In this episode, Emily interviews Ariel Floro, a second-year PhD student at the Buck Institute for Research on Aging in northern California. Ariel details her budget, from the mechanics of her system to the emotional benefits she experiences. Ariel started budgeting after finishing her bachelor’s while she worked as a research associate, and she was able to adapt that system to still work for her with a lower income in a higher cost of living area. Ariel explains why she believes budgeting is an essential activity for every graduate student.

Links Mentioned in the Episode

• Emily’s E-mail Address
• PF for PhDs S14E11 Show Notes
• Budgeting Apps
  • Mint
  • EveryDollar
• PF for PhDs Season 15 Contribution Sign-Up
• PF for PhDs Subscribe to Mailing List (Access Advice Document)
• PF for PhDs Podcast Hub (Show Notes)

Teaser

00:00:00:00 Ariel: It just gives more control and power overall and not being so, not feeling like we’re like completely powerless to, you know, grad students just make this and that’s just how it is. And I’m poor and I can’t really do anything. And I know it is really hard to live on the income that we have now, but it gives us some control back and some power so that we can really set ourselves up well financially in the future.

Introduction

00:00:27:20 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. This is Season 14, Episode 11, and today my guest is Ariel Floro, a second-year PhD student at the Buck Institute for Research on Aging in northern California. Ariel details her budget, from the mechanics of her system to the emotional benefits she experiences. Ariel started budgeting after finishing her bachelor’s while she worked as a research associate, and she was able to adapt that system to still work for her with a lower income in a higher cost of living area. Ariel concludes by explaining why she believes budgeting is an essential activity for every graduate student.

00:01:29:22 Emily: If you’ve been getting value from this podcast, would you please do me a favor? This is a perfect time of year to recommend me and my work to a potential host or sponsor at your university or alma mater. In case you didn’t know, I offer numerous personal finance seminars and workshops on topics like financial goals, investing, budgeting, and debt repayment, all tailored for graduate students, postdocs, and/or prospective graduate students. These are in addition to my tax workshops. If you think that you and your peers would benefit from my teaching in the upcoming academic year, please recommend me to your graduate school, graduate student association, or postdoc office. My seminars are usually slated as professional development or personal wellness. These recommendations help me get my foot in the door with new clients or remind past clients of the need for this material. If you choose to recommend me over email, please cc me, [email protected], so that I can pick up the conversation. I really rely on these types of recommendations and appreciate them so much. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! You can find the show notes for this episode at PFforPhDs.com/s14e11/. Without further ado, here’s my interview with Ariel Floro.

Will You Please Introduce Yourself Further?

00:03:04:12 Emily: I am delighted to have joining me on the podcast today Ariel Floro. She is going to speak with us about her budgeting journey during graduate school and prior and all the things that she’s learned and how much budgeting has benefited her. So, Ariel, I’m really pleased to have you on the podcast today. Would you please introduce yourself a little bit further for the audience?

00:03:21:09 Ariel: Yeah, thank you so much for having me here. So, as you mentioned, my name is Ariel. I’m currently a second-year PhD student at the Buck Institute for Research on Aging, which is in NorCal up in Novato in the Bay Area. And it is a joint program with the University of Southern California.

00:03:41:07 Emily: Alright. I can already see that it’s going to be a very interesting conversation because obviously, budgeting is especially challenging in a high-cost-of-living area. So, actually, let’s get some groundwork out of the way first. Do you mind sharing how much your stipend is?

00:03:56:24 Ariel: Yeah, our stipend is $38K per year, which actually just recently got moved up.

00:04:01:21 Emily: Okay, nice. So, we’ll be talking a little bit about, I guess, last year. What was it like prior to being bumped up?

00:04:07:15 Ariel: It was $34K last year.

Budgeting: Peace of Mind

00:04:09:01 Emily: Okay. So, 34 up to 38, sounds decent, but again, very high cost of living area. So, I’m really curious about your strategies here. So high level first, what benefits have you enjoyed in your life thanks to your budgeting practice?

