarah: I mean, I think I’d probably give you the same answer, that first of all, I probably could have afforded more childcare. Particularly once I was making, you know, above $50,000, I probably could have done it. It would have been a little bit tight, but I could have afforded it. Again, it was kind of my own personal comfort level with how much I wanted to be away from my children, but it also was, I just was so used to living as restrictively as possible. It didn’t even occur to me to get more help because I just operated as stringently as possible, but I didn’t have to. And if I had taken a little bit more time to really understand my finances, my cashflow, I’m very lucky. I didn’t have any debt from college. My parents paid for college. I didn’t have any debt from graduate school, aside from my house. I didn’t have any huge responsibilities, liabilities, so I probably could have afforded it. And if I had really examined my finances, I would have seen that.

24:22 Emily: Yeah. I’m asking these questions because I was in a similar period. So I have two children. They’re four and two right now. And in their very young years I was self-employed. And so I had this wonderful flexibility. And so I also didn’t employ as much childcare as I could have, and we sort of slowly dipped our toe into more and more childcare as they got a little bit older. And then the pandemic took the childcare away, and I really, really miss it. So that’s kind of my perspective on this. It’s like, yeah, I could have done a little bit more with that and been a little bit more focused on my work. And maybe for my business, you know, maybe gotten things ramped up a little bit faster than they had been. But, you know, like you said, also, like not regretting having the time with the children because that’s wonderful, but yeah, I’m just curious now for, I know, obviously there’s, you know, younger listeners maybe still in graduate school, maybe they haven’t had any children yet. Just trying to think through these decisions. I think it’s useful as you do on your podcast to talk through the issues that people face as they’re juggling career plus, you know, caregiving for family members and so forth.

25:24 Sarah: Yeah. And I think the bottom line is, you know, it is an intersection of personal values, finances, aspirations for what you want to do with your money, and just understanding all of those fully is going to position you best to make the right decision.

Commercial

25:47 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 your 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 2020 tax return, which are available at pfforphds.com/tax. I hope you’ll 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 you can find links to from P F F O R P H D S.com/T A X. It would be my pleasure to you save time and potentially money this tax season. So don’t hesitate to reach out. Now, back to our interview.

Retirement Savings, Directed Gift-Giving, and Coaching

26:52 Emily: So, let’s also talk a little bit about what financial practices did you have? Because you were saying you weren’t super aware of your cashflow during that time. You didn’t really examine it. So, were you budgeting? Were you saving? What was going on?

27:05 Sarah: Yeah, so by this time my partner was a personal financial planner, which was extremely convenient. He had always been really interested in personal finance. And so, you know, early on I had been, even when I worked at the community health center, I maxed out my retirement savings or contributions and didn’t have that option as a graduate student, no benefits there, but we certainly were saving as much as we could. Just a little bit here and there. But I was not a participant in that decision by my own, kind of, I guess it was more passivity than it was a conscious decision that I didn’t want to be involved in that. And so, I think for me, I just had so little perspective on any of our cashflow. But we had set up 529 plans for each of our children before their birth. And that was something that we started to ask anybody who wanted to give presents to just contribute to 529 plans. So, these were the kinds of things that we were starting to do that would make things a little bit easier and asking for things like, instead of stuff, like memberships to museums and things like that.

28:18 Emily: Yeah, I like that directed gift-giving, the nudges, that’s a good tip for any future parents. Okay. So, any more that you wanted to say about that postdoc position?

28:28 Sarah: I did work with a professional coach when I was trying to make a decision about kind of what I wanted to do towards the end of the postdoc in terms of my next steps. And one thing she encouraged me to think about was that there are all types of currency, and salary is just one of those. You know, benefits are just another component, but flexibility, anything really that you value as a human, you know, personal happiness, contentment in your relationship, proximity to family, be that far or near, depending on what you want. These are all important forms of currency. And that was kind of my orientation as I sought another position following my postdoc.

29:15 Emily: Yeah, that sounds like a really great exercise to go through when you’re at that point of deciding where you’re going to go next in your career. Is that something, an exercise you would recommend to others?

29:25 Sarah: Oh my gosh. Yes. Literally writing it down. I think just making all of those things as explicit as possible. Again, in the vein of really having clear picture of all of these things. Now, still at this point, I didn’t have a clear picture of my finances, but at least knew that that was a consideration that I had to account for.

Sarah’s Half-Time Research Track Faculty Position

29:50 Emily: Yeah. So, you went on the job market again, and where did you end up?

