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How to Live on Time to Maintain Margin in Your Financial Life

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In this episode, Emily explains how to live on time with your finances. Living on time means maintaining financial margin in your life to be able to absorb unexpected occurrences in your income or spending. When you’re behind in your finances, your income is going out the door right after you receive it, you have balances on your credit cards that you can’t pay off until your next paycheck comes, and/or you are unprepared for the next manual tax payment that is required of you. This may be true even if you’re not experiencing financial consequences such as interest payments on debt. The good news is that it’s very simple, though not necessarily easy, to transition to living on time once you know what it means.

Links Mentioned in the Episode

How to Live on Time to Maintain Margin in Your Financial Life

Introduction

Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance.

This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others.

I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

This is Season 21, Episode 2, and today is a solo episode from me on how to live on time with your finances. Living on time means maintaining financial margin in your life to be able to absorb unexpected occurrences in your income or spending. When you’re behind in your finances, your income is going out the door right after you receive it, you have balances on your credit cards that you can’t pay off until your next paycheck comes, and/or you are unprepared for the next manual tax payment that is required of you. This may be true even if you’re not experiencing financial consequences such as interest payments on debt. The good news is that it’s very simple, though not necessarily easy, to transition to living on time once you know what it means.

I am delighted to announce that I am now offering one-on-one financial coaching! If you are a PhD or PhD-to-be in the US, I would be happy to serve as your financial coach. I can help you prioritize your financial goals, brainstorm and refine ideas for reducing spending, manage your side hustle income, start investing, prepare for tax season, set up a functional budget, evaluate a stipend or salary offer against your expected living expenses, and much more. What I can’t do is give you individualized investment or tax advice, but beyond that, it’s really open. As of now this coaching is structured as one-time appointments, so there’s no big commitment and you can book just one session or multiple at whatever interval makes sense to you. You can view my rates and book a free 15-minute initial call at PFforPhDs.com/coaching/. During that call, you’ll introduce yourself and your financial questions to me, I’ll let you know if we’re a good fit for a coaching relationship, and we’ll decide how you can best prepare for our first session together.

You can find the show notes for this episode at PFforPhDs.com/s21e2/.

Without further ado, here’s my solo episode on living on time.

Living on time is a concept I touch on in some of my financial education workshops, but I don’t always have time to expound and explain it completely, and it can be confusing. I decided to create this episode to go into detail about what I mean by it and how to enact it in your financial life. Also, this isn’t a concept that I really see other financial educators cover in depth so I can’t refer you to a book or similar resource. It’s not that mysterious or anything, as you’ll see, it’s probably more that the educators don’t have lower-income people front of mind for their teaching.

What Does It Mean to Live on Time Financially?

The basic concept here is that you shouldn’t unintentionally obligate your future income to pay for your current or past expenses. Basically, I’m encouraging you to not slide unknowingly into debt, although the debt I’m cautioning you about doesn’t always look like you might expect. I’ll share in a moment the three main ways this can easily happen.

The reason that I bring this up is that funded graduate students and others who live paycheck-to-paycheck, either habitually or occasionally, are particularly susceptible to not living on time and experiencing related consequences, such as overdraft fees, credit card interest, and financial stress.

What I’m going to suggest to you is a new way to be aware of your cash flow, i.e., your income coming in and your expenses going out, and that you exercise discipline to align with this concept of living on time. If you aren’t currently living on time, you are living with little or no margin in your financial life. When your financial life is going okay, do your best to live on time and create margin, so that the margin is there for you to access when your financial life is not going okay. In a way, this is an extension of the common financial advice to build an emergency fund.

Two more notes before we dive into what it means to live on time:

First, debt is a financial tool that is available to you. It’s not immoral or wrong to take out debt or be in debt. Debt is to various degrees financially damaging, so you should certainly carefully consider the type and amount of debt you take out. So when I said earlier that you shouldn’t unintentionally obligate your future income to pay for your current or past expenses, I’m not speaking about debt that you have intentionally taken out, such as student loans, a car loan, a mortgage, etc. In fact, I would rather you have a little more well-considered debt than to habitually live behind.

Second, I’m not at all shaming you for not living on time, if in the course of this episode you discover that you aren’t. I would venture that the vast majority of Americans do not practice what I’m about to outline. There are frequent instances in my own life when I’m not living on time and am eating into margin that I created in the past. That’s okay, that’s what it’s there for, but when you emerge from that tougher period, you should try to get back to living on time. Going back to the analogy of an emergency fund, your emergency fund is available for you to use, and after you spend some of it down, you should work gradually to build it back up so that it’s there for you the next time you need it.

Okay, enough beating around the bush, let’s get down to what I define as living on time financially.

1) All your income from one month goes to funding the next month’s spending.

In my view, monthly budgeting cycles make the most sense because so many of your bills are due once per month, including, virtually always, your largest bill, your rent or mortgage payment. A month is also long enough to average out most of your more frequent consumption-based expenses like groceries, car gas, eating out, etc. So if we are going to use a monthly cycle for our expenses, I also suggest that you create a monthly cycle for your income. Specifically, all the income that you bring in the course of a month funds the next month’s expenses. All of the income you receive in June should go toward funding your July expenses. That means that on July 1st, you should have sitting in your checking account all of your income from June, plus any buffer amount of money that you might like to keep in your checking account. That June income will be spent down over the course of July. All of the income you receive in July should be preserved for your August expenses.

If you are paid a monthly or bimonthly salary, this is a really simple and natural cycle to adopt. Things get a little more interesting when you are paid biweekly, weekly, or at some other cadence or have an income that varies with number of hours worked or amount of work accomplished. In those cases, the amount of money you take in over the course of a month will change, perhaps every month. I’ve seen people adopt really complex and confusing systems for handling their bills when their paycheck dates and amounts move around from month to month. They do this because they are using their income as soon as it comes in to pay expenses. In my view, it’s much simpler to wait. Collect all the income in the course of a month, know how much it is, and then use it in the subsequent month. You can even plan a unique monthly budget for every month if this happens a lot, but it’s all going to be based on money already received, not money you expect to receive.

If you are paid less frequently than monthly, which happens with some fellowships, your version of living on time does not include all income in one month funding the next month’s expenses because you don’t have income in every month. Tune back in later in this podcast season for a whole episode devoted to managing your unique income frequency.

In fact, the more of a time buffer you can create between when you receive your income and when you start spending it, the better, up to a point. When I was in graduate school, depending on my funding source, I was paid either on the 25th of the month or the last day of the month. I didn’t have much of a buffer because I was turning around and starting to pay expenses from that income within a day or a few days. After I finished grad school, I set up my business to pay my salary on the 15th of each month so that I could let that money rest, so to speak, for about two weeks before I started spending it in the subsequent month. My husband is currently paid bimonthly on the 15th and last day of the month. We’ve backed up our time buffer even a little further so that we let those paychecks rest for between half a month and a full month before we start to spend them, meaning that the money we will spend in July was received on May 31st and June 15th.

2) Use credit as debit and don’t slide into buy now pay later.

We’ve discussed living on time with respect to your income, and now I want to turn to living on time with respect to your expenses. The biggest danger in this area is the use of debt to delay actually paying for your expenses. This, too, can make budgeting much messier than it has to be.

The principle here is to use credit cards, if you choose to use them at all, as if they were debit cards. That means that every time you make a charge on a credit card, you already have the money to pay for that purchase in your checking account. You could pay the expense in cash, with debit, or with credit.

It’s all too easy with credit cards to push forward actually paying for the purchases you make for a few weeks or over a month. The same goes for buy now pay later schemes like Affirm and Afterpay.

To go back to our example from the last section, the money that you receive in June funds July’s expenses. Those July expenses can be put on a credit card, but you should be able to pay off the credit card in July with that June money. In fact, if you haven’t paid much attention to this before, I suggest that you pay your credit cards off completely at the end of each month to make sure you aren’t carrying any charges forward.

Getting behind with credit cards looks like making charges in July that you actually pay for in August or even September. If you combine it with using your income as soon as you receive it, you might be using August or even September income to pay for charges you made in July. That’s what I mean about unintentionally obligating your future income. You’re behind. And you didn’t even mean to be.

3) Keep up with your tax obligations.

This point only applies to people who are not having income tax automatically withheld from their paychecks, such as grad students, postdocs, and postbacs paid by fellowships or training grants who are US citizens, permanent residents, and residents for tax purposes.

Automatic income tax withholding by employers is very convenient for the individual. A more or less appropriate fraction of each paycheck is set aside and sent to the IRS and your state tax agency on your behalf to pay your annual income tax obligation. You never receive the money in your paychecks.

However, if you are not having income tax automatically withheld from your paychecks, that doesn’t mean you don’t owe the income tax. You will have to pay it at some point, whether it’s when you file your annual tax return or throughout the year via estimated tax payments.

For these individuals, I recommend setting up what I call a system of self-withholding, which means that from each paycheck, you automatically transfer the amount of money you expect to pay in income tax to a savings account dedicated to sequestering this money from the money available to you to spend. When it comes time to pay the IRS and your state tax agency, you pull the payment from this particular savings account, which has been pre-funded with the amount due.

Therefore, this is one more component of ‘living on time.’ If you don’t set aside the money for these tax payments, and perhaps spend it or allow it to leave your bank account for some other purpose, you will be caught out when the payment comes due and need to set up a payment plan with the IRS if you can’t pay—once again, sliding unintentionally into debt.

Living on time means preparing for your income tax bill with every paycheck that you receive, just like when you had an employer doing it for you.

I actually didn’t plan it this way, but it turns out that the day this episode drops, Monday, June 16, 2025, is the estimated tax payment deadline for quarter 2. And that is strange because June is the sixth month of the year, not the seventh. You would think that each quarter, for estimated tax purposes, would be three months long, with the payment due date coming midway through the following month, but you would not be correct. For whatever reason, the payments are due in mid-April, mid-June, mid-September, and mid-January, implying quarter lengths of three, two, three, and four months. Oh, but you still owe one-fourth of your calculated annual obligation on each due date. So to live on time, not only should you save a fraction of each paycheck for your future tax obligations, but you need to make sure that you save extra in quarter 2 or prior quarters to meet that early deadline.

Commercial

Emily here for a brief interlude.

Would you like to learn directly from me on a personal finance topic, such as taxes, goal-setting, investing, frugality, increasing income, or student loans, each tailored specifically for graduate students and postdocs? I offer seminars and workshops on these topics and more in a variety of formats, and I’m now booking for the 2025-2026 academic year.

If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, medical school, postdoc office, or postdoc association? My workshops are usually slated as professional development or personal wellness. Orientations, postdoc appreciation week, or close to the start of the academic year would be a perfect time for tax education or general personal finance content. Ask the potential host to go to PFforPhDs.com/financial-education/ or simply email me at [email protected] to start the process.

I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation!

Now back to our interview.

Why Attempt to Live on Time

So why should you endeavor to live on time the way I have defined it, even if you don’t always live up to the ideal?

Think about what could happen if you don’t live on time—if you spend your paycheck the day after it comes in and put charges on a credit card that you aren’t able to pay off for a month or two?

First, the income side. If anything goes awry with your income and you don’t receive a paycheck when you expected it in the amount that you expected, immediately you’re overdue on bills or unable to buy gas or food without accessing debt. If you get sick and miss work and either don’t have paid sick leave or you run out, your next paycheck will be smaller than usual or nonexistent. If you depend on side hustle income, but it dries up suddenly, you may find yourself in a bind. If you are on fellowship, your university might play fast and loose with your paycheck date as they don’t have the same legal obligation to stick to a schedule that they would if you were employed. I’ve seen this happen over multiple years to fellows in the University of California system, for example, who expected a stipend disbursement on September 1, but it didn’t come until over a week later. And earlier this spring, the paychecks of NSF postdoc fellows arrived late because of interference by the Trump administration. Of course, none of that is the fault of the individual, but they are the ones to suffer the consequences of a late paycheck, so it’s best to be proactive to build in some margin. When you live on time, a paycheck coming late or in a smaller amount than anticipated is still a problem, but you’ve bought yourself some time to figure out how to pivot.

Second, the expenses side. If you’re spending money you don’t already have in your bank account on a regular basis, what happens when an unexpected expense arises or an expense is larger than you anticipated? You have no margin to absorb these expenses on a temporary basis so that you can figure out your next move. Maybe you’ll put the expense on a credit card, but that tips you into carrying credit card debt instead of managing to pay it off by the due date to avoid interest accruing. If you maintain margin on your credit cards through the habit of living on time, breaking that habit once in a while by making a charge you can’t pay for immediately gives you a handful of weeks to adjust your spending in other areas so that you can ideally pay it off by the due date.

You can see from these examples that it’s not a terrible thing to eat into this margin when you need to to buy yourself time. But if you never maintain the margin in the first place, sliding unintentionally into a type of debt, it can’t serve its purpose when you hit a speedbump in life.

Of course, if you do have an emergency fund, you could access it to handle a small or missed paycheck or an unexpectedly high expense. I just consider the emergency fund to be the backup layer to the margin that’s created by living on time.

In fact, I think you should get on time with your finances even before starting to build your official, separate emergency fund.

How to Start Living on Time

If you are not currently living on time in the most ideal sense, how do you start moving in that direction? The answer is perhaps disappointingly simple. You have to spend less than you earn—even more so than what you’ve been doing to this point.

The ultimate outcome I want for you is to start each month with zero balance on your credit cards and a checking account balance equal to all of your income from the prior month. You can also add a buffer of $500 or $1,000 if you feel more comfortable with that, and I would recommend that if you are operating off of a once-per-month paycheck that arrives late in the month.

As a variation on this, you don’t actually need to clear the balance off of your credit cards at the end of each month as long as you have enough in checking to cover the balances on top of your prior month’s income and you have all the cards on autopay. However, that means your target checking account balance will vary every month.

How do you get from where you are to your target checking account balance and zero balance credit cards? You have to save money. I suggest first trying to do so inside of your checking account because that is where the money ultimately needs to go. You basically need to see your checking account balance gradually increase month over month until you reach your target. But that process can be difficult to track with money cycling in and out all the time, so alternatively you can save money in a separate savings account until you reach your goal and then transfer it into checking and pay off your credit cards in one fell swoop. I would only recommend this method if you’re not accruing interest on credit card debt. After you reach your target checking account balance, all you have to do is maintain the correct balance. Or, if you use the margin for one reason or another, restore it as soon as you’re able to by, you guessed it, saving money.

How do you save money? It’s not really the topic of this episode, but your choices are essentially to earn more, spend less, or redirect your existing savings rate. Your mileage will definitely vary on which of those options is most accessible.

If you are currently saving money for a different goal, I would suggest pausing progress on that goal until you’re living on time. The exception would be if your goal is to repay high interest rate debt, in which case that can take precedence. Whatever goal you’re working toward would get disrupted anyway if you had a loss of income or an unexpected expense.

If this is a goal that can be accomplished in the short term, the most immediate way to increase your savings rate is likely to spend less, so try some temporary fasts from discretionary spending such as eating out, alcohol, and entertainment and re-evaluate your small, fixed expenses like subscriptions.

If this is a longer-term goal, you can try to increase your income through side hustling, if that’s permissible, by winning a fellowship or grant, or negotiating. I also recommend re-evaluating your large, fixed expenses such as housing and transportation and creating new habits to reduce your grocery spending.

In closing, I want to emphasize that living on time is an ideal, and I don’t expect you and you shouldn’t expect yourself to live up to it 100% of the time. However, if you make it a general practice to reserve all of your income from one month to fund the next month’s spending, use your credit cards as if they were debit cards, and keep up with your tax obligations, you will have financial margin in your life to absorb the smaller shocks that you might experience like a late paycheck or unexpected expense. To get to living on time, you just have to save money so that your checking account balance grows to your target level at the start of each month.

Outro

Listeners, thank you for joining me for this episode!

I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/.

Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/.

See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps!

Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual.

The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC.

Podcast editing by me and show notes creation by Dr. Jill Hoffman.

How to Reduce Financial Anxiety as a Limited-Income PhD

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In this episode, Emily presents five suggestions for reducing financial anxiety that you could use alongside your general anxiety management strategies. These five suggestions are designed to be used by graduate students, postdocs, and PhDs who are in objectively stressful financial situations. They include choosing just one financial goal, taking a small step, creating a recurring appointment, thinking through the worst case scenario, and talking with others.

Links mentioned in the Episode

How to Reduce Financial Anxiety as a Limited-Income PhD

Introduction

Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

This is Season 21, Episode 1, and today is a solo episode from me with five suggestions for reducing financial anxiety that you could use alongside your general anxiety management strategies. These five suggestions are designed to be used by graduate students, postdocs, and PhDs who are in objectively stressful financial situations. They include choosing just one financial goal, taking a small step, creating a recurring appointment, thinking through the worst case scenario, and talking with others.

