Personal Finance for PhDs

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How to Plan and Prepare for a Frugal Long-Distance Move

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“Don’t do your PhD at the same university you went to for your bachelor’s, and don’t postdoc at the same university you got your PhD from. You need to demonstrate success in multiple environments.” I heard this advice many times during my PhD training, and this is the path I followed: I did my undergrad in California, my postbac in Maryland, my PhD in North Carolina, a fellowship in DC, and now I live in Washington (for my husband’s first post-PhD Real Job). While there are certainly some PhDs who choose to stay in one certain city or region, the norm is to move a couple times or many times, even internationally. All this moving takes significant time and money to execute, especially once you start collecting possessions you actually want to retain. This article outlines how you can plan and prepare for a frugal long-distance move so that you minimize the cost to you in money, time, and stress.

frugal long-distance move

Further reading:

How Much Will Your Move Cost?

The price of a move runs the gamut from quite inexpensive at a few hundred dollars to quite expensive at several thousand or even on the order of $10,000 once all costs are accounted for. The main factors are:

  • the distance,
  • how many people and how much stuff you’re moving,
  • how much labor you choose to outsource, and
  • the wind-down and start-up costs in each city.

On one end of the scale, if you’re a single person and your possessions amount to a suitcase and a box, moving will be fairly inexpensive, perhaps a few hundred dollars for the transportation and whatever your start-up costs are in your new city (e.g., up-front rent and deposits).

On the other end of the scale, if you’re moving your family and all your stuff from a full house, your transportation costs will be quite high, your wind-down and start-up costs may be high, and you may choose to outsource some of the labor associated with moving to keep it time-efficient.

Buying and selling homes also add layers of expenses that I will not cover in this article.

Components of a Long-Distance Move

Long-distance moves can be expensive both in their direct costs and lost income.

The expense components of your move include:

  • Transporting yourself/your family, including housing and feeding in transit
  • Transporting your possessions, including storage in the new city if necessary
  • Transporting your car(s)
  • Packing materials and labor
  • Wind-down expenses for your old residence
  • Start-up expenses for your new residence, including scouting trips if necessary
  • Unpacking labor
  • Childcare

It’s also vital to plan for the income side of the equation. How much time will you take off between the end of your current position and the start of your next position and what does that translate to in missing dollars from your typical income? How much will maintaining your health insurance cost during that period up until you are covered by your new position?

There is often a trade-off between time and money when it comes to moving. Fast transportation costs more than slow transportation for long-distance moves, but slower transportation may necessitate more time away from work. It costs more to outsource labor such as packing, but if it allows you to take fewer days away from work it may be worthwhile.

When and How to Plan a Frugal Long-Distance Move

Moving long-distance is a major project with many moving pieces, so you should start your planning as soon as you know where you’re headed (if not before!).

Where Will You and Your Stuff Go?

Determine where your new home will be or at least when you will decide where to live.

This requires researching the housing market local to your new position.

If you plan to rent, figure out approximately when you need to sign a lease relative to your start date. The answer may be “not until you arrive in the city” or “several months in advance.” Know that you will have to conduct your housing search in earnest in the month or weeks leading up to that time, which may involve an additional trip to the new city.

If you plan to buy prior to your arrival, it’s never too early to start familiarizing yourself with the housing market and choosing a realtor.

Of course, finding appropriate housing is enormously important to your life and finances, but determining when you will take possession of your new residence will likely impact the method(s) you choose for transporting yourself and your stuff. Namely, when you and your stuff arrive in your new city, where will you/it go? Do you need to arrange for storage for your stuff and lodging for yourself for a period of time before you take possession of your new home?

How Will You and Your Stuff Get There?

Tackle the transportation question. You, your possessions, and your car(s) might travel together or separately, so there are a lot of combinations of methods available. Consider the cost, time, and stress involved in each method.

Ways to transport yourself/your family:

  • Plane
  • Train
  • Bus
  • Car (yours or a rental)
  • Cab of a moving truck

Ways to move your possessions:

  • In a car (yours or a rental)
  • Moving truck/trailer driven by professionals
  • Moving truck or trailer driven by you
  • Pod
  • Shipping (mail, bus, plane)
  • Luggage with you while traveling

Ways to move your car(s):

  • Drive it yourself
  • Trail it behind a moving truck
  • Ship it
  • Hire a driver

Some of the simplest combinations of methods for long-distance moves are:

  • Fast and expensive, lots of stuff: Fly yourself with luggage and hire professionals to move your possessions and your car
  • Fast and inexpensive, little stuff: Drive yourself and your possessions in your car or a rental car
  • Fast and inexpensive, lots of stuff: Drive yourself and your possessions in a rented moving truck trailing your car
  • Slow an inexpensive, little stuff: Fly yourself with luggage and ship your possessions
  • Slow and inexpensive, lots of stuff: Drive your own car with possessions, ship remaining possessions in a pod or boxes

There are many transportation configurations possible, so settle on the one that best conforms with your desired amount of time off, how much money you have available for the move, and the degree you want to be involved with the transportation of your possessions. Be sure to get quotes from several providers of each service you are considering.

Settle on the Dates and Book Everything

Negotiate and finalize your end date for your current position and the start date for your new position. If you are using a professional moving service at any stage, book them as soon as you know the dates. Some services book out weeks and months in advance, and the summer is the busy season.

Prepare for the Move Logistically and Financially

Use the months and weeks leading up to your departure date to prepare for the move to make the final days as smooth as possible.

1) Designate a moving fund

In an ideal situation, you will pay for your move with cash, even if it will later be reimbursed by your employer. Set aside the total amount of money you expect to spend on the move, start-up expenses, etc. plus an extra 10% or more for unexpected expenses.

The more time you have leading up to the move, the more opportunity you have to redirect some of your ongoing savings rate or to earn additional money through side hustling.

If paying for your move with cash is not possible, carefully consider the least damaging type of debt available to you, e.g., a personal bank loan or a 0% interest credit card, and make a plan to pay it off as soon as possible with your new paycheck.

