frugality

Making Ends Meet on a Graduate Student Stipend in Los Angeles

March 25, 2019 by Jewel Lipps

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

Links mentioned in episode

Teaser

Adriana (00:00): I tell everyone, I, I’ve told people in my lab being like, no, you have to do this. It’s simple and it’s easy, and it can help you a lot.

Introduction

Emily (00:15): Welcome to the Personal Finance for PhD’s podcast, A Higher Education in Personal Finance. I’m your host, Emily Roberts. This is season two, episode six, and today my guest is Adriana Sperlea, a PhD student at UCLA. Adriana shares her detailed budgeting process, how she keeps her expenses in Los Angeles in check, and what a difference doing an internship made in her financial life. We also discussed the mistake she made with her taxes while receiving a fellowship and how she got that aspect of her financial life back on track. Without further ado, here’s my interview with Adriana Sperlea. I’m welcoming to the podcast episode today, Adriana, who is joining us from, uh, Los Angeles. She’s a graduate student at UCLA, and in today’s episode, we’re covering budgeting, you know, the big challenge of living in a high cost of living area on a grad student stipend. Um, she’s doing really well with this, and she’ll tell us all about her process and what financial goals she’s able to accomplish, and then also about something that happened in her second year of graduate school, which is a big, uh, financial mishap, financial challenge that she had to overcome. And we’re talking about how to, one, not let that happen to you, and two, if something big like that does happen, how to work through it and how to recover from it. So that’s a subject for, um, today’s episode. So Adriana, thank you so much for joining me today.

Please Introduce Yourself

Adriana (01:40): Yeah, hi. It’s great to be here.

Emily (01:43): Uh, so first question right off the bat is, you know, just take a moment to introduce yourself to us, where you are, what you’re studying, and so forth.

Adriana (01:50): Yeah, so my name’s Adriana. I, um, go to UCLA for graduate school. I’m in the bioinformatics program there, uh, which is actually an interdepartmental program, so we don’t have our own department, uh, which sometimes causes all, like, funding gets complicated also. Um, yeah, and I live in Los Angeles. Um, I’m, and I’m actually an international student, so I’m originally from Romania, uh, which also adds a wrinkle to the funding situation.

Emily (02:15): Yeah. Okay, great. Um, and so what, what are you making there? What is your stipend?

Adriana (02:20): Yeah, so, um, we’re, I’m pretty fortunate. We’re in a fully funded program. The stipend is 30, around $32,500 a year, I think it is now. It goes up a little bit every year with inflation and stuff. Um, and so that’s before tax, like after tax, it comes out to about 28,000 a year, I think. Um, which what I know is that every year I get, every month I get $2,400 into my bank account.

Emily (02:45): Okay. And how long have you been there?

Adriana (02:47): So this is my fifth year, that I’ve been here for.

How do you live within your means in Los Angeles?

Emily (02:51): Okay, great. You have long experience then, um in Los Angeles. So, um, right off the bat, you know, when, when we were prepping for this episode, I know about you that you live, uh, within your stipend, you live within your means, you’re not having, you know, loans and so forth coming out for you. And so, um, why did you do that during graduate school? Because I think some people might look at living in LA and living on, you know, 30 some thousand dollars a year and say like, oh gosh, this is gonna be really, really tough. I’m gonna need some extra support from here or there. Um, so why, why did you per not not pursue any of those routes?

Adriana (03:31): So, um, it basically wasn’t really an option for me to pursue those routes. Um, a I don’t have any extra support from my family, um, just because they can’t really afford it, and they’re also far away from me. They’re still back in Romania. Um, and because I’m an international student, I can’t actually take out loans. Um, I, there’s some small private loans that I could probably qualify for now after a few years, but at least in the beginning of my graduate school for sure no. Um, so that was kind of, yeah. Um, the only way I could supplement my income and I did, um, it was actually through, um, internships. So I did do an internship, um, in between my, uh, after my third year of graduate school. But yeah, that was the only extra income, otherwise it would be extremely illegal for me to work, um, federally illegal, so I would get potentially deported. So yeah.

Emily (04:18): Yeah, I noticed that, um, you know, I, I talk a lot about side incomes and stuff and, and to some extent I know that debt is an option, uh, for domestic graduate students. But the thing is that like, if you’re in a tight situation, like some places, some programs, they just plain are not paying enough, and it’s really the international students that are in the hardest squeeze because they have no, as you said, legal, other options out of this. Like, there’s no other way to work, there’s no way to get access to these loans, like that is it, that’s the end of the story. And so I really think that in, in some cases, domestic students can learn a lot from international students on how to make things work because their back is really up against the wall, um, more so than domestic students. So I wanna hear a little, a tiny bit more about this internship, um, so in that year that you, the summer that you did the internship, were you, like, did your grad student stipend stop and you were instead paid through the internship, or did you get like both or how did it work?

Adriana (05:17): Yeah, so I actually got both, but that’s a corner case, like that’s not how it usually works. Um, other people in my program have done internships, and I think depending on when your, where your funding is coming from, most of the time your other funding stops and you just get your internship. Um, in my case, I was on this training grant that, um, encourages, I think it’s actually a requirement of the training grant to do an internship, um, because it’s called Biomedical Big Data Training Grant. So they want to do an internship where you actually explore using big data in the biomedical field, yada, yada. So it’s actually part of the training grant, so they keep paying you. Um, so I got my training grant. I didn’t get, the training grant was actually supplemented by a little bit of a graduate student researcher funding. Um, I didn’t get that part, but I was still getting that and my income from the internship. And I was living in San Diego, which was slightly cheaper than Los Angeles, so that helped too. <laugh>.

Emily (06:08): Yeah. Cool. Okay. So did you actually like sublet your place in Los Angeles for the summer?

Adriana (06:13): Um, so I was living with my boyfriend at the time. Um, so he kept paying. I, I kept paying. Did I pay? It was a little bit ago. I think we had, yeah, I stopped paying half of my rent, I think my half of the rent here. Um, and then, yeah, I subleted a place in San Diego.

Emily (06:29): Yeah. So it’s good that you had the double income because you had the double rent <laugh> for a little while. Yes. Yeah, that can be really tough when you do have to move for just a short, a short period of time. Yeah. Um, okay.

What is your approach to budgeting in Los Angeles?

Emily (06:41): But you had, through that period, I would imagine already this effective like, budgeting system in place. So for, for making it work, for making it on your stipend with no other kind of outside income sources, um, yeah. How, how do you budget? Tell us about your system.

Adriana (06:58): Yeah, so I mean, I think even before budgeting, there’s like kind of the more basic thing where like you kind of have to figure out housing that’s like the first order of priority in LA and it’s hard, but there are ways, I mean, currently for example, I’m in a situation where I’m in graduate student housing that’s subsidized. So it’s actually really affordable. Um, but not, there’s not enough for everyone. So it’s not a, not all graduate students get it. So making it work with roommates, like finding the roommates, like hustling on Craigslist, finding the right deals, like you have to shop around a lot. Um, but there are still ways to find something that can kind of fit in that, like desirable percentage of your income. Maybe. Like, I, I don’t think 30% is feasible in Los Angeles <laugh>. Um, it’ll still probably go up to like 40%, but still, um, yeah, making it work.

Emily (07:47): Well, I would like to hear a little bit more about that one, about the subsidized housing, and then two, just about your, when you’re hustling, when you’re hustling on Craigslist, what are you looking for? How do you find those deals? Because I mean, Los Angeles is a huge city. We’ve got a lot of universities there. I’m sure there are some local people who wanna hear about this because it’s such a problem. And then it will also translate well, I think, to other high cost of living cities. So tell me a little bit more about the, the subsidized housing through UCLA. Like how do you get into it?

Adriana (08:14): So that’s a, that the subsidized housing is a lottery based system. Um, so you just apply and then when someone moves out, they let someone off the wait list in, and I think there’s some random component to it. I don’t really, know, there’s not a, I don’t know exactly how that process works, but you get an email if you got it. So, and you celebrate.

Emily (08:31): Are you allowed to stay as long as you would like? Or is there a cap on it?

Adriana (08:35): So in the one that I’m currently in, yes. Um, well, no, not, I think it’s nine, seven years, seven or eight years, basically, as long as hopefully you don’t need more than that, so, yeah. Um, but it is month to month, so people sometimes will move out, like not, not at the beginning of a year. Um, and then anyone can take their spot. So, yeah. Um, the, it, it’s actually a great system, but it’s just not enough of it. And I’ve, I’ve talked a lot at UCLA trying to push, um, more housing, more affordable housing for students. It’s needed like Los Angeles, it’s impossible. So

Emily (09:06): How much of a discount are you getting? Like how much is the subsidy?

Adriana (09:10): Uh, well it’s, it’s not like percentage based, but it’s, it’s subsidizing that it is cheaper. So, uh, a one bedroom, we have like a junior one bedroom. It’s me and my fiance now living in it. Um, and we pay, uh, 30, around 1300 for the whole place. So split, I pay like $650 for, for rent, which is amazing for LA.

Emily (09:31): Yeah, 650 sounds like pretty good for a lot of cities around the country. Yeah. So a junior, one bedroom. Okay. Yeah. So it helps certainly if you have someone that you’re willing to share a bedroom with.

Adriana (09:43): Yes, a hundred percent. So that may be, if you have a significant other, then that’s a lot easier. I’ll be honest, I’ve talked to people in grad school that talk about like the advantages of having a partner in terms of rent <laugh>, um, but then also you can share a bedroom. I mean, it’s not ideal as a graduate student. You don’t want to be sharing a bedroom, but if you need to make it work because there’s no other money share a bedroom like that, that can be the case. Yeah.

Emily (10:08): Yeah. I just actually ran into someone, um, not ran into, someone attended a seminar of mine a couple days ago and she said, yep, I live in a, I share a bedroom with my roommate. That is still a thing that is happening, like to make her her budget work. So it’s not, it’s not totally unheard of, not totally out of the question. Okay. I totally agree with you. You have to get that housing component kind of set, and that’s something around which a, a lot of the rest of your budget will, will be determined. Um, yeah. So is there anything else like that? Is housing the one expense that you need to fix first? Or like, what about transportation? Did you figure that out before really working on your budget?

Adriana (10:43): So I mean, housing and transportation are probably the two big ones. Um, I don’t own a car. Um, so for me it’s like you can pay a little more for rent because I don’t own the cars. I don’t have car costs like insurance and all that, or parking. And so I can live a little closer and not have the car. You can have the car that’s more cost, but you might be able to get cheaper rent. So that’s kind of a balance, I feel like. Um, I mean, if also if you’re somewhere that has public transit, then you, your problems are way easier. But in LA it’s kind of the trade off between car and, um, housing. Yeah.

Emily (11:13): Yeah. Okay. So you live car free. That’s awesome. I love that.

Adriana (11:16): Well, so my fiance does have a car now, so

Emily (11:18): Oh, okay. So you’re sort of, you sort of share a car.

Adriana (11:20): Yes, now I do. Yeah. But I didn’t have one for a very long time,

Emily (11:24): So I, I forgot that I wanted to go back to this, um, this idea of how can you find like, affordable housing? Do you have any tips about that?

Adriana (11:33): Um, yeah, I mean, honestly, a lot of it’s just like spending time and looking around and eventually you’ll find kind of these offers that are not as common. Um, there are in LA there the, there’s this one type of building in LA in particular, I forget what they’re called, but basically they’re like older houses that are honestly like, not earthquake proof, <laugh>, um, they’re the <inaudible> build. They have like a carport underneath. Um, and those, because they’re not retrofitted and they tend to have like slightly older furniture and like the AC is like not super up to date and stuff like that, they tend to go for a little less. And occasionally in some areas there is rent control. So if you can get into a place that has the rent control, then your rent at least won’t go up. Um, so there’s various hacks like that, and it’s all about just like having patience and kind of starting early on the housing search. Um, but I do know that it’s getting harder every year. So yeah, there’s, there’s only so much you can do with that, to be perfectly honest. Like, I don’t wanna like claim that it’s, I have some amazing magic for finding housing because it’s just tough.

