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How to Qualify for a Mortgage as a Graduate Student or PhD, Even with Non-W-2 Fellowship Income

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In this episode, Emily interviews her brother, Sam Hogan, a mortgage originator with Prime Lending (Note: Sam now works at USA Mortgage) who specializes in PhDs and PhD students, particularly those receiving fellowship income. Sam relays what it takes to qualify for a mortgage in terms of credit score, income, and debt load, including the special way deferred student loans play into the calculation. He details the unusual strategies he has learned over the past year of working with PhD clients to help them get approved for mortgages, even with non-W-2 fellowship income. At the end of the interview, Sam shares why he loves working with PhD home buyers. Over the past year, Personal Finance for PhDs has referred so much business to Sam that he has become an advertiser on the podcast.

Links Mentioned

grad student PhD mortgage

Teaser

00:00 Sam: It’s always best for a PhD student to be as proactive as possible. I’ve seen letters with three years of continuance, but they’ve reached out to me after one semester has passed. Now they only have two and a half years of continuance, where someone, if they had reached out a year earlier about their future, and how they’re planning to purchase home when they were in a new area, that is the perfect slam dunk way to do it.

Introduction

0:33 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is Season 5, Episode 17. And today, my guest is Sam Hogan, a mortgage originator with Prime Lending (Note: Sam now works at Movement Mortgage) who specializes in PhDs and PhD students, particularly those receiving fellowship income. Sam relays what it takes to qualify for a mortgage in terms of credit score, and debt load, including the special way deferred student loans play into the calculation. Sam details the unusual strategies he has learned over the past year of working with PhD clients to help them get approved for mortgages, even with non-W-2 fellowship income. At the end of the interview, Sam shares why he loves working with PhD home-buyers. Over the past year, Personal Finance for PhDs has referred so much business to Sam that he has become an advertiser on the podcast. Without further ado, here’s my interview with my brother Sam Hogan.

Will You Please Introduce Yourself Further?

01:34 Emily: I’m welcoming back to the podcast today. My brother Sam Hogan, who is mortgage originator. He sells mortgages. And Sam was actually on the podcast before in Season Two, Episode Five. It was while we’re recording this on April 12, 2020 and he was last on about a year ago. At that time, we were talking about how someone with fellowship income can actually get a mortgage — non-W-2 fellowship income because tis is a tricky thing that we talked about in that episode. So now, as I said, it’s been a year since that time, Sam’s handled a lot more mortgages of this type and so he knows a lot more about this process now. So I thought we’d have him back on for an update, basically, and a little more background on getting a mortgage as a graduate student or postdoc or PhD. So, Sam, welcome back to the podcast. Thank you so much for coming back on. Will you please just tell the listeners a couple words about yourself?

02:28 Sam: Thank you for having me, Emily, and Happy Easter from the east coast. Yeah, I’ve been working with PhD students now pretty heavily over the last 12 months. The company I work for, Prime Lending (Note: Sam now works at Movement Mortgage), is licensed in all 50 states. I’ve had the opportunity to read, review, approve, sometimes deny, these special candidates while they’re looking for their options for home-ownership.

[Sam’s Nationwide Mortgage Licensing System and Registry number: 1491786]

Basics for First Time Home-Buyers

02:52 Emily: Thinking about someone who is probably probably a first time home-buyer doesn’t necessarily know a whole lot about the process of getting a mortgage, and of course is concerned maybe about their their income, and are they really going to qualify and all these factors — what are the factors that go into a mortgage application? And what are the the ranges, that would be acceptable for those different factors?

03:16 Sam: Okay, so generally speaking, we’re looking at a risk profile and the ability to repay. For the borrower, having a over 700 credit scores for conventional, now about over 640 or 660 for FHA loans.

Different Types of Home Loans

03:32 Emily: Okay, you just dropped the terms conventional and FHA — what’s the difference between those two?

03:37 Sam: Yeah, so FHA is your original first time homebuyer program. It’s backed by the government and it’s designed for everyone to qualify for it, if you have decent credit and decent income. Conventional is preferred because it’s going to have a lower monthly payment, and the private mortgage insurance will drop off automatically. You should have over 680 or higher credit scores to go conventional and the income ratios are a little tighter. So it’s the better loan to qualify for and it has better terms throughout the whole 30 years, or whatever your loan term is.

04:16 Emily: Okay, so FHA is a little bit easier to qualify for, because it’s sort of designed for first time home-buyers, but it’s a less preferable loan in the long term. And so if I remember correctly, a lot of people who have FHA loans for a while they then end up refinancing to a conventional type of loan a little bit later on, to get rid of that private mortgage insurance.

04:38 Sam: That is correct.

04:39 Emily: Okay, great. Okay, so going back to the the lending standards you just mentioned, like credit scores, what else goes into an application package?

04:49 Sam: Yeah, I want to just touch on our current world situation and the lending standards are changing right now. And they’re changing because everyone is in the same boat regarding a possible change or disruption in income, slowing income for a certain amount of time, so be sure to talk with an expert and their specific requirements because this will change from bank to mortgage company to a larger credit union or financial institution. These are uncertain times, so you’re going to have some fluctuation and differences from lender to lender, but you want to work just as we said before, you want to work with someone who’s keeping you in mind and your goals in mind.

How Credit Scores and Debt Impact Home Loans

05:32 Emily: Yeah, okay, great. I totally agree and we should re-emphasize that like we’re recording this in mid April, things could be different by the time we publish it, things could be different a couple months down the line, so definitely just talk with someone right away. You mentioned credit scores, but I know also, your income, of course, plays into how much of a mortgage you can qualify for. Can you talk about that a little bit?

05:53 Sam: The common rule of thumb is people will qualify for four to five times their annual income. Now that will depend also on how much debt they’re carrying, and how much they’re putting from their savings into downpayment. But that’s a pretty safe estimate. Some people who are completely debt free will qualify six times their annual income, up to. Something else lenders experience a lot is, um, people doing their own due diligence and crunching the numbers, but we have systems and practices that do this quickly, more accurately, and can give you better results, so I would say talk with someone early and have them do the work. And then after you get their feedback, run your numbers to double check and maybe have some questions for them. We want to be able to work for you, and there’s no obligation to just have a few conversations and have someone explore your options.

06:48 Emily: Yeah, that sounds good. How does that play into that because I know a lot of PhD students do have significant debt loads from maybe undergrad or a master’s degree or something like that. How does debt affect the package?

07:03 Sam: Debt is not bad. It’s good to have things on your credit that have positive history, whether that’s a student loan you’ve paid off or currently paying off, revolving credit cards. You will run into issues, if you have absolutely no debt or debt history. I strongly recommend everyone, even against their pride, get a credit card. Don’t exploit it but use it regularly, pay off regularly. You want to have established credit, especially for a young homebuyer, because they might not have the 10 or 15 years of other types or forms of debt that someone who’s in their 30s or 40s might have.

07:49 Emily: Yeah, I definitely agree with establishing a credit score and having a strong credit history. But I’m just wondering, you mentioned earlier about the size of the mortgage and how debt can affect that. Solet’s say there’s someone who’s holding a good amount of debt. Does that affect like the ratio of the amount of mortgage they can take out?

08:06 Sam: Absolutely. Let me put it in some simpler numbers. If you’re bringing in $3,000 a month, all your credit cards, new house payment, maybe your car payment or gym membership, all that cannot add up to more than $1500 dollars of your income, We take your gross income and if you’re over 50% of that debt ratio, that’s a “Hey, better luck next time.” Even better situation is to be under 43%. Under 43% of your monthly income to debt ratio, is what Freddie Mac and Fannie Mae require, currently. Now this could be used to change, sometimes annually, sometimes quicker than that, but under 43% and better is a very good place to be in.

08:55 Emily: That makes sense. Yeah, so the total amount of debt payments you can have per month is limited and the mortgage has to fit in. To be approved for a mortgage, it has to kind of fit in around those other debt obligations that you already have.

09:09 Sam: Correct.

09:09 Emily: Okay, yeah, that definitely gives us something to kind of get our hands around when someone’s deciding, like, is it even worthwhile for me to approach Sam or another lender about possibly applying for a mortgage? I know you said earlier, just ask, that’s the best thing to do, because you guys can run the numbers better than than we can outside of the industry. I had one more question about student loans, because while student loans are in deferment, how does that play into that 43% that you just said. Because if they don’t make payments, does that just like not count at all? Or how does that work?

09:43 Sam: This a very specific guideline detail that changes, just letting you know Emily, and for conventional loans, and FHA loans, it’s both different. A rule of thumb: if your student loans are in deferment, you have to take the remaining balances and calculate 1% of that, and we factor that into your debt to income ratio. So if you have $100,000 in student debt, and we’re about to calculate a potential thousand dollar payment, even though you’re not making payments on them, that could stop your deal. Okay, so brings me back to letting an expert look at it.

10:19 Sam: Also, sometimes when the lender pulls credit, the way the credit populates, it looks like they’re making payments on their student loans. But really, they’re in deferment, so all those payments have to be switched. This is why when people run the numbers themselves, they might think, “Oh, no, I can’t do it.” But lenders know what it takes to get it approved. And I did want to touch back on the debt to income, it’s best for people to know first that you want to be under 43%. If that’s 42.98%, that’s still two thumbs up. But as soon as you’re over the 43%, some of the loan terms can change and make it stricter for you to buy.

10:56 Emily: Gotcha. And I also want to emphasize that just because you qualify for a mortgage of a certain size, or just because your debt-to-income ratio fits onto that 42% or whatever, that doesn’t mean you have to buy a house that that’s expensive. So these standards are for the lending industry, they’re not necessarily the advisable thing on the personal finance side. So just keep that in mind. We’re talking about basically how to qualify, not whether this is a good idea for your finances overall to have that high of a, an amount of debt per month. I just want to add that in there from the personal finance side.

What If You Don’t Have a Typical Situation?

11:33 Emily: Okay, Sam, so thanks for running down those broad strokes criteria. If someone doesn’t meet one of these, is there any recourse? Is there anything else that can be done if they still want to go through with a purchase?

11:47 Sam: Don’t give up lenders in general, we’re in the process of approving loans. We’re not in the business of denying people we would be out of business. So try and try again, I would say, because I have had PhDs students who have finalized their transactions with me been denied by two other lenders. The tip I can give to some of these people exploring their options is be willing to over document things for any uncertainty the lender might have. If there’s some variables in your income, explain to them that “Hey, this is all under the same advisor. I’m working in different areas, different years, but it’s under the direct supervision of x and he can provide you a letter saying that I’m here for five years under his supervision and it’s common for students in my place to continue to receive their funding. Please let me know if you need any other confirmation from my supervisor.” But yeah, recourse I would just validate how good of a borrower you are: I have great credit. I have the downpayment. I have guaranteed funding.

12:52 Sam: And you always can strengthen a file with obviously a cosigner. You can have a non occupant co bar family member, even a friend, who also is hopefully in good credit standing and has income to cosign on the loan for you. That’s not a forever thing, you can refinance them off the loan. But what I’ve found out in my years in this business is, there’s always a way to make it work if you keep working at it. Some people run out of options, and while they’re in school, it’s a funky time in their life, but that doesn’t mean that you’re not going to be a homeowner in a year or two years.

13:33 Emily: Yeah, gotcha. I actually was thinking specifically about co-borrowers because that was another example that we had on the podcast. My interview with Matt Hotze, he bought a home in Durham, North Carolina when he was at Duke and he bought his first year there and he had his parents, or maybe one of his parents, as his co signers and that enabled him, because his income was, low — one graduate student stipend. He was able to get into a larger house than he would have qualified for on his own. He actually had a three bedroom house. And then he rented out two of the bedrooms. So he was able to house hack, had no problem paying the mortgage because he had reliable renters. And yeah, it all worked out really well for him. So he just needed that little bit of help at the beginning. His parents, very fortunately, were able to provide that to him, and it was kind of a rosy story after that point, but that’s what he had to do to qualify for the mortgage.

14:27 Sam: A cosigner, sometimes can solve everything, except for poor credit. But strength in numbers. You can have up to four people on conventional loan application. Have I done that ever? No. But is it possible? Yes. So yeah, I mean, if you’re having some difficulty, your loan officer, if you’re brainstorming with them, one of their first solutions is have a cosigner. A cosigner is a very simple fix. If you have to pivot your approval because you have gone through the process, you didn’t get approved on your own and your adding a cosigner on your contract, I would say give your lender about 10 days and you should be in good shape.

15:08 Emily: Gotcha. I’ll add in one more time. This is the “how to qualify for a mortgage” talk, not “is it a good idea to be a cosigner or to have a cosigner”. Totally separate conversation.

15:19 Sam: A client of mine that’s closing this month who listened to your podcast…I don’t want to reveal too much about his purchase, but we’ve been given the approval and at the start, we ran the numbers a few different ways. He was like “With a cosigner, what’s my payment? Without a cosigner how much is my cash to close?” And we were on the fence for a little bit but we were still in the process. So while he was under contract, I was still able to give him scenarios and options. We eventually decided with his deposits and everything that was already being credited, his cash to close was low enough that he wouldn’t need to have a cosigner. So it’s not set in stone at the start. Yes, it’s always better to have your ducks in a row. But the lender is flexible. We always can pivot for the buyers needs. And I also say that in the buyers defense. If something’s going wrong with the house, the lender can help you get out of the loan on your finance contingency, maybe if your home inspection is past. So there’s different ways we’re always here willing to help.

16:25 Emily: Yeah, that sounds really good.

Commercial

16:30 Emily: Hey, social distancers, Emily here. I hope you’re doing okay. It took a few weeks, but I think I have my bearings about me in my new normal. There is a lot of uncertainty and fear right now about our public and personal health and our economy. I would like to help you feel more secure in your personal finances and plan and prepare for whatever financial future may come. You can schedule a free 15 minute call with me at PFforPhDs.com/coaching to determine if financial coaching with me is right for you at this time, I hope you will reach out, if only to speak with someone new for a few minutes. Take care. Now back to our interview.

Tips for Home Loans with Non-W-2 Income

17:15 Emily: Okay, so let’s narrow down to the the scenario that we talked about the last time we did an interview, which is about a graduate student or postdoc with fellowship income, with non-W-2 income, and that a lot of lenders don’t understand how to deal with that. You’ve been working with these types of clients quite a bit over the last year. And so you have really figured out some things that how to make these loans work in some cases and what will not work in other cases and maybe in those cases, a co-borrower or something like that would be needed. Can you just tell me a little bit about, you know, this particular weirdness of non-W-2 fellowship income and how you make it work?

17:54 Sam: It’s definitely a tricky income. How I help make it work is I support all the variables within the fellowship income. I show that it’s the same field of study or field of work that they previously in. Especially in the offer letters, they usually always contain a phrase if the student remains in good standing, and the underwriter can say, well, that’s too much of a variable, we can’t accept this income because there’s too many variables. Well, I say well look at her transcripts, look at his transcripts. They’ve always been in good standing, literally forever. That’s why they were one of five students selected out of 400 applicants to get into this program. Yeah, it takes a little bit of storytelling, and the presentation is important, so it’s okay if someone who doesn’t have W-2 income, we treat other incomes just as fairly, but you have to know how to present it, how to over-document it, and if it’s too uncertain at the start, most lenders have a scenario desk you can reach out to who will give you some early feedback without going completely through the application process, completely through the loan process, and still having a little bit of a question mark about if you’re really approved. I’ve had our scenario desk, give me pushback on certain files, and I just asked, How can I support that variation or the uncertainty that you’re seeing in this letter because I can provide what you’re looking for most likely, I just need to know what that is.

19:38 Emily: Yeah. So I think if I can kind of zoom out from that a little bit. First of all, one of the things that you talked about in the last interview was that non-W-2 fellowship income is not going to qualify for an FHA loan. It’s just completely off the table. It’s only going to be a conventional loan. And what you’re talking about now is saying, okay, you know, PhD student or postdoc, you’re showing me your offer letter and you are looking for certain things that offer letter, like the income and also the number of years of guarantee, sometimes that’s in there as well. And then you’re saying, Okay, well for all the things in the offer letter that are maybe a question mark to the underwriter, you have now learned how to recognize some of those things, and you can start providing additional supportive documentation, that is asking the student or postdoc, okay, well send me your transcripts. Okay, well send me whatever it is, your work history. I don’t know what those things are. Can you talk a little bit about that guarantee? Because I know the guarantee is a very important factor when we’re talking about non-W-2 income.

Loan Types for Non-W-2 Income

20:41 Sam: Yes. So I want to answer your questions in the right order. One of the main critical points for this type of income is that it’s not recognized by the VA, Veterans Administration, FHA. It’s not recognized by USDA, and it’s not recognized by Fannie Mae. Your most successful application and loan approval is going to come from a Freddie Mac conventional loan, okay. Now you can do as little as 3% down for that conventional loan. But this is the key point that only Freddie Mac recognizes this income, per the lenders approval. Why these PhD students are not going to approved their first attempt with their lender is because it’s per the lenders approval, the lender can’t document it and approve it with their underwriter, then Freddie Mac will not take the loan.

21:40 Emily: So what you’re just saying there is that you now know having worked this type of income, this mortgage type is off the table. This mortgage type is off the table. This is the one that is potentially successful. And what you have to do is get your underwriters that you work with to approve that loan and then Freddie Mac will take it on, will approved it. What you have figured out is these little tricks and document support and so forth that need to happen for the underwriters that you work with, which presumably would be the same elsewhere, except they’re not necessarily as knowledgeable about this particular type of income.

The Importance of Offer Letters for Non-W-2 Income

22:15 Emily: Let’s talk more about that. I know that you’ve mentioned to me before, I think you mentioned in the last interview, that for this non-W-2 income, normally underwriters, lenders for W-2 income, they presume it’s going to continue for at least a while, even though we all know you can lose a job at any point. But for the fellowship income, they for some reason, don’t presume that it’s going to continue and they want to see a certain length of guaranteed fellowship time.

22:41 Sam: Yes. For conventional loans, we’re looking for three years of continuance of income. Now, I know it’s not fair because my job doesn’t guarantee me three years of employment in the future. That’s not the typical contract for all employment, its employment will usually. For conventional loans we want to see three years. I actually have a example that I’ve written up. It’s a mix of a few different approval letters that worked, that I had some success with clients in the past year. And I will say briefly that if your approval letter is more than three pages, there might be too many variables in your offer to get an approval.

23:36 Emily: You’re saying an offer letter, like the offer letter you get when you start grad school or start a postdoc position. This is going to be your stipend this along goes on for. This is a typical document, like instead of having a Form W-2, this is what a fellowship recipient would send to you. They would send you their offer letter and so what are you looking at in that offer letter that is like yeah, this is going to go forward or no, this might be a problem.

24:00 Sam: Yes, so what we’re looking for is the continuance of income, we want to have three years. We want it to state that you’re being provided health insurance, because that’s a really good sign shown you’re actually an employee, you’re not just a student. It’s okay for it to have a few variables in it, like remaining in good standing or making satisfactory progress towards their doctoral degree. That’s a good phrase in there, that’s fine. But when you have layers and layers of variables, like you know, making satisfactory progress towards our doctorate, you must take these courses or get this exact GPA or higher in these courses, must have approval from their supervisor for a continuance into a fifth year. Those are things I’ve had to get more information on because the more variables, the more uncertainty it makes the underwriter feel. And so that’s where it comes back to the presentation of the loan.

