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How to Identify and Change the Money Mindset You Developed in Academia

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In this episode, Emily interviews Dr. Chris Cornthwaite of Roostervane. Chris and Emily share the money mindsets that they have observed among PhDs and academics, including believing money and wealth to be evil, scarcity, relating time to income, and anchoring. They discuss how to identify and change your own money mindset. Chris shares how his money mindset has evolved from his youth idolizing poverty through his underpaid grad student years and now into his employment and entrepreneurial journey.

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PhD money mindset

Teaser

00:00 Chris: It’s one thing to start when you’re, when you’re 20 or 25, and have the value of compound interest over time and save that $40 a month or whatever it was. But it’s actually quite a different thing to start when you’re 35 with student loans that need to be paid off and try to create a sizeable chunk of wealth.

Introduction

00:23 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season seven, episode 11, and today my guest is Dr. Chris Cornthwaite of Roostervane. Chris and I list the money mindsets that we have observed among PhDs and academics, including believing money and wealth to be evil, scarcity, relating time to income, and anchoring. We discuss how to identify and change your own money mindset. Chris shares how his money mindset has evolved from his youth idolizing poverty, through his underpaid grad student years, and now into his employment and entrepreneurial journey. As you’ll hear during this episode, one of the best ways you can change your money mindset is by intentionally seeking out and learning from people who have the money mindset you want to move toward, whether that is through books, other media or new acquaintances.

01:22 Emily: If this episode convinces you that you should work on your own money mindset, I invite you to join the Personal Finance for PhDs community at pfforphds.community. Inside the community, you can communicate with me and other like-minded PhDs through our forum and monthly live calls. The community has a monthly book club and group financial challenges as well. In November, 2020, we’re reading Get Money by Kristin Wong and in December, it we’ll read The Millionaire Next Door by Thomas Stanley and William Danko. Our challenges for November and December are to create a frugal stack and set up a system of targeted savings accounts. One of the eBooks included in the community, The Wealthy PhD, also has a chapter on what money mindset is, why it’s important, and how to shift it. While I didn’t understand it at the time being part of the personal finance blogosphere while I was in grad school was absolutely vital to the level of financial success I had then and now, and was directly my inspiration for starting my business. With the Personal Finance for PhD’s community, I’ve attempted to replicate many of the positive elements of that experience while making the whole process more time efficient and accessible for you. If you’re interested in learning more about and joining the community, you can do so at pfforphds.community. Without further ado, here’s my interview with Dr. Chris Cornthwaite from Roostervane.

Will You Please Introduce Yourself Further?

02:49 Emily: I’m so delighted to have joining me on the podcast today, Dr. Chris Cornthwaite of Roostervane. He writes a lot about PhDs and career transitions and career over there, but he also has a lot of material about money, wealth, money, mindset, and so forth. And that’s why I invited him on the podcast today to tell us more about money mindset. So, Chris, will you please just introduce yourself a little bit further to the audience?

03:14 Chris: Yeah, for sure. So in terms of my academic background, I have a PhD in religious studies from the University of Toronto and after I finished my PhD, I was kind of lost and didn’t know what to do for work. Kind of was the impetus for starting Roostervane, eventually. But I went and I worked for a think tank. So I ran projects for Canadian think tank. Kind of a lot of different projects, but some that kind of related to money that are still interesting to me is things like economic development and prosperity and things like that. And then I went and worked for the federal government for a little while, the Canadian federal government. I worked on a project that helps other countries launch refugee programs. Basically it’s a lot of like international diplomacy kind of stuff and that was really neat. And I still do some consulting in that world, in the refugee program world, but I also run Roostervane. I started a blog, initially it was kind of chronicling my own journey out of academia, but it’s just evolved to things that I like to write about. It’s become everything from a little bit on personal finance, as you say to careers, LinkedIn, ideas about purpose, which has really been an interesting question for me. That’s become about, I would say it’s maybe like 80% of the work I do, but it’s not my full-time income yet. It’s growing, but as you know, it takes time, so I’m working on that too. That’s me.

4:40 Emily: So interesting. Thank you so much. So money mindset is our topic for today.

What Are the Common Money Mindsets of PhDs and Academics?

And I wanted to start off by asking you what are the common money mindsets that you have observed in PhDs or academics?

4:53 Chris: This is such a fun conversation. I’m really glad to have it. I think the thing that I see a lot of, I mean, we could talk about scarcity mindset and that sort of thing, and that’s certainly common. I think the thing that I deal with the most, especially as people are like leaving academia and it’s not just about money, but it’s about careers in general, but there’s a lot of constructs within academia, like ideological constructs that money is bad, money is evil. The pursuit of money is something that, especially for those pursuing life in academia, a lot of people kind of buy the idea that this is a noble cause and worth doing for nothing basically. I think that a lot of PhDs have the idea that they shouldn’t think about money or that they’re bad for thinking about it or that they’re not serious academics if they want to think about it.

5:46 Chris: The irony is that, I remember having one exchange with a student in particular and he was kind of saying some of these things to me and he was quoting his professor. And some of the things his professor had said about how this is not about money. And I said, “is that your professor who makes $170,000 a year?” There’s a huge discrepancy, I think, between the idealism of PhDs and the reality of both the Academy and just “real world”. I think that’s the biggest holdup I see in terms of money mindset is that people have this idea that poverty is noble or that earning money is bad. Investing is capitalism, capitalism’s bad. I think those become really big holdups and I think can actually seriously hinder people from first of all, making good decisions about their career, but also from actually acquiring wealth and getting comfortable, much less wealthy.

6:38 Emily: So I think here, your discipline might be showing because like in contrast, so I’ve heard the same things, but it was not until I started speaking with PhDs more widely across a lot of disciplines that I encountered that mindset. Because for me as an engineering PhD and in the STEM fields, yes, scarcity mindset was there. Yes, undervaluing yourself was there, but not the money is evil aspect of things because I think we were all expecting like, okay, yeah, this is a low-income period of life, but this is not characterized my life overall. Like overall I’m going to be a highly employable, decent to good earner as an engineering PhD or STEM PhD. And honestly, even in my let’s say path through academia in terms of the professors that I interacted with, because I was in science fields and engineering fields, I didn’t have any professors say to me, capitalism is evil or anything like that. So it’s not an idea that I found until I started interacting with humanities PhDs that I even encountered that. I think this is really feel dependent.

7:48 Chris: A hundred percent, I agree. And it’s interesting for careers too. I’m always kind of realizing where these field differences are and it’s hard because I write for PhDs, like it’s one audience, and in some cases I think there are a lot of things that are kind of universal, but you’re a hundred percent right. And I think a lot of the kinds of ideologies around money that I was exposed to, and I mean, I still see them a lot, but you’re you’re right, they’re definitely much more predominant in humanities, social science fields for sure.

8:13 Emily: Yeah, but I’m so glad you brought that one up because I think that one is maybe the most insidious, like the hardest to reverse, which of course we’ll get to in a moment, but that was a great first observation to bring up. Do you have any other ones? You mentioned scarcity mindset earlier, but didn’t actually define it. Do you want to talk a little bit more about what scarcity mindset is?

8:31 Chris: Gosh, yeah. I think scarcity mindset for me, the way I understand it is just the idea that like there’s never enough money and it’s always, I’m just going to be poor and I’m always going to be poor. I mean, I don’t know, we’ve never had the conversation about the philosophies of money behind it, but a lot of the people that I read see this as manifesting into your life, that you adopt this type of scarcity and it becomes true for you. There’s a whole different conversation we could have, but I think at least anecdotally that’s been true in my life too, that when I kind of live this kind of scarcity — there’s never enough money, I have to keep it all tight, and pinch every penny and be just really, really controlling about, about my money. I think that’s what I see and I saw a lot of that in academia and I think, I mean, a lot of people are poor. I actually did all right, because I won the right fellowships. I mean, it’s just luck of the draw. There’s not really any reason why one PhD makes $15,000, another one makes $50,000. But all that to say that I saw a lot of that scarcity mindset. But the other thing that I think one of the things that I really observed academia taught me was this idea of linking your time to money. I didn’t get paid by the hour other than when I did TA or RA work, so I think one of the really valuable lessons I learned in academia and it’s a mindset that academics have if you kind of dig for it is this idea that you can actually work on a grant application for five or six hours and it might bring you a hundred thousand dollars. I think there are also some positive money mindsets from academia too, if you want to dig for them, but it’s just hard to kind of hard to get at them sometimes.

10:16 Emily: Yeah. I think that’s a really interesting point to bring up. Actually, I wanted to go back to the scarcity mindset for a second because there’s actual scarcity in your life and there’s the scarcity mindset and those things can come together or they can be separate from each other. You can have one or the other, you can have both, you can have neither. There is actual scarcity, especially at the graduate student level in terms of how much money you’re making. Now, does that apply to everybody? No, because of course there’s fellowships you can win, you can have side hustles, but there is scarcity in a sense. But whether it limits your mindset or not doesn’t necessarily come along with that scarcity. And the other thing is the academic job market, like there is literal a lot of scarcity in the academic job market. And I think that PhD’s observing that market, even if they choose not to pursue it or don’t end up in academia long-term, they still take that observation with them onto their other career paths and imagine the kind of scarcity and other places that they have rightly observed within academia.

11:15 Chris: Yeah. That’s really interesting. One thing I’m thinking of as you say that some of my professor friends who sat on on grant committees, especially for university-level scholarships and realize how many scholarships actually didn’t get any applications. So it also kind of does make me think that like there is of course literal scarcity, but I think one of the ways for example, that that can play out is that instead of me saying as a student, how can I go make more money or how can I increase my, my income? What scholarships can I apply for in this case because there was a lot of years that they didn’t give out a lot of the scholarships. It’s easier just to say, well, I’m just poor and this is my lot in life and woe is me kind of thing. So I hear what you’re saying. I do. I totally agree with you. And I think there’s a balance there for me between the actual scarcity and the mindset that says, how can I make the most of this? There’s obviously going to be some kind of a limit, but how can I expand what I do have access to?

12:11 Emily: Yeah, exactly. I think it’s really depressing for graduate students to think about their hourly wage, because they imagine, especially because they work so many hours, usually beyond 40 and yet they’re only being paid ostensibly — you mentioned RA or TA work earlier, that’s typically limited to like 20 hours a week, at least in the US — so they’re calculating this off of like 40 plus hours per week when actually they’re only being paid for 20 and technically they’re doing their dissertation for free and a lot of people don’t understand that. So it is depressing, they calculate their hourly wage, but like you said, that’s not actually literally what they’re being paid for. And sometimes you can, as you said, win an award for just a handful of hours of extra work on top of the work that you are already doing. So I do like the idea of divorcing the hourly wage thing, but it’s disheartening to think about in the first place.

13:05 Chris: I’m trying to look on the bright side. There’s a lot to be sad about, about the financial state of academia. So overall I’m not saying it’s like, great, but there are things that I’ve realized — I know we’re going to talk about it later — but as I’ve moved into my life, there are things that academia trained me for that I’m actually like, Oh, that’s actually not a bad thing.

13:22 Emily: Yeah. So let’s finish up talking about the mindsets that you see. Are there any ones that you’ve have any other ones that you’ve observed either positive or negative, helpful or unhelpful?

13:32 Chris: Let me think. Well, I guess so, so I think the thing that initiated this conversation was you had mentioned a post that I wrote where I had identified a lot of different things that I had learned. I’m trying to think about how much they relate to mindset, but I think there are principles, some of which do relate to mindset, about money that students kind of carry forward. So we already talked about the hourly wage, but I was thinking about in terms of scale, like when you think of I don’t know, a journal publication, like creating one thing that can influence multiple people. That’s not so much a mindset though. I guess I think the answer is no, I don’t really have any other mindsets offhand that I talk about.

14:13 Emily: I think the only other one that I’ll bring up is anchoring. So when you’re in graduate school and you’re making this tiny hourly wage or maybe you think about your yearly salary also tiny, because you’re anchored there, because that’s the first, early on salary that you’ve experienced in your life, you may not really understand your value in the marketplace once you go forward from that position, whether it’s in academia or outside of academia. And so your anchored to this, as you mentioned, 15 or 30 or whatever it is, thousand dollars per year, you’re making as a graduate student and you think, “Oh, wow, could I make double that?” And that’s like amazing to you. Instead of thinking, I want to three X, four X, five X, 10 X what I was making in graduate school, or more. I think that’s another really insidious one is, is the ultimate under valuing that you do later on.

15:04 Chris: Yeah, that’s a great point.

How Do You Identify Your Money Mindset?

15:06 Emily: So we talked about the money mindsets that are common among PhDs. These are not universal. So how does an individual determine what are the money mindsets that I currently have? And this is such a tough question because money mindsets are so closely held you don’t even recognize them as such. It’s just how the world works according to you. So how do you identify your own, your own money mindset?

15:28 Chris: I think the thing that helped me most was reading. I would say the first book I read on money was The Undercover Economist. And I read that, I mean, that must be 10 years ago now. I read it somewhere in my graduate journey, I think pretty early on and it rocked my world and I started reading every single personal finance or money book I could get my hands on after that. So I’ve read a lot of them. And I think a lot of what I saw through reading kind of reflected back to me in my own life.

16:01 Chris: For example, I started to, I can’t even pinpoint like where I got it from, but I started to see like things that I was raised with. I was raised in quite a poor family. My dad worked as a maintenance man in hospital, my mom stayed home with five kids, and a lot of my money mindset came from there. There was never enough money, money doesn’t grow on trees, money is for other people, and then we were also religious, so it was also spiritualized. I don’t know if I ever heard that money is evil, but I definitely heard that poverty was kind of noble, poverty was spiritual. I think the more I started to read and just hear people name similar things to what I had felt and seeing other people who grew up in similar places, I started to unpack a lot of those. There’s one podcast I really liked, it’s called Profit Boss, and she really did a fantastic job. Is it Hillary Hendershot? Do you know that one? I haven’t listened to it about five years.

17:00 Emily: I don’t think I know that one.

17:00 Chris: She had done an episode on money mindset, and it was really good and really opened up to me a lot of my own limitations and that really helped a lot. I think just hearing people name their money mindset and seeing it in myself.

17:17 Emily: So I totally agree with you that you have to start encountering other minds to recognize your own mindsets and whether that’s through reading as you were doing. I also early on in my life journey was reading the personal finance blogosphere quite a lot. So hearing from other personal stories of people who are talking explicitly about money. That’s the thing is you have to actually kind of get towards money or money related topics when you know, exchange these other minds. So it’s a little bit easier to do in an impersonal format, like reading or listening to podcasts or watching videos or whatever. But I’ll add into that talking with other graduate students, maybe like we mentioned earlier, outside your own discipline and outside your own worldview. Or not even other graduate students, but just like your peers, maybe peers who have real jobs, that can help you open up. If you’re actually, again, touching on these money or money related topics can help you recognize what’s a mindset in you and what’s like actual observable truth about the world versus just your perception of it. Encountering other people I think is crucial to identifying your own money mindset.

18:24 Chris: The kind of thing that that makes me think of is this idea of even talking about money. And I know that’s another money mindset I had is like, we don’t talk about money. We don’t talk about it with anybody. Money, politics, and I guess religion were the three things you’re not supposed to talk about. Right. And that’s definitely something that I’ve experienced. It’s funny, even with Roostervane. For example, I wrote a post a while back and it was just for fun about how PhDs can be worth a $100K or something, and it was one of the most read posts that I’ve ever done, but it’s actually one of the least shared. People were happy to kind of read about it, but didn’t really want to talk about it. I think there’s a lot of shame in talking about money and expressing an interest in money, and even an interest in having money or growing wealth. That’s another mindset that had held me back in the past. And I think it’s still pretty prevalent.

Commercial

Emily here for a brief interlude. If you are a fan of this podcast, I invite you to check out the Personal Finance for PhDs Community at pfforphds.community. The community is for PhDs and people pursuing PhDs who want to take charge of their personal finances by opening and funding an IRA, starting to budget, aggressively paying off debt, financially navigating a life or career transition, maximizing the income from a side hustle, preparing an accurate tax return, and much more. Inside the community, you’ll have access to a library of financial education products, which I add to every month. There is also a discussion forum, monthly live calls with me, book club and progress journaling for financial goals. Basically, the community exists to help you reach your financial goals, whatever they are go to pfforphds.community to find out more. I can’t wait to help propel you to financial success. Now back to the interview.

How Do You Change Your Money Mindset?

20:27 Emily: Okay, so an individual has started to identify their own money mindset by listening to this podcast or reading your articles or reading other materials. How do you think they should actually go about changing a money mindset that they’ve identified as unhelpful that they have?

20:44 Chris: I’ve given a lot of thought this. It’s an interesting question, because I think what I realized is it doesn’t change overnight and I will find myself even years later, like something identified years ago and all of a sudden I kind of will stop myself when I’m doing something and say like, Oh, that’s my X mindset that has kind of played in, but it’s kind of sneaking back in. It’s really, really hard to change the way that you are kind of hardwired to think about money. It takes a lot of time. I mean, I’ve done things like I do journaling and I will sort of journal about it. I just watch and read a lot of stuff. I think really immersing yourself in things that kind of present a different view from what you’re used to, I think that kind of immersion has really helped me a lot. I’m trying to think what else. Those would be the two main ones, just kind of exposing yourself to different ideas and kind of recognize that you’re on a journey to change your money mindset. It will definitely take time. It’s not going to happen overnight. Start taking kind of the little incremental steps to grow it. And I think also education, I would say, is a big part of that. The more you learn about money, the more you learn about growing wealth, the less scary it get. It can get confusing because there’s a lot of contradictory information, but it’s at least less scary. So ideally you’re going to, you’re going to be a little more competent and therefore comfortable with actually thinking about and dealing with your money.