29:55Sarah: Well, so I didn’t really go on the job market. One of the major values that I pulled out of my experience with the coach was that I did want to stay home part-time with my children. I really liked being home part-time and I liked kind of being able to be with them as much as possible while continuing to do my research. And so, I basically worked with a mentor who was in a powerful position to design a half-time research track faculty position. Again, this was a huge compromise in terms of, you know, just financial benefits because it was half a salary, it was no benefits. So I forewent retirement savings aside from any personal contributions, which I did make, and, you know, was on my partner’s benefits which was stressful because he worked for a very small firm. Health insurance was very limited and expensive, but that was a conscious decision on my part to forego the benefits, you know, real and kind of personal, associated with the kind that I would get in a full-time position.

31:10 Emily: Yeah, I think, so I also work part-time now because I can design my own schedule. I find it to be great. And I think a lot of people wish that they could negotiate for that kind of, like still keep their career going, maybe a little slower speed than before, but still on some kind of track while having a lot more time for their own stuff, for their own families or whatever it is that they’re doing. How long were you in that part-time role?

Transition to Full-Time Contingent Faculty Position

31:37 Sarah: I was in the part-time role, I want to say, for maybe a year and a half or two years. And then I sought a position elsewhere because I was ready to work full-time, and it didn’t seem like that was going to be an option at UNC in my department. And so I did get an offer for a full-time position at another institution. And as you know, the chips fell, I was offered a full-time position at UNC in the same department where I was. It was still research track. So I was completely contingent, which means that I ate what I killed. If I didn’t get a grant to cover my salary, I wasn’t going to get a salary ever or a full salary. So that was stressful. But I was taking into account, frankly, a couple of things. One was the kind of intellectual freedom that I would have being in this, even though it was not a tenure-track faculty position, I had the intellectual freedom to do investigator-initiated research. Another consideration was, I was just scared, basically, to do something new or to think about what else my career might look like. I was kind of already on a path, and it was frightening to me to think about doing something different.

33:08 Emily: I see. So, were you at UNC that entire time, or was your postdoc at a different institution?

33:13 Sarah: No, my postdoc was at UNC and its Cancer Center.

Sarah’s Finances During Full-Time Faculty Position

33:17 Emily: I see. I think you’ve talked about on your podcast about the relative of merits of staying at an institution, right? The same institution where you did your graduate work. So yeah, I’d love it if you could give me an episode and I’ll link to it in the show notes for like further discussion about that. For our purposes, now you have this full-time role. You know, you’re going after your own grants, but you get to set your own salary. What do you want to say about the finances during that stage?

33:45 Sarah: I have to say that it was a kind of delay cognitive shift, because I doubled my salary overnight and I was still functioning as though I made half of my salary. And, you know, I really, because I had never confronted or taken the time or the initiative to closely examine my finances, I couldn’t adjust my thinking around finances or how I spent my money. Again, my M.O. was just make as much as possible and spend as little as possible. And I think that, on the one hand, that continued to work out relatively well, but on the other hand, it meant that I was really deferring to my partner for all things, all financial decisions. And I do not recommend that. I cannot overemphasize, and I remember sitting down with a financial planner who helped my partner and me before we got married.

34:50 Sarah: And she said, you need to focus on this. You need to pay attention. And I, honestly, where my brain was was to say like, I’ll figure it out when I need to. Like, right now, I’m overwhelmed with everything I have on my plate. And I don’t want to think about it. There was nothing anybody could have said to convince me to pay more attention to it until I was ready, which is kind of my personality anyway. But at this stage, it’s much harder to wrap my head around things because things are much more complicated. And I would like to think that if I had started earlier and focused when things were simpler, I would be able to keep up a little bit better now. Now that I really am taking the bull by the horns, I am able to get my head around it. I’m happy to say I was right. You know, I need to figure it out now and I am figuring it out, but it’s much more complicated than it would have been, say, when I was in graduate school.

35:50 Emily: I think that’s a really, really great message for the people listening who are starting their adulthood, right? And I actually have, not about finances generally, but I kind of say the same thing about taxes, actually. Like when you start understanding how your tax return works and how income tax operates when you have a simple income, a small income, you know, no assets, no house, no all this complexity that can come like later on, as your financial life gets more complicated, your taxes also get more complicated. And so I can definitely see how, yeah, if you were deferring this work to your partner for all those years now, suddenly you open your eyes and you have this wonderful paying job, but you’ve got the two kids and you have all the different, you know, aspects of your finances that are going on. I can definitely see how it could be certainly overwhelming, but I’m really glad to hear that you’re finally, you know, deciding to take charge of it. So definitely the advice is pay attention when it’s small and, you know, your knowledge will grow as your finances become more complicated. Yeah.

36:52 Sarah: Absolutely.