An Example of An Offer Letter

24:58 Sam: “I’m pleased to inform that you been awarded a fellowship in the first academic year beginning September 2019. In subsequent years, you’ll be supported by research and teaching assistantship. This Fellowship Award gives you deserved recognition for your accomplishments to date, as well as added independence to stipend and exploring your research interests for the first year. For the academic year 19-20, the stipend will be $3,345 for nine months. For Summer 2020, the stipend will be $3,475 for three months. This means you receive an annual stipend of $40,530. In addition, the award pays your tuition health insurance and health services fee. We are committed to continue this financial support for for up to five years, as long as you remain a PhD student in good academic standing.

25:51 Emily: Yeah, so what I’m hearing and I think what the listeners will hear is, that’s first year fellowship followed by W-2 income for the remainder, four years guaranteed.

26:02 Sam: Right.

26:03 Emily: That’s great. So that means in your world, that person would qualify for a mortgage during that first year, even though it’s fellowship, because their letter says, Yeah, it’s one year of fellowship, but you’re going to have after that this W-2 type income,

26:17 Sam: Correct. The most success I’ve seen with the PhD community are the simple letters that are less than two pages with little variable, that will show more than three years of continuance. And that’s a very simple approval for us.

26:35 Emily: And that’s whether that is fellowship income, or W-2 or a combination. If that’s what the offer letter says three years or more. That’s straightforward for you.

26:46 Sam: Correct. And that is where I’ve seen the most success with these doctoral candidates.

26:53 Emily: But still going back to your earlier point of if that’s not what a particular individuals letter looks like, still reach out to you, or another lender, because maybe with enough supplementary documentation, it could still go through, but it’s just going to be a little bit more of a process.

27:09 Sam: Correct. And, I mean, when I get connected with some of these department supervisors, I let them know, “Hey, this is what we’re looking for. Can you simplify this offer ladder for me, because we’re looking for something a little less complicated?” And I do like to tell my PhD applicants that, “Hey, I would love a shortened version of your personal statement. I want to be able to know a little bit more about where you’ve been, where you’re going.” And it always helps to tell a little bit of a story.

27:40 Emily: That is really interesting. That adds a little more detail to what you said earlier about the story and the presentation being what matters. That’s really interesting to me that you that you might include something like a version of a personal statement in this package that goes to the underwriter, that’s really interesting.

27:59 Sam: At the end of the day, I know I said this in the last episode, the last time I chirped in, but it does come down to one person’s decision. If the underwriter is comfortable, they’re going to approve you. If they’re not comfortable, they’re gonna want more documentation, or a cosigner, or something else to make it, you know, aboveboard.

28:20 Emily: Yeah, that clarifies. Thank you.

Final Words of Advice

28:23 Emily: Sam, is there anything else that you’ve learned about this fellowship type income that would be helpful to the listeners, with respect to getting approved for a mortgage?

28:32 Sam: I’ve learned that working with the PhD community are some of the best clients I’ve ever had.

28:38 Emily: Yeah, you’ve told me that before, and I really love to hear it!

28:42 Sam: Yeah. It’s really nice to work with people who are planning. It’s always best for a PhD student to be as proactive as possible. I’ve seen letters with three years of continuance, but they’ve reached out to me after one semester has passed, so now they only have two and a half years of continuanc, and that is a big problem. Whereas someone, if they have reached out a year earlier about their future, and how they’re planning to purchase a home when they were in a new area, that is the perfect slam dunk way to do it. Unfortunately, I’ve had to let some PhD students know that it’s not going to work out because their continuance, they’re under three years. And that’s going to be one of the major roadblocks. So talk to someone early, tell them you’re interested in a Freddie Mac, conventional loan. If they can find the right way to document their income and approve them. It’s happened more often in the last two months, I would say, with clients reaching out at this time of the year, when, if I had been talking to them six months ago, I could have had them approved.

29:52 Emily: Yeah, so actually at this time of the year, April 15 is decision day. Everyone has to decide what grad school they’re going to, or they’re supposed to decide. So if a PhD student is looking at that fellowship income in their offer letter, it says three years, they need to reach out to you sooner rather than later before that clock starts ticking, if they’re interested in purchasing within that first few months or first year or whatever, of being in graduate school. They need to reach out earlier. Thank you for saying that.

How To Reach Sam Hogan

30:21 Emily: Sam, you have not been particularly self promotional during this interview, and I appreciate that but I do want to say that you have been working with this type of client — people receiving fellowship income, also other types of PhD clients over the past year. I think you’re working really hard for them and that they should go to you, at least among getting a few different voices in their life, they should come to you. So will you please tell them the best way to contact you?

30:46 Sam: The best way to reach me is definitely by cell phone. Text is preferred right now because there’s a lot of volume going through the industry. My cell phone number is (540) 478-5803. And then my work email is a great line of communication, also. It’s [email protected].

31:15 Emily: Yeah. And we’ll have all that contact information in the show notes, as well. Sam just mentioned, I was surprised to learn, but even during this social distancing period, the mortgage industry is hopping, because interest rates are so low. People are really refinancing a lot right now, even if they’re not doing necessarily new purchases at the moment or not going into that process at the moment. But, you know, maybe in a few months or a year, whatever things will return to a more normal time and you’ll be able to move forward with lots more purchases.

31:47 Emily: Sam, thank you so much for coming on the podcast. And thank you so much for working with this population and being willing to, as a personal favor to me, to investigate this and take this on. I think it’s really fruitful and it’s been really great for my audience, so I really appreciate you

32:00 Sam: Thank you for having me on Emily. Always a pleasure to work with you and the PhD community. I’m just here to help, so if you need help text me, call me bother me on the weekend. It’s all good. I just want to make sure you all are seeing some success here while you’re getting your doctorates.

32:16 Emily: Excellent. Thank you, Sam.

Outtro

32:18 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the personal finance for PhDs podcast. There you can find links to all the episode show notes, and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind the scenes commentary about each episode. Register at PFforPhDs.com/subscribe. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is stages of awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC podcast editing and show notes creation by Lourdes Bobbio.

Three Financial Strategies Every Early-Career PhD Should Employ (with Kate Mielitz, PhD, AFC)

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In this episode, Emily interviews Dr. Kate Mielitz, an assistant professor at Oklahoma State University who holds a PhD in financial planning and is an Accredited Financial Counselor. Kate gives her top three financial tips for early-career PhDs: celebrating financial wins, no matter how small they are; asking questions regarding your pay and benefits; and saving in advance so you can say “yes” to networking opportunities, from a meal or drink with a colleague to conferences. Kate also tells the story of a recent financial challenge she encountered that is highly relatable to anyone in academia. Due to her preparation, what could have easily been a financial disaster became just a hiccup.

Links Mentioned in This Episode

financial strategies for PhDs

Teaser

00:00 Kate: It is okay to make a financial mistake. I want that very, very clear right now. We are human. It is only money. Yes, you heard it from me. It is only money. How do we use it? It’s the tool that we’re using like the hammer or the screwdriver. If you make a mistake, you pick yourself back up, you carry on, you figure it out. What’s the mistake? You ask the questions of yourself and figure out where you went wrong. You figure out where you need help going forward, and you take proactive steps. You’re going to be okay.

Introduction

00:43 Emily: Welcome to the Personal Finance for PhDs podcast, higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season five, episode five and today my guest is Dr. Kate Mielitz, an assistant professor at Oklahoma State University who holds a PhD in financial planning and is an accredited financial counselor. Kate and I discussed the top three financial strategies early career PhDs should employ: celebrating financial wins, no matter how small, asking questions about your pay and benefits, and planning to spend money on networking. Kate also shares her recent and pretty big financial mistake, which will be highly relatable to anyone in academia, and how she weathered it. Without further ado, here’s my interview with Dr. Kate Mielitz.

01:34 Emily: I am just delighted to have joining me on the podcast today, Dr. Kate Mielitz, who is an assistant professor at Oklahoma State University and an accredited financial counselor. So we have an expert on the show with us today, for once. It’s wonderful. Please introduce yourself to the audience. Tell us a little bit more about how you got where you are and what you do.

01:55 Kate: Yes. Thank you so much Emily for having me on. This is a thrill for me. Let me give you the deep background first. I have 20 years combined experience, a bit little more than that, in collections, bankruptcy, fraud, financial counseling and education. I’ve been an accredited financial counselor for a little over 10 years. And the accredited financial counselor can be associated with and compared to the certified financial planning designation. The accredited financial counselor focuses on some of those foundational pieces, like, do you know how to budget? Do you know how to save? Do you have enough insurance? Do you know how to appropriately use credit? Whereas the CFPs look at wealth growth and wealth management. So my area of expertise is helping people get a solid financial foundation that works for them, that’s specific to them and their financial situation. Then I have my PhD in personal financial planning from Kansas State University and I work in the family financial planning program in the department of family development and family science at the Oklahoma State University.

03:06 Emily: Yeah. And again, it’s such a pleasure to have you on today, Kate. So, because you are an accredited financial counselor and a PhD in this area, and again, an expert, I am basically going to turn the reins over to you and let you direct where you want this to go. I asked you to give me your top three financial strategies that early career PhDs should be using. Let’s talk through those.

Financial Strategy #1: Celebrate Financial Wins

03:28 Kate: First, I want you to remember before I give these three strategies that it’s always dangerous to give me this much leeway, Emily, so thank you for that. But remember that no matter what I say, you need to be true to you. So ground this in your financial reality. And when I say for example, with my first strategy, always celebrate the progress forward that you make on your savings goals no matter how small, I mean that quite literally. If that means that for one month to the next, that all you can get in that savings account is an extra penny — celebrate it. It’s the small victories that then help us get into the bigger victories. Do we want to focus on just putting pennies, nickels, and dimes in savings? Not if we can avoid it, but when we are early career, when we are in graduate school and coming into postdoc and coming right up, it’s not always easy. Finding a way to commit to savings and then doing it always celebrating those small successes is so very, very important.

04:29 Emily: Yeah. I’d love for you to elaborate on the point you were just making about how, okay, even if it’s just a penny, it’s still worthwhile. It’s still something to celebrate. Even if the dollar $10 a hundred dollars, whatever scale we are at, it’s worthwhile doing. And can you talk a little bit about the reasoning behind that? Like why it’s worthwhile to save even if it’s just a few dollars? Because some of my audience members, it can only be a few dollars, if anything.

04:53 Kate: I have so been in those shoes. We could go forever on this, Emily. The fact of the matter is, any teeny tiny amount that you can put forward is still a teeny tiny amount that you’ve put forward. I have worked with families who are experiencing homelessness, who are out of work or supporting a family on minimum wage. So I get working with small amounts and the reason that we focus on the small amounts is because those are bite size. How do we eat an elephant? One bite at a time. Therefore we save a penny, a nickel, a dime, a quarter, a few bucks at a time to make that small progress. So then we’re more conscious about it. The more we’re thinking, “Oh, you know what, this is 34 cents that I got back in change — I’m going to put that in my savings account.” And then the next time, “Oh, this is 56 cents, I’m going to put that in my savings account.” Maybe we can’t do it every time, but as we think about these pennies, whether we collect in a change jar or it’s just, “okay, I made progress,” it’s gonna stick in there and we’re going have these little tickle reminders that it’s like, “well, I was successful. I was successful before. I can be successful this month.” And we’re not focusing on, “Oh my God, I only put 20 bucks in savings. I should just give up now.” Never give up! These teeny tiny amounts add up. Americans throw away billions of pennies a year. I mean, it’s mind blowing. So stop and think about what you can put forward.

Kate: One real quick caveat I wanted to share with you, Emily, on this idea. I remember watching an old Family Feud episode and the host asked, “we surveyed a hundred people on the street, what is the smallest dollar amount you would dive back in the trashcan to retrieve?” I was blown away that the number one answer was a $10 bill. I mean, I was like, are you kidding me? I have gone for 26 cents and I’ll do it because to me those small things make a difference. And I mean, whatever happened to the $1 bill and the $5 bill? Those, those are very valuable, as our quarters and dimes and nickels and pennies. So start small, save small, build as you can and you can do it. So celebrate that small progress.

07:11 Emily: Yes. Oh my gosh, I love this point so much. And one thing I wanted to add to what you’re saying is, one of the most valuable things that I think, and this is I think another rephrasing what you’re saying, of it sticks in your head when you start saving, you know, rounding up to the next dollar, whatever it is. I think what most important thing that it does is it changes your self identity to one of “I am a saver.”

07:32 Kate: Oh yeah, absolutely.

07:33 Emily: Doesn’t matter what the amount is. If you become a saver in your own mind, that’s what’s going to create that habit change that carries into the future when the dollar amounts can be bigger. But you have to start with that identity change. And the best way of doing that is to actually enact savings. Even if it is that small amount.

07:52 Kate: You’ve nailed it, Emily. I mean that’s it. It’s really about phrasing it. When you got your first published article, even if you were fourth or fifth author, didn’t you then say, I’m a published author? Well, yeah, the same thing goes. I’m a graduate student, I’m a successful graduate student. Oh my gosh. I’ve landed my first job. I’m a postdoc, I’m an assistant professor. Own these things. And yes, even if it’s pennies, you are a saver. So now let’s keep going. Absolutely.

08:22 Emily: Yeah. And going back to your original point of celebrate — what are some ways that you can celebrate without spending the 34 cents that you just saved?

08:31 Kate: Absolutely. Well, it’s kind of like weight loss. They say never celebrate weight loss by going out to eat. So we’re not going to celebrate saving by spending, but we’re going to maybe, and this is so key, especially for graduate students in early careers, but give ourselves permission to just kick it. Give ourselves permission to sit back and worry about the hustle, not worry about the side hustle, it exists, and just breathe. Whether that means taking an hour for ourselves and watching an extra show, or that means potluck in with a friend. You already have the food in the, in the cabinet. So let’s have somebody over. They bring a piece, you bring a piece. Nobody’s really out of pocket. Talking about it with friends. Call Emily, send her a message, send me a message. Say, “Hey, listen, I did it!” Celebrate those small things. Tell your mom and your dad. Sometimes it’s just a matter of not physically doing something, but just acknowledging it. Looking at yourself in the mirror and say, dude, you saved. That’s empowering and it’s exciting and it is a way celebrate.

09:41 Emily: Yeah, absolutely. So I think the word celebration maybe can be boiled down to just acknowledgement in some positive way. It could be as small as that or it can be bigger, if you have the means and the time to do so. But the key is do something that’s out of your routine to acknowledge that you accomplished something because you really did.

10:00 Kate: That’s right.

Financial Strategy #2: Ask Questions About Your Finances

10:01 Emily: Okay, let’s move on to your second strategy.

10:04 Kate: Second strategy: ask questions about money. Now, if you are in graduate school and you don’t have access, for example, to a retirement plan, maybe it’s not human resources that you’re going to. If you’re early career definitely be seeking out human resources to ask questions about your insurance plan or your retirement plan and what those things mean. But don’t ever think that you have a question that is too small or too easy or so-and-so is going to think I’m an idiot if I asked this. Listen, Emily and I would not be doing what we are doing if any question were too basic or too small. That’s how we thrive, right? Emily?

10:46 Emily: Exactly.

10:47 Kate: So if you don’t know who to ask, reach out to Emily, reach out to me. We are more than happy to answer any financial question you have because it is your financial health that you need to be focused on. So what resources? No, we’re not going to rescue. Absolutely not. But we’ll get you a list of resources. We’ll point you in the right direction. Sometimes it’s just as simple as, well does this mean that they’re going to match this and that’s a yes or no. So ask the questions and never be scared that “Oh, I’m a graduate student or I’m a PhD, I should know this.” No, not necessarily. That’s why they give PhDs in personal financial planning because other people don’t know. So that’s what I’ve got mine.

11:29 Emily: Yeah. I’ll say especially for, so obviously anyone who is an employee anywhere, you’re going to have an HR department or an HR person, or something. I say person because my husband works for a startup and they do not have an HR department, but they have a person, part of whose job is to handle this kind of thing. So there is someone, if you are an employee, who you can ask questions about the benefits that you’re receiving or even something as simple as, and this is a big question that we’ll get into later, “Hey, when’s my next paycheck coming? What amount is it going to be in?” Those, those are not even trivial questions for, let’s say a graduate student or a postdoc who’s changing how they’re being paid from this system to this system, et cetera. Things can fall through the cracks. It is very worthwhile to keep on top of these questions.

Emily: If it’s not an HR person who’s available to you, go to someone in your department, like the administrative assistant for the graduate program that you’re in or there is someone there. Even if they can’t help you with the question directly, they’re going to be able to point you to the next step. Definitely keep asking questions at your institution until you get the answers that you need around your benefits. And like Kate was just saying, you can go to outside people like me and like her if you have non institution specific questions. One I get all the time is “am I eligible to contribute to an IRA?” I can answer that question for you if you give me a few details about you know, how you’re being paid.

Financial Strategy #3: Plan to Spend on Networking

12:47 Emily: Now, what’s the third third strategy?

12:49 Kate: The third strategy is to plan to spend money networking. We talk a lot about planning to pay our rent. We talk about planning to pay our car payment or our car insurance, but we don’t always talk about planning to spend money socially. And, no, I’m not talking about going and kicking it with the girls or the guys after work, but that can sometimes be a networking tool. But I’m talking about really digging in and you know, once a month, every couple of weeks, having that networking lunch. Who is somebody that you met at an orientation or somebody who your major professor introduced you to, or somebody who you happen to find out via a Google Scholar search has the same area of interest as you in research, but it’s across campus in a whole different department. Reach out, invite that person to lunch. You can go splits down the middle, you can pay, you can switch off and pay as you go, but plan to spend that money. Because the old adage is that it’s not what you know, it’s who you know. But truly it’s what you know and who you know, you’ve got to have both pieces in there and that is so insanely true in academia. It’s what you know and who you know.

14:02 Emily: I think it’s really, really smart, as you’re bringing this up, just to acknowledge that first of all, networking is an important part of career development at every single stage. Never think that you’re too early on to start networking. You are a person worthy of knowing and you should introduce yourself to other people. So plan for it at every single stage of your career and just acknowledge in advance that you’re going to have opportunities come your way and you want to be able to say yes to them immediately without being concerned about where’s that money going to come from? You want to be able to accept a lunch invitation when you’re not really sure if you’re going to end up paying or the other person will, or you want to be able to accept taking a few hours drive to another institution to do a meeting. Anything like that, where you might end up being financially are responsible for, you don’t want to have to say no to that because you’re not prepared. So I really love the idea, and tell me what you think about this Kate, of having, so I’m really into targeted savings accounts or sinking funds, so having a sinking fund or target saving account that’s labeled networking and there’s enough money in there for whatever you think might come your way.