22:07 Emily: I totally agree with you that I think the first stop is sort of the extension of the identification. It’s continuing to encounter other ideas about money and maybe now you can kind of selectively go towards, “okay, well, this is a money mindset that I would like to cultivate, or this is the money mindset I want to get away from, so I’m going to specifically listen to source X or source Y, which is going to help me move again slowly over time towards that more helpful money mindset.” So yeah, I totally agree. Like for instance, listen to this podcast. Maybe this is giving you a different perspective on money than you had before. Or continue to read other sources. I know I, as I mentioned earlier, totally immersed myself in like the personal finance blogosphere. That was really helpful in changing some of my money mindsets, especially around like earning more because definitely as a graduate student, I had those limiting beliefs about like, I can’t have a side hustle and like, I can never increase my stipend, but that turned out to not be true after working on it for years and years I finally figured that out. So definitely getting around other people. I don’t remember the exact phrase, but there’s that thing where like, you’re the average of the five people you spend the most time with. And so with respect to your money mindset, if you’ve had parent one, parent two, professor one in that circle before, you can maybe, at least with respect to this subject, edge those people out in favor of people who, have the mindset that you want to adopt.

23:28 Chris: Exactly. Yeah, I totally agree.

23:30 Emily: And I’ll add in, you mentioned a little bit earlier, abundance mindset and thinking and so forth. And I’ve also read a little bit about that in the entrepreneurial space. That’s how I actually first sort of encountered the topic of mindset was through the entrepreneurial stuff. One of the things that is talked about a lot in that space, which I think might be helpful, is actually writing and saying affirmations. And you mentioned, it’s a little bit related to journaling. Basically what we’re talking about is self-talk. You’ve been telling yourself money is the root of all evil and capitalism needs to die and I will never have money and all those things. You’ve been telling yourself those things for years. And so now you need to start telling yourself other things. It might be helpful to actually write down an affirmation, something that you know maybe intellectually to be true, but you don’t really feel it. You haven’t really internalized it yet and start reciting those to yourself. Maybe it’s once a day or a few times a day, to kind of get that self-talk like grooved in. And so eventually you’ll go to it more naturally. This is something I recommend to people who I work with on money mindset. It’s not something I practice all the time, but I do it from time to time when I feel like I need a little boost or a refresher with my mindset. Have you ever done the affirmation thing?

24:46 Chris: I do actually. I think I just, wasn’t clear in defining how I think of journaling because I do journaling, but within my journaling, I do affirmations as well. I have every day and there’s one in particular, there’s one that I’ll share just because it’s been a recent realization for me. I’m not particularly religious anymore, but coming from this idea of my youth that having money is evil somehow or whatever, I’ve really been thinking through like trying to get myself to adopt the idea lately that money is almost spiritual. That having money and creating wealth, especially as an entrepreneur, is actually an indication of the value that I bring to somebody else’s life. Rather than our ideas about entrepreneurship growing up is like, well, business people trick people into giving them money or whatever. In fact it’s quite the opposite. My wealth, the amount that I get paid is reflective of the value that I bring to people’s lives, and that’s really a beautiful thing. I think that’s one thing, just for example, that I’ve been kind of writing down variations of that for quite a long time now, trying to really worm it into my head because I really do believe it’s true, actually.

25:54 Emily: Yeah. I’m working on a similar one for me and my business as well. The amount of money you’re bringing in reflects the value that you bring to the world. That’s true, if you have a job too, but it’s sort of brutally true when you’re an entrepreneur, like you’re feeling that like all the time, there’s no comfort of the salary.

Chris’s Own Money Mindset Journey

26:13 Emily: Okay, so we’ve talked through what kind of mindsets you might have if you’re in academia, how do identify them, how to change them or start to change them, because you said, it’s going to be a process. You’ve talked about your own personal story here and there throughout this. Is there anything that you want to add more so about your career or your financial journey, especially as it relates to your money mindset?

26:35 Chris: Yeah, I think it’s interesting. I’ve had a constant evolution of my money mindset and it started back when I started reading personal finance books, at the beginning and each personal finance books was like a revelation. Like the first one, I remember reading a book called The Millionaire Teacher. I don’t know if you know that one. And it was like, okay, it’s low cost index funds, that’s how I’m going to build wealth. Low-cost index funds, low MER, ETFs — that’s the answer. And then I read the next one and it was like, actually people with managed portfolios do better over time and like, okay, who do I believe?

27:11 Chris: I think one of the most interesting things about my money journey has been, first of all, just digesting the huge amount of contradictory information out there. And there is a lot of it. For example, I remember reading Dave Ramsey and David Bach around the same time, and Dave Ramsey is like, pay down debt, don’t buy a house until you’re out of debt and David Bach was like buy a house tomorrow because nobody’s going to let you leverage that amount of money anywhere else. So it’s funny, I think like looking back now, I was forming my own views around money, even though there are little nuances in how they actually play out. I remember reading one book in particular and it was after I had read all these different people and the book was, I’m almost ashamed to say it. There are two money books I’m really ashamed to say that I like. I wonder if you could guess them, the first is Robert Kiyosaki’s Rich Dad, Poor Dad.

28:05 Emily: Yeah I was going to say Rich Dad, Poor Dad.

28:08 Chris: I’m so embarrassed to say that I liked that one. First of all, because if you Google Robert Kiyosaki, as an individual, I’m not endorsing Robert Kiyosaki. He’s had some interesting business practices and definitely has some interesting beliefs today. But the book was revolutionary for me. It really changed the way that I thought about business and wealth and just my own upbringing. The second one, this one it’s called The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime! It’s by a guy named MJ DeMarco. I would almost recommend it, but I’m hesitant because it’s like a bro book. He’s just one of those…he was an internet millionaire and it’s really, especially when you read it there are just some things that like don’t sit right. But the one thing that I will say that hit me about that book is he said actually when you look at all these personal finance gurus, none of them got rich off of following their own advice. Dave Ramsey and Susie Orman, these people didn’t get rich from saving 15% of their paycheck. They got rich by creating something that had massive value, massive scale, and creating huge personal brands and putting it out there in the world.

29:16 Chris: And I think that was really like something clicked. I had been working for the government too and realizing that even though I was making quite good money compared to what I was making in my PhD and I was interviewing for jobs that would make even more, I was giving away a third of it in taxes. I was struggling. Even our family, we thought we were going to be wealthy now that we have a paycheck and have a good job and I have a pension. And I mean, the opposite was true. Trying to scrape together that 15% to save every month or whatever it was going to be, it felt almost impossible, just because of the realities of our cost of living and raising kids and unexpected expenses. And I remember kind of thinking this through and saying, okay, it’s one thing to start when you’re 20 or 25, and have the value of compound interest over time and save that $40 a month or whatever it was. But it’s actually quite a different thing to start when you’re 35 with student loans that need to be paid off and try to create a sizable chunk of wealth. It’s possible. It’s definitely possible.

30:23 Chris: At the time I was the only one working my spouse Carolyn was home with our kids and she is a graphic designer, so she does some freelance work, but she wasn’t making a full-time income. So I think I just kind of came to the reality and it was about the time I read this, that it kind of shook me. And I said like, actually the way that I’m thinking about wealth is right for a lot of people, but it might not be right for me. For your listeners, there’s probably a variety of people. If you’re a two income family earning $180,000 a year, it might be pretty easy to catch up and squirrel away 30% a month instead of 15% a month and catch up to where you would have been. But for my own reality, I fell in love with the idea of business and the idea that in my case, especially with an internet business that I could start with almost like nothing. I could start with $3 a month and create a business that’s worth a lot of money. I didn’t know where else you could leverage that. Like you have that kind of leverage or create that kind of scale from starting with like paying Bluehost $3 a month and putting my ideas online to creating something. And I don’t know exactly, like I’m not great at evaluating blogs, but I think even today, Roostervane, from what I understand would be worth like between $30 and $60,000, which is not a huge amount of money, but I started it last year.

31:39 Chris: As a business person, it’s just thinking through business has changed everything about how I see money and I’m no longer one of those people trying to squirrel away part of my paycheck. And those are totally fine if that’s the position somebody is in and that’s kind of their money worldview, that’s totally great. But for me personally, I just got a lot more interested in creating an asset. Creating this asset that’s called a business and it changes everything. I don’t really care how much I take out of the business. I don’t care how much my paycheck is because I actually love having money in the business to reinvest back into it. It’s just little things like that, that as an entrepreneur radically reorients your relationship to money and it really changes the way you view everything. It’s been a long journey and I think I’ve talked a lot about it, but it’s been really interesting, and I still have so much to learn, but it’s just that constant growth and realization, coming to the idea that there are some principles that I’ve come believe about money, about things like scale and impacting people and creating value. And that’s some of the things that I’ve put on the blog, which I haven’t really blogged about why you should invest in low cost index funds. I’ve just blogged about here are some of the kind of generic things that I believe about building wealth.

32:54 Emily: Yeah, I’m so glad to hear that narrative and I see a lot of my own story reflected in that as well. Of course, I’ve also come to entrepreneurship.

Chris’s Business

33:01 Emily: So if people want to read more stuff from you, tell us where they can, they can find you.

33:08 Chris: Yeah, Roostervane.com. It’s kind of like a weather vane, but there’s a rooster on top — Roostervane. And that’s where I blog about…my main thing is careers with purpose. It’s just thinking through like how we actually get jobs and careers, but also how we make meaning from them. That’s the kind of humanities thing that I bring to it is how we think about meaning. So Roostervane.com. You can find me on Twitter, @cjcornthwaite is my handle. You can just search my name, Chris Cornthwaite. Twitter, LinkedIn, wherever I’m always happy to chat.

33:40 Emily: Wonderful. And last question for the interview, Chris, what is your best financial advice for another early career PhD? And it could be related to something we’ve already discussed in this interview, or it could be something completely else.

33:52 Chris: Educate. Education, learn. It’s amazing how many people can spend five or ten years learning about the nuances of a field, but don’t actually want to take any time to learn about the basics of personal finance. I would say read as much as you can, listen to a podcast like this one, and just educate yourself and you’ll be empowered to actually create wealth and to get over some of those mindsets we’ve talked about.

34:18 Emily: Wonderful advice. Thank you so much for joining me for this interview, Chris.

34:22 Chris: Thank you, Emily. My pleasure.

Outtro

34:24 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the personal finance for PhDs podcast. There you can find links to all the episode show notes, and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind the scenes commentary about each episode. Register at PFforPhDs.com/subscribe. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is stages of awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.

Working Before Starting a PhD: The Financial and Career Advantages

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In this episode, Emily interviews Diandra from That Science Couple, a PhD student in nutrition at the University of Wisconsin at Madison. Diandra went straight from undergrad into a funded master’s program, then worked for six years before starting a PhD program. She lists the career and financial advantages to working before embarking on a PhD—and the disadvantages. Diandra and her husband are currently pursing SlowFI (Slow Financial Independence) while she is in her PhD program, and she gives excellent financial advice at the conclusion of the interview.

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Links Mentioned in the Interview

work before PhD

Teaser

00:00 Diandra: I said that I never want to retire because I love research. And then I kind of shifted to, well, if money’s not the determining factor in the position that I choose, then we can spend more time with family. We can travel more and be open to different opportunities so that maybe money is more of a tool rather than a requirement. And if I want to donate my time to work on some really awesome, amazing lifestyle research that maybe doesn’t have much money in the budget to pay me, then I can choose to do that.

Introduction

00:40 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 seven, episode 10, and today my guest is Diandra from That Science Couple, a PhD student in nutrition at the University of Wisconsin at Madison. Diandra went straight from undergrad into a funded master’s program, then worked for six years before starting a PhD program. She lists the career and financial advantages to working before embarking on a PhD. And the disadvantages. Diandra and her husband are currently pursuing slow financial independence while she is in her PhD program. And she gives excellent financial advice at the conclusion of the interview. This interview came about because I noticed That Science Couple tweeting about financial independence. I checked out Diandra and her husband’s website and noticed that she is a PhD student. So I decided to invite her on the podcast. It turns out that Diandra is a long-time listener of this podcast.

01:41 Emily: I literally did not know that until just before we started our interview. So I have a message for other long-time or short-time listeners, i.e., you. I am actively looking for interviewees right now. If you have personal finance knowledge or a skill that you want to teach through an interview, I would love to have you on. It’s absolutely fine if you gained this knowledge or skill from personal experience. So don’t shy away from volunteering because I use the word teach. Go to pfforphds.com/podcast to volunteer to be interviewed. Do not make me hunt you down on Twitter. Also, if you would like to hear me interview a particular person on the podcast and can help me make that connection, please send us both an email or tag us on Twitter. I’m actually looking for interviewees who can speak to two topics in particular. One, the proper tax treatment of travel and research grants. Two, exactly what kinds of income-generating activities are and are not permissible on F1 and J1 visas. If you know a professional who works in either of those areas in the U.S., please email me that recommendation. I hope to feature many of you on this podcast. Without further ado, here’s my interview with Diandra from That Science Couple.

Will You Please Introduce Yourself Further?

02:57 Emily: I have joining me on the podcast today Diandra from That Science Couple, and I was so pleased to run across her and her brand on Twitter, that’s where I found her, to find another science couple like me and my husband, who are passionate about personal finance. So Diandra, it’s a real pleasure to have you on today. Would you please introduce yourself a bit further to the listeners?

03:18 Diandra: Okay. Thank you, Emily, for having me today. I’m a long-time listener to the podcast. I actually listened before I got into my PhD program. So that was a bonus. And my name is Diandra and I’m a second-year student, PhD student, at the University of Wisconsin-Madison in nutritional sciences. I have a Master’s in Cell and Molecular Biology from Towson University. And before I started my PhD program, I worked in the industry from technician to scientist in the field of late-stage cancer diagnostics for six years. I’ve held five positions at four different companies over the six years and met my future husband, Brad from That Science Couple, at one of them. Each move was growth and financially motivated. And I’d like to say that it all started with a simple 1% cost of living increase.

Career Advantages of Working Before School

04:02 Emily: Wow. Okay. Very fascinating. So I heard in that description that you had a pretty big change in fields between what your master’s was in, what you worked in, in industry, and then what your PhD is in. So maybe we’ll get into a little bit why that happened. Because the topic that we’re going to discuss today is that path that you took between your master’s degree and your PhD and what the advantages are of working for at least a year or two years, few years, before you start a PhD program. The financial advantages, the career advantages. So let’s dive into that. You obviously have experience in this area, but you’ve probably also observed peers as well. So what are the career advantages that you perceive for working for at least some period of time between, you know, the first round of training, whether that’s undergrad, whether that’s a master’s, and then embarking on the PhD program?

04:52 Diandra: All right. So one of the big career advantages that I noted was that you’re able to test the waters. So you can gain experience before committing that five or more years to a program. And you can also determine what you don’t want in a career rather than like, focusing on what you wanted. So as you go through, you might identify different work environments that don’t click with you or ones that you like really do like, and that can help you channel your focus for your PhD program and what career you would want after that. You also are able to learn about the business side of things. You could go through different phases to take a project from beginning to completion. You work in diverse teams. So I specifically had worked in several different companies, and that collaboration either with inside my company, or to other branches, was very valuable, I think as well.

05:47 Diandra: It also trained me how to have proper documentation. So this is very useful for a PhD program. A lot of the beginning part of work for my program right now is all acquiring samples and making sure that we have good QC metrics and that we’re starting from a level basis for all of our samples. And then also I learned a realistic view on the cost of research. So I did a lot of ordering with my jobs, and then I could see what it would take to run the samples, how many times, what you needed for different replicates and then including like the final, like analysis cost as well at the end. So I think that was really important to get a realistic view of what a project I could propose in the future might cost.

06:34 Diandra: Also, another career advantage is that I was able to network early. So when you work in the industry, every time I changed jobs, I would go on LinkedIn and I would request my coworkers so that I could follow them after I had moved on. And they became references for my future applications. I gave several of them references as well. And then I also gained new mentors through working before going into my PhD. And they’re spread across a variety of fields. So now when I come back from my PhD, I’ll be able to see where they are and then potentially choose a path that maybe they’re already on or they switched to during the meantime. And then, also, I believe that I bring something unique to my PhD from working in the industry. It definitely helped me to improve my PhD application because I had a series of projects that I completed. Products that I helped launch. So that was something that I was able to include. And then I acquired additional skill sets, knowledge, and problem solving. And I’m definitely a lot more confident this time around, and I have more life experience. So when they throw a curve ball at you, or there’s an issue with your dissertation, then I’ve already been through so many times when we’ve had to switch projects or stop in the middle and change course and correct from there.

Projected Future Career Advantages, Post-PhD

07:55 Emily: So clearly there are advantages to you as the future PhD applicant, like having a stronger application, once you do decide to go for those kinds of programs. There are advantages to you in terms of knowing what you want out of your own career, whether or not a PhD is going to fit in that, and what you want to do after the PhD. And so you’ve described what you’ve experienced so far as, you know, your path to getting into the PhD program. I wonder if you can project forward, what are going to be the advantages of having worked prior to doing the PhD, once you’re looking for your first post-PhD position. What do you imagine will be the advantages then?

08:33 Diandra: Yeah. So one of the advantages then is that I already have this network built in. So I’ve tried to collaborate potentially with like my former colleagues and so far it hasn’t gone through. But when I’m looking towards the future, there are potentials that if I was a PI, that I could actually collaborate with them more. So it being like across industry is a good connection to have. So they can give you a discount on your study as long as you’re willing to share the information. So I think that’s a big proponent and I already have some of my former colleagues that are keeping in touch with me now and seeing like where I am. So I know that they’re vested in me and that if I were to say, “Hey, I need to start a team.” I have several people who have already told me, you know, “Just let me know when and where.” And they would be willing to make the leap and come join me potentially in the future.