2) Start collecting moving materials for free

You’ll likely need at least some moving materials, e.g., boxes, packing material, tape. Boxes can be readily sources for free in your community. Ask nearby grocery and liquor stores when the best day is to pick up their excess boxes. You can also check craigslist, Freecycle, and Buy Nothing for free boxes. Collect boxes from these sources regularly over the weeks leading up to your move so that you can cover most or all of your needs. Don’t expect to find all the free boxes you need the day before you start packing!

If you end up buying new boxes, consider reselling them once you’ve finished with them to recoup some of your costs.

Packing material is more difficult to reuse so you can check some of the same sources for free material but you may need to buy some of your own.

3) Pare down your possessions

Generally speaking, the less stuff you have to move, the less expensive your move will be. Of course, if you sell vital possessions, there will be a cost to acquire them again in your new city. But think of your move as an opportunity to declutter and make sure you only retain what is most useful and/or important to you.

The possessions that you use frequently will have to be packed up or disposed of last, but in the time leading up to your move, you can go through your less frequently used possessions and either pack them or get rid of them. Selling your possessions is a great way to pad your moving fund, and the more time you give yourself in this process, the more likely you are to be able to sell your stuff. You can also give away your possessions that still have life in them through Buy Nothing or Freecycle or donate them to nonprofit organizations like Goodwill, Habitat for Humanity, the Salvation Army, etc. Your possessions without remaining value can be recycled or, as a last resort, put in the garbage.

Execute the Move

All your planning and preparation will pay off once you start your move! In the final days leading up to your departure, you will pack everything up and clean your old residence. It will take a lot of work so don’t try to cram it into too little time. If your movers show up and you aren’t fully packed, they will pack for you and charge you an arm and a leg!

A couple final tips:

  • Make sure to pack the things you will need during your move or upon getting into your new place separately and/or with clear labels. You don’t want to have to open all your boxes to find a saucepan or your work clothes!
  • Be prepared to spend above your normal levels on food as you pack and unpack your kitchen and as you devote your free time to packing instead of cooking.
  • Enlist your friends and family to help with packing and even childcare while you pack. (But return the favor when you have the opportunity!)

To hear my personal story of how my husband and I moved cross-country for his first post-PhD Real Job (not very frugally!), listen to my podcast episode dropping 5/27/2019!

How Far Will My New Stipend or Salary Go?

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Virtually every PhD will experience this at one point (if not multiple points): You’re looking at an offer letter, whether for grad school, a postdoc, or a Real Job and you’re not sure what to think about the stipend or salary. Because you’ll have to move to a new city to accept the position, you don’t have any context for understanding if it is reasonable or generous or stingy. Your personal finances as well as the local cost of living play heavily into the determination you have to make. Will you be able to survive (or thrive – or neither) on this salary? How far will your new stipend or salary go toward paying your living expenses and getting ahead financially?

new salary new city

This isn’t at all a trivial question, especially for:

  • Graduate students and postdocs who unfortunately can’t assume they will be paid enough to live comfortably.
  • PhDs who are responsible for the well-being of others, e.g., spouse and/or children.
  • International scholars who are prohibited by their visas from working to earn extra money.

You can attempt to answer this question with little or much research, depending on how invested you are in the outcome and what your initial inquiries turn up.

Further reading:

Find Answers on the Internet

You can find a first-pass, non-personalized answer to “How far will my new stipend or salary go?” at any time over the internet.

Stipend and Salary Databases for PhDs-in-Training

If your offer is for a graduate program, go to PhDStipends.com and search for stipend entries for your university and other universities in your city, if any. Not only will this data tell you what other graduate students are being paid so you can compare your stipend offer, some of the entries contain subjective comments on how possible it is to live on that stipend. The stipends will also be normalized to the local living wage for the county the university is in (the LW Ratio) – more on that in a moment.

Similarly, if your offer is for a postdoc, use postdocsalaries.com.

The Living Wage

For graduate students and possibly postdocs, a well-researched, insightful database is the Living Wage Calculator. For each county in the US, this resource shows you the minimum your necessities will cost (on average) based on your family size. It calculates the “living wage” needed to support one adult, two adults, adults with children, etc. and breaks it down into its constituent categories: food, child care, medical, housing, transportation, other expenses, and taxes.

As graduate students are likely to be paid close to a living wage (perhaps above or below by up to 50%), this database will give you a starting point on what you can expect to spend in your various necessary budget categories. Postdocs who are paid close to the living wage can also utilize this resource. Higher earners and homeowners will not find the calculations as relevant.

Cost of Living Calculators

If you know what you spend on your expenses in your current city, you can use a cost of living comparison calculator to translate that amount of money into an amount of money in your new city based on the differences in the cost of living.

Some of the prominent cost of living comparison calculators are provided by:

These cost of living comparisons also break down into sub-categories of spending such as housing, utilities, food, transportation, etc. However, be warned that the housing data come from a mix of renters and owners, so you may find you own housing costs differ dramatically from the expected increase or decrease.

Find Answers from Your Peers

I think the best way to get an accurate answer to “How far will my new stipend or salary go?” is to survey people currently living on it in your new city, i.e., your future peers and co-workers.

This is trickier for PhDs starting Real Jobs because of the (damaging but firm) culture in most workplaces of not disclosing your salary. However, graduate students and postdocs are usually paid on a set schedule, so you can assume that someone already in the position you have accepted (e.g., within your same department or funded by the same source) does have the same or a similar salary to yours.

Simply ask an open-ended question such as “Are you able to make ends meet on the stipend?” or “Do you live more or less comfortably on the salary?” and see what it elicits. Be sure to ask several different people because you one person’s perspective may not be representative.

Find Individualized Answers through Research

If you are willing to dig into some financial weeds, the ultimate way to obtain an individualized answer to “How far will my new stipend or salary go?” is to draft a budget.

After all, your finances are unique, and looking to average data or asking a few peers will not directly speak to your specific obligations, lifestyle, and preferences.

If you already track your spending and keep a budget, you can use that as a starting point, or you can download a fresh template. There are plenty of templates available online, and I’ve also created one specifically for this purpose, which is available below.