Emily (12:37): Yeah. So you’re just saying be patient, um, sort of target, you know, types of buildings that you know, are gonna be less expensive. Yeah, I’m a little concerned about this not being earthquake proof thing, <laugh>. Um,

Adriana (12:50): It’s the truth. That’s how it, I mean, yeah, I don’t know if that like, it’s a good thing to say that you should live somewhere that’s not retrofitted, but I do know those apartments are not well retrofitted. It’s a common thing. And that’s why I think they’re going, a lot of them are being like, replaced by newer developments. Um, but yeah, there’s, I mean, maybe don’t live somewhere that you don’t feel safe, of course. But, um, there, you know, you can definitely sacrifice on things like granite countertops, <laugh>, or the open space. You know, like you’re not gonna get, um, something beautiful, but you can get something livable and clean for, um, more affordable.

What is the system that you use for budgeting?

Emily (13:27): Yeah. Okay. So, okay, so let’s return to the, the budgeting, um. System that you used. I, I’d love to hear more about just how you make it work overall. Once, once you’ve gotten this rent and then like your decision about transportation in place.

Adriana (13:40): Yeah. So I’ve had, for a very long time I had this like spreadsheet system where I would put in my income that comes in every month and I would separate it. I would put in my fixed costs, like the rent that has to be paid and my bills, like my phone bill, um, whatever other bills you have that are just monthly, like if you have a gym membership, if you have other bills, et cetera. Um, if you have to pay for insurance, I guess you have a car, you would have that there too. Um, and then I split whatever is, I did sub subtract that from my monthly income and then I divided into four. Um, ’cause there’s like four weeks in a month. And then whenever I buy something, I entered it, I entered in my spreadsheet and I have a cell that subtracts that from my weekly budget.

Adriana (14:22): Um, and so I always have a sense kind of like, of what I’m spending. Um, and I try, so for me, I, I notice, I think, I think it’s common from a lot of grad students that eating out tends to drive your budget up a lot. Like if you don’t cook your own meals, like that’s gonna be a big expense. Um, so for me it’s all about just, you know, buying my, making sure I buy my groceries on the weekend and kind of prep some type of food and make sure I’m cooking my meals. And if my meals are cooked and I’m on top of that, then I pretty much don’t spend anything Monday through Friday, to be honest. ’cause I just go into lab. I eat lunch that I brought from home and then I come back home. So there’s not a lot of expenses. And so then by the end of the, on the weekend, you still have like a hundred something dollars to work with that. Um, you can, you know, you can go see a movie, you can go out, you can do something.

Emily (15:09): I’ll just recap that for a second. ’cause I wanna make sure I, I really like what I’m hearing. I wanna make sure I understand. So, so you take your, your total monthly income, and then you subtract out all of your, basically your monthly bills. They’re often fixed expenses. Maybe there’s some variable in there, like some utilities or something. I dunno if any of your utilities are variable, but, so you’re subtracting out all those monthly bills and then you take the remainder and you divide it up by the week. And so you have your, your sort of, uh, discretionary or variable spending money for each week, and you start that week by buying your food, your groceries for the week. And you basically just are living sort of a, uh, a lifestyle where you don’t spend much during the week. Like, you know, you’re not, you’re not buying gas, you just said you don’t have a car. You’re not eating out during the week, you’re presumably not doing any entertainment stuff so that when you get to the following weekend, you know, you have, you know, the amount of money you have to work with, uh, in terms of being able to do some discretionary stuff, some fun stuff, um, eating out or entertainment or bar or what have you. Does that sound, is that, yeah.

Adriana (16:08): That’s pretty much it. Yeah. And then, I mean, there’s, you know, you wanna have a little bit of room. I have, I actually have a little bit of money set aside for like, things that come up, you know, like things can come up, so you can’t always anticipate that, like the miscellaneous stuff. Um, but yeah, that’s pretty much how it works. And I mean, um, the other thing is like if I have, I see something that I wanna buy, right? That’s just like something I want that’s fun. I want this new pair of jeans, or I want this, I don’t know, whatever it is. Um, like for example, a new part for my gaming computer, something like that, right? Um, I will, I won’t buy it the moment I want it. I’ll make a list and then at the end of either the month or the week or whenever, after a while, I look at that list and then I go through it and kind of rank the things that I’ve I, that I’ve seen that are like, oh, I would really like to own this. And then the impulse part is out of it, right? So now I can make kind of a cool-headed decision about it and I can see where I’m at, how much can I actually afford? And then I can actually buy a few of those things.

Emily (17:08): Yeah, I love that. I love that idea. So you’re, you’re sort of formalizing the practice of delayed gratification. You have a centralized list that you’re using and you’re adding something catches your eye, you add it to it, and then after some days or maybe a full month or something, you’re reevaluating, do I really want that? Is it worth it? What’s the amount of money I have right now available to spend on it? Yeah, that sounds awesome.

What do you do about large expenses?

Emily (17:30): Um, what do you do about like, large expenses, like if you were to fly home?

Adriana (17:35): Yeah, so I mean, in this past year, because it’s been, um, my rent has gone down since I’ve moved into the subsidized housing, um, I’ve been able to have a little more leeway with that. So I usually have a little more extra money at the end of the month. Um, I have, since my internship, I’ve actually maintained this emergency fund, um, that’s about two or $3,000 in just a savings account that’s not, that I can still access whenever I want to. Um, so usually for big expenses like that, I’ll go into, it’s not really just an emergency fund, I guess it’s more of a big expenses that I, that are necessary though. Um, and I’ll, I’ll use from there and then I’ll gradually fill that back up, um, with money as I have extra during the month. Before that, um, before the internship where I did, I had this like extra money saved up. Um, it was pretty tough. Um, I didn’t go home that often, like all the way to Romania. Um, occasionally my mom would help with that, like she would help with the plane ticket. Um, but yeah, so it, it’s tough when big expenses come up.

Emily (18:47): Yeah, definitely. I mean, I like that you, I mean, it sounds like you had this, this one, one summer, only one summer where you did this internship, but because you were getting that dual pay, because the pay rate was a bit higher, it, it sort of gave your finances overall a boost plus the boost that you’re getting from the subsidized housing. And so kind of between those two, you’ve gotten a little bit ahead, right? You’re able to have this money set aside for kind of whatever comes up. It’s already there, you can draw on it and then refill it. Um, instead of being like, I don’t know, putting something on a credit card and then having to repay that over time, you’re sort of repaying yourself into your own savings.

Adriana (19:25): Yep.

Emily (19:25): Kind of like doing the debt, you know, process. So

Adriana (19:28): I’m super afraid of credit cards, actually <laugh>. So I have credit cards for maximizing like rewards and stuff like that, but I absolutely do not spend money on a credit card unless I have that money in checking like that liquid money. So, yeah.

Emily (19:41): Yeah, that’s perfect. I, I use, in grad school, I, I also was pretty afraid of credit cards for like, the first few years that I was like an adult. And I very strictly stuck to that system of, okay, the money is already in my bank account. I’m spending it just like I would if I were swiping my debit card, but I’m only doing this because I’m getting like extra rewards at the end of the day. I think there’s a healthy amount of fear right there. There’s a healthy level of fear that you can apply to credit cards. Maybe you can take it too far. And certainly some people are not afraid enough, but there’s like a sweet, you know, middle, middle there. Um, okay. Yeah. Is there anything else you wanna say about like, your budgeting or just how you’re making it work in la?

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

Adriana (20:21): One thing is that recently I have kinda like loosened the reins on how I budget, where I don’t maybe like log everything. Like I would log literally, oh, I bought coffee a dollar 50 into my Excel spreadsheet. I don’t do that anymore in the past year or so. Um, just ’cause you kind of get a sense of it after you’ve done it for a long time of what you can or cannot afford. So you don’t make silly purchases because you know what’s affordable and what’s not. Um, and I think that’s part of the learning system. Like you just, you learn that as you go. So

Emily (20:49): Yeah, you’ve sort of, you’ve internalized your budget. It’s now like in your mind instead of explicitly like in your spreadsheets.

Adriana (20:56): Yep, exactly.

Emily (20:57): Yeah. That’s nice. I, I think I, well, I never completely stopped tracking. I think I also internalized, um, my budget during grad school, but then everything got thrown when I moved. Right? If you go to a new city, you have a different life, different setup. Like you’re kind of, you’re not starting over at, you know, square one, but you’re taking a couple steps back in terms of that, that intuition or that like internalization, I think. So that’s a good time to start doing all the, you know, intensive tracking. Again, if there’s a big shift, you know, in your life.

Commercial

Emily (21:30): Do you know what’s even scarier than an upcoming committee meeting the prospect of preparing your tax return? But it doesn’t have to be that way. I’ve created a variety of free and paid resources to help you get through tax season with as little pain as possible. These resources are specifically for grad students and fellowship recipients postbac through postdoc, check them out at pfforphds.com/tax.

Can you talk about saving for retirement?

Emily (21:59): Okay. And you also told me earlier that you are saving for retirement, you’re contributing to an IRA. Can you tell me a little bit about why you’re doing that and how you’re doing that?

Adriana (22:09): Yeah. I’m not saving much. I’m not even maxing it out <laugh>. Um, but I am saving, so, um, about a year or so ago, I just, so my fiance’s uh, dad actually, he like talks a lot about, uh, investing and stuff like that. And I was like, on Thanksgiving, I was like, I, I need to figure that out. Like, can you tell me what you’re doing? Because you talk like there’s stocks that sounds super complicated. And he was like, all right, this is what you do. You go and you buy this book, it’s called A Random Walk Down Wall Street*, and you read it and then you got this. And that’s what I did. I bought the book and I read and I was like, oh, this is not at all complicated. Like, investing is not rocket science at all. Um, there’s just a weird culture around it that makes it sound complicated.

[* This is an affiliate link. Thank you for supporting PF for PhDs!]

Adriana (22:51): And I think people like to talk about it as if it’s something that’s just rocket science, but it’s totally not. It’s super easy and you can do it at like kind of a low risk. I’d say, um, if you want to, and also this is the best time in your life to do it because it doesn’t matter what, like, oh, the market is crashing, I don’t care. That’s a perfect time to buy more because I only have to have access to this money in like 60 years. So maybe not 60, but you know, like 40 years from now. So it’s actually really not stressful at all. I thought it would be super stressful of like, oh my God, now I have to worry about the market. But you really don’t. The best investment strategy when you’re, uh, our age is to just forget your password or something like that, you know, for your investment account and just don’t look at it.

Adriana (23:34): Um, yeah, so I just used, um, I use a Roth IRA because it’s, um, money that’s after. So I’ve already paid taxes on it, um, as opposed to using a traditional IRA or something else that, um, you pay tax when you take money out of it. So when you retire. And my rationale for that was that I’m in probably in the lowest tax bracket I’ll ever be in, um, because it’s the lowest tax bracket that exists. Um, so this is a good time to do that because my tax, uh, is only gonna go up. Um, and yeah, that’s what I do. I put like $200 every, uh, month in it. Um, and that’s just been a recent thing ’cause I was like, oh, I probably can swing that now because of the rent and whatever. So I just did it and it goes up pretty nicely. It’s just like fun to look at it every once in a while and so that you’ve accumulated money and, um, yeah, it’s, you can actually, because of compound interest, right, you can end up having a lot more money when you retire. And I know you write about this on your blog too, and I, I read a little bit about the that there as well.

Emily (24:35): I just, for, for any listener who is nervous or intimidated about investing, I just want you to go back and go back, you know, three or four minutes in this podcast, listen to exactly what Adriana said like a few times and listen to her like, you know, the transformation that she went through in being intimidated to just asking a very simple question of someone getting a book recommendation, which she just gave to you and just saying, read this book. It’s so simple. We do have a culture of making investing seem a lot more complicated than it is. And like, I guess that’s because people make money off of making it sound complicated. But for goodness sake, that does not need to be, it should not be, it is so simple and, you know, you just put it absolutely perfectly about your strategy and, and why you’re doing it that way. And yeah, everyone just listen to that a few times over again. Um, great. Go pick up a random walk down Wall Street. Perfect. Perfect recommendation. Thank you so much for sharing that. I’m, I’m really glad to yeah, hear that the same thing that I say, but just coming from someone else who, who approached it from a different way and got to the same conclusion and I think it’s exactly right. So thank you so much for that.

Adriana (25:42): Yeah, no, yeah, I’m super into inve. Like I tell everyone, I, I’ve told people in my lab being like, no, you have to do this. It’s simple and it’s easy and it can help you a lot. Yeah.

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

Emily (25:51): Exactly. Um, so let’s switch gears and talk about this, uh, big financial, uh, mistake or challenge that came up in your second year. Can you tell us that story?