Financial Advantages to Working Before the PhD

09:31 Emily: Wow, that’s fantastic. I also think that it takes a variable out of the equation for your future employers of, can this person be successful in my setting, an industry setting and not just an academic setting. And that question has already been answered, especially for like you had maybe a longer period of work experience, not just like a year or two. That’s already been well demonstrated for you. Okay. So we’ve covered the career advantages. This is not a career podcast. This is a financial podcast. So what are the financial advantages to working prior to starting a PhD program?

10:05 Diandra: Okay. So this was a big one for us because it took a lot of thought into, you know, why go back when I’m already established in my field, right? So it will make a big impact on you financially. And so I think the basis is just knowing what you’re getting into. Knowing that you’re going to have a few years of low income, but you can weigh that versus the potential future gains. So originally the program that I was thinking I wanted to go into would have given me a similar skillset and would not have provided any leverage up in comparison to where I already was. But then this past year, as I was developing and choosing which lab I wanted to go into, I was able to identify like, look, this is a gap in my knowledge, this is a skill that I don’t have.

10:53 Diandra: So if I add this, and it was data analysis, so if I add data analysis, then I can be potentially location-independent. I can also add this as like potentially a part-time job as well. So I could do research and then do data analysis on the side. So it’s a side hustle potential as well. So, it brought a lot of additional motivation to the PhD that I’m not going to just go out and make the same money that I was making before, but I can actually leverage that further in the future.

How Did Finances During Work Help with the PhD Transition?

11:26 Emily: Yeah, absolutely. I’m also thinking about, you know, let’s say traditional PhD student, you know, straight out of undergrad, straight of a master’s degree, early twenties, not a lot of capital, maybe a lot of student loan debt. What were you able to do in your finances in those years when you worked that helped you once you transitioned into the PhD program?

11:49 Diandra: Yeah, that’s a great question. So financially I didn’t have any student loan debt because my parents paid for my bachelor’s degree, which was great. And then when I got my master’s, I said, I’m only going to do it if they pay me to do it because I wasn’t quite sold on the need for it yet. And it was just at a transition point where I had an opportunity to stay on as a master’s student with my current research, my undergrad research. So it just kind of flowed right through. And I was able to get a TA position that covered it and then paid a small stipend. So I wasn’t able to pay off any, you know, credit card debt or things like that during that time. But once I started working, I was able to over the years level that out.

12:34 Diandra: So I had $5,000 of debt that I had to level out. And then Brad had also had some minor student loans that he was able to pay off during that time. So we go from a negative net worth of, you know, five, 10,000 to a positive net worth. And starting to open that 401k was a turning point for me because I had always started saving cash. And I had this number, this like specific amount that I could always get to my bank account. And then something big would happen. Like I would have a car repair or I would have a medical expense or something like that. And then I would have to, you know, bring it down again and start over in the savings. So working helped me to start investing earlier in comparison to some of my counterparts that are in the PhD program with me now.

13:28 Diandra: And I have that capital there that can grow during my program. So I was able to open a 401k, an HSA, which was very crucial. So I don’t have a ton in there since I was using it as I was contributing. But it’s been able to sustain me so far. And I’m hoping that after my program, that it will either still be there or it will have just covered all my medical expenses during the program. So I don’t have to worry, which is really, really useful. And then I’ve also started a Roth. So I’ve been able to do that post-tax money as well, that I will be able to access earlier. So if we choose to be, FI [financially independent], take time off you know, work remotely, or try to do more traveling, then I’ll have that money that I’ll be able to access since I’ve already paid the taxes on it.

14:22 Emily: Yeah. I call being able to start investing, and/or pay down debt, before you start graduate school. I call it having a financial wind at your back, right? Like if you just get that little nest egg started right at the beginning of graduate school before graduate school, and then you take whatever five plus years for your PhD training, even if you don’t add any more money to that, it’s something that it can be growing alongside you as that time passes. So it’s fantastic to be able to have that.

Common Objections to Working Before Grad School

14:50 Emily: Something I hear from people who are debating with themselves about going directly from undergrad into graduate school, debating with themselves about that versus working for a while. I hear two things. One is I’m going to get used to my financial lifestyle on my industry salary, and then it’s going to be too hard to live on a PhD stipend. So I should just go directly and never have that, like lifestyle intermediary. That’s one potential downside or whatever. The other one is that they’re concerned that their academic abilities, basically their ability to do school well, is going to deteriorate if they’re working for more than a year or two. How do you feel about those two objections?

15:36 Diandra: Yeah. Okay. So the first one, the financial aspect. I do agree. It can be really easy to get swept up in there. So I think for us, like the turning point was that we didn’t want to start like putting off our future. So we wanted to start traveling now and we didn’t want to say, “Oh, when we’re 65. That’s when we’ll start traveling.” So what we did initially was, when we started dating, moved into this nice apartment together, started saving for our first international vacation. And then when it came time to renew the release, it was going to go up. And we said, look, we can either do the vacation when we planned, or we can live in this nice apartment. And we looked at each other and I was like, I don’t want to live here. I would rather have the adventure that we planned than live in just a nice, shiny apartment that I can’t afford to have parties because I spent all my money on rent.

16:37 Diandra: So that kind of got us to stop with the lifestyle inflation. To cut back early on. And then we did back to back three years in a row, we did international trips for our birthdays and then just for the summer. So it was really nice. Like each one was only two weeks at a time, but instead of paying that extra to the nice, shiny things, we decided to pay it towards experiences. So I think if you were to work, you can still do that. But then like, what are your values? Like, does your spending align with your values? So if you value having a nice house for your children to grow up in, then that’s fine. But if you value adventure, then you don’t need to spend as much on your rent. So I think that that can be can be difficult to go up against like financially and having that inflation. But also every time I got raises, I pretended like I was still making the money that I was making in my master’s. So of course it was slightly more. But what I did was I took that extra when I got the raise, when I, the bonus and I put that into my savings and my investments, and I said, “I don’t want to see that money at all.” So I had that mindset that like, I’m still living on this fixed income, and no, I don’t have the extra to spend.

18:03 Emily: Yeah. I think that’s it’s a particular application of the advice live like a college student, live like a grad student, live like a resident, which is, if you are anticipating a future income decrease live on that future income. This is the same advice you hear, like people who are, for example, going to buy a house. Well, can you live on the mortgage payment that you’re going to make in the future? You know, is that possible for you in your budget? So like sort of projecting to your future, live on what that is, so that you make the adjustments in advance instead of having a real sudden, real abrupt, real painful lifestyle decrease when you enter, you know, something like graduate school. So I really liked that you took that approach of especially keeping your living expenses, your fixed expenses, on the lower side as if you were still a graduate student or will again be a graduate student. And saving the increase and also spending it on experiences. Because it’s not really lifestyle inflation, unless I guess those experiences become habitual for you.

Commercial

19:01 Emily: Emily here for a brief interlude. On Saturday, November 14th, 2020, I’m facilitating a new workshop: Chart Your Course to Financial Success, and you’re invited to attend. The central question this workshop will help you answer is, What should my singular financial goal be right now, and how should I best pursue it? This particular instance of the workshop is just for funded grad students. Future dates will be for post-docs and PhDs with real jobs. You can learn more and sign up at pfforphds.com/chart. That’s P F F O R P H D S.com slash C H A R T. The deadline to register is Wednesday, November 11th. So don’t delay. Now, back to the interview.

Financial Independence and Early Retirement (FIRE)

19:46 Emily: You discovered FIRE, it sounds like, in your time in industry. Financial Independence and Early Retirement. How is that pursued, or how are the principles still carrying on for you in graduate school?

19:58 Diandra: Yeah, so our basis going into graduate school was very important to see where we are and what we still need to do to get to potentially FIRE, or if not, just financial independence. So individually my husband and I are both 25% of the way towards our FI numbers. So that’s good. It means we have money that can grow. And then while I’m in my program, we’re working on our savings in two different ways. So instead of me trying to do everything and him trying to do it all separately, my focus is more on the post-tax money. So I make sure to pay myself first, every paycheck. And I have 25% of my stipend that will go in towards savings and individual investments. And then I also have another 10% that goes into a 457, and I’m treating this as a Roth account.

20:53 Diandra: So I’m paying the taxes now while I’m in a lower tax bracket in comparison to what I expect to be when I graduate. And then, so what Brad is doing is the kind of opposite. So he’s focusing on the pre-tax savings. So he’s also a university employee, but not a graduate student currently. So he’s been able to ramp up his savings and utilize a 457, 403(b), and HSA. And then while he has a moderate salary, he’s living on a similar income to me. So everything above that, instead of inflating our lifestyle, he’s saving that additional amount.

How Do You Have Access to a 457?

21:33 Emily: I was surprised to hear that you have access to a 457. How do you have access to that?

21:40 Diandra: So I have access to that through the UW system. So I actually didn’t know I had access to it in the first year of my PhD program. So I was doing like those micro investing apps. And then like, I would randomly put money into my individual retirement account, my IRA. So when Brad had gotten a job with the University, he saw all the benefits and explored it fully. And then he’s like, so I’m looking at these details. And it says that, aAt UW, that graduate students are considered employees. So since we had that label, we do have access to a 457. And I was able to go through and say, I could have it pre-tax, or it could have it post-tax. But since I know that I want to work for a few years, at least once I graduate, I’ll be in a higher tax bracket then. And so I’d rather pay the taxes now. So the whole point of it is that maybe we can get together funds that the whole first five years, when you become FI and you leave work is, it’s really hard to access your funds. So if you do like a Roth conversion ladder, that takes five years. So my aim was, what can I do now to build that initial five-year cash cushion?

Tracking Finances and Navigating Lifestyle Expectations

23:03 Emily: It sounds to me from the way you described that, that you and your husband either keep separate finances or like sort of track things kind of separately. Is that right?

23:11 Diandra: Yeah. So we don’t have any joint accounts but we do, you know, send money back and forth to each other all the time. So we keep it separately, and it’s good because then since we both did work around the same amount of time, that we have that money to grow. But we know that jointly, like if we’re going to go and buy a house, we can pull from both accounts. So like the HSA, since we got married this year, he’s going to switch over to a family plan. So I can’t contribute to my HSA during my program, but he’ll be able to contribute double. So it’s separate, but we joined them together. And like, when we look at our numbers, we’ll do both. So what do we individually and what do we combined have?

23:59 Emily: Yeah. And I think it’s also kind of a great, even though you’re keeping separate finances, it sounds like your lifestyle level you’ve agreed on. And you’re both living at this kind of grad student stipend ish level, and just doing a lot of saving above that. Because it sounded like you were saving 35 or maybe more percent of your stipend income, which is very high, very impressive. You must be keeping your lifestyle expenses quite low.

24:22 Diandra: Yeah. Yeah. So when we moved to Wisconsin from Maryland, actually, the last bonus that I got from my job paid for us to move across the country. So that was nice. It was just a net zero after that. Unfortunately I didn’t get to save any of it, but that was fine. So what we did when we moved here is we said, let’s pick an apartment that we can afford on my stipend. Since he was moving with me and for me, and he didn’t have a position to start with here. So we just immediately said, what is the lowest that we can find? And then like, you know, can we go slightly above that? You know, you want to live in a decent neighborhood, something that’s safe. But we were just very lucky. We got an apartment sight unseen.

25:12 Diandra: But it was actually only slightly higher than our rent back in Maryland. So we were able to just like, keep that nice low rent amount there. So that helped. And then one of the big things for us is that we do track all of our spending. We have a calendar. And so every day when we spend money, we have to write it on the calendar and then stare at it for the rest of the month. So it’s more like, was that purchase worth your life hours because that’s what you did and now you have to admit it. So we’re not like as stringent on what we spend, but like we always go into the grocery store with a budget. We say, we’re going to spend a hundred dollars on all our groceries. And we put every item in there individually. So we know when we’re hitting the cap. And if it’s only $5 more, well, that’s fine, but you don’t want to blow your budget. Like if you just don’t track it, then you can easily spend a lot more than you intended.

How Do You Describe SlowFI?

26:13 Emily: Well, thank you. So I actually have never heard that tip before of writing your spending on a calendar and then looking at it for a month. That’s actually a really great one. I understand that you identify as being on a SlowFI track right now. And I actually wrote a post recently on the flavors of five. So there’s all these different versions of FIRE, SlowFI being one of them. How do you describe SlowFI and yourself on that path?

26:38 Diandra: Yeah, so SlowFI is a term that was coined by the Fioneers. And so give like three big components. So they say it’s like embracing your dreams. So working in positions that will motivate you to like add to the world. To give back. Also being more intentional. So instead of just, I’m gonna work, work, work, work, work, you are in whatever you’re doing and that you’re actually like focusing on it and it speaks to you. So your position, your ultimate career should give you energy rather than take energy away from you. So I thought that was really, really key for the SlowFI movement. And then it’s also against that consumeristic kind of viewpoint of our country, where as you gain more money then you just buy more things. And then more things means more upkeep and being like environmentally-conscious.

27:38 Diandra: So for us, we just want to focus on the journey. So I think of it as what are you running towards instead of what are you running away from? So initially, we didn’t like our jobs, we weren’t satisfied. So we wanted to just get to FI so that we could take a break. But actually it’s really interesting with the pandemic right now that we’ve had glimpses of what life would be like if we were FI because we were fully remote for a while and we made our own schedules and it was interesting to see what do we choose to do with those extra hours. So finding that out now, while we still have incomes is better than leaving your job entirely, and then not knowing what you want to do, because if you say, I want to sip mojitos on the beach, that’s great.

28:30 Diandra: But how long is that going to last? So, I mean, for us, it was a really big shift when we met, I said that I never want to retire because I love research. And then I kind of shifted to, well, if money is not the determining factor in the position that I choose, then we can spend more time with family. We can travel more and be open to different opportunities so that maybe money is more of a tool rather than a requirement. And if I want to donate my time to work on some really awesome, amazing lifestyle research that maybe doesn’t have much money in the budget to pay me, then I can choose to do that. So that’s what SlowFI brings to us.

29:15 Emily: Yeah. I think the SlowFI path is probably one that’s quite appealing to PhDs. I know it’s appealing to me. Well, one, because it’s kind of necessary if you’re going to do graduate school at some point, you’re going to slow down your FI pursuit during that period. Almost certainly. It’s going to add some years. Like you said, though, earlier, there is income upside on the backside of the PhD, depending on, you know, what field you’re in. But I think PhDs also by and large have more opportunity to create work that they really love, that they’re really passionate about. That’s more, it goes with the territory, I think, of pursuing a PhD is that you found something that you love. And so yeah, work being part of your lifestyle long-term could still be attractive. Finding a job that you like, doesn’t have to be necessarily the most high-paying. Again, you don’t go into research if you want to be paid super, super, super well. You are talented enough to do other things if that’s your, you know, your primary motivation. So yeah, I think the SlowFI pursuit goes along very, very well with a lot of things that are common personality-wise to academics.

Best Advice for Another Early-Career PhD

30:15 Emily: So Diandra, as we wrap up here, would you please tell us your best financial advice for another early-career PhD?

30:23 Diandra: Sure. My best financial advice would be to fight lifestyle inflation and determine your value of enough early on. So this will be easier than trying to cut back, but instead use your bonuses or raises to supercharge your investments and move you along the path to financial independence.

30:44 Emily: So you’ve used language a couple of times in this interview that I have recognized as being from Your Money or Your Life, which I am currently reading. Would you recommend that book or how has that book shaped your journey?

30:55 Diandra: Yes. Vicki Robin is amazing. I would highly recommend Your Money or Your Life. She’s the one that talks about calculating your life-hours. And so how much money you make, and then how many hours does it take for that? So, when I was working at the startup company, I was driving an hour and a half down to the company and hour and a half back. So it was three hours. So instead of saying I had an eight-hour day, I would have to say that I had an 11-hour day, and then I needed time to wind down. So it turned into a 12-hour day. And then I had car maintenance. So then, the money that I got paid per hour started getting ticked off because of all these additional costs that I didn’t think of initially. Because you think of your hourly rate is one flat rate, but I would highly recommend it if you want to get more context and see that, is your job really paying you what you think it is or are you trading too many of your life-hours for that paycheck?

That Science Couple Blog

32:01 Emily: Yeah, absolutely. Thank you so much for that recommendation. And finally, tell us a little bit more about That Science Couple and what you’re doing with the blog.

32:08 Diandra: All right. So That Science Couple is a blog between Brad and I. And it was originally born out of a newsletter that we had written for our friends and family. So a couple of years ago, we had started our journey to becoming plant-based and we’ve used evidence-based nutrition. So there was the documentary Forks Over Knives, which I would highly recommend, and also the website nutritionfacts.org, which really motivated us to say like, look, there’s some science behind nutritional choices and that it’s not all about the macros. So we had noted that a lot of our friends and family didn’t understand the nitty-gritty details of this. And we wanted to start breaking down those complex ideas and topics into more relatable terms. So when we started our blog, we wanted it to be more holistic. Dr. T. Colin Campbell, his whole idea is treating us as like whole people.

33:07 Diandra: Also Dr. Dean Ornish does the same thing and there’s several other physicians that if we just look at one part, then we’re missing the whole picture. So what I really wanted to get across with our blog was that we can’t just talk about nutrition. But we are here because nutrition is important, but finances and having healthy finances is super important to having a lifestyle that, you know, supports health. And then our other point was the environment. So we didn’t want to tax the environment a lot. Brad was an environmental science major and got his master’s as well. So he wanted to talk about sustainability, and then that grew into, well, what makes a sustainable life? So when I was working as a scientist, it wasn’t sustainable. The commute wasn’t sustainable. The hours, the stress wasn’t sustainable. So how does that branch out further than just your impact on the environment, but your impact on you, personally?