I recently created a new workshop, the topic of which dovetails pretty nicely with this episode. The title is Create Your Financial Emergency Response Plan. As the name implies, during the workshop, I guide you through creating a plan for handling the type of financial emergency you’re most likely to encounter at the moment, which is the loss of your primary income. The idea is to really think through the resources that you would rely on if your grant gets cancelled, your funding runs out, you’re laid off, or you can’t land a job as quickly as you expected. Then, you’ll decide what steps you can take in the immediate future to bolster your plan’s likelihood of success. I piloted this workshop with subscribers to my mailing list, and it was very well received. I’m offering this workshop in two formats. The first is as a live workshop for university clients, so if you’d like to learn more about that you can go to PFforPhDs.com/financial-education/. I would really appreciate you recommending the workshop to an appropriate host at your institution. The second is as a pre-recorded workshop for individuals. You can read more details about this option and purchase it via PFforPhDs.com/financialemergency/.

If you perceive that there’s a reasonable chance that you might lose of your primary income in the next year or so, I hope that you will find a way to take this workshop, either via your institution or individually, so that you can create your plan and experience a bit of relief from the financial anxiety and stress that our academic and research community is currently experiencing. You can find the show notes for this episode at PFforPhDs.com/s21e1/. Without further ado, here’s my solo episode on reducing financial anxiety.

Disclaimer

I have to get this out of the way up front: I’m not a psychologist or anything similar—my PhD is in engineering—so the strategies I’m sharing with you today don’t necessarily have a medical or clinical basis or backing. Also I personally am not a generally anxious person and I’ve never sought treatment for anxiety or anything like that. I have experienced financial anxiety and financial stress at times, particularly when I was in graduate school, because money is obviously important to me and objectively that was a financially challenging time, and I did become too preoccupied with it for a while. However, I’m more so coming to this topic from my position as a financial educator, someone who is thoughtful about finances, reads and listens widely, and talks with people. And I have noticed that many people in our PhD community experience some degree of financial anxiety as well as financial stress.

What Is Financial Anxiety?

One conversation in particular inspired this episode. This past spring, I gave away a bunch of one-on-one money coaching sessions as part of my Giveaway Spring initiative. One of those coachees, a graduate student, came to me with the chief question, “How do I reduce my financial anxiety?” The person shared that they also experience climate anxiety and had found a body of suggestions for reducing it that were helpful, and so were looking for something similar in the financial realm.

I thought this was a fantastic question, but I wasn’t very well-prepared to answer it during that coaching session. I did make a couple of suggestions and gave a podcast recommendation, but promised to look into the topic further. This podcast episode is my follow-up for that coachee and all of you.

Let’s start off with a definition of financial anxiety, because it is distinct from stress, and I want to at least try to not conflate the two.

I pulled this definition of anxiety from the American Psychological Association’s website: “Anxiety is an emotion characterized by feelings of tension, worried thoughts, and physical changes like increased blood pressure. Anxiety is not the same as fear, but they are often used interchangeably. Anxiety is considered a future-oriented, long-acting response broadly focused on a diffuse threat, whereas fear is an appropriate, present-oriented, and short-lived response to a clearly identifiable and specific threat” (https://www.apa.org/topics/anxiety).

Furthermore, I pulled this summary of financial anxiety from an article from Healthline: “Money anxiety, in basic terms, happens when you worry about your income or fear something bad could happen with your finances. To put it another way, it’s an emotional response to your financial situation… A few signs your anxiety around money is becoming a more serious concern are aches and pains, avoidance, analysis paralysis, no work-life balance, rigidity, rumination, and trouble sleeping” (https://www.healthline.com/health/anxiety/money-anxiety#signs).

If you are experiencing financial anxiety, you should put into practice general anxiety-reducing advice to the extent of your ability, things like getting enough sleep, eating well, exercise, meditation and mindfulness, etc. You should also consider therapy, if that is accessible to you, such as through your university. In this episode, I’m going to focus on ideas for reducing anxiety long-term that are more specific to your finances. These strategies are ones that I pointed to during that coaching session and that I teach in my workshops. I’m going to avoid strategies that will primarily reduce your financial stress, like earning more or spending less, to focus more on the anxiety reduction. Of course, not all these strategies may work for you since anxiety is caused by and manifests differently in everyone.

Suggestion #1: Choose Just One Financial Goal to Work on at a Time

Here’s something I like to say in my financial goals workshop: There are a lot of good things you could be doing with your money. When you’re living on a limited grad student stipend or postdoc salary, you can’t work on all of them at once. You have to pick and choose the most optimal single goal. When you focus all of your available savings rate on just one goal at a time, you make relatively quick progress, which helps you to stay motivated and even get creative about how you might reach your goal even faster. When you split your available savings rate across multiple goals, you make slow or even imperceptible progress toward all of them, which can be very demotivating, and you’re more likely to abandon your plan.

How I think this principle can help with anxiety is that you give yourself permission to set aside all of your potential priorities save for the single one you’ve decided to work toward in the present. Instead of spinning your wheels in your mind telling yourself that you should be addressing every single aspect of your financial life or potential financial life, you can feel calm and settled that you are working toward the one most important thing you should be doing at the moment. The rest can wait until later.

In my workshops, I teach a financial framework that guides you in selecting that singular goal that’s most appropriate for you at any given time. I get a lot of questions like should I repay my student loans while they’re in deferment or start to invest? Should I save up cash or pay down my credit card debt? The framework answers those questions. If you can accept that it’s best to work on just one goal at a time and have confidence that you’ve chosen the most optimal goal to work toward, hopefully your mind can rest easier that you’re doing everything you need to right now and that those other goals will be addressed when the time is right.

While I can’t present my whole financial framework in this podcast episode, I will get you started on it: Step 1 is to create a starter emergency fund in a separate, named, high-yield savings account. Previously, in normal times, I suggested a starter emergency fund size of $1,000 to two months of expenses. Since academia and research are currently under attack in the US, I’ve revised the target size for the starter emergency fund to three months of expenses.

The good thing about having a target for this goal is that there is a defined end point. I have actually seen a tendency to over-save among some PhD trainees, and that is potentially financial anxiety manifesting itself. Having an emergency fund is vital, but there are other great financial goals to work toward as well, namely steps 2 through 8 of my framework, so it’s important to move on once you’ve fulfilled the first step. Excess savings are not actually serving any practical function for most people most of the time.

Suggestion #2: Take Just One Small Step

Related to that first suggestion of picking just a single goal, even a goal can be too overwhelming sometimes. For example, Step 2 of my framework is to pay off all high-priority debt, which includes credit card debt, IRS debt, and high interest rate debt. That’s a lot! So you really have to break it down further to make it manageable; it’s still far too intimidating as a group of debts.

Pick just one of these various debts that you want to work on first. Let’s say it’s a credit card balance. Break it down even further. What’s the one very first smallest step you can take to start to clear this debt? Maybe you could set up autopay on that card for more than the minimum, unsave the card from your online shopping portals and wallets, or eliminate one recurring expense so you can shift the money over to repaying the debt. Maybe you need to simply log in to the account and look at the balance if you’ve been avoiding that! Choose something readily accomplishable in just a few minutes.

Taking that very first small step might help to alleviate some anxiety because you are starting to take appropriate action. Again, you don’t have to do everything all at once, and in fact trying to tackle everything simultaneously can be counterproductive. Don’t beat yourself up about not going from A to Z immediately. It’s better to take one small step and then another than to stay stuck at the starting line.

Commercial

Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, goal-setting, investing, frugality, increasing income, or student loans, each tailored specifically for graduate students and postdocs? I offer seminars and workshops on these topics and more in a variety of formats, and I’m now booking for the 2025-2026 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, medical school, postdoc office, or postdoc association? My workshops are usually slated as professional development or personal wellness. Orientations, postdoc appreciation week, or close to the start of the academic year would be a perfect time for tax education or general personal finance content. Ask the potential host to go to PFforPhDs.com/financial-education/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

Suggestion #3: Create a Recurring Appointment with Your Finances

My next suggestion is one that I came up with spontaneously during the coaching session that I mentioned, and it’s a variation on a commonly recommended tactic. The idea is to create a recurring appointment to address your finances, perhaps 30 to 60 minutes 2 to 4 times per month. In a couple, this is often referred to as a money date, but I think it would work very well for a person managing financial anxiety, whether single or coupled, and that’s how I’ll speak about it now.

During your money appointment, you should run through a few potential action items.

1) What do I need to decide regarding my finances? This is your time to think through and possibly research decisions you need to make. Maybe you want to open a new type of account and you’ll use this time to review your options. Maybe you have an upcoming spending opportunity and you need to figure out whether it’s possible and how you’ll pay for it. Updating your budget is a type of decision as well.

2) What do I need to do regarding my finances? This might involve carrying out a decision you just made or made previously. It probably involves minor recurrings tasks, like recording your net worth, updating your tracked expenses and comparing them to your budget, or manually paying a bill.

3) What do I need to learn regarding my finances? I think that you should make financial education a regular part of your life, and you might devote a portion of each appointment to it. Perhaps you can read a book in installments, listen to a podcast episode, or catch up on a financial creator’s social media content. This learning could be targeted to a certain topic you want to bone up on or be general.

4) What do I need to celebrate regarding my finances? Take some time to acknowledge when you’ve accomplished a goal or reached a milestone. Your celebration might just be an internal “good job!” during your appointment, or you could commit to a more visible celebration, like treating yourself or sharing your good news with a family member or friend.

What this strategy, when practiced regularly, could do for your anxiety is two-fold:

First, you will do things within your finances. Because of the regular attention you’re giving your financial decisions and tasks, your to-do list will get whittled down and you will make positive strides. It can help you get out of the procrastination-perfectionism cycle that is so common among PhDs. After a while, you start to trust yourself that you are appropriately handling your money—because you are! This can reduce anxiety in some cases.

Second, with this meeting, you have created a time container for your financial energy, whether that’s positive energy or negative. When you start to experience more acute financial anxiety, part of how you can alleviate it is to tell yourself that you will think about and/or deal with the matter during your next appointment. You can even keep a running agenda so items don’t slip through the cracks. You might also want to limit your consumption of financial content, like this podcast, to this appointment window only. This can help you calm your mind outside of those meeting times so you aren’t ruminating 24/7 about financial matters. You have already marked on your calendar when you’re going to address it so you can have confidence that it will be addressed at the appropriate time.

One final tip: Occasionally, you may need to call or chat with a financial institution during business hours. So, while your regular appointment time does not need to be during business hours, it might be helpful to identify a secondary time that falls within that window that you can use for that purpose when necessary.

Suggestion #4: Think Through the Worst Case Scenario

During another recent coaching session, not specifically related to financial anxiety, the coachee shared with me that they had an impulse to hold on to grant money they received and not spend it on research. Their reasoning was that they could keep the money in reserve for future research expenses in case they never won another grant. However, they had already told me during the session that in the past spending grant money on research expenses produced results that, as you would expect, made their subsequent grant applications stronger.

So I asked that coachee, “Well, let’s say that your worst-case scenario came to pass and you never won another grant. What would happen? Would you still be able to finish your PhD?” We talked through that for a few minutes, and the coachee realized that they had ways to pivot if they didn’t get any more grants and that the proper course of action would be to spend the already received grant money instead of holding onto it.

The coachee had been held up by this decision about what to do with the grant money for some time before we met. Yet all that really needed to happen was to face the dragon, so to speak. Once they looked the dragon of not winning another grant full in the face, they realized that it wasn’t so scary and was in fact manageable.

Other scary potential scenarios that might cause anxiety could be funding being cut off or running out, a soft job market in your chosen field, rising cost of living, or a personal or familial emergency.

Now, realizing that the scenario is manageable is not always going to be the outcome when you decide to address the source of your financial anxiety or stress. However, I think often it is the case that you’ll feel better having fully faced the possible worst case scenario rather than trying not to think about it.

I saw this with the pilot version of Create Your Financial Emergency Response Plan. I asked participants to self-report their financial anxiety on a scale of 1 to 5 at the beginning and end of the workshop, and they reported a 1-point reduction over that span of time. What we did, in part, was face up to the possibility that the participants could lose their primary incomes and created a plan for what resources to draw upon if that happened. The participants left the workshop with a few next steps to carry out or research to increase the chance of their plan successfully helping them navigate a loss of income.

Suggestion #5: Talk with Other People about Money

The last option I’ll put forward for reducing your financial anxiety is to talk with other people about money generally or your financial anxiety in particular. It can really help to know that you’re not alone in your struggles, stress, and anxiety. In fact, these coachees that I’ve been mentioning were taking this exact step when they signed up for a session with me, and several of them spontaneously expressed at the end of our time how much it had helped them emotionally just to talk and hear from me.

Of course, financial coaching isn’t the only way you can accomplish this. You can broach the topic with a friend or family member. Polling shows that financial stress and anxiety are very common among Americans generally, and I have to imagine it’s only increased in our current financially uncertain times. It may help to speak with someone who knows more intimately what’s going on right now in academia and research, like a friend who’s also a peer. I certainly found it easier to talk about money with my fellow grad students back when I was in that stage of life because I knew all of our incomes were within a tight range so we could all relate to one another.

If even speaking with a friend is too much, going back to the small step suggestion, perhaps consume some public financial content. Not if it worsens your anxiety of course, but if you find it helpful. You already know about this podcast. Another podcast that might help is called Money Feels, and I would suggest in particular the early episodes, where they speak often about money trauma. Again, you might find that particular podcast helpful or super not helpful, but there are lots of financial content creators out there on every platform for you to choose among.

That’s it from me for this episode! I hope that if you are experiencing financial anxiety that you will try out one of these suggestions alongside your other general management strategies. If you do, please let me know how it goes!

Outro

Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by me and show notes creation by Dr. Jill Hoffman.

Are PhDs in a Financial Emergency?

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In this episode, Emily shares her thoughts on whether PhDs are in a financial emergency. It’s possible that you are facing a financial emergency because you’ve been laid off or your grants have been terminated or interrupted or there’s some risk of that happening in the future. In this episode, Emily explores 1) what she learned from attending the National Postdoctoral Association’s Annual Conference in March, 2) what steps she recommends that you take in your personal finances and your career if you are in a financial emergency, and 3) what she’s giving away this spring to help you in this turbulent time.

Links mentioned in the Episode

Are PhDs in a Financial Emergency?

Introduction

Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

This is Season 20, Episode 7, and today you’re getting my thoughts on whether PhDs are in a financial emergency. It’s possible that you are facing a financial emergency because you’ve been laid off or your grants have been terminated or interrupted or there’s some risk of that happening in the future. In this episode, I’m going to share with you 1) what I learned from attending the National Postdoctoral Association’s Annual Conference in March, 2) what steps I recommend that you take in your personal finances and your career if you are in a financial emergency, and 3) what I’m giving away this spring to help you as best I can.

The tax year 2024 version of my tax return preparation workshop, How to Complete Your PhD Trainee Tax Return (and Understand It, Too!), is now available! This pre-recorded educational workshop explains how to identify, calculate, and report your higher education-related income and expenses on your federal tax return. Whether you are a graduate student, postdoc, or postbac, domestic or international, there is a version of this workshop designed just for you. I do license these workshops to universities, but in the case that yours declines your request for sponsorship, you can purchase the appropriate version as an individual. Go to PFforPhDs.com/taxreturnworkshop/ to read more details and purchase the workshop. You can find the show notes for this episode at PFforPhDs.com/s20e7/. Without further ado, here’s my episode on whether PhDs are in a financial emergency.

I attended the National Postdoctoral Association Annual Conference in March, and it was quite valuable for me to get to speak with postdocs and postdoc office personnel about what’s happening on their university campuses and with their jobs. Everything has been so chaotic this spring in terms of the actions of the new administration and the responses from the judicial and legislative branches, it’s really hard to keep up with. Thankfully, some of the presenters pivoted their planned sessions to address what’s been happening and academia’s response, and the conference helped me to clarify a few of my thoughts, which I’ll share with you in this episode. Part 1 is what I took away from the NPA conference. Part 2 is what you can do in your personal finances to best weather the present storm, and I’m going to include specific advice for different stages of PhD training and employment. Part 3 is what I’m giving to you over the next couple of months and why and how you can access everything.

Part 1: My Take-Aways from the National Postdoctoral Association Annual Conference

This was my first time attending NPA, and I attended as a sponsor, and I thought it was a wonderful conference. I attend conferences both for networking with potential clients and my own professional development, and in this case the timing was really good for me to get a sense of how universities are responding to the funding cuts and so forth. Because this conference was focused on postdocs, I didn’t hear much specifically about graduate education, but I’m sure I will learn more when I attend other similar conferences later this year. At this conference, I especially appreciated the talks from Tom Kibis from the NPA and Nicholas Dirks from the New York Academy of Sciences, the session co-led by Meagan Heirwegh from Caltech, Sofie Kleppner from Stanford, Julia Parrish from the University of Washington, and Zoe Fonseca-Kelly from Harvard, and my conversation with Alberto Roca of Diverse Scholar, as they most directly addressed the current situation.

My overall take-away from the conference is that everyone is bracing for a tough time economically. The tough time has already started but will get worse in the next fiscal year, which typically starts in July, if we continue on the track we’re on. Some universities have instituted hiring freezes, which may or may not extend to postdocs and graduate students. I’m sure we’ve all seen reports of graduate programs rescinding offers and just generally admitting fewer graduate students than has been typical in recent years. Positions that are funded by soft money, which means external grants and contracts, are most at risk of being eliminated.

Tom Kimbis, the CEO of the NPA, referred to the results of a survey of NPA members conducted in February; the survey results and an op-ed by Tom are linked in the show notes. The headline numbers from that survey are that 43% of postdocs say their job or position is threatened and 35% say that their research is delayed or otherwise in jeopardy.