Adriana (26:02): Yeah, so it’s a little bit of a longer story, but I’ll, I’ll try to make it short. Um, so, um, I guess, so when I started graduate school, I was still taxed as an international student. Um, so what that means is, and so I went to, I was an international student in undergrad as well. I went to college in the US um, and I had never had to worry about taxes because they were always withheld from my, um, any salary I had. So I had some small on-campus jobs in undergrad and taxes always been withheld, right? So I never had to worry about it. Um, and then in my, after one quarter in graduate school, I had officially been here for five years and that’s when your, um, your residency status for tax purposes changes from a non-resident alien to resident for tax purposes. So that’s, it literally just means we can now tax as if you’re a resident, but you don’t get anything else that residents get <laugh>.

Adriana (26:56): Um, so when that changed, they actually, so sorry. No, that’s <inaudible>, it was a long time ago, but when it, that actually changed in June, in June of my first year of graduate school. And so what they did is they retrospectively went and said, okay, so this applies to this whole year. It doesn’t apply just starting after June, so we’re actually gonna give you back $3,000 that we withheld from your stipend because you were an international student and we withhold from international students, so we’re giving you back $3,000. Um, and I was like, what is this money that I’m getting back? Why am I getting it back? I don’t even know what it is. Um, and they’re like, yeah, well, taxes, blah, blah, blah, something, something. So I had never heard of anyone having this issue before. I asked a few of the people in the program like how much money they spend on, they, like, did they pay taxes on the fellowship?

Adriana (27:44): How does it work? Because all my money did come from, so it’s, it’s different and, and you write a lot on your blog, there’s tons of resources on this. Um, I’m like, how it’s different if you’re in a fellowship, taxes don’t get withheld, you still have to pay them. Um, and people were like, oh, I paid about a thousand dollars. Oh, I paid like $2,000. There were just like sums all over the board. And I think part of those are from like people, some people were still getting claimed as dependents on their parents. Some people potentially were just committing tax evasion, I’m not quite sure. Um, it’s just all sorts of like information from so many places. And I was like, okay, well this seems fine. Like, I don’t know, I’m just gonna, I’ll, I’ll put this money kind of away. But I did end up spending a little bit from it that I got back.

Adriana (28:26): And then I didn’t know that after that I have to start, like my paycheck went up and I just had no idea what was going on. And I was kind of like, you know, I was like, if, if something bad happens, I would’ve heard about it, right? Because someone else would’ve had this issue and I would’ve, there would’ve been a big uproar about it, but no, then April hit and I had to do my taxes and I did my taxes and it said, you owe $3,000 in taxes. Uh, which was like, what? Um, and it was pretty scary. Um, like I kind of freaked out about it a little bit, um, the way I, you want me to talk about how I dealt with it too, right? Like what happened next?

Emily (29:04): Yeah, yeah. So like the first part of this story is, it’s complicated a little bit because of your previous status as a, a non-resident alien, but it, it is a similar story to what many graduate students go through often, you know, they enter their programs in the biomedical sciences, it’s very common to be on a fellowship or training grant, uh, non W2 income for a year or two, three years at the beginning of your PhD, maybe you won an outside fellowship and so that, that first year, yeah, maybe you came out of college, your income wasn’t too high, maybe you’re still dependent on your parents. It’s, it’s complicated, but also you have usually very little tax due for that year, if any. But then that’s that first full calendar year that you’re in graduate school when you’re supposed to be paying quarterly estimated tax, but you don’t know to do that.

Emily (29:51): Super, super common. I mean, I meet, I meet people in this situation all the time. You don’t know that you’re supposed to be paying and then maybe at the end of the year you figure out that you, you know, had this large amount of tax that you either should have been paying or at least at that point it’s due all at once. Um, or you know, I’ve talked to people who go several years without making this discovery and so then it just builds up and builds up and builds up. In your case, you did figure it out just one year in, um, yeah. That you, you were, were, you know, going to owe tax a good amount of tax on your stipend and maybe you were supposed to be paying that or maybe not during the year. Um, so yeah, that’s kind of where we are. You see this big bill.

How did you pay the tax balance?

Emily (30:28): How did you, I mean, it sounds like you still had some of that money set aside. Did you use that and then where else did you turn for the balance?

Adriana (30:35): Yeah, so I had a little bit set aside, um, but it wasn’t, I think I had about a thousand dollars set aside. Um, so I still had to pay like $2,000. Um, I did get lucky again in that I was actually from a previous year disputing with the IRS, um, over a thousand dollars that they hadn’t given me back on a return. Um, and it was because of this. Um, so they withheld from me, uh, in that first quarter of graduate school, right? That’s from the previous tax year. And I actually was owed that money back because there’s a treaty between Romania and the US and so when you have a treaty status, you can get your tax money back from the first five years. But UCLA still withheld it and they weren’t giving it back, and it was this whole thing. So the, that thousand dollars finally got resolved at the same time as with this giant tax bill. So I got some money from there. Um, and then I actually applied for a payment plan with the IRS, which you can do. And um, they kinda laughed at me because it was only for a thousand dollars <laugh>. Um, but I did, this is usually people that apply for, those have like giant sums, right? That they have to pay, um, or I’m not sure, but they seem to make, they made it seem, when I talk to ’em on the phone as if, why do you need a payment plan for this?

Emily (31:50): Um, yeah. ’cause you’re a grad student and you can’t make a thousand dollars materialize out of nowhere.

Adriana (31:55): Exactly. <laugh>. Um, so I did a payment plan and they were like, yeah, sure, it’s fine. Because usually the, the conditions are just, you have to not have applied for a payment plan in the past five years, I think, and the sum has to be below something absurd, like $200,000. I don’t even know what it was. It was something that wasn’t close. Um, so yeah, so I did that and then I slowly just kind of paid it off. Um, and that actually happened, a similar thing happened to my fiance where he also did a payment plan because he had a smaller tax bill, but it was still a pretty significant sum that he couldn’t just make a appear overnight. So yeah, we, we both took advantage of that. So that’s a good pro tip I guess to.

Emily (32:32): Yeah, that is um, I don’t think I’ve spoken with anybody. I mean, I’m aware these payment plans exist, but I, I don’t think I’ve spoken with anybody before who’s been on one. So it sounds like it was a pretty easy, positive experience. I mean, a lot of people are very intimidated to even like talk to the IRS, like if they know they have this outstanding balance, it’s like, oh, I don’t even wanna engage with this because, you know, they’re gonna like gobble me alive or whatever. But it sounds like it worked out okay. Right.

Adriana (32:58): Yeah, there’s a lot of time spent on hold because they’re, uh, like when you call them that you, there’s not, the call center is super overwhelmed with calls. Um, but they, they, they were, yeah, they were okay with it, so, yeah.

Emily (33:09): Okay. Yeah, so that’s how you worked through it. You had, uh, the savings still, you had a different <laugh> unrelated dispute being resolved at the same time, plus the payment plan and that kind of got you through that. That’s really, really good to know for anyone who is facing a similar, you know, I’m, we’re gonna be releasing this episode shortly before, um, April 15th, 2019. And so if you are a graduate student and you’re coming up on that, you know, you’re filing your annual tax return or maybe it’s your first, um, estimated tax payment for 2019 and you realize that you cannot pay this, the IRS is a place to turn to for help really. Um, it’s, I guess it’s a little bit like finance. I mean it’s IRS debt, like it’s, you’re sort of financing it through the IRS, but it’s, uh, manageable it sounds like, as long as you can afford to be waiting on hold to talk with them. So I’m really glad that you shared that aspect. Thanks.

Adriana (33:57): Yeah, and I don’t think there’s any interest. They never, there’s, it’s an interest free thing, I think for the most part.

Emily (34:02): Yeah, I think if you totally ignore what’s going on and they’re like, then that’s when penalties and interests rack up. But if you engage with them and start working with them, then they can like waive those fees and, and penalties and stuff. So it’s definitely better to just admit that like, Hey, I know, I know this debt exists, you know, this debt exists. Uh, let’s work on, you know, figuring out how to pay it rather than just, uh, yeah, just sort of trying to run and hide ’cause it’s not gonna work out in the long run.

Adriana (34:26): Yeah, absolutely. <laugh>.

Final Comments

Emily (34:28): Yeah. Well, um, yeah, thank you so much Adriana for, for sharing that with us. Do you have any sort of closing comments about, you know, any, any tips you didn’t get in any other part of this interview?

Adriana (34:39): Budgeting can definitely be tough and kind of it’s time consuming and a little bit stressful. Um, but it’s totally worth it because it’s more stressful to not afford to pay your rent <laugh>. So that’s, yeah.

Emily (34:52): Kind of what we were just talking about, like it’s, it’s better to just face up, fess up, face up to the reality of the situation always and engage, you know, with what, whatever you need to engage with rather than just trying to run hide because it just, it just compounds the problems really. Yeah. Thank you for, thank you for sharing with that, that with us. And uh, thank you so much for being on the podcast today.

Adriana (35:14): Yeah, thank you for having me. This was great,

Outro

Emily (35:18): Adriana. Thank you so much for being my guest on the podcast today. Show notes for this episode are at pfforphds.com/S2E6. As a postscript, this episode is being released shortly before April 15th, 2019, which is the deadline both for your annual tax return and your quarterly estimated tax payment for the first quarter of 2019. If you’re unsure how to go about calculating and making that payment, please consider purchasing my quarterly estimated tax workshop for fellowship recipients. The prerecorded videos walk you line by line through how to fill out Form 1040es. I also hold a live q and a session once per quarter to answer any questions that arise for you during the process. You can find more information about the workshop at the tax center on my website pfforphds.com/tax. If you wanna get in touch with me, you can email me at [email protected] or find me on Twitter at pfforPhDs or Facebook personal finance for PhDs. If you’d like to receive updates on new podcast episodes and other content, go to PFforphds.com/subscribe. See you in the next episode. 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 Jewel Lipps.

As a Single Parent, This Graduate Student Utilizes Every Possible Resource

January 14, 2019 by Jewel Lipps

In this podcast episode, Emily interview Lauri Lutes, a fourth-year PhD student at Oregon State University and single mother. Lauri’s stipend is equivalent to the local living wage for just one adult, yet she supports herself and her daughter on it without using student loans. Lauri details how she makes ends meet by taking advantage of every possible university and community benefit, such as subsidized and free childcare, food assistance, and recreation and arts scholarships. Lauri additionally serves her community by advocating for graduate student parents on two university boards.

Links mentioned in episode

Teaser

Lauri (00:00): My daughter was four when I was looking at graduate schools, and so I, I was looking at the family resources available, and I was surprised to find the Oregon State University actually offers quite a few resources to their students to help them be successful, and I’ve definitely taken advantage of those things.

Introduction

Emily (00:20): Welcome to the personal Finance for PhDs podcast, a Higher Education in Personal finance. I’m your host, Emily Roberts. This is season two, episode one, and today my guest is Lauri Lutes, a fourth year PhD student at Oregon State University. Lauri is a single parent to an elementary school age child whom she supports on her graduate stipend. We discussed the numerous on-campus and community resources that Lauri has enrolled in, such as subsidized childcare, food assistance, and recreational scholarships. This is a discussion that will benefit anyone who is struggling to make ends meet on a stipend. Without further ado, here’s my interview with Lauri Lutes.

Please Introduce Yourself

Emily (01:02): Well, welcome. I’m here with Lauri Lutes, my guest for our Money Story interview today, and we are going to be discussing making ends meet, or at least attempting to make ends meet as a parent in graduate school, especially, um, of an, of an older child, and in particular as a single parent. So, Lauri, welcome to the podcast. Um, please tell us a little bit more, more about yourself and about your family.

Lauri (01:27): Yeah, so, um, my name is Lauri Lutes and I’m a PhD student at Oregon State University. And, um, my research is to study viruses on, um, sweet cherry trees. So that’s the main reason why I am, have put myself in this situation. Um, I have a 7-year-old daughter who will be eight next week actually, and I am currently a single mom. So, as you can imagine, juggling all of that, um, there are some struggles.

What is your current annual income and expenses?

Emily (02:01): Yeah, I mean, I, I can’t even imagine, first of all the, the time challenges to being, having such important roles, obviously as a parent and also trying to finish your PhD, but we’re gonna focus on the financial side of things today. So yeah, let’s start off by talking about your income and your expenses. So what is your current income?