34:09 Diandra: So those are the different categories that we’ve chosen to talk about on our blog. And, overall, we just want to provide a place for people to get information. So if you love those, you know, nerdy little citations and you want to see the references, like we’re going to be the place to go to, but then like personal growth is just like a free reign. So we had talked about The Value of Enough was a recent post that we put out. So if you’re trying to determine, you know, what makes your life sustainable, then maybe that’s a post that you would be interested in, too.

34:45 Emily: Yeah. We’ll link that post from the show notes. I can very easily see how those three topics interlock with one another and support and complement each other. So sounds wonderful. I’ve of course been to your blog and would recommend that everyone else go and check it out. And Diandra, thank you so much for joining me today and giving this wonderful interview.

35:04 Diandra: Yeah, thanks for having me. It was great.

Outtro

35:07 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind-the-scenes-commentary about each episode. Register at pfforphds.com/subscribe. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance. But it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

Why and How to Increase Your Retirement Account Contribution Room

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In this episode, Emily presents why and how you should increase your retirement account contribution room. She gives a compelling compound interest example calculation that illustrates why you should start investing early in your career and reviews the types of tax-advantaged retirement accounts you might have access to and why you should use them if you can. If you would like to increase your available contribution room in tax-advantaged retirement accounts and you are self-employed, the last part of the episode is for you. You can open a tax-advantaged retirement account through your business, even if your business is new or tiny or unincorporated. Emily compared the three most popular self-employment retirement accounts and evaluated which is most advantageous for a solopreneur side hustler, as so many PhDs are, in a video training she recently added to the Personal Finance for PhDs Community. In this episode, she tells you about the training, what motivated her to create it, and how to avoid making the same mistakes she did with her self-employment retirement account. You can access the training by joining the Personal Finance for PhDs Community at PFforPhDs.community.

Links Mentioned in This Episode

retirement account contribution room

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

This is Season 7, Episode 9, and today I don’t have a guest but rather am going to tell you why and how to increase your retirement account contribution room.

I’ll give you a compelling compound interest example calculation that illustrates why you should start investing early in your career. I’ll review the types of tax-advantaged retirement accounts you might have access to and why you should use them if you can.

If you would like to increase your available contribution room in tax-advantaged retirement accounts and you are self-employed, the last part of the episode is for you. You may not be aware, but you can actually open a tax-advantaged retirement account through your business, even if your business is new or tiny or unincorporated.

I compared the three most popular self-employment retirement accounts and evaluated which is most advantageous for a solopreneur side hustler, as so many PhDs are, in a video training I recently added to the Personal Finance for PhDs Community.

In this episode, I’ll tell you about the training, what motivated me to create it, and how to avoid making the same mistakes I did with my self-employment retirement account. You can access the training by joining the Personal Finance for PhDs Community at PFforPhDs.community.

I highly recommend going through the training if you are looking for more retirement account contribution room. It might even convince you to start a self-employment side hustle for that express purpose. This episode is specific to the US and is not tax, legal, or financial advice for any individual.

Without further ado, here’s my episode, on why and how to increase your retirement account contribution room.

Why You Should Invest for Retirement Early in Life

To build my case, I need to start by showing you why you should invest for retirement early on in your life.

There is an example I use in my seminars that makes a big impression on at least a few people in the audience.

This is a compound interest calculation, and you can follow along with it and play with some numbers of your own using a compound interest calculator such as the one at Money Chimp, which is linked from the show notes.

Compound interest calculations model the exponential growth of money over time with a given rate of return. It’s a way of modeling the returns you can get in the stock market, for example, though this calculation has a steady rate of return and your rate of return on stock investments would fluctuate quite a lot year to year. It’s a good model if you’re calculating returns over long periods of time.

So here’s the example:

Let’s say you’re able to save and invest $250 per month. That’s 10% of a $30,000 per year stipend or salary. You have no starting balance with your investments, and your money gets an average annual rate of return of 8%. You do this over five years, for example while you’re in grad school or a postdoc.

After five years, you have contributed $15,000 and your money has grown to $18,369. That might not sound too impressive yet but just wait!

Now, let’s take that $18,369 and let it keep growing with an 8% average annual rate of return. You’re not going to add any more money to this particular pot. Let it ride for 50 years this time.

The balance in your investment account has now grown to $990,000. You heard me right! The money you contributed over just five years has, given enough time and a good rate of return, grown to just shy of one million dollars! This is the power of compound interest.

If you’d like to read this example for yourself and dissect it a bit, I’ve linked an article from the show notes about all the assumptions and so forth.

Here’s the takeaway point, though: Don’t discount any amount of money you are able to invest during grad school or your postdoc. Whatever money you manage to invest early in life is going to have an outsized impact on your wealth in your older years. So start early and save at as much as you reasonably can.

Of course, you’re not limited to investing for retirement to an early five-year period of life. I hope that you will continue to invest throughout your career in larger sums than $250 per month. That doesn’t take away from the importance of starting early.

Why You Should Use a Tax-Advantaged Retirement Accounts

That’s the case for investing in general. Now I’m going to tell you why you should use a tax-advantaged retirement account for your very long-term investments.

What do I mean by tax-advantaged retirement account? Basically, the federal government gives a tax break to incentivize people to fund for their own retirements in particular. Money that has been contributed to a tax-advantaged retirement account is shielded from income and capital gains taxes.

These tax-advantaged retirement accounts go by many names, such as Individual Retirement Arrangement or IRA, 401(k), 403(b), 457(b), Thrift Savings Plan or TSP, and there are even more.

If you invested in a regular taxable investment account, you would pay your full income tax on the money you invest, plus every year there might be some small bites taken by income or capital gains tax. How large the tax bites would be depends on what you’re invested in, how long you’ve held the investment, and how high your overall income is.

Instead, with a Roth tax-advantaged retirement account, you pay your full income tax on the money you contribute, and then the money grows tax-free while it’s in the tax-advantaged retirement account and you can withdraw it in retirement without paying any income or capital gains tax.

A traditional tax-advantaged retirement account allows you to deduct your contributions to it from your taxable income in the year you contribute. The money grows tax-free while in the tax-advantaged retirement account, and then you pay ordinary income tax on the withdrawals in retirement.

It is a great strategy to use a tax-advantaged retirement account for money that you’re sure you won’t need access to until your retirement. While in any given year the tax you might pay on investments in a regular account might be fairly small, the cumulative effect on your investment balance over decades of this is a bit like a death by a thousand cuts. Plus, once you are in your peak earning years, it’s quite a valuable tax break to be able to deduct your contributions to a traditional tax-advantaged retirement account.

The tax break on the growth in a tax-advantaged retirement account alone typically amounts to tens or hundreds of thousands of dollars over the course of an investing lifetime. This again demonstrates the power of compound interest, because the biggest part of the difference is not in how much you pay in tax, but in how much that money could compound and grow if you were able to leave it invested instead, which is what a tax-advantaged account does.

Add to your investment balance some hundreds of thousands of dollars more if you are able to use Roth and traditional tax-advantaged retirement accounts to selectively pay ordinary income tax in retirement and/or your lower-earning years instead of in your peak earning years.

What Is Contribution Room?

I hope I have convinced you of the power of investing and specifically inside a tax-advantaged retirement account.

Now, I’ll define a term I’m going to use quite a bit in the remainder of this episode: contribution room.

Contribution room is the maximum amount of money you are permitted to contribute to a tax-advantaged retirement account in a given year.

For example, graduate students and postdocs who are not employees of their universities or institutes are not extended retirement benefits, so their only tax-advantaged retirement account option is an IRA. If you are under age 50, the annual contribution limit to an IRA is $6,000 in 2020.

Graduate students who are employees of their universities or institutes are only very rarely extended retirement benefits; it’s worth checking into but don’t get your hopes up.

If you are an employee in the private sector, it’s typical to have access to a 401(k), perhaps even with a matching program. If you are under age 50, the annual employee contribution limit to a 401(k) is $19,500 in 2020. Your total contribution room between a 401(k) and an IRA is $25,500.

If you are an employee in the non-profit sector, such as at a university, it’s typical to have access to a 403(b), perhaps with a match or a fixed contribution by your employer. If you are under age 50, the annual employee contribution limit to a 403(b) is $19,500 in 2020. You might also have access to a 457(b). If you are under age 50, the annual employee contribution limit to a 457(b) is $19,500 in 2020. Your total contribution room between a 403(b), a 457(b), and an IRA is $45,000.

You can see that the contribution room available to you as a full-time permanent employee is much, much greater than if you are a fellow or graduate student. This is why there is such a focus on contributing to 401(k)s and similar and less so IRAs.

Now we come to the question of how to create more contribution room. Of course, you only need more contribution room if you are currently maxing out the contribution room available to you.

When I was in grad school, I never maxed out my IRA. So if you are maxing out your IRA as a grad student, please hear me: You are a rock star. I am not telling you that you have to contribute more. I’m only going to show you how you can if you already want to.

If you are maxing out a 401(k), etc., you are also a rock star. But if you want to contribute even more to make up for lost time or hasten your retirement date, I can show you how.

Self-Employment Retirement Accounts

The specific strategy I’m teaching you today is about self-employment retirement accounts and how they can supplement your IRA, 403(b), etc.

But to have a self-employment retirement account, you have to own a business. That could sound like a really fancy, complicated thing, but it definitely doesn’t have to be. All I mean is that you file a Schedule C with your tax return, assuming your business is unincorporated. You might describe yourself as a freelancer, an independent contractor, a gig worker, a solopreneur, or self-employed.

You know as well as I do that lots of graduate students and postdocs have side hustles to supplement their pay, and many of those, whether the person thinks about it this way or not, are businesses. Again, if you file a Schedule C with your annual tax return, this information is for you.

If you aren’t a business owner and have no plans to become one but you know a grad student or PhD who might be interested in this strategy, please share this episode with them!

I’ve covered the two main requirements you should check off before pursuing a self-employment retirement account: 1) that you own a business and 2) that you want more contribution room in tax-advantaged retirement accounts.

My Story and My Client’s story

I’ll tell you what motivated me to first investigate self-employment retirement accounts a few years ago.

When my husband and I were in grad school, as I mentioned earlier we never maxed out both of our IRAs. So even though I did have some self-employment income by the end of grad school, we had no need to open a self-employment retirement account.

We defended in 2014, and in the year following, my husband was a postdoc employee and I had self-employment income, so we had our two IRAs plus access to a 403(b), and we didn’t get anywhere close to maxing out that contribution room.

Halfway through 2015, my husband took a job at a start-up that offered a 401(k). That was when our household income really jumped up. We knew we would need more contribution room than just our IRAs to meet our retirement investing goal of 20%.

However, the 401(k) offered by my husband’s job was and is really expensive. It’s offered through Edward Jones and composed of American Funds, both of which are notorious for charging high fees. And the company doesn’t offer a match.

So in 2015, I read up about self-employment retirement accounts and opened one for Personal Finance for PhDs. We had a lot of options in where to open the account and which funds to purchase within it, so we could keep the costs really low. And that’s been our tax-advantaged retirement investing strategy for the past five years. We can meet our retirement investing goal using our IRAs and my self-employment retirement account. If we do ever need more contribution room than those accounts provide, we will use the expensive 401(k), but not until.

Your motivation to use a self-employment retirement account to increase your contribution room might be different from mine. Honestly, I didn’t imagine that any graduate students, for example, would want to contribute more than the $6,000 IRA ceiling.

But I was wrong. One of my recent coaching clients through The Wealthy PhD, a grad student, maxed out her 2020 IRA, but had some additional money that she was interested in getting into a tax-advantaged retirement account. She did freelance work on the side of her role as a graduate student, so I suggested that she look into self-employment retirement accounts.

Self-Employment Retirement Account Options

Our conversations throughout that program on this topic inspired me to create a new training inside the Personal Finance for PhDs Community titled “Self-Employment Retirement Account Options.” You can access the training by joining the Personal Finance for PhDs Community at PFforPhDs.community.

As you can tell, I love to encourage PhDs to invest early on in their careers, even during grad school or a postdoc. I also love teaching about taxes. So this training is a perfect crossover point between my two favorite personal finance subjects, and it stretched me quite a bit as well as I learned lots of new things.

The objective for “Self-Employment Retirement Account Options” is to help you choose which self-employment retirement account type is right for you and your business. I haven’t mentioned it yet, but there are at least half a dozen high-level options and many of those have various permutations.

As I was sifting through these options to decide what to include in the training and in what depth, I kept in mind my coaching client who inspired the training. There is a lot of information out there about self-employment retirement accounts, but it’s largely intended for people who work full-time in their business, like I do, or even for small businesses with employees.

What I decided to do with the training in the Personal Finance for PhDs Community was to create it with a side hustler in mind instead—a solopreneur who has only a few thousand dollars in self-employment income—but who wants to maximize their retirement account contribution room even on that smaller income. When you frame the question that way, I believe the best choice becomes much clearer.

I included in the training detailed information about the three most popular self-employment retirement account types. The less popular account types are not ideal for a side hustler or solopreneur. The types I included are SEP-IRAs, SIMPLE IRAs, and one-participant 401(k)s.

Across these three account types, I compared the type of business they are ideal for; their employer, employee, and overall contribution limits and formulae; whether a Roth version is an option; and their deadlines to set up. For each account type, I also calculated the overall contribution limit for someone whose net business profit is $24,000 per year, an amount that highlights well the differences among the plans.

I also show you how contributions you or your employer make to a retirement account offered through your primary job affect your contribution room within each of the types of self-employment retirement accounts. This information is not the type you uncover by reading quick summaries of various account types, but it is crucial for a side hustler.

Ultimately, I recommended one account type over the others. I present whether that account type can be opened at 13 of the most popular brokerage firms today and a few specifics about the account at each of the firms where it is offered, such as what fees are charged. All of that is to save you a bit of research time when you are actually going to open your account.

I admit I did not do any research on the best place to open my self-employment retirement account. I opened it with Vanguard, which is where I had all my other investments. It was quite surprising to me when I looked around at other brokerage firms to find that Vanguard is not necessarily the best option.

The very last module in the training shows you how to use a certain IRS worksheet to calculate your contribution room, and I show four calculation examples. This module is really in the weeds, but should be super helpful for someone who trying to put as much money as legally allowed into their self-employment retirement account.

I actually didn’t know about this worksheet a couple of years ago when I accidently slightly overcontributed to my self-employment retirement account. Once I realized my mistake, I had to reverse that contribution in a slight panic right before the tax deadline. I don’t want anyone else to go through that process or overcontribute and not catch the mistake, so that’s why I included this module.

Summary

Let’s come back around to the compound interest illustration that I relayed at the beginning of this episode. Given the assumptions in that example, investing $250 per month for five years and then letting the portfolio grow for fifty years resulted in a balance of almost one million dollars.

Whatever your saving rate, increasing it by $250 per month is going to have a very impressive outcome, either in more wealth in retirement or achieving financial independence even earlier.

If your budget has no room for additional investing right now but you have a bit of time on your hands, consider pursuing a self-employment side hustle such as consulting; freelance research, writing, or editing; tutoring; baby or pet sitting; or gig work.

To invest $250 per month in the type of self-employment retirement account that I recommend, you only need to net $269 per month through your business. Let’s round it up to $350 per month to account for income and self-employment tax.

If you earn $15 per hour after expenses, you can earn $350 in 23 hours of work, or less than 6 hours per week.

At $25 per hour, that’s 14 hours of work in a month or between 3 and 4 hours per week.

If you charge $50 per hour, which is quite moderate for some of the types of work I mentioned earlier, you can earn $350 in just seven hours of work per month. Increase it to $100 per hour, and you’re down to less than 1 hour of work per week to meet your goal.

If you think that charging $50 or $100 per hour is outlandish, you’re probably anchoring against what you’ve been paid as an employee and/or for work outside of your unique skill set. Capitalize—literally—on the skills you built or are building during your PhD to command higher pay rates.

Do you think you can find between 1 and 6 hours per week to devote to a side hustle over just five years if it can become an extra million dollars fifty-five years from now?

If you’re already there with your self-employment side hustle or will be soon, please consider joining the Personal Finance for PhDs Community to take the Self-Employment Retirement Account Options training. You will learn which self-employment retirement account is best for you and your business and where to open one to protect your investments from taxes and maximize their growth over the decades. You can access the training by joining the Personal Finance for PhDs Community at PFforPhDs.community.

This Grad Student Travels for Free by Churning Credit Cards

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In this episode, Emily interviews Julie Chang, a graduate student at Stanford University. Julie’s partner and parents live on the East Coast and she has family abroad, so during grad school she has pursued a specific credit card rewards strategy known as churning to help her travel hack. She has regularly flown domestically and internationally for several years almost exclusively using points and miles instead of cash. Julie details how she manages her churning strategy, including how she meets minimum spending requirements on her stipend, and how she has changed her strategy during the pandemic.

Links Mentioned in this Episode

grad student travel hacking

Teaser

00:00 Julie: Even if you don’t want to start off with churning right away, my best advice is to just get a credit card with a low minimum spend, and at least use that to start building your credit score and acquiring some points.

Introduction

00:18 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host Dr. Emily Roberts. This is season seven, episode eight, and today my guest is Julie Chang, a graduate student at Stanford university. Julie’s partner and parents live on the East coast and she has family abroad, so during grad school, she has pursued a specific credit card rewards strategy known as churning to help her travel hack. She has regularly flown domestically and internationally for several years, almost exclusively using points and miles instead of cash. Julie details, how she manages her churning strategy, including how she meets minimum spending requirements on her stipend and how she has changed her strategy during the pandemic.