15:08 Kate: You know Emily, I was just thinking in my head, “Oh, I want to make sure that I talk about the budget sheet that I use.” Whether you call it budgeting or spending plan or targeted savings. The fact of the matter is you’ve got to have a plan for those dollars and cents and yes, having that emergency savings — I’m going to remind you, emergency savings comes first — but then secondary to that, what else do you need to have that money set aside for. On our budget sheets, I tell people all the time, I tell my students, I tell my clients, I remind co-counselors all the time — it’s not my money, it’s your money. So what is your plan for it? Where do you intend to spend it? And write it down. If I’m going to spend a $500 a month on entertainment, which I don’t do, but if I was going to spend $500 a month on entertainment, as long as my budget is balanced and I have the dollars and cents to do that, I can do it.

15:58 Kate: Now, when we’re talking about planned networking and we’re talking about spending money consciously to do this, I’m not talking 50 bucks a month. I’m talking maybe as little as $20. But like you said, Emily, maybe it’s a few hours drive to another institution. Or maybe we’re talking about a conference. It’s really big in our industry, and so we’ve got to take the time to find the money. Now it can be very difficult to do on small salaries so seeking out what funding is available through my department, what grant funding, what fellowship, what scholarship monies might be available. Ask. Even if you, graduated, you’re in your first position as an assistant professor or you’re a postdoc, don’t think that that precludes you from opportunities to get assistance to travel. Ask. Worst case scenario, the answer is no, we got nothing. Okay. At least you know, and then going forward you can put those dollars and cents away toward that. But I’m still going to say try and keep that $20 in your pocket so that if you get the opportunity to say, “Hey, let’s go grab a Coke” or “let’s go grab, you know, a quick bite to eat and talk this through,” you’ve got it. It’s not always easy to do, so please do not hesitate to ask a qualified professional for help. How do I put this budget together on these teeny tiny little pennies that I am paid? And there are resources available to help you do just that.

17:23 Emily: Absolutely.

Commercial

17:28 Emily: Emily here for a brief interlude. Tax season is upon us and while no one loves this time of year, it’s particularly difficult for post-bac fellows, funded grad students, and postdoc fellows. Even professional tax preparers are often thrown for a loop by our unique tax situation. And don’t get me started on tax software. I provide tons of support at this time of year for PhD trainees preparing their tax returns. From free articles and videos, to paid at-your-own-pace workshops, to live seminars and webinars for universities and research institutes. The best place to go to check out all of this material is pfforphds.com/tax that’s P F F O R P H D dot com slash T A X. Don’t struggle through tax season on your own. Visit my website for the exact information you need in the most efficient form available. Now back to the interview.

Saving tips for larger networking events

18:38 Emily: One thing I just wanted to follow up on about the conference travel, because now we’re not talking about a $20 lunch, right? We’re talking about potentially thousands of dollars, between fees and travel and the lodging and all of that. So of course, totally want to underline, ask and ask and ask if there’s any money available from the sponsoring organization, from your department, from your university, from anywhere you get funding, outside scholarships you can apply for. There’s many different potential sources of funding for travel awards. That’s something we’ve covered on the podcast in the past. But I want to say that in some fields, the money is less prevalent, right? And so in some fields you may be able to say, “Oh, of course I’ll be able to find funding for that conference.” And maybe you can keep, you know, just a smaller amount of money available for your incidental expenses while you travel. But in some fields you may know, “well, I may get funding once or twice during my PhD, but really I should be attending a conference every year.” Then, it’s a scary thing, but you just need to acknowledge that that is going to come up at some point and start preparing for it.

Emily: Because the thing is, I think what happens with a lot of people with conference travel is that they end up just with a reaction to it. They act retrospectively instead of proactively about it. If you put a conference on a credit card and it’s $2,000, whatever, you’re gonna end up paying that over months or years and with interest and you may as well flip that around and pay it upfront into your savings over months and years and be gaining interest instead of losing interest. You’re going to end up paying for it slowly over time either way, if it has to come out of pocket and you can’t get it paid for, so just do it upfront instead of on the backend and you’ll come out much further ahead financially. I just hate it when I hear about students who have to forego these really wonderful conferences or networking opportunities because they can’t find the funding, they don’t have the money saved. And it can be a real blow to your career potentially. So it’s just something that’s worth building into your budget, as you were just talking about, early on, you know, from the beginning.

20:36 Kate: And let me, if you don’t mind Emily, I’d like to follow up on, on the comment you made with the credit card. Credit cards are amazing tools when used appropriately. We’re not going to use a hammer to put in a screw, we’re not going to use a credit card to finance everything. But if you know that you can utilize some points off that credit card and/or, emphasis on the and, you can pay that off, say for example, six months from now I will have this conference paid off rather than just making the minimum payment, but you can pay twice or three times the minimum payment, even if you can’t front load the conference because you found out about it last minute, or Oh my gosh, I never thought about it this way and I’m coming up on it. Don’t be afraid to use the credit card as a tool, but I just want you to be careful and I want you to be conscious and I don’t want you to think about, “Oh, it’s okay, I’ll carry a minimum balance for the next however long.” No, no, no. Go into it with the forethought to say, “all right, I’m going to pay this off in six to 10 months. This is how I’m going to do it. And at the same time, I’m going to be saving for next year’s conference.” Again, you are not walking this path alone. You have resources. Ask, ask, ask, ask, and you will get answers and you will find help to help you make these decisions and figure out how you’re going to use these dollars.

22:04 Emily: Absolutely. I feel I have to at this point put in a bid for my own services, which I do offer one-on-one money coaching. And so if you, one of the listening audience members, wants to work with me on these kinds of issues around budgeting or around paying off debt or investing for the future or whatever it might be, please contact me and I will be happy to, you know, have a short call with you to talk more about that. You can find more details about that in the show notes. And Kate, I don’t know if you offer individual services at this point or if you are, uh, you know, strictly in your academic role.

22:37 Kate: I do offer services. You can find, contact information for me and other professionals like me at afcpe.org and you can just search, find a counselor. I think it’s either find a financial counselor or find a financial professional in your area. I happen to be in Oklahoma, but there are many of us throughout the country who work specifically with students, graduate students, postdoc, early career, the broke, the wealthy, across the gamut. So we are available afcpe.org.

23:09 Emily: What I love about that AFCP database, and also if you wanted to search for a CFP, similarly, is that the professionals identify themselves by their areas of expertise or types of people that they prefer to work with. And so for example, for me, I’m not an AFC, but I specialize in graduate students, postdocs and early career PhDs. So probably anyone listening, your,within my area of specialty. But let’s say you had a different situation like you are in the military or your spouse is in the military, or you’re dealing with maybe an inheritance due to the death of a parent or you know, there are all these other special situations that might come up that maybe that’s your primary identification, not as a graduate student or postdoc, and maybe in some other area. That’s what I love about these databases that you can really search and find who is looking for…you are someone’s perfect client, right? And you can try to find that person through one of these databases. Thanks for adding that a resource, Kate, and that’ll be in the show notes as well.

How a AFC Deals With Financial Challenges

24:05 Emily: Okay. I think we’re ready to talk about your financial challenge that you have had recently due to your academic position. This will be very relatable to many people in the audience.

24:15 Kate: Okay, so let me lay it out really quick. Miscommunication is what this boils down to. Misunderstanding. Me, even as a financial professional, not asking the right question. Not full information being passed down the pipeline. So I wanted on the board, nobody is at fault here, but if somebody has to take it, it’s probably me. I didn’t ask the right questions, didn’t think about it the right way. But what happened is this: I have a nine month contract and I wanted to get paid over 12 months from the start, but because of when I did my onboarding paperwork, I couldn’t do it, I had to wait until the next spring. Well, the way I understood it was that when I did my 12 month pay, my pay would become effective July 1st, the new fiscal year of this year. Well, I knew that I was going to be out pay for about a month, but it turns out that that’s not what the actual situation was. Yes, they would input the information, but my 12 month pay would not actually start until my next contract started. My next contract starts September 1st, my first pay September 30th. So instead of one month without pay, I’m four months without pay. Ouch. Just to put it mildly.

25:42 Kate: Fortunately, because by nature I am a saver, I am a scrimper, I have very little fun. My husband is just like, “Can we go?” “No, I got to put the money away. No, we can’t. No, don’t ask me again.” I put money aside and my emergency fund will be empty come payday because I’m still pulling from savings with his retirement, his disability money to pay the bills. But come September, we’re back on the horse. And so yeah, the end of September. So I’m eking, I made it, I had enough money set aside. I had, I didn’t even realize it at the time, but with small changes, I had three to four months in the emergency fund. I’m always shooting for six. We had had a lot of fun and relaxation prior so I could have tightened the belt a little bit more. We only made a few small changes. This has been a hiccup for us. Not a, “Oh my gosh. Oh my gosh,” but again, another learning experience.

26:45 Kate: It is okay to make a financial mistake. I want that very, very clear right now. We are human. It is only money. Yes, you heard it from me. It is only money. You set a hundred dollar bill on the table. You get up and walk away. Forget the wind. It’s not going to get up and walk its feet. How do we use it? And so it’s the tool that we’re using, like the hammer or the screwdriver. And so if you make a mistake, you pick yourself back up, you carry on, you figure it out. What’s the mistake? You ask the questions of yourself, you figure out where you went wrong. You figure out where you need help going forward, and you take proactive steps to fix it. You’re going to be okay. We’re okay. I’m going to be rebuilding my emergency savings over the course of the next year, because that’s probably how long it’s going to take to get things back into the groove. But that’s okay. I now have a plan of action and I lived through it. My family lived through it. Nobody starved. This is a good thing.

27:47 Emily: Yeah. I think that this issue that you ran into, again, for the people inside academia, I mean, I hope it hasn’t happened to you, but you probably know someone this has happened to you. They didn’t, as you were saying, didn’t fully understand the contract that they were signing, didn’t fully understand the timeline that the other party was working on. And you end up without — in your case, it wasn’t specifically without summer funding, but that’s how it sort of laid out — but many people will end up without funding for a summer or a semester or something, at some point in their graduate degrees. Hopefully not as a postdoc, although I have known postdocs that that’s happened to, that they go a lapse and pay for some period of time. But this is exactly what an emergency fund is for, right? The primary way you calculate how large an emergency fund should be is if I lost my income for three to six months, how am I going to pay the bills in the meantime? And that is exactly the kind of emergency fund you had so you were able to sustain yourself and your family through that period. But it’s a super, super relatable problem. I’m really glad that you brought this up because hey, if it happens to you as a graduate student, that’s a mistake that Kate made and so you don’t have to feel bad about making that mistake.

29:01 Kate: Don’t feel bad at all!

29:04 Emily: People with PhDs in personal financial planning can make this kind of mistake too. So don’t feel bad about it. But the point is just to the greatest extent possible to prepare in advance for whatever comes your way. It might not be specifically this kind of lapse in income, but at some point you may have a lapse in income for a variety of different reasons. It’s a great reason to have an emergency fund. All kinds of other emergencies might occur and other great reason to have an emergency fund. As we were saying earlier, use that mindset of putting away even the small amounts of money. Start snowballing that account bigger and bigger and bigger, and over time it’ll eventually become a full-fledged emergency fund or whatever it is that you’re working on. Thank you for sharing that story, Kate.

29:44 Kate: Absolutely. And then when you do use it, like I’m in my position, I’m empty or I will be empty in about three days. Start over. And if that means that I’m starting small and I will, because my last paycheck when I was really focusing on building it, I was getting paid over nine months. Now I’m getting paid over 12 months, so my paycheck is going to be smaller. So my contribution to savings is going to be smaller. But that doesn’t mean that I give up. That doesn’t mean that I look at that and say “Oh, I’m never going to make it.” No, I am going to make it. Is there something I can cut out? Like, I don’t need to go downstairs to grab something to eat everyday. I can pack that sandwich, or you know, small things like that. The things that we hear, no matter where we go, here are easy ways to trim your budget. They are true. Not all are applicable, don’t get me wrong, but if it’s a $1.50 for the soda at the vending machine and you’ve got a cold Coke at home, grab it from home, stick it in your backpack and off to work you go. Small, teeny tiny changes will add up. That’s not just in contributions to savings, but also in decreases to your budget. The small make a difference, because gosh darn those pennies add up.

30:54 Emily: Absolutely. One last point that I wanted to make about this story and what you were just saying, is that if you do end up choosing to make some sacrifices to your lifestyle to fund a savings goal. For example, you’re needing to rebuild your emergency savings, it’s going to take a while. You’re going to have to do a few sacrifices in the meantime. Don’t think that that’s going to be forever. Don’t think that just because you have to give up your weekly lunch out, or whatever it is that you are in the meantime, it’s a temporary thing that you need to do to reach this goal. Once you have reached the goal, you can reevaluate. Is that something that I want to continue in that habit that I’ve created? Or is it time to add that spending back in now that I have a little bit more financial security. But don’t have the mindset that just because you make the cut for some period of time, it has to be forever. Things will be different in a few months or a few years and you can reevaluate at that point.

31:47 Kate: And also don’t be afraid to say, I can’t afford to do it this month. It is absolutely empowering to say I can’t afford to do it this month. Maybe that means that you don’t participate. Okay. But if you are honest with yourself and have the courage to say, I can’t afford it, I guarantee you the person you’re talking to is going to understand, because they have been there or maybe they’re there, but they’re hiding behind a credit card or they’re hiding behind borrowed funds. Listen, people, it happens and it happens all the time. So it is okay to say I can’t afford it. And yes, I know that point number three was the plan to spend money networking. Well, plan to bring a Coke and a sandwich from home and go meet on the bench. Go meet at the union and people watch. Go for a walk in network. You don’t have to have $20 every time if it’s not going to work. If it’s not in your budget, it’s not in your budget. But don’t think that the money needs to stand in the way of that networking.

32:48 Emily: Yes, absolutely.

How to Contact Dr. Kate Mielitz

32:49 Emily: Well Kate, this has just been a wonderful interview and I’m so glad to have met you and to be able to introduce my audience to you and you know, let them know a little bit more about what an AFC is and you know, what do you guys do? And so thank you so much for joining me today.

33:03 Kate: Thank you so much. It’s been an absolute thrill to be on today, Emily. I really appreciate it.

33:08 Emily: And where can people find you if they want to follow up about something?

33:11 Kate: People can find me on Twitter, @KateMielitz, and I have a sneaking suspicion Emily that you’ll put that in the comments. You can also find me on Instagram, @KSMielitz , or if you just Google my name Kate Mielitz and Oklahoma State University, it’ll pop right up and give you my university contact information as well.

33:35 Emily: Beautiful, thank you so much.

33:36 Kate: Thank you.

Outtro

33:38 Emily: Listeners, thank you for joining me for this episode. PFforPphDs.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcast, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media or with your PhD peers. Three, recommend me as a speaker to your university or association. My seminars covered the personal finance topics PhDs are most interested in, like investing, debt repayment, and taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.

How to Combat the Negative Financial Attitudes We Learned in Academia and in Childhood

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In this episode, Emily interviews Cortnie Baity, a doctoral candidate in Human Development and Family Sciences at Florida State University and licensed marriage and family therapist intern. Cortnie’s dissertation is on how your upbringing influences your financial attitudes and behaviors later in life and how to effect better financial outcomes, specifically for African American families. Cortnie shares a framework from the literature of four money belief systems, three of which significantly correlate with income and net worth and two of which can become pathological. We discuss the financial messages PhDs absorb from academia and how those might influence financial attitudes and behavior. We conclude with Cortnie’s advice for PhDs who want to combat financial attitudes that don’t serve them well.

Links Mentioned in This Episode

financial attitudes academia

Teaser

00:00 Cortnie: I would suggest early career PhDs to take a financial attitude questionnaire and to gain additional insight to see what financial attitudes you resonate with the most and how they could be possibly subconsciously guiding on your financial behaviors and influencing your overall financial well-being.

Introduction

00:25 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season five, episode three and today my expert guest is Cortnie Baity, a doctoral candidate in human development and family sciences at Florida State University and licensed marriage and family therapist intern. Cortnie’s dissertation is on how your upbringing influences your financial attitudes and behaviors later in life, and how to bring about better financial outcomes, specifically for African American families. We discuss how financial attitudes form and how they translate into behavior. Cortnie shares a framework from the literature of four money belief systems, two of which can become pathological. We discussed the financial messages PhDs absorbed from academia and how those might influence financial attitudes and behavior and what PhDs can do to combat financial attitudes that don’t serve them well. Without further ado, here’s my interview with Cortnie Baity.

Will Please Introduce Yourself Further?

01:25 Emily: I am delighted to have joining me on the podcast today Cortnie Baity, who is a doctoral student, and she specifically has an interest in financial attitudes and how they develop. This is such a relevant subject for us. I’m so delighted that Cortnie reached out to me and that we’ve been corresponding and she agreed to come on the podcast. So Courtnie, will you please introduce yourself?

01:47 Cortnie: Hello, Dr. Roberts and hello listening audience. Again, my name is Cortnie Baity. I am a current doctoral candidate in the human development and family sciences PhD program. I am located at Florida State University. I earned my masters of science degree from the couple and family therapy program at the University of Kentucky, where I initially became interested in personal finances. Just a little bit of background about my areas of research, it includes family finances, personal finances, socialization processes, African American families, and minority mental and physical health disparities. The overall goal of my research program is to minimize any inqualities in mental and physical health, experienced by black families. In the way that I have chosen to go about intervening on health for black families is looking at how personal finances influences or undergirds some of those health disparities that we might be noticing in the literature.

02:52 Emily: That is so interesting. So exciting. Really, really glad that you’re working in that area. Can describe for us for just a couple of minutes, the dissertation that you’re working on, your specific research?

03:04 Cortnie: Yes. So my dissertation studies financial socialization in black American families, and its implications on financial wellbeing for young black adults. My primary hypotheses is that black young black adults experience asset and resource inqualities, in part because they receive minimal or possibly counterproductive training about finances. My goal with my dissertation is to do three things: document diverse types of family, financial socialization experienced by black young adults, explore the consequences of types of family, financial socialization for financial literacy and financial wellbeing, and then lastly, consider gender variation experienced in family and financial socialization and how it may have undesired effects on financial literacy and financial wellbeing. My overall hope for this study is to, in this study and in following research, will be to produce clinical strategies for marriage and family therapists like myself to help black clients improve financial management, which can help reduce asset and resource inequalities among black families. Personal finance has been demonstrated in the literature to be connected to mental and health outcomes, especially unfavorable mental and physical health outcomes. So I’ve chosen to focus my research on personal finance interventions to improve black health overall.

What is Financial Socialization?

04:40 Emily: Yeah, I’m sure the listeners know that this is a subject that I’m intensely interested in — how to improve financial outcomes among our population, the PhD population. And this is so applicable. It’s a great subject for me to learn about as well. You’re using the term family financial socialization. Can you explain that? Can you define that a little bit more? What plays into that?

05:03 Cortnie: Yes. If we think about socialization broadly, there’s a communication component, so it’s the sending and receiving of a social message, but it also includes the implementation and application of that message into the individual’s life. If we put that into context of personal finance, we’re looking at how families socialize their members surrounding personal finances. That includes how the messages and beliefs surrounding personal finances, including budgeting, world perspectives about money, and the economy and that influences an individual’s financial attitudes. There’s also a tie between financial attitudes or your perspective of finances and how that influences your financial behaviors. And then of course your financial behaviors feed into your overall financial well-being.