Lauri (02:22): So my income comes from a graduate stipend. Um, students in my program, unless you are performing poorly, are pretty much insured, some sort of an assistantship. So I’ve either had a teaching assistantship or a research assistant assistantship, um, the whole time I’ve been here and I make about $24,000 a year.

Emily (02:43): Compare that to what are your, what, what are your current expenses for the year?

Lauri (02:49): So my, my current expenses probably exceed that. A very modest estimate would be somewhere between 27 and $30,000. Um, but that, that is really just the bare minimum of paying rent and, um, you know, not having a car payment and also, um, not taking into consideration some supplemental income that I get from food assistance programs and things like that.

Emily (03:16): Yeah, we’ll definitely be talking more about that a little bit later on. And I just wanna give the listeners a little bit of context. So I looked up what the living wage is in, um, Benton County, and, um, so for, I, I really like this tool, it’s, it’s livingwage.mit.edu. So those of you who are looking at moving or something maybe for graduate school or for your postdoc, check this out by uh county. It tells you what living wages are for different family units. And so for one adult, um, with one child in Benton County, um, they suggest a living wage of $51,000 before tax 41 or about 42,000 after tax. So, I mean, you can tell <laugh> from the numbers that Lauri’s throwing out that she is living close to the bone here. Um, and so we’re certainly gonna learn more about her, her strategies and why she’s, why she’s chosen to make this work.

What benefits do you receive and how did you find these benefits?

Emily (04:11): Um, so we have your income and your expenses. And so you did mention, you know, you’re receiving some kind of assistance from OSU right? Some support, um, for yourself as a student and as a parent. So can you tell me more about what you found, uh, the benefits that you’ve been receiving and, and how you found out about them and enrolled in them?

Lauri (04:32): Sure. So when I was looking at different graduate schools, one thing I looked at, because I had a child at the time, I’ve been at Oregon State for, um, this is my fourth year now. So my daughter was four when I was looking at graduate schools. And so I, I was looking at the family resources available and I was surprised to find actually the Oregon State University actually offers, um, quite a few resources to their students to help them be successful. And I’ve definitely taken advantage of those things. So the two main ones that, um, I’ve taken advantage of are the childcare subsidy. So there are, um, student fees that are pulled together along with some, um, donor funding that supports a, a childcare stipend that pays up to 50% of childcare, which is for, um, children before they’re in school. And then once they’re eligible to be, um, in kindergarten where they can be in public school and not in full-time childcare. Um, even if you have before care or aftercare costs, the stipend can also be contributed to that. And so when we, uh, first moved, my daughter was able to use, we were able to use that to pay for her childcare before she was in school. And now that she’s in school, I receive the subsidy to help pay for her, um, aftercare program.

Emily (05:57): Yeah, that sounds, yeah, lemme just, just interrupt you there for a second. That sounds like really great that that’s being offered, especially because, you know, childcare isn’t just what’s, you know, during the, the hours of public school, like you need more time at work than that. So that’s really great that it extends beyond, um, beyond kindergarten. Um, I wanna go back to what you said that you were comparing what was being offered, um, by the different universities that you were applying to or admitted to. Did you find that this was, um, typical or, or did it really stand out to you as, as more than what other places were offering?

Lauri (06:31): Yeah, definitely more rare. Um, I didn’t, I was pretty much set on going to graduate school in the Pacific Northwest, so I didn’t thoroughly investigate a lot of other universities. Um, but it, it’s more rare to have this, uh, sort of stipend available to students in my experience. Um, and also because I’ve done research since then due to my different, uh, involvement with the Family resource Center, which I’ll talk about later probably. Um, but it’s, it’s more of a rare thing that a university has this sort of assistance and that it’s, um, and that it covers up to 50%. Like that’s pretty substantial as well.

Emily (07:13): Yeah. Please continue with what was the second benefit?

Lauri (07:16): Sure. So the second benefit, um, which you, uh, kind of hit the nail on the head with is that, you know, having assistance for non-school hours is another huge issue. Um, because being a student, there are many things that you need to do, um, outside of the, the school day for your child <laugh>, um, even up to like five o’clock or even in the evening sometimes. And so Oregon State also has two childcare facilities that are just a drop in, um, childcare where it is free, um, for up to three hours per day. And these are mostly offered in the evening and weekends. And so I think the hours on the weekends are something like 10:00 AM to 7:00 PM or you can go and drop your child off for three hours on the weekend and have free childcare while you’re getting work done or going to a conference or working out. One of the childcare facilities is actually at the recreation center.

Emily (08:15): I am like blown away by this <laugh>. Is there any kind of like limit on it, like a number of hours per week you’re allowed to use it?

Lauri (08:22): Um, there’s not, it’s just a three hours per day and, um, it is a first come first serve basis. And so the students who, um, are working there, student workers who, um, are the childcare providers, but a lot of them, it’s also a great experience for them because they’re students from, you know, child development or education related fields. And so they’re getting some hands on experience doing that. Um, but the, so there’s only a certain number of students and really they’re most limited by space. So the, the thing that it’s kind of first come, first serve, which I’ve only ran into one situation where instead of going to the childcare facility and the recreation center, I had to go to the one in the library. But, um, typically there, there is enough room and, um, I haven’t really run into that problem. So I, I think the, the folks that oversee that are, um, knowledgeable enough to know what the peak times are and know when to offer the hours and have that worked out to where it’s still a reliable resource for student parents.

What is your daily routine like? Is your advisor supportive?

Emily (09:31): Are you, um, are you an experimentalist? Are you in the lab or what’s your kind of day-to-day like?

Lauri (09:37): So my day-to-day, my work is, it ebbs and flows for sure. Um, so the first couple years of my work I was surveying in orchards throughout the entire state. And so my work was more, um, where I would need to take a trip for a day, uh, sometimes even overnight. And, um, so then I, you know, rely on my, um, friends and community to help me out with, with babysitting and things like that to fill in those hours. Um, but the day-to-day I can mostly fit my work in, in the lab, um, during, you know, nine to five hours. And so I really try to stick to that sort of schedule. I don’t really have, um, work that requires me to be here on the weekends. Not that I don’t ever work weekends, but I, you know, I don’t have those sorts of, uh, requirements for the type of work that I do. So usually it’s, you know, there are days where I’m gone for a couple days and have to be out in the field. Um, and my work is, the bulk of my work right now is about three hours away from, it’s in the Columbia River Gorge and I’m located in Corvallis, and so there’s some logistics to work out there. Um, but most of it on the day to day, that’s more of a, an exception. Most of my work day to day is from nine to five.

Emily (11:02): Yeah. So it sounds like you are able to kind of manage your hours so you’re not, I guess I always, maybe I wasn’t so good at time management when I was in graduate school, <laugh>, but, um, you know, there were plenty of times when I would stay into the evening, keep working if I had an experiment that I really needed to set up, you know, maybe I would underestimate the amount of time I would take. And I didn’t have children at the time, so I was, you know, free to <laugh> let my work run over if I needed to. But I, I did observe that the people in my lab, um, and in my department who are parents kept pretty strict, um, work hours and I assume it had to do with childcare. Um, so that’s great that your work has, you’ve made it at least lend itself most of the time to, you know, be able to keep hours that are compatible with the childcare you’ve set up.

Lauri (11:44): Yes. And, and thankfully, I think another piece that comes with that is I, um, I have an incredibly supportive advisor who, who understands my situation and, um, never puts me in a position where I feel like I have to compromise being a parent for being a student. And so I think, um, I’m very fortunate in that.

Emily (12:04): Is this something that you talked about during your interviews? Like you were vetting the people who you were interviewing with on this, on this aspect?

Lauri (12:13): Um, I wasn’t, it wasn’t a secret that I was a parent, and so, um, it wasn’t something that I was specifically looking for. Um, maybe in retrospect I definitely should have done that. I think it was more, it, it just happened to work out and I got myself into good situation, but I would definitely encourage <laugh> other people who, who might be a, a student parent considering graduate school to definitely consider that because I know other student parents who, um, haven’t been quite so fortunate in, in their situation. So I think for me, I wasn’t specifically looking for that, even though I probably should have been. Um, but my advisor knew that I was a mom and so at least you know that that information was, was out there and so he, he could consider that fully before taking me on as a student.

Tell us about your service experience on advisory boards and committees.

Emily (13:05): You mentioned earlier that, um, you’re serving on some kind of, um, board or council or something. Can you tell me more about that?

Lauri (13:12): Sure. So, um, I’ve taken advantage of a lot of the resources through the family resource center with the childcare stipend and with the, um, free childcare on campus. And, um, you know, there were, they were asking for people to join the family resources advisory board. And so I, I thought this would be a great place for me to get more involved and, um, sort of advocate for students and, um, I have, you know, have my voice heard and be able to share, uh, the perspective of other students that, um, other student parents in the graduate program. And so I serve on the Family Resources board in that regard. And that group, um, works together to decide on the budget, um, for the, uh, student fees and where those student fees, uh, where that funding goes, um, under the umbrella of the Family resource center. And, um, so that’s for the, um, childcare assistance stipend for different activities for students, um, with families on campus.

Lauri (14:22): And actually that also includes, um, employees with, um, dependents as well. And then more recently, because my involvement on that board, I am the, uh, graduate student representative on another committee for children, youth and families that is a part of the faculty Senate. And the really neat thing about that committee is that we report directly to the president of the university. And so, um, there’s really, uh, a lot of power there. And, um, I guess it’s, it’s inspiring to be a part of that because I feel like we can really make some changes, um, on the university level. And that one is really focused, um, focused students and faculty with dependents and so not just, um, not just children, you know. So we’re also looking at elder care and we’re looking at, um, folks who may have, um, adult dependents and all these different situations that people may find themselves in where they might need assistance because, um, you know, we want to cultivate this culture of care at the university, and, um, that includes being able to support the students and faculty in whatever life situation they might have going on.

Emily (15:52): Yeah, I’ve been reading, um, you know, there’s been more and more I think of the news about this issue of, you know, uh, parental leave right after a birth or, you know, yeah. Ongoing childcare assistance. And then as you mentioned, people, even if they don’t have children, <laugh>, they have other families and like plenty of people do, you know, need to care for, um, parents or other kinds of relatives as they age. And it really, like having your employer, um, be sensitive to these issues and have official programs in place can just make it so much, I mean, it really keeps people in the workforce honestly. Like, I don’t know if you’ve like thought about this, but the likelihood, I mean, half of people, half of people drop out of PhD programs, right? And so like you have extra challenges, um, logistical and financial and so forth, and like, would you be finishing your degree or on track to finish your degree if you didn’t have such a supportive, um, environment? It’s totally worth considering, um, going into graduate school if you already have children or if that’s something you’re interested, you know, in starting a family during graduate school. It’s just, I’m really glad that you found your way into a good situation and are working still to improve it for yourself and for other people at the university. So, you know, thank you for your work on that.

Commercial

Emily (17:04): Do you know what’s even scarier than an upcoming committee meeting the prospect of preparing your tax return? But it doesn’t have to be that way. I’ve created a variety of free and paid resources to help you get through tax season with as little pain as possible. These resources are specifically for grad students and fellowship recipients, postbac through postdoc, check them out at pfforphds.com/tax.

What strategies do you use to keep expenses down?

Emily (17:34): Let’s move on to kind of, um, the, the numbers again, right? So when we spoke before, uh, this interview, you told me you had a laundry list of different strategies you were using to keep your expenses down and to take advantages of, you know, take advantage of programs available to you. So let’s start talking about that. Like, how are you making this work or, or almost work on, on a yearly basis?

Lauri (18:00): Yeah, so I think the, the first thing to think about is that I had to come to a point where I, um, needed to let go of the stigma. The stigma of, um, asking for help and needing help. So before coming to graduate school, I had a, a stable position. I was, you know, working in the industry, I had a, you know, an income that could, um, support me and, and my daughter. And so coming to graduate school and having a drastic change in income was a, a bit of a challenge for me, I think one to accept, um, but, and then two, to deal with <laugh>. But I think once I got over the fact that like, you know, this is, this is the season of my life and right now in order for me to achieve this goal of getting a PhD, I need to, um, take advantage of all the help I can get.

Lauri (19:00): And so some of those resources, you know, I already mentioned some of the ones at OSU, there are also, um, other programs at OSU to help with, uh, food assistance. So there’s a food bank on campus. And, um, I have, um, taken advantage of that. And so I think I, I think there’s a certain stigma there of like, you know, actually taking yourself to a food bank is kind of like a bit of a hurdle to get over for some people. And, um, I guess I’ve just learned to embrace that this is just where I’m at right now.