01:06 Emily: Julie and I don’t go deeply into the topic of who can or should pursue credit card rewards or how to get started, so I’m going to point you to some free resources I’ve created on those topics. They’re all linked from the show notes for this episode, which you can find pfforphds.com/podcast. My article titled “Perfect Use of a Credit Card” explains how to avoid all the pitfalls that easily accompany credit card usage by putting in place some pretty stringent rules. You will have to be well-practiced and following strict rules in this area if you want to succeed with credit card rewards. My article titled “How to Establish Credit in the US” is for people who have recently arrived in the U S or who have lived in the US for many years, without taking out any debt. It explains how to get your first toe hold in the world of credit and how to build your credit score over time. Finally, in 2019, I published a podcast interview with Seonwoo Lee titled “How To Make Money Without Working: Credit Card rewards and 529s”. That episode is quite complimentary to this one, and I recommend listening to it. If you want to go deeper into the subject. Without further ado, here’s my interview with Julie Chang.

Will You Please Introduce Yourself Further

02:20 Emily: I have joining me on the podcast today, Julie Chang. She is a graduate student at Stanford currently, and we’re going to be talking about credit card hacking, credit card rewards strategies today. So, Julie, will you please introduce yourself a little bit further?

02:34 Julie: Sure. I’m a fifth year bioengineering PhD student at Stanford, and I’m currently studying how the mechanical properties of the extracellular matrix affect cell behavior and specifically in the context of cancer.

Credit Cards vs. Debit Cards

02:48 Emily: Yeah. Excellent. You have done what I used to view as the impossible, which is having a strategy for credit card rewards during graduate school. And I always thought there’s a little bit out of reach, so I’m really excited to learn more about credit card reward strategies in general, and then the strategy that you use in particular. Let’s just start off for listeners with what are the general advantages for using a credit card versus using a debit card? Because I know for me, I definitely started out just using debit cards. I was a little bit afraid of credit card. So what are the advantages?

03:22 Julie: Yeah, so I think there’s a couple of main advantages. The first is that you can earn rewards often in the form of points or miles, and then you can actually redeem this for either cash back or for miles to fund plane tickets. And on another point is that you can actually use credit cards to help build credit history. So in the future, when you’re buying a house, getting a mortgage, having a high credit score is super important.

03:50 Emily: And another benefit I’ll add to the two that you just mentioned is there’s a little bit more fraud protection available for credit cards. It’s quite easy to have a fraudulent charge reversed, erased on a credit card versus maybe more of a process or maybe even potentially impossible with certain charges on debit cards. Those are three, three great ones.

Pursuing Credit Card Rewards

04:08 Emily: Specifically on the rewards aspect of using credit cards, what are the different kinds of goals you might be able to pursue?

04:15 Julie: Right. Sometimes you can acquire airline points, so you can get a lot of Delta points, American airline points, and then you can use those to re redeem tickets, either domestically or internationally. On the other hand, you can also use points for cash back. Then you can actually use this to kind of pay yourself back when you purchase, say groceries or anything else. It kind of depends on the credit card.

04:43 Emily: Yeah. I know when I was in graduate school and I started learning about this area, I definitely only tried to pursue the static cashback, because I guess I sort of felt like the travel rewards were a little bit more, it’s a little bit higher level. It’s a little bit more complicated. It’s something you have to learn. There’s more of a learning curve on that. So I definitely stuck with the static stuff at first, which I think is a pretty common approach for people. But both of those are different kinds of strategies that will work. For you in particular why are we talking to this today? Why is this a strategy that you have learned a lot about and decided to pursue during your graduate degree?

05:19 Julie: For me, I’m doing my PhD program in California, but my family lives in New York, so then I would have to go back during breaks and my partner, he’s actually also a PhD student in Atlanta, so this requires a lot of traveling. Also a lot of my relatives are in Taiwan, so occasionally I make these international trips. Basically my perspective is using credit cards on things that I would purchase anyway and slowly build points to then redeem for these flight tickets. My goal was to not spend too much money on flights during grad school, but I don’t want money to be kind of a limiting factor in that I can’t see my partner or my family.

06:08 Emily: Okay. And was there…when did the shift happen? When did you set this as a goal? Was it just when you were starting graduate school, when you were looking at the geography of the situation and realizing the challenge, or did you go for while paying for flights in cash and then said, well, there must be a better way here.

06:23 Julie: I got into it just before graduate school since, I think to apply for credit cards, it’s a lot easier to apply for credit cards after you’re a certain age. It might be 21. So before then, I wasn’t really applying for credit cards anyway. And I think just when I turned 21 and then it was right before I went to graduate school, so it kind of worked out in that sense. And then I just kind of learned about it from searching online.

06:54 Emily: Yeah. And would you say that you’ve done more traveling than you would have been able to do just if you were paying straight cash? What’s been the effect on your finances, I guess?

07:06 Julie: Yeah. Essentially I typically don’t really need to factor flights into my budget, which is really, really awesome. And basically when I need to travel, I typically am able to, of course I still need to look at my budget overall, but there is a lot of flexibility. Another example is that my partner and I, we were able to go on a vacation to Greece, which typically the tickets might be a little bit more expensive and because we were able to pay for our flights in points, then maybe we have a little bit more flexibility in our budget for say housing or for food, during our vacation. So it definitely just reduces the impact of needing to spend a lot on a vacation.

07:50 Emily: Oh yeah. I mean, I can’t remember exactly what I was saving to spend on travel during graduate school, but I think it was at least a couple hundred dollars per month per person. And that was really mostly just for like obligation travel, like I have to go see my family, I want to go attend this wedding. So yeah, it’s really inspiring what you’ve been able to do. I’m really excited to dive into the mechanics of exactly how this happened.

The Basics of Credit Card Churning

08:13 Emily: What you have been doing as a strategy known as credit card churning. Can you explain what that is?

08:20 Julie: Yeah. Basically the bulk of the cash back from credit cards isn’t necessarily through the exact amount of money that you spend. It’s actually through these bonuses of signing up for new credit cards. For example, in some credit cards, you can get a certain number of points, usually it’s pretty high, maybe like 50,000 points, if you spend a certain amount of money in a few months. So a lot of cards you might have to spend $1,000 to $4,000 in about three months. And these points have 50,000 points. It could translate to say $500 if one is 1 cent, but if you can actually increase the value, say 1.50 cents per point, it becomes $750.

09:05 Emily: Yeah. I think maybe another way of phrasing what you just said is the amount of money that you need to spend to gain a given level of rewards is much less when you do that through signup bonuses, rather than through ongoing spending and ongoing cash back. There’s this lucrative period available right when you sign up for a new card. It’s the incentive that they’re giving you to do your business through that card versus some others. It’s this opportunity to capitalize on, right when you first switch onto a card. And so credit card churning is like very frequent switching onto new cards to gain those early on sign up bonuses. Is that right?

09:42 Julie: Yes, that’s correct.

Keeping Track of of Credit Cards

09:44 Emily: Okay, awesome. For you, as I said earlier, this is a little bit of an advanced level strategy. How do you keep track of all these cards that you either currently have, or maybe ones that you need to close, or maybe ones that you’re planning on opening? What is your mechanically…how do you keep track of all this?

10:04 Julie: Oh yeah. I basically do this through an old-fashioned spreadsheet. I color code everything. I typically put when I sign up for a credit card. And this is especially important if a credit card has an annual fee, because potentially you might want to cancel or downgrade the card when the annual fee comes up because it might not be worth keeping the card.

10:27 Emily: Yeah. So you keep track of when you sign up for a card, and then when one year, let’s say, is up for something that has an annual fee. Do you keep track of anything else? Maybe the minimum spend amount I would imagine, and the time period over what you have to do that?

10:40 Julie: Yeah. I keep track of all of that. I actually go into more detail in which I actually, every month I update all the point totals that I have and I also keep track of all of my redemption. So I think that might be a little bit extra in the amount of information I’m keeping track of, but for me it’s actually pretty fun to just tabulate everything.

11:01 Emily: Yeah. I could totally see how this would be fun because there’s kind of two halves of this, right? There’s like the accumulation of points and then there’s the planning of how am I going to actually use these points. And that is the really pleasurable par, I think, especially if one enjoys planning then getting to play around with different scenarios and so forth. Well, let’s come back to that in a few moments.

Meeting Minimum Spends

11:20 Emily: We just mentioned the minimum spending requirements like between one and $4,000 over a period of some months, that might seem like a lot of money on a graduate student’s stipend. So how do you actually make sure that you’re going to meet these minimum spends without, as you said earlier, outspending your budget, outspending your planned expenditures?

11:40 Julie: First I just want to be clear that everyone has to be very careful and tracking their finances. And you’re definitely in a very privileged position if you are able to do this. But for me, I look at many different factors. So one is timing. If I have a big purchase coming up, then I might as well use it in a minimum, spend another, more specific for graduate students is if you have conferences. So conferences can be pretty expensive. Sometimes you have to use your own credit card, so why not actually use it to help meet a minimum spend? Another thing that I’ve done is paying stuff in advance for other people, especially my family, where, for example, if we have a cell phone bill, I can pay that ahead of time. Another one that actually found out more recently is that you can actually pay estimated taxes with credit cards. And this is really interesting because with a credit card, there is a fee of, I think the lowest is 1.87%. But say, if you have a credit card that does 2% or even a special credit card, if the rotating category matches 5%, you can actually make money by paying the estimated taxes, which you actually have to do anyway. However, if you don’t have a card for that, if you’re actually trying to meet a minimum spend, perhaps it is worth it to pay that fee to kind of help you get that really high bonus for the credit card.

How Many Cards is Too Many

13:09 Emily: So for you, like let’s say in 2019, how many new cards did you sign up for?

13:19 Julie: I would say I haven’t signed up for too many cards just because I’ve been slowing down a little bit towards the end of my PhD, but I would guess maybe three to four cards, so nothing too crazy. I know there’s people that are super into it that might sign up for 10-20 cards per year.

13:36 Emily: Yeah. Well, that’s 10-20, that’s a number of more minimum spends that you need to hit. Actually three to four sounds like fast, but like okay, reasonable pace for graduate students. I think that this strategy of keeping track of minimum spends and what your expenses might be that are coming up that might help you meet those minimum spends, it goes actually really well with the strategy I love to talk about, which is that of targeted savings accounts. Not specifically the saving in advance for doing things, which is also a good idea, but actually more the planning aspect that comes along with keeping account budgeting like that is that you can look out over the next six months or over the next year and say, yup, I know that this large expense is hitting in this month. I know this needs to be, be paid here. And I definitely found that there were some one, two month periods when I was in graduate school where I would have like a flight I needed to buy, well, I was buying them in cash, a flight I needed to buy, and my six month car insurance premium was coming up and there were some other maybe some housewares or electronics purchase we need to make. There were definitely months where they would hit kind of like that, and I was budgeting for those and using targeted savings and thought that was great, but hey, the next level up from that is yes, save in advance, but why not also put it on a credit card and meet a minimum spend that you’re gearing up for anyway.

When to Apply for a New Card

14:48 Emily: This is more of a personally motivated question, but how far in advance of, let’s say a major purchase that you know is coming up on a certain date, would you need to sign up for a card? How do you actually time this so you know that you have the card ready to go when you actually need to make the purchase.

15:04 Julie: Yeah. I mean, I would probably do at least a month just because you have to apply for the card. And in some cases, if you’re not approved right away, you might have to wait a week or so. And that doesn’t mean that they’ll reject you, it’s just something that is part of the process. Another is if you put a credit freeze on your credit score, so that’s actually something I’ve done to be extra careful, you might have to lift your credit freeze, and that also takes some time. So I would budget at least a month.

15:35 Emily: Yeah. I know there’s a little bit of a game there because you need to give some buffer time in advance, but you also need to have enough purchases within the period of time to get the bonus to go through.

Commercial

15:46 Emily: Emily here for a brief interlude. If you are a fan of this podcast, I invite you to check out the Personal Finance for PhDs Community at pfforphds.community. The community is for PhDs and people pursuing PhDs who want to take charge of their personal finances by opening and funding an IRA, starting to budget, aggressively paying off debt, financially navigating a life or career transition, maximizing the income from a side hustle, preparing an accurate tax return, and much more. Inside the community, you’ll have access to a library of financial education products, which I add to every month. There is also a discussion forum, monthly live calls with me, book club and progress journaling for financial goals. Basically, the community exists to help you reach your financial goals, whatever they are go to pfforphds.community to find out more. I can’t wait to help propel you to financial success. Now back to the interview.

Using Credit Card Churning to Fund Travel

16:50 Emily: So you mentioned the challenge that you were facing of living far from your family and your partner, and you also mentioned, okay, you’ve been able to, for instance, you were able to go to Greece with your partner. What were some of the other benefits that you’ve experienced by doing this? For instance, have you ballparked like how much money you have not spent on travel by doing this strategy? Or can you tell us a little bit more about the upside?

17:13 Julie: It’s definitely quite a bit of money that I’ve saved through travel. I don’t remember exactly how much, but for example, I would go from California to New York round trip before the pandemic, probably two to three times a year. Then in addition, I would also go to Atlanta or vice versa maybe a couple of times a year. So it’s definitely many flights that I’ve saved on. And pretty much I’ve been able to not pay cash for most of my flights during grad school.

17:44 Emily: Yeah. It’s just an incredible benefit to not have to have that aspect in your budget, of paying for travel when you know that you have to do it like this. It’s really amazing that money can come kind of from nowhere, if you have a great credit score, if you’re really on top of your budget, if you have a spreadsheet like you do and you’re keeping track of everything and being diligent. It’s just amazing how much money you can free up for your budget. So I hope this is sounding like good news to some people in the audience who are currently spending more than they would like to on travel.

Credit Card Churning Strategies

18:14 Emily: For you, like when you’re realizing you’ve come to the end of a one period of minimum spend and you start thinking, well, what’s going to be my next card, how do you search out these cards? How do you actually find that’s going to be the best fit for you?

18:27 Julie: There’s a lot of very active communities on the internet. Specifically on Reddit, there’s a subreddit called churning that has all of these. There’s a lot of specific websites such as Doctor of Credit. Actually, I keep pretty up to date and people will typically announce whether there might be a new card coming up. But for me as a graduate student, if I know I don’t have any big purchases coming up, it’s also a practice of self-restraint, where I know I shouldn’t apply for new credit card, and instead kind of look at my portfolio of credit cards and see perhaps certain cards have increased points per certain category and maximize that instead.

19:10 Emily: I see. And then you mentioned earlier cards with annual fees, specifically canceling a card with an annual fee before that second fee comes up. How do those overall play into your strategy? Is it something that people should consider or maybe should avoid? What are your thoughts about that?

19:26 Julie: I would say definitely for beginners, maybe focusing on cards without annual fees because they also have much lower minimum spends, so it would be pretty easy to hit minimum spend. But for me, the only card I have with an annual fee that I currently use is a Chase Sapphire Reserve. For me, I always have to do a calculation, whether it’s worth it for me to keep the card for the next year. There’s certain factors that I consider. One is looking at the benefits that the card offers and if I would actually use that, and another that I might consider is whether keeping the card will help me increase the value of the points that I’m spending. For example, with the Chase Sapphire Reserve, each point I can actually redeem for 1.50 cents instead of just 1 cent.

20:19 Emily: Yeah. I actually, so also for me, the Chase Sapphire Reserve was the first or maybe the second card with an annual fee that I ever signed up for. And I actually just canceled it a few months ago because I was like, I’m not traveling. I’m not traveling anytime soon. I don’t want to pay this fee because I do not see any redemption on the horizon. What I did specifically with that was I transferred the points to another Chase branded card that we had figuring at some point in the future, I’ll probably get the Reserve or the Preferred again, transfer the points back and be able to redeem them at at least that much value, if not more/better later on. So that was my particular solution to that, but I’m glad that you reevaluated and decided, okay, I’m going to keep this card for the time being. It does have some pretty nice perks to it for a high fee.

Churning During the Pandemic

21:04 Emily: Speaking of the pandemic and recent changes, what has been going on with you and this strategy in the last six months?

21:11 Julie: Yeah. So there has actually been a lot of changes to the point space since the pandemic and I think these effects are likely to stay for quite a while. So obviously I’m not redeeming my points for travel; however, for Chase, because they realize this they’re actually allowing you to redeem 1.50 cent per point for groceries. Before it used to be just travel, but now it’s actually for grocery purchases. So for me, if I put my grocery spend on the Chase Sapphire reserve, I’m able to redeem those points for the groceries. And also since I had a few canceled flights this earlier this year, then I’m not really looking to apply for cards that will give me more miles, but I might look for cars that give me a little bit more flexibility in how I can use those points.

22:01 Emily: Hmm. So when I thought about the pandemic and affecting my travel plans, both personally and professionally, I’m already in a period of not applying for cards right now because my husband and I are looking forward to buying a house in a few months. And so we don’t want to be messing around with our credit right now. If not, I think I would probably still be signing up for stuff because I, again, hypothetically, I think my attitude would be well, get the points, bank them now, spend them later at some point. Why is that not your approach? Why do you prefer the flexibility right now?

Julie (22:36): Well, so actually right now, I’m not really applying for cards and I’m just kind of using my current portfolio of cards to reach or to kind of build up the points, as you said. I might look towards applying for a card later this year, but I’m actually not in a rush to apply for new cards right now.

Planning Point Spending

22:59 Emily: Yeah. You said you updated your spreadsheet monthly with figuring out how many points you currently have and with what providers and so forth, how do you go about planning how you’re going to spend the points? What is that process like for figuring out, okay, these points transfer to this airline, you know, all of the complexity that goes along with that.

23:18 Julie: Yeah. That I would say is actually the hard part of figuring out how to use those points. There’s certain programs, like Chase, where it’s pretty easy to redeem the points because you can just do it through any airline by using Chase travel, but certain cards you can actually transfer it to specific airlines and convert it into miles, which is actually, even though it’s harder, it could be better because you could get better value for your points. For me, I like having points in several different companies, for example, also in American Express. I also have points specifically in Delta, so then whenever I, for example, if I want to travel to New York, I can look at what are the different points I have and figure out which program I want to redeem it in for the best value.