06:03 Emily: Yeah. So there’s a whole chain there and this is something that is being passed from parents and other family members to children, and it’s being propagated within families, as well as within society more largely. Can you give some concrete examples of maybe those communications or demonstrated behaviors?

06:23 Cortnie: Sure. One concrete example of a family financial socialization that you may witness in families is, for instance, when families, parents will distribute out an allowance to a child, and they say, “Hey, you know, you have this amount of money once it’s gone, if you want to buy things for your hobbies or if you want to buy a video game, that money is gone.” And so it’s socializing the child surrounding finances in the family social context. Some type of message is being transmitted over to that child. The thought behind family financial socialization is that the child not only hears that message from the receiver, but they start to internalize that message and start to make decisions about their environment around them, based on the message from the receiver. And in that case, whether the child internalize the message to save the money and let it stretch a little bit. So don’t kinda spend all your money on the most expensive video game because you know that if you want to go to the movies the next weekend with your friends as well, you won’t have anymore financial means until the next time that you receive an allowance. So that will be one concrete example.

07:47 Emily: Yeah. Thank you for that. That’s definitely an example of an intentional or an overt way that parents would communicate around finances to their children. I don’t know about you, but the family that I grew up in, the signals around finances were implicit. We did not talk very openly about this subject, but I learned a lot from my parents by example. So can you give another example of how that kind of communication would work?

08:11 Cortnie: Oh yes, absolutely. Gudmunson and Danes has a family financial socialization theory and they support the idea that the majority of family financial socialization happens through modeling or observation. So one implicit way that we learn about money is when our parents will take us to the bank with them. There is some type of message that is being sent to us that there are outside institutions that help us to manage our money. That would be one concrete example of family financial socialization. You’re with your parent, it’s in the family social context is not really being spoken we’re at the bank because I need them to help me manage my money, but it’s that kind of unspoken undertone. It’s an institution It’s associated with money. I see mom and dad go here. So those kind of implied messages are occurring in that kind of way.

09:16 Emily: It’s a really, really interesting example. It just reminds me of, well first of all there’s a large unbanked population within the United States, right? So there’s all kinds of children who are not getting that particular kind of message that maybe some other children are. Maybe the actual interaction the parent is having with the teller or the manager could be positive, could be negative. All kinds of differences there. And it’s actually making me think now. So I have two very young children. The older one is maybe on the cusp of being able to learn some money lessons if we were to overtly teach something. But I’m just thinking about how much financial stuff that I do that it just takes place digitally online. It wouldn’t necessarily be seen very easily by my children if I just choose to not do that stuff in front of them. So yeah, I don’t know. Going into the new generation, we might have to have different strategies around how to do the socialization, given the differences.

10:09 Cortnie: Very true, very true.

The Four Financial Attitudes

10:11 Emily: Okay. So that’s about how parents and families are communicating some lessons around finances, implicitly or explicitly. How the children are receiving those attitudes. Can you speak a little bit more about the connection between what you’re learning in your family and the attitudes and so forth that you develop and then how that translates to behavior? What the connection is between those two.

10:33 Cortnie: Personal finance psychology and marriage and family therapist scholars, Klontz and Britt have produced some studies that look at how financial attitudes developed and they suggest that trans-generational personal finance messages, typically learned in childhood, subconsciously influences the development of financial values and beliefs. And collectively these financial values and beliefs are referred to as financial attitudes. So Klontz and Britts specifically have come up with four distinct financial attitudes. One is money avoidance, money worship, money status and also money vigilance. To have these categories are important because some of them suggest a pathologic view of money that can have a negative impact on your financial behaviors in your overall financial well-being.

11:35 Emily: I love to hear a framework. This is great. Can you say a couple of words about what each of those four categories are so people can kind of say, “Oh, I definitely see myself here or there.”

Money Avoidance

11:45 Cortnie: Reiterating when I say a financial attitudes are important because certain attitudes for example, like money avoidance and money worship, have been demonstrated to suggest pathological views of money. Those who resonate with money avoidance attitudes may tend to believe that money is bad or that you don’t deserve money, and for people with this personality, money can typically evoke feelings of fear, anxiety, or disgust even. This is a financial attitude that is common among low income, younger, and single individuals because they typically have something going on with them where money is evoking these anxiety or stressor indicators for them. It has been demonstrated that typically those who are money avoidant produce, financial outcomes like financial well-being that are not as high as individuals who possibly resonate more with other types of financial attitudes.

12:58 Emily: Yeah, I definitely can see that. I mean, we can sort of imagine very easily that prototype person who is money avoidant. There’s probably, I don’t know if they’d be listening to the podcast, but there’s certainly potentially some of those within academia, within graduate students. Maybe not because of how they were raised, but then the environment that they’ve been put in, you know, since getting into training. We’ll talk more about that a bit later, but go through these other three categories please.

Money Worship

13:23 Cortnie: Money worship, more so those types of individuals, you would see indicators of that individual where they’re very central to their career. They’re very central to building wealth and things like that. It can be suggestively pathological. In the Klontz Money Scripts inventory, there is a cutoff score for what is kind of considered as like a clinical concern, a clinical cutoff score. If you go beyond that threshold, you will be considered possibly you need to look into it being an actual issue. Even if you resonate with, and I do want to say it is possible for you to resonate with several categories of financial attitudes. For a lot of people it kind of depends on the context. Like we talked about, being a PhD student. But going back to what I was saying with the, clinical cutoff score, there essentially are four different types of financial attitudes and worship would be another example of that. There’s literature that goes through the exact representations of the four financial attitudes and Klontz and Britt will be the scholars to kind of refer to that information in further detail.

15:05 Emily: Yeah, I would love it if you could send me a link to put in the show notes for that. Yeah. So I think money worship is another one where we can again, sort of maybe imagine a prototype for that. And I think that I, obviously I don’t know about this clinically for myself, but I have been very careful, mentally to not, because I think I have maybe some tendencies where I could fall into that category. Maybe not even tendencies, but just based on what I do, right? I talk a lot about money. I’m very careful to not allow myself to fall into that category.

Money Status and Money Vigilance

15:33 Emily: Can you remind me what the final two were and maybe give some examples? These were maybe more the non pathological categories.

15:41 Cortnie: Money status, it more so resonates with viewing money as a social status for yourself. And then also money vigilance is being careful with money. Those are two that are not as suggestive to pathological views of money.

16:02 Emily: Yeah. Okay. Thanks for that clarification. I’m seeing myself maybe in the vigilance category, for sure, and I hope the audience is starting to get an idea of where they might fall and what possible interventions might be helpful depending on where they are.

Commercial

16:21 Emily: Emily here for a brief interlude. Tax season is upon us and while no one loves this time of year, it’s particularly difficult for post-bac fellows, funded grad students, and postdoc fellows. Even professional tax preparers are often thrown for a loop by our unique tax situation. And don’t get me started on tax software. I provide tons of support at this time of year for PhD trainees preparing their tax returns. From free articles and videos, to paid at-your-own-pace workshops, to live seminars and webinars for universities and research institutes. The best place to go to check out all of this material is pfforphds.com/tax that’s P F F O R P H D dot com slash T A X. Don’t struggle through tax season on your own. Visit my website for the exact information you need in the most efficient form available. Now back to the interview.

How Financial Attitudes Can Affect Your Finances

17:25 Emily: Can you give maybe like a concrete example of how let’s say, a money avoidant person, a behavior that might result from that attitude?

17:33 Cortnie: I think that it kind of blends into our follow-up question of how does academia, how does being a graduate student, how does that influence certain financial attitudes. As we all know, being a graduate student is very expensive, yet graduate students often have very little income, unless you’re in a situation where you do have enough fellowships and scholarship funding to carry you throughout your entire program. Also, because graduate students are in the process of becoming experts in their field, they may feel like they do not deserve to get paid very much. Those kinds of experiences typically evoke fear and anxiety surrounding money, which could be suggestive that graduate students tend to have a money avoidant financial attitude. Of course, there are clinical cutoffs for that, as we discussed before, but some of those common experiences and feelings of being a graduate student, surrounding money, may lead to being category categorized as money avoidant.

18:52 Emily: Yeah, I definitely want to talk about for this for another moment, because I think this is going to be such a common experience for many people in our audience. Either that they’re currently in this space, they are currently a graduate student and experiencing some of these forces and attitudes or maybe that is in their past and it’s still something they’re working on because they still have some residual effect, mentally, from that time. I do think there are pervasive messages within academia that your passion should sustain you. You should not care how much money you’re making right now or in the future because you just love your work so much, none of the rest of that matters. It really plays into a larger attitude within academia. And I’m not blaming any person or institution. This is just like a mother culture kind of thing around “Well, you should just go ahead and put your life on hold while you’re in training. Nothing else matters aside from your training. Put your money on hold, put your relationships on hold. Other things in your personal life, your health, mental health, all that stuff is secondary to the all consuming goal of your research getting to a certain level, finishing your dissertation, whatever it is. Super, super unhealthy. Super, super unsustainable. I mean, maybe you can do that for a few months or a year, but for the five, ten, more years you might be in training it’s too tall of an order. And yet this is still the message that we’re all kind of marinating in within academia. Right? And so what I think I’m hearing from you is that these messages, maybe it’s not the family that we grew up in, right? That has a certain influence on us. But then our academic family is also having an influence. Does that make sense? Can you talk a little bit more about that?

20:37 Cortnie: That definitely makes sense because essentially what family financial socialization theory suggests is that our founding beliefs and values surrounding money typically come from the family system because that’s typically our first opportunity to learn in a social context. As you become 18 and you move away from home and you have more interactions with other socialization agents, like being in an academic setting, being around peers, being in a romantic relationship, that influences your personal finances as well, or how you’re being socialized around personal finances as well. It’s certainly a undertone, kind of an unspoken thing in academia that the main goal is to focus on getting your program or research to a certain level, getting through the program and graduating and the personal finance piece is often not really addressed very much, or the stressors that are associated with finances are typically not addressed unless you actually go directly to a personal finance specialist on campus that can help you to continue to fund your program. And not just your program, but your life outside of that. A lot of graduate students have full blown families. They’re married, they have mortgages and all kinds of things like that. So yes, academia can definitely put some stressors on your personal finances and your financial beliefs and kind of make you question “Should I be money avoidant because it gives me so much anxiety or possibly having the opposite effect of making you so money vigilant to the fact that you kind of become OCD about just budgeting down to the dime every single semester so that you can have all your expenses covered.

22:43 Emily: Yeah I think there’s the component of what we sort of implicitly absorb in academia about work being the primary thing. But then there’s what you were just saying, the actual real life in your face stressors – the stressors associated with being academia, not being paid enough for where you’re living, having to pay tuition fees, the budgeting issues. These are all not just in your mind, these are real problems that are happening to students. And I think what I’d also love you to comment about is the influence that these experiences and hearing these messages can have on a young adult, right? We’re just talking about okay, the family is the first place where we start to form these attitudes. But I would imagine that a graduate student in their 20,s maybe straight through college and to graduate school is going to have a different set of experiences than someone who starts later on after working. Maybe they are married, maybe they’ve had just more time to build up what their beliefs are and their attitudes around their own finances. Can you comment about that a little bit?

23:46 Cortnie: So I’m not speaking from my empirical research theoretical standpoint. This is just my own personal perspective. But my belief is that when young adults go straight through graduate school and they don’t really get that real world application personal finance management, they kind of start at a deficit when it comes to personal finances as an early career PhD, or if you’re graduating fresh out of a master’s program or early career master’s degree recipient. You don’t have those opportunities to really grapple and absorb what it means to budget with an income and a salary, especially not at the level that you will be earning outside of a graduate program. Then also maybe not being privy to the realities of the consequences of not having enough personal finance related literacy. Not knowing about how credit works, how student loans may impact credit, how that may later impact your purchasing power when it comes to purchasing a new home or a car. And then of course, it has implications on your romantic relationship. Having to have not so easy conversations with your partner that “Hey, you know, when it comes to my personal finances, I’m kind of behind the curve”, especially if you have a partner who did not take the graduate school route, who did have opportunities to kind of build up their financial literacy through work experiences and budgeting that adults do who do not decide to go straight through graduate school. So yes, absolutely, going to graduate school for us to sit significant amount of years, not participating in the workforce as like a traditional adult would so to speak, definitely can leave a graduate school student at a little bit of a deficit when it comes to managing their personal finances. Unless you’re a business major, typically you do not get that background working knowledge about personal finance management.

How to Work with the Money Attitudes You Have

26:11 Emily: Yeah. This is exactly the space that I’m trying to step into. On that subject, once a person recognizes, “okay, academia is feeding me some toxic messages, it’s giving me all these stressors,” what do you do with that? How is it that you can change financial attitudes. Or maybe it’s from the upbringing as well. Maybe you recognize, “okay, my family was not super healthy around this, can I change my own way I approach these things?” How do you actually do that?

26:39 Cortnie: Me, personally, as I’ve gone throughout my graduate school education, I have become more immersed in the subject area of personal finances, becoming more aware of my own financial attitudes and financial behaviors that do not serve me well, and I go by the saying of try to practice what I preach in my clinical practice. And as a therapist, I suggest to all my clients, the first step of changing an unwanted behavior is to acknowledge that it’s problematic and explore its origins. If you recognize that you’re just taking out way too many loans, it’s just not feeling right to you, kind of explore the fact you’re going against what one of your financial values or beliefs are, which is to keep your loans to a minimum, and explore where the origin of the motivation to do that behavior is coming from. Once you have acknowledged that the behavior is problematic, explored its origins, from there I will suggest seeking out resources to support the desired behavior change. Personally what I did for myself is one, I made personal finances, I was very intentional incorporating that in my area of research. And also, my niche is actually surrounding personal finances, mental health, physical health and family relationships. And so it kind of forced me to get immersed in the personal financial literature, become more financially literate in ways that were supportive of my career, but also in my personal life. So I actually did the accredited financial counseling education requirement through Texas Tech University. I did that program back in this past spring and I learned a wealth about personal finances that not only legitimized myself as a marriage and family therapist, that her niche would be personal finances, but also my research. I will say another huge impact that it had was application into my own personal finances. Recognizing that there’s an issue with the financial attitude or the behaviors that you have become accustomed to in graduate school, exploring what the origins are, like why did you even start doing these behaviors, and then seeking out resources, and there’s a wide variety of ways of doing that, but just becoming more knowledgeable about healthy money management.

29:44 Emily: I can definitely see a parallel in myself to what you’re saying. I didn’t necessarily know that what I was trying to do was changing my attitude so that my behaviors would follow. But I can see, from my upbringing, I grew up with a one one parent who was like a spender and one who was like a saver, and sort of absorbed the spender mindset from one of my parents. And that was something when I finally had my own paycheck coming in, I realized my small stipend cannot support the spender inclinations that I had based on my upbringing. And so that was something that I had to, as you were just saying, recognize, “okay, this is going to put me at some dissonance here.” This desired behavior and the financial realities, I realize, “Okay, well that I learned that from my parent. That doesn’t have to be what I do. That’s just what my parent behaves that way, I can be different.” And as you just said, seeking out more and more resources and support around the positive behavior that I wanted to affect, which was not spending a lot of money whenever I wantet to. And so the resources that I went to at that time were personal finance books, the personal finance blogosphere, which now has morphed into podcasts and blogs and Reddit and all these other wonderful places where you can go for resources. So I really sort of started to see into the lives of people who I could recognize as models of positive financial behaviors and start to, um, enact what they were doing in my own life. And if I would be so bold, I will say that the Personal Finance or PhDs community is one of these places where you can learn some of these positve behaviors, from me and from the guests who I interview and from the articles I have on the site and there’s lots of ways you can get involved. In fact, please, if you’re not yet on my mailing list, get on my mailing list because I’ll be sending this great content your way every week.

31:35 Emily: Cortnie, thanks so much for pointing that out. I think we’re coming to the end of the interview here. If someone wants to follow up with you, maybe they have a question about something you’ve said today or maybe they’re like, “Oh my gosh, I need Cortnie in my life. I need more Cortnie”, how can they get in touch with you?

31:51 Cortnie: For those listeners out there who are interested, I’m always happy to share whatever information I have and chat with you. So, um, I can be best contacted at my email. It’s [email protected]. I am also listed on the Psychology Today website as a psychology today verified marriage and family therapist intern. You can look their website up and then as we’ve discussed previous to actually starting the interview, you’ll leave the actual website in the notes. Then also the agency that I’m currently contracted it as a marriage and family therapist intern, Better Living Solutions in Tallahassee, Florida, and we’ll also leave information for their direct website. Those are two additional mediums to gain contact with me.

32:57 Emily: Yeah, it’s so excellent. All that information will be in the show notes as Cortnie just said.

Final Words of Advice

33:00 Emily: So last question here, Cortnie, what is your best financial advice for another early career PhD?

33:07 Cortnie: In the same spirit of the conversation we’ve been having, I would suggest early career PhDs to take a financial attitude questionnaire — one example is the Klontz money script inventory — and to gain additional insight. If you have some inklings but you’re not exactly sure if you’re at that clinical cutoff for certain financial attitudes, to see what financial attitudes you resonate with the most and how they could be possibly subconsciously guiding on your financial behaviors and influencing your overall financial well-being.

33:47 Emily: Perfect. And can we add that link to the show notes as well?

33:49 Cortnie: Absolutely.

33:50 Emily: All right. Perfect. Oh, Cortnie, this is such a wonderful interview. Thank you so much for providing your expertise on this subject.

33:56 Cortnie: Thank you so much for having me Dr. Roberts, I enjoyed talking with you.

Outtro

34:01 Emily: Listeners, thank you for joining me for this episode. PFforPphDs.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcast, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media or with your PhD peers. Three, recommend me as a speaker to your university or association. My seminars covered the personal finance topics PhDs are most interested in, like investing, debt repayment, and taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.

Healthy, Wealthy, and Wise: Choose a PhD Program That Will Support Your Personal and Professional Development

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This episode comprises seven audio clips from PhDs and PhD students who are advocates for PhD students’ professional and personal development. They each answer the prompt: “What aspects of a PhD program – beyond academics and research – should a prospective graduate student consider when deciding among offers of admission and why? How should they investigate and evaluate the strength of a program in this area?” The contributors are Dr. Emily Roberts of Personal Finance for PhDs on finances, Mr. Kevin Bird on unionization and advocacy, Dr. Emily Myers on unionization and advocacy, Dr. Jen Polk of Beyond the Professoriate on career development, Dr. Katy Peplin of Thrive PhD on mental health, Ms. Susanna Harris of PhD Balance on mental health, and Dr. Katie Wedemeyer-Strombel on work-life balance. Please share this episode with all the prospective PhD students in your life!

Links Mentioned in This Episode

PhD personal professional development

Introduction

00:05 Emily R.: Welcome to the Personal Finance for PhDs podcast, higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season five, episode two and today I have a very special episode for you. I have invited six other PhD advocates to contribute their voices to this episode and you’ll hear from myself and each one of them in turn. The questions I’ve asked each of these contributors to answer are: what aspect of a PhD program, beyond academics and research should a prospective graduate student consider when deciding among offers of admission, and why? How should they investigate and evaluate the strength of a program in this area?