The overall climate of the conference was of great concern for the postdoc workforce, particularly international postdocs. If we don’t see major pushback from Congress or via the judiciary, there will be a lot fewer postdoc positions available next year. Again, we’ve already seen the reduction in PhD program offers, and this is honestly the responsible step for PIs to take as they face uncertainty regarding their grants. So the postdoc itself as a training step is in jeopardy. And, broadening beyond this specific conference, the research enterprise as a whole in the US is under threat.

A lot of current postdocs will need to find new positions in the near future. Again, the highest level of concern is for international postdocs if temporary visas are harder to come by and fewer jobs are available overall. Will those positions be in academia or the federal government? We all know how few people were being hired as tenure-track faculty members before this attack on research, and that market is only going to get tighter, and I think hiring for non-tenure track academic and governmental jobs is also going to be quite limited. Understandably, institutions feel most responsible for their current employees and probably won’t want to extend themselves too much in hiring.

I don’t mean to give the impression that the conference attendees were throwing up their hands in defeat. There was plenty of talk about what people generally and postdocs offices specifically can do to meet the moment, and I heard some creative ideas about how to keep people on payroll to at least give them more time to find another job.

However, from what I heard, most of the discussion was around helping PhDs prepare for and land jobs in “industry.” What I didn’t hear enough discussion about was the likely upcoming recession and how that is already affecting hiring in the private sector. While the pain might be less acute in the private sector in comparison with government and academia, again, if we continue on this route, there will be an overall contraction in the labor market. PhDs typically have a very low unemployment rate, but I am definitely skeptical of industry’s ability to provide jobs to a glut of PhDs exiting the federal government and academia in the coming months. Some private companies are already conducting layoffs, even when not directly or substantially funded by the federal government. Of course, this will be worse in some sectors and not so bad in others, and I expect the most pain will be felt by PhDs in areas of research that are more dependent on funding from the federal government.

So the conclusion is: A lot of PhDs are going to lose their jobs, whether that’s called a layoff or a firing or a contract not being renewed. I suspect the unemployment rate or at least underemployment rate among PhDs is going to go higher than we’ve seen in recent recessions because academia is being targeted, and that PhDs are going to land in jobs that are different from their previous career aspirations. Many PhDs on temporary visas will have to exit the country, even if they would like to stay, because they can’t find an appropriate position fast enough when their current one ends. I’m not much one for prognostication and it really pains me to report such a grim outlook, but that is how I see it.

Part 2: Financial Steps You Should Take Right Now

I want everyone who works in academia or research to consider that they may now or soon be in a financial emergency and to take appropriate steps. Since the main threat at the moment is loss of income, rather than being underpaid or experiencing rapidly rising expenses, the steps are to serve both your finances and your career.

First, I’ll share some steps I think everyone should take, and then I’ll share some stage-specific suggestions. To begin with, please assess your finances holistically. What are your assets: bank account balances, investments, property, etc.? What are your liabilities: credit card debt, buy now pay later debt, student loans, a car loan, a mortgage, medical debt, IRS debt, etc.? What is your current income? What are your current expenses? Specifically, I want you to focus on one type of asset and one type of debt. What I’m sharing next is an abbreviated form of the financial framework that I teach in my live workshops.

The asset is your emergency fund. The best practice is to have a separate, named high-yield savings account for your emergency fund so that you can be super clear about the money available to you in the case of an emergency vs. the money available to spend on a monthly basis on regular expenses or annual basis on irregular expenses. Based on your current expenses, for how many months could your emergency fund support you if you were to lose your primary income? If your answer is that you don’t have an emergency fund or it’s smaller than three months of expenses, please make it your top financial priority to build the fund to that level. This is a slightly larger recommendation than I have made in the past specifically because of the unique threat we are under. You should consider yourself to be in a financial emergency until you reach this goal—more on this in a bit.

The debt is credit card debt. The best practice is to carry no balances on your credit cards, and in fact to use your credit cards as if they are debit cards, only making a purchase if you could pay for it right then with the money already in your bank account. If you could not immediately pay off all your credit cards and switch to using only debit cards, you are in credit card debt—even if you never pay interest. Following the creation of your 3-month emergency fund, your next financial goal should be to clear this credit card debt. However, I recommend that you keep the credit cards open as long as they don’t have an annual fee; you may need these lines of credit in the future if you do lose your income or incur a large, unexpected expense such as a move. Holding debt of this kind also puts you in a financial emergency.

If you’re a little further along in your financial journey, I want you to increase your emergency fund size to six months of expenses. That would be if you have no credit card or other high-interest debt, have other savings for near-term expenses, and have started investing. If all those elements are in place, you’re not in a financial emergency, but you should put some extra financial effort into building your emergency fund to six months of expenses. Once you’ve achieved that goal, you’re in a very strong financial position and don’t have to be quite so intense about keeping a high savings rate.

The next step is to assess your job security and career security. If you haven’t yet, this is the time to talk with your advisor or boss about the source or sources of your paycheck and the group, office, or company’s overall funding. You may learn that the source of your income is entirely or largely independent of federal funding, such as from a private foundation or tuition. You may learn that the source of your income is federal, but there are currently no concerns about its continuity. Or you may learn that the source of your funding is federal and is tenuous. We’ve already seen many grants cancelled or temporarily paused, and so you would probably know if you were in that group because you’ve either already lost your job or you’ve been switched to some kind of emergency or temporary funding. Or perhaps your advisor is currently funded but not optimistic about securing more grants due to the shifted funding priorities of the new administration. In those latter cases, assuming your emergency fund meets the levels I just outlined, throw your efforts into preparing for a job or career transition.

Now let’s get to some practical steps. We’ll do the financial first and then the career. If you’ve self-diagnosed that you’re in a financial emergency or have a financial goal that you should strenuously work toward, how should you do so? Let’s look first at expenses. Normally, when I teach about reducing expenses, I do so with a focus on long-term sustainability, so I talk a lot about right-sizing housing and transportation and other large, fixed expenses. Right now, I’m not so concerned about sustainability, because you have a short-term, highly urgent goal of increasing your emergency fund or paying off high-priority debt. That means slashing your discretionary expenses, essentially engaging in a limited-term fast from anything you can possibly spare.

The question you should ask yourself is: If I had no income right now, would I spend money on this? If the answer is no, don’t spend on it and put all the money you can free up toward your financial goal. I suggest that you stop spending entirely or as close as you can get on discretionary expenses such as restaurants, takeout, and delivery; entertainment; going out; travel; and shopping aside from the bare minimum. The exceptions are for expenses for your job search or career pivot, such as expenses related to interviewing or professional development. Delay every expense that you can delay, even what you might consider necessary expenses. Take a hard look at your subscriptions and cancel everything that you would cancel if you didn’t have an income. You can always restart them when you’ve reached your goal.

For me personally, it would be really hard, but if I didn’t have a fully funded emergency fund right now, I would cancel my gym membership, take my kids out of their pay-by-the-month extracurricular activities, cancel all our streaming services including Amazon Prime, skip my next haircut, and put off some much-desired-but-not-strictly-urgent home repairs.

You can also try to increase your income to reach your urgent financial goals. Normally, when teaching on increasing income, I say to focus on income-generating activities that also advance your career goals. That’s still great work if you can get it, but with our top-of-mind objective of adding to your emergency fund or paying off debt, you can pursue other types of work as well. Whatever gives you the best pay rate-to-time or pay rate-to-energy ratio is worthwhile. In fact, diversifying your income sources so that you are less directly or indirectly dependent on the federal government is a great idea in the short term.

Finally, I suggest planning where you would turn should you lose your income and deplete your emergency fund. If you would turn to debt, think through what is the least toxic type of debt available to you. Credit cards are an easy option, which is why I want you to pay them down but not close them, but as they come at such a high interest rate, they might not be your best option. If you have good credit, you might be able to get another type of loan like a personal loan or a home equity line of credit, but it’s going to be more difficult if you wait until after you’ve lost your income. If things got really dire, would it be possible for you to move in with a family member or friend until you get back on your feet?

Turning our focus back to your job or career, I suggest devoting serious time to professional development, and that goes whether you perceive your job to be at risk or not. Of course, the more unstable your job or career is, the more important it is to engage with this. If you don’t know already, you need to figure out, as I heard one person at NPA put it, your career plans B, C, and D and start setting yourself up to pursue them. If you are affiliated with a university, this means patronizing professional development events and the career center. Check if there are recordings of past events that you can catch up on as a full suite of topics is probably covered over the course of 12 to 24 months.

Networking is vital right now, and again that goes whether you anticipate a near-term job search or not. Yes, use LinkedIn and attend local meet-ups, but also make an effort to connect individually with people you know from past degrees or past jobs. It’s always great to catch up with an old friend or colleague, and it doesn’t have to be like “Can you offer me a job?” Just ask what they’re up to and if their industry has been impacted by the new policies. Then if you do need to come around again with a serious request, it won’t be so out of the blue.

By the way, when you’re networking, keep two things in mind: 1) What can you offer the person you’re speaking with? It could be continued friendship or information or access to your own network. 2) By keeping up with your network, you might very well be able to help a friend or colleague. So do this not just for yourself, but to help the people you know find great-fit jobs and careers. We should all increase our networking activities right now, not just if we have an urgent need.

So far I’ve only mentioned networking with peers and colleagues, but don’t forget that people outside of your profession can be part of your network and prove very helpful, especially if you are considering changing industries. To that end, speak openly about your career aspirations and industry concerns with people you know socially. In fact, it will be a great boon to your mental health if you lean into in person social groups and gatherings in this difficult time. Remember that you are much more than just a researcher; you are a well-rounded human being with unique hobbies, interests, beliefs, etc.

Commercial

Emily here for a brief interlude! Tax season is in full swing, and the best place to go for information tailored to you as a grad student, postdoc, or postbac, is PFforPhDs.com/tax/. From that page I have linked to all of my free tax resources, many of which I have updated for this tax year. On that page you will find podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs and PhDs-to-be. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with. Again, you can find all of these free resources linked from PFforPhDs.com/tax/. Now back to the interview.

Financial Advice for Each Stage of Your Academic Career

We’ve spoken in general terms to this point about assessing your finances and your career stability and some steps you can take to prepare for a loss of income. Nothing I’ve said so far is extreme, and you will improve your finances and career by following the advice, even if you never lose your income. Now let’s delve into some stage-specific advice for those who have lost their income or whose income is at higher risk. We’ll start with people earlier in the PhD career track and move to later.

A) Prospective graduate students: If you’re still interested in graduate school after all this, more power to you. Go ahead and apply next fall or whenever is appropriate for you. But please apply for jobs as well in case admission or funding doesn’t work out. Seriously consider whether a master’s or PhD is more appropriate for your career goals and whether it might be worth paying for a master’s, even if your original plan was to pursue a funded PhD. I can’t yet tell how the landscape will shift between those two types of graduate programs. It might be worth taking a couple of years to work before you head back to graduate school; you will have more clarity about your career goals and what academia can offer you and will also be in a stronger financial position to start graduate school if you use your income intentionally. When you apply to graduate school, please apply widely for fellowships. Consider programs abroad as well as in the US. Also, listen to my advice for rising and current graduate students.

B) Rising graduate students: Some of you have gotten a really raw deal, and I’m sorry. The fact that this attack went down literally during admissions season was the worst possible timing for you. If you’re still headed to graduate school, take a really critical eye to the stability of your funding, and do your best to build financial and career security if you do perceive your funding to be tenuous. More on that next in the section for current graduate students. Also, as you start graduate school, do your best to keep your large, fixed expenses like housing and transportation as low as is comfortable for you so that you can maintain a savings rate. Your emergency fund, etc. could become a lifeline if things go south.

C) Current graduate students: If your funding does not seem to be secure, layer in financial and career stability in other ways. 1) Apply widely for funding opportunities, focusing outside the federal government. 2) Establish at least one side stream of income, if that’s legally and morally permissible for you. Ideally, this would be from a career-advancing activity. 3) Treat every year of graduate school like it might be your last, because it very well might be if your funding evaporates. What I mean by this is that you should have at least one big accomplishment to point to within the last 12 months that will translate well to your resume. That could be completing practical classes, mastering skills, finishing your master’s degree, publishing or patenting, etc. You should also be ready on very short notice to conduct a job search, so stay up-to-date on your professional development, career exploration, and networking. This especially goes for international graduate students, who have a very small window of time available to find another position before they would have to leave the country. 4) Submit the Free Application for Federal Student Aid. I certainly hope it doesn’t come to this, but if a small student loan will bridge you to the end of your degree which itself would vastly improve your job prospects, it may be worthwhile. 5) Do your research now on the social supports that would be available to you if you did lose your funding or have to leave grad school abruptly. For example, does your department, school, or university offer any kind of bridge employment or funding? Do graduate students qualify for unemployment in your state, and if so under what circumstances? Does your university offer emergency loans or grants to graduate students? Are there programs through your city that would help you pay for rent or groceries if you lost your income?

D) Current postdocs: Much of the same advice for graduate students applies for you as well, although thankfully you have the security of your finished PhD. Take those steps to shore up your financial and career resources, especially if you are an international postdoc. You should also check into whether you would qualify for unemployment in your state should your position end; don’t assume you will, especially if you are a non-employee.

E) PhDs in government, academia, and nonprofits: You know your situation best, but stay frosty. Like everyone else, you should understand how your position is funded to ascertain its potential instability and be ready to transition out at any time. If you haven’t already, I suggest starting the process of separating your personal identity from that of your job. These can become especially intertwined for tenured or tenure-track faculty. If you do have to separate, it will probably be super painful. I suggest listening to the new podcast Academics and Their Money by former podcast guest, Dr. Inga Timmerman.

F) PhDs in the private sector: Your job is probably the most secure of any that we’ve discussed so far, which is not at all the case in normal times. You will be everyone’s best friend right now if you devote some of your time to networking, doubly so if your company is hiring. It may benefit you in the future, but it will almost certainly benefit your friends and peers.

I have a couple of concluding thoughts, and for these I need to thank the most recent episode of the new podcast Optimist Economy, titled Is This a Recession or Not?, and the financial independence movement.

First thought: During a recession, if you manage to keep your job and assuming you didn’t expect to retire super soon, you are going to be financially fine. You might have some anxiety, and perhaps I’ve fed into that today, but you will come through it in good shape. The pain of recessions is felt mostly by people who lose their jobs, and typically, it’s not so much the losing of the job that’s the worst, it’s the time it takes to get another job, which is lengthened during recessions. That’s why I’ve focused so much time today speaking about how you can prepare yourself for the loss of your income. It’s a low-probability but high-risk event.

However, we have the added wrinkle in the PhD community of being super specialized in our research or skills and perhaps even the sector in which we expect to perform that research or use those skills. For PhDs in academia and government and nonprofit research settings especially, losing your job is so much more than a temporary disruption in income. It’s a rupture of your identity because of how much of yourself you had to put into breaking into that career path. In another time, you might have been able to get a similar job, but that just might not be the case right now if your whole field is contracting. Losing your job might feel like the end of your career. It’s not, it doesn’t have to be, but if you feel that way, it’s going to take some serious inner work to decouple your career from your identity and move on. In this, we can take some inspiration from the financial independence movement. Many early retirees have modeled this process of finding yourself outside of your career. It will look different for someone who is still working, but it is a good example.

Second thought: One of the scariest aspects of losing your job in the good old U S of A is that you likely lose your health insurance as well. That part of it is almost as horrible as losing your income, especially if you are chronically ill or have dependents. There are solutions, however, and again these have been well explored by the financial independence community. It may help you alleviate some anxiety to think through what you would do specifically about health insurance if you were to lose your position.

You might be able to hop onto your spouse or partner’s insurance or your parent’s insurance, depending on your specific eligibility and the cost of doing so. Some insurance plans offer a program known as COBRA, in which you can continue with your same coverage for up to 18 months after you lose your job. Your workplace likely offers COBRA, but your student health insurance plan probably doesn’t qualify. If you are eligible for COBRA, you have up to 60 days to enroll in the program and it covers you retroactively, so you could wait up to 60 days to see if you actually need insurance before starting to pay any premiums. The premiums are going to feel high because you have to pay the portion that your employer was paying previously in addition to the portion you paid before. Another good option is to purchase a health insurance plan through the ACA marketplace in your state. This is the fallback plan for most early retirees who stay in the US, and it is a good one, especially since you likely will just be on the plan in the short term. Finally, another type of plan that’s popular with early retirees is a health care sharing ministry, which is not proper health insurance but serves some of the same functions as health insurance. People like it because it’s less expensive than proper health insurance. I will leave it to you to look into further and decide whether this is a viable or preferable option for you should you lose your job.

Part 3: What I’m Offering You for Free

A few weeks ago, I was feeling really despondent and powerless in the face of all these terrible changes, so I decided to embark on what I’m calling Giveaway Spring. I finished all my scheduled speaking engagements by the end of February, so I have an unusual amount of free time between now and the end of the academic year, and I’ve decided to give away a lot of it.

