Personal Finance for PhDs

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How to Combat Lifestyle Inflation When You Exit Grad School

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Lifestyle inflation is one of the great personal finance sins that just about everyone falls into at one point in time or another. However, as a graduate student you have the opportunity to anticipate the temptation to inflate your lifestyle that will come with your first Real Job and prepare yourself to fight it using the financial skills you’ve learned during grad school.

A version of this article originally appeared on GradHacker.

combat lifestyle inflation post-PhD

What Is Lifestyle Inflation and Why Is It Damaging

Lifestyle inflation is the mindless increase in spending as income rises. Generally speaking, people spend (virtually) all of their take-home pay (the average personal savings rate of Americans has been hovering below five percent in recent years). Even as income generally increases with career progression, expenses find a way to increase as well without the individual intending them to. This makes beginning or accelerating debt repayment or saving quite difficult, as lifestyle deflation is usually perceived as unpleasant.

My main objection to lifestyle inflation is not that it’s wrong to spend more as you earn more but rather that the spending increase is unintentional and undirected. The mission statement of my business includes encouraging PhDs(-in-training) to “make the most of their money,” which means optimizing your use of money to maximize your life satisfaction. Spending more across the board as your income increases isn’t optimized; rather, you should minimize the increase in the expenses that you care little about so that you can direct your income toward goals and spending that matter more to you.

How Graduate School Prepares You for Battle

Graduate students who live only on stipends for at least a couple years have a unique position with respect to lifestyle inflation. During graduate school, our incomes were held to a lower level than they would have been had we not pursued additional education. Therefore, our (most of the time initial) adult lifestyle was set at a low level, which forced us to budget, practice frugality, and discover the true distinction between needs and wants (all valuable skills to carry forward).

The salary jump that comes with the first post-grad school Real Job presents the opportunity for serious lifestyle inflation. After all those years of frugality, don’t we deserve to finally have nice things? Yes, we do, but keep in mind that the nicest things will come not from mindless lifestyle inflation but from intentional lifestyle increases.

How to Fight Lifestyle Inflation

How do you increase your lifestyle without inflating it?

The most common advice for the general population in combatting lifestyle inflation is to “live like a college student,” which means to keep your cost of living as low as it was during college for as long as possible. I think this was great advice for Baby Boomers, but I’m less convinced of its applicability to Millennials due to the many perks and amenities now offered on college campuses. However, I think “live like a grad student” (or the M.D. version, “live like a resident”) is generally good advice, with a caveat that you should selectively and judiciously treat yo’ self.

While you’re still in grad school, consider what aspect(s) of your lifestyle you would most like to change. Are you itching to live alone for once? Sick of “beans and rice, rice and beans?” Ready to overhaul your wardrobe? Dreaming of a vacation that doesn’t involve a conference? Identify the aspects of your lifestyle that would bring you the most satisfaction if you were able to throw more money at them.

Once you’ve landed that coveted Real Job, default to maintaining your spending as it was in graduate school across the board, but build in some spending increases in those areas that matter the most to you. From the get-go, you’ll also need to set up a serious savings rate that will go toward your savings account, retirement account, loans, etc., especially if you weren’t able to work on those financial goals during grad school.

My Experience Combating Lifestyle Inflation after Grad School

When my husband and I transitioned from Ph.D. training to Real Jobs, we decided to focus our lifestyle increases in two areas and kept all the rest of our spending as similar as possible to when we were in grad school. (Oh, and as a one-time splurge we bought a few pieces of new furniture from Ikea).

First, we moved from a medium cost-of-living city (Durham, NC) to a high cost-of-living city (Seattle, WA). This move automatically increased our spending in several areas even while we kept our perceived lifestyle constant. We made sure to find a rental that fit comfortably within our budget (we downsized), and after that didn’t worry too much about the fact that we were spending more on housing, utilities, and food.

Second, we had a baby, which of course opened up totally new spending opportunities for us.

With just those two areas of intentional increase and maintaining the saving percentage we established in graduate school, pretty much all of our income increase was spoken for. I’m very glad that we focused our lifestyle increase in the areas that mattered most to us. Inflating our lifestyle in any other areas (e.g., buying a more expensive car) would eventually have caused us to sacrifice in another area or decrease our savings rate.

What lifestyle increases would you like to implement once you have a Real Job?

Give Yourself a Raise: Prepare Your Own Food Even with a Busy Schedule

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Grad students and postdocs typically spend a significant portion of their income on groceries and restaurant food; these budget categories are often targeted by trainees who want to cut back on their spending in favor of reaching other financial goals. Forming new habits around cooking and eating is challenging but certainly not impossible, even for busy researchers.

prepare food busy schedule

A version of this article was originally published on GradHacker.