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Some line items on your budget will need major overhauls due to your career and geographic transition:

  • Tax: If you’re changing salary and/or state (or making changes to your household), your income tax bill will need to adjust. Some early-career PhDs might also start or stop paying FICA tax or be excused from paying state income tax depending on the exact type of paycheck they will receive in the new position. My favorite calculator for estimating income and FICA taxes is from Smart Asset.
  • Employee/student benefits: With a change in university and/or employer comes different benefits that you may or may not have to pay for out of pocket. If the amount of money you are responsible for paying is not clearly delineated in your offer letter, it is worth inquiring about as you draft your budget. Examples of these types of payments are premiums (and copays/coinsurance) for your health, vision, and dental insurance; life and/or disability insurance premiums; and tuition and/or fees.
  • Student loans: If you are entering graduate school and have decided to defer your student loans, you’ll need to update your minimum required student loan payments to $0. Conversely, if you are exiting deferment for a postdoc or Real Job, you’ll need to know how much your payments will be. Your loan servicer should be able to tell you your minimum payments. If you have federal loans and are considering an income-driven repayment program, you can use the Repayment Estimator from studentloans.gov to compare your payments under different plans.
  • Living expenses: Obviously, if you are changing cities, many of your living expenses will shift. But the ‘major overhaul’ here is if you need to add or subtract whole budget categories, such car ownership, daycare, and travel to visit family, a partner, and/or friends.

As for your living expenses, you can use one or more of the methods detailed in the first two sections of this article to start putting numbers into each budget category. Some living expenses may stay more or less constant even when you change cities (e.g., cell phone bill, cost of electronics) while others will be subject to the cost of living (e.g., housing, utilities, food).

The most important budget categories to get right from a distance are your large, fixed expenses, e.g., housing, transportation (if you own a car), and childcare. The Living Wage calculator and the cost of living comparisons can help here, but it’s going to be even better for you to do your own research and determine your individualized expenses.

The two best ways to research your housing and childcare costs from a distance (and jump-start your housing search) are to ask your peers what they pay and monitor prices online for at least several weeks before you commit to your expense. (Knowing when to sign a lease/pay a deposit is part of familiarizing yourself with a market!)

Drafting a budget will help you decide how much you can afford to spend on these large fixed expenses, so it will be most beneficial to start drafting this budget before you commit to any expenses. Your ability to reach financial goals in your first year in your new position will likely hinge on getting these large, fixed expenses set at an appropriate level, so it’s worth quite a bit of time and research. Variable expenses can be changed more or less on a dime and small expenses aren’t so impactful, so it (literally) pays to focus your effort on the large fixed expenses.

If you would like some additional help with drafting your new budget at a distance, please purchase my previously recorded webinar ($24.99) below. The 30-minute “Draft Your Budget from a Distance” webinar also includes the budget template spreadsheet described above.

The objective of the webinar is to help you draft a complete budget for your new position (in a new city) so that you can set your large, fixed expenses at a reasonable level for your income and determine in advance what financial goals you might set for the next phase in your career.

Sign Up for “Draft Your Budget at a Distance”

The final answer to “How far will my new stipend or salary go?” will only come once you’re living in your new city. But you can start getting approximations on that answer immediately from online sources and your future peers. These initial answers may prompt you to create a more detailed draft budget before you move if it looks like you will experience a financial challenge or reaching financial goals is important to you. This budget will help you determine how much you can afford to spend on the expenses that are generally fixed prior to or upon your move. It will also help you decide how much money you can put toward your financial goals during your next position.

How to Start Grad School on the Right Financial Foot

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Starting a PhD program is, professionally and personally, one of the most exciting times of life. You’re meeting people who will be your peers and advisors in the coming years whose research interest align with yours, getting acclimated to a new university and city, and of course starting a fresh school year. However, many first-year PhD students, as they’re going to happy hours to get to know their cohorts and buying their textbooks, are thinking to themselves: “Am I going to make it until my first paycheck arrives?” Financially speaking, starting a PhD program is one of the most challenging times of life as well.

The financial challenges of the transition into a PhD program are myriad and the resources are likely to be few. Moving to a new place and starting the school year are expensive endeavors, and sub-optimal decisions around housing and transportation may reverberate in your finances for years to come.

I present this article not to discourage you in what should be an invigorating and hopeful experience, but so that you have time to prepare for its unique financial demands. Starting grad school on the right financial foot means that you are poised for financial success throughout your PhD instead of reeling from the initial financial blow and playing catch-up for months and years to come. Here is what you can do in the months leading up to your transition into grad school to start in a place of financial strength.

grad school right financial foot

Draft a Budget ASAP

It’s vital to put your stipend offer in context as early as possible. The number may strike you as generous-for-a-stipend or meager, but until you know something about the local cost of living it is rather meaningless.

The best way to get an idea of how far your stipend will go is to start drafting a budget and use approximate numbers until you lock in various aspects of your living expenses. Two starting points are the Living Wage Calculator and the estimated room and board from your university’s financial aid office. Neither one of these numbers will prove to be totally accurate (I hope they are both overestimates of what you will pay) but it’s a start for the triangulation.

Your draft budget should include:

  • The income tax you expect to pay,
  • Your necessary expenses, i.e., housing, transportation, utilities, groceries, household consumables, clothing, etc.
  • Your discretionary expenses, i.e., restaurant and bar spending, travel, entertainment, etc.), and
  • Your education expenses, i.e., tuition and fees required to be paid out of pocket, course supplies, etc.

Further reading: How to Read Your PhD Program Offer Letter

To a degree, you can use your current expenses (if you track them) to estimate what your future expenses will be, possibly with an adjustment for the shift in the cost of living.

It’s quite difficult to drill down into the specifics of what you will spend in a job/life that you’re not yet in, especially if you are not currently tracking your expenses. Therefore, you can use placeholder percentages to help you estimate your expenses and guide your decisions. For example, the Balanced Money Formula states that you should not spend more than 50% of your net (after tax) income on all of your necessities together (including minimum debt payments). This is a challenging benchmark for grad students to adhere to, especially in high cost of living areas, but it illustrates how important it is to keep your necessary expenses in check to the greatest degree possible.