If you aren’t already on my mailing list and you want to sign up for any of these giveaways, please register through PFforPhDs.com/Giveaway/. You’ll receive an email with all the current giveaways being offered, and I’ll update my mailing list periodically as I add items. I’m planning on expanding the content I’ve shared in this episode into a full webinar, for example, and I’ll give a pilot of that webinar away to a limited number of people on my mailing list after I put it together.

Here are some of the items on offer as part of Giveaway Spring:

1) I’m offering free 60-minute Q&A calls to cross-institutional groups. This would be perfect for a professional society or interest group that has a lot of PhDs and PhDs-to-be. You don’t even have to be on my list to schedule one of those, just email me at [email protected].

2) I’m offering free 30-minute coaching sessions, four per week between now and early June. These are going fast so once you get the link, keep checking back as availability opens up on a rolling basis.

3) I’ve collected all my best free templates and downloadables into one easy folder.

4) I’m hosting a free AMA with Sam Hogan, a mortgage originator specializing in graduate students and PhDs, on April 8, 2025. You can register via PFforPhDs.com/mortgage/.

5) I’m giving away other people’s books! The first giveaway is for The Entrepreneurial Scholar: A New Mindset for Success in Academia and Beyond by Ilana Horwitz. I will keep cycling through my favorite personal finance and academia books throughout the spring. You can sign up for the book giveaway directly at PFforPhDs.com/BookGiveaway/.

6) I’m sharing free opportunities hosted by other groups or people as I find out about them. For example, Princeton’s GradFUTURES conference from a couple of weeks ago went out to my list, and right now via PFforPhDs.com/Giveaway/ you can sign up for an upcoming free webinar from AccessLex titled “Navigating Recent Updates to Student Loan Repayment and Forgiveness.” If you are hosting or know of free events or resources that are related to PhD personal finance or careers that you think I should pass along, please notify me—I would be happy to do so!

Again, the link to find out about all the current giveaways is PFforPhDs.com/Giveaway/. I would really appreciate you sharing that link with your peers. I’m trying to get two things out of these efforts: 1) goodwill within our community and 2) new mailing list subscribers. So you can really help me out with both of those goals by sharing PFforPhDs.com/Giveaway/ or any of the other links I’ve mentioned in this section.

I would be very happy to hear your reactions to the content of this episode if you would like to share them with me. Perhaps you’re hearing different messaging from your university or employer or you think I missed a good piece of advice. Please share any comments with me at [email protected]. Good luck this spring, this year, and this four years. I’m rooting for you.

Outro

Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by me and show notes creation by Dr. Jill Hoffman.

Why and How I Started Personal Finance for PhDs

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In this episode, Emily narrates the origin story of her business, Personal Finance for PhDs, which started as a personal interest when she graduated from college. She also shares why she has devoted her career to financial education for PhDs and the behind-the-scenes business operations. This episode is for you if you are an avid follower of Personal Finance for PhDs, a personal finance enthusiast, or interested in solopreneurship yourself.

Links mentioned in the Episode

Why and How I Started Personal Finance for PhDs

Teaser

00:00 Emily: You are so smart, so talented, so capable, so visionary—you are such an extraordinary group of people—that I want you to be able to experience personal wellness and satisfaction and live out your values and have a wildly impactful life. I don’t want you to feel hamstrung by money. I want you to be free to apply your incredible energy to your professional pursuits and personal lives and not be stressed or distracted or held back by your finances.

Introduction

00:33 Emily:  Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

01:01 Emily: This is Season 17, Episode 1, and today is a solo episode for me on Personal Finance for PhDs. I’ve been asked more and more in recent years how and why I started the business, so I’m taking this opportunity to tell you the origin story of Personal Finance for PhDs, why I’ve chosen financial education for PhDs as my career, and what my day-to-day work looks like. This episode is for you if you are an avid follower of Personal Finance for PhDs, a personal finance enthusiast, or interested in solopreneurship yourself. These action items are for you if you switched onto non-W-2 fellowship income as a grad student, postdoc, or postbac last fall and are not having income tax withheld from your stipend or salary.

01:50 Emily: Action item #1: Fill out the Estimated Tax Worksheet on page 8 of IRS Form 1040-ES. This worksheet will estimate how much income tax you will owe in 2023 and tell you whether you are required to make manual tax payments on a quarterly basis. The next quarterly estimated tax due date is January 16, 2024.

02:12 Emily: Action item #2: Whether you are required to make estimated tax payments or pay a lump sum at tax time, open a separate, named savings account for your future tax payments. Calculate the fraction of each paycheck that will ultimately go toward tax and set up an automated recurring transfer from your checking account to your tax savings account to prepare for that bill. This is what I call a system of self-withholding, and I suggest putting it in place starting with your very first fellowship paycheck so that you don’t get into a financial bind when the payment deadline arrives.

02:48 Emily: If you need some help with the Estimated Tax Worksheet or want to ask me a question, please consider joining my workshop, Quarterly Estimated Tax for Fellowship Recipients. It explains every line of the worksheet and answers the common questions that PhD trainees have about estimated tax. The workshop includes 1.75 hours of video content, a spreadsheet, and invitations to at least one live Q&A call each quarter this tax year. If you want to purchase this workshop as an individual, go to PF for PhDs dot com slash Q E tax. You can find the show notes for this episode at PFforPhDs.com/s17e1/. Without further ado, here’s my solo episode behind the scenes of Personal Finance for PhDs.

03:38 Emily: I’ve noticed that in the past half-year or so that I’ve been getting more frequent questions about how I got started with my business, whether it’s my full-time job, and just generally why I do this. I realized that while I’ve answered these questions and told these stories numerous times over the years, I’ve never put it together coherently on my website or on this podcast, so that’s what I’m taking this episode to do. In this episode, you’ll hear the origin story of Personal Finance for PhDs, why I’m so passionate about equipping PhDs with skills and knowledge around money, and how I run my business currently. I hope you’ll enjoy this behind-the-scenes look!

Origin

03:38 Emily: My interest in personal finance goes back to my first post-college position, which was as a postbaccalaureate fellow at the National Institutes of Health. I frankly was quite privileged to not have to have given money much thought prior to that point, although in retrospect I absolutely should have. I grew up in the DC area in a middle class family, and my parents really never taught me overtly or explicitly about money beyond going with me to open a checking account when I got to college. When I started my postbac fellowship in 2007, it was the first time I had a full-time non-temporary job, so to speak. My annual stipend was $24,000. Since I had grown up outside of DC on the Virginia side and was now moving back to the same area to work on the Maryland side, I knew that $24,000 was really, really a small amount of money to try to live on in a fairly high cost of living area. I decided at that point to start learning about personal finance. I read a few books, and the one that made the biggest impression on me was Get a Financial Life: Personal Finance in Your Twenties and Thirties by Beth Kobliner. I think my baseline motivation was that I wanted to be responsible with the salary I was receiving. I wanted to do all the right “adulting” things financially, although I don’t believe that word was in popular use yet. The main actions I took following my initial reading were to track my expenses, which I did in Excel; open my first credit card; and start investing for retirement. I didn’t really let the fact of my low income or status as a trainee stop me from following the advice I was reading. Somehow, I didn’t absorb from the books the importance of having an emergency fund, and I kept absolutely no cash savings on hand. I essentially lived paycheck-to-paycheck with the exception of my Roth IRA, to which I was contributing $200 per month, exactly 10% of my stipend income.

06:04 Emily: I started my PhD in biomedical engineering at Duke in 2008, and shortly after was when the financial system and economy really started going downhill and we entered the housing market crash and Great Recession. I felt very secure in my position, so I didn’t have fear or anxiety around the continuity of my income. I again was paid a $24,000 annual stipend, but that effectively felt like a raise since Durham was a moderate cost-of-living city. During those first couple of years of grad school, I kept living pretty much paycheck to paycheck aside from my Roth IRA contributions, and I kept reading personal finance books. In 2010, I got married. My husband was also a grad student at Duke at the time. In 2011, I started reading and commenting on personal finance blogs, and I started my own personal finance blog. This was the heyday of the personal finance blogosphere, and participating in that became a serious hobby for me. I posted three times per week, mostly short essays or musings on personal finance tactics or strategy and updates on how we were spending our money. My blog was always small in terms of readership. What I observed in Google Analytics, however, was that my posts about grad student-specific topics actually had sustained traffic from search engines, specifically my posts about taxes and IRAs. I didn’t know a lot about those topics at that point, but I knew my own experiences and what I had read on the IRS website, so I was simply sharing that. But the insight I gained was that grad students were searching for these topics, and there weren’t many good sources of information, because my little blog was actually ranking well enough in search that people were visiting it. Also in that period, I attended any and all financially-related seminars that Duke hosted. I want to say first that I appreciated and still appreciate that Duke was making any kind of effort at all to provide financial education to its graduate students, but the content of the programming wasn’t exactly what was needed, in my opinion.

07:58 Emily: I remember a couple of seminars in particular from around that time. The first seminar was when a local wealth management firm sent a couple of representatives over to give a talk on investing. I attended with high hopes that they would discuss how to invest in IRAs. Instead, they talked about utilizing 401(k)s while repaying gigantic student loan debts. These advisors were clearly speaking to the professional students in the room, the future doctors and lawyers, about how they could invest post-graduation, while completely overlooking the PhD students who actually had the cash flow to be able to invest in the present. The second seminar was on tax return preparation by a local CPA. While I did glean some useful insights, my overall impression was that the person wasn’t speaking to the specific situation that the stipend-receiving graduate students in the room were facing, spending way too much time on general background information and the less-relevant higher education tax benefits and no time at all on how to deal with Duke’s confusing reporting of fellowship income. Basically, they were speaking from their experience preparing tax returns for the parents of college students, not to the audience’s experience of receiving a Form 1099-MISC but not a Form 1098-T.

09:11 Emily: In 2012, Duke started a personal finance initiative called Personal Finance @ Duke, and I volunteered as the grad student representative on the planning committee. Basically, I was there to make sure that some PhD student-specific educational programming was offered, and later on to help orient the speakers to the financial peculiarities of our population and the types of questions the audience would have. However, despite our best efforts with that tax firm, for example, we were never able to get the speakers to really meet the unusual concerns of our audience. That was when I started thinking, “I could teach this material better than these professionals are. I’m less qualified, but I know this audience better.” Fast-forward to the summer of 2014 when my husband and I both successfully defended our PhDs. My husband decided to stay on as a postdoc in his PhD advisor’s lab to get a couple more papers out the door. My advisor moved from Duke to Columbia, so there was no opportunity for me to stay on in a similar way, and in fact my defense date had been rushed due to my advisor’s schedule. The last six months of my PhD were incredibly busy, so on the other side of my defense I became happily ‘funemployed,’ as I called it, for the next year. Basically, I gave myself some time to explore and figure out what I wanted to do for my career, since I didn’t want to stay in research any longer. I explored a few career tracks through a short-term fellowship and contractor work, but nothing was exciting me as much as personal finance was. My blog had made a small amount of money in 2014, so I decided to use it to attend FinCon, the financial bloggers conference, in October. What I learned from that conference was that I had no interest in turning my blog into a full-fledged business. However, I attended a session on public speaking, which was the first time I was exposed to the concept of professional public speaking. I learned that there are three strata of public speakers. At the bottom, there are people who speak for free to promote a product or service that their business offers. That’s what those financial advisors and CPAs were doing at Duke. At the top, there are celebrities and politicians who command enormous speaking fees because of their fame and prestige. And in the middle, there are the professional public speakers who receive modest speaking fees in exchange for sharing their professional expertise or personal story. The person who ran that conference session actually spoke on personal finance in K-12 schools, so that was a little indicator to me that schools might host such speakers.

11:34 Emily: The final piece of the puzzle that would become Personal Finance for PhDs was that, with my abundant free time that fall, I volunteered to give my own seminar for Personal Finance @ Duke. Basically, I wanted to teach everything that I had learned about personal finance from books and the blogosphere specifically that would be relevant and actionable for current stipend-receiving graduate students. I had the best time creating the slides, delivering, and answering questions! I knew I wanted, somehow, to make that my career. At that point, I had identified what I consider the three core aspects of my business: 1) The people I serve are my peers on the PhD track, from undergrads applying to PhD programs through to PhDs in their first or so “Real Jobs;” 2) I help these people with their personal finances; 3) I do so through teaching or one-to-many communication. What took a little more time to figure out was exactly who would pay me for this teaching. While I have tried at different times, I am deeply uncomfortable trying to sell anything to my audience directly, particularly the graduate students. Through trial and error and learning from my peers in Dr. Jen Polk’s community, Self-Employed PhD, I identified that my clients, the people who are in a position to pay me for this work, are those who provide professional development programming to graduate students and postdocs, primarily. Mostly they are staff members who work in graduate schools, medical schools, postdoc offices, etc., but I also occasionally work with graduate student groups as well.

Commercial

13:07 Emily: Emily here for a brief interlude! Tax season is in full swing, and the best place to go for information tailored to you as a grad student, postdoc, or postbac, is PFforPhDs.com/tax/. From that page I have linked to all of my free tax resources, many of which I have updated for this tax year. On that page you will find podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs and PhDs-to-be. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with. Again, you can find all of these free resources linked from PFforPhDs.com/tax/. Now back to the interview.

Mission

14:00 Emily: I just gave you the narrative of how I came to start Personal Finance for PhDs, but I haven’t really told you why I cared so much about my personal finances while in graduate school and why I decided to devote my career to helping my peers in this area as well. This is the first time I’ve tried to articulate this mission, so forgive me if it’s a little rough going. There are a couple of foundational truths that I learned about personal finance early on that made it a very compelling area of interest for me. 1) How you use your money is an expression of your unique life values. 2) Having money gives you options. Let’s explore those a little further each in turn.

14:39 Emily: 1. How you use your money is an expression of your unique life values. The more closely aligned your use of money is with your individual values, the more satisfaction you will derive from that money. Money is not the only way you can express your values, but it is a very useful tool. With graduate students and postdocs, and really anyone with a lower income, it’s very difficult to align your use of your money with your values because such a large fraction of it goes toward your basic living expenses. When the vast majority of your income goes toward housing, food, and transportation, you have very limited agency to express your values and derive satisfaction from how you use your money. I find the puzzle of optimizing your use of money within the constraints of life as a graduate student or postdoc very compelling.

15:26 Emily: 2. Having money gives you options. This is an expansion on the first point. When you have money, whether that is in the form of savings, investments, or income in excess of your expenses, you have a greater ability to make choices in your life. You can extract yourself from toxic professional or personal relationships. You can choose where and how you live. You can add a child or a pet to your household or materially support other family members. You can give to causes that you believe in. How can a low-earning young professional generate this kind of financial agency?

16:03 Emily: This probably won’t be a shock to anyone listening, but after my first year or so of graduate school, I didn’t find my research to be consistently fulfilling and it felt very out of my control. I didn’t have consistent or predictable success. I only have this perspective from the many years that have elapsed since I finished my PhD, but I think my interest in and let’s face it at times fixation with my personal finances was a response to those feelings of failure and helplessness in my professional life. Improving my personal finances was something that was much more within my control. I could set and achieve process-based goals and oftentimes effect positive, measurable outcomes. So my interest in personal finance was a form of escapism. Yet, there were downstream benefits of this attention and effort, and I think they can be replicated without the large time and energy investment I underwent. My husband and I experienced what I consider to be great financial success during our seven years of PhD training. We took our combined net worth from a negative number in 2007 to over $100,000 in 2014. That’s an excellent outcome, right there in black and white. What I didn’t appreciate until that point, though, was how having that nest egg and the skills and experiences it took to build it actually could help us in our professional lives. For me, the first thing was that I could be funemployed for that first year after I finished my PhD without sinking our household. My husband’s income went up a bit when he transitioned to being a postdoc, plus I brought in income in fits and starts from my various experiments, so we were still making it month to month. But I felt a lot less pressure about needing to commit to a career and increase my income because I knew we had that nest egg working for us. That money gave me time to explore and eventually find my calling.

17:50 Emily: My husband actually had a similar experience when he finished his postdoc in 2015. He had always thought he would continue in academia or work for a large company—something stable. He came across a job listing for a role that seemed tailor-made for his research expertise and interests. The hiccup was that the job was at a start-up. We didn’t know much about that world, but we knew that he would be paid a bit less in salary and there was a higher possibility of job loss in comparison with being hired by an established company. Again, our nest egg gave him the confidence to take a professional risk and accept that role that he was so well-suited for. I had known from the beginning that your career affects your finances via the income and benefits provided to you. But this is how I learned that your finances can also affect your career. We didn’t know when we started saving and budgeting and everything that those small actions, compounded over time, would end up freeing us professionally to this high degree. This agency and confidence is what I want for all of you, the PhDs and PhDs-to-be. You are so smart, so talented, so capable, so visionary—you are such an extraordinary group of people—that I want you to be able to experience personal wellness and satisfaction and live out your values and have a wildly impactful life. I don’t want you to feel hamstrung by money. I want you to be free to apply your incredible energy to your professional pursuits and personal lives and not be stressed or distracted or held back by your finances. I will feel satisfied if I can, through my teaching, play a tiny role in enabling that success in your life by giving you financial best practices and mindsets and so forth. I don’t want you to have to go through all the self-education and experimentation that I did to get to that point. I’m delighted to interpret and refine general personal finance education for the unique circumstances of a PhD’s life.