00:45 Emily R.: If you’ve already matriculated into or completed a PhD program, you probably appreciate what an important topic this is. Will you take a minute to please share this episode with prospective PhD students in your sphere of influence? Please tweet your thoughts on the episode using the hashtag #PhDfactors. In this episode, we’re going to hear from me, Dr. Emily Roberts of Personal Finance for PhDs on finances, Mr. Kevin Byrd on unionization and advocacy, Dr. Emily Myers on unionization and advocacy, Dr. Jen Polk of beyond the professoriate on career development, Dr. Katie Pepin of thrive PhD on mental health, Ms. Susanna Harris of PhD balance on mental health and Dr. Katie Wedemeyer-Strombel on work life balance. Without further ado, let’s hear from our contributors.

Finances with Dr. Emily Roberts

01:43 Emily R.: Naturally, my contribution to this episode revolves around your finances, specifically how to evaluate whether you will be sufficiently supported by the stipend or salary provided by the program. You may or may not end up using this factor when you choose your PhD program, but either way you should go into graduate school well aware of the financial realities. When I was applying to PhD programs, I didn’t pay much attention to the stipends in the offer letters. I naively trusted that every program I was accepted to would support me financially to a reasonable degree. The PhD program I picked based on only the research opportunities and location actually did pay a decent stipend, but that was blind luck on my part. I know now that graduate students often do experience a great degree of financial stress and ill effects. Approximately 50% of PhD students take out student loans, prior to graduation and many also accumulate credit card and other types of consumer debt. Some PhD students qualify for snap benefits and a few experience food insecurity. Think about the difference it would make to your mental health alone to attend a graduate program with a stipend that allows for a comfortable standard of living versus a program where you have to pinch every penny, side hustle like mad, and still be in the red every month. Do you think you will be able to perform well academically if you’re experiencing chronic financial stress?

03:08 Emily R.: There are long-term financial effects to think about as well. If you currently have student loans, will your stipend allow you to start to repay them? If they are un-subsidized, they will accrue interest all through your graduate school deferment period and you’ll have an even larger balance to tackle post-PhD. What if you were able to start investing with your stipend? If you’ve never played around with a compound interest calculator, pause this episode and spend a few minutes doing so now. With reasonable assumptions, investing $250 per month throughout only five years of graduate school can turn into nearly $1 million in your retirement years. That’s $1 million of wealth in retirement that would not exist if you accepted a stipend that didn’t afford you that ability to save.

03:56 Emily R.: Are you sufficiently motivated to pay attention to the stipends in your offer letters? Good. I’m going to tell you how to evaluate the single most important factor in your funding package. The number that I want you to find in each of your offer letters is your stipend or salary net of fees. Some of your offer letters might state this number clearly and some might obfuscate it. To compare apples to apples across all your offers, you need to know how much money is actually going to end up in your bank account after your tuition, insurance premiums, and all fees have been paid. If your offer letter doesn’t make it clear to you what financial obligations you will have to pay to the university from your stipend, it’s worth a follow-up email to clarify.

04:39 Emily R.: Next, we need to put this net stipend number in the context of the local cost of living for the university. I like to use the MIT living wage database for this. The living wage is basically the amount of money it takes to pay for basic living expenses like housing and food in that local area. It doesn’t include discretionary expenses like travel or putting money toward financial goals. Go to livingwage.mit.edu and click on the state and county of the university you’re considering scroll until you see the amount of money that constitutes a living wage, including income taxes for a single person. If you have a child, or someone else who depends on your income, you may need to scan over to the amounts for larger family sizes. Take the living wage number you found and compare it to the stipend after all education related expenses have been paid. Ideally, your stipend will be higher than the local living wage. Personally, I felt I was able to live comfortably during grad school and save a good amount of money and my stipend was about one third higher than the local living wage. The number that represents your stipend, net of fees divided by the local living wage is the number that you can compare across all of your offer letters.

05:54 Emily R.: Now, what should you do with this information? My advice, which you can take or leave, is to eliminate from consideration all of the PhD programs that will pay you less than the local living wage. If you choose to go to a program that pays you poorly, steel yourself for the likelihood that you will take out student loans or consumer debt during your PhD or have to devote a lot of time to side hustling. You may decide that this is worthwhile, but at least now you’ll go in with your eyes open. If you have two or more offers that are above the local living wage, if you like, you can continue to factor in financial considerations as you make your decision. In fact, I’ve made a list of a dozen additional factors you should evaluate before committing to a PhD program. The stipend divided by the local living wage actually just scratches the surface. You can download the PDF of the full list by going to pfforphds.com/offerletter and signing up for my mailing list.

Further reading: 10 Ways to Combat Financial Fragility Beyond Grad School

Unionization and Advocacy with Mr. Kevin Bird

07:00 Kevin: Hi, my name is Kevin Byrd. I’m a PhD candidate in the department of horticulture at Michigan State University and I’m also the current president of the graduate employees union in Michigan State and I’ll be covering how and why to take graduate unions into account for your graduate school decision. Graduate unions are important to consider because I think they’re central to a safe, secure, and equitable experience in graduate school. If you have a graduate union, it means there’s a system in place to combat harassment, discrimination, overwork, and other workplace mistreatments, independent from these university institutions. It also means there’s more power to pushing universities to provide living wages, comprehensive health insurance to all graduate assistants and to keep university fees low. When we were looking at other universities at Michigan State for our last contract campaign, we found a pretty stark pattern that the highest stipends in terms of cost of living were held by unionize universities and the lowest by non-unionized. In fact the only universities that had stipends less than half the cost of living were non-unionized universities.

08:03 Kevin: Additionally, through collective bargaining, there is something that holds institutions to their word and maintains benefits and services graduate assistants are entitled to receive. When I was an undergraduate at the University of Missouri, there was a moment when graduate assistants lost their health insurance with two days notice. Without a binding collective bargaining agreement, these students were largely left powerless to get back the benefits they were promised upon signing. Meanwhile, at Michigan State after several contract campaigns, we have some of the most comprehensive health care on campus with low deductibles and low co-pays, even after the university tried to reduce those benefits in the last contract cycle. It’s this sort of stability and progress that unions help maintain and build upon year after year. Hopefully the benefits of unions are at least partially clear right now and we can move on to how to evaluate unions at universities that you’re looking at.

08:52 Kevin: One of the first things to look at is whether the university is public, private, public universities are governed by state labor law, while private universities are governed by federal labor law. Given the latest ruling by the national labor review board, most private university unions are fighting for a struggle to be recognized by universities, whereas many state labor laws allow for graduate students to be unionized. Knowing whether university is public or private is one of the easiest ways to figure out if there is an established union or if there is a union currently fighting for recognition. Right now at Harvard University, the University of Chicago, and Loyola, all private universities, there are unions but they are not officially recognized by the university and they have not been able to participate in collective bargaining.

09:33 Kevin: The next move would be some internet sleuthing to look at the website of the union at the university you’re looking at first see if they have their last collective bargaining agreement posted. This would tell you the benefits that graduate assistants currently have with the university, especially important things like the minimum stipend the university can pay you, the pay increases every year, and the current health insurance plan the graduate students currently enjoy.

09:54 Kevin: Next, would be the current campaigns the union’s currently working on. What sort of things need to be addressed in the university? What’s the union doing to address them? And what does progress look like over the last few years? All of these things will help you get a landscape of what issues are facing a campus and how a union is working to address them and how successful they’ve been in the past. Additionally, you can look at media presence to see how the news covered the last bargaining cycle that a union undertook. Did they have to shut down streets with a march? Did the hold rallies? What sort of actions were they able to take that eventually led to the progress that they got in their latest contract? These things in particular can tell you how well organized a union is and how they can use their power to make changes on progress for graduate assistance.

10:34 Kevin: You can also look for other benefits that unions provide to their members. At Michigan State, we have something called the solidarity grant where members can apply to the union in times of financial need and receive a couple of hundred dollars or a thousand dollars to address major crises that have occurred in their life, from a flat tire to burst pipes. One final thing to consider is whether the university website talks about the union on it. This could be an indication of labor relations between the union and the university. It’s probably best to be at a university that acknowledges and at least recognizes the union and works to distribute information about contract benefits to prospective and current students.

11:07 Kevin: All these things considered, I would personally recommend prioritizing universities with strong unions in your decision. A graduate degree can take many years and the political and economic landscape can change rapidly. An established union is capable of increasing and maintaining current benefits, while also fighting off rash decisions by university administrations. If you’re committing to live somewhere for five years and you’re embarking on an ambitious academic project, it’s good to have someone on your side fighting for your benefits and maintaining a quality of life that you deserve while you’re working on this degree. While these conditions may exist anywhere, I think they’re much more likely to occur in universities with strong graduate unions.

Unionization and Advocacy with Dr. Emily Myers

11:50 Emily M.: Hi, my name is Dr. Emily Myers. I, very recently, as of last week, have a PhD in pharmacology from the University of Washington, here in Seattle. I am also an executive board member with UAW 4121, which is the union that represents about 6,000 postdocs and academic student employees, like teaching and research assistants, here at the University of Washington. I am going to give some insights into what I wish I had known when I was looking for a PhD program, and how important unions can be for your graduate student experience beyond stipends and student fees, which unions have also won major victories for graduate students.

12:31 Emily M.: So I chose my program for my science interests and because I loved Seattle, but I really didn’t have the depth of knowledge about how institutions work that I do now that I’m on the other side of my PhD. I was fortunate that I chose a university where the graduate students had been unionized and had been building power since 2001 and we had stronger workplace protections than most other schools, because academia is a strict hierarchy, with power dynamics that do not favor trainees, like grad students. In tandem with these power structures are institutional structures, where harassment and discrimination are widespread. In fact, the National Academies of Science, Engineering, and Medicine put out a report last year showing that women in science face rates of harassment second only to the military, and that this was for white women, and so fails to capture any sort of intersecting identities. And it’s important to understand that harassment and discrimination are about power, and who has power, and who maintains access to that power. Unions are a fundamental way to change power structures, through bottom up grassroots organizing, and gives graduate students and other trainees more of a voice in their workplace. As union members, we have access to third party neutral arbitration, which is the only scenario where the university does not have final control over the outcome of a harassment claim. This is a huge step in rebalancing power and that’s one of the top things that grad students at Harvard are on strike over and are fighting for right now.

14:07 Emily M.: In addition, unions can be a phenomenal source of community in graduate school, because graduate school can be extremely isolating. And so finding folks outside of your discipline is huge and the unions can also offer resources that are not dependent on university approval, which can be critical for international students on visas. And I think that enthusiasm and recognition for the need to change these power structures is reflected in how we are seeing a huge spike in graduate students and postdocs forming unions across the country at all kinds of schools.

14:43 Emily M.: So to give an example of this, towards the end of my time as a PhD student, I made a complaint about a professor in my department who notorious for making sexual jokes for harassing young women and saying racist things. And the university investigated and said while they believed us, but it wasn’t bad enough, meaning it didn’t cross the legal definition of harassment, and so the university was not liable and would not take further action. And it was through working with my union, we were able to get this professor removed from supervision of grad students, even after the university failed to take action. So I am not sure that without my union community and allies, I would have felt safe enough to say anything in the first place, let alone get results from speaking out about harassment.

15:32 Emily M.: As always, I hope anyone listening here won’t face harassment and discrimination in their time as a graduate student or in general. But I also strongly encourage anyone who comes from a marginalized background or is concerned about their future work environments to consider the status of a graduate student union in their decisions about choosing a program. So you can find out if a university has a union by either asking current graduate students. Or universities typically will have a labor relations office and you can check their webpage to see what workers are unionized on campus and you’ll want to look for a name and local number. Like for example, UAW 4121 is United Auto Workers four one two one. Because student senates and associations are not the same thing. And you can always reach out to current graduate unions like mine at UAW4121.org for more resources or resources or information. Or for example, if you’re in California, it would be UAW2865.org. And with that I just want to say congratulations on your PhD programs and good luck.

Career Development with Dr. Jennifer Polk

16:50 Jennifer: My name is Jennifer Polk and I’m co-founder of Beyond The Professoriate. I earned my PhD in history from the University of Toronto and now work full-time helping graduate students and doctoral degree holders build awesome careers. It’s crucial to actively attend to your career while pursuing a PhD. This might seem counterintuitive. After all, isn’t the PhD itself the thing that will help your career? While that may occasionally be true, it’s only true if you build into your experience activities and accomplishments that matter to employers, both within and beyond academia. That building is usually something you need to do for yourself. You can’t rely on your advisor or graduate program to do it for you.

17:44 Jennifer: Most PhD students live on minimal stipends and it’s common for folks to take additional paid work, if they’re able, to pay their way. An awful lot of folks have significant student loans too, of course, and if you’re a regular listener of this podcast, you know all this very well. All of that is to say that you might need a decent paying job pretty quickly once you graduate. Since it could take months to find work, even for the most successful among us, you’ll need to put in the groundwork over the years of your PhD to build experiences, gain skills, and cultivate a professional network that spans a variety of fields. That’s so you’ll be in a good position to get hired when it’s time to start applying for jobs. Ideally, your advisor will be supportive of your career no matter where it takes you. A good match with your primary advisor is incredibly important. That’s true beyond career concerns, of course. Advisors have a lot of influence over your experience, much more than you might expect, and there are academic studies that show this. I’m not just making it up.

19:01 Jennifer: Beyond your advisor, ideally, your department and the graduate program specifically will actively create opportunities for you and your fellow students to gain professional experience and grow your networks. Maybe you can do an internship with the full support of your department or attend regular lunch and learn or other networking events that they organize. Pay attention to academic and nonacademic resources. The default in many academic disciplines is to privilege scholarly careers above all others. Avoid, please, avoid departments that give you that vibe. They are not living in reality and you very much will be.

19:46 Jennifer: The bottom line here is to make sure your advisor will treat you with respect always and support you doing what you need to do to build career-relevant experiences and skills for both academic and nonacademic careers. You can absolutely ask your prospective advisors pointed questions about what kinds of career support you can expect. This is your career, your life, and you want to make sure you’ll get the support and resources you need for success during and after your studies. Graduate school is hard enough without all this added stress.

20:21 Jennifer: As you’re exploring your options, learn about programming and other opportunities available to you via the institution’s career center or graduate school. Look, for example, for a robust series of workshops, for career consultants, you can make one on one appointments with. Maybe they focus specifically on graduate students, even just PhD students. That’s awesome. You can also investigate what’s being done at the association level, so to check on what your academic discipline is up to. For example, some of the larger scientific societies host regular webinars and program multiple career-related sessions during their annual meetings. That’s great. Do take a proactive approach before you accept an offer and enroll. This is not the time to be shy. If you don’t find a good fit, you might be better off not doing a PhD at all or not this year. Your bachelor’s or master’s degrees are absolutely good enough to help you create an awesome career and life for yourself. One filled with all the creativity, intellectual rigor and challenging problem solving that drew you to want to do a PhD in the first place.

21:36 Jennifer: Learn more about Beyond the Professoriate on our website beyondprof.com and you can find us on social media too. You can also follow me, Jen, on Twitter at @FromPhDtoLife. I’d love to see you there. Thank you.

Mental Health with Dr. Katy Peplin

21:58 Katy: Hello, my name is Dr. Katy Pepin and I am the founder and head coach of Thrive PhD. Thrive PhD is a community for graduate students. It’s also individual coaching, courses, a Twitter presence, and Instagram all at that handle. Why I care about this aspect, mental health, of PhD programs is because it was one of the things that was so hard for me when I was a grad student. I have been dealing with a brain that tends toward anxiety, that can have some depression issues. My diagnoses aren’t as important as the fact that I knew early on in my PhD program that if I didn’t take care of my brain, as well as my career and my publications, I wasn’t gonna make it through.

22:48 Katy: So some of the things that I think it’s important to consider when you’re looking at a PhD program are first of all, the resources that are available for your mental health, through the university and hopefully at no cost or little cost to you. Some questions to ask: are grad students allowed to be seen in the on-campus mental health facilities? Sometimes those are undergraduate student only, so that’s important to know. Whether or not the health insurance that you’ll be offered covers mental health services or medications? If so, is there a limit to how many sessions you can have per year or per semester? Do you have the ability to be seen by providers outside of that insurance network or are you limited to a handful of people inside of the area? All really good questions to ask for your insurance.

23:41 Katy: Secondly, it’s important to kind of ask some questions around the mental health culture in the department. Some of the sure sign tells for me are: one, do graduate students stay enrolled? Do they have a high dropout rate? Sometimes that can indicate a mental health climate problem. Do people openly and excitedly talk about their non-PhD, non-grad school lives in the program? Do they talk about how they go rock climbing? Is it encouraged to work out? Do people have the ability to flex their schedules based on how they’re feeling on any given day? Is the opportunity available for you to work remotely? And if people are struggling, do people feel comfortable asking for help around those areas?

24:29 Katy: It can be really difficult to find that out on a prospective visit or even from an email as you’re evaluating, as you’re not a student. But it can be very important to find ways to ask that question. So some of the questions that I have asked to get around the mental health climate without directly saying, does your faculty support or not support the idea of graduate students having robust mental health resources and support, are to ask things like, do people feel comfortable talking about their personal lives? Do any graduate students have different family structures? Do graduate students have kids? Is anybody a parent? Is anyone a caretaker? What kind of relationships do people have? And are those things supported? Another great question to ask are how are the boundaries around breaks? One of the sure fire tells of a department that has a kind of problematic culture around mental health is that students either don’t feel comfortable taking breaks or they only take them in between the semester when their grading is finished or when the university is otherwise shut down. So ask graduate students, you know, what are the PI’s policies around weekends and evening work? What are the policies if you need to go home unexpectedly or if you’re not from here? Is it flexible enough for you to work remotely if you need to? Are there opportunities for graduate students to tweak the conditions of their work in order to best support themselves?

26:02 Katy: It can be really hard to ask those questions and it definitely can be worrying to say, I want to know what these resources are in advance because some graduate students might feel like that makes them seem like they’re already a problem and they’re not even there. So I would embolden you and encourage you to ask as many questions as you feel comfortable, but know that there are always ways to build support around yourself, whether that is through what the university provides or supplementing it from an outside perspective or place. I’m wishing you a happy new year. And again, my name is Katy Paplin. I am the founder of thrive PhD. You can find me on Twitter or Instagram @ThrivePhD or thrive-phd.com

Mental Health with Ms. Susanna Harris

26:58 Susanna: Hi everyone. My name is Susanna Harris and I am a PhD candidate at the University of North Carolina in Chapel Hill. I am also the founder and CEO of the PhD Balance. PhD Balance is an online community dedicated to talking about those difficult challenges and problems we face while we’re in our graduate programs. I founded this group because we really wanted to make a space to talk about certain things like dealing with difficult advisers or understanding what to do after graduation, but most importantly we wanted to talk about the struggles that students have with their mental health and with dealing with mental illness throughout their programs. I really care about this because I myself have depression and anxiety and I realized that a lot of other people around me did as well, but we just didn’t talk about it.