36:54 Emily: Is there anything else that you want to say about your finances during that period when you were still at UNC, but at the full-time role?

Negotiating Salary as Research Track Faculty

37:01 Sarah: The only kind of negotiating advantage one has as a research track faculty member is that the institution is not on the hook at all for the money that they’re paying you. Because it’s not them paying you. It is completely grant funding. And as a non-physician research scientist, there is no amount that, you know, if I were a physician and I made over the NIH cap, then sure, the institution would have been on the hook for the remainder, but that wasn’t the case for me. So, that was something where I didn’t feel like it was asking too much. So, I did kind of push that a little bit more than I would have otherwise when I was negotiating that retention package.

37:53 Emily: Because as you said earlier, you’re completely funding your own salary. Plus, the research expenses, the lab, whatever it is, well, you said you weren’t lab-based research, but whatever it is that you’re funding costwise.

38:01 Sarah: Right, exactly.

38:02 Emily: Yeah. So, what I’m taking that to mean is that you can set your own salary, but there’s some input from the institution and you don’t want to shoot too high because then you’re running through the grant money more quickly. Is that right?

38:13 Sarah: I mean, that is a consideration, although you kind of put in for a percent effort, but that will eat up the research budget a little bit. That wasn’t something I thought of too much, just because I think the kind of incremental chunk of the overall budget that my salary would take up, you know, a $5,000 increase in my salary, isn’t going to blow my budget.

Sarah’s New Tenure-Track Position at Wake Forest

38:40 Emily: Gotcha. Let’s talk about your new position now. What prompted you to go for it and be willing to leave UNC?

38:49 Sarah: Oh my gosh, it was such a process, but I had a career development award. That is how I funded 75% of my salary for the time, the three years that I was in a full-time position. The other 25% was made up of teaching and other kind of co-investigator positions. And as I near the end of my career development award, you know, the writing was on the wall. I was going to have to, you go from 75% of your salary being covered to, you know, whatever you can pull in with grants. And after your career development award is over, as a, you know, an academic researcher. You’re never going to have a grant that’s going to cover that percent of your salary again. It’s just, you know, you might, if it’s a really generous project, you might get 25%, but usually it’s more on the order of like 10, 15, 20% of your effort.

39:47 Sarah: And that means that you’re on a lot of projects. And funding being what it is, it did not seem like something that was viable for me in a research track position, being able to pull in enough money to support the lifestyle that I had come, you know, again, I was still not spending a ton of money. But, you know, we moved from a smaller house to a bigger house. We had bought a new car by that time. These are things that do add up and, frankly, I wasn’t excited about making half a salary anymore. And, you know, one of the things that happened when I was on faculty was I just wore, in graduate school and for the postdoc, I really just more whatever clothes I had and I just didn’t really care. And something happened and I was like, I love clothes. And I still only buy used clothes to the extent possible. I really am like a big consignment person, but still, these are kind of the orientations that shifted a little bit. So.

40:58 Emily: I want to actually interject there because I think it’s, again, I’m so pleased to speak with someone who’s a little bit further on in their career, because I think this is a great perspective to have that the lifestyle sacrifices that you are willing to do in your twenties might not be ones that you’re willing to do later on. Now, of course, within personal finance, there’s this FIRE movement and there’s lean FIRE, which is, you know, keeping your lifestyle capped at this really low level. And you expect to live on that in perpetuity, maybe for a subset of the population that is acceptable. But I think most Americans on average kind of want to spend more as they, you know, advance through their lives. They grow accustomed to certain comforts and little luxuries that they want to keep around. So, I think that’s a perfectly reasonable perspective. It’s something I’ve observed in myself as well of, yeah, growing to like a little bit more spending once it’s available and not wanting to backtrack from that.

41:53 Sarah: Yeah, exactly. Yeah. And so, you know, going through a tenure-track position was, in some respects, kind of just a psychological shift. I knew that I could probably find a position that would have some startup, which would cover a part of my salary and kind of the percent coverage that I would have would decrease over time. This is kind of the way things go in my field. But that psychological comfort of knowing that I didn’t have to pull in a hundred percent of my salary based on grants was enough to pull me away. And it was time for me to find a position that felt more secure. So, really it was just psychological. I am in a soft money position now, but I like to call it, you know, semi-firm because it is, you know, my startup package was such that I started out with 90% of my salary funded and then it will decrease over five years to 65% of my salary I need to pull in from outside. And my thinking was, if, you know, I’m five years into a tenure-track faculty position and I can’t pull in 65% of my salary, then I probably shouldn’t be doing the kind of research that I’m doing. There’s a little bit of wiggle room because there are lean years, but I feel like I should be able to do that. So, it felt very fair.