19:45 Emily: I’ve been describing working on my own personal finances and teaching you how to work on yours, but it’s become more and more apparent to me over the years that this personal responsibility is only part of the equation. While I still consider that to be core to my teaching, it’s foolish to gloss over the responsibility that universities and funding agencies play in each PhD’s finances by setting the pay rates for assistantships, fellowships, grants, etc. and constructing benefits packages. For graduate students and postdocs to flourish and succeed in their roles, not to mention their lives, they must be paid a living wage and in fact significantly more than a living wage. Of course, personal responsibility is a requirement, but a higher income also confers the benefits I spoke of earlier. It’s obvious to me that graduate students and postdocs must be paid fairly to fulfill their potential and produce the wonderful research and become the wonderful scholars as is expected of them. In fact, by underpaying its trainees, the academic system is undermining itself and driving talented people into other sectors. Related to this issue is one of equity and the hidden curriculum that I often refer to in this podcast. Academia is more diverse and is endeavoring to become more diverse with respect to race, gender, socioeconomic class, etc. than it was in the past, but that means that more and more trainees lack access to the innate resources that their predecessors had, whether that is familial financial support, certain types of financial acumen, or insight into how academia functions, financially. If you are a first-generation college student, your parents are not necessarily able to help you decide how to manage your student loans during graduate school. If you come from a family that has never saved for retirement, you have no one to clue you in about IRAs. If your parents always had simple tax returns that they prepared with software, you don’t have easy access to a CPA to ask questions about your fellowship income. And if you’re an international student or postdoc, you’ve got to figure out how to navigate the US banking and credit systems on top of everything else. I believe universities have a responsibility to teach or at least offer to teach about these nuanced, academia-specific financial topics so that all graduate students and postdocs have access to this information that is critical to their personal wellness—in addition to paying them decently. So that’s my internal motivation for doing what I do. I want all PhDs, regardless of background, to experience personal and professional freedom and fulfillment, similar to what I have, and I believe that money is a crucial tool to master in that process. You have so much to offer the world, and I want the world to benefit from the work you do that is your true calling, all without compromising your personal wellness.

Operations

22:30 Emily: In this final section of this episode, I’d like to give you some details on how I run my business. For example, I am often asked if it’s a side hustle or my full-time job. Personal Finance for PhDs is my sole professional pursuit at this time. I would describe it as a lifestyle business. That is a pejorative term to some people, but I don’t see it in that negative light. I’ll go through now what I do for work, when I work, where I work, and with whom I work.

What I do for work

23:00 Emily: There are two main avenues by which I offer financial education, paid and free. The free financial education includes this podcast, articles on my website, and social media posts. The paid financial education is my work with universities, and, to a much lesser extent, the products I sell to individuals. The educational services and products I provide to university clients include live seminars and webinars and pre-recorded workshops. At this point, the only products I offer to individuals are my pre-recorded tax workshops and membership to the Personal Finance for PhDs Community. What might be interesting to learn about solopreneurship is that only a tiny percentage of my work time is spent actually delivering my revenue-generating financial education. The great majority of my own time as well as my assistants’ time goes to marketing and networking, communicating with clients, preparing presentation materials and rehearsing, and professional development.

When I work

24:00 Emily: I work around my children’s school schedule. In a regular 5-day school week, I’ll work about 20 hours, typically exclusively while they are in school. This gives me a bit of personal time during their school day as well as work time. I take off all of the academic year holidays and vacations that they have, such as Thanksgiving, winter, and spring breaks, federal holidays, etc. Over the summer, when we’re not on vacation, we generally put the kids in day camp so I have those weeks to work as well, maybe with a few extra days off here and there. The exception to this rule is when I travel, when I’m typically working much longer hours. I like this balance personally as well as for our family. I find I’m able to accomplish what I set out to professionally in those limited hours by being very judicious about what I take on, and I also get to spend a lot of time with my children and facilitating their relationships and development. In recent years, I’ve become a student of time management and productivity, and I try to conform my schedule and work habits to the principles I’ve learned. I theme each one of my work days so that I know what I need to do and what I don’t need to do on each day. Mondays are for creating paid content, Tuesdays are for client check-ins, Wednesdays are for business operations, Thursdays are for catch-up, and Fridays are for creating free content. That’s not to say that I don’t do other types of work on those days, only that they have to wait until my tasks related to the theme of the day are complete. I learned this strategy from the podcast Productivity Straight Talk. I only open my schedule for appointments between about 10 AM and 2 PM on Tuesdays and Thursdays, and I only record podcast episodes on Fridays in that same window. I’ve become a bit of a devotee of Cal Newport recently, so I try to follow his time block planning method, reserve time for deep work, and not let my work bleed into my personal time.

Where I work

25:48 Emily: I set up the business from the start to be location independent, meaning that I can operate the business no matter where I live. I have always worked primarily from home. Pre-pandemic, I spoke mostly in person, so I would travel to university campuses to do so. Since the pandemic started, my deliverables have transitioned primarily to live webinars and pre-recorded workshops, and I travel only very occasionally to speak in person or attend conferences. While working remotely is very convenient and easy, I desperately miss connecting with audiences and clients in person, and I don’t believe webinars are as effective as in-person seminars. I’m hoping that more clients will shift away from webinars toward either live, in-person seminars or pre-recorded workshops.

With whom I work

26:33 Emily: I call myself a solopreneur. The tax structure for Personal Finance for PhDs is a sole proprietorship, and the legal structure is a single-member LLC. My business doesn’t have any employees, only myself as the owner. I work with two contractors on a part-time and ongoing basis; you hear their names if you listen through to the end of each of the podcast episodes. Dr. Lourdes Bobbio does all the editing on the video and audio files for this podcast and my workshops, and Dr. Jill Hoffman prepares the podcast show notes, assists with delivering the pre-recorded workshops, and does other miscellaneous administrative work. I also work with other professional service providers as needed, such as CPAs and lawyers. That’s all I have to say on the matter of my business for the time being! If you have questions for me, I would be happy to try to address them in a follow-up social post, as I know solopreneurship is a path of interest for many PhDs. Please email me at [email protected]. And if you’ve been inspired by this episode to support my mission, the best way you can do so is by hiring me, if you’re in a leadership position at your university, or recommending me to a professional development-type staff member or student group leader at your university. Thank you in advance for making the effort!

Outtro

27:51 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

Expert-Level Frugality from ChatGPT and Grad Students Like You

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In this episode, Emily features contributions from the PhD community and from ChatGPT around the topic of frugal tips. Grad students in particular are typically open to exercising frugality to decrease their expenses. Emily talks through her framework on how to decide which area of spending to target first with frugality. She then demonstrates how to use ChatGPT to find as many frugal tips as you could ever want. The episode ends with the frugal tips submitted by grad students and PhDs, which are often more tailored and actionable than the generic ones you can find online.

Links mentioned in the Episode

Expert-Level Frugality from ChatGPT and Grad Students Like You

Introduction

00:05 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

00:34 Emily: This is Season 16, Episode 6, and today my guest is ChatGPT and all of you! Our topic is frugal tips. Grad students in particular are typically open to exercising frugality to decrease their expenses. I talk through my framework on how to decide which area of spending to target first with frugality. I then demonstrate how to use ChatGPT to find as many frugal tips as you could ever want. The episode ends with the frugal tips submitted by grad students and PhDs, which are often more tailored and actionable than the generic ones you can find online. You may have heard that Mint, the popular budgeting app, is half being shut down and half being moved under the Credit Karma umbrella. Longtime Mint users are freaking out and looking for alternatives. As it happens, a few weeks ago I finally cleaned up and made available the Excel spreadsheet I use for tracking to fulfill a request made in advance of a webinar. If you would like to try out manual tracking, please take my spreadsheet and use it as is or build it out however you like. It includes a couple of budgeting principles that I like to follow and teach to grad students. There’s a companion video available explaining those principles. If you’d like to grab the spreadsheet, it’s totally free, just register through PFforPhDs.com/tracker/. You can find the show notes for this episode at PFforPhDs.com/s16e6/. Without further ado, here’s our episode on frugal tips.

02:20 Emily: PhD students are pretty frugal, right? I mean, not everyone in every area of life, but a degree of frugality is necessary if you have any hope of staying in the black throughout your PhD. Now, that frugality may come naturally or it may be something you have to white-knuckle through, but it will happen. I did my PhD during the Great Recession, and frugality was a very popular topic in the personal finance blogosphere, of which I was a part. I remember reading blog post compilations of frugal tips and thinking that I already practiced the great majority of them, and some of my peers did, too. After some time of honing my own frugality, it became a bit of a struggle for me to find new-to-me frugal tips that I was willing to try out. Everyone has their own limits, of course. That’s one of the tricky things about searching for frugal tips: You have to wade through a bunch of tips that aren’t relevant for your life or that go beyond your comfort zone to find one or two that could really work for you. This episode will help you with that process of finding frugal tips that might actually work for you. First, I will share my frugality framework to help you prioritize which budget categories are the best to target with frugal tips. Second, I’ll tell you how to use two invaluable resources to come up with relevant frugal tips, ChatGPT and your peers, and include example tips from both sources.

Frugality Framework

03:41 Emily: Some frugal tips are poised to have a greater effect on your budget than others, especially if they take significant time and/or energy. The juice is not worth the squeeze, so to speak. The Frugality Framework that I’m about to share with you is one that I teach during some of my personal finance seminars for universities. When people decide that they would like to reduce their expenses, it’s often a bit of a panic response. They realize they’re over budget or racking up debt or are about to experience a decrease in income or an increase in another expense. For example, after 3.5 years of forbearance on federal student loans, in October they went back into repayment, so borrowers suddenly had a new expense of tens, hundreds, or thousands of dollars per month that they hadn’t had to pay in quite a long time, if ever. The common response to this is to reduce or eliminate the types of expenses that will have an immediate effect on your overall spending and that give the least resistance. Generally speaking, the first target expenses are variable and discretionary. Variable expenses are ones where your spending correlates with your consumption level, and discretionary expenses are optional, not required to keep you alive and productive. Variable and discretionary budget categories include eating and drinking outside of your home, entertainment, appearance-related personal care, some types of shopping, and much more. You might even be able to immediately reduce spending in budget categories that are commonly viewed as necessary but that have a discretionary fraction as well, such as groceries and gas.

05:16 Emily: This can be very effective in the immediate term to alleviate a cash crunch, but it is likely to only be sustainable for a short period of time. Discretionary expenses are the ones that provide some flavor and enjoyment to our day, and life is likely to feel bleaker without them. Because these expenses are variable, it takes willpower to sustain cuts in these areas, and that willpower will eventually deplete. As easy as it is to reduce or eliminate spending in these areas, it’s just as easy to turn the spending back on once that happens. I don’t want to convey that it’s impossible to sustain cuts to variable and discretionary expenses or that your life won’t be worth living if you do. But to make sustainable, long-term changes to these areas, you will have to make your lower-spending lifestyle a habit and really learn to love your frugal substitutes. That takes time, and if your willpower runs out before your habits take hold, your spending can easily bounce back. There is a time and place for frugality in your discretionary and variable expenses. But if you know that your frugality needs to be a long-term practice, such as the length of your PhD, I suggest a different approach.

06:30 Emily: Think of your expenses as falling into four quadrants, arranged in a square. The two columns are for your variable and fixed expenses. The two rows are for your large and small expenses, or you could picture a continuum here if you like. The expenses that we just mentioned mostly fall into the small and variable quadrant, with some budget categories like groceries probably falling into the large and variable quadrant. The quadrant that I believe you should focus your frugality efforts on first is the fixed and large quadrant. Your fixed and large budget categories almost certainly include your rent or mortgage, your car payment and car insurance if you own a car, and childcare if you have a young child. The reason that I suggest putting your frugalizing energy into this category first is that reductions in these expenses are the 80:20 solution to reducing your spending without depleting your time and energy reserves. By definition, if you reduce a fixed expense, that lower spending level is locked in for the term of your contract and probably indefinitely into the future. Once the change is made, you don’t have to spend any more time or energy to maintain the reduction. Furthermore, because these are large expenses, they have the greatest potential to affect your overall spending level. Even a 10% reduction in your rent or mortgage translates to a savings of dozens or perhaps more than one hundred dollars each month, whereas you would have to dramatically reduce or eliminate entirely a small expense to have the same effect.

08:07 Emily: You already know why almost no one starts with this category though, right? It’s because it’s intimidating and difficult to reduce expenses of the type that I mentioned. For housing, it would likely involve moving, which takes time, research, expense, and a whole lot of effort. It’s also not something that you can do immediately, but requires an acceptance of a long-term commitment to frugal living. Same thing goes for selling or trading your car or finding a different childcare arrangement. These are incredibly challenging tasks to undertake, and they lack the immediate gratification that denying yourself a restaurant meal can provide. But the effort that accompanies changing one of these expenses, I believe, is worth it, if you can get a large enough expense reduction. I went through this personally in graduate school. I moved four times during my PhD, and in three of those moves I reduced my rent expense without sacrificing square footage or proximity to my university. When I finished graduate school, I looked back at the most effective strategies that I employed to increase my cash flow, and those moves topped the list. If you’re interested, I detailed the whole list in Season 1 Episode 1 of this podcast. Frankly, I think it’s highly atypical to make an optimal housing decision in your first year of your PhD program, doubly so if you are moving from out of the area, so at least one move during grad school is warranted once you get to know the housing market and area as a local.

09:37 Emily: Once you’ve investigated and addressed your large, fixed expenses to the greatest extent possible, it’s time to move on to the other quadrants, which should be far less daunting. The second quadrant to focus on is your small, fixed expenses, which can include your internet service provider, your cell service provider, any ongoing subscriptions, and insurance policies. Again, we are not focusing only on discretionary expenses here, but also re-evaluating what are usually considered necessary expenses. Yes, it is necessary to have a cell phone, and probably a smartphone with a data plan at that. But there are likely many plans available that will fulfill your needs, and you have a choice about whether you want to pay for discretionary elements such as a large amount of data. Consider each of your small, fixed expenses through this lens, and keep in mind that annual re-evaluation and frequent switching of providers is typically the best strategy to keep expenses low. The cost of this once-per-year expenditure of time and effort to shop around is well worth it when you find a way to lock in a lower spend for one of these fixed expenses as no ongoing willpower is needed.

10:50 Emily: The third quadrant to work on is your large, variable expenses. Groceries almost certainly fall into this quadrant, and depending on your lifestyle, other potential budget categories are travel, gas, shopping, hobbies, entertainment, and appearance-related personal care. Because these expenses are larger, there is room for a significant reduction in spending, but being variable, they are beset by some of the same issues as those of the small, variable quadrant. You will need to start with experimentation into how to reduce these expenses, but the experimentation must shift into habit formation around any tips you want to use long-term, or else they will not feel sustainable. For example, if you want to reduce your grocery spending through purchasing and eating less meat and dairy, the experimental phase might involve trying out new recipes, with the habit coming when a few of them graduate into your regular meal preparation rotation. Personally, my family has implemented a “decide once,” to borrow one of the principles of the Lazy Genius, of always purchasing gas when we shop at Costco because it is reliably less expensive than the alternatives. We have also been experimenting with a decide once of always flying Southwest when available as it is a budget airline and we are plugged into its companion pass and points system.

12:12 Emily: Finally, we can return to considering the fourth and final quadrant, your small, variable expenses. Perhaps by the time you have worked through all three other quadrants, you will not feel the need to make any further budget reductions. If you would like to reduce your spending further, at least you will have practiced determining for your life what is necessary and what is discretionary and what you value and the frugal habit formation process. You’ll be better positioned to tackle this category. Perhaps you could even pair some immediate cuts to your small, variable expenses to some cuts to your fixed expenses that are in the works so that you can increase your spending once again when your fixed expenses drop. You have to know yourself to figure out what will work for you when it comes to using willpower to sustain reductions in expenses and how you can transition it into habits. For example, Gretchen Rubin has a framework classifying people into abstainers vs. moderators. Budgeting variable expenses is usually an exercise in moderation as you say yes to certain expenses within limits. If you’re an abstainer like me, it might be easier to tell yourself that you simply do not spend any money in certain categories while eliminating or raising the limits on other categories. Now that I’ve shared with you my recommended theoretical approach to frugalizing your budget, I’d like to point you to some resources for actually finding frugal tips to experiment with in your budget categories of interest.

Resources on Frugal Tips

13:43 Emily: From my blogging days, I know that the internet is littered with lists of frugal tips, and there are books and other resources that you can tap as well. But since I want you to target just one budget category at a time, I’m going to point you to two resources where you can really target the type of information that you’re seeking: ChatGPT and your peers.