27:48 Susanna: For this reason, I think it’s really important to look at graduate programs and understand how they will support students’ mental health. You can get a good idea of this based on what kind of resources they have, as in, can you go to campus health? How long does it take to get an appointment? What kind of treatments are covered and can you see a therapist outside of those treatment options? This might include how does the department respond to when there is a mental health crisis or when a student divulges to someone that they are struggling with some sort of mental illness. You can even understand what is the culture surrounding the discussion of mental illness. Does the department actively provide resources? Will the lab group that you’re joining be open and accepting of someone having a difficult time? Does the university provide mental health days or access to other kinds of literature? This is really important because although a lot of us, myself included, go into graduate school thinking we are prepared and we will somehow get through it faster and easier than the average, we have to remember that the average is made up of people just like us and I’ve quickly realized that the challenges I faced in the PhD were just as hard as people before me had said.

29:06 Susanna: So what are the best ways to go about seeing if your new program or your new lab will take care of your mental health, no matter what kind of challenges arise? The best way to do this is to just ask people directly. Say, “this is something that is commonly talked about. I know that others have expressed difficulties with dealing with their mental health. How does it work in where you are?” It’s better to ask things about how or what or when rather than just asking, “is the mental health culture good or is mental health supported?” You can ask things like what has happened in the past when someone has talked about these things or you can say, are you aware of what resources there are and can you show me where to find them? Even understanding if a faculty member or a lab member or department has or knows about these resources tells you a lot about how important this topic is to them.

29:57 Susanna: If you want to understand more about my perspective, you can find me on Instagram and Twitter at @SusannaLHarris and I would love for you to check out PhD Balance. We have a website that’s www.phdbalance.com or you can follow us on Twitter and Instagram to hear other people’s stories of dealing with these really hard challenges in graduate schools and sharing resources about how to get through a program. That’s at @PhD_balance. So thank you so much. Bye.

Work-Life Balance with Dr. Katie Wedemeyer-Strombel

30:39 Katie: Hi, I’m Dr. Katie Wedemeyer-Strombel and if you follow me on Twitter it will be no surprise that I’m here to talk about the importance of considering work-life balance when choosing a PhD program. This is a subject I’m passionate about because I chose a PhD program without considering things like departmental culture and the recreational opportunities in the area. Both of these ended up being a pretty bad fit for me and in hindsight I wish I would have more strongly considered the nonacademic factors as seriously as I considered the academic ones. As a PhD student, it’s very easy to lose yourself to your program, to your work, and it’s critical that you’re able to rest and recreate regularly in ways that fuel you. As I say frequently, rest is not just a reward for hard work, but a critical component to working hard. Making sure that the university you attend and the surrounding area can provide enough resources for your well-rounded life and interests is important.

31:33 Katie: When you become a PhD student, generally you will work for the university as a teaching or research assistant in addition to conducting your own research and while will take up a lot of your time and energy, it should not and does not have to be all that you are. You are allowed to be a whole person, not just a research robot and finding a departmental culture and location that fit your interests is important.

31:57 Katie: Let’s first talk about departmental culture. What do I mean by this? Let’s say for example, if you don’t drink alcohol but learn that a department you’re considering regularly encourages binge drinking as a reward for working hard, then perhaps that’s not a great fit for you. If it’s important for you to see your family for certain holidays, make sure that the department you’ll be joining encourages or at the very least does not reprimand students for taking time to spend with loved ones.

32:25 Katie: Now about location of the program. This is something, again, I mistakenly did not consider when choosing my program and it made falling into the bad habits of overwork and over-drinking too easy, as my usual hobbies and recreational activities were hard to come by in the area. For example, do you like to hike and camp? Then a university in a flat state with few nature exploration opportunities may not be a good fit. Do you enjoy seeing or performing in live theater? Google the area and make sure there’s an outlet for this nearby. Does seeing the ocean or other body of water help calm you down when you’re stressed out? If so, maybe only consider schools that have natural features that fit these needs.

33:04 Katie: So how can you look into the work life balance factors as a perspective student? Well, the best thing you can do is ask current students in the department, preferably over the phone or in person, questions about the local culture within the department and the recreational opportunities nearby. Preferably, you’ll be able to talk to this current students over the phone or in person, and I specifically recommend asking over the phone or in person so that the current students will feel more open to answering honestly, as they don’t have a written record of their answers. If you are unable to ask in person, say on a recruiting trip, you can email and ask for a quick phone call. In my experience as both the perspective student and the current student in this scenario, most folks are happy to chat and share their own experiences. Some questions that I recommend asking are: are current students able to comfortably take time to spend with loved ones? Can they travel for holidays? Are they encouraged or reprimanded for working reasonable hours and taking time away when needed? What do they do for fun that’s not related to their work? What do they like most about the location of their program? And what do they like most about the departmental culture that they’re in? If you’re a minority, I’d also recommend asking others who share similar backgrounds with you if they feel that their way of life feels welcomed and safe within their department and local culture. And one of the most important questions I think you can ask is if the current student would choose the same program again, knowing what they know now about it.

32:42 Katie: So now that you’ve talked with the current students about the departmental culture and the location of the university, what do you do with this information? Seriously consider their answers and allow those answers to help you decide between programs. If you get an off feeling from a program’s culture or worry that you won’t be able to do your favorite hobby, trust your gut and find a program that best suits your needs, both the academic and your personal work life balance needs. As my amazing advisor, Dr. Tarla Rai Peterson once told me, “We are all better off when we give ourselves permission to know one another as whole people.” Your PhD research is going to be important, but who you are as a person is even more important and I encourage you to consider your own personal needs in addition to your academic ones in choosing a program. For more on work life balance as a graduate student, you can read some articles I have in the Chronicle of Higher Education or follow me on Twitter at @krwedermeyer. Thanks for listening and best of luck as you choose your program.

Outtro

35:58 Emily R.: It’s Emily again as we close out this episode. I’d like to emphasize two themes I heard from the contributors. First, grad school is your real life. It’s not reasonable to try to ignore or suppress your personal life or what makes you happy and healthy for the five or so years you’ll spend in your PhD program. Choose a PhD program that enables you to live a full life and succeed academically. Second, you can find a good amount of information online, but nothing can replace personal real time conversations with current graduate students. The best time and place for those conversations, and your other observations, is during campus visits. I encourage you to attend as many of those as you possibly can and participate in them fully, asking all the questions the contributors suggested in this episode. You can follow up over the phone, as needed, as decision day approaches. I wish you all the best in choosing the PhD program that will foster both your professional and personal development. Please share this episode with all of the prospective PhD students in your life.

37:12 Emily R.: Listeners, thank you for joining me for this episode. PFforPphDs.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcast, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media or with your PhD peers. Three, recommend me as a speaker to your university or association. My seminars covered the personal finance topics PhDs are most interested in, like investing, debt repayment, and taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio

How Effective Presentations Advance Your Career and Improve Your Finances

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In this episode, Emily interviews Dr. Echo Rivera, a PhD in community psychology and founder of Creative Research Communications. Echo is an expert in effective presentation, and she teaches these skills to other academics and researchers. Emily and Echo discuss the various ways effective presenting can improve an early-career PhD’s finances, such as through career advancement and networking in person and online. Effective presentation design can even help you feel more confident and move past a fear of public speaking, as it did for Echo.

Links Mentioned in This Episode

effective presenting PhDs

Teaser

00:00 Echo: Try to invest in yourself as soon as you can. Especially for something like effective communication skills, effective presentation skills, the earlier you can get in on some type of professional development, it’s going to pay off more in the long run.

Introduction

00:21 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season 4, episode 19 and today my guest is Dr. Echo Rivera, a PhD in community psychology and expert in effective presentation design. During graduate school, Echo began teaching herself effective presentation design to help her move past her own anxiety around public speaking. Through her business, Creative Research Communications, she teaches academics and researchers how to present effectively. We discuss the various ways effective presenting can improve your career prospects and financial bottom line. Without further ado, here’s my interview with Dr. Echo Rivera.

Will You Please Introduce Yourself Further?

01:05 Emily: Joining me on the podcast today is Dr. Echo Rivera, and I’m so pleased to have Echo on. We’ve been in each other’s circles for a number of years now, but this is actually the first time that we’re talking together live. I’m really excited to have a conversation with her about what she does and how it can improve early career PhDEs finances. So Echo, thank you so much for coming on the podcast.

01:26 Echo: Thank you so much for having me. I’m really excited to be here.

01:29 Emily: Awesome. So please tell us a little bit more about yourself.

01:33 Echo: Yeah, so just real briefly, I have a PhD in community psychology from Michigan State University and immediately after finishing my PhD, I got a job as a research associate at a nonprofit research and evaluation center and that’s in Denver, Colorado. I worked there for three years and then quit so that I could pursue my own business full time. That’s called Creative Research Communications and I’ve been doing that for about one and a half years. That’s the nutshell.

02:09 Emily: So one and a half years full time, but you started this sometime before you left your job?

02:14 Echo: Yeah, it was the side hustle. Something I worked on on the weekends or when I got home after work.

02:20 Emily: Yeah, we talk plenty about side hustling on this podcast. Echo and I met through the self employed PhD community originally, which now is part of Beyond the Professoriate run by Jen Polk and Maren Wood. If any of you are self employed in your side hustle or your full time thing, or interested in that, that’s a great community to join to have more conversations with me and people like Echo and others who are pursuing the same kind of thing, so definitely want to plug that.

More About Creative Research Communications

02:48 Emily: All right. So awesome. You’re now self-employed. Tell us a little bit more about what your business is, like what do you actually do?

02:56 Echo: Yeah, so I help academics and researchers and scientists and basically people in this higher education world, I help them communicate their work more effectively and creatively. So that’s mostly through slide presentations, like PowerPoint, Keynote, Google Slides, stuff like that, because it’s just a great place to start for a lot of people, but it also includes things like comics and infographics and visual abstracts and just things that are beyond a standard conference presentation or publication. Today I’ll be focusing on presentations, but a lot of it’s about creativity.

03:36 Emily: Gotcha. What inspired you to go into this line of work?

03:40 Echo: In undergrad I was really torn between going into graphic design for my major or psychology for my major. I had already transferred universities and it was already going to take me five years to get my bachelor’s degree and it would have taken even longer if I switched my major to graphic design. So I basically just went with psychology and I enjoyed research. My degree is in research, not clinical psychology, so I just kind of went with it. But I never really left that graphic design world. I took classes, I learned on my own, and in grad school, I just kind of started merging those together, using graphic design for things like participant recruitment flyers and toolkits, presentations, obviously. I did comics for a blog. It just kind of always was merged for me, and I really loved it, so I made it my business.

04:37 Emily: Yeah. Well, it is kind of a leap from applying your talents and doing something for your own work, to teaching others how to do it or doing it for other people. Now which one do you do or is it both?

04:49 Echo: It’s both. I do design presentation slides or comics or things like that for others. I also train people to do it and I have sort of different options, like an online course or one-on-one sort of more mentoring style. I try to help everybody where they’re at, and what their available time and resources look like. So I offer that that wide range.

05:13 Emily: Gotcha. Very, very exciting. I had another interview recently in season three with Dr. Gaius Augustus who told a similar story, I’m sure you know Gaius, of how he also was an artist and a scientist and over time has found a way to combine both of those two passions. So yeah, really cool that we’re having another episode around that same idea.

Effective Presenting and Finances

05:35 Emily: But Echo, why are you here on a personal finance podcast talking about effective presenting? How can the skills that you teach people, if people are able to present more effectively, how can that actually affect their bottom line?

05:52 Echo: I’m so excited to talk about this, especially because I haven’t really talked about this on my blog, yet, so this is kind of the first time I’m really out there telling people this, but I need to, because effective presenting it can help you in some pretty obvious ways, but also some more indirect ways that you might not have thought about. The things I want to talk about today are how effective presenting can help you with the obvious thing, which is a job talk. Pretty important. And some of the less obvious things, like networking and promotions, once you have a job.

Situation #1: Job Talks

06:29 Emily: Excellent. Yeah, let’s get started with the obvious one. If you are finishing up your PhD, finishing up a postdoc, finishing up a job, you’re looking for something new. Pretty common. If you’re going to another research position, certainly within academia, but also outside of academia that you’re going to have to give a job talk or research talk in some capacity. So you’re presenting your past work, maybe you’re even presenting a proposal for future work at that particular institution. That’s kind of the context of what we mean by a job talk. So what can people do when they’re preparing for a job talk to make it killer? And why would it matter if they did a great presenting job with that? How would that actually affect whether or not they get the position?

07:10 Echo: Yeah, yeah. Let’s talk about all of that. So why does this matter? I’ll start there. The reason why this matters is because once you get to that point, once you’re invited for an interview, the job talk is probably one of the most important things. I have even a couple of quotes for you. Karen Kelsey, from The Professor Is In, who is amazing and if you don’t know about her website definitely check it out. In one of her webinars about job talks, she had a quote, this is sort of like a loose quote, but she said “you cannot bomb the job talk and still get the job.” She just came right out and she just said it. You’re not going to get an offer if you bomb the job talk. That’s how important it is. And even Rick Reis, I might be saying his name wrong, from Stanford, he’s called Tomorrow’s Professor, he said the job talk is, quote: “Perhaps the single most important thing you’ll do during an academic interview.” So you know that’s a lot of pressure. I mean a lot rides on this job talk and —

08:22 Emily: I just want to jump in there, because it’s a little bit almost counterintuitive to think that it would matter that much, right? If you can’t do this one thing, you are disqualified from this new position. Because maybe giving presentations is not going to be a huge part of that actual job. Maybe doing the research is what it is or maybe it’s teaching, which is a little bit different from a presentation kind of scenario. The one-on-one interviewing that you do over the course of the interview visit, all that stuff matters as well. And maybe why is the job talk important in particular? I mean, we’re not asking why, we’re just saying it is really, really important. It’s a little bit counterintuitive because maybe you’re not thinking that that’s a huge part of what you do. I mean, what percentage of your time do you actually spend presenting, as like a researcher or an academic? It’s pretty small ,yet a lot rides on those singular moments, right?

09:17 Echo: Yeah, absolutely. And I think part of it is…I don’t know how it was 10, 15 years ago, but we all know how much more competitive the job market is now. It’s an ultra competitive situation and it is one way where you can set yourself apart from other people who are also there or doing a job talk. So that is one reason I think it’s so important. But I’m sure it’s a complex combination of reasons too.

09:50 Emily: That was the obvious thing, right? You’ve got to nail the job talk, of course, and the skills that you teach are going to help the candidate do that. Outside of the job talk scenario, what are some other ways and other scenarios where effective presenting can really help your finances?

Situation #2: Networking

10:08 Echo: Networking is one of the ones that might surprise people, because it is a little more indirect. This is something that will help just about everyone. I know we were just talking about a job talk and an academic interview, which mostly applies to academic jobs, but in terms of nonacademic jobs, as well as academic jobs, your network is crucial. It’s crucial for getting opportunities, whether it’s for publications or projects or grants or jobs even — your network is really crucial at pretty much any stage of your career. So how do you network? There’s a lot of tips out there, there’s a lot of suggestions, and one way is through presentations. So how? If you think about it, conferences are actually an excellent opportunity for increasing your network, which I think a lot of people already know. I don’t think that’s new and surprising. What people might not think about is that if you have a visually engaging, effective presentation, one that is organized, one that is easy to follow, that people understand that doesn’t feel overwhelming, isn’t just all text, isn’t just bullet points, it doesn’t have word clouds, doesn’t have all the data, it’s an organized narrative — people will be more likely to come up to you and talk to you after your presentation and you’re going to stand out more. If you think about it, one hard part about networking is just making that introduction. When you want to meet someone new but you’re nervous, you don’t know how to break the ice, you don’t know what to say — if you have a presentation, you’ve given that to people. People can now come up to you and they know what they want to say — “your presentation was great, your slides were great, I loved your presentation” — and it breaks the ice and people have already connected with you because you presentation was great. It speeds all that up along and encourages ways to build your network.

12:17 Emily: I totally, totally agree with you. Obviously as someone who presents as part of my living, I agree with you that it’s, it’s a wonderful way to start networking. Another thing, a little bit to take a step back from maybe an individual presentation that you give, if you as a researcher, as a PhD, increase your confidence around presenting because you’ve learned how to create effective visuals, you’ve done some practicing of your actual delivery of presentation, wouldn’t you be more likely to put your name in to do this sort of thing more and more and more, if you build up your skills and you feel competent. It’s kind of a stereotype, but public speaking is people’s number one fear, right? It’s like the worst, most intimidating thing that you would possibly do. Many, many people think that. So instead of shrinking back from those opportunities, if you have confidence around that, especially if you’ve been trained in some capacity, then you can again, put yourself out there, put yourself forward, and be increasing your network, because you’re just having more and more of those opportunities, where maybe you wouldn’t, if you weren’t feeling so confident about it.

13:23 Echo: Absolutely. I’m really glad that you actually brought that up because I’ve really started all of this — my own personal training for effective presenting, because I was terrified of public speaking. I was scared. I was nervous. I would throw up before a presentation. I was really high on that anxiety scale. I started doing visual presentations and storytelling and academic presentations almost as a way to distract from myself and help myself just get up on the stage hoping people would look at my slides and not mean. Then, just over time people would compliment me and I would be surprised and not believe them at first, but then, over time, it really did build up my confidence and now I love it. Now I love public speaking and giving presentations because I know people are going to engage with it. It’s going to resonate with them, they’re going to be able to understand it and it goes really well.

14:23 Emily: Yeah, and this ties into the job talk part of it as well. If you’re feeling confident about giving that job talk, you’re going to come off that much better in the interview. Something I’ve also seen, and this is sort of regarding networking as well, in the past few years since I’ve been giving presentations at universities, I see people pull out their phones or their iPads and take photos of my screen. I’m assuming it’s usually for their own like future reference or something like that. But if you, and I’m not saying I do, but if one has really beautiful visuals up on that screen, that’s a sharing opportunity, in terms of social media. We’ve all seen, if you follow a conference on Twitter, people are posting images of slides from presentations and so forth, so if you have a particularly beautiful, engaging, clear, as you were saying earlier, slide, that’s something that could even expand that network beyond the people in the room.

15:18 Echo: That’s such a great idea. Yeah, that is so true. I definitely see people sharing slides from conferences they’re at all the time on Twitter and the ones that get a lot of engagement and excitement are definitely the ones I would say are more well-designed compared to the ones that are all text, small text, bullet points, that kind of thing.

15:38 Emily: Yeah. The text ones might be getting some photos in the room because they’re like, “Oh, I can’t read all of this and the amount of time it’s going to be up, I need this for future reference”, but the shareable ones are definitely going to be the more beautiful and clear ones.

Commercial

15:53 Emily: Emily here for a brief interlude. As a listener of this podcast, every week you hear strategies that another PhD has used to improve their financial picture. But listening and learning does not automatically translate into action in your own financial life. If you are ready to change how you think about and handle your money, but need some help getting started, I can be of service. There are two main ways you can work with me to create and implement a financial plan tailored for you. First, I offer one-on-one financial coaching, either as a single session or a series, as you make changes over the long term. You can find out more at PFforPhDs.com/coaching. Second, I offer a group program called The Wealthy PhD that is part coaching, part course, and part community. You can find out more and join the wait list for the next time I open the program at PFforPhDs.com/wealthyPhD. I believe it’s possible to succeed with your finances at every stage of PhD training and throughout your career. Let’s figure out together how to make that happen for you. Now, back to the interview.