Further reading:

Thoroughly Research Your Housing Options

Housing is by far the largest expense in virtually every grad student’s budget, and first-year PhD students are expected to make this enormous financial decision with little to no insight into the local area. The result is that graduate students often overextend themselves in their housing costs, which are financially, logistically, and emotionally difficult to change.

Starting grad school on the right financial foot means locking in your fixed housing and transportation costs at a reasonable level for your stipend. The general rule of thumb is to spend no more than 25-30% of your net (after tax) income on housing. This guideline proves impossible for many if not most PhD students, who may be paid too little, live in an expensive area, or both.

Further reading: How Much of Your Stipend Should You Spend on Rent?

Particularly in those challenging housing markets, the best course of action to find the most suitable housing (even if you spend more than the guidelines) is to start your search early and thoroughly research your options. I recommend starting your research with a housing survey conducted by your university or graduate student association (if one exists) and senior grad students who are paid a similar stipend to what you will be (e.g., 3rd years and up). From these sources you can ascertain the price range you can expect for housing and potentially tips on the best locations, housing types, and even specific complexes or landlords to pursue.

Further reading: Your Most Important Budget Line Item in Graduate School and Why You Need to Re-Evaluate It

A note on on-campus or university-affiliated housing: On-campus housing is attractive for students moving from a distance because it short-circuits this whole decision-making process. But this type of housing was not all created equal. At some universities, the university housing is subsidized, which means there is likely fierce competition to live in it. At other universities, the university housing is more expensive than comparable non-affiliated housing. You won’t know whether university housing is a good deal and worth pursuing until you talk with current grad students.

Further reading and listening:

Go Frugal on Transportation

Alongside figuring out your housing options and eventually committing to something, you need to decide how you will get around town. If you don’t own a car, you might need to buy one. If you already own a car, you have to decide whether to bring it with you or sell it.

Owning a car, even without a car loan, is a very expensive undertaking. Beyond the cost of the car itself, you typically have to pay for insurance, parking, gas, registration fees, inspection fees, taxes, maintenance, and repairs.

If it is feasible to live car-free in your new city and you don’t currently own a car, I recommend trying to live car-free for your first year. You can always reassess and buy a car at a later time if you decide you want one.

If you decide to buy a car or keep the car you already own, make sure you globally assess your expected costs (not just the best-case scenario!) and write them into your budget. An expensive or newer car costs you more not just in the purchase price but in your insurance premiums as well.

Your transportation and housing expenses are necessary to fix in concert to a degree. If you decide to live car-free, you might choose to pay more to live closer to campus or on a convenient bus route. If you decide to buy or keep a car, you can offset some of those costs by finding less expensive and less convenient housing.

Create a Transition Budget

Most graduate students experience what I call the long and expensive first month of grad school, though I have noticed some universities are working to change this pattern. You must prepare for this long and expensive first month prior to starting your transition to grad school.

The expense of the first month comes from your move. First, the moving expenses themselves: your and your possessions’ transportation to your new city plus the cost of feeding yourself and so forth during that time. Second, the start-up expenses for your new place: first (and last) month’s rent and security deposit, deposits for your utilities, furniture, and stocking your pantry. Third, the expenses of a new school year/term: any money that you must pay to your university in a lump sum and the expenses associated with your coursework.

The long first month refers to the length of time from when you move to your new city until you receive your first paycheck. Personally, I showed up for orientation in mid-August and didn’t receive my first paycheck until the last day of September. Of course, that time includes all your regular living expenses, on the back of your moving expenses.

You want to be sure going into the long first month that you can come out the other side without racking up debt. Saving cash in advance to pay for the transition is the best solution, and a transition budget will help you estimate the total cost.

Build Your Financial Foundation Now

Because you have several months between now and your matriculation into your PhD program, you have the opportunity to establish your financial foundation prior to the challenges of this transition. By financial foundation I am referring to saving cash for the transition, saving an emergency fund, paying off debt, and/or investing – whatever is most appropriate for you right now.

If you currently have a full-time job, you have the most opportunity to shore up this foundation, but even as a student or part-time/gig economy worker, it is still possible to a degree. It will be well worth a few months of sacrifice, either in terms of earning more through a side hustle or spending less through frugality, to start grad school on the right financial foot instead of a few steps behind.

Further reading: Financial Reasons to Work Before Starting Your PhD

After you save the money you need for your transition into grad school, consider whether you can pay off any of your current consumer debt completely (e.g., credit cards, car loan, medical debt, IRS debt). While you can defer student loans while you are in grad school, these other kinds of debts will still require minimum payments even while you receive your stipend, so it’s worthwhile to attempt to knock them out completely.

Further reading:

If you spend the time and effort now on planning out your expenses and saving money, once you matriculate you will be able to focus solely on the stimulating new people and experiences you encounter instead of experiencing financial stress. Starting grad school on the right financial foot by locking in a good deal on housing and not allowing yourself to fall into credit card debt also sets you up for financial success throughout your PhD. An ounce of prevention is worth a pound of cure.

If you would like to me to work with you on navigating your financial transition to graduate school, please check out my financial coaching program exclusively for rising grad students.

How to Financially Manage Your NSF Graduate Research Fellowship

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Congratulations on being awarded the National Science Foundation (NSF) Graduate Research Fellowship (GRF) (or a similar remunerative, competitive, national fellowship)! Whether you’re a prospective grad student or a current first- or second-year PhD student, this fellowship is a great boon to your research, your CV, and almost certainly your finances. However, you may not yet realize that your finances will become a bit tricky once you start receiving your fellowship. With the help of this article, you can avoid the pitfalls associated with fellowship income and fully capitalize on the benefits.

NSF GRFP stipend

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

The NSF GRFP’s Negotiation Power

I’m sure you didn’t miss this headline info about the NSF GRFP: The fellowship pays you a stipend of $34,000 plus $12,000 of educational expenses to your institution for three years. Awesome! At the majority of universities in the US, that stipend amount is well above what you would be paid if you didn’t receive the fellowship, so you’ve effectively achieved a raise for the next three years.