Emily (19:32): I’ve heard about food insecurity, um, for graduate students on other campuses across the, the, this, the country. Um, and it’s not just people with families, right? I mean, there’s all kinds of reasons why your stipend would be insufficient for your living expenses, where, you know, maybe you can just make rent and do like nothing else. And so it’s an unfortunately very, I I don’t wanna say very, it’s an unfortunate, it’s an all too common issue. Um, and food banks are something that, you know, universities, um, have started and it’s great that they’re trying to help out a bit. Um, like you said, I think it would be hard to get past, um, the, to admit to yourself, I need this kind of help. Um, but you know, you like, especially for you with a child, like you have to put that food on the table for your child. And so you’re doing, you’re doing what it takes.

Lauri (20:23): And I think, I mean, you brought up a great point with the rent. You know, my well over half my income is in rent, and so that’s something that I can’t really change right now. There’s, there’s not really a way for me to, um, make that better. And so one way that I can supplement my income is, you know, in, in food assistance. And so, you know, I do get some funding through the Snap, uh, program or the food stamps program, um, there, and then, you know, if I need it, I will, I will go to the food bank on campus, or I will go to the food bank in the, um, in my community as well. And, um, you know, I think that <laugh> I think it takes a lot even for me right now to admit that, that that’s a thing. But you know, like I said, that’s just where I’m at right now. Um, there’s also, you know, plenty of opportunities on campus to, you know, go to a luncheon or get a free meal here and there. One thing that OSU does is they have a Twitter handle that is @eatfreeOSU. And whenever there’s an event on campus, you know, there’s pretty much always leftover food. They will post that and where it’s at, and then people can go and, um, take advantage of that. So I think that’s,

Emily (21:35): That’s such a great idea. Yeah. I’ve actually asked in, you know, some of the, the previous podcast episodes, I’ve asked people, how do you find out about food free food on your campus? And usually there’s not, I haven’t, I’ve not so far gotten a centralized answer like that. So this is something that all universities should have, right? A central place where everyone can say, Hey, you know, Twitter handle, there’s food here, and they can, you know, uh, amplify that. And that’s a great idea. It’s actually kind, it’s a little bit funny because I feel like graduate students are totally shameless about grabbing their free food from the seminars, and yet you’re right, there would be a stigma to go into the food bank. And you know what, for some people they need that free food at the seminars, um, but maybe there isn’t a food bank available to them. Very, very little difference in, um, uh, function, I guess. But big difference in getting yourself, I think, to, to veil yourself of it. That’s kind of interesting. I wanted to go back to, you mentioned the SNAP program, and I’ve seen this question, I’ve, I’ve received this question before about how do you actually apply for and get snap and what are the qualifications, for instance, you know, for your city or, or whoever’s administering the program, like how did you actually go about, you know, obtaining that benefit?

Lauri (22:43): Um, initially I applied online, so that was a fairly easy process. There’s, um, there’s an interview involved that can be done over the phone. And then, um, I mean, I’ve been doing this for a little while now, and so, you know, you’ll go through your periods of where you have to prove your income. So, you know, initially you have to give, um, proof of income and then every, um, I think it might be every six month, it six months, at least annually, unless there’s a change in between, you have to show proof of income and then your, um, benefit will be recalculated. So I honestly don’t know exactly the details of my qualifications right now because I actually think it’s the, uh, funding we receive. The benefit we, we receive is for my daughter and not really for me. And I know that there’s some, um, complications with students getting, uh, funding through snap, but definitely something to look into, I know. Um, so you can look online for those sorts of forms, at least in the state of Oregon. And also our Human Services resource center, which does a lot of these, um, programs that Twitter handle and the food bank. They also, um, are very helpful with getting students to apply for SNAP and seeing what their benefits might be.

Emily (24:04): Great idea to look to, to that kind of centralized place on campus for, for that kind of help, because it can be really difficult to navigate. Wow. You know, it’s clear my stipend is not sufficient either because a family situation or just because some programs don’t pay enough. Um, so there’s a lot of students kind of in the same boat, and so it’s really good that they have a centralized place that you can go to. I don’t know that that would be the case across all campuses, but at least worth checking out. Um, okay, so back to your, your frugal strategies that you employ.

Lauri (24:33): Um, so another one through the Human, um, resources Center is a Mealbux program. So this is not government assistance, this is through the university, also funded by student fees, I believe. But you can apply every year and actually every term, and you, um, there’s no proof of income. You just fill out this questionnaire about your, you know, financial situation and your food insecurity situation. And then, um, based on that information funds will either be, um, you’ll either be accepted into the program or not, and then if you are, funds will be put on your student ID card to be used at the different food locations around campus.

Emily (25:18): So this, unlike Snap, this is for you, right? It’s not, I mean, your daughter’s involved in the calculation, but it’s not really for her. Like the SNAP is for her, this is for you

Lauri (25:27): On campus. Yeah. And you know, some of the questions that they ask in this questionnaire is like, would this make it, um, you know, they ask, have you gone hungry? And things like that. But it’s also like, would this make it easier for you to study, um, in a group or, um, not feel, um, bad about going to grab a cup of coffee when you’re on campus or, you know, to, so that you’re, you have that sense of belonging and that you don’t, um, so when you’re studying with your friends or whatever, like you can participate and not feel bad about that. Um,

Emily (26:01): Yeah, excellent point.

Lauri (26:03): Yeah. Um, so, so really as you can see, I pull from everywhere <laugh> to get all the help I, I can. Um, I recently just moved my daughter to a school that’s closer to our home, and with that, she also, um, can participate in the free lunch program, which was not available at her other school. So that’s also another benefit to us. Again, a lot of these things right here are focused around food, but if that’s one place where I can get help because I can’t in other areas, then that’s what I, uh, take advantage of.

Emily (26:39): Exactly. And food is a major, I mean, it’s a top expense anyway for graduate students. And you, I think you already mentioned that you either don’t have a car or don’t spend much in that area of transportation.

Lauri (26:49): I, I have a car, um, but it, it’s very old <laugh>, so I don’t have a car payment. Um, but I do, I do try to use my bicycle and really my car could die any day, so yeah,

Emily (27:01): You’ve already, you’ve already minimized that category as much as it’s gonna get. But yeah, the food is one that’s, um, until you get into these assistance programs, it’s after you reach a certain point, it’s pretty hard to minimize it any further.

Lauri (27:12): Right. Um, the other couple other things that are more, less related to food, but just, um, some community resources that I think are probably available, um, in many different communities. Um, our local parks and recreation department has scholarships available, and so I’ve applied for that, um, both for me and my daughter. And so that has allowed us to get a membership to the community pool so we can go there and enjoy that. We can also have a little bit of funding to take classes so I can use that, um, for her to go to a dance class or painting class or whatever, you know, to just, you know, something a little extra that I wouldn’t be able to afford otherwise. So that, I think it’s really great that our, uh, community has that available. Um, and then also we’ve taken advantage of some of the Arts for all programs, which, um, I don’t know if this is specific to Oregon or not, but, um, it’s a way to get, uh, inexpensive tickets to go to the theater or go experience different, um, arts and cultural events that maybe, you know, we wouldn’t be able to afford otherwise, but, you know, I can afford a, a $5 ticket here and there to go do something like that.

Lauri (28:25): So I think my main point there is like, um, to be aware that there are resources out there like that, and again, to just not be afraid to, you know, apply for help and apply for scholarships, because sometimes that’s just what you need to do. And so I think it, it makes me feel good that I can still, you know, give my daughter some of these opportunities that, you know, I really can’t afford on my own, but my, um, community makes that available for me.

Emily (28:54): Yeah, that’s, um, that’s really fantastic. And I think maybe one of the differences between your situation, you know, I, you’re on this grad stipend, you kind of know it’s gonna be five years-ish, you know, maybe more. Um, it’s gonna be a pretty much a static level. There’s not a lot of, um, hope to increase that income in terms of, you know, from that primary job. Maybe that’s different from people who find themselves, um, you know, temporarily at a, at a lower income, like maybe ’cause of job loss or something they might not have really. Maybe they think their situation’s gonna change soon enough that they don’t start looking into these other kinds of programs, but, you know, hey, this is the situation like indefinitely pretty much. So yeah, it makes sense that you’ve, you’ve taken the time to investigate and I really appreciate you sharing all of that, you know, knowledge that you’ve gained, you know, with my audience because I think both, both parents and non-parents alike, you know, uh, can benefit from this in, in terms of looking the way that you have in their own communities and at their own universities for this kind of assistance.

Emily (29:53): Um, was there anything else in that sort of for frugality category there?

Lauri (29:58): Um, I think, I think that’s about it there that I can think of. But, you know, I’m always looking for <laugh>, whatever’s available, and I’m, you know, I’m not afraid to, uh, take advantage of that.

Why have you chosen to this frugal strategy instead of taking out student loans?

Emily (30:12): So why, um, you know, we’ve spoken about how you know, what your stipend level is, which, uh, again, from the living wage calculator, that’s pretty much right in line with what a single person would need to support just themselves. So you’re <laugh> supporting two people on that level of income. Um, why have you chosen to go this route of asking for, you know, food assistance, for example, rather than just taking out student loans? Because as a student you can do that. It is there available to you. So why have you endeavored to make your ends meet instead of going the debt route?

Lauri (30:50): So I think, um, first of all, I have some debt from being an undergraduate, and so that is all being deferred right now, so I don’t have to really worry about that, but that is looming over me. And so I don’t want to contribute any more to that <laugh> than I absolutely have to. And I did take out a little bit of student loans when we moved out here just to kind of help with that transition time. But I have this, you know, $30,000 weight on top of me and I, um, I, I just, I really would rather make sacrifices than, uh, contribute more to that. And I think another piece with that is that, you know, I, I used to have, um, I used to make a living wage <laugh> and be comfortable. And when I came back to graduate school, it wasn’t my goal to go to graduate school and get a degree and increase my wages substantially.

Lauri (31:55): So I, you know, in my field in plant pathology, it’s not, especially for what I do in applied work and extension, um, it’s not really known for high wages and especially if my first job out of graduate school is a postdoc position or something along those lines, um, it, I will be making similar wages to what I left in my current, at my job before graduate school that I had with just a bachelor’s degree. So for me, coming to graduate school was more about the education and the fulfillment and the opportunity, um, and not so much about an increase in salary. So when I leave here, I won’t necessarily be making a lot of money that would allow me to contribute greatly to, um, pay off the debt.

Emily (32:45): Yeah. I think, um, with that sort of, you know, you’re trying to be realistic right? About your salary prospects, um, there you are choosing to make a sacrifice now, but the thing is, like the other choice with the debt is to sacrifice later. Like, it’s still gonna be challenging even with a higher income to pay back the debt you already have plus whatever you, you could have accumulated if you hadn’t been sacrificing so much in the, in the, you know, for the time being. So it’s gonna be hard now. It’s gonna be hard later. It’s gonna be hard all this time. I, I mean, you’re not really, um, there’s not an easy path. Even taking on debt doesn’t create an easy path for you. Yeah, maybe it would be okay or justifiable if you had a huge increase in income after the PhD, but no one’s guaranteed that <laugh>, even if it’s, um, what you hope, hope will happen.

Emily (33:32): So especially with like postdocs, I mean, that’s a long time to keep your, uh, to keep accumulating debt before getting to that like payoff salary. So I think you’re being very prudent, even though it’s very challenging, um, for the time being. So I definitely, you know, commend you for making this goal and for doing everything you can to, to meet it, to meet it, um, through your time in graduate school.

Final Comments

Emily (33:52): So do you have any kind of final thoughts or final encouragement for, um, the parents or the single parents, uh, in academia, in the audience?

Lauri (34:02): I mean, I guess just like I’ve said, like don’t, don’t be afraid to take advantage of, um, your resources and to really search those out and, and talk to people and, and to get involved. Because once you start, I guess, um, sort of diving into what resources might be available to you, you’ll become more aware of other ones. And also, you know, it, I think it’s totally worth the sacrifices and I, um, am very happy doing graduate school and being in a graduate program, even though financially it is a challenge. And so I guess don’t give up on your dreams, even though there might be, um, some things to make that a little bit more difficult along the way.

Emily (34:47): Yeah. Some hurdles to overcome. Yeah. Well, thank you so much for, for this conversation and for your thoughts, Lauri.

Lauri (34:52): Thanks.