Situation #3: Promotions

17:07 Emily: Okay, so what was the third way that effective presenting can affect one’s bottom line?

17:13 Echo: The other way was promotions. This works for academic context, but also nonacademic context. A lot of people think that, okay, so presentations are great for a job talk, itt helps me get the job, but once I have it, now it’s time to worry about tenure. And that is all about publications and that’s not a good time to learn how to present effectively. And yes, publications are important. I’m not trying to diminish that at all, but I think people don’t realize how presentations can help with the other part of the tenure package. So for example, I just had a student in one of my online courses, she’s an assistant professor. She just did her third year review letter, which she called, a mini tenure package and she wrote in there in her section about teaching effectiveness, she talked about the professional development that she took, how it helped her teach her undergrads and how she was evidenced based principles that she learned in my course for learning and memory and that kind of thing. And she had quotes from her student evaluations and her students even said things like “the PowerPoints were the best part of the class” — is a loose quote. But it was something like that where they said PowerPoint slides were the best part of this course. And so it can help you in that area. It can help you with maybe the broader impact, if you have to talk about that. It can help you with those other areas if you just frame it that way.

18:49 Emily: Yeah, absolutely. I mean, this all again goes back to effective communication of which presenting and visuals and all of that are components of that. But just effective communication in general, of course that’s going to help you maintain the job you have, get promotions at the job that you’re in, not just in a new job scenario. Yeah. Great point. And again, I actually want to go back to the confidence aspect that we were talking about earlier because I’m thinking, okay, we’ve been talking a lot about landing a job, keeping a job, and that’s career-related, which is obviously within the scope of personal finance. But I’m also thinking about like negotiations. I don’t know if you’d necessarily be using visuals in a in a negotiation session with your potential supervisor or boss, or your existing one, b,ut again around the confidence, if you’re just building up your confidence in talking in front of people, in presenting a case to other people, that is an enormous asset to have with you when you go into a negotiation situation.

19:53 Echo: Yeah, and I would actually agree with that. Part of effective presenting, a lot of people are thinking probably about design, about typography and text and text size and colors and that kind of thing, which is definitely part of it. The other part is also the story-boarding, which is just the word I use to describe organizing your content, what order are you going to say things, what are you going to say, what level of detail. And learning that for presentations is a great place to start, but then it starts helping you just to make good arguments in other areas. I’ve heard this from my students that it even helped with things like grant applications because you learn how to set up your argument and maybe it’s not an argument, but you still learn how to hook the audience from the first thing that you say. So yeah, if you want to negotiate for a promotion or a raise, you’ll have more skills to do that in a more narrative, storytelling kind of way. A lot of academics were trained to do fact, fact, fact, like just a list of facts, just a data dump. And that’s not an effective way to communicate. That wouldn’t be an effective way to communicate for a promotion, probably. You would want to start with more of an engaging opening, so to speak.

21:23 Emily: Yeah. I’m really seeing how, I mean, we started talking about effective presenting, but how these skills that you’re talking about are permeating so many different areas of professional life.

21:35 Emily: Okay, I think we’ve made a good case. People care about the skill set, they want to get better at it. Really quickly, what are some tips that you have for people to do a better job in this area that they could implement right away?

Presentation Tips You Can Implement Today

21:52 Echo: Yeah. I think there’s some things that you’ve heard before so I won’t spend too much time on them. I’ll just reinforce them a little bit. Less text. Yes, even academics want less text on your slides and you want to use bigger font sizes. A lot of people they have too small font sizes. The other thing that I wanted to mention, because a lot of people feel like the problem is PowerPoint, and that they have to spend a lot of money on a fancy program like Prezi, or they have to take a lot of time to learn a new program. I have good news and the good news is that you don’t need to do that. PowerPoint is actually fantastic. You can absolutely make visually engaging presentations with PowerPoint or with Keynote. So if you’re an Apple user, Keynote is great as well. Google Slides is okay. It has fewer features, and most people have PowerPoint anyway. So PowerPoint is great. You can totally use PowerPoint.

22:53 Emily: Yeah. So it turns out the tool was not the problem, it’s our usage of the tool.

22:59 Echo: Exactly. And the other thing I wanted to mention was habits. You probably also know that you should be practicing your presentation and that you should be starting your presentation earlier than say, on the plane ride to the conference. I know —

23:16 Emily: You don’t say?

23:17 Echo: I know it happens, I’ve done it, so I totally get it, I’ve totally been there. But if you start earlier, it doesn’t have to be a lot of time, but if you start earlier and give yourself time in between revisions, you’ll be surprised at how much better your presentations turn out, because I think a lot of presentations are ineffective because people are cramming in it at the last second.

23:40 Emily: Yeah, it’s just something that hasn’t been thought through well yet.

23:44 Echo: Yeah, exactly.

Final Words of Advice

23:46 Emily: The final question that I like to ask everyone who comes on the podcast is what is your best financial advice for another early career PhD? And that could be related to what we’ve been talking about today or it could be something totally different.

24:00 Echo: Yeah, I think, partly related to what we’re talking about is try to invest in yourself as soon as you can. Especially for something like effective communication skills, effective presentation skills, the earlier you can get in on some type of professional development, it’s going to pay off more in the long run. For example, if you learn it now, then you’re going to have those skills when it comes time to make your job talk presentation, you’re teaching demo. You’ll already know how to make good slides for that and a good presentation from start to finis,h rather than trying to do all of that at the last second. And the earlier you learn it, the sooner your presentations will be better and more effective, and then you can sort of continue to improve on that over time. That’s sort of a tip I wanted to share.

24:53 Emily: Yeah, totally, totally agree. And the thing is, the listener might be thinking, especially if they’re still in training, “I am investing in myself right now, I’m taking this huge pay cut to like be in grad school or be doing a postdoc, that is investing in myself.” But the unfortunate reality, as we mentioned earlier, is that a lot of essential skills for the workplace, and even for the job you have right now, are not being taught by universities or by advisers or by departments. Maybe they are in some pockets, I don’t want to say that’s a universal thing. Maybe you at your university have a course on public speaking. Maybe there’s something available to you, that’s awesome if you can take advantage of that. But probably most places it’s not available, or it’s not really a good time investment, maybe you have to put way too much time into it than what would be effective for you. So I totally agree that it’s oftentimes very necessary to go outside the university environment to pick up these skills. And the earlier you do it, of course, as you said, the more and more you can deploy those skills over the years and hone them and continue to develop them.

Find Dr. Echo Rivera Online

25:58 Emily: Speaking of which, Echo, how do people get them to get you to teach them some of these skills that we’ve been talking about?

26:06 Echo: Yeah, so I hope that I’ve excited people about learning presentation design and how to be an effective presenter because I have tons of stuff on my website. I have free courses, I have tons of blog posts, I have some download-ables in my blog posts, I have a YouTube channel. All of that you can find at echorivera.com so it’s just my name, Echo Rivera dot com. I’m also really active on social media. I’m on Twitter and Instagram and my handles are @echoechoR. Find me on social media, check out my website. I’d love to connect and I’m just kind of curious what people thought of this podcast and if they learned something new or just want to chat, so don’t hesitate to reach out.

26:59 Emily: Yeah, absolutely. When this episode comes out, I’ll be tweeting a bunch of times that week and tagging Echo and certainly reply to any of those and tell us like what you thought about this. Maybe this is a surprising thing for us to talk be talking about on a personal finance podcast, but as you can see, it plays into your finances in so many different ways and these skill sets are so essential. Echo, thank you so much for, for being my guest today.

27:24 Echo: Thanks so much for having me.

Outtro

27:26 Emily: Listeners, thank you for joining me for this episode. PFforPphDs.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcast, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media or with your PhD peers. Three, recommend me as a speaker to your university or association. My seminars covered the personal finance topics PhDs are most interested in, like investing, debt repayment, and taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.

Can and Should an International Student, Scholar, or Worker Invest in the US?

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In this episode, Emily interviews Hui-chin Chen, a Certified Financial Planner specializing in advising globally mobile professionals through her business, Pavlov Financial Planning. In the interview, Hui-chin answers the questions: Is it permissible for an international student, postdoc, or worker to invest while in the US, and if permissible, is it advisable? Hui-chin and Emily discuss several factors that could impact the answers to these questions: whether the person desires to stay in the US long-term, the type of visa they are on, what type of income they have (W-2 vs. fellowship/training grant), and whether they have access to a tax-advantaged retirement account, such as a 401(k), 403(b), or IRA. Listeners to this episode should come away with clear next steps to further evaluate whether and where to invest while living in the US.

Links Mentioned in This Episode

international investing in US

Teaser

00:00 Hui-chin: I would actually recommend the default is think about, well, if I had the extra money I can invest for the long term, I don’t really need the money — why not? So there has to be a really good reason why you don’t do it.

Introduction

00:21 Emily: Welcome to the Personal Finance for PhDs Podcast for higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season 4 episode 17 and today my guest is Hui-chin Chen, a certified financial planner specializing in advising globally mobile professionals through her business, Pavlov Financial Planning. In this interview, Hui-chin answers the questions: Is it permissible for an international student, postdoc, or worker to invest while in the US and if permissible, is it advisable? We discussed several factors that could impact the answers to these questions. One, whether the person desires to stay in the US long-term. Two, the type of visa they’re on, F-1, J-1 or H-1B. Three, what type of income they have, that is W2 versus fellowship or training grant. And four, whether they have access to a tax advantage retirement account such as a 403B, 401k, or IRA. I’ve wanted to help the international graduate students in PhDs in my audience think through these questions and scenarios for a long time and I’m so grateful to Hui-chin for giving us her expertise in this area today. Please consider sharing this episode with your friends and peers. Without further ado, here’s my interview with Hui-chin Chen.

Will You Please Introduce Yourself Further?

01:42 Emily: I am so delighted to have joining me on the podcast today Hui-chin Chen. She is a CFP. Her business is Pavlov Financial Planning. She is an expert in this area of international students, postdocs, workers living in the US and what can we do investment wise? I know this is a question of high, high interest in my audience. I get this question every single seminar I deliver at universities. Can I invest in the us? Should I invest in the US. What kinds of accounts can I use? So Hui-chin is here to help us answer these questions as best we can. It’s a very complicated and detailed area, but you know, we’re going to work through it over the next 30 minutes or so. So Hui-chin, thank you so much for, for joining on the podcast and please tell us more about yourself and your business.

02:29 Hui-chin: Well, thank you for having me Emily and I think you covered like all the high levels. Like you said, I’m a CFP, a certified financial planner and I focus my work on clients and international planning needs, whether they’re immigrants to the US, people who are temporarily working in the US that migh leave or US citizens that become expats. So sort of like your listeners who are technically expats from other countries. So I deal with international complexities day in and day out for my clients, so I’m happy to answer any questions you might pose today.

03:05 Emily: Yeah, I mean I have been searching high and low for an expert, just like you. Will you please mention your blog name, your website name.

03:12 Hui-chin: Yes. You can read more about just in general financial planning topics for global and mobile people on moneymattersforglobetrotters.com and if you want to learn more about my business or working with me, it will be on pavlovfp.com.

03:29 Emily: Great. And you have a YouTube channel as well, right? What’s the name of that?

03:32 Hui-chin: Yes. Well there’s no name because I just record more like a series of different topics. The most recent one I recorded, I call it “Welcome to the USA: personal finance edition”. I think some of you might be interested or your spouses who accompan you to the US while you study or work and they may or may not be able to. So it goes through a lot of the different steps of understanding the US system that will be helpful if you eventually do want to stay in the US.

04:04 Emily: Yeah, perfect. Tell me just a little bit more about yourself — when did you arrive in the US, where are you from, why did you come here and those kinds of things.

04:12 Hui-chin: I first arrived full time in the US in 2004 for my graduate degree in public policy and management. I did consider going into a PhD, but I did not eventually and I basically stayed. Since then, I found a job in the US, I continued my work and then I met my husband in grad school, but after working separately for a few years, decided to get married and he got a job posting overseas in different countries. So I also have a very personal interest in working with people from all over the world because, for example, right now, I’m actually not physically in the US, we’re somewhere else. So.

Investing in the US as an International Student

04:58 Emily: Okay. Yeah. Fascinating. Oh my gosh. I really hope people follow up with you about this. So what we decided to do with this interview was to answer two broad questions, which are the ones that hear during seminars. The first is am I allowed to invest in the U S is this permissible? Secondly, is it advisable for me to invest in the U,S while I live here? Now the second question is a lot thornier than the first, I understand, so we’ll kind of go through a few different, aspects of this question that might affect the first question or the second.

Is it permissible? Yes!

05:33 Hui-chin: All right, so you’ll have to prompt me later for all these different questions. I’m going to answer the easiest one which is whether, as an international student who is not a US citizen or a green card holder, can I invest through a US based account? The answer is yes. And the United States is one of the few countries that’s very friendly to foreign investors investing directly in the stock markets and the US also has one of the largest stock markets. A lot of foreign companies come to list in the U S. dot. Markets. So really, even if you were not in the US, even if you were just like live in your home country and you want to open a US brokerage account, you can actually do it.

06:24 Hui-chin: It’s not only permissible, it’s actually a sometimes recommended way to invest, especially if your home country gives you very little access directly to investing equity on your own. A lot of countries don’t even have what we call retail access, like in the US. In a lot of places you have to invest through insurance contracts or very expensive mutual funds. So investing directly as a retail investor, that means that you’re as an individual, not going through an advisor, just like open your own account and start investing, it’s actually a great opportunity to do so. Now you’re in the US, it’s a lot easier. It’s easier for you to find information like that instead of doing it in your home country and tried to find those kinds of information. So that’s the long answer. But the short answer is it’s definitely permissible to do so. Right now you’re in the US and you can invest no matter what kind of income that you have. We’re talking about just a normal broker brokerage account, so it doesn’t give you any tax advantages. It’s just for somebody who wants to buy some ETFs or even just stocks. For example, if you really like Apple, you want to buy Apple stocks, you’re totally permissible to open a brokerage account online and pressures that Apple stocks with whatever money you have, either from your work in the US, from your grants, from your fellowships, or from your wealthy uncle back home who wired you some money. Those are all possible ways to invest.

Opening a Brokerage Account

08:06 Emily: So I think there may be, you can tell me if this is the case, I think there may be a distinction between something being permissible under the law and being, will I actually find a brokerage firm who will work with me? Because what I hear from international students and scholars is, and I never know if this is the rumor mill or if it’s actually their own experience is, “well it’s difficult to find a brokerage firm to approach who will work with me.” Is that the case? Is it, I can walk up to any brokerage firm and you know, as an international student or scholar or worker and open whatever. Or is it like, Oh well some of them might, by policy, be excluding certain types of people from you know, opening accounts.

08:51 Hui-chin: That’s a good question. Sort of at the practically, how does that work? So the first scenario is that if you have, for example, if you actually pay social security, now you have a social security number and you’re technically getting your income and you’re an employee of your university, then, for example, if you go onto Vanguard, that’s all the information they ask for. So at Vanguard, if you provide those two types of information, you will be able to open the account and plus you have a US address because you’re currently living in the US, so you actually do not need to already be a green card holder or something in order to have it processed through it. It doesn’t mean that if you eventually decide to leave the U S and if Vanguard finds out, they will want to close the account. So that’s one scenario.

09:43 Hui-chin: The other scenario is that I know some people because their totalization agreements, they don’t even have a social security number or they choose not to have one in the US and so in that case, even though you’re physically in the US and you have a US address through your apartment or on campus, it’s basically you’re considered a foreign, like how you file taxes as a nonresident alien, you can be a foreigner. So in that case, if you still have pretty close ties with your home country and you do decide to go back, you can actually open an account like your just a person living overseas, but in that case it is pretty much dependent on the brokerage company being willing to work with you because every brokerage company, like Schwab or Fidelity or TD Ameritrade, it’ll have their own internal list of which countries residents they were willing to do business with. So you’re basically declaring to them, I am a resident of some other country, would you would do business with me? And then they may or may not. So that’s another way to go about it.

10:59 Emily: Got it. So, okay, an international student or scholar who does not have an SSN, when they actually try to go and open a taxable brokerage account, what should they say to customer service? I’m a resident of X country, but I’m living in the US currently, will you work with me? Is that the question that they need to pose?

11:22 Hui-chin: Yeah, the question will really be, I’m a resident of another country, because if that’s the case, you’re providing an address of that country. You may be able to provide a us mailing address, but that’s not the address that’s associate with the account. So if they know that you are foreign customer, they will have different tax reporting, different tax withholding. Instead of filling out a W9, you fill out W8-BEN, all the different things, so it’s whether you want to be considered as a foreigner to the US institution or somebody who’s a US resident.

12:01 Emily: Got it. So in the case where someone does have an SSN, probably because they’ve been employed W2 employee for at least part of the time that they’re here, would you say that it’s totally fine to then present yourself as a US person? Even if you’re still technically a non resident alien for tax purposes, even though you have the SSN, but let’s say you’re a nonresident alien for tax purposes, is it okay to go ahead and use that SSN and be like, I’m a US person?

12:26 Hui-chin: Well, that’s the tricky part because you are still for tax purpose, like your dividend capital gains interest will be taxed differently. So you do need to report, you need to write a W8-BEN instead of W9. So I would just give an example on how easy it is to actually open an account. For example, on TD Ameritrade’s website they actually ask what kind of visa you have. So I’m just saying that usually in those kinds of applications, if you have a SSN, you have a US address, you have a US employer, it’s most likely those online retail brokerage account, they will allow you to open the account. But you also need to make sure that they know that for tax purposes you need to fill out a tax form as a non resident alien.

Investing during Short-term vs. Long-term Stays in the US

13:17 Emily: Got it. Okay. I think that’s very clear now. Than you so much for going through that in detail. Okay. So then let’s go back to the scenario of “I plan to stay in the US long term, or hope to, not sure if it’s gonna work out” versus “I don’t plan to stay in the US long term”. We now know what’s permissible, but then what is advisable? Should a person who hopes to stay in the US long-term, has the ability to invest right now — is there any reason for them to shy away from doing that because they’re not sure about the longterm status? Let’s start with that question.

13:50 Hui-chin: So like I mentioned, I guess, eluded to earlier, because the US is such an attractive market, not in terms of return or performance, but in terms of access, you can invest in a broad index in so many different countries, so many different companies with such little cost, and it’s really hard to beat if you tried to do it in some other country. Usually there’s more brokerage fees more commission, there are more hurdles to jump through as an individual investor. So I would actually recommend the default is think about well if I have the extra money I can invest for the long term, I don’t really need the money — why not? So there has to be a really good reason why you don’t do it upon the US perspective.

14:38 Emily: Got it. And so maybe that person in that situation is thinking, “well, is it a good reason that I might eventually leave?” How would the investments that are in the US for the moment, do they to exit the country with that person? If the person ends up leaving, how does that work and how’s that handled?