But the good news doesn’t stop there: Your university/department might confer even more benefits upon you for winning independent funding. If the administration isn’t forthcoming about these additional benefits, it is appropriate to inquire about them.

Independence

Your new outside funding may give you a degree of independence in your research that you wouldn’t otherwise enjoy. This is highly dependent on your field, department, and advisor, but the fellowship may enable you to take your doctoral research in a direction that you advisor couldn’t or wouldn’t have supported without it. Perhaps you could take a risk on a side project, establish a new collaboration, or take extra time to rotate through a lab to gain new skills.

Additional Funding

At many universities, there is a standard offer of additional funding for winning a multi-year, lucrative fellowship like the NSF. This offer could come in one or more forms, such as:

  • A guarantee of funding for additional years
  • A one-time bonus
  • A stipend supplement above $34,000 while you have the fellowship
  • A stipend supplement after the fellowship concludes (e.g., up to $34,000/year for your remaining time in graduate school)

Not all departments offer additional funding to NSF GRFP recipients, but it’s worth inquiring about with your advisor, the administration, and current NSF fellows at your university. Stipend supplements during the time that you receive the NSF GRF are more common in high cost-of-living cities where the departmental base stipend is near $34,000/year to begin with. For example, searching “NSF” in the PhD Stipends database reveals stipend supplements awarded during the NSF GRFP years to students at the University of California at Berkeley, Northwestern University, and Columbia University, while a student at the University of California at San Diego writes that he/she received no funding incentive for winning the NSF GRF.

For Prospective Graduate Students

You’ll never have more negotiation power than you do as a prospective graduate student with an outside fellowship in hand. Unfortunately, you don’t have a lot of time to negotiate as the NSF GRFP awards list comes out approximately two weeks before grad school decision day, April 15.

Further reading: Vote with Your Feet, Prospective Graduate Students

As quickly as possible, you need to clarify if the offers from the universities you are still considering are going to be sweetened at all now that you have your fellowship. If the financial package from your preferred university isn’t up to par with your other offers (after considering cost of living differences), you can tactfully ask if a bonus, stipend supplement, or guarantee of future funding is possible.

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Budgeting with Your Fellowship Income

There are two vital questions you need to ask of your department before you can begin creating a budget for your NSF GRF stipend.

  1. After the fellowship ends, what will my stipend be?
  2. How frequently is my fellowship disbursed?

Accelerate Progress on Financial Goals

In my ideal personal finance-oriented world, an NSF fellow would live on (less than) the base stipend from his department and put all the excess income received toward growing his wealth. There are a few advantages to that approach:

  • Your lifestyle roughly matches that of your peers in your department.
  • You can relatively quickly achieve financial goals such as saving or debt repayment.
  • If your income is set to drop once the fellowship ends, you avoid acclimation to the higher, temporary income and don’t have to make major lifestyle sacrifices once the three years are up.

Some financial goals you could work on during the time you receive the additional fellowship funds are:

  • Eliminating any troublesome debt (e.g., credit card balances, medical debt, car loan)
  • Saving up cash for short-term needs and expenses (e.g., emergency fund, targeted savings accounts)
  • Investing for long- and mid-term goals (e.g., retirement, house down payment)
  • Pay down student loans

Further reading:

This strategy is easiest to implement for graduate students who start the NSF GRF after one or more years in grad school. Just put all of your ‘raise’ toward financial goals and don’t change anything about your lifestyle! Prospective grad students will have to be more conscious about setting up their grad student lifestyle on a lower income than they will start out with.

Preparing for the Post-Fellowship Income Drop

If you choose to upgrade your lifestyle with your fellowship stipend, be careful to maintain any long-term financial contracts at a level that will be sustainable for you after your income drops (if it will). The two key areas to watch out for are housing and transportation expenses. While it is possible to reduce your spending in either of these areas during grad school, it is a painful process, so it is preferable to lock in your spending in those areas at a level that you can maintain long-term.

Budgeting with an Irregular Income

Sometimes, fellowships are disbursed to the recipient at a frequency other than monthly, e.g., once per term. This schedule can cause issues for budgeting, which is usually framed as turning over each month.

One of the advantages of an infrequent disbursement schedule is that you are paid at the beginning of the period rather than the end, so the money you need throughout the period is already available to you. However, you may not be able/inclined to use typical budgeting software functions and prefer to set up your own budgeting system.

One of the most useful budgeting concepts for people with irregular incomes is that of fixed vs. variable expenses. At the beginning of your budgeting period, project the fixed expenses that will be paid during the period, such as your rent/mortgage, debt payments, certain utilities, subscriptions, etc. Then allocate your remaining income to your variable expenses at a frequency that is convenient for you. For example, you can estimate the variable utility bills that you may pay monthly during the period, plan to spend no more than a certain amount of money each week on groceries, and give yourself a lump sum of money for entertainment for the entire period to be spent as opportunities arise. In this way, allocate your fellowship disbursement so that you are sure that your expenses won’t exceed your income (leaving some buffer for unexpected expenses).

Income Tax Implications of the NSF GRFP

Your NSF GRFP stipend is subject to federal income tax. (It is usually subject to state and local income tax as well, but there are some exceptions.)

Further reading:

However, the taxation of fellowship stipends is handled completely differently by universities than assistantship pay.

Tax Reporting

While assistantship pay is reported on a W-2, fellowship stipends are not required to be reported in any particular way.

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A large fraction of universities, possibly the majority, do not report outside fellowship stipends on any official tax form. At most, the fellow might receive a courtesy letter, which is an informal letter stating the amount of the fellowship stipend received during the calendar year.

Some universities report fellowship stipends on Form 1098-T in Box 5 (along with other scholarship and grant income).

A small minority of universities report fellowship stipends on Form 1099-MISC in Box 3.