00:04:25:19 Ariel: The first thing that comes to mind and I think is really the key one, is just peace of mind amongst many different fields. So, the main thing knowing that because it’s such a low income, knowing that I’m not spending more than I actually have, because that just like really terrifies me. And along with that, just giving myself the freedom to enjoy time with friends, like going out to eat or do other fun things.

00:04:49:00 Ariel: And so that I know that if I budgeted a certain amount of money for that, then I have the freedom to really just not stress out about it and enjoy it and not like freak out or like, “Oh, I shouldn’t be doing that,” or feel guilty in any way. That’s the main one. I would say the second one is just planning for saving more or like financial goals, and just know that even though again, because it’s kind of like a low income at this moment, I’m still setting myself up well for later, even if it’s just investing a little bit of money or saving a bit of money, like any bit helps and kind of helps to build that habit.

00:05:22:07 Emily: So, it sounds like in your case, a lot of times people have this like kind of avoidant behavior with their finances, like it stresses them out, so they don’t want to look at it. But it sounds like you’re like me, which is that it was it was stressful not to know. And so, it’s easier to look and make the plan and execute the plan as best you can. Is that right?

00:05:41:12 Ariel: Yeah, definitely.

00:05:42:19 Emily: So, how did you get started with budgeting? Did this start in graduate school or were you budgeting in at any point prior to that?

00:05:49:22 Ariel: Yeah, the minute I graduated from undergrad, I worked as a research associate for two years and between, and once I knew that I was having a steady income, I knew I had to budget the first dollar that came into my bank account. And so, I have kind of been planning, you know, since that time and really built up the more efficient process that I have on budgeting now.

00:06:12:23 Ariel: I also saw it as once I knew I was going to go to graduate school while I was working as an RA, I took even more power over my budget at that time and said, okay, I’m making more as an RA right now than I would be as a graduate student. So, I’m going to make sure I know the ins and outs of my entire budget so that when I do move to that lower income, I know where I can cut costs where I want to, you know, what I can sacrifice and this and that.

Gap Years Working as an RA

00:06:40:16 Emily: Give us a few more details about that time you spent as an RA. Like, where were you? You said you’re making more, but how much more?

00:06:48:16 Ariel: Yeah, I was at UCLA working as an RA, and I think starting I made about $40K and then it jumped up to maybe a little over 45. But at the end I was making a good amount. Yeah, so that was all in L.A. and I was just planning out. Rent there is still more expensive. But you know, there are a lot of areas around L.A. that you can find cheaper places. And so, I had a roommate, we lived in a two-bedroom, two-bathroom place, which is a really good spot.

00:07:19:13 Emily: Okay. So, it sounds like your experience going from being an RA to a graduate student, your income is going down a bit. Your cost of living is probably jumping up a bit, but not huge shifts in either of those directions. So probably a lot of what you learned as an RA, that is to say with your budgeting as an RA, was able to apply. Do you want to tell us any more details about you know, you said you kind of took more control of your tightening up and then how you did that transition into graduate school with your budget?

00:07:46:24 Ariel: Yeah, I think I was definitely the main thing is I like to go out to eat a lot with friends and I’m sure a lot of people do. So, I realized that that was probably the first thing I was going to cut down was just eating out and food and being more intentional about cooking meals and like looking at prices and not just like, “What am I going to cook today?” and then just buying things off of the shelves. The other interesting thing about my program is that because we’re at the Buck Institute and USC, we actually spend our first semester at the Buck Institute, and then we have to move to USC for the second semester. This is all within the first year. And so that was another cost that my cohort and I had to think about is moving here and there and then having to do short term leases. So, I would say also the way that I budgeted this past year is different than now because I had to keep in mind just having money to move and my rent actually was even higher because it was a short-term lease.