43:27 Emily: Interesting. Yeah, this is, it’s kind of a lesson in like betting on yourself, I guess, that you’ve gone through. That is to say, you’re giving yourself a little bit more time for that transition by getting your salary covered again, but you’ve just sought out the structure within academia that makes you feel comfortable at any given time. I really love this lesson about like negotiating for what you want. Like when you did the half-time position, then, well, you phrased it as if it fell into your lap, but somehow you managed to get that to be a full-time position. So, presumably there was some kind of negotiation going on there, or at least going after a position. Yeah, I really like how you’ve been kind of flexible and gone with what you want and what you feel comfortable with, through these you know, through this arc of your career. Is there anything else that you want to say about negotiating that startup package?

Negotiating a Startup Package

44:13 Sarah: Yeah, I mean, I think it’s important to acknowledge a couple of things. So, one is kind of a small thing, but it was really important. When I was a postdoc, I attended a seminar given by an expert in negotiating. And one of the things I remember from that was, you know, well, two things I remember from that, one was start with a win. And the other thing was, you know, you can be honest about what you’re hoping for in terms of the outcome. And so when I was faced with the opportunity to negotiate, because I had been offered a position, I took those things to heart. So, I knew that I wanted the position. And so I didn’t, you know, make any effort to suggest otherwise. I said, I really want this to work out. I’m looking forward to finding a way that we can make that happen so that we’re both happy. And I think that was true and it was nice and it made for a really comfortable negotiation.

45:15 Emily: Yeah. You’re sort of establishing from the beginning, like we’re going to be working together. So let’s make this a pleasant process and both get something that we want here.

45:24 Sarah: Exactly. And, you know, I think I had very different expectations about what the salary was going to be, not very different, but sufficiently different, that that was one of the things that I wanted to negotiate. And we came to a place that we were both happy with. And the startup package made up for kind of any, you know, difference between what I kind of thought the salary was going to be versus what it was. And I certainly came out of the negotiation feeling really good about where things landed. And I think my chair did too.

45:58 Emily: Yeah. I think that’s the best kind of outcome is that you, it’s actually something that I like to say about discussing finances generally is that you, you learn a lot about another person by sort of exposing your values through discussing how you handle your money and what your aspirations are and so forth. And this the same kind of thing could happen through negotiation. My husband actually was in, it wasn’t a negotiation, but it was a performance review recently. And he was asked by his supervisor, well, what motivates you? Is it more salary? Is it more something else? Like what’s going to really, you know, get you to do great work for us? I thought that was a great question, you know?

46:34 Sarah: Great question.

What Motivated You to Face Up to Your Finances?

46:34 Emily: Yeah. Is there anything else that you want to add about, you know, finances through this arc? Do you want to talk about what motivated you to finally face up to your finances and do that whole process?

46:48 Sarah: You know, I turned 40 this year, last year. And I think with taking on a new position, really, it was, I mean, I should emphasize what a big deal it was for me to leave UNC. I like control. I like being able to anticipate what things are going to be tomorrow. And for me to take the leap to leave an institution that I had been at for five years as a faculty member for three years as a postdoc and for seven years as a graduate student was huge. Huge. Especially since I had had several opportunities prior to that to leave and I hadn’t. So, I think, you know, a combination of turning 40 and having succeeded in shoehorning myself out of my comfort zone and, you know, emphasis on the succeeded. Because I really did succeed.

47:47 Sarah: I got exactly what I wanted. That empowered me to be like, Oh, I can do this. Like I’ve got skills, I can handle this. So, and I, you know, I now work with, and there’s a website called Personal Capital that I use and I’m working with a financial planner through them and just getting a hold of the basics. I think I’ve just come to recognize that I have skills, and I’m smart. And I just need to approach this in a really pretty straightforward way of like, I make money, I spend money. I should be able to know what those things are and have a full picture. And I owe it to myself to have that full picture. And hopefully all of the kind of, you know, considerations I have when I look back at my trajectory, I can think that moving forward, I’m going to have a much clearer picture and I will be able to make decisions that are fully informed.

Best Financial Advice for Another Early-Career PhD

48:52 Emily: I’m so glad that you’ve come to this point. And isn’t it fortuitous that I asked you to come on the podcast right at the same time as you’re going through this personal journey as well? You have a new lease on your financial life now. It’s wonderful to hear. So, Sarah, as we wrap up, the question that I ask all my guests is what is your best financial advice for another early-career PhD? And that could be something that you want to emphasize that we’ve already touched on, or it could be something completely new?