Outro

Emily (34:55): Lauri, thank you so much for being my guest on the podcast today. The show notes for this episode are at pfforphds.com/S2E1. If you wanna get in touch with me, you can email me at [email protected] or if I’m me on Twitter at pfforPhDs or Facebook personal finance for PhDs. If you’d like to receive updates on new podcast episodes and other content, go to pfforphds.com/subscribe. See you in the next episode. 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 Jewel Lipps.

Can a PhD Achieve FIRE?

January 7, 2019 by Emily

Would you like for paid work to become optional for the rest of your life? What would you do with your time if you didn’t have to work? When you become “financially independent,” you have enough money and passive income streams to sustain you for the rest of your life without earning any more. At that point, you have the option of retiring (whether or not you actually do). Achieving this goal in youth or middle age instead of 65 is the objective of adherents of the FIRE movement (Financial Independence / Retire Early). Typically, FIRE walkers earn high salaries and save a radically large percentage of their income. This article explores whether FIRE is a good or reasonable goal for a PhD (graduate student, postdoc, or PhD with a Real Job) to set.

Further listening: This Prof Used Geographic Arbitrage to Design Her Ideal Career and Personal Life

What Is the FIRE Movement?

The FIRE movement (or at least the current iteration of the trend) started to gain traction within the last decade. Two of the fathers of the movement who documented their FIRE journeys on popular blogs are Jacob Lund Fisker (Early Retirement Extreme) and Pete Adeney (Mr. Money Mustache). They both advocate establishing a very frugal lifestyle to 1) save a high percentage of your income while working and 2) minimize the size of the nest egg needed to retire from paid work.

Now that the FIRE movement has gained popularity, it has diversified (it’s not just for young, single, male tech workers!) and splintered. One of the useful delineations is among ‘lean FIRE,’ ‘FIRE,’ and ‘fat FIRE.’ Roughly speaking, lean FIRE adherents seek to achieve FIRE primarily through expense minimization (and a high salary as well) while fat FIRE adherents seek to achieve FIRE primarily through vastly out-earning their spending (and keeping a lid on expenses as well), with regular FIRE falling somewhere in the middle.

Why Would a PhD Want to FIRE?

A person who completes a PhD has passion for her work (as well as incredible perseverance). I find it hard to imagine that such a person would want to retire early from her chosen field – especially those pursuing a life of the mind in academia.

But people who complete PhDs are also people. They end up in all types of jobs with all levels of job satisfaction. Even those with high job satisfaction might want to escape the demands of full-time work.

Even if retiring early is not attractive, becoming financially independent may be. Once you are financially independent, even if you keep working, you don’t have to be concerned about losing your job or put up with a job that’s no longer a good fit. Even during the journey to FIRE, you will have a much, much greater degree of financial security than most Americans, which brings peace of mind.

How Do You FIRE?

While difficult and rare to achieve, the mechanism of becoming FIRE is easy to understand.

To become financially independent (from active work), you need to have investments and/or passive income streams that will pay for your expenses in perpetuity. I’ll focus this discussion on the investments needed rather than the passive income streams.

Basically, to achieve FIRE, you need a nest egg of investments that is large enough that you can withdraw what you need to live on each year without eating into the principal. The higher your living expenses, the larger the nest egg you need to support them in perpetuity.

FIRE adherents usually follow the “4% Rule,” also called the Safe Withdrawal Rate (SWR), or perhaps a more conservative 3% or 3.5% Rule. The 4% Rule means that withdrawing 4% of your portfolio balance each year gives you a very good chance of your portfolio not running out of money prior to your death; it is based on historical market returns. (Early retirees may adjust this rule to be more conservative due to their post-FIRE life expectancy being longer than a typical retirement.)

The 4% Rule shows you the two vital factors to FIRE: size of your nest egg and yearly living expenses. Therefore, to achieve FIRE you must save (invest) a lot of money and keep your living expenses in check. For example, for a household with $50,000 in yearly living expenses, a portfolio of $1,250,000 is needed.

A person pursuing LeanFIRE will primarily focus on minimizing living expenses. The rough definition of LeanFIRE is living expenses of under $40,000/year or a portfolio of $1,000,000. A person pursuing FatFIRE will primarily focus on building a large portfolio. The rough definition of FatFIRE is a portfolio of over $2,500,000 or living expenses of at least $100,000/year.

There is a delightful synergy between the necessarily high savings rate and necessarily low expenses. Given a static income, the less you spend on living expenses, the higher your savings rate can become, enabling you to achieve FIRE even faster. Mr. Money Mustache published in “The Shockingly Simple Math Behind Early Retirement” a set of ratios that illustrates the relationship between savings rate and years of saving needed until the SWR could be achieved. For example, with a savings rate of 10%, you need 51 years to save before you can retire, but that drops to 22 years with a savings rate of 40% and 8.5 years with a savings rate of 70%.

Because the key to achieving FIRE is an unusually (to say the least) high savings rate, it is almost exclusively pursued by high income earners. There is a floor on how low you can drop your living expenses (although that varies person to person), so if your income doesn’t exceed your expenses by much, achieving the “E” in FIRE becomes a remote possibility.

Can PhDs FIRE?

PhDs can FIRE if they commit to the process, but they have challenges that are not shared by their peers from college who went immediately into high-paying careers. (It has been done; Jacob Lund Fisker has a PhD and retired at age 33.)

The ideal path for someone pursuing FIRE is to obtain a high-paying job immediately upon completion of their education at 18 or 22, commit to a low-cost lifestyle, set up a radically high savings rate into investments, and keep the pedal to the metal until FIRE is achieved, for instance by age 30 or 35.

A PhD becomes derailed from this ideal path upon entering graduate school. Unless he previously set up massive passive income streams, a grad student’s income is nowhere near large enough to achieve a high savings rate (even if you live in a van like Ken Ilgunas did at Duke). This means that pursuing FIRE with a high savings rate will have to wait until landing a post-PhD Real Job.

However, the graduate school experience offers a unique advantage to FIRE: A necessarily low lifestyle. The $40,000/year maximum living expense for the definition of LeanFIRE is much higher than what virtually every graduate student takes home after paying income tax. Even a couple living the graduate student lifestyle can usually spend less than that amount.

Further reading: What Grad Students Can Learn from the FIRE Movement

A PhD also confers the possibility of a high income. While PhDs are not needed in currently high-paying careers such as finance, medicine (some specialties), computer science, and engineering, a person with a PhD does on average earn much more in a lifetime than the average person with less education, and people with PhDs can absolutely land well-paying jobs.

Therefore, a PhD maintaining her grad school lifestyle (more or less) while earning a high salary post-PhD is a recipe for FIRE, albeit starting in earnest closer to age 30 than age 20. A LeanFIRE early retirement can still be achieved within a short period, and of course she could opt for FatFIRE if her income is generous enough.

However, a graduate student (or postdoc) who commits to FIRE can go further than this default:

Instead of living at 100% of net income during graduate school, save (invest) as much as possible. This will have the dual effect of further lowering living expenses and getting a head start on building your nest egg.
Experiment with frugality to discover whether you want to ultimately pursue LeanFIRE, FIRE, or FatFIRE. You may decide that living below a graduate student’s means is not what you want long-term.
Finish your training as quickly as possible to increase your income as early as possible. Prepare yourself to land a high-paying job through professional development and networking.

Further reading: Whether You Save During Grad School Can Have a $1,000,000 Effect on Your Retirement

What Is Your Reason to FIRE?

Ultimately, it’s vital to have clarity on why you want to pursue FIRE. It’s easy to become consumed by the numbers and the process and lose track of your motivation along the way. Sometimes it’s possible to achieve aspects of the FIRE lifestyle without actually being FIRE, and I think that’s particularly true for PhDs who have a lot of transferrable skills and potential for autonomy. Remember the parable of the fisherman and the businessman. Just like you shouldn’t put your “Real Life” on hold during graduate school, you shouldn’t put your Real Life on hold while building up to FIRE.

If you are a PhD (-in-training) and seriously pursuing FIRE, I’d love to interview you on my podcast! Please fill out this form to volunteer.

An Unfunded Summer Didn’t Deter this PhD Student Thanks to Her Creative Side Hustle

December 24, 2018 by Emily

In this episode, Emily interviews Bailey Poland, a rising second-year PhD student in rhetoric and writing at Bowling Green State University. Bailey earns a stipend of just $14,000 for the academic year, but manages to live a comfortable life thanks to her disciplined budgeting and two side hustles. Unlike many of her classmates, she devoted her first summer as a PhD student exclusively to research, relying on her side hustle income and savings from her stipend to tide her over until the next academic year started. Emily and Bailey discuss in detail Bailey’s housing choice, frugal habits, and unique Patreon side hustle that complements her graduate work.

Links mentioned in episode

0:00 Introduction

1:26 Q1: Please Introduce Yourself

Bailey Poland is a second year PhD student in the Rhetoric and Writing program at Bowling Green State University. Bowling Green is a city in Ohio, located to the south of Toledo, Ohio. Bailey’s stipend is $14,000 per academic year. Additionally, Bailey earns $460 per month from Patreon and $150 quarterly from copy-editing a music magazine focused on Texas. She is the only person in her household.

Bailey’s PhD stipend does not include summer funding. She budgets savings over the academic year in order to meet her expenses over the summer.

3:25 Q2: What are your five largest expenses each month?

Bailey’s largest expenses are rent at $600 per month, car payment at $200 per month, health insurance and fees at $400 per month, food at $150 to $200 per month, and car insurance at $112 per month.

4:14 #1 Expense: Rent

Bailey rents a two bedroom apartment for $600 per month. She says this rate is higher than other options available in Bowling Green. She looked at options for rent at rates of $350 to $450 per month, but these apartments were in poor quality or clearly undergraduate housing. Bailey used to own a house, so she approached her apartment search with those expectations.

Bailey’s apartment is in downtown Bowling Green. She walks to campus, so she doesn’t use her car or have a university parking pass. She drives to the grocery store, but she lives above a coffee shop. She thinks she is in the perfect location. She lives by herself in the two-bedroom apartment, so she sleeps in the smaller bedroom and uses the extra bedroom as her office and library.

6:18 #2 Expense: Car Payment

Bailey pays $200 per month for her car. She has a 2017 vehicle that she bought new. She traded in her older Toyota Corolla when she bought her new car. Due to unfortunate family circumstances, Bailey received money from inheritance and estate closure. She used this money for her car payments. She has stayed ahead of interest and has gotten ahead on payments.

8:06 #3 Expense: Health Insurance and Fees

Bailey pays health and insurance and fees in lump sums a couple times a year. The amount works out to about $400 per month. She uses her credit card to make the payment at the start of each semester, but she pays it off immediately. Her credit card pays back 1.5% so she received a small kickback. Generally, she doesn’t keep a balance on her credit card so she avoids interest payments.

She made her first health insurance and fees payment before she received any of her graduate school stipend. Because she formerly worked as a marketing analyst for global HR and payroll company, she had enough savings available to make this payment when she started graduate school. She chose to go to graduate school because she was much happier in a classroom than behind a desk in a corporate office.

10:25 #4 Expense: Food

Bailey pays $150 to $200 per month for food, which includes groceries and dining out. She plans and prepares meals ahead of time. She cooks two or three times a week and freezes leftovers. She takes food with her to campus.

She has a limited set of go-to recipes. One of her favorites is chile garlic tofu. She says the meal is filling and takes half an hour to prepare. She gets four meals from one block of tofu. She eats lots of eggs, pasta, and rice-based meals. Her vegetarian cooking has increased since she started PhD program.

Bailey learned meal preparation from trial and error in the first few months of graduate school. She figured out which meals took too long or she didn’t like enough to have leftover. She used the Budget Bites website to find recipes. She cooks on the free nights of her week, because she knows which nights she’ll want to eat dinner as soon as she gets home. Bailey is on campus from 8am to 6pm most of the week. The latest she gets home is 7pm or 8pm. She takes lunch and a small snack with her to campus, and she eats dinner at home.

14:51 #5 Expense: Car Insurance

When Bailey purchased her new car, her car insurance rate increased from $85 per month to $130 per month. She has a plug-in for diagnostics of her driving habit, which lowered her insurance rate to $112 per month. She only regularly drives to and from the grocery store, which is a 10 minute drive. She also drives to her mom’s house, which is 30 minutes away and all highway driving.