00:08:42:10 Emily: Yeah, that’s a big financial challenge to throw at a first-year graduate student of living in two different places. And then I understand, so it was like you were living in the L.A. area, then you moved up to Northern California, then you moved back to the L.A. area. Now you’re back in Northern California. Okay. So, at least you had some familiarity with those areas.

Mechanics of Budgeting

00:09:01:04 Emily: Let’s talk more about kind of like the mechanics of how you budget. Like, do you use software? Do you use your own spreadsheets? How often are you looking at or touching the budget?

00:09:11:12 Ariel: Right now, I use an app on my phone, and I know there’s some there’s one called Mint that I’ve tried to use and it doesn’t really work that well for me. I actually use an app called EveryDollar, and I’ve used that since the beginning where they have every line item, you know rent and food for groceries, you can even add certain funds in there maybe if you’re saving up for something. And so normally, like in the beginning, I kind of took a couple of months to figure out what I was spending each month on certain things and realizing I probably spent more on eating out than I thought I did and other things like that. And so, then I kind of started to regulate and now it’s a lot faster where I just kind of copy last month’s budget and I go through and make minor changes. If I maybe have a friend’s birthday or something that I have to buy a gift.

00:09:59:18 Ariel: And the other thing that I really like about the app on my phone is that some of them can connect directly to your bank accounts or your transactions can go directly into them. But the app that I use, I actually don’t have that software for that just because it’s an extra fee for it. But I do have my bank account app on my phone, and anytime I use my debit card that’ll show up as a transaction, as a notification in my phone. And so, I kind of see those notifications build up as like a to-do list to enter into my budget later. So, I end up probably looking at it at least I once every couple of days, maybe once a day even.

00:10:36:24 Emily: Okay, so two things I want to follow up in there. So, one, budgeting, I mean, we’ve been using term budgeting, but I really think of budgeting as two different actions. So, one is budgeting, which is telling your money what to do in the future and the other is tracking, which is making sure that your money did what you told it to do. And that’s like the accountability portion of it. So, you just mentioned both of those, right? So, on the budgeting front, you are creating a unique budget for every single month. It’s based on, you know, roughly templated from what you did last month. But you’re making those individual tweaks for what’s going on in this current month, is that right?

00:11:10:03 Ariel: Yes.

Manual Tracking of Spending

00:11:10:24 Emily: And then the tracking component of it, like you, I’m a little bit familiar with every dollar, so you can pay a fee to have your transactions automatically down a little, but you choose not to. You are manually tracking. And what I love about that is, of course, it does take some time and it takes, again, accountability with yourself to stay on top of it, like you just mentioned, your system of notifications, but it keeps you very, very intimate with your numbers. There’s no like escaping, facing up what you did with your money as long as you are keeping up with the tracking. So, I think that works really, it’s not for everybody, but I think that works really, really well for some people. Can you maybe give us an example of how the manual tracking specifically has helped you? Like in behavior change, for example?

00:11:54:24 Ariel: Yeah, I mean, even just if I stop at a Starbucks or something and get a coffee and then I have to put that into my budget. And since the interface is very easy to look at, sometimes I just kind of end up scrolling through the rest and, you know, I might say, “Oh, okay, I actually only have like $40 left for eating out and it’s only like halfway through the month or something like that.” Then I can kind of keep track and keep an eye out and like, how far into the month I am and versus how much I’ve earmarked for all of the things that I budgeted for.

00:12:29:00 Emily: So, you mentioned that you started with this budgeting practice the minute you graduated from college and had this regular, you know, salary coming in. What was it that inspired you to start budgeting at that point, and maybe why not earlier?

00:12:44:21 Ariel: Yeah, I think my dad was a big influence and wanted to set me up well financially, where even going back to like the 2008 recession, I remember when our house had to go on a short sale. I mean, it was I just always style. My dad really stressed with money and so he was always, especially after that point and kind of getting a hold of his finances, he was always very intentional, telling me, like, I want you to do this. I want you to you know, when you have a steady income, you should start budgeting and kind of encouraging me to do a lot of that. And it made a lot of sense to me. So, I do attribute my dad to helping me a lot in that way.