24:10 Emily: I’m also thinking that some of this, the planning of the redemption might be specific to your local city. You obviously live in a major city with several different airports and airlines to choose from. I’m also reflecting, I recently moved from Seattle to the Los Angeles area. So in Seattle it’s all about Alaska. Like Alaska is by far the winner airline right there, so I was always trying to sort of figure out how to get Alaska airline points versus other things. Now that I live in a different kind of city I’m thinking, well, my strategy might need to be different. Do you know of any resources where people can find out more about the airlines that service their local airports or maybe their destination where they commonly go, they want to figure out how to do that?

24:51 Julie: I think the best way to figure that out is just looking through the specific airline website and figuring out which destinations your city travels to. But otherwise also just looking online to see what other people tend to do in your city.

25:08 Emily: Yeah. And I guess if you live in a major city, like the San Francisco Bay area, Seattle, Los Angeles, there’s going to be plenty of conversation around how to do this in cities like that. Well, is there anything else you want to add to tell the audience more about your strategy or what you’ve been able to do with it?

25:26 Julie: I think as a graduate student, even if you don’t want to start off with churning right away, my best advice is to just get a credit card with a low minimum spend and at least use that to start building your credit score and acquiring some points.

Best Financial Advice for Early Career PhDs

25:43 Emily: So Julie, as we wrap up this interview, what is your best financial advice for another early career PhD?

25:50 Julie: My best financial advice would be to start early. Many financial related actions serve their greatest benefits when done early, so the effects can be compounded over time. And I think this not only applies to investments compounding over time, but also any positive practices that you do such as saving money on food by not eating out too much or using credit cards to your advantage.

26:14 Emily: Yeah, absolutely agree. Starting early, I mean, a lot of graduate students might feel like they don’t have a lot of options right now, especially living on a lower stipend, but anything you can do any habits that you can form any even habits of mind that you can work on, it’s all going to benefit you throughout your time in graduate school, after that going into your career, and really, I like to think of it as, if you build up these habits and practices and thought patterns right now during graduate school, once you get that higher salary later, you’re going to be able to like hit the ground running blast through financial goals, when you get to that point, if you’ve done the sort of mental preparation beforehand, even if you don’t see a lot of actual financial progress earlier on.

26:57 Emily: Thank you so much that advice, and thank you so much for joining me today, telling the audience about your strategy. I’m really excited post buying a house to be back on the credit card rewards game so this is really inspiring to me.

27:11 Julie: Thank you.

Outtro

27:13 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the personal finance for PhDs podcast. There you can find links to all the episode show notes, and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind the scenes commentary about each episode. Register at PFforPhDs.com/subscribe. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is stages of awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.

A Lucrative Summer Internship Enabled This PhD Student to Max Out Her IRA

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In this episode, Emily interviews an anonymous member of the Personal Finance for PhDs Community and alum of The Wealthy PhD. Anonymous did a summer internship at Google Research, which helped her evaluate whether she wants to pursue a career in academia or industry and set her up well for an industry career. The internship also paid her in three months approximately what she makes in an entire year on her grad student stipend. Anonymous shares her tips for applying to Google’s summer internship program and convincing your PhD advisor to let you do the program. The sudden but temporary increase in Anonymous’s income spurred her to participate in The Wealthy PhD, through which she opened and maxed out an IRA, optimized her financial accounts, and started tracking and budgeting her expenses.

Links Mentioned in the Episode

Teaser

00:00 Anonymous: Kind of talking about how much you earn, or like, how much money you have in your bank account can be an uncomfortable topic. So, having a safe space, or a kind of required space, to be open about your finances and listen to other people’s ideas. I think having this community was really empowering for me.

Introduction

00:26 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season seven, episode seven, and today my guest is an anonymous member of the Personal Finance for PhDs Community and alumna of The Wealthy PhD. Anonymous did a summer internship at Google Research, which helped her to evaluate whether she wants to pursue a career in academia or industry and set her up well for an industry career. The internship also paid her in three months approximately what she makes in an entire year on her grad student stipend. Anonymous shares her tips for applying to Google’s summer internship program and convincing your PhD advisor to let you do the program. The sudden, but temporary increase in Anonymous’s income spurred her to participate in The Wealthy PhD, through which she opened and maxed out an IRA, optimized her financial accounts, and started tracking and budgeting her expenses.

01:23 Emily: The Wealthy PhD is my signature program that delivers financial inspiration, accountability, and actionable knowledge. Through one-on-one coaching sessions, I help each participant to identify at least one overarching goal that they would like to achieve during the program and map out the necessary steps. I also lead weekly accountability meetings with small groups of participants during which you will set and report on small weekly goals and also receive help overcoming any obstacles you’re facing. It’s an intensive and highly transformative experience. The next cycle of The Wealthy PhD will take place in early 2021. You can find out more at pfforphds.com/wealthyPhD. In the meantime, the Personal Finance for PhDs Community is available for you. The Community comprises many financial education resources I’ve created, including the ebook, The Wealthy PhD. The Community is a self-directed experience. However, I am always available to provide assistance and personalized feedback to you through the Community forum and monthly live calls. We also have monthly challenges and a book club. A benefit I recently added is that you are invited to sit in on my podcast interviews and ask your own questions of my guests. You can learn more about the Community and join anytime through pfforphds.community. Without further ado, here’s my interview with Anonymous.

Will You Please Introduce Yourself Further?

02:31 Emily: I have a really special guest joining me on the podcast today. She is a member of the Personal Finance for PhDs Community, and she is also an alum of my Wealthy PhD program. So, we’ve been working together for a few months now. She is actually choosing to remain anonymous for this episode. So, I won’t use her name, but I will let her introduce herself to you in just a second. And we are going to be talking about the wonderful, lucrative internship that she did just this last summer, summer of 2020 with Google and how she got the internship and what it’s done for her finances. So, super excited about this. This is a great one to listen to if you are considering whether or not you should do an internship during your PhD program. What are the pluses and minuses? We’ll be talking about all of that. So, welcome, and will you please introduce yourself?

03:42 Anonymous: Yeah. Great to be here. So, hi I’m Anonymous and I’m a fourth-year PhD candidate studying electrical engineering and computer science, or EECS. Actually, a fun fact about myself is that I actually studied Biomedical Engineering at UC Berkeley, where I went as my undergrad.

Google Research Summer Internship Experience

04:04 Emily: Yeah, good to know. I didn’t even realize that. So, we have that field in common, actually. Okay. So, I mentioned this last summer, you did an internship with Google. What was that type of internship and what do you think you got out of it? Professionally speaking?

04:19 Anonymous: So, the internship was my first industry experience. So, it was actually very valuable for me in and of itself to gain perspective on how research works in an industry setting versus academia. And during the internship, besides doing research, I tried to attend a few seminars which talked about industry versus academia. And there were some great workshops where professors slash research scientists, so people who lead a dual life of industry and academia, talked about their experiences. So, I tried to focus my experience on what would it be like if I were to get a job in industry.

05:00 Emily: Okay, so this was, you were thinking of it as actually kind of like a trial period in helping you decide which way to go in your career.

05:08 Anonymous: That’s right. Yeah. Since I switched my major from biomedical engineering to electrical engineering, before I wasn’t really thinking about industry as much as now. But having switched the major I noticed that a lot of people in my major would start doing internships after their third year or their fourth year. So, I really wanted to try something out to see if I would like it or not.

05:36 Emily: Okay. Yes. Let’s come back to that point in a moment, but I just wanted to hear more about did you actually learn anything new or was it more about you learning the setting and how things work in that setting? Or, yeah, just more about like, what did you get out of this internship?

05:51 Anonymous: So, this internship is actually a little bit special in the sense that it’s very research-focused. So, within Google, I was within Google Research. So, it’s not quite typical industry experience, I suppose. The setting was actually quite similar to how I would normally work with my PhD advisor.

Career Development Opportunities via Google Internship

06:14 Emily: And what about future career opportunities? You know, if you do decide that you want to go into industry instead of academia, you know, do you see the possibility of being hired at Google or at least would maybe your mentor be able to serve as a reference? Or what about sort of the furthering of your career?

06:30 Anonymous: Oh, definitely. So, I’m not sure about other companies, but at the end of my Google internship, I had the option to either return as another intern for next summer, or for those who are graduating within one or one and a half years, they had an option to do full-time position conversion internally. So, at a minimum, this is a great opportunity, I think, for me to get an internship opportunity back again, because I will not be graduating for another two years, so I’m not eligible for full-time conversion. But I think this is also kind of a good motivation for PhD students to do an internship either after their third year or their fourth year. So, I haven’t gotten a job yet, but I think this would also greatly help with the job search once you’re near the end of your PhD.

Why Should a PhD Student Consider an Internship?

07:23 Emily: Yeah, that sounds fantastic. So, both between your reasons and also maybe other people’s reasons, why should a PhD student consider doing an internship? Obviously, there are some programs like yours where it’s more culturally common to do internships. So, maybe speak to the people who are less familiar with why you would do an internship at all.

07:44 Anonymous: So, I think that you should try to keep your options open for those in the PhD. It’s still not late to get new experiences and decide what you would like to have in your career. So, if it’s something that you haven’t tried out before while we’re still in the program, I think that’s a great experience to get. And we will get to this aspect, but usually an internship helps greatly with your financial aspects compared to your graduate stipend. And that can be, I think that’s a wonderful motivator as well.

08:27 Emily: I see. I think the reason that you did this, especially, I think is a really great one is just kind of checking out the setting. Like, is this a place where I’d like to work compared to academia in helping people make their career decisions? I know that I did one, you could sort of call it an internship. It was, it was built more as a fellowship, but I did one three-month fellowship. It was actually after I finished my PhD, but it’s open to people who are not finished with graduate school yet, called the Christine Mirzayan Science and Technology Policy Fellowship at the National Academies. And from their like sort of conception of the fellowship program, it’s very clear that they’re not about like recruiting people to come work at the Academies. Like they’re about offering an experience in science policy to people who will, they always talk about it in thirds. About a third of them might go into careers in science policy.

09:13 Emily: A third of them will probably go back to academia and be, you know, faculty members or whatnot, or work in other roles within academia. And a third of them will go on to have other jobs. So, their purpose is just to give that experience away to people as sort of a way to tell them about what the National Academies are doing no matter what setting they end up in. So, at least that is billed as being very open. Like this is about career exploration and we’re happy to have people, you know, come participate in it for that purpose.

How Do You Discuss Internships with Your Advisor?

09:39 Emily: So, we said earlier that in your field, it’s a little bit more common to do internships, not unheard of. How did you navigate this conversation with your advisor of maybe, should I do an internship? What should the timing be? Is it okay with you? And how do I fit it in with the rest of my research plan?

09:57 Anonymous: I think the easiest way is to talk to your advisor early about, even if you’re a first year student, you probably have some careers aspirations that might change, and that’s totally fine. But try to have regular conversations with your advisor about what you might want to do after your PhD. And actually, your advisor can be the person who helps you get the internship. So, it’s not about getting his permission to do something outside of academic research, it’s working together to find something that works for both the advisor and yourself. And in my case, the research field that I was in while at Google Research, was not exactly my thesis topic, obviously. But it was in the same field of intersections between biology and artificial intelligence. So, I learned a lot of transferable skills in research that is actually helping me a lot right now that now that I’m back in PhD research. So, it’s a win-win in my case.

11:13 Emily: I think that’s a really smart approach to take in any negotiation is put yourself in the shoes of the person across the table from you and figure out what they want to hear and how this would benefit them. So, that’s awesome. You’re going to another setting, you’re learning something new and you’re able to bring back, you know, new ideas, fresh perspective, new insights to your existing resource and to your advisor. Hopefully, everyone can find some kind of connection between, you know, what they might be doing in an internship and how it can benefit their work or their advisor. At least try, that does sound like a great approach.

Tips for Being a Competitive Google Research Applicant

11:48 Emily: So, specifically talking about when you applied to Google Research. This is a fairly big program, right? Like, do you know how many people they accept every year?

12:01 Anonymous: I’m not sure, but probably across the world, there’s thousands of interns for summer.

12:06 Emily: Oh, wow. Is that at the undergraduate and graduate level?

12:10 Anonymous: I think so.

12:11 Emily: Okay. Yeah. So, quite a big program. What tips do you have about being a competitive applicant? Obviously, you were successful, but maybe you’ve learned even more since then about other commonalities that people who are successful in landing this internship.

12:25 Anonymous: Right. Yeah. So, I have some tips from myself and also something that I heard from a student. So, my specific role was software engineering intern. So,, it only applies to that position. Just FYI there are many types of internships within Google, not just software engineering. So, it’s going to be specific to that position. For this position, I had to do something called technical interviews, and I think that’s kind of unique to this one which requires some problem-solving related to data structures and algorithms. Thankfully this process is fairly common in other tech companies as well, not just in Google. And there are plenty of resources out there, too. There a standard interview book that everybody seems to use for this position and also a website called Leet Code to do practice problems.

13:20 Emily: What’s the title of that book?

13:22 Anonymous: The title of the book is Cracking the Coding Interview.

13:27 Emily: Okay. So, yeah, I’ll link to that from the show notes, as well as the website that you just mentioned.

13:33 Anonymous: Yeah. So the book is Cracking the Coding Interview, and the website is called Leet Code L E E T Code. So, I realize that this kind of technical interview might not be really common in other positions. And rather there might be more behavioral, quote unquote, behavioral questions. I think something common that other PhD students might need to do to get internship positions, not just software engineering, but other positions is explaining their research. And a great tip for this I heard is to try to prepare your research speech at three different levels. So, one level is for recruiters who know nothing about your field, the second level is for someone who is somewhat familiar, maybe you might know some terminologies, but not your specific research area. And the third level is someone who might be really familiar. So, maybe he or she is world class expert who invented the technique that you’re using. It’s uncommon that you might get this kind of recruiter, but at least with Google, it’s a large place with many, many smart people who know many things. So, when you’re explaining your research, which I think that would happen in nearly all probably positions that PhD students apply to, I think it’s really beneficial to prepare your speech in three different levels.

14:52 Emily: Yeah, that is a great idea. I’ll add in actually on the, using a book to prepare or whatever, I went through a round or two of interviewing for like management consultant company internships, which I did not get. But there is like a similar process of like everyone uses the same book, everyone practices, they call it casing, everyone practices casing together. And so, you can often find students at your same university who are preparing for the same type of interview. Maybe not even at the same company or whatever, but you can sort of form like working groups and practice together if you want to. I would imagine if you go to a large university, you’re probably going to be able to find some other people who are going through the same process at the same time.

Biggest Tip: Apply Early

15:33 Emily: And outside of the technical interview, do you have any tips on, I don’t know what the rest of the application entailed, but any tips on the rest of it?

15:48 Anonymous: The rest, I had to do a few more interviews regarding project matching. So, this was the phase where research scientists from Google would reach out to me. And we would talk about what their project is about, if I’m interested, what my skill sets are. So, this is where explaining your research comes in. Yeah. Otherwise, I think the biggest actually tip is to apply early. So, I don’t know when this will be published, but right now early October would be a good time to start looking around. Yeah, usually these positions get filled up in a rolling basis and I know really smart students who applied early the following year and they don’t get any offers at all, even though they’re super qualified to do so. So, the earlier the better.

16:37 Emily: Yeah, that’s a great, great tip. Thank you for adding that. We’ll try to push this episode out as quickly as we can so that it gets in front of people in a timely manner.

16:48 Anonymous: Right.

Commercial

16:51 Emily: Emily here for a brief interlude. If you are a fan of this podcast, I invite you to check out the Personal Finance for PhDs Community at pfforphds.community. The Community is for PhDs and people pursuing PhDs who want to take charge of their personal finances by opening and funding an IRA, starting to budget, aggressively paying off debt, financially navigating a life or career transition, maximizing the income from a side hustle, preparing an accurate tax return, and much more. Inside the Community, you’ll have access to a library of financial education products, which I add to every month. There is also a discussion forum, monthly live calls with me, a book club, and progress journaling for financial goals. Basically, the Community exists to help you reach your financial goals, whatever they are. Go to pfforphds.community to find out more. I can’t wait to help propel you to financial success. Now, back to the interview.

What Did the Internship Do For You Financially?

17:50 Emily: You mentioned earlier that finances can be a great motivator to do a summer internship. Can I ask you how much you were paid by Google for doing the internship?

18:06 Anonymous: I don’t remember the exact total amount, but I think the total was almost equivalent to the amount that I would get paid by NSF for a whole year. But I got the same amount in three months.

18:21 Emily: So, NSF I think pays $34,000 if I recall correctly, or at least in that ballpark, for the year. So, it’s around that amount of money for three months. So, something like $10-$11,000 a month.

18:35 Anonymous: Yeah. I think it was slightly less than that, but yeah, I think that’s reasonable.

18:41 Emily: Yeah. That is incredible. You know, for a graduate student, you’re a fourth year. So, you’ve been living on, you know, your stipend for a few years now. It’s the NSF stipend, so it’s, you know, relatively generous. And then to get that same amount of money over a very short period of time is–maybe it’s wonderful, but also maybe a little bit like shocking. Like where’s this money coming from? And, “Oh my goodness, how did I do this?” So, what did doing the internship do for you financially? Obviously, the income is high, but then what did you do with that income?

Roth IRA Contribution Goals Achieved

19:14 Anonymous: So, I joined The Wealthy PhD program about the same time that I started my internship to exactly deal with the question that you just posed, which is what do I do with all this extra money? And I had a few goals I wanted to kind of accomplish over the summer. One of which was trying to contribute fully to the 2020 Roth IRA. So, I knew from this podcast that graduate students are able to contribute to Roth IRAs pretty recently. I don’t think I was eligible last year, but I am definitely eligible this year due to the internship. And I wanted to pay all $6,000, like within the summer. Concretely, this internship has enabled me to do that in one go. And that also really helped me with the lifestyle inflation problem. So, I was quite worried when, before starting this internship that I would suddenly live very lavishly and waste all my hard earned money that I earned.