49:17 Sarah: Well, I mean, I guess I’ll just double down on the idea of, I think if I could go back and tell myself it would just be, for me, I like things as simple as possible. I would just break out a spreadsheet and put in my income and start tracking my spending. Like that’s pretty easy. It really is. And it’s really easy now with all the apps. And I think that just doing that is a first step. And then you start to get curious, like, okay, well, what do I do with the gap between what I make and what I spend? Okay, I got to do something about that. Or what do I do if I have a little extra? What can I do with that? And it kind of can be a natural progression.

50:02 Emily: I think that’s exactly right. I’ve heard that from other guests as well. And it’s something I went through myself is just that very first baby step is just to start tracking. Just to write down what’s going on, and then you don’t have to push yourself to start budgeting or do anything complicated right away. Just start observing what’s going on. And then as you said, you’ll become curious, you’ll naturally start to make changes. Yeah, I think that’s wonderful advice. Well, thank you, Sarah so much for this interview. It’s so fascinating to learn about, you know, the arc of your career and how your finances have changed through all of that as well.

50:30 Sarah: This has been lovely. Thank you so much for inviting me.

Listener Q&A: Taxable Fellowship and Scholarship Income

50:38 Emily: Now, onto the listener question and answer segment. Today’s question was asked during a live tax webinar I gave recently for a university client. So, it is anonymous. Here is the question. Quote, “How does the IRS verify the amount of taxable fellowship and scholarship income that we report on our form 1040?” End quote. I love answering questions during live events, and I especially love questions like this one that are completely unique. I’d never been asked this one before. It sort of goes to this fundamental thing about income tax in the U.S. which is that the IRS does not necessarily know in advance what your tax liability is. You are really telling the IRS what it is through generating your tax return. So there’s a lot of individual responsibility there, and there’s also kind of a lot of, you know, trust on the IRS’s that you are doing a good job at reporting, you know, your income and your expenses and so forth accurately. That is, unless they decide to audit you. Anyway, that’s pretty unlikely for a grad student.

51:39 Emily: So, to give you some context for this question in the workshop, I talk a lot about how to track down all of your income sources as a graduate student and also all of your qualified education expenses. Now, if your university issued you a form 1098T, you would think that that 1098T would be a complete record of those two things, but it is not. I emphasize in the workshop that it’s very common for graduate students to have additional qualified education expenses not listed in box one of the 1098T that they can use to reduce their taxable income, and therefore, ultimately, their tax liability. So, the question is basically asking, well, if my taxable scholarship and fellowship income is not simply box five of the 1098T minus box one of the 1098T, how does the IRS know that I actually have those expenses?

52:32 Emily: Or how does it know that I did my math right on the subtraction? And my answer, at least for U.S. citizens and residents, is that the IRS doesn’t really know what went into calculating that taxable scholarship and fellowship income, at least when you first submit your tax return. All you’re reporting is that net number, the taxable fellowship and scholarship income. You’re not putting on your tax return anywhere your total scholarship and fellowship income and your total qualified education expenses, only the net of those two. So, in that tax return, you’re not showing the math, right? You’re only showing the answer. However, my firm suggestion is that you keep your notes on this process. Keep the receipts. Keep the records of all the qualified education expenses and so forth. Because while unlikely, it is possible that the IRS may come back to you and say, Hey, we don’t understand where this number came from of your taxable scholarship or fellowship income.

53:31 Emily: What is it? What went into this calculation? And then you’ll be able to show how you did the math there. It’s not something you have to submit in your initial tax return, but it is very handy to keep around for several years in case the IRS does question your return. By the way, that’s not necessarily a full formal audit. It could just be something that you respond to in a brief letter or over the phone. I’ve actually coached several graduate students through something similar to this process where the IRS didn’t understand how they were reporting their grad student income. And they were able to, you know, write a coherent letter, justifying it, and the issue was put to bed. So I loved answering that question in the live webinar. I’m glad to have been able to replicate that for you here. By the way, there are two ways that you can get more of this kind of tax info in your life.

54:17 Emily: One is that you can join my tax workshop, which is called How to Complete your Grad Student Tax Return (and Understand It, Too!). You can join that as an individual, or actually you can even make a bulk purchase. Like if you want to arrange that through your department or grad student association or something. You can find out more details about the tax workshop at pfforphds.com/taxworkshop. I am also available for live events. Believe it or not in previous tax seasons, I have been booked late in March to give an event actually that was in-person that year in early April. So, if you want to bring this kind of material to graduate students and even postdocs broadly within your university, please just email me, [email protected], to kind of get the ball rolling on that. If you would 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

55:21 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.