00:13:19:03 Ariel: Before then, I didn’t really budget that hard because in undergrad I would get some income here and there. Maybe if I was teaching a private lesson for like a hobby or other things like that and I was just so used to saving anyway, it was I would just dump them into my savings. And then if I wanted to go out to eat, and I didn’t go out that often, right? Because college is just so busy, I kind of just knew, I just kept tabs on how much I had in my savings. So, it felt a lot easier once I was getting a steady income. I could say I’m making X amount of dollars per month and I’m going to designate each dollar in that to a certain point. So, I know exactly where my money’s going each month. And I felt like it gave me a lot more control over my finances and again, gave me the peace of mind to know that I’m doing okay.

Looking Ahead

00:14:06:18 Emily: Yeah, that makes sense. Do you think there’s ever a time in the future when you wouldn’t budget or would change the mechanics of how you budget?

00:14:15:24 Ariel: I do see a possibility where, if your income goes up significantly and the way you live your lifestyle stays about the same, you might have that flexibility where, you know, no matter how much you know, if you’re spending and living your normal lifestyle in your normal ways, that you’re always going to have enough in savings. I think that might be a way like a situation where you wouldn’t have to budget. But then I would still think that with the extra money there, you know, there’s a lot of potential other than just dumping it into savings. You know, you can put that into investing. You’d be giving it away to charity. So, I don’t know, I would say maybe rarely at this point, but I wouldn’t know for sure.

00:14:56:19 Emily: Yeah. You’re actually describing kind of the point that I am with my like budget right now, which is the way that I budgeted when I was in graduate school and for a few years afterwards is not necessarily serving me now with a higher income, but also different kinds of goals than I had before. So, it’s like, how do I have the income that I have, meet the goals that I want to meet, not overspend, but also feel more like relaxed about how much to spend and how to balance all that together. And we’re recording this in December 2022. So, like, I’m literally thinking about this of like for the new year, like how do I adjust my budgeting system so it works more with the current realities that I’m living in rather than, you know, kind of a holdover from what I was doing before? So anyway, just a little food for my thoughts there.

Commercial

00:15:42:01 Emily: Emily here for a brief interlude. We’re doing something special for season 15 of this podcast, and as a loyal listener, I know you’re going to want to be involved. Season 15 will be a chance to share your financial experiences, even if you don’t want to give a full episode interview or want to remain anonymous. We’re going to publish compilation episodes around certain themes, and each episode will feature at least a half dozen different contributors.

00:16:12:05 Emily: If you are interested in contributing, check out PFforPhDs.com/season15/. That’s the digits 1 5. On that page, you’ll find a list of the proposed themes and how many volunteers I’ve identified for each episode. Your next step is to email me at [email protected] to let me know which episode you’d like to contribute to or if you have another idea for the list. Once I’m confident that we have enough contributions for an episode to be created, I’ll give the volunteers specific prompts and directions to create their submissions. I hope you will choose to participate in this unique season! I can’t do it without you, so please get in touch! Now back to the interview.

Expected, Irregular Expenses

00:17:06:24 Emily: So, let’s get back to some more like kind of mechanics of budgeting. So, I wanted to know how you handle large irregular expenses. So, by that I mean maybe something that costs maybe a couple hundred, few hundred dollars that comes up very occasionally. And I’m always curious about this because I know irregular expenses are a really tough challenge for graduate students or anyone living on a tight income. So, how do you handle those? I mean, I know you already mentioned adjusting your budget, but let’s say for a really large one, how would you do that?