Gaining Control Over Finances

20:23 Anonymous: So, I really wanted to avoid that. And The Wealthy PhD program really helped me to gain control over my finances so that, A) I know how I’m spending my money, which I didn’t really have an idea before. I knew I was kind of close to living paycheck to paycheck. I wasn’t in debt. But I was a little bit afraid and I was the type of person who was afraid to check her bank account sometimes. So, being in The Wealthy PhD program helped me gain confidence to manage my finances. And besides contributing to the Roth IRA, I think I also ended up changing all my bank accounts at the end. It wasn’t my plan. But while in the process, I noticed that I should try to consolidate various different accounts that I had into one place so that I can check more easily. So, it was kind of motivated by that so that I can be on top of my finances and that kind of led to discovering things like I think I had a GenGuard investment account that I totally forgot about. I worked very briefly between my undergrad and grad and I had an investment account that I opened, but I never checked. So yeah, a lot of things got accomplished during this program to gain control over my finances.

21:58 Emily: Yeah. I would say, you know, it was the combination of the extra income from the summer internship plus, “Oh, we have this opportunity now.” And so we’re not only going to be using the money in the best way you can, but also kind of cleaning up some other things that you had lingering in your finances that weren’t quite organized the way you wanted, and so forth. Like changing the bank accounts, like what was going on with that old investment account and like digging it up and figuring out what to do with it. So yeah, that’s wonderful. And as I, you know, what I do with The Wealthy PhD is, actually you have this as part of the Personal Finance for PhDs Community as well. It’s a framework that I developed for early-career PhDs to basically develop financial security and then wealth.

22:39 Emily: And so for you, like the other Wealthy PhDs, we just work on sort of figuring out where you were on that framework and getting organized and getting onto one single step. Because often people start, they are sort of on multiple steps at the same time. Getting onto one step and then moving forward. So, you were able to get through, you know, step four of the program, which is start to invest. You maxed out that IRA for 2020. Plus, you know, you were able to go beyond that, should you want to buy, you know, extra savings and so forth on based on the higher income. I would say it’s a major shift for you personally. Obviously, you know, decided to face your finances enough to decide to participate in The Wealthy PhD. But going from being someone who didn’t want to check their bank account to being, you know, an investor, totally like confident and competent. I mean, that’s a really big change, plus having the money available to do what you want to do with savings and so forth. Yeah, I would say it’s a really big shift. It was really a pleasure to have you in the program and I’m happy to have you continuing on with me as part of the Personal Finance for PhDs Community.

Additional Benefits of The Wealthy PhD Program

23:41 Emily: Is there anything else you wanted to add about your summer internship or about your experience with The Wealthy PhD?

23:48 Anonymous: I think I would like to just say that The Wealthy PhD program was a very valuable one. It was also not just getting over control, but it was the first time where I could speak freely about finances. I guess, depending on how you grew up or your culture kind of talking about how much you earn or how much money you have in your bank account can be an uncomfortable topic. So, having a safe space or like kind of a required space to be open about your finances and listen to other people’s ideas. That was really helpful for me to hear about how other people are dealing with their finances. I know that everybody’s situations are very different of course, but something that I learned that was really interesting to me was side hustling. So, I never thought about, I guess internship is a type of side hustling, but I never imagined anyone in their PhD doing extra work while they’re doing their PhD research. And during the program, I saw many, at least a couple people, who are doing really interesting side hustles. I think someone had a YouTube channel, which is amazing. I think somebody was an actual licensed therapist, which blew my mind. So, I think having this Community was really empowering for me.

25:11 Emily: I’m so happy to hear that. Yeah. It’s obviously something that I love to run. I love to be in. I love to provide support to these grad students and PhDs in this way. As you said, it’s really hard to find a space where you can openly talk about money. So, you have two challenges, right? First find a space where you can openly talk about money. Not too many of those. Secondly, find a space where people actually like can understand and sympathize with your situation of, “I only earn $30,000 a year.” Well, for you this year, that was different. But in a typical year, that would be the case. And, “Oh yeah, I really don’t have any potential for increasing my income on a fulltime basis until many years from now. Oh, and I’m also dealing with lingering, you know, debt issues and not having invested throughout all my twenties,” and all kinds of like unique to PhDs kinds of issues. So, I’m really pleased that I’ve been able to provide that space and that people like you have been taking advantage of it and we’ve been having such wonderful conversations. So, yep. I really appreciate that. Thank you.

Best Advice for Another Early-Career PhD

26:07 Emily: So, as we close out the interview, what is your best advice for another early-career PhD?

26:14 Anonymous: I would say I think just echoing what you just said. Try to start saving for retirement early. I, I think I had this mentality in my early PhD as well. But as PhD students, we mightfeel like we’re not earning enough money. So, we might think that, “Oh, I don’t have enough money for retirement. All my money’s gone after paying rent and food.” Or I think another thing is, “Oh, we’ll catch up once we get a real job. So, we’ll not save during our PhD years, but start afterwards.” But I think something that’s constantly being emphasized is the importance of time and compounding interests in investing. So, even if it’s very little, now that I’m back to my PhD stipend, I’m investing very little, but I’m still investing. As soon as my stipend comes in, I’m investing a certain amount of money to my Vanguard investment account. So, I think that that’s pretty important, no matter, regardless of what you think about how much money you have, where we can catch up afterwards. Just try to save for retirement early.

27:25 Emily: Yeah. You really only know what’s going on today. You don’t know what the future holds. You might stay in grad school longer than you expect to. You might do a five-year post doc. It may be a long, long time until you reach the point that you thought you would start investing. And as you said, with the power of compound interest, the time value of money, those years that go by could have been helping you a lot in terms of your investments. If you have, you know, the means and the willingness to start earlier, then it’s a wonderful idea. I just wanted to add in, actually, because you sort of briefly mentioned this earlier, but prior to 2020 people in your position, fellowship recipients, weren’t able to use IRAs, to contribute to IRAs. So, you could still invest, you could still invest for retirement.

28:06 Emily: It just couldn’t be inside a tax advantage retirement account. However, starting in 2020, that changed. So, your eligibility was different in 2020, not just because you did the internship, but also because your fellowship is now eligible to be contributed. So, I’ll link in the show notes to the podcast episodes that I have explaining that change as well. But it just happened at the end of 2019. So, some people are still not aware of the shift yet. So, yeah, if you have fellowship income in 2020, and you weren’t aware, yes, you can contribute that to an IRA. So, definitely think about doing that, or at least starting one, contribute a little bit before the end before tax day in April, 2021. So, thank you so much Anonymous for coming on the podcast and sharing about this internship experience of what it did for you financially. I found it fascinating. I found it really hopeful for people who maybe in other fields who could take advantage of an internship like this and have kind of a boon year like you did in the middle of grad school when it’s sorely needed.

29:04 Anonymous: Yeah. Thank you so much for having me.

Outtro

29:07 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind-the-scenes commentary about each episode. Register at pfforphds.com/subscribe. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

This PhD Student’s Intricate Budgeting System Uses Cash Symbolically

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In this episode, Emily interviews Alicia Jones, a PhD student at the University of Illinois at Urbana-Champaign and the creator of the YouTube channel Alicia Does Adulting. Alicia explains in detail her intricate budgeting system, which involves creating a zero-based budget every two weeks, allocating cold hard cash into envelopes, contributing to her debt avalanche, and funding her targeted savings accounts. She uses this budget to keep her intimately connected with her spending decisions and accountable to her financial goals. Alicia and her husband have paid off $70,000 of debt in the past year and a half and now have a positive net worth.

Links Mentioned in this Episode

Teaser

00:00 Alicia: I try to turn whatever I can into a game. And finance has become a game for me. I do the little colored charts. I want to see exactly how much money I can put towards savings or debt each month and that continues to motivate me.

Introduction

00:18 Emily: Welcome to the Personal Finance for PhDs Podcast, a higher education In personal finance. I’m your host, Dr. Emily Roberts. This is season seven, episode six. And today my guest is Alicia Jones, a PhD student at the University of Illinois at Urbana-Champaign and the creator of the YouTube channel, Alicia Does Adulting. Alicia explains, in detail, her intricate budgeting system, which involves creating a zero based budget every two weeks, allocating cold, hard cash into envelopes, contributing to her debt, avalanche and funding her targeted savings accounts. She uses this budget to keep her intimately connected with her spending decisions and accountable to her financial goals. So far Alicia, and her husband has paid off $70,000 of debt in a year and a half and now have a positive net worth.

01:12 Emily: You’ll hear an exciting new addition to the interview today, which is a couple of questions contributed live by members of the Personal Finance for PhDs community. Going forward, members of the community are invited to attend my podcast recording sessions and ask their own questions of my guests. If you would like to participate in the interviews as well, all you have to do is join the community at pfforphds.community. If you’d like to check out my schedule of upcoming podcast recording sessions, you can find that pfforphds.com/podcast. Joining the community is an excellent way to support the podcast. Plus, you’ll receive myriad other benefits. Without further ado, here’s my interview with Alicia Jones from Alicia Does Adulting.

Will You Please Introduce Yourself Further?

01:58 Emily: I have joining me on the podcast today Alicia Jones from Alicia Does Adulting, which is the name of her YouTube channel. And Alicia has really fantastic story to tell us, but really primarily, she’s here to teach us her budgeting system, which is quite intricate. And I highly recommend that you go check out her YouTube channel. It’s actually really fascinating. You’ll be hearing more about it as we go forward. Ao Alicia, please introduce yourself a little bit further for our audience.

02:26 Alicia: Well, thank you so much for having me. This is super exciting. My name is Alicia. I’m a third year doctoral student and I go to the University of Illinois at Urbana-Champaige. I am studying kinesiology. I actually got my masters from U of I in kinesiology as well. And my research interests are kind of varied. I’ve not had the most traditional grad student experience. I am running on average three studies at once, just because of the way my program is. Overall, my research is how behavioral changes impact the overall wellbeing of people with and without disabilities. I also work in MS work. I work in breast cancer work. I kind of do a little bit of everything, but it’s nice being in kinesiology because you get to wear leggings to class sometimes. If you’re looking for a major or concentration, highly recommend exercise science for that.

03:20 Emily: All right. That’s really fun. Well, thank you so much for sharing that. And along the way of your grad school journey, or maybe before, I don’t know, you developed an interest in personal finance, and in particular, you started your YouTube channel, Alicia Does Adulting. The channel name is quite general, but I think that you mostly talk about personal finance stuff, is that right?

03:39 Alicia: Yeah. The way that I introduced the channel is that I’m attempting to get my life together and I’m focusing on finances first. Eventually I would like to fully adult with all the aspects of adulting, but I’m not there yet. I’m still working on the money part.

03:55 Emily: Yeah. Well, the money part is going to, it takes a lifetime to work all this stuff out.

Alicia’s Budgeting System

The Basics

03:59 Emily: Really excited to get to the topic of our conversation today, which is on your budgeting system, which of course, when I saw your YouTube videos, I was absolutely fascinated by this. Please, I know it’s going to take a little while to explain, but just kind of walk us through all the different elements that you use for your budgeting.

04:14 Alicia: Definitely. I will start off with, I’m not saying that this budgeting system is for everyone. Everyone has their own way of making this work for them. I actually originally started doing a monthly budget and it failed horribly and I started playing around with it from there. The way that I will describe my budgeting system is that it is a zero-based, paycheck-to-paycheck budget.

04:41 Alicia: What does that mean? Zero-based means that I take any remaining penny after my bills, expenses, free spending money, any of that, and it gets given a specific job. So before the pandemic, that was pretty much exclusively going towards debt. When the pandemic hit, I switched my goals and I wanted to save some money, so it all went there. So I have $0 left after my paychecks are all cleared. I do keep a little bit of money in my checking account just because math is not always my friend and sometimes I forget something. I leave about a hundred dollars cushion. So you don’t have to worry about overdraft fees this way.

05:23 Alicia: Then I do paycheck to paycheck. Between my husband and I, we have anywhere between four and eight or nine jobs at once. The paycheck to paycheck system worked well for me because every other Friday we each had a steady income coming in on those days. All of the bills that come up during that pay period, I take care of all of that during that paycheck. Then if I’m saving up for something, I can kind of devote that. It comes down to a lot of planning and a little bit of strategy, I guess.

05:56 Emily: Yeah. Let me make sure understand exactly what’s going on here, because this is definitely different from how I budget and probably how most people do it, which is one of the reasons why I wanted to have you on. When you say that you have the zero based budget, is what you mean that when you receive your pay or at least every second Friday, when you’re settling up, you are at that point, allocating all of the money for the upcoming two weeks, is that right?

06:20 Alicia: I do it within the week. Anything that was due on that Friday, I account it starting there up until the next Thursday. Whenever the bill is hit, for the most part, I tend to pay my bills about two weeks in advance, just because I’d never want to miss it. That just tends to be my system, but if you look at a true paycheck to paycheck, it would be within that Friday to the following Thursday.

Dealing with Variable Expenses

06:46 Emily: Okay. And then I understand that the bills that have come in, that’s a fixed amount, you know what it is. What about money that’s sort of up to you, like your grocery spending or some discretionary money. Are you allocating a maximum that you’re going to put towards that? Or how do you handle variable expenses?

07:05 Alicia: This is where my system probably gets more complicated to people, but it’s what works for me. I use a cash envelope system on top of it. For groceries, for example, for our household, every paycheck, I set aside $300 for household, so groceries and whatever else might come about, but then I put everything on credit cards. If you watch my channel, you’ll see I will do an expense tracker where I go through every single penny that I spent, then I actually will take the money out of the cash envelopes. The reason why I like this system is I am a chronic spender. I actually managed to get myself into $15,000 of debt in my early twenties and I never want to be in credit card debt like that again. This is kind of like a checks and balance system. If I didn’t have that check for me personally, if I say I’m only spending $50 on clothing, and then I find a $75 outfit that I really want, in my brain, I still want credit card. I want to put it on a credit card. I want it now, that kind of thing.

Alicia: What I can do with my system is, “okay, I bought the $75 outfit, I have to make a sacrifice somewhere else because I don’t have any flexibility.” That $25 could come out of my household to make up the difference, but then I can’t spend all of my money on household. It kind of becomes a checks and balance system. And for me, I’m flexible with it. Some people, with the envelope system, it’s very much like when you hit the end of your envelope, you cannot spend any more. And I just give myself a little bit more leeway. Things come up, or sometimes you just need to de-stress a little bit and maybe you go out and have a drink with a friend or something. As long as I’m making sacrifices and none of it stays on my credit card, then I’m happy with it.

09:01 Emily: So the cash aspect is actually a stand in for just, this is the limit. The important part is not literally that you’re using cash because ultimately when you make the purchases, you are not using cash, you are using credit cards. But the cash is just sort of a visual and physical reminder that, okay, that’s the end of the envelope, you’ve reached the end, now you must reallocate if you need to go beyond that. I definitely like this aspect of it because I am not that strict with my budget anymore. I used to be quite strict in a similar way, like, okay, I overspent here, I’ll have to transfer from somewhere else now. I sort of let it go, but I definitely find it attractive to, at the end of the day, make sure everything’s added up to zero to account for the entire paycheck.

How Alicia Keeps Her System Flexible

09:43 Emily: Okay, we’ve talked about it being a paycheck to paycheck budget, a zero based budget. You’re allocating every single dollar that’s coming in. We talked about the cash envelopes. Are there any other elements to your budget that you’d like to share?

09:56 Alicia: I think the big thing for me, and it’s one of the things that I think some people don’t understand if you’ve watched the channel for a little bit. It’s strict and slightly complicated, but it also allows for a lot of flexibility, and that was something that was really important to me. Everyone that’s listening to this is either in grad school or wants to go to grad school or has experienced grad school and we know how stressful it is. And I try to add as little extra stressors to my life as I can, but I have a bunch of student loan debt that I really want to pay off. I have a bunch of financial goals, like I’m working towards technically retiring early. I want to have that kind of cushion in my bank account. So I want to start working towards those goals, but I also just don’t want to stress myself any more. It is a little bit time consuming, which is why I’ll say it’s probably not for everyone, but it is something to potentially give it a try. It’s been really fun on the YouTube channel in particular, because I get to hear people trying my system and it was never really meant for other people to try it, it’s just what worked for me, so it’s been really cool to hear success stories about how it works. If you’re interested in it, definitely give it a shot.

11:11 Emily: There was one more thing that I wanted to ask you about, which is, I believe that you also use sinking funds or, I use the term targeted savings accounts for that. Is that the same as your envelopes or is that a separate sort of variation on that?

11:25 Alicia: It’s very similar, but I leave my sinking funds online because they’re usually bigger purchases and I just don’t want to have that cash on me, personally. I put all of my sinking funds into one checking account and then I have an online tracker for everything. It’s a similar kind of grace system of, I actually have three sinking funds that are negative right now, and it’s because I’ve borrowed from other places. We do an annual trip to Canada, but we didn’t this year because the borders were closed. So I have some money set aside in that account that I can borrow from. I do highly recommend sinking funds or targeted savings. They have been a massive game changer for me because that was one of the ways that when I originally started to budget without much guidance, those types of things like needing new tires, I logically knew that those that was going to happen, but I never planned for it. And then the month would come and it would be a disaster and it would go on a credit card and then I’d carry on. And that’s how I got $15,000 of credit card debt.

12:31 Emily: Yeah. Can you actually, for the listener, explain a little bit further what a sinking fund or a targeted savings account is, and actually give a few maybe examples or your list of which ones you have named.