ChatGPT

14:05 Emily: Seeking frugal tips is an accessible and easy way to use ChatGPT; it’s not at all sophisticated. I used the free version of ChatGPT that is available at chat.openai.com for my queries. I like ChatGPT for this over a search engine because you can be quite specific with your query and iterate it as necessary. I’m going to give you one example of seeking frugal tips for a fixed cost and one for a variable cost. Let’s start with exploring frugal tips to reduce the cost of your internet service, a fixed cost. My first request was “Please list 10 ways to reduce the cost of my internet service.” This is what ChatGPT returned:

“Reducing the cost of your internet service can help you save money. Here are ten ways to do just that:

  1. Shop Around for Providers: Compare different internet service providers in your area to find the most cost-effective plan. Some areas have multiple providers, each offering different pricing and packages.
  2. Bundle Services: Many providers offer discounts when you bundle internet with other services like cable TV or phone. Consider bundling if you need these services.
  3. Negotiate with Your Current Provider: Contact your current internet service provider and ask if they can offer you a better deal. They may have promotions or discounts available, especially if you’ve been a loyal customer.
  4. Downgrade Your Plan: If you’re not using the full capacity of your current plan, consider downgrading to a lower-speed tier. You can save money by paying for only what you need.
  5. Cut Out Unnecessary Features: Some plans come with extras like unlimited data, premium channels, or additional services you might not need. Trim these to lower your monthly bill.
  6. Use Wi-Fi Instead of Cellular Data: When at home, connect your mobile devices to your Wi-Fi network to avoid using expensive cellular data.
  7. Monitor Your Data Usage: Some providers charge extra for exceeding data caps. Be mindful of your usage to avoid these charges.
  8. Buy Your Modem and Router: Many providers charge a monthly rental fee for their equipment. Consider purchasing your own modem and router to save in the long run.
  9. Look for Promotions and Deals: Keep an eye out for special promotions, discounts, or introductory rates offered by internet service providers. These can provide significant savings, especially for new customers.
  10. Consider Alternative Technologies: Depending on your location, you might have access to alternative internet technologies like fixed wireless, satellite, or DSL. These may offer more cost-effective options than traditional cable or fiber.

Remember to check the terms and conditions of any changes you make to your internet service, as well as any potential termination fees or contract requirements. Additionally, the best approach to cost reduction may vary depending on your location and the specific providers available in your area.”

17:09 Emily: I like this list pretty well. It includes all the standard suggestions that I would have thought of or eventually found. I was curious if we could get a little more creative, though, so I iterated my next request as “Please list 20 ways to reduce the cost of my internet service.” ChatGPT added ten more ideas. I won’t repeat all of them as most were redundant, but one that I thought was out-of-the-box was to “Take Advantage of Government Programs: Check if you qualify for government assistance programs that provide discounted internet service to low-income households.” One suggestion I didn’t see on this list but that I would like to add, in case you are looking for ways to reduce your internet bill, is to ask your internet service provider what types of discounts they offer so you can make sure that you’re enrolled in all the applicable ones. So if you really were looking for ways to reduce this fixed cost, you could start with the suggestions to shop around providers, including considering alternative technologies, and then either switch or negotiate with your current provider, and make sure that the plan you have fits your purposes well. I thought ChatGPT might be able to help a bit further with the negotiation suggestion, so I asked it “What should I say in a negotiation with my internet service provider?” That resulted in a list of 15 suggestions for how to handle such a negotiation. After seeing that list, I decided a sample script would be more helpful, so I asked “Would you please write a sample script of a negotiation between a customer and an internet service provider?” ChatGPT then created a sample script that started out as

“Customer (C): Good morning. I’m calling because I’ve been reviewing my monthly expenses, and I’m finding that my internet bill is becoming a bit too high for my budget. I wanted to discuss some options for reducing the cost.

Internet Service Provider (ISP): Good morning, I understand your concern. I’d be happy to help you with that. May I have your account number or name, please?

C: Sure, my account number is [Your Account Number] or my name is [Your Name].

ISP: Thank you for that. I see your account. Can you please tell me specifically what you’re looking to change or reduce in your service?

C: Well, I’ve noticed that there are some new promotions from your company that offer lower prices for similar plans. I’d like to see if I can get a lower monthly rate on my current plan.

ISP: I see. I can certainly check if there are any promotions available for your account. Before I do that, can I ask how long you’ve been a customer with us?

C: I’ve been a customer for [X] years, and I’ve generally been satisfied with the service.

ISP: Thank you for your loyalty. Let me check our current promotions for you.”

The script continues on with the customer and customer service agent exploring various options. It ends this way, which I thought was interesting:

“C: Thank you for the information. Let me think about it for a moment. Can I also request that you send me an email confirmation of the new promotion and bundle details we discussed?

ISP: Certainly, I’ll send that confirmation right away.

C: Great, thank you for your assistance. I’ll take some time to think about the bundle offer and the new promotion, and I’ll get back to you with my decision.

ISP: You’re welcome. Feel free to call us anytime if you have any questions or if you decide to make any changes. Thank you for choosing our service.

C: Thank you for your help, and have a great day.”

20:32 Emily: I liked seeing this sample script as it made the whole process seem much more approachable. Our second example is in how to reduce the cost of groceries, a variable cost. The field of possibilities for reducing spending on groceries is just about infinite, so I’m going to use ChatGPT to follow one type of suggestion until we get some really concrete ideas. My first prompt is “Please list 10 frugal tips to reduce the amount of money I spend on groceries.” This is what ChatGPT returned:

“Certainly! Here are 10 frugal tips to help you reduce your grocery expenses:

  1. Create a Budget: Start by setting a budget for your grocery spending. Having a clear budget will help you stay on track and avoid overspending.
  2. Meal Planning: Plan your meals for the week in advance. This allows you to make a shopping list with only the items you need, reducing impulsive purchases.
  3. Use Coupons and Discounts: Keep an eye out for coupons, discounts, and special offers from your local grocery stores. Many stores offer loyalty programs that can provide significant savings.
  4. Buy in Bulk: Purchase non-perishable items in bulk when they are on sale. This is especially useful for items like pasta, rice, canned goods, and frozen foods.
  5. Shop Seasonal Produce: Fruits and vegetables that are in season are often cheaper and fresher. Take advantage of seasonal produce to save on your grocery bill.
  6. Avoid Convenience Foods: Pre-packaged and convenience foods tend to be more expensive. Buy whole ingredients and prepare meals from scratch whenever possible.
  7. Compare Prices: Pay attention to unit prices (price per ounce, pound, etc.) to determine the best value. Sometimes buying larger quantities is more cost-effective, but not always.
  8. Reduce Meat Consumption: Meat can be one of the more expensive items in your cart. Consider incorporating more plant-based meals into your diet to save money.
  9. Use Leftovers: Don’t waste food. Use leftovers creatively to make new meals, reducing the need for additional ingredients.
  10. Store Brands: Often, store-brand or generic products are just as good as name brands but come at a lower cost. Give them a try to see where you can save.

Remember, the key to saving money on groceries is to be mindful of your spending and make intentional choices when shopping. With a little planning and effort, you can significantly reduce your grocery expenses.”

23:08 Emily: These tips are all great but very high-level, and I don’t yet know exactly how I would implement them. Several of the tips are getting at changing my diet to incorporate less costly foods, so I’m curious which foods exactly ChatGPT would suggest that I buy. My next prompt is “What are 10 low-cost but filling foods I can buy in a grocery store?” This is what ChatGPT returned:

“You can find many low-cost but filling foods at the grocery store. These items are not only budget-friendly but can also provide you with satisfying meals. Here are 10 such options:

  1. Oatmeal: A versatile and filling breakfast option that’s high in fiber. You can add fruits, nuts, or honey for extra flavor.
  2. Rice and Beans: Both rice and beans are inexpensive staples that, when combined, create a complete protein source. They are versatile and can be used in various dishes.
  3. Pasta: Pasta is an affordable and filling carbohydrate. Pair it with a simple tomato sauce, vegetables, or beans for a hearty meal.
  4. Eggs: Eggs are a great source of protein and can be used in a variety of dishes, from omelets to frittatas.
  5. Canned Tuna or Salmon: These canned fish options are not only low-cost but also high in protein. You can make sandwiches, salads, or pasta dishes with them.
  6. Frozen Vegetables: Frozen vegetables are often more affordable than fresh ones and have a long shelf life. They can be used in soups, stir-fries, and as side dishes.
  7. Potatoes: Potatoes are a cheap source of carbohydrates and can be prepared in numerous ways, from baked potatoes to mashed potatoes.
  8. Peanut Butter: Peanut butter is an inexpensive source of healthy fats and protein. Spread it on whole-grain bread or use it as a dip for fruits and veggies.
  9. Canned Soup: Canned soups, especially when on sale, can be a cost-effective way to have a quick and filling meal.
  10. Cabbage: Cabbage is a low-cost vegetable that can be used in salads, coleslaw, stir-fries, and soups. It’s a great source of vitamins and fiber.

Remember to balance your diet with a variety of these foods to ensure you’re getting a range of nutrients. These options can serve as the foundation for many nutritious and filling meals without breaking the bank.”

25:34 Emily: That’s a great list! Now I know a few items to add to my grocery list to displace some others. But I don’t quite yet know how I would use these grocery items. I asked ChatGPT: “Would you please point me to 10 recipes that incorporate the aforementioned foods?” I thought it might return links to full recipes, but instead it lists simple recipes right in the response.

“Certainly! Here are 10 recipes that incorporate the low-cost, filling foods mentioned earlier:

  1. Oatmeal with Banana and Peanut Butter:
    • Cook rolled oats with water or milk.
    • Top with sliced bananas and a dollop of peanut butter for a satisfying breakfast.
  2. Rice and Beans Burrito:
    • Cook rice and black beans.
    • Wrap them in a tortilla with salsa, cheese, and any other desired toppings.
  3. Pasta Primavera:
    • Cook pasta and mix it with sautéed frozen vegetables, olive oil, garlic, and a sprinkle of Parmesan cheese.
  4. Scrambled Eggs with Veggies:
    • Whisk eggs and cook them with sautéed bell peppers, onions, and spinach. Season with salt and pepper.
  5. Tuna Salad Sandwich:
    • Mix canned tuna with mayonnaise or Greek yogurt and add chopped celery and pickles. Spread it on whole-grain bread with lettuce and tomato.
  6. Baked Potato Bar:
    • Bake potatoes and set up a toppings bar with options like sour cream, cheddar cheese, chives, and bacon bits.
  7. Pasta with Canned Tomato Sauce:
    • Cook pasta and toss it in canned tomato sauce with garlic, herbs, and a drizzle of olive oil.
  8. Stir-Fried Frozen Vegetable Medley:
    • Sauté a mix of frozen vegetables in a hot pan with garlic and ginger. Add soy sauce and serve over rice or noodles.
  9. Peanut Butter and Banana Sandwich:
    • Spread peanut butter on whole-grain bread and add sliced bananas for a quick and nutritious lunch.
  10. Cabbage and Sausage Stir-Fry:
    • Sauté sliced cabbage with sliced sausage in a pan. Season with salt, pepper, and your choice of spices.

These recipes are simple, budget-friendly, and make good use of the low-cost, filling foods we discussed earlier. You can customize them to suit your taste and dietary preferences.”

27:48 Emily: I’m quite happy with this list! I could pick one or two of these new recipes to incorporate into my meal plan and grocery list. Let’s take the final step with ChatGPT, which is to create a meal plan. I asked, “Would you please create a meal plan of five lunches I can bring to work from the aforementioned recipes and/or low-cost foods?” This is what ChatGPT returned: 

“Of course! Here’s a meal plan for five budget-friendly work lunches using the low-cost foods and recipes mentioned earlier:

Day 1: Pasta Primavera

  • Lunch: Pasta Primavera (pasta with sautéed frozen vegetables, olive oil, garlic, and Parmesan cheese).
  • Side: A piece of fruit (e.g., an apple or an orange).

Day 2: Rice and Beans Burrito

  • Lunch: Rice and Beans Burrito (rice and black beans wrapped in a tortilla with salsa, cheese, and toppings).
  • Side: Baby carrots with hummus.

Day 3: Cabbage and Sausage Stir-Fry

  • Lunch: Cabbage and Sausage Stir-Fry (sautéed cabbage and sliced sausage with your choice of seasonings).
  • Side: Greek yogurt with a drizzle of honey.

Day 4: Tuna Salad Sandwich

  • Lunch: Tuna Salad Sandwich (canned tuna mixed with mayo or Greek yogurt, celery, and pickles, on whole-grain bread with lettuce and tomato).
  • Side: A small serving of mixed berries.

Day 5: Baked Potato Bar

  • Lunch: Baked Potato Bar (baked potatoes with toppings like sour cream, cheddar cheese, and chives).
  • Side: A side salad with vinaigrette dressing.

These meal ideas are not only budget-friendly but also relatively easy to prepare. You can make adjustments to suit your taste preferences, and they’re designed to be portable and easy to bring to work. Don’t forget to prepare and pack them in advance to ensure a convenient and satisfying lunch experience.” 

29:38 Emily: That’s where we’re going to leave this exploration of grocery-related frugal tips. I focused more on what I would do at home rather than exactly how to navigate the grocery store, but your frugal experimentation with your grocery budget is likely to go down a completely different path.

Commercial

29:55 Emily: Emily here for a brief interlude! I’m hard at work behind the scenes updating my suite of tax return preparation workshops for tax year 2023. These pre-recorded educational workshops explain how to identify, calculate, and report your higher education-related income and expenses on your federal tax return. For the 2023 tax season starting in January 2024, I’m offering four versions of this workshop, one each for US citizen/resident graduate students, postdocs, and postbacs and non-resident graduate students and postdocs. While I do sell these workshops to individuals, I prefer to license them to universities so that the end users, graduate students, postdocs, and postbacs, can access them for free. Would you please reach out to your graduate school, graduate student government, postdoc office, international house, fellowship coordinator, etc. to request that they sponsor one of my tax preparation workshops for you and your peers? I’d love to receive a warm introduction to a potential sponsor this fall so we can hit the ground running in January serving those early bird filers. You can find more information about licensing these workshops at P F f o r P h D s dot com slash tax dash workshops. Please pass that page on to the potential sponsor. Now back to our interview.

Peers

31:39 Emily: The other excellent resource for frugal tips, in my opinion, is your peers. They have the most natural insight into your financial situation and the options and resources available to you. For example, perhaps your university or the surrounding community offers certain discount programs, but they aren’t well-advertised. Your peer could alert you to this fact. This happened to me, actually. When I was in grad school, I went to the dentist for the first time in my city, and because we didn’t have dental insurance, I paid cash for my visit. I mentioned how my morning had gone to my officemate, and she told me that our health insurance actually offered a discount program. You were able to get 50% off the cash price if you provided your health insurance card to certain dental care providers. I called the office I had seen that morning, and I was very lucky that they were one of the partners and they refunded me half of what I had paid! That small exchange with my peer saved me a couple hundred dollars that morning, and a couple thousand over the course of my time in grad school. Now that’s a valuable frugal tip! The ideal peers to learn from are those who attend your same university, but I wanted to get you started with frugal tips from your peers around the country who listen to this podcast, which they have submitted over the past few weeks. I’ve organized these tips into distinct budget categories. I’ll also add in some comments of my own as we go through.

Housing

33:11 Emily: An anonymous contributor said: “Consider grad housing and an RA position as this can reduce your housing costs a lot.” This simple tip is probably more valuable than all of the others put together, honestly. Several of our past podcast interviews have discussed the value of subsidized campus housing and the possibility of reducing or eliminating your housing expense through serving as a resident advisor. I want to point you in particular to the Season 10 Episode 8 interview with Dr. Erika Moore Taylor. Erika served as a resident advisor in four out of the five years of her PhD program, completely eliminating her housing expense in those years. Now, make no mistake, being a resident advisor is a part-time job, but it’s a comparatively lucrative part-time job that is unlikely to raise any red flags within your program. Since we only received that one housing-related tip—and it was a stellar one, make no mistake—I’ll make one further suggestion. Of course, you can go to ChatGPT for specific ideas on how to reduce your housing expense. But my meta-suggestion is to get to know the housing market in your area, definitely the rental and also potentially the buying market. You’re very unlikely to make an optimal housing choice in your first year of grad school, especially if you’re new to the area. Real estate is local, after all. Be intentional about getting to know the housing market during that first year by talking with your peers about where they live, how much they pay, and whether they like it, and also searching for housing through a variety of mechanisms, not just online. Through that process, you’re likely to discover a less expensive way to fulfill your housing needs and wants. And if housing in your area is inexpensive enough, please consider purchasing a home and house hacking, which is when you purchase a home and rent out part of it to roommates. We did a whole episode on house hacking with Sam Hogan, which is Season 8 Episode 4.

Transportation

35:16 Emily: Several of our contributors mentioned either living car-free or using your car less due to high gas and parking costs. They suggested taking public transit or biking instead. Ricky Gettys from Penn State added that his campus offers a bike den, and you can use their tools and expertise to maintain your bike. An anonymous contributor observed, “Many cities allow you to ride for free with your student ID.” Another anonymous contributor who has a car suggested finding free street parking near campus and walking a bit further instead of paying for parking, noting “I saved ~$3000 over the course of my PhD because I never bought a parking pass.”

35:58 Courtney B: Hi, this is Courtney Behringer, PhD student at Oregon State and my frugal tip is that used e-bikes are very plentiful right now on the market, including Facebook marketplace and Craigslist and with a little of negotiation, you could likely get one for under $300 and new ones are getting cheaper every day. I’ve avoided hundreds of dollars in parking and gas and it has only been five months with my e-bike and I actually get to my office faster.