00:17:33:10 Ariel: Yeah, I think the main, so one of the points that came to mind is that you know, there’s large irregular expenses that might be unexpected and there’s those that are expected. And so, under the expected category would be things like I have a car, so car maintenance is something that’s, you know, large and irregular. I think since I’ve started budgeting, I have that as a fund where I put some money into a fund designated specifically as car maintenance. And then whenever that comes up, I know I have that fund. And I realized probably about this year that I’d put a lot more money in it that I may have needed to. And so that actually gave me a little bit of leeway for other irregular expenses, maybe like, like the current thing right now that I know is coming up is that I might want to buy a pair of skis which can be like a couple of hundred dollars or more.

00:18:20:21 Ariel: And so, if it’s something like that, then I can spend the past few months prior saying, okay, I’m going to put X amount into this fund. And then of course that might have to come out of some other aspect of my budget and just, you know, it’s only just for those three months and then I’ll have the amount needed for the item and then I can purchase that. And then other times maybe if I just, at the end of the month, I will go through my budget. And because some of the times what you actually planned isn’t going to be exactly what I end up planning, or what I end up actually spending. So, I might find that, oh, I didn’t spend as much on gas as I had expected to. I can put the excess there and to just general savings and I’m sure something might come up. But I do like having a good amount, like maybe like a little bit more in liquid savings in cash I have on hand just because I know things can come up here and there.

00:19:12:20 Emily: So, when you say, you know, moving money into general savings or moving in to a certain fund, is this like different bank accounts or is this maybe within your budgeting app, you’re like allocating things differently?

00:19:23:03 Ariel: This is within the budgeting app, so it’s all within my bank account. But just in terms of my like where I’m mentally earmarking them, that’s how that goes. And I also do have some investment accounts. And so, then if I know I want to put more into investing than I actually have to like deposit that into that account.

00:19:43:07 Emily: Okay. But you are operating for all of your cash out of a single account. A single checking account.

00:19:48:13 Ariel: Yes.

Money Mindset of a Saver

00:19:49:18 Emily: What stops you, psychologically, from spending how you didn’t allocate? That was always my temptation and the reason that I don’t use a single account for everything is that I would really be tempted to move things around.

00:20:04:04 Ariel: I think I also have just been a saver since I was little. If I would get like $20 for Christmas, I was like, “Oh, I’m going to save this all so when I get older, I’m going to have a lot of money and be financially stable.” I have with my bank, I have like a checking and savings, and technically my savings I have what my emergency fund and the checking I have right now, it’s just the remainder of my cash. But I think just because I am naturally such a saver, I do kind of get like a, I guess I don’t know if it’s a reward or reward thing when I see a bigger number in my account, but it just makes me feel safer. So, I put more towards savings and not just spending it.

00:20:44:11 Emily: And you also mentioned a moment ago about like if you come in sort of under budget in some categories, you said gas specifically. So, for your variable expense categories like gas, are you usually coming in under budget? Like have you set a generous enough budget that that’s a typical thing that you spend less? Or if not, what do you do in situations where you have overspent the budget?

00:21:06:01 Ariel: Most of the time, I put in roughly about the amount like, I’ve tightened my budget now to where I spend the amount that I plan to. There might be some instances where if I’m expecting to spend say $200, if I maybe carpool with friends to an event that we’re going to and they’re nice enough to not or they don’t ask for gas money or I tend to drive back home because I’m from L.A., so I tend to drive home a lot. And so, I know I’m going to be spending more on gas in those times. And again, that’s just a thing that if I know I’m driving to L.A., then I’ll add it in more money into the gas budget the beginning of that month. But most of the time, I think they stay pretty closely. I mean, if I come under budget on some categories together, that might come up to maybe 100 bucks, but that’s still like 100 bucks more I can put in the savings versus not really planning for that before.

00:22:05:22 Emily: So, it sounds like you’re keeping like you have a dynamic budget, from month to month you do. In the course of the month, do you also update what you budgeted for that current month?

00:22:15:21 Ariel: Yeah, I think there’s times where that could happen. I think that like one of the examples is maybe if I know I want to go out with friends and do another thing or if there’s a concert or something, and then I’m like, “Oh, I really want to go to this concert,” I would take out from my eating out budget to spend more on going out to a concert, for example like that. So, it is very, very dynamic and I think that’s super easy to do being a single person and just having me on the app. So, I really, again, I really appreciate the mobility of having the app on my phone and just deciding wherever and whatever I want. As long as it’s within the monthly income, I still know that I’m still planning where everything is going.