Bailey says graduate students can get by without a car in Bowling Green. In her PhD cohort, at least one person doesn’t have a car. Busses run regularly to and from campus. Grocery stores deliver for a fee. Local activities are accessible to pedestrians. Bowling Green does not have cabs, Uber, or Lyft. It is pretty rural. Bailey needs a car to leave town to see her family.

18:10 Can you tell us about your side hustles?

Bailey has two separate side hustles. For one, Bailey copy edits a magazine about the country music scene in Texas. She missed doing copy-editing work, so she posted on Twitter that she was looking for an opportunity. Someone from the magazine responded to her and said they’d pay her to copy edit. Bailey has had this side hustle for three years. She receives $150 every few months and she has learned a lot about a topic that is unfamiliar to her.

For another, Bailey uses Patreon, the crowdfunding platform for artists and creators. She receives $460 each month from Patreon. She got started after she defended her Master’s thesis and she quit her corporate job earlier than she had planned. She was working at a bookstore and she needed more income. Some of her friends had Patreon, so she was familiar with the platform. Bailey started by doing live readings of The Rhetorical Tradition, like live tweeting her readings with funny commentary. People got invested in her live readings and she transitioned the activity to Patreon. Reading The Rhetorical Tradition was a really long project. She planned in advance and read as much as possible during the summer so she wouldn’t need to read during her first graduate school semester. She planned to post about The Rhetorical Tradition on Monday and Friday, post photos of her mom’s three cats on Tuesday and Thursday, and post an essay style blog post on Wednesdays. She only writes one or two truly new posts per month. With her PhD work, she doesn’t have time to write four or five new posts a month. Recently she has started a new reading series that overlaps with her prelim list for her PhD. She is gaining familiarity with texts in her field, having interesting conversations with her patrons, and making some money.

Bailey has created a very niche platform. Starting a Patreon was a huge leap of faith. She used to be super active on Twitter with a group of 18,000 followers. She authored a book, which helped her gain an audience invested in her thoughts. She trusted that her audience would move with her from Twitter to Patreon. She front loaded the work during the summer, so during her first semester it was more like a passive income stream. Now it serves multiple purposes for her. She finds it fulfilling that her academic work is accessible to the public. Her work lately is archival, and through Patreon she can share what it’s like to work in an archive. Bailey finds joy in her patrons and appreciates that they pay for her to do this work.

26:35 How do your colleagues react to your side hustle? Do they take on side hustles?

Bailey says her colleagues know and are supportive. For example, Bailey did a public series on Patreon that was a reflection on teaching practices she learned at Bowling Green. Her program’s website’s homepage included a link to her series. Generally, PhD students are discouraged from outside work because they should focus on doctoral work, but her department gives no formal prohibition of outside work. Most other graduate students have some other work, though it may not be talked about.

During the summer, other PhD students in her department find jobs. Some find online teaching roles, and one is working in the garden center at Lowe’s Hardware Store. One is going to a writers retreat that comes with a stipend. PhD students with spouses don’t work or find part time work.

29:28 Q4: What are you currently doing to further your financial goals?

Bailey has a 401k from her corporate job that she will roll into a Roth IRA over the next few years. She has investments with Betterment that serve as her long-term emergency funds. She has a high earnings online savings account as her primary emergency fund. Her goal is to have three months of expenses saved, and she is $600 short of her goal. Generally, her goal is to have her retirement well planned. She wants to be in academia long term, but she can’t be certain about this path. She wants security and confidence during her job search. Having savings going into graduate school frees up opportunities.

During her first summer as a PhD student, Bailey is working on archival projects and taking a class. During the school year, Bailey has multiple things going on, like classes, teachers, committees, conference planning. Summer is really valuable to devote focused attention to a project. In subsequent summers, it is possible she will take teaching jobs.

34:30 Q4: What don’t you spend money on that might surprise people?

Bailey doesn’t have student loans. She paid all of her loans within two years after undergrad. She hasn’t taken out any loans for higher education. Because she went to a State school, had scholarship, and finished in three years, she had very manageable loans from her undergraduate education. She took a job after college right away.

She has stopped buying books, which is hard for her personally. Even if she buys used books, it adds up quickly. She tries to keep miscellaneous spending low every month. She used to buy $200 to $300 worth of books every month, now she just buys one book a month. She checks out a lot of books from the library, and she lives less than a block from local public library

She doesn’t spend a lot on hobbies. She likes to cross stitch. This is inexpensive and takes a long time. She can spend $20 on one project that entertains her for five months. She has hobbies that help her relax and are not difficult for her budget.

39:00 Q5: What are you happy with in your spending and what would you like to change?

Bailey’s rent is higher than she wants to pay and is more than what others pay. She negotiated for lower increase rate when she renewed her lease. She’s considering doing a spending fast over the summer because she has no stipend coming in. She wants to minimize the hit that her savings is taking. She can find entertainment in Bowling Green for free. For example, there is a huge arts community and a massive arts festival.

42:12 Q6: What is your best advice for someone new to your city who is budget-conscious?

Bailey recommends that someone new to Bowling Green shops around for a place to live. There a lot of good options. Graduate student housing is affordable and it is easy to find a roommate. She says to look for an apartment as early as possible. She started looking in July, which limited her options. She would have looked earlier if she knew.

She advises new PhD students in Bowling Green to plan on saving. She says make sure you have cushion before you get here. Graduate school is stressful enough without living paycheck to paycheck. You should get rid of debt completely if you can.

44:22 Q7: Would you like to make any other comments on what it takes to get by where you live on what you earn?

Bailey says it is definitely possible to live in Bowling Green frugally and have a good time. She says there is always stuff happening that’s free or inexpensive. Toledo is a twenty to thirty minute drive. It may not be possible to live on the stipend alone, but you don’t need much more. Bowling Green has a low cost of living and is a college town invested in the university community.

45:22 Conclusion

PhD Job Transitions Are an Opportunity to Break Negative Financial Habits

October 28, 2018 by Emily

Pursuing a PhD and post-PhD jobs usually means frequent professional and personal upheaval. Changing jobs/”jobs” and moving are typical for each stage of training and possibly career: posbacc programs or jobs, master’s/PhD programs, postdocs, and Real Jobs. Every time you change jobs or move, your routines and habits are upended, including those that affect your finances. The upside of these frequent transitions is that each time you give yourself a clean slate upon which to write new habits. That’s great news for anyone with a degree of dissatisfaction with their current habits.

I recently read Better Than Before* by Gretchen Rubin, which is about how to create and maintain habits. The quotes included in this article are from the chapter “Temporary Becomes Permanent: Clean Slate.” While it is not a financial book, the strategies included in Better Than Before can be applied to your financial life, and the Strategy of the Clean Slate struck me as particularly useful for PhDs.

[* This is an affiliate link. Thank you for supporting PF for PhDs!]

Why the Clean Slate Works

A great proportion of our decisions each day are not ones we make consciously but rather are part of our routine or standard responses to stimuli. This is great when you have cultivated positive habits or at least are not in any negative habits. But a negative habit can be incredibly challenging to break under normal circumstances.

Any beginning is a time of special power for habit creation, and at certain times we experience a clean slate, in which circumstances change in a way that makes a fresh start possible–if we’re alert for the opportunity.

Experiencing a clean slate – a wiping away of your previous habits in part or much of your life – can greatly benefit you if you had any negative habits or even a desire to start new positive habits. The old stimuli that prompted you into your negative habit are no longer there, and instead you can tie your new stimuli to positive habits. There is also an opportunity for a strong change in your self-conception, such as “In my new job/city, I am a person who ___.”

There’s a magic in the beginning of anything. We want to begin right, and a good start feels auspicious… Because we’re creatures of habit, the first marks on that slate often prove indelible. We should start the way we want to continue.

When you experience a clean slate for whatever reason, you should very intentionally start practices that you want to become positive habits and keep yourself from falling back into old habits. This will likely take some preparation in advance of the occurrence of the clean slate. You should devote some time to brainstorming the positive habits you want to begin practicing and the negative habits you want to drop so that you’re ready to hit the ground running when you have that clean slate.

I now pay very close attention to the first few times I do anything because I know those decisions will shape my baseline habits; to deviate from them will feel like a deprivation or an imposition.

Job Transition and Moves Are Perfect Clean Slates

The slate may be wiped clean by a change in surroundings: a new apartment, a new city, even rearranged furniture. Or some major aspect of life may change: a new job, a new school, a new doctor.

Job changes for PhDs come relatively frequently throughout training and sometimes following, and many or all of those job changes may very well involve a move. A new job in a new city is just about the cleanest slate you can get when it comes to your habits (not including changes in the members of your family): new home, new job, new co-workers, new commute, new city to learn.

Not only are you in a different environment with your old triggers and routines wiped away, but the people surrounding you are no longer reinforcing your prior habits and associating you with them. You have a chance to forge relationships without succumbing to any negative habits.

What Kinds of Financial Habits Should You Lose with a Clean Slate

Mindless Spending

The entire point of a habit is that it takes little to no conscious decision-making to carry out. If you are aware of any mindless spending that you currently engage in, resolve to drop it with your upcoming clean slate (if not before!).

Mindless spending is spending that you neither need nor even truly want to do. Perhaps it gives you some satisfaction, but it’s all too fleeting. You pick up a coffee every day during your commute because that’s what you always have in your hand on your way in. You browse a certain store and make a purchase on the same day of the week because that’s how you kill time in between work an an evening activity. You go out with the same people to the same bar/restaurant/club every weekend because that’s where you went when you first met them. Somehow these actions became habits even as your desire to do them faded. You may not have even realized the cumulative effect they were having on your finances.

With your clean slate, you have the opportunity to drop these old habits and begin how you want to continue, e.g., brewing coffee at home, taking a route that doesn’t pass any shops, and meeting people through fun and less expensive activities.

Living Beyond Your Means

In many graduate programs and at many places, limiting your spending to the means provided by your stipend/salary is not possible or at least not palatable. In those cases, accruing debt, usually student loan or credit card debt, is a necessary evil. Still more PhDs (in training) accrue debt because of a lack of sufficient motivation to avoid it.

Living beyond your means is a negative financial habit, necessary or not. When you start a new, higher-paying job, make a clean break with that habit. In your new job, you are A Person Who Lives Within Your Means. In fact, you should not only resolve to not accrue any new credit card (or similar) debt, but you should start repaying your accumulated debt. If credit cards were your debt of choice, stop putting new charges on them entirely.

Hiding Your Head in Sand

Sometimes a negative financial habit is simply the absence of a good financial habit. Your financial state during grad school or after can be so discouraging that you stop looking at it entirely. You might slip into being unaware of the balances in your checking and savings accounts, the balances on your credit cards, the total of your student loan debt, the value of your investments (if any!), etc.

At some point and after some healing, you’ll start looking at your finances again – perhaps when you have a higher income and the future looks rosier. With your clean slate, leave behind your habit of hiding your head in the sand and put in place a new habit of regularly looking over your finances comprehensively, even if it’s painful at first.

Keeping Up with the Joneses

Keeping up with the Joneses is a negative financial habit for anyone, but it’s particularly impossible for PhDs on trainee income. You don’t want to be in that habit when your higher income rolls in, as you might actually be able to make a go of keeping up. Do whatever you need to do to (leave/filter social media, stop watching HGTV) to keep the Joneses out of sight and out of mind.

What Kinds of Financial Habits Should You Implement or Maintain with a Clean Slate

The Strategy of the Clean Slate can help us launch a new habit with less effort.

With your clean slate, adopt a new identity as a person who practices positive financial habits and is actively working to improve your financial health.

Tracking/Budgeting Your Spending

Tracking your spending and creating a spending plan (a budget) are fundamental tools for managing your finances well.

Tracking can be done relatively automatically with software, so the easiest way to implement this habit is to sign up for Mint/You Need a Budget/similar, hook up your bank accounts, and check on your spending periodically (at least once per week).

After you have an idea of your expenses, you can start projecting them with a budget, which will help you be mindful about your spending in your trouble areas. You may have to update your budget frequently if you’ve recently moved, but after some time checking in with it once a month or more will become automatic.

Track Your Net Worth

When my husband and I transitioned to our first post-PhD Real Jobs, I started manually tracking our net worth. Yes, our Mint account has it, too, but I liked my own formatting. Once per month on the 1st, I copy all of our account balances into an Excel spreadsheet and update my graph. You don’t need to check frequently for the habit of tracking your net worth to be valuable. After all, “That which is measured, improves.”