Whatever reporting mechanism used or not used, the important information to bring to your tax return preparation process is the amount of fellowship stipend paid to you during the calendar year. From that point, the fellowship stipend income is treated the same as any other fellowship/scholarship/grant income, and (possibly after some adjustments) it will ultimately be taxed as ordinary income.

Further reading:

Quarterly Estimated Tax

While you are required to pay federal and usually state income tax on your fellowship stipend, the vast majority of universities do not offer automatic income tax withholding on your fellowship stipend as they normally do for employee pay. (You should inquire whether automatic withholding is an option and use it if so, but the remainder of this section assumes it is not offered.)

This means that you will receive 100% of your gross fellowship stipend instead of your stipend net of income tax as you would assistantship pay. However, the IRS still expects to receive income tax payments throughout the year, so you will have to look into filing quarterly estimated tax.

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

As a default position, you should assume you are responsible for paying quarterly estimated tax. It’s possible that you won’t be required to in the year you switch on or off of the fellowship or if you’re married to someone with a high income and high withholding, but even in those cases it’s prudent to check.

The way you calculate your quarterly estimated tax due (and figure out if it’s required of you) is by filling out Form 1040-ES. That form will give you the amount of the payment you are supposed to make four times per year and an estimate of your total tax due for the year. You can make the payment online at IRS.gov/payments or through a host of other mechanisms.

Whether or not you are required to file quarterly estimated tax, it’s a great idea to set up a personal system that simulates automatic tax withholding. Open a separate savings account labeled “Income Tax” and transfer in the fraction of each paycheck you receive that you ultimately expect to pay in tax each time you are paid. Then, draw from that savings account when you make your quarterly or yearly tax payments.

Investing Implications of the NSF GRFP

The upside of receiving the NSF GRF is that your income is most likely higher than it would have been, which means you have an increased ability to achieve financial goals during graduate school such as debt repayment, saving, and/or investing.

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Through 2019, fellowship income, like that of the GRFP, was not eligible to be contributed to an Individual Retirement Arrangement (IRA). However, starting with tax year 2020, fellowship income is eligible to be contributed to an IRA, eliminating the only major downside of receiving fellowship income.

Further listening: Fellowship Income Is Now Eligible to Be Contributed to an IRA!

An IRA is a tax-advantaged retirement savings vehicle. It’s a great idea to use an IRA (or other tax-advantaged retirement vehicle such as a 401(k) or 403(b)) for your retirement savings as it helps you maximize your long-term rate of return by protecting your investments from taxes. As a graduate student, you almost certainly don’t have access to the university 403(b), so the IRA is basically the only game in town for tax-advantaged retirement savings.

Further reading:

Making Ends Meet on a Graduate Student Stipend in Los Angeles

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In this episode, Emily interviews Adriana Sperlea, a PhD student in computational biology at the University of California at Los Angeles (UCLA). Living in Los Angeles is financially challenging to say the least, and Adriana has found ways to improve her cash flow over time, such as by doing a summer internship, moving into subsidized graduate housing, living car-free, and budgeting intensively. She has even recently started contributing to a Roth IRA! Adriana and Emily additionally discuss how Adriana discovered that she owed a large tax bill on her fellowship income and how she paid those back taxes and started paying quarterly estimated tax.

Links mentioned in episode

grad student los angeles

0:00 Introduction

0:54 Please Introduce Yourself

Adriana Sperlea is a PhD student at the University of California, Los Angeles. She is studying Bioinformatics through an interdepartmental program. She is an international student from Romania. Her stipend is about $32,500 and she says it goes up a little bit every year. Each month, she receives $2,400. She is in her fifth year of her program.

3:03 How do you live within your means in Los Angeles?

Adriana says that getting outside financial support wasn’t an option for her. Her family doesn’t have the means to provide her financial support. As an international student, she doesn’t qualify for subsidized loans. After her third year of graduate school, she had a summer internship that provided an income on top of her graduate stipend. This is the only extra income she has been able to receive outside of her stipend. Due to regulations on visas, international students cannot work side hustles. It is illegal for international students to be employed outside of the university. Emily says that international students are in a tough financial position because they don’t have access to options to loans or side income that U.S. citizen graduate students can access.

Adriana was on a training grant that required her to do an internship. It was the Biomedical Big Data training grant. She received pay for her internship and continued receiving her graduate student researcher funding. She lived in San Diego for her internship. San Diego is cheaper than Los Angeles, but she still had to pay her portion of rent for the apartment she shared with her partner in Los Angeles.

6:56 What is your approach to budgeting in Los Angeles?

Adriana says that before she created your budget, she had to figure out your housing costs. She lives in graduate student housing, which is subsidized and affordable, but there’s not enough available for all graduate students at UCLA. In Los Angeles, you have to shop around a lot and hustle to make housing costs work with your stipend income. Many people use Craig’s List. Finding housing that costs 30% of your income is not feasible in Los Angeles, but housing that costs 40% of your income could be feasible.

Adriana explains that the subsidized housing at UCLA is available through a lottery system. Those who get into the subsidized housing are allowed to stay for seven or eight years, basically as long as needed to complete the graduate program. The leases are month-to-month, so people move out at any time of the year. Adriana says there isn’t enough available, so she pushes for more student housing. She lives in a junior one bedroom, which costs $1,300 per month. She pays $650 for rent because she shares the one bedroom. It helps lower housing costs to share a one bedroom, but for many people this is not an ideal situation.

Adriana says that housing and transportation are the two big items for the budget. She doesn’t have a car, but she shares one with her fiancé. She says to find affordable housing, you need to spend time looking for uncommon offers, start early, and have patience. You may need to sacrifice certain amenities and quality, but look for places livable and clean. Ultimately, there is only so much you can do.

13:30 What is the system that you use for budgeting?

For her budgeting system, Adriana uses a manual spreadsheet. She inputs her income and monthly fixed payments first. Then she divides the remaining income by four, for four weeks of the month. This sets her variable spending income for each week. Whenever she buys something, she inputs it. She always has a sense of what she spends. She buys groceries on the weekends and cooks her meals, so she doesn’t go out to eat during the week. She doesn’t spend anything Monday through Friday. Often, she has about $100 leftover to use on the weekends for fun.