Unexpected, Irregular Expenses

00:22:57:21 Emily: Gotcha. And when I was starting to ask you about irregular expenses, you mentioned four expected irregular expenses. That’s a system that I called targeted savings. What about for unexpected irregular expenses? Are there any unexpected irregular expenses in your life, or do you expect everything?

00:23:14:05 Ariel: I think maybe some unexpected might be medical or something. And I know I always have an emergency fund on hand for that. I just again, I’m such a saver and I’m kind of in a transition period right now because I moved. And so, I do have a heftier amount of cash in my checking than I probably normally would. But for unexpected ones, I could always dip into the emergency fund and take that out. If it was like an E.R. visit, for example, but then the next month would have to be really hunkering down and replenishing the emergency fund back up to what it was before. Then I can go back and do fun things and all that.

00:23:54:01 Emily: Yeah, I think that system makes a lot of sense. And like the way that I sort of define an emergency is an unexpected but necessary expense. It can’t be discretionary, and you should try to anticipate everything that you reasonably can. Yes. If you get into like some sort of major accident or unforeseen illness, of course those things can happen. You may not have prepared for that. I mean, that’s why we have insurance for, right? So like insurance then accessing your emergency fund, that really makes sense. But yeah, under sort of my like system, you would you would anticipate everything like you would really spend some time brainstorming like the things that could happen and setting up either targeted savings or like you, just a general dynamic, flexible budget that will help you meet those expenses when they do come up. And then if something is truly necessary and truly unexpected, hey, that’s what your emergency fund is there for. And like you said multiple times so far, like it gives you peace of mind to have this money in your savings, in your checking, to know that you know you’re spending within your budget and so forth, living within your means.

Regular Expenses: Housing, Transportation, and Food

00:24:54:00 Emily: Zooming out a little bit more like high-level speaking about your budget, how did you set your large regular expenses like housing, transportation, food? How did you set those up so that you are able to live within the stipend provided?

00:25:11:13 Ariel: Yeah, I think even from, so again, going back to once I graduated and started as an RA, even those months prior, it was my dad and I kind of just he was helping me form what a budget is. And so, we were saying, well, you know what would rent be? I’m going to estimate this and maybe get an idea of if it was me going into an RA position, I would get an idea of what RA’s normally make and the rent that was in the area or some of the areas that I wanted to live in and just kind of do like a mock budge then and get an idea. And so, once I had had that, it was actually pretty similar because I set a rent estimate that ended up being pretty much exactly to what I ended up spending for that. And so, that was pretty easy to transition into. And now coming into this program, like the first short-term lease that I had to take for moving up here, I just did the same thing. I kind of mock budgeted on my app and I put in, “Okay, I’m probably going to spend this amount on rent. How is that going to look? Where am going to have to cut? Can I even afford this?” And it really was just kind of trial and error through the app and me taking time and sitting down and manually doing it.

00:26:22:03 Ariel: Because I know that a lot of the general advice for how much you should be spending on rent based on your income is always like, I feel like doesn’t really apply to PhD students because you spend way more. But I was just making the mock budget and when I had moved back to L.A. for that short-term lease, it was also kind of tricky because then instead of renting a place, I did like an Airbnb, and that meant that utilities and everything were included. Plus, it was for a four-month period of time versus sometimes you have to be locked into like a six-month lease. And so, with that one, I kind of had to budget long-term, but it was still amongst the same principles of just trial and error, trying it and seeing if I could do it, where would I have to cut? Is this okay? And this and that.

00:27:08:14 Emily: Let’s put aside the short-term leases because that’s obviously, it’s a big challenge, but it’s a little bit like unique to your situation. Let’s take the example of when you moved back to start, what I presume is you’re now on a year-long lease, right? Currently?