14:57 Hui-chin: Yeah. So as I mentioned earlier, even for somebody who’s never been to the US, some custodians will be willing to open account for a foreign customer. So if you’re thinking about, “Oh, I’m just leaving after I finished my grad degree in three years,” if the country you’re likely going to is on whatever list that custodian posts, like it’s European EU country or it’s a relatively developed country or it’s a safe country, it’s not like a terrorist country that may be on the treasury list of “do not do business with”, then you’re probably safe to assume that you can continue to hold the account. But of course do your own research on the specific countries. It’s impossible for me to go into every single country.

15:46 Emily: We’ll link to a reference if you can provide a reference of that treasury list. We’ll put that in the show notes and check to see if your country appears on this list, in that case, okay, we need to tread more carefully. But let’s say, okay the country is not on that list, go ahead.

16:04 Hui-chin: Yeah, so basically what will happen is that for example, if you went the first route when we’re talking about opening an account, you open account with the U S address and everything, and let’s say you actually end up staying over five years or you actually got a job at under H-1B then leave, right? So you actually went from nonresident alien for tax purpose to a US person tax role, and then you’re leaving, so you’re going back to a non resident alien textual. So you do need to report to the custodian that you’re leaving this is my W8-BEN, this my new address. So of course you want to make sure the custodian does business with people at that address. And there is some other complexity in terms of what you can invest in. Some people from the EU countries might know there are some new regulations saying that the custodian is not supposed to sell ETFs that’s not registered in the EU to their residents. So that’s one type of complexity that may come up that whatever you invested in, you may or may not be able to add more to it once you leave. But whatever you have already invested in, there shouldn’t be any issue with keeping it there, as long as the custodian is willing to keep you as a customer.

17:30 Emily: Got it. So let’s say then that the custodian is not willing to keep you as a customer, for whatever reason. What happens in that scenario?

17:39 Hui-chin: It does happen. Over the last 5 to 10 years, even some US citizens are experiencing that, living overseas, it used to be okay that custodians know that they live overseas and now they’re not okay and custodians say please close your account. For normal brokerage account, of course the first step was if you want to keep your investment in the US, you can always find a different custodian to move your investment to. You actually do not need to sell those investments. You can do a transfer. It’s just whoever’s holding those stocks will transfer the certificate electronically to another custodian. It’s not like you’re selling and getting the money back. But if because where you’re going next or because of personal reasons, after investing in the US for five years, you’re willing to take the money and leave, you can go ahead and sell your investments, close the account, taking the money and leave. There’s no problem with that. There’s also some tax considerations there. For people who are considered a nonresident alien, getting capital gains while they stay in the US for over 183 days versus they do not. Because if, for example, if there is a tax year when you have a US based account and you have a lot of capital gains on your Apple stock because it increases in value a lot, but if you already finish your study and you’ve moved back to your country for two years you’re just wondering, well, will I be taxed on the capital gains? The question is, you actually do not get taxed on the capital gains, in the US. There could be also tax treaties that differs between the US and your country, but in general, the rule is the US does not tax and your country may or may not tax that. So that’s actually a good–

19:34 Emily: It sounds like in that situation, where you’re planning on moving the money out of the US, it sounds like that’s the time to consult a tax advisor in the country that you’ve moved to, right? How to execute this, when to execute this and the tax implications. Is that right?

19:51 Hui-chin: Yeah. So you’re definitely thinking about tax strategy, because, as opposed to the situation I talked about, if you sell the day you leave the U S for example, like “I’m just closing everything down, I’m moving back home.” And if you sell the stocks as somebody who has lived in US, even though you’re a nonresident alien but you were in the US as a tax home, when you sell the stocks, the capital gain is actually taxed at 30%, unless their treaty dictates differently as well. Like you said. So definitely talk to your tax advisor in your home country, as well to understand how the tax coordination works.

Taxable vs. Tax-Advantaged Accounts

20:33 Emily: Got it. And now, you mentioned earlier that all of that was for a taxable brokerage account. So let’s also throw in the scenario that the person has been using a tax advantaged retirement account — IRA, 401k, 403B — and they’re not going to leave it in the US, they’re are going to be moving the money out, what are the tax implications of making a withdrawal from whichever account type.

20:56 Hui-chin: Yeah, in that scenario, basically first of all, you should know that there is a penalty that applies if you take money out of and IRA, 401K, 403B. You should have known it before you put money in, but that’s the same rule that applies broadly to everyone, whether you’re a US person or not. Right? Because the reason is that the government gave you a tax benefit and it’s the incentive for you to keep the money there for retirement. They don’t want you to take the money out. So, if you need the money obviously and you think closing the account, paying the penalty and income taxes is still better going back home and doing it in a few years because of the different tax situation, of course that’s something you can consider. But knowing, with a penalty if you are not not going to need the money and it is eventually going to pay for retirement, one thing you also can consider is to leave the account open for a very long time and let it grow. Of course, you cannot keep putting money into it, but whatever is in there can continue to grow and you can consider taking the money when your income is lower and take the penalty, so the income and the penalty together is less of a hit, or you can take it out when you are 59 and a half, which is the current law of when you can take it out and then there won’t be a penalty but there is going to be taxes in the US and withholding as well.

22:42 Emily: It sounds to me, and this may be painting with too broad of a brush, but it sounds to me like you know, if you end up having investments in the US, if you’re eligible to keep them in the US, and you do leave, sounds like it’s a good idea to keep the accounts open. You won’t be contributing anymore, at least to the tax advantage ones, but it doesn’t sound like there’s a big reason to be closing accounts and moving the money out, unless it is that you are not permitted to keep the accounts open based on the custodian and the rules of the country that you’re going to, and how they deal with the US, is that right? It sounds to me like that’s the pattern. Like go ahead and keep the money here and then when you’re of retirement age in the country that you’re residing and then you can work on doing the withdrawals and dealing with taxes at that time. Is that kind of broadly what you recommend?

23:32 Hui-chin: I think that’s generally correct. Like I said, the main reason for that is because the US is such a individual investor friendly country to allow you to invest that way, so like I said, I would ask the question of why not. Of course everybody’s situation is different. If there is a legit reason that you think that you shouldn’t be keeping the investment in US, of course, you just need to understand the tax implications. Otherwise, keeping investing long-term in the US, not just — let me clarify this, not investing in US companies only, but using a US based account and custodian, who charges you basically right now no commission to buy and sell anything and with very low mutual fund costs, very low ETF costs, it’s a really good bargain compared to the other alternatives.

24:34 Emily: Yeah. So it sounds like whether an individual in the US, not on a green card yet, not sure if they’re gonna be able to stay long-term or planning to not stay long-term, if they have the ability to invest at the time that they’re living in the US, as you said, why not? Why not go ahead and open the taxable brokerage account or the IRA or the 401k or whatever it is and use it, because it’s sort of, as we know — we don’t have to go into about the power of compound interest — starting to invest earlier is fantastic. So basically don’t a waste or fritter away the time that you may be in the US, it might be longer than you expect. Go ahead and start investing and then deal with either moving the money out or keeping here or whatever later, once you know where exactly are you going to be living. I like that approach of why not. So whether the intention is to stay in the US long-term or to not, go ahead and use the time while you’re here. Use your access. Go ahead and open the accounts, again if you’re able to be able to invest.

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25:37 Emily: Emily here for a brief interlude. As a listener of this podcast, every week you hear strategies that another PhD has used to improve their financial picture. But listening and learning does not automatically translate into action in your own financial life. If you are ready to change how you think about and handle your money, but need some help getting started, I can be of service. There are two main ways you can work with me to create and implement a financial plan tailored for you. First, I offer one-on-one financial coaching, either as a single session or a series, as you make changes over the long term. You can find out more at PFforPhDs.com/coaching. Second, I offer a group program called The Wealthy PhD that is part coaching, part course, and part community. You can find out more and join the wait list for the next time I open the program at PFforPhDs.com/wealthyPhD. I believe it’s possible to succeed with your finances at every stage of PhD training and throughout your career. Let’s figure out together how to make that happen for you. Now, back to the interview.

Investing Under Different Visas

26:52 Emily: Okay. That was the first scenario to talk about. And then the second one was about visa types. So F-1, J-1 and H-1B. You’ve already said broadly it is permissible, but is it advisable? Are there any differences among people holding each one of those different visas that they should be thinking about? Or is it like, “no, the general consensus of it’s permissible, why not?” still applies no matter what visa type?

27:17 Hui-chin: I think that it’s not really only based on visa type, but the idea of combination of visa type, how long are you staying in the US — as, you know, F1 can turn from NRA to US person, J-1 as well, with different time frames. I would think about it as just, it’s very similar to what we were talking about before, like longterm or short term. Eventually, the main difference is tax treatment of if you’re staying, if you’re becoming a us person long-term, or even becoming a US citizen and we’re just going to pay US taxes forever versus at some point, in the future, it’s possible you will sever tax ties with the US, other than whatever investment you kept in the US. So overall investing in both scenarios are great. You just need to know the tax implication and the tax strategies, because if you’re switching from one to the other, there may be some opportunities for you to reduce taxes. And if you don’t think about it clearly or get the correct advice, you might find out, well I could have been taxed zero but now I’m getting taxed 30%.

28:28 Emily: Got it. So it’s not so much about the particular visa type, but rather at what point it flips to you being a resident alien for tax purposes, which is different on the different visa types. Okay, great! Quick one there.

Investing for Different Income Types

28:41 Emily: Third point that I wanted to talk about was the income type. So having W2 type income, or even self-employment type income, if that’s permissible, versus having this weird fellowship, training grant, non W2 type of income. This is very common for graduate students and also for postdocs. And so the general rule that certainly applies for US citizens and residents is if you have the W2 type of income that is taxable compensation for the purposes of contributing to an IRA. So let’s say in the scenario where the person does not have access to a workplace-based retirement account, they’re looking at can I open an IRA or not? Taxable compensation would be the W2 type of income. They can open an IRA and use that income towards it. If you go an entire calendar year and don’t have the W2 type of income, not taxable compensation, it’s all fellowship or training grant, and of course for international students, scholars, they’re not permitted to side hustle, they can’t have the second jobs and so forth, so there would be no possibility of having taxable compensation type of income. I guess the question is, whether they had access to an IRA or not, does it change the, we know it’s permissible, but does it change the advisable recommendation on whether to be investing at this time or not, knowing that in the one case with fellowship and training grant type income they wouldn’t be able to use an IRA but could be using a taxable brokerage account as we discussed earlier.

30:09 Hui-chin: I think that’s actually something we can just combine with the fourth one, so the tax-advantaged one. Like you said, eventually the main question is whether I have taxable compensation or I do not have taxable compensation.

30:23 Emily: Now, I want to jump in just to note that we’re recording this in November 2019 so the SECURE Act has not passed the Senate, yet. I am certainly hopeful that it will because what it does is it changes the definition of taxable compensation to include fellowship and training grant type of income, non-W2 income for graduate students and postdocs. So maybe when you’re listening to this, that law would have changed, and so certainly keep that in mind that we’re discussing this as what is the definition of taxable compensation. Basically, right now it does not include fellowship and training grant and come perhaps in the future it will, but right now it doesn’t. Okay, go ahead.

31:02 Hui-chin: I think at the very beginning you mentioned the whole connection to your personal service, right? So the idea of you can contribute to areas that you need to have taxable compensation and that’s related to the idea of it’s not just that it’s taxable, but it is a compensation for performing a service. If we’re just really thinking about why we’re using IRA, it is for the tax advantages. So even before you think about that, it’s like what would be the tax consequences or how much you save by using that kind of account and is that really helpful in your situation? I know, one question, you posed before is well, everybody wants a Roth IRA because they’re like, well, I’ll never get taxed in the future. I want to be able to contribute to that.” But a Roth IRA and traditional IRA have the same rule: the compensation needs to be taxable. So if it’s already not taxable, the government wouldn’t allow you to put money into something that’s never been taxed before. The Roth IRA is for the government to tax you up front, so it doesn’t tax you it in the future when you take it out.

32:26 Emily: Okay, let me, I just want to clarify this. This is a little bit new information to me. So when we have the two words, taxable and compensation, you have to have taxable compensation to contribute to an IRA. The compensation part of it is this, is it non-W2, fellowship and training grant type income? Okay, that’s not compensation. But now we’re also talking about the “taxable”, the first word there in taxable compensation. Your income has to be taxable in the US in the first place to be eligible to be contributed to an IRA. So maybe under certain tax treaties, your income for a time is not taxable in the US, that income would not be eligible to be contributed to an IRA. Correct?

33:05 Hui-chin: Yes.

33:06 Emily: Okay, great. Go ahead.

33:07 Hui-chin: Yeah, and the second one, we use compensation, but on the US-person side it’s called earned income. So if you look at IRS publications it’s always referred to earned income for US person related publications on contributing to IRA. Those two are equally important. It has to be earned income, so your compensation from service, and it’s taxable. The idea is that you will know whether you have that kind of income or not and if you have that income, meaning you’re getting tax in current year, so you’re thinking about, “Oh, if I contribute to an IRA or 401K, or 403B, I get taxed less. Or you contribute to it and now we get taxed, but in the future it won’t get taxed, which is the Roth side. In the first one, just the pretax contribution, it makes sense if you’re really high income. I think for the students, because if you’re on a 1040-NR, depending on the level of your compensation, because you may not have standard deduction, you may only have itemized deduction, some people can be at the zero percent, some people can be twelve percent or above, so you have to look at your tax situation of which bracket you’re going to be in to give you an idea of, well, maybe I want to do pretax instead. And the second one is, okay, so if I’m at a really low bracket, how about I just do Roths, but then the idea is you want the tax benefit in the future, right? But if you are going to move away from the US, how much more is that tax benefit versus simply using a taxable brokerage account, if you don’t get current year tax benefits. So those are the analysis that you need to go through, in terms of whether or not to use a tax advantage account, if you have the income type to do so.

35:20 Emily: Okay. Yeah. Let me see if I can summarize that. If you don’t have taxable compensation, can’t use a tax advantage account anyway, so go through the brokerage firm and go for the taxable brokerage account, if you’re able to use it, if you can set up that kind of cap. Okay. On the other side, we have eligibility for the 401K, the 403B, the IRA. If you want the tax deduction today for contributing to a traditional version of each of those accounts, great. Go ahead and take it and get a tax deduction today. Awesome. The money grows tax deferred, you’ll deal with the taxes in retirement or whenever you move the money out or whatever. For the Roth option, because of any of those kinds of accounts, because you don’t have the immediate tax advantage today, you really have to be asking yourself, does it make sense to put my money into a Roth IRA, no immediate tax advantage, but it will grow income tax free and then I can withdraw it income tax free in retirement versus can I just use a taxable brokerage firm, which is more flexible. And I think maybe the answer to that question, of course it will depend on the math in any individual’s scenario, but might come down to, again, what we talked about earlier, the expectation of staying in the US long-term or the hope, because really over the long, long term it is very advantageous to be using an IRA of any kind, Roth or traditional. But maybe if the time that you see yourself being in the US is on the shorter side, not to retirement or only five years or the length of your degree, then maybe it’s like, well why bother with the whole Roth IRA scenario? Let’s just go for the taxable brokerage account because if you are expecting to move the money out, for example, it’s kind of more of a pain to do so with a Roth IRA, because while you can withdraw your contributions, whatever gains have been in the account, if you try to withdraw those, then then the penalty comes into play. Is that correct?

37:12 Hui-chin: Yeah. And one big difference for people who eventually just move away from US and no ties in the US, I think I mentioned that before, you could qualify for 0% capital gains tax rate if you sell it, so it’s almost like the same, but the only difference is the dividend. So dividends are taxed at a flat 30% if your a NRA living outside of the US, but over the long term, if you’re investing in, for example tech companies, they don’t pay dividends anyway, and your main goal is for that capital gain growth for the next 30 years, then investing in Roth and investing in a taxable brokerage as an NRA living somewhere else is the same.

37:53 Emily: Gotcha.

37:53 Hui-chin: Why give yourself more ties to a Roth type account you can’t access and there’s more complexity.

38:01 Emily: I see. So really your investing strategy might change based on the tax treatment, if you’re no longer living in the US, of capital gains versus dividends. I actually do want to also add in for people who, I think this is still the case under post-tax custom jobs act, people who are the 12% marginal tax bracket or less, they have 0% federal tax on long-term capital gains and qualified dividends. So if you have a very tax efficient strategy, if you’re buying and holding, generally, as long as you stay in those lower tax brackets, you’re really going to see much or any income tax anyway. So why bother with the IRA, when you could be using a taxable account and not really having that much in the way of actual tax burden. Is that correct?

38:47 Hui-chin: Yeah. And just going back to definitely understand the tax treaty if you already know where you’re going to. Of course, most of the time you might think, well I’m just moving back to my home country, but then you get a job somewhere else and then you know, your life is not really as predictable, but at least understand the tax treaty between us and your home country, if you think it’s very likely you might end up there at retirement age when there would be IRA, 401k distribution consequences and compare that to, if I simply use a taxable brokerage, how does that change my dual country tax liability.

39:31 Emily: Got it. I think what I’m hearing mostly from this interview and the point that you just made about life being sort of unpredictable is, okay, here’s what you know. You know you’re in the U S right now. You have to be in the US for a few years, several years, maybe longer. Deal with what you know about right now, make the best decision you can for right now, and then if the situation changes later, you have to pivot. It’s possible to pivot. You’re not going to be losing your investments just because you’re leaving the country or whatever. It’s something that you can move with you, so you can adapt and change depending on, you know, the next step that you take. And hey, if you end up, if you do end up living in the US long-term, like until retirement age, it will be awesome if you started investing earlier and had started using an IRA or a 403B or a 401K earlier, as soon as you have access. Is that fair?

40:22 Hui-chin: Yeah. And I think those more specific questions and people questioning whether they should have account here. I think in my experience, I really mostly hear it from people from EU countries, Australia, Canada, because they feel like they have the same access when they move back. They don’t want the complexity of dealing with cross border things. And I totally understand that. And if you have good access to invest when you go back home, of course. But I think, what I know is being from a developing country myself is that most of the people who come to US see it as an opportunity and if you can have an investment in the US and don’t have to deal with turmoil that may be happening in your home country, most people jump on the opportunity. I don’t know that many people would say it’s a bad idea to open an account in the US.

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Where to Find More Information

41:26 Emily: Got it. I think we’ll leave it there. This has been fantastic. Thank you so much for joining me. Tell us again where people, can find you — your website, your business name and so forth.

41:35 Hui-chin: Yeah, sure. If you want to read more about what I just talked about, and this also how Emily found me, is on moneymattersforglobetrotters.com. It’s just a blog for reading. And if you’re interested in working with me, you can go directly to pavlovfp.com. That’s Pavlov Financial Planning.

41:54 Emily: Thank you so much for joining me today Hui-chin.

41:57 Hui-chin: You’re welcome.

41:58 Emily: Listeners, thank you for joining me for this episode. PFforPphDs.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcast, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media or with your PhD peers. Three, recommend me as a speaker to your university or association. My seminars covered the personal finance topics PhDs are most interested in, like investing, debt repayment, and taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.