Emily recaps Adriana’s budgeting system. Adriana subtracts her monthly bills from her monthly income. With the remainder, she divides by four for each week. She uses it for groceries first, then doesn’t spend money during the week. She has wiggle room for miscellaneous and money leftover for the weekend. Adriana adds that if she sees something she wants to buy, she puts it on a list. At the end of the month, she looks at her list and ranks the things she wants. This reduces impulse purchases and formalizes the practice of delayed gratification.

17:30 What do you do about large expenses?

Adriana has a savings account with $2000 to $3000. She has this savings because her rent decreased since she moved into subsidized housing and she received extra income during her internship. She uses this savings account for big expenses that are necessary, and then she gradually fills it back up. She says that before her internship, it was really tough to make big purchases. For example, she didn’t go home to Romania often because she didn’t have enough for flights.

Emily recaps that Adriana got a boost from her summer internship. This helped her get ahead. She repays herself into savings instead of using a credit card. Adriana says she has credit cards for maximizing rewards but she does not spend unless she actually has that money. She has a healthy fear of credit cards.

20:16 Any other comments about your budget or how you make it work in Los Angeles?

Adriana has loosened the reigns on herself. She says she has gotten a sense of it after manually managing her budget for so long. Emily says Adriana has internalized her budget. Her budget is in her mind, so she is less dependent on the spreadsheets. Emily says that if you go to a new city, you get thrown. If there’s a big shift in your life that’s a good time to start carefully tracking again.

22:00 Can you talk about saving for retirement?

Adriana shares that about one year ago, she asked her fiancé’s dad about investing. Her fiancé’s dad talks a lot about investing, so she asked to learn more. He recommended the book A Random Walk Down Wall Street*. Adriana realized that investing is not rocket science and super simple. She thinks there is a weird culture around investing to make it sound more complicated than it is. She says that it’s easy, there’s a low risk way to do it, and during graduate school is the best time to invest. She thought that you have to worry about the market, but she jokes that the best strategy is to forget your password.

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Adriana uses a Roth IRA. This account pays taxes on her money now. She says this is better because during graduate school, this is the lowest tax bracket that she’ll ever be in. It’s the lowest tax bracket that exists, so this is a good time to invest. She puts $200 in every month. She can budget that now because her rent costs are low. Adriana likes to check in and see she’s accumulated money. Emily writes about investing on her blog and agrees investing is easy.

25:54 Can you tell us the story of your big financial mistake from your second year?

When Adriana started graduate school, she was taxed as an international student. As an undergraduate, she went to college in the U.S. She always had taxes withheld and she never had to worry about taxes. But after Adriana started graduate school, Adriana’s residency status changed from non-resident alien to “resident for tax purposes.” This means the U.S. can tax her like she’s a resident. This tax status changed in June of her first year of graduate school, but it was retroactive for the whole calendar year. She had never heard about this issue from anyone else. In June when her status changed, the IRS refunded her about $3,000 that was originally withheld from her. At the time she didn’t fully understand why she received this money, and she spent it. But when April came and she had to do her taxes, she learned that she owed about $3,000 in taxes. It was pretty scary for her.

Emily says this tax mistake is pretty common. For the first full calendar year that you’re in graduate school on a fellowship-style stipend, you’re supposed to pay quarterly estimated tax. Most people don’t know about this.

30:28 How did you pay the tax balance?

Adriana only had about $1,000 set aside. She feels a bit lucky that she was disputing with the IRS for money that she hadn’t gotten back due to a treaty between Romania and the U.S. that provides for international workers to get their taxes back from first five years from working with non-resident alien status. This dispute got resolved at the same time as her large tax bill. She also applied for a payment plan with the IRS. Anyone can do a payment plan with the IRS if you haven’t done one in past five years and your balance is less than $200,000.

Emily says that many people are intimidated by the IRS, but it sounds like Adriana had a good experience. Adriana says she spent a lot of time on hold. But if you’re a graduate student and you realize you can’t pay your tax bill, the IRS is a place to turn to and get a payment plan with no interest.

34:40 Final Comments

Adriana says budgeting can be tough and time consuming, and a little bit stressful. She says it’s worth it because it’s more stressful to not be able to pay rent. Emily says that it’s better to fess up, face up to reality of the situation, and engage with it. Don’t try to run and hide, because that compounds the problems.

35:18 Conclusion

This Postbac Fellow Saves 30% of Her Income through Simple Living and a SciComm Side Hustle

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In this episode, Emily interviews Maya Gosztyla, a postbac fellow at the National Institutes of Health in Rockville, MD who saves approximately 30% of her income from her stipend and freelance science writing income. Her goals for funding her PhD program applications and upcoming move to grad school and wedding motivate her to keep her expenses low and sustain her side hustle. Maya gives great financial advice for PhDs in transition into and out of grad school.

Links mentioned in episode

postbac savings rate

0:00 Introduction

1:15 Please Introduce Yourself

Maya Gosztyla graduated in May 2018 from Ohio State. She majored in Neuroscience and Molecular Genetics. She started as a postbac at National Institutes of Health (NIH) right after graduation. She is mainly focused on drug discovery research. Her interests are in neurodegenerative diseases in particular. She is applying to PhD programs, with intent to begin her PhD program in Fall 2019. Maya is relieved that she does not have to balance undergraduate coursework with time spent on graduate applications. She also has more time for the interview weekends, which Emily says can be a fun experience.

2:33 What is your income? Where do you work and live?

Maya’s postbac annual salary is $30,000. She works at NIH location in Rockville, Maryland. The cost of living in this location is fairly high, because she is in the Washington DC metro area.

3:26 What was your financial situation coming into your postbac position?

Maya didn’t have any student loans. She says she treated filling out scholarship applications like a full time job, so she was able to fund her entire junior and senior years of undergraduate education. She didn’t spend all of her scholarship stipend during senior year. She has emergency savings fund of about $7,000 since she graduated from college.

4:25 Do you apply the same mindset from your undergraduate scholarships to your graduate school fellowship applications?