00:27:21:13 Ariel: Right now, my situation’s a little interesting. I came back. I’m actually living with my boyfriend’s parents because of some personal things with him moving back. And so, we had just signed a lease. We’re signing on to a one-year lease now. So, now I’ll be on a 1-year lease.

00:27:38:22 Emily: Okay, so in this process that you’re currently in of figuring out your housing expense for the upcoming year, locked in for a year, how are you like researching the market? I mean, obviously, you’ve lived here prior as well, so like that gives you some insight, but how are you figuring out like what’s reasonable, what is attainable for you to spend on rent in this area so that you can build as your budgeting model?

00:28:00:20 Ariel: I think just getting an idea of if you go on any of the apartment’s websites and saying what the average, you know, one or two-bedroom or three-bedroom places depending on roommates and stuff, I’m getting an idea of that. I also like when I was originally in L.A., I paid about $1200 a month for rent and I was pretty comfortable with that at that time. And even though I’m at a lower income now and knowing that it’s higher cost of living here than it was when I was in L.A., I ran the numbers again and know that looking at that, that if I do $1200, I could still be pretty good with that and feel okay.

00:28:40:16 Ariel: It’s still super tricky to find that around here. And so, my boyfriend and I actually had spent a lot of time kind of like researching like when is rent really low and rent prices are really low in winter. And so, we’re really, really grateful to have his parents nearby and letting us live with them to figure that out. But I think about like around here, I have a friend who has a one-bedroom for $1600. I have three friends that are paying, like two of them are paying $1100 and the other one’s paying $1400. And so, kind of those seemed pretty similar around to the $1200 range that I had thought. And I just realized, you know, if I did end up having to go higher like $1300, that’s just something I have to figure out. Because I really do want like my own room, if I was going to live with roommates and other things I would have to consider and just realize like a lot of things like that.

00:29:34:02 Emily: Yeah, that makes sense. I love that you mentioned that you actually know how much your peers and friends spend on rent. It’s a topic of conversation that is not as taboo among graduate students as it may be at other times in your life to kind of like share that information. So, I’m really happy about that.

Why is Budgeting Essential for Grad Students?

00:29:47:20 Emily: So, kind of to wrap up here, why do you think that budgeting is essential for graduate students?

00:29:54:10 Ariel: I think as I mentioned before, the number one thing is just that we have such a low income anyways, and it’s really vital knowing where all your dollars are going and you don’t run any risk of overspending. Like I know somebody in my program who is like, “Yeah, I kind of just put my card and see what happens.” And hearing that really just did kind of terrify me. And so, you don’t want to accidentally go into debt or you’re just more intentional. It’s more about the overspending that I think really like scares me a bit. And I think that alone is like the biggest goal to come out of a PhD without any debt.

00:30:32:09 Ariel: I was also actually pre-med and I didn’t want to go $200,000 into debt and so if that’s really one of the big things that I went into a PhD, I think that’s a good goal to have. And you’re still able to fulfill some financial goals, even though it might not be as high of a degree as you want to. It still really helps you to facilitate that and just gives more control and power overall and not being so, not feeling like we’re like completely powerless to, you know, grad students just make this and that’s just how it is. And I’m poor and I can’t really do anything. And I know it is really hard to live on the income that we have now, but it gives us some control back and some power so that we can really set ourselves up well financially in the future. Even if it’s not putting, you know, $300 into savings every single month, if it’s just building a habit of saving or building a habit of investing or building habits of this, this, and this, that’s really going to help you financially.

00:31:26:13 Emily: I love those points. Thank you so much for articulating that. I also think that budgeting is a really powerful and essential tool and especially because of not only like sort of the tangible benefits that we’ve talked about of having control of where your money is going and awareness and so forth, but also the intangible ones that just help you sleep better at night and everything.