36:26 Emily: Even if you own a car, I think it’s really smart to get to know and try out the biking and public transit routes between your home and your university. There may come a time when your car is unavailable to you, and you’ll need an alternative way of getting to campus. Who knows, you may find the alternative more pleasant than driving and parking. There are some trade-offs if you decide to live car-free, and Shaniah at Emory had a tip that straddles this transportation category with our next category of food: “If you don’t have a car, try Door Dash or Uber Eats. Consider getting a Dash Pass for discounts on large grocery purchases. The cost for delivery is way less than Ubering back and forth.”

Food

37:07 Emily: I received a lot of food-related frugal tips, so we’re going to divide them into tips that relate to eating out of your own kitchen and those that relate to procuring food outside of your home. First, the tips related to eating out of your own kitchen. Right off the bat, we receive the simple advice from an anonymous contributor to “cook at home.” It’s virtually always less expensive to eat food that you prepare yourself vs. food that someone else prepares. So if you want to spend less on food overall, as often as possible and to the greatest extent possible, eat from your own kitchen. Another anonymous contributor put it like this: “Instead of eating out, cook your own meal whenever possible. I personally don’t do this as much as I should but I have other PhD friends who cook most of the time; it saves a lot of money for them.”

38:00 Emily: Pranav from Purdue offered several pieces of advice on the practicalities of making this strategy work, particularly when you are on campus: “1. Avoid buying coffee or snacks during the day. Keep a coffee mug, coffee, tea, granola bars, and other snacks at your desk. Carry fruits every day. 2. Cook at home and plan to carry food for most, if not all, meals on campus. If you eat chicken, marinate on weekends and use through the week in pasta, salad or sandwiches. 3. If you like salad, and a refrigerator is available at your lab for food, store salad dressing and salt/pepper there. Then you just carry a packet of salad and marinated chicken or boiled eggs, and/or fruits. 4. If you plan to stay till late night on campus, make overnight oats in the morning. This helps me avoid the urge to buy dinner, because I know I have already prepared it at home.” Anonymous from Tufts concurs, saying: “I avoid buying food or coffee out by bringing a lunch and coffee with me each day.” They then extended the advice on beverages to alcohol, saying: “I like drinking wine at the end of my day and so I buy a full box of wine at a time to receive a 15-20% discount.” When it comes to actually doing all this cooking that we’re talking about, an anonymous contributor shared: “Meal prep: One of the biggest expenses is eating out. However much you try to eat out healthy, it will be worse than when you cook. Make 4 or 5 things at once to save time, portion and keep them in identical containers so you have a sense of surprise when you open your lunch box. Eating food you cook is better than eating out on multiple fronts.”

39:41 Emily: How about frugality in procuring all the groceries you’ll need? Katie suggested visiting the food pantry on campus. Food pantries or food banks are increasingly available and increasingly utilized on university campuses. 

39:55 Courtney B: Another frugal tip I have is that many universities have a basic needs center. It might not be called that, um, or some sort of food pantry. Um, and my university gives out quality groceries once a week, which always includes eggs, bread, and yogurt, but also often vegetables and fruit that last me a whole week. Um, this program aims to reduce food waste in the community and provide shame-free food to students.

40:22 Emily: An anonymous contributor suggested a subscription to an imperfect produce delivery box or a community supported agriculture (CSA) farm.

40:32 Courtney B: Courtney here with another tip. I am learning the art of gardening and preserving. There’s a veggie you use a lot. For example, spinach or tomatoes consider planting a lot in the spring and harvesting in the fall and freezing for the rest of the year. I recently did this with jalapenos and now I have jalapenos to last me a year in the freezer. Speaking about freezers, you can freeze just about any food, too much tomato paste, freeze it, garlic, ginger, freeze it, freeze bread. Food waste is expensive and as a busy PhD student, I love pulling things outta the freezer as needed.

41:04 Emily: Shaniah from Emory submitted several tips related to grocery shopping: “1. Join Grocery Store reward programs for discounts and deals. CVS, Kroger and Publix have really good promotions. 2. Shop online first (add items to your cart) then go in person. This helps you stick to your budget and pr events overspending. 3. Download the store apps. Similar to #1, this helps you scan items before adding it to your cart; some grocery stores do not update their grocery store price tags / labels.” Finally, as an in-between solution, Shaniah from Emory suggested substituting restaurant meals for a meal subscription service. Second, the tips related to procuring food outside your home. As you might expect, obtaining free food on campus was brought up several times, including by an anonymous contributor who said “FREE FOOD opportunities abound on campus – make the most out of them! (‘One of the essential skills to be a great researcher is being able to find free food.)” Katie suggested bringing food storage containers to campus so that you can easily collect this free food and save it to be eaten later. An anonymous contributor took another approach: “Look in to graduate student off-campus meal plans. At UC Berkeley, our off-campus meal plan equates to getting an all-you-can-eat lunch for $10. There aren’t many restrictions and any unused money rolls over to the next semester.” Ricky Gettys from Penn State pointed out that “kids under 6 eat free at the campus dining halls” and a few other establishments, so that would really help out a young family. We also heard that tip in the Season 16 Episode 4 interview with Dr. Ilana Horwitz regarding Stanford.

Subscriptions

42:51 Emily: Katie and an anonymous contributor were both thinking along the same lines regarding a gym membership, pointing out that your university’s gym might be free or discounted or your health insurance might reimburse you for a gym membership. Another anonymous contributor from Tufts shared: “I use my school’s offerings such as free NYT for my news following.” I have to say, something I really miss about grad school is the abundant free or discounted on-campus resources like the ones mentioned in this section. I didn’t appreciate them enough until after I left!

Miscellaneous

43:28 Emily: Anonymous from Tufts offered a creative solution, “I try to get Amazon gift cards through side gigs (e.g., participating in user interviews or events on campus that pay) to pay for basic household/personal items so that those little costs don’t hit my budget.” Grad students often complain about being considered a student only when it suits the university vs. an employee only when it suits the university, but this anonymous contributor is trying to have the best of both worlds: “Check for (college) student discounts at businesses, these usually still apply to PhD students. Also check your university HR website for employee discounts, you might be able to use some of these too if you can be considered an employee.” Katie added: “Also look into if your university partners with community businesses, often you can get free/discounted things that way. I use my grad student id for any student discounts I can—movie theaters, admission costs, etc.” Another anonymous contributor was thinking along the same lines: “Utilize coupons/discounts/other promotions from school, local newspaper ads, etc.” Another anonymous contributor said “Pay attention to your graduate student society and university calendar as there may be free or discounted events for students on and off campus.” An anonymous contributor suggested “Finding furniture and other home goods on facebook marketplace.”

44:56 Courtney B: Another frugal tip here from Courtney Thrifting. Items enclosed is sustainable and a frugal game changer. I go about twice a month through the thrift store and set price boundaries for myself, and I recently found very nice clothes for conferences for $5 each piece. Um, pro tip go after each semester is over when students are dumping items like crazy.

45:21 Emily: And finally, another anonymous contributor noted that “Events that give away free t-shirts/clothing items are your friends.” It’s a trope, but all those free T-shirts saved me significant money in grad school!

Financial

45:37 Emily: I wasn’t necessarily expecting this, but I received several financially-related frugal tips. From an anonymous contributor: “Have a system (app, spreadsheet, etc.) where you track monthly budgets and expenditures grouped into budget categories.” Absolutely wonderful advice that is an umbrella over all the other frugal tips. Another anonymous contributor said, “Have 2 separate bank accounts. A high yield savings account and a spending account. Adjust the money you put into the spending account from each paycheck such that it is only a little bit more than your monthly budget. This keeps you disciplined about spending while you know that you are not running out of money.” I believe this person is saying to deposit your paycheck into the savings account and allocate to the spending account only what you actually want to spend that month plus a bit of wiggle room, like a more extreme version of the adage to pay yourself first. I like this strategy a lot! Pranav from Purdue suggested, “Maximize bank and credit card rewards and referrals and use a budgeting (not spend tracking) app like YNAB. YouTube is excellent for information about this. (pay on time and in full, and don’t spend money you don’t have!). First year of YNAB is free for college students.” At the time of this recording, Mint has just announced that it is partially transitioning to Credit Karma/partially shutting down at the end of 2023, so frankly this is a great time to try out another budgeting system like YNAB, which stands for You Need a Budget, or my simple spreadsheet tracker, which you can find at PFforPhDs.com/tracker/. Finally, Ricky Gettys from Penn State said, “Most Grad student stipends are NOT taxable at Penn State, meaning income is $0 on PA tax returns. That means that federal programs are almost guaranteed to apply (SNAP, Medicaid, ACP aka free internet).” I can’t verify everything in this tip, but I do know that fellowship income not reported on a Form W-2 is not considered taxable income in Pennsylvania, so if I were on fellowship in Pennsylvania I would for sure look into all the programs that Ricky listed. I hope you all enjoyed listening to this episode as much as I enjoyed creating it! If you have a frugal tip of your own to share, please visit the show notes at PFforPhDs.com/S16E6/ and add it as a comment there. I can’t wait to hear your tips and how you will use the strategies in this episode!

Outtro

48:09 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

Five Ways the Tax Code Disadvantages Fellowship Income

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In this episode, Emily details five ways the federal income tax code disadvantages fellowship income, sometimes resulting in a higher tax rate and sometimes just causing a bit of a headache for fellows. Additionally, she covers two ways that the tax code advantages fellowship income and one more difference that has both pluses and minuses. This episode is for current fellows and future fellows as advance tax planning and action can mitigate some of these negative effects. At the end of the episode, Emily also shares how you can advocate for change at the federal level.

Links Mentioned in this Episode

 

 

Intro

Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance.

I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others.

This is Season 14, Episode 1, and today is a solo episode for me on fellowships and federal income tax. Specifically, I am going to detail for you five ways the tax code disadvantages fellowship income, sometimes resulting in a higher tax rate and sometimes just causing a bit of a headache for fellows. Additionally, I’ll cover two ways that the tax code advantages fellowship income and one more difference that has both pluses and minuses. Keep listening to this episode if you are currently on fellowship or expect to be in the future. Advance tax planning and action can mitigate some of these negative effects. I will also tell you at the end of the episode how you can advocate for change at the federal level.

Speaking of the disadvantages of fellowship income, it’s unfortunately quite common for fellows to have a tough time getting a mortgage. Sometimes they will be preliminarily approved based on their income numbers alone, but once under contract on a home they are dropped by their lender because of their income type and documentation! However, there is one lender who works with PhDs and particularly fellows very regularly.

Sam Hogan is a mortgage originator specializing in grad students and PhDs, an advertiser with Personal Finance for PhDs, and my brother. Years ago, I told him about the issue I just outlined, and he set to work figuring out how to use fellowship income to qualify for a mortgage. While I won’t say it’s as straightforward as using W-2 income, Sam has a great success rate in presenting grad students and PhDs to the underwriters working with his employer, Movement Mortgage, and getting them approved for mortgages. Sam can readily tell you if your fellowship income is likely to be approved or not based on the specifics of your circumstances, and if not what options you still have.

I am hosting an Ask Me Anything with Sam today, Monday, January 9, 2023 at 5:30 PM PT. Come with any question you like about the home-buying process and we will do our best to help you. You can register for the AMA at PFforPhDs.com/mortgage/.

If you’re listening to this later on, you can still check that link for the next AMA date as we hold them periodically, or you can contact Sam directly at 540-478-5803 or [email protected] to discuss your situation.

I wish you all success with your homebuying aspirations in 2023 and following!

You can find the show notes for this episode at PFforPhDs.com/s14e1/.

Disclaimers

Disclaimer #1: This episode is going into production in early January 2023. I rely on IRS forms, instructions, and publications for this material, and at the time of this recording most of these documents have been updated for tax year 2022, but not all of them. In those cases I’m going off the 2021 material. If any content in this episode turns out to be inaccurate for tax year 2022, I will update the show notes page with the corrections, so I suggest visiting PFforPhDs.com/s14e1/ before relying on any of the information. For tax year 2023 and later, please visit PFforPhDs.com/tax/ for my most updated tax content.

Disclaimer #2: The target audience for this episode is postbacs, graduate students, and postdocs at US universities and institutes who are US citizens, permanent residents, or residents for tax purposes. Unless otherwise specified, when I say tax I mean federal income tax.

Disclaimer #3: The content in this episode is for educational purposes only and should not be considered advice for tax, legal, or financial purposes for any individual.

Without further ado, here’s my solo episode on how the tax code disadvantages fellowship income.

Motivation

You might be surprised by the topic of this episode, because striving to obtain funding via a fellowship is a super common if not universal practice in academia. Fellowships are seen as a superior form of funding because of their prestige and that they normally excuse the recipient from teaching responsibilities or similar. In many cases, winning a fellowship results in a raise as well.

I’m not making any kind of argument in this episode that you should stop applying for fellowships or reject a fellowship that you’ve won—doubly so if you will be making more money with the fellowship than without it.

What I am doing is:

  1. Pointing out the tax issues and pitfalls that can or might come with fellowship income. There are certain groups of people who are at risk of actually paying more in income tax with a fellowship, which are people under age 24, parents, and non-students. Even if you don’t end up paying more in income tax, there are certain complexities of fellowship income that you can prepare for or even avoid if you know about them. This is to help you with taking personal responsibility for your tax situation.
  2. Suggesting changes to the tax code that would resolve these disadvantages. This is to help our community know in what ways advocacy for our workforce is needed.

Outline

Here’s where we’re going with this episode. I’m going to define some terms and tell you what I am comparing the tax treatment of fellowship income to when I say that it is disadvantaged by the tax code. I have five points to cover on how the tax code disadvantages fellowship income. The first couple points apply to most fellows but don’t result in a higher tax rate when handled properly. The next couple of points are about when having fellowship income actually results in paying more income tax. The final point is about a tax benefit that is not available to fellows. Then we’re going to switch gears and discuss two ways the tax code advantages fellowship income and one difference that I see as having both pros and cons.

By the way, I am trying to keep this episode focused on how the tax code disadvantages and advantages fellowship income. I could do an entire other episode, and perhaps I will, on the ways universities disadvantage and advantage fellowship recipients through their policies. But for today, we’re sticking with the topic of the federal income tax code.

Terms

I have to establish some definitions of terms here at the start. The subject of this episode is fellowships, but academia doesn’t necessarily use that term exactly the same way the IRS does. Therefore, I have created my own framework to explain the two types of higher education income.

The most common way the word fellowship is used in academia is to describe an amount of money that is awarded to an individual, as IRS Publication 970 states, “to aid in the pursuit of study or research.” Usually these are awarded for merit via a competitive process, such as a unique application for a specific fellowship program or your application to a postbac, graduate, or postdoc program. I call this income ‘awarded income’ in my framework.

The other type of income in my framework is ‘employee income.’ This is payment for services such as teaching or research, and the postbac, grad student, or postdoc is an employee of the university or institute. Employee income is reported on a Form W-2 at tax time. It’s unusual for programs to use the word fellowship to describe employee income, but it does happen occasionally.

For the purposes of this episode, we are only discussing awarded income, which is to say fellowship income that is not reported on a Form W-2. I will continue to use the word fellowship throughout the episode, but please understand that we’re only discussing that particular variation of the term, which is the most common in academia. If you’re unsure whether your fellowship is awarded income or employee income, reference the type of tax form or forms you receive during tax season. More on that in a moment.

Income Tax Basics

Another point I need to get out of the way at the start here is to clarify that fellowship income is subject to income tax. There are nuances and special scenarios that we’ll get into later in the episode, but very generally speaking, your stipend or salary is going to be taxed at the same rate whether it is awarded income or employee income.

When I speak about fellowship income being disadvantaged by the tax code, what I am pointing out are the ways that fellowship income ends up being treated differently or ultimately taxed at a higher rate than how employee income is treated and taxed. Conversely, in some ways fellowship income has an advantage, and again that is relative to employee income. 

If you’ve heard that fellowship income is tax-free, that is either a false rumor, a misunderstanding, or a statement that requires a lot more caveats. Fellowship income used to be exempt from income tax, but that changed with the Tax Reform Act of 1986. I’ll tell you more about why these rumors and such persist throughout this episode, but for now just know that you should expect to pay income tax on your stipend or salary, unless your gross income for the year is quite low or you can take lots of deductions and/or credits. That is true whether your stipend or salary comes from a fellowship or an employee position. You can learn more about that in Season 2 Bonus Episode 1 of this podcast, which you can find at PFforPhDs.com/s2be1/.

Now we’ll get into the meat of this episode: my list of five tax-related disadvantages of receiving fellowship income, two advantages, and 1 neutral difference.

Disadvantages

Disadvantage #1: There is no single correct way that fellowship income is required to be reported to the postbac, grad student, or postdoc recipient. This is in contrast to employee income, which must be reported on a Form W-2.

Because there is no single correct way to report fellowship income, universities, institutes, and funding agencies take a variety of approaches. The most common form issued is a Form 1098-T, but sometimes Form 1099 is used, such as Form 1099-MISC, Form 1099-NEC, or Form 1099-G. Sometimes a courtesy letter is sent in lieu of an official tax form. Many organizations choose to not communicate at all with the fellowship recipient. When fellowship income goes unreported entirely, it contributes to the rumor mill that it is not taxable income.

These approaches can mislead fellows into not reporting their income, resulting in underpayment of tax, or misreporting it, which often results in overpayment of tax.