Maya says she has been applying to many graduate school fellowships. She applied to the National Science Foundation Graduate Research Fellowship Program (NSF GRFP), the National Defense Science and Engineering Graduate Fellowship (NDSEG), and one example of a school specific fellowship is the Knight-Hennessy Scholars at Stanford University. In addition to her graduate school applications, she has been sending in many applications to go after award money in full force. Emily assures that this strategy is a great idea, because you are certain that you will get paid for your graduate work.

5:58 Where did you move from? How did you manage your finances during your move?

Maya’s rent during college was $350 per month. In Rockville Maryland, her rent is $850 per month. Maya says what helped her most during her move was making a really detailed budget. She used several cost of living calculator websites. Additionally, she doesn’t have tax withdrawn from her postbac stipend, so she had to estimate quarterly tax.

She was in shock when she moved from the inexpensive Ohio city to the much more expensive DC area. She thought she needed to spend as little as humanly possible. For instance, she first moved into a bedroom in a three bedroom apartment. Her portion of the rent was $700 per month, which is the cheapest she could find in the area. She had an hour long commute, and she had to leave the apartment because of a cockroach infestation. Maya advises that people not to choose the cheapest apartment, but to take into account other factors. She says it can be worth more rent money to be closer to work for a shorter commute, and to live in a quality apartment.

Maya used cost of living calculators to get a sense of the maximum expenses she would have in the DC area. She says she spends less than suggested by the calculators. She talked to people who are in the NIH postbac program, because these are people in her age group and income level. At this early career stage, people are willing to share information about income and rent.

10:04 What is your savings rate? How are you saving this amount each month?

Maya is averaging around 30% of her gross income, pre-tax, going into savings. She emphasizes the importance of setting targets and timelines for what she is saving for. One of her specific goals was to pay for PhD program applications, which was well over $1000. She wanted to start an Individual Retirement Account (IRA), since she’s not sure she can have an IRA while she’s in graduate school. Another financial goal is to get married next summer! With her partner, she wants to take a couple of weeks vacation in Europe. She wants to do all of this without tapping into her emergency fund, because she wants to use this fund for her move to graduate school.

Maya has several frugal strategies. She doesn’t have a car, which is unnecessary in DC and major cities. She takes a bus to work, which she says is reliable. NIH will pay for public transit, so she gets reimbursed for her bus expenses. Maya says eating out is really expensive. She cooks almost all of her meals, and she meal preps. She goes out to eat with friends, as a social experience, it’s important to eat food to bond with people. This happens two to three times a month, and they don’t go out for drinks that much either. She views her eating out expenses as paying for access to space and people, and eating food isn’t the purpose. She set a rule for herself that she won’t eat out alone.

She goes to work, gets groceries, finds free stuff to do, and she doesn’t spend on entertainment. Also, she has a side source of income. Maya does science writing as a freelancer. It’s not easy work, but it’s not incredibly technical. She can pick and choose when and what kind of assignments she wants to accept.

15:27 How did you get connected to opportunities for freelance science writing?

Maya started a blog about Alzheimer’s Disease while she was in college. She wasn’t making money from the blog, but she started getting cold emails from people who liked her writing who would commission her for articles. She uses Upward, the freelancing website to find clients. Upward has a fee of 30% from every writing, so she charges more to make sure she doesn’t undercharge for her work.

Emily recommends the academic blogging network on Facebook (now called Gradblogger Connect) as a great resource for people interested in blogging and podcasts.

She doesn’t see science writing as her career. The variable income makes her feel anxious. She’d like to keep writing on the side, because she believes it is important for scientists to write about research for the public. Emily says that a side hustle during the PhD training is useful to figure out if this is what you want to do for your career.

20:37 Do you consider yourself having a financially quiet life?

Maya says that she applies a KonMari method to her purchases. She asks herself questions like, “will getting take out actually make me happier?” She does spend money on flights, because her fiancé lives in Ohio and she travels to see him. Maya observes that people spend money because they feel like they have to. She says it’s not a sacrifice for her to not go out every weekend, because she doesn’t really like alcohol. Emily says that it’s very interesting to apply Marie Kondo’s method to finances, and ask “does this spark joy?” Maya has gone through the introspection to consider what is bringing her high value. When you have low income, you can’t just default to the kind of consumerism you see around you.

23:30 Have you started thinking about how you’ll financially manage the transition to graduate school?

Maya is applying to high cost of living areas, so she feels more prepared for that move. Since she’s lived in the DC area, she will have a better idea of expense in places like Boston and San Francisco. She’s trying not to touch her emergency fund, because she needs it for her moving expenses. She is also trying to make sure that fiancé and her are comfortable in their current low income lifestyle, she wants to avoid the lifestyle creep. Graduate school will be a transition, but Maya will also experience the life transition of combining her lives with her partner.

25:02 Do you have any advice for someone looking at a transition out of college or into graduate school?

Maya says the first thing you have to do is look at what you have and where do you want to be in a month, or year. There is no way to set a savings rate if you don’t have something you’re aiming for. She gives the example that she wanted to save $4,000 for their honeymoon, then she could create a budget with that goal in mind.

She also says don’t forget about taxes. She had lab mates who didn’t know this. They weren’t setting aside money for tax season, and ended up owing. She says you can set up a separate savings account to set aside taxes. Emily says that this blindsides a lot of people. She has created resources on her website to help people estimate their quarterly tax.

Maya says you need to buy things that actually make you happy. She offers the caveat that if something is actually important, like you don’t need to get the cheapest apartment, get one you want. You can keep stock of what you actually care about. Maya wonders if people really know the taste of expensive wine, for example, or if it’s more about expectations. Emily says we may need to shuck the expectations. You have to figure out if something is right for you, if it “sparks joy” for you, and it’s not an expectation that others put on you. Maya says that others don’t pay attention.

Finally, Maya says to keep a really detailed spreadsheet. She used to use Mint, but now she uses a manual spreadsheet, and inputs once a week. She customizes it for her needs.

30:47 Conclusion