Best Financial Advice for Another Early-Career PhD

00:31:45:03 Emily: So, I’m so thankful that you volunteered to come on the podcast to talk about this subject in detail, Ariel. And I want to finish up here with the question that I ask of all of my guests, which is what is your best financial advice for another early-career PhD? And it could be something that we’ve talked about already or it could be something completely new.

00:32:01:12 Ariel: Yeah, I would say my best advice, I mean, I’m also an early-career PhD, is having to do with investing. And I would say it’s best to start investing monthly, even if it’s something that seems kind of small and you’re wondering, is this even worth it? Again, it’s still just building that habit and building that, you know, like muscle memory and plus one is bigger than zero. So, I think anything is good. And I’ve heard some people, like a lot of people say a bunch of different things, like, “No, you should just save a lot.” And maybe it’s different for, you might be in a different situation. But I find that even just starting to invest at this time will help you get the habit once you graduate.

00:32:43:13 Emily: And to add on to that, I mean, the habit formation alone is a great reason to start investing or start budgeting or start doing other kinds of financial practices. But specifically with respect to investing, I think it’s really powerful just to get your systems like off the ground. Like with investing, you have to make a bunch of decisions, like especially with an individual retirement arrangement or an IRA, you have to decide which brokerage firm you’re going to house it at, you have to decide what funds you want to invest in. So those are like big, like they don’t have to take necessarily that much time to make those decisions, but the decisions have to be made and it’s really easy to procrastinate them. And so, if you aren’t, you know, determined to start your investing now, it could be something you end up putting off for years just because of the annoyance of like starting this system, right?

00:33:27:01 Emily: So, not only the habits but just getting like your account set up is like a great thing to do and it’ll facilitate, you know, continuing to invest going forward. Yeah, really easily. So, I’m really glad you brought that up. And I think you also want to give some advice about those two years you spent as an RA, right?

00:33:43:14 Ariel: Yeah. Those two years that I took in between undergrad and grad school were some of the best, like really was probably one of the best decisions that I’ve ever made. I was pre-med, I graduated and was a little bit unsure if I wanted to do a PhD because I was kind of not wanting to do med school at that point. And I thought, you know, what’s the rush? Let me work. I like research. Let me work in research and just figure things out. And just realistically, in terms of a PhD, it helped me figure out what I wanted to research for a PhD, what I wanted to get out of it, why I’m even doing it. But even after that, just taking the designated time for working and kind of settling into a bit of adult life and gaining an income, I really learned a lot and matured a lot mentally, emotionally, and as we’ve talked about financially.

00:34:35:07 Ariel: And so, I think those two years were really key for me to set myself out well for the rest of my time in grad school. And I can’t imagine like going straight from undergrad into grad school. I feel like that would be a complete whirlwind. So, that’s another thing I like to tell a lot of friends thinking about whether they want to take gap years or not, I think that’s like a really good time to kind of just figure things out on your own and plan out, you know, everything across the board or just, you know, just figuring out what you want to do.

00:35:02:17 Emily: And I know we already talked about you like starting your practice of budgeting that period of time, but were you also able to come into graduate school with some savings? 

00:35:12:11 Ariel: Yeah, I saved good chunk just because again, the habit. So, I think going into graduate school, I would save just general savings monthly however much I wanted to. I hadn’t invested at that point because I knew I wanted a little bit more of like a safety net coming into grad school to have on hand.

00:35:32:03 Emily: Yeah, that makes so much sense. And it’s, Ooh, it’s a lot easier to build that emergency fund when you are making a little bit more rather than, you know, having to build it up once you start graduate school. Of course, there’s no time like the present. So, start if you haven’t started already with that emergency fund, but it’s really giving yourself a leg up to have done it when you had a higher income before. So, that sounds awesome. Ariel, it was such a pleasure to talk with you. Thank you so much for volunteering to come on the podcast!

00:35:55:22 Ariel: Yeah, thank you so much. This was really great!

Outtro

00:36:02:23 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? My team has 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/. 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.