Negotiating

That a candidate will attempt to negotiate a job offer is almost always expected. (Grad school offer letters are an exception, though some students do attempt to negotiate. Negotiating a postdoc offer is more common than you might think.) If your clean slate comes with a new job, be sure that you negotiate that job offer (and every one that follows). You may make an exception if the offer is clearly and objectively on the generous side of appropriate, but even then you can still try to negotiate some benefit. A raise gained through negotiation is the easiest money you’ll ever earn, and it compounds throughout your career!

Automatic Saving and Being “a Saver”

Post-clean slate and with a higher income, you are a saver, no matter what you were before. Enforce this positive financial habit by setting up automated transfers to your savings account, loans, or investments, depending on your goal. Incrementally increase your savings rate over time.

Investing can be very intimidating to someone just starting to get their finances in order. It’s doubly intimidating for someone who doesn’t have access to a 401(k)/403(b)/similar like a grad student and some postdocs. With your clean slate, put in place the positive financial habit of investing (if that’s an appropriate financial goal). If your new job offers a retirement account match, by all means take full advantage, and invest beyond that up to your goal amount. Never leave match money on the table!

It’s a shame not to exploit the power of the strategy of the Clean Slate when it presents itself. For instance, the time of moving introduces so much upheaval into our customary habits that change becomes far easier. In one study of people trying to make a change–such as changes in career or education, relationships, addictive behaviors, or health behaviors including dieting–36 percent of successful changes were associated with a move to a new place.

The Downside to a Clean Slate

While the clean slate offers tremendous opportunity for forming new habits, it can disrupt a person’s existing good habits by eliminating a useful cue or breaking up a positive routine.

To this point in the article I have largely assumed that you have some negative financial habits that can be eliminated by a Clean Slate, and I’ve suggested positive financial habits to fill the vacuum. But you also may well have positive financial habits that will be jeopardized by the Clean Slate. It’s understandable that you habits will be disrupted by a Clean Slate as dramatic as a move and job change, so as soon as possible (before you feel settled and ready) jump right back into your old positive habits so you don’t slide into negative habits in their absence. As much as possible, maintain monitoring your habits through your transition so you have an accountability system urging you to return to them as soon as possible.

Travel and Savings Are This Frugal Grad Student’s Top Priorities

October 22, 2018 by Emily

This podcast episode is a budget breakdown with Latisha Franklin, a third-year graduate student in biochemistry and molecular biology at Penn State University. Latisha works to keep her housing and especially food spending low so that she can spend more on experiences, such as her yearly international vacation. She employs several powerful strategies in her frugality and budgeting to enable her saving, such as taking out cash for variable spending, prioritizing a “me” budget category, vegan meal prepping, and actually reading her email to find free food on campus. Emily and Latisha discuss how establishing a routine schedule lends itself well to developing frugal practices.

Links mentioned in episode

Subscribe on Apple Podcasts, Google Play Music, Stitcher, or Spotify.

Give your feedback on Season 1 and influence the direction for Season 2 through this form.

0:00 Introduction

1:14 Q1: Please Introduce Yourself

Latisha Franklin is a third-year graduate student in the Biochemistry and Molecular Biology program at Penn State University. She moved to State College, Pennsylvania, for graduate school from her hometown Mobile, Alabama.

Her stipend is $1,996 per month after taxes.

2:27 Q2: What are your five largest expenses each month?

Latisha’s top expense categories are rent, car insurance, food, bills, and “me,” in other words, money she can spend freely on herself. She shares that she budgets much of her income for her Roth IRA and savings.

3:57 #1 Expense: Rent

Latisha lived in a one-bedroom apartment with her dog at the time of the interview. However, she had plans to move. Her rent was $820 per month and the rent in her new place is $710 per month. Originally, she wanted to move to a new place with a roommate. When those plans fell through, her realtor helped her find the new apartment.

Her new apartment is attached to a house. She has access to a backyard for her dog, which was appealing to her. Her new apartment is closer to Penn State, a 5 minute drive and 20 minute walk from campus. The neighborhood is family-oriented. This is in contrast to her former neighborhood that had a good mix of graduate students, young families, and late-career adults.

Latisha thinks Penn State graduate students living alone pay about $900 or more for rent. She thinks that $700 is the low end of the range for rents. In her estimates, she is not taking into account possible lower rents in shared housing with roommates.

8:29 #2 Expense: Car Insurance

Latisha has a 2016 Hyundai Tuscon. She bought the car new in winter 2015 and paid it off completely within two years. She used savings she had been building since middle school to buy the car new. Her monthly insurance payment is $159.

10:22 #3 Expense: Food

Latisha spends $150 per month on food. She spends $20 each week for food that she’ll eat during the week, and $50 each month to buy items she’ll use throughout the month. Her strategy to keep food expenses low is to meal prep and cook in bulk.

During her first year, she found herself cooking every other day. Cooking was too time-intensive, so she read articles about meal prepping. Now, she uses Sundays as her meal prep and cooking day. She makes enough to last the week and portions food into six or seven containers.

Latisha didn’t have any dietary restrictions or considerations during her first year in graduate school. She has now removed meat and dairy from her diet. She uses many kinds of beans, rice, nuts, and fruit in her meals. She buys fruit from the farmers markets and from her share of community supported agriculture (CSA).

Her meals include muffins, which she eats every week, salads, soups, and pastas. Additionally, Latisha eats free meals on campus as often as three times a week. She takes ten minutes each day to read her university emails to find events with free food that also match her interest. She rarely eats take-out or at restaurants, and this expense is from her “me” category.

18:54 #4 Expense: Bills

Latisha’s pays for electricity and wifi, because heat and water are included in her rent. Her parents pay for her cell phone bills. The electricity bill is $13 per month and wifi bill is $32 per month. To keep electricity costs down, Latisha makes the most of daylight for work. During the evening, she relaxes and minimizes her electricity use.

In her new apartment, she will have to pay for all utilities separately. She’ll have more bills, so she has planned to increase this budget category.

21:38 #5 Expense: “Me,” or Variable Spending

Latisha budgets about $20 a week, or strictly $100 a month, to spend as she wishes on herself. Typically, she uses this money to go to the movies, go out to dinner, or try something new. She bought herself a microscope because she enjoys using it to look at everyday items. Overall, she prefers “experiences, not stuff.”

Latisha’s strategy is to keep her “me” budget in cash. Using cash is strategy to keep variable spending in check. She mentions that credit cards didn’t suit her.

25:17 Q3: What are you currently doing to further your financial goals?

Latisha prioritizes savings. Since her teenage years, she kept savings for undetermined large purchases. For example, she bought her new car with her savings, even though she hadn’t intentionally planned the purchase.

She contributes $150 per month to a Roth IRA for retirement. She saves $50 per month in her savings account. This is about 10% of her net income. She is focused on building her Roth IRA

She started savings with a CD, about three years ago, without much knowledge of savings or investing. Her dad encouraged her to get a Roth IRA. Latisha read Emily’s emails and is now working on better managing her Roth IRA.

Latisha has set a goal to take one big trip a year. Here she discusses saving for her trip to Iceland. She has budgeted about $100 per month and has $1,200 saved at the time of the interview. She likes to travel and wants to get out and see the world while she has minimal responsibilities. Iceland is the first big trip that she has initiated on her own.

33:24 Q4: What don’t you spend money on that might surprise people?

Latisha spends very little on food. Many of her peers claim to not have the time to cook, so they get take out or eat out more often. She found the time on the weekends to prepare all her meals for the week, so she saves time during the week. Emily and Latisha agree that in reality, getting take out or going to eat can take just as much time as preparing your own meals. Prioritizing cooking your own meals is a great frugal strategy.

35:34 Q5: What are you happy with in your spending and what would you like to change?

Latisha is happy that most of her money goes to experiences, not things. She wants to add money to food, because she believes trying new kinds of foods is a good experience. Joining the CSA is one way she is trying new foods. She is interested in new fruits, like dragonfruit. Additionally, she is happy has “cushion money” so she is prepared for anything.

36:48 Q6: What is your best advice for someone new to your city who is budget-conscious?

Latisha recommends over estimating your budget so you have cushion money. This reduces stress and helps even out irregular expenses. One strategy that Latisha uses is to set up separate accounts for her money. For example, she moves her income out of her spending account into a reserve account. This restricts how much money is available for her to spend, but the money is still accessible if she really needs it.

Latisha also recommends personalizing your budget. She has had financial training that emphasizes certain income percentages for budget categories, but this advice doesn’t suit her lifestyle. She realized this when she went through the process of purchasing a home but ultimately could not get approval. During the process to buy a home, she found that financial advisors insisted that 50-60% of income is budgeted to living expenses. Though she was frustrated she couldn’t buy a home, she is glad she went through the process and would recommend the experience to other graduate students.

44:46 Q7: Would you like to make any other comments on what it takes to get by where you live on what you earn?

Latisha takes the bus for her commute. She does not use her car for every day commuting, just for irregular driving, like taking her dog to the groomer. Penn state has a graduate students bus ridership program that Latisha says is a $180 one time fee, then free riding for the entire year. Just a few rides each month would make the pass pay off. She says this is definitely worth it.

Latisha says her budget is possible because she manages her time carefully and sticks to a routine. Her budget is a result of her focused lifestyle. Emily and Latisha agree that budgeting is easier and more accessible when you recognize the patterns you have in place in your life.

48:30 Final Comments

Latisha and Emily hope listeners learned more about frugal strategies for living on a graduate stipend.

frugality

Links mentioned in episode

Teaser

Introduction

Please Introduce Yourself

How do you live within your means in Los Angeles?

What is your approach to budgeting in Los Angeles?

What is the system that you use for budgeting?

What do you do about large expenses?

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

Commercial

Can you talk about saving for retirement?

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

How did you pay the tax balance?

Final Comments

Outro

Links mentioned in episode

Teaser

Introduction

Please Introduce Yourself

What is your current annual income and expenses?

What benefits do you receive and how did you find these benefits?

What is your daily routine like? Is your advisor supportive?

Tell us about your service experience on advisory boards and committees.

Commercial

What strategies do you use to keep expenses down?

Why have you chosen to this frugal strategy instead of taking out student loans?

Final Comments

Outro

What Is the FIRE Movement?

Why Would a PhD Want to FIRE?

How Do You FIRE?

Can PhDs FIRE?

What Is Your Reason to FIRE?

Links mentioned in episode

0:00 Introduction

1:26 Q1: Please Introduce Yourself

3:25 Q2: What are your five largest expenses each month?

4:14 #1 Expense: Rent

6:18 #2 Expense: Car Payment

8:06 #3 Expense: Health Insurance and Fees

10:25 #4 Expense: Food

14:51 #5 Expense: Car Insurance

18:10 Can you tell us about your side hustles?

26:35 How do your colleagues react to your side hustle? Do they take on side hustles?

29:28 Q4: What are you currently doing to further your financial goals?

34:30 Q4: What don’t you spend money on that might surprise people?

39:00 Q5: What are you happy with in your spending and what would you like to change?

42:12 Q6: What is your best advice for someone new to your city who is budget-conscious?

44:22 Q7: Would you like to make any other comments on what it takes to get by where you live on what you earn?

45:22 Conclusion

Why the Clean Slate Works

Job Transition and Moves Are Perfect Clean Slates

What Kinds of Financial Habits Should You Lose with a Clean Slate

Mindless Spending

Living Beyond Your Means

Hiding Your Head in Sand

Keeping Up with the Joneses

What Kinds of Financial Habits Should You Implement or Maintain with a Clean Slate

Tracking/Budgeting Your Spending

Track Your Net Worth

Negotiating

Automatic Saving and Being “a Saver”

The Downside to a Clean Slate

Links mentioned in episode

0:00 Introduction

1:14 Q1: Please Introduce Yourself

2:27 Q2: What are your five largest expenses each month?

3:57 #1 Expense: Rent

8:29 #2 Expense: Car Insurance

10:22 #3 Expense: Food

18:54 #4 Expense: Bills

21:38 #5 Expense: “Me,” or Variable Spending

25:17 Q3: What are you currently doing to further your financial goals?

33:24 Q4: What don’t you spend money on that might surprise people?

35:34 Q5: What are you happy with in your spending and what would you like to change?

36:48 Q6: What is your best advice for someone new to your city who is budget-conscious?

44:46 Q7: Would you like to make any other comments on what it takes to get by where you live on what you earn?

48:30 Final Comments

48:45 Conclusion