12:41 Alicia: Definitely. Sinking funds and targeted savings accounts are things that you’re saving up for that you know will eventually happen. For me and my family, we celebrate Christmas. Christmas happens same time every single year, and I know approximately how much I want to spend. So instead of in December pulling $600 out of my budget, every single month, I put $50 into a Christmas sinking fund account. I have some for the Canada trip that I mentioned, which is usually about a $2,000 expense, so I save a couple hundred dollars every single month, so it doesn’t feel super overwhelming to me.

13:19 Alicia: I actually did some research into sinking funds because they were such a game changer and I’m a grad student nerd, so I wanted to know what the literature said, and it’s actually a concept of being able to allocate money with a name. I don’t know if any listener or if you might have this experience, but I’ve actually always been a semi-decent saver. I always had money and usually several thousand dollars, at least in my savings account, but then my tires would blow up and I would need new ones and I’d put it on a credit card because to me in my brain that wasn’t an emergency. I shouldn’t take that out of my emergency savings. That money always has to be there. So by allocating this little bit of money that just sits to the side that has a name, it makes the rational jump of, “Oh, I need new tires. I have a car maintenance fund. It comes from the car maintenance.” That is probably one thing I will keep the rest of my life, no matter what. It is a massive game changer for me.

14:19 Emily: Yeah. I absolutely love sinking funds and targeted savings accounts as well. I started using them in grad school as well, when, similar to you, I had some expenses come up and in our case we didn’t go into credit card debt, but we just had to say no to a bunch of stuff that we didn’t want to say no to. And it kind of helped us realize, okay, well we do need to do some advanced planning for these sort of large expenses that come up every so often. So I started using them in grad school as well. And I did have a year when I didn’t use them, which was the year from when we left Durham, where we were living during graduate school and moved to Seattle. And so for that first year in Seattle, everything was an upheaval and we had no idea, it was a lot harder to predict your expenses once you moved to new place, et cetera, et cetera. But after that year, I was like, “Nope, I’m tired of living this way. I need to go back to having the targeted savings accounts in place.” So they’re back in place and still in play, which has been wonderful. Of course, 2020 has thrown things off quite a bit. Like you didn’t end up using your Canada trip money and certainly we’ve had spending opportunities that we anticipated that didn’t happen, so there’s definitely been some reallocation, but you kind of have to roll with it.

Using a Combination of Cash and Credit

15:25 Emily: Actually we have a question that just came in from one of my Personal Finance for PhD community members. I invite my community members to listen in on my podcast recordings. So if you are listening to this podcast and you want to be in on these recording sessions and ask your own questions, I invite you to join the community. You can find it at pfforphds.community. The question that just came in is: why or how did you decide to use both cash and a credit card and not just cash? What do you do with the cash since you’re not actually spending it? And this is exactly the question that I was gonna ask too, so please go ahead.

16:00 Alicia: Yeah. This is one of the biggest questions that I get. The big reason why I didn’t want to use just cash is because I’m on campus very late at night. And so I didn’t feel comfortable. I have a very relatively safe campus, but I just didn’t want to have any extra money on me that I didn’t need to have. I’m also not a purse or bag carrier, so I have just like a little wallet that has my keys. So having the credit cards was more convenient for me and some places on my campus actually don’t take cash, they only take cards. So the few times I’d like go to pay for something. I would have had to put it on a card anyway. But there are a few benefits for me personally, at least I guess, not just me, but you do get a little bit of extra security. If something goes wrong, if it’s a payment that you didn’t actually make or something like that, there’s security systems built into credit cards, which is beneficial. I have a little bit of extra leeway. If something massive happens, so for a real life example, last night, I had to take my cat to an emergency vet and that is $2,000 and that was not in the budget. That will go on a credit card, which now gives me 30 days to pay it off before any interest hits. That’s a nice benefit. And you also get cash back. Eventually I do want to get into travel hacking, but right now I just use the cash back to help pay off random bills that come up that I wasn’t expecting or kind of like treat yourself things. And on average, I make about a hundred dollars a month on my cash back credit cards, so I’ll take that.

17:42 Emily: Yeah, that definitely helps with the budget as well, to give you a little bit more wiggle room. And then the other part of that question was, so you literally have cash in your home, and it just gets recycled paycheck to paycheck period? What exactly is happening with that cash?

17:56 Alicia: It kind of depends. Before COVID, I was very good at taking that money, putting it into the deposit envelope and taking it right back to the bank. Since I’ve been limiting my trips, it has been getting recycled. So the people at my bank know me very well and they know I have very specific denominations that I asked for. They were very used to me doing it, but it is just kind of like a cycle of cash. So I end my week on a Thursday and usually on Friday is when I will go through all of my expenses and pull out all the cash. If it’s convenient for me to go to the bank, that money just goes back and then goes directly to credit cards. If not, since COVID that money kind of just sits there, and then the next time I need to take out cash, I just don’t take it. So the cash that got left in the bank account that never came out, goes towards the credit cards.

Commercial

18:49 Emily: Emily here for a brief interlude. If you are a fan of this podcast, I invite you to check out the Personal Finance for PhDs Community at pfforphds.community. The community is for PhDs and people pursuing PhDs who want to take charge of their personal finances by opening and funding an IRA, starting to budget, aggressively paying off debt, financially navigating a life or career transition, maximizing the income from a side hustle, preparing an accurate tax return, and much more. Inside the community, you’ll have access to a library of financial education products, which I add to every month. There is also a discussion forum, monthly live calls with me, book club and progress journaling for financial goals. Basically, the community exists to help you reach your financial goals, whatever they are go to pfforphds.community to find out more. I can’t wait to help propel you to financial success. Now back to the interview.

Debt Repayment Under Alicia’s Budgeting System

19:53 Emily: You mentioned earlier that you’re working on student loan debt repayments, some other debt repayment — how does your debt repayment process figure into the budget?

20:02 Alicia: That’s one of the reasons why I like the zero based budget. I do a debt avalanche. I target one debt at a time and I specifically targeted the highest interest debt to save the most amount of money that I could in interest. I have an allotted amount of all of the previous debt that I’ve paid off. Each month $1,600 actually goes towards debt pretty much no matter what. Maybe in a massive emergency I wouldn’t, but I pretty much do that every month. Then whatever excess money I have goes towards debt. I pay all of my bills, I do all of my cash envelopes and sinking funds, and then every other penny gets thrown towards debt.

20:47 Emily: I see.

20:48 Alicia: It becomes a big part of my budget.

20:50 Emily: Just to clarify, I think when you said all the debt you’ve paid off in the past, what you’re talking about is the minimum payments of each one of the debts that you’ve made in the past that have now been cleared. You’re still quote unquote making that minimum payment. You’re just making it to the next debt and you you’re in your list, the top debt in your list. So it used to be that you had minimum payments of $1,600 and now some portion of that is you just throwing additional money at your current top loan, is that right?

21:18 Alicia: Yep. And so the way it ended up working with the debt avalanche method in particular, pretty much all of my big minimum payments were first. I did, after about five months of starting budgeting, get a $20,000 medical bill, so I put that onto a credit card and I had one year to pay that off and I made the decision to have that as part of my minimum payments and my debt snowball too. It got a lot bigger because of that.

21:44 Emily: Yeah. Wow. I’m so glad to have these examples of real life coming at you. Not that it’s pleasant or happy, but just as instructive as it is for the listeners to learn how you’re dealing with that, because I’m sure a lot of them have had similar experiences or are having similar experiences.

22:00 Emily: One comment about that debt repayment method — I think I made this name up, so I don’t know if anyone else uses it, but I call what you just explained saving first and last. In the personal finance community, we talk a lot about pay yourself first. So as soon as you get paid, you do your debt snowball, you put money towards that, all of your financial goals, you put money there, then you spend whatever remains. But I also used your system of, okay, I have my financial goals, that’s happening right after I get paid, and then whatever money I have left over because I came in under budget in X, Y, Z categories, that also gets saved or thrown into a debt snowball or debt avalanche process. I call that saving first and last because saving last is like not a good idea, but saving first and last to me that was like motivational to come in under budget in these various categories so I would have more money to throw towards the financial goals. Does that work same for you?

22:54 Alicia: Yeah. And I don’t know if you’ve read any of like the gamify literature, but that’s kind of what I do with everything is I try to turn whatever I can into a game. And finance has become a game for me. I do the little color charts. I want to see exactly how much money I can put towards savings or debt each month. And that continues to motivate me. I hadn’t thought about that it was first and last, but it definitely is.

Why This Budgeting Method Works For Alicia

23:19 Emily: Yeah. So you mentioned earlier, your system is complex, it’s intricate. That may not be for everyone, but why have you made it so complex to yourself? Why do you think that this is working well for you?

23:32 Alicia: I think a big part of it is that I am very numbers driven and I wanted to take this journey to learn as much as I could about myself and about my finances, particularly since I’m the spender of my family. I wanted to know every little piece of data and I don’t really show it too much on the channel, but I do run the numbers for myself. I like to see exactly how much I’ve increased in household spending from this time, this year versus last time. It’s complicated, but part of it just feels like I’m learning lessons every single week. And particularly with using cash and credit, I’m having to constantly remind myself that you can have certain things, but you have to make sacrifices. You don’t just get the easy win all the time. You have to balance it out.

24:24 Emily: Yeah. When I talk with people about budgeting, sometimes I talk about the merits of using an app versus like maybe creating your own spreadsheet, or at least doing manual tracking in some manner, even if it is in an app or something. And what I say about that is that, doing these things manually keeps you very intimate with your numbers. It keeps you very closely connected to facing up to the decisions that you’re making and reconciling them. It sounds like that’s why you’re doing that. In terms of recommending the system to anyone else, who do you think the system would work well for?

24:56 Alicia: It has to be someone that’s pretty motivated, I think, because it does take more time than just tracking it within an app. But I think this is someone who, if you’re very motivated by learning, I think that’s probably the biggest thing. I’m constantly diving back into my own spending habits and I really like self help type things. I love working on self-improvement and that’s, I think why I was really drawn to this method of constantly having to learn and adapt and that to me is exciting.

25:30 Emily: Yeah, that sounds wonderful. What motivates you to stick with this now intricate and somewhat time consuming system?

25:40 Alicia: Honestly, one of the biggest thing is accountability. One of the reasons why I first started this channel is I’ve found that the more that I talk about things that I experienced in my life, the more people I find to have experienced similar things, or can relate and give advice. I started talking about money with my friends and family. I started talking about it on my YouTube channel, and if you follow it, you see just about everything that I spend and do and whatnot. Unless I forget something, you see it. Knowing that that’s always there, that my friends are now tracking my progress in some ways, on the times that I’ve just really wanted to go and do something, maybe not super crazy, but a little bit frivolous I don’t because I know someone’s holding me accountable to it. And unfortunately I’m not the type of person that can just hold myself accountable. Having other people has really, really helped me in this journey.

26:39 Emily: Yeah. I’ll say another vote for that as well. My current website, my home on the web is pfforphds.com but during graduate school, I was actually blogging for under a different website, which was evolvingpf.com, Evolving Personal Finance. And I similarly, not as frequently as you, but I would do at least monthly reports of this was everything I spent and this was a very popular thing to do on the internet at that time. And I’m sure it’s still maybe on YouTube as well. And it was really, really great accountability for us, helping us to stick to our goals. We use that during the time that we were in graduate school when we really had a tight budget and we had high, lofty goals for our money. It seems less necessary in my life now, post PhD, so I’ve kind of moved on from it, but it was a really, really useful tool for that time. And just actually to mention the community again, this is something that any listener can do through the PFforPhDs Community, if you choose to use it that way. It can be great for accountability, and you’re welcome to report all your spending inside that community as well, if you want. It’ll be private. It won’t be open for everyone to see, but you will have the other community members there to at least in theory, hold you accountable.

How Alicia Uses Her Budgeting Method for Achieving Financial Goals

27:48 Emily: I was also thinking about your debt repayment journey, and now you said earlier that you’ve also started saving up more since the pandemic. Maybe your priorities are a little bit different. Can you talk about using this budgeting system and how you’re motivated to use it towards your financial goals?

28:03 Alicia: Yeah. So I started this journey with $120,000 of debt and actually just this month, I’m under the $50,000 mark, so we’re making some pretty good progress. But it comes back to the idea of kind of gamifying everything. I turn as much as I can of my life into a game to keep it fun and interesting. Each month being able to see my savings account get higher, and then you get additional interest, which is also a nice little boost because it feels like free money. And then seeing my interest amounts go down when I pay off debt or just seeing the numbers go down. Each and every month I track that I track both of those and then I also track my net worth. And so each of those has become a game to me, and again, I try to not have too much stress in my life, so if my net worth goes down, I don’t beat myself up over it. I know it’s part of the journey. When the pandemic hit, I was working really hard to pay off all of my debt by May of 2021 beause that’s when I turned 30 and I wanted to be debt free by 30. That didn’t happen and that’s not going to happen because pandemic, but now I’ve been able to see my investments grow a little bit. I’ve been able to see my savings grow. Having constant check-ins, or at least regular check-ins really helps keep me motivated.

29:21 Emily: Yeah. Thank you for telling us about that. How do you think being a PhD student interacts with this journey? I know you’re married, so presumably your husband is not a graduate student as well. Do you think that being a PhD student plays into your budgeting or your financial goals at all?

29:39 Alicia: I think in some ways. I think possibly the reason why it’s so complicated is because I do like data as much as I do, and I like being able to see those numbers. Tracking absolutely every single thing, maybe a PhD thing, but I think also being a PhD student and looking at things from more of a logical point of view has also really helped me. Being able to sit down and like logically look at the debt versus how much money I could have in retirement has really helped me on the journey. It’s helped me take some of the emotions out of finance when finance is a very emotional thing. It can be your entire life. I think that’s kind of where the PhD-ness comes out

30:23 Emily: More of like the personality of a PhD student or PhD. Will you please recommend a video or two, if people want to check out your channel, Alicia Does Adulting. So you count cash on your channel, which I had never watched a video of before, but now that I’ve seen on your channel, wow it’s actually pretty riveting. Would you recommend a video or two for people to kind of get an intro to you?

30:46 Alicia: It sounds really odd when you tell people the first time I’m a former bank teller, so the sound of cash is very soothing to me. That’s how I actually found personal finance YouTube, was cash counting. Any of the “budget with me”, you can see in detail how I do my budgets and then see the cash counting, which is very fun. I actually have a video coming out this next week, which is really exciting, so before October 1st and it’s the science of cyclical savings. I’ve kind of evolved my channel a little bit into at least two educational videos per month-ish, when I can.I dug into financial literature and I started to find different savings strategies, investment strategies. Different things that my population for the most part is not PhD students they’re not going to go to academic literature, so I kind of break it down into more lay terms for people, because I genuinely just want everyone to have a good financial standing and for it to not be stressful for them. That will be out next week and I’m really excited to talk about that, and how you can save 80% each month more than if you didn’t have a plan.

31:59 Emily: Oh, wow. Yeah. I’ll definitely watch that video and will, and get from the show notes as well beause it should be out by the time this episode comes out. That sounds fabulous.

Questions from the Personal Finance for PhDs Community

32:06 Emily: I want to take a pause here and invite any members of the Personal Finance for PhDs Community who have a question at this point. This is your opportunity to follow up with Alicia and maybe get some more specifics for your situation.

32:18 Emily: Okay, so we do have one question that came in from a community member. Would you say that using cash is symbolic for you more than anything?

32:27 Alicia: I think symbolic is a really good word for it. I just need one extra thing of accountability and I’m the type of person if I hand over $20 that actually wasn’t as painful for me as having to budget it at the end, so using just cash envelopes, didn’t really work for me in that sense, but physically going through and having to pull money out of my personal spending for an unexpected thing is very symbolic and just kind of helps visualize that process for me.

33:00 Emily: Yeah. I really liked that aspect of it as well. Thank you so much for sharing that with us. I actually didn’t really catch on to that just from watching a few of your videos, that the cash was really being recycled, at this point, not before, but at this point.

Best Financial Advice for an Early Career PhD

33:10 Emily: We’ll wrap up with our final question, Alicia, which is what is your best financial advice for another early career PhD?

33:17 Alicia: My biggest advice is it’s never too early to start and it is never too late to start. Every little bit that I’ve done along the way has helped. Every step you take really does help you and if you have never really thought about looking at your finances, today’s the day to start because you never know when one of these unexpected massive things are going to hit. Since I started my journey, I’ve had a lot of massive financial things happen and because I understood my money and I understood where I was at, I could face $20,000 of medical debt with relative calmness, which I can guarantee you, Alicia from five years ago would have been a sobbing mess over all of it and I was actually pretty calm. My biggest advice is just start. Even if it’s small, even if it’s $5, it really does add up.

34:13 Emily: Yeah, I totally totally agree. And actually just to give people some scope, you said you’ve paid off, I think it’s over $70,000 worth of debt right now. Over what time period did you do that?

34:22 Alicia: It’s been about a year and a half.

34:25 Emily: Oh wow!

34:26 Alicia: Yeah! Our first year was really good and then everything kind of hit the fan. This year has not been great, but we actually went from a negative $56,000 net worth and we’re now in the positives. We’re about to hit $10,000, which might not sound like a big net worth to a lot of people, but it was a big deal for me to be positive.

34:46 Emily: Yeah. You’re now at a $10,000-aire, right? Every order of magnitude we can celebrate. Well, this has been such a wonderful conversation, Alicia, and thank you so much for joining me and sharing your experience and your wisdom with my listeners.

35:00 Alicia: Well, thank you so much for having me. This has been super fun!

Outtro

35:04 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the personal finance for PhDs podcast. There you can find links to all the episode show notes, and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind the scenes commentary about each episode. Register at PFforPhDs.com/subscribe. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is stages of awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.