To put fellowship income on even footing with employee income, the IRS could require that a tax form be used to report fellowship income, whether one that currently exists or a new or adjusted one. This would greatly reduce the confusion among taxpayers and tax preparers about whether and how to account for this income on tax returns.

Disadvantage #2: The issuers of fellowships are not required to withhold income tax on behalf of the recipients, and they almost never take the responsibility to do so.

Employers virtually always withhold income tax on behalf of their employees. This is the situation that most Americans experience and are familiar with. Your employer sends in income tax payments on your behalf throughout the year, and then after you file your tax return, you receive a refund or owe some additional tax.

However, for fellowship income, the issuing organizations have no such withholding requirement. With very few exceptions, they leave paying income tax entirely up to the fellowship recipient, which is typically a very unfamiliar arrangement.

This lack of withholding also contributes to the rumors that fellowship income is not subject to income tax. I have even seen university administrators label fellowship income “tax-free.” What they mean is that it is not subject to income tax withholding; they are speaking from their own perspective. But when a fellow sees that label, they read it from their own perspective, and it is highly misleading.

By default, the IRS expects to receive income tax payments throughout the year. In the absence of employer withholding, the taxpayer is supposed to make quarterly payments through the estimated tax system, unless an exception applies to them.

This typically goes one of two ways: 1) The fellow learns about the estimated tax requirement close to the start of their fellowship, sets aside money for their future tax payments as their paychecks come in, and makes their estimated tax payments if required. This is the ideal and something I am constantly beating a drum about. 2) The fellow does not realize that they are responsible for their own income tax payments until they are hit with a large tax bill and possibly a penalty upon filing their tax return. This is at minimum extraordinarily unpleasant and in some cases dangerous to the financial, physical, or mental well-being of the fellow. I further discuss this scenario of a large, unexpected tax bill in the videos titled “Why Is My Fellowship Tax Bill So High?!” and “What to Do When Facing a Huge Fellowship Tax Bill,” which you can find on my YouTube channel, Personal Finance for PhDs.

A rare few universities and institutes do offer income tax withholding on fellowship income. My alma mater, Duke University, did so when I was a graduate student there. This relieves the fellow from calculating and making estimated tax payments and prevents large, unexpected tax bills.

To put fellowship income on even footing with employee income, the IRS could require that universities and institutes at least offer income tax withholding on fellowship income. To go along with the previous disadvantage, a specifically designed fellowship reporting form could explicitly list federal, state, and local income tax withheld.

Until such reform comes about, I recommend that fellows take my workshop, Quarterly Estimated Tax for Fellowship Recipients, which you can find linked from PFforPhDs.com/tax/.

Disadvantage #3 and this is the big one: Fellowship income is not usually considered “earned income,” and without that designation many postbacs, grad students, and postdocs pay more in income tax than they would if it were considered earned income.

The term “earned income” is actually used all over the tax code and publications, and you have to be really careful because its definition can change depending on which benefit is being discussed. For example, for the purpose of calculating the standard deduction, taxable fellowship income is included in the definition of earned income. But for the Kiddie Tax, the Earned Income Tax Credit, and the Child and Dependent Care Tax Credit, fellowship income is not considered earned income.

Let’s discuss each of these scenarios briefly in turn.

  1. The Kiddie Tax, which is a colloquial name, is when the unearned income, above a certain threshold, of a person under age 24 is taxed at their parents’ marginal tax rate. There’s a whole history behind the Kiddie Tax that I won’t go into now, but you can read my article about it linked from PFforPhDs.com/tax/. What is both perplexing and infuriating to me is that fellowship income is included in the definition of unearned income. So if you are a student under age 24 on fellowship, even if you are not claimed as a dependent on your parents’ tax return, you could be hit with the Kiddie Tax. I’m not saying you definitely will because there are calculations that go into this, but it can happen. If it does, your income is taxed at your parents’ marginal tax rate. If your parents have a low to moderate adjusted gross income, the Kiddie Tax either won’t apply or won’t increase your tax liability by much. But if your parents’ top marginal tax bracket is 22% or higher, your tax liability will be much higher than it would have been without the Kiddie Tax. And, again, it does not matter if you’re financially independent from your parents, this tax can still apply. Ugh!
  2. The Earned Income Tax Credit is a super valuable credit for people who are low-income, especially if they have children. For example, if you are single with one child and qualify for the credit, you’ll receive a benefit from the Earned Income Tax Credit if your income is below $43,492 in 2022. The lower your income is under that threshold, the more of the benefit you’ll receive, up to a maximum of, again for example, $3,733 for one child in 2022. This credit is refundable, which means that if it wipes out your entire tax liability, the IRS can end up paying you money. Again, just an incredibly valuable credit for low-income individuals and families, which you know many postbacs, grad students, and postdocs would be considered. However, as the name implies, your household has to have earned income during the calendar year to qualify, and fellowship income isn’t earned income. I will never forget a heartbreaking comment I received on my website years ago from a grad student who was married with two children and supporting the entire household on his grad student stipend. He was devastated when his tax return showed that because he switched onto fellowship and didn’t have any earned income for a calendar year, that his family lost out on thousands of dollars of a benefit they had received in prior years when he had employee grad student income. Can you imagine? Why would the IRS, Congress, we the people, exclude vulnerable families like that one from this benefit?
  3. The Child and Dependent Care Tax Credit is a tax credit that helps parents, among others, pay for daycare, preschool, after school care, etc. so that they can work or look for work. The benefit inversely scales with your income, like the Earned Income Tax Credit, but for example if you had one child in care and your income was low enough that you received the maximum benefit, this credit would reduce your tax liability by $1,050 in 2022. Pretty good benefit. However, here’s that catch again, you and your spouse if you’re married must both have earned income to qualify. There is an exception for students, so grad students will still qualify for the credit for all the months in which they are students, but postbacs and postdocs won’t. This issue was brought to my attention by a married couple with a baby, both postdocs on fellowship, who were taken aback that they weren’t able to claim this credit. And why? Does being on fellowship mean that they don’t need childcare? Or do they not deserve a similar carve-out to the one that students get?

I have to stop here because I’m getting really worked up about these issues. Pretty simple change here, IRS. Include fellowship income in the definitions of earned income everywhere. Or make exceptions for fellowship income in all of the above benefits and any other relevant ones.

I haven’t even covered how fellowship income relates to the definition of “support” for determining if someone is a dependent or subject to the Kiddie Tax, and I won’t take the time to illustrate it now. It’s a similar problem that the IRS could solve by saying that fellowship income counts as support… anyway. See my tax return workshops for further discussions of that rat’s nest. Let’s move on.

Commercial

Emily here for a brief interlude!

Tax season is about to start heating up, and the best place to go for information tailored to you as a grad student, postdoc, or postbac is PFforPhDs.com/tax/. From that page I have linked to all of my tax resources, many of which I have updated for tax year 2022.

On that page you will find free podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with.

The absolute most comprehensive and highest quality resources, however, are my asynchronous tax workshops. I’m offering three tax return preparation workshops for tax year 2022, one for grad students who are US citizens or residents, one for postdocs who are US citizens or residents, and one for grad students and postdocs who are nonresidents. Those tax return preparation workshops are in addition to my estimated tax workshop for grad student, postdoc, and postbac fellows who are US citizens or residents.

My preferred method for enrolling you in one of these workshops is to find a sponsor at your university or institute. Typically that sponsor is a graduate school, graduate student association, postdoc office, postdoc association, or an individual school or department. I would very much appreciate you recommending one or more of these workshops to a potential sponsor. If that doesn’t work out, I do sell these workshops to individuals, but I think it’s always worth trying to get it into your hands for free or a subsidized cost.

Again, you can find all of these free and paid resources, including a page you can send to a potential workshop sponsor, linked from PFforPhDs.com/tax/.

Now back to my expert discourse.

Disadvantages Continued

Disadvantage #4: There is no mechanism for making fellowship money that pays your health insurance premium tax-free unless you are a student.

This disadvantage requires a bit of background.

Think of a regular employment situation, not related to academia. Unfortunately in the US, health insurance is tightly tied to your employer partly because of a tax benefit afforded to them. When your employer provides your health insurance plan, the cost of the premium is tax-deductible for both you and the employer. That means that you don’t pay income tax on the portion of your income that goes toward that particular purpose. It’s as if you earned less money than you actually did. This is accounted for automatically for you on your Form W-2. The income listed in Box 1 is your gross income less your pre-tax payroll deductions such as your health insurance premium. Easy peasy. If you’re self-employed, there is also a mechanism to deduct your health insurance premium.

But if you’re not employed or self-employed, the only way you can perhaps deduct your health insurance premiums is if you itemize your deductions. Even in that case you can only deduct the portion of your medical expenses that exceeds 7.5% of your adjusted gross income. If you are a relatively healthy single person who wouldn’t otherwise itemize your deductions, I doubt itemizing will help you overall. Most people in this situation effectively cannot deduct their health insurance premiums or at best can only deduct a portion of them.

I need to back up now and talk about the situation with health insurance provided by universities. If you receive your health insurance through your parents, the following is not relevant to you. If you’re an employee of the university and receive health insurance because of that status, that’s a normal straightforward deduction as I just discussed. Let’s set that aside and discuss what happens when fellowship or scholarship income pays your health insurance premium, either automatically before you receive your paycheck or out of your own pocket.

If you are a grad student, there is a mechanism to make that fellowship income tax-free. We’re actually going to discuss that in the upcoming section on the tax advantages of fellowship income. However, if you’re a postbac or postdoc, this mechanism isn’t available to you. There is no way that I know of, short of itemizing their deductions, for postbacs and postdocs to make the fellowship money that pays their health insurance premiums tax-free. And that sucks.

This conundrum has been highlighted by many postdocs and postdoc associations. If a university or institute pays postdoc employees and postdoc fellows the same amount, the postdoc fellows effectively receive a pay cut because they have to pay income tax on the portion of their fellowship income that pays their health insurance premiums while postdoc employees do not.

The general solution to this whole issue is universal healthcare, but even without going that far, Congress could change the tax code so that all health insurance premiums are tax-deductible even without having to itemize deductions. I don’t know, maybe that would have disastrous effects somehow. Another way to fix this would be to expand the benefit that students use to non-student trainees as well.

Disadvantage #5: Fellowship recipients cannot contribute to their university or institute’s 403(b) or 457 plans. These are employer-sponsored tax-advantaged retirement accounts, and they are only available to employees.

Similar to the health insurance situation, the tax code has incentivized saving and investing for retirement primarily through employer-sponsored plans. These plans are exclusively offered to employees. That goes for 401(k)s as well as 403(b)s and 457s.

Looking at the situation for postdocs again, it’s typical for postdoc employees to be able to contribute to the university or institute’s 403(b) or 457, albeit usually without a match. However, postdoc fellows do not enjoy this benefit. While the universities administer these plans, again this is a policy issue at the federal level that excludes non-employees. Side note: If you’re wondering why grad student employees don’t usually have access to their university’s 403(b)s or 457s, that is a university-level policy issue as far as I can tell.

Not exactly the same but as a related issue, there is a type of tax-advantaged retirement account that is available to everyone with “taxable compensation,” which is an Individual Retirement Arrangement or IRA. You do not have to be an employee to contribute to an IRA. Up until 2019, the definition of “taxable compensation” excluded fellowship income, but the SECURE Act changed that definition starting in 2020. Taxable fellowship income for graduate students and postdocs is now considered taxable compensation for the purpose of contributing to an IRA. We know from this example that change is possible when it comes to fellowship income and federal tax benefits. You can learn more about this issue in Season 4 Bonus Episode 1 of this podcast, which you can find at PFforPhDs.com/s4be1/.

I think the most accessible solution to this particular disadvantage is actually not to somehow extend the employee-only workplace-based retirement benefit to fellows but rather to increase the contribution limit for IRAs to solve this for everyone. The contribution limits in 2023 for someone under age 50 are $6,500 for an IRA and $22,500 for a 403(b), 457, or 401(k). Why should there be such a big advantage for employees?

Advantages

Alright, it’s time for a dose of positivity. There are two advantages to fellowship income that I have come across.

Advantage #1: Students can make fellowship income tax-free by pairing it with qualified education expenses or QEEs. Basically, if your awarded income paid for a QEE, that amount of awarded income is tax-free. You essentially get to deduct the QEEs from your awarded income before you even report it on your tax return. This federal income tax benefit is found in Publication 970 Chapter 1, and I call it Tax-Free Scholarships and Fellowships or TFSF. Again, this benefit is only available to students.

How does this work differently for grad students with awarded vs. employee income for their stipends? This comes into play when you use your stipend to pay for an education expense rather than having it paid on your behalf via a scholarship or waiver.

Let’s take as a very simple example a grad student who has only two education expenses, tuition and a student health fee. The tuition is paid on their behalf by a scholarship, and they pay the student health fee out of pocket.

The scholarship that pays their tuition is awarded income, but it is made tax-free via TFSF because it pays for tuition, which is a QEE. So that awarded income doesn’t become part of the grad student’s taxable income.

The student health fee is a QEE under TFSF, so if the grad student’s stipend is from a fellowship, the student health fee makes that amount of fellowship income tax-free. It’s like taking a deduction. However, if the grad student’s stipend is employee income, no part of it can be made tax-free by the student health fee. Furthermore, student health fees are not qualified education expenses under the other two available higher education tax benefits, the Lifetime Learning Credit and the American Opportunity Tax Credit. So in this particular example, there is no tax benefit available to a grad student employee for their student health fee, whereas a grad student fellow can use the student health fee to reduce their taxable income.

That was a very simple and contrived scenario, but it turns out that this benefit can be uniquely applied, under specific circumstances, to lots of other common education expenses, such as textbooks, computers, software, and health insurance premiums.

If you are a grad student on fellowship, I highly recommend taking my tax workshop How to Complete Your Grad Student Tax Return (and Understand It, Too!) to understand TFSF and the other higher education tax benefits fully. This goes double if you did pay out of your fellowship stipend for the kinds of education expenses I just mentioned. You will learn under what circumstances you can use them to make your fellowship income tax-free and under what circumstances you cannot. Go to PFforPhDs.com/tax/ for the link to the workshop.

Advantage #2: Fellowship income is not considered taxable income in some states. For this advantage only we are leaving the realm of federal income tax. I won’t say too much about this except that I’ve run across it in two states, Pennsylvania and Alabama, and there may be others. But this is a truly fantastic benefit that puts fellowship income at a great advantage over employee income in those states.

Neutral Difference

Finally, we have a difference with fellowship income that has both pros and cons. For this one we’re also not discussing federal income tax but rather FICA tax, which pays into the Social Security and Medicare systems.

Fellowship income is not wages, so it is not subject to FICA tax. Postdoc and postbac fellows do not pay FICA tax, but postdoc and postbac employees do. Grad students by and large qualify for a FICA tax exemption, so they usually don’t pay it whether their stipends or salaries are fellowship or employee income.

When I was a grad student, I thought these exemptions were great. I was not interested in losing 7.65% of my paycheck toward a dubious far-future benefit. I still think keeping an extra 7.65% of your paycheck is super valuable for grad students, postbacs, and postdocs. However, now that I’m older and I’ve learned more about Social Security and Medicare, I think forgoing all those quarters of credits during grad school plus any postbac or postdoc fellowship years might be a little foolhardy. For example, if you become disabled as a young adult before paying into the system for the required number of quarters, you are at risk of not qualifying for the disability benefit. That’s a pretty remote possibility, but it’s scary that people could be left unprotected by this supposed last resort insurance plan because of these exemptions. And I really don’t think Social Security is going to disappear entirely. Ideally, I’d like to have both the money in my pocket and the insurance coverage, please and thank you.

At the beginning of this episode, I told you there were two purposes: First to help you with tax planning and second to direct your attention to issues about which you can advocate for change.

On that first point, the best place to go to learn more or take one of my tax workshops is PFforPhDs.com/tax/.

On the second point, I have three ideas for you if you would like to advocate for change to one of the federal tax policies I’ve mentioned:

  1. You can write to your representative in the House and/or your senators and ask your peers to do the same explaining how the tax law negatively affects your life and in what way it could change. The component of the SECURE Act that updated the definition of taxable compensation started as a bill called the Graduate Student Savings Act, which was sponsored by a bipartisan group of members of the House and Senate for several years before it was finally included in the SECURE Act.
  2. You can submit an explanation of your issue through the IRS’s Systemic Advocacy Management System. Just search for IRS SAMS and it will be the first result. The IRS will evaluate these issues and decide which to move forward with trying to correct.
  3. You can get involved with organizations that advocate for the workforce in your field or for PhD trainees generally, such as the National Association of Graduate-Professional Students and the National Postdoctoral Association. You can make them aware of these tax problems, if they aren’t already, and partner with them to advocate at the federal level.

It’s been lovely to have you with me for this wonky episode. One final time: I offer educational tax workshops both on preparing your annual tax return and calculating and paying estimated tax. I would really appreciate you recommending my workshops to a potential sponsor at your university. If that doesn’t work out, you can purchase the appropriate one for you as an individual. You can find the links to take either one of those actions at PFforPhDs.com/tax/.

Outro

Listeners, thank you for joining me for this episode!

I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/.

Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/.

See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps!

The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC.

Podcast editing by Lourdes Bobbio and show notes creation by Meryem Ok.