If you are looking to “give yourself a raise” by reducing your spending on food, the go-to suggestions are to:

  • Reduce the number of meals you eat in restaurants or as take-out.
  • Prepare food from base rather than pre-processed ingredients; shop the perimeter of the grocery store.
  • Buy food in season.
  • Don’t waste food.
  • Buy in bulk.
  • Plan your menus.
  • Stick to your shopping list.
  • Patronize alternative food retailers.

Sometimes trainees justify their high food spending by citing long hours on campus and variable schedules. They tell themselves they don’t have time to plan, shop, or cook or they can’t commit to being home by dinnertime. They are often inexperienced in the kitchen, which means they rarely cook or are slow when they do.

Early on in my grad school career, I fell into some of these high spending patterns. I ate out with classmates because I wanted to bond with my peers. I wasn’t very capable in the kitchen, subsisting largely on sandwiches, fruit, salads, and canned goods. When I did cook, I picked rather involved recipes from cookbooks with several ingredients I wouldn’t use again, and making each meal took a large investment of time. I often stayed late on campus, and I ate far too many meals at Panda Express because I hadn’t planned ahead.

Over the course of my grad school career, I slowly improved both my time management and food preparation skills to the point that I was able to reduce the amount of money I spent on food while still feeling satisfied with what and with whom I was eating. My health also improved in parallel with my nutrition.

Sometimes the stumbling block in our efforts to reduce our spending is not that we don’t know how to spend less but rather that we don’t understand how to adjust our lifestyles to meet our new goals. The remainder of this post will not focus on how to spend less money, but how to make typical strategies for spending less money on food more palatable to a grad student or postdoc.

Think ‘Food Assembly’ or ‘Food Preparation’ Rather than ‘Cooking’

Novices in the kitchen may be intimidated out of preparing much of their own meals because they don’t know how to replicate, especially in a time-efficient fashion, the meals they are accustomed to eating in their parents’ homes, dining halls, or restaurants. But feeding yourself doesn’t have to involve skilled or elaborate cooking; you can reframe it as food assembly or food preparation.

Identify a few simple (components of) meals that you like that have only a single or a small number of ingredients and may or may not involve ‘cooking.’ You’re the only one you need to please with your meal, so don’t worry about whether it would be worthy to bring to a potluck.

Some of my favorite meals during grad school that involved little to no cooking were spinach salads loaded with vegetables and hardboiled eggs or ham, curry tuna salad paired with fruit, tuna mashed with avocado, a taco bowl, and a bunless cheeseburger with steamed broccoli.

Get into a Groove

Repetition is an amazing time-saver when it comes to eating out of your own kitchen. You don’t have to master every cooking technique out there; you just have to become competent at preparing a small number of meals that you like. Rotate through each meal in your wheelhouse at whatever frequency you need to keep from getting bored; add in new foods and techniques slowly so you don’t become overwhelmed.

Some personalities are more amenable to this strategy than others. My husband has eaten virtually the same breakfast and lunch nearly every weekday for years, and before we were married he only ever cooked a handful of different dinners; this amount of variety is satisfying to him and certainly has cost him very little in terms of time and money. Disabusing myself of the idea that I needed (or wanted) a different meal every day of the week was one of my big breakthroughs in committing to preparing my own food while pursuing my PhD.

Establishing patterns in your weekly or monthly meals also makes grocery shopping much easier; you don’t have to spend much time making a list or running to the store for forgotten items.

Acknowledge Your True Schedule

I didn’t have many peers in graduate school who seemed to keep a fixed work schedule, and I don’t remember any non-parents doing so. On top of the large number of hours many researchers put in each week, the nature of research often demands time flexibility. I frequently found myself staying on campus well past what my body told me was dinner hour to finish up labwork, meet up with classmates for a study session, or knock out some administrative tasks.

Early on in grad school, I didn’t plan ahead for these evening workday extensions; while I was quite consistent in bringing lunch to campus daily, I was ‘forced’ to buy dinner on campus if I wanted to stay late. Once I acknowledged that I would be eating dinner on campus from time to time, even if I didn’t know exactly on which days of the week that would occur, I started to plan for it. I prepared a few refrigerator-stable, microwavable, single-serving meals each week to keep in my office for the late nights, replenishing my supply as needed.

My favorite microwavable dinners to keep on campus were chili, split pea soup, flaxseed meal pizza, Mexican lasagna, and pasta with sauce. Full meals aren’t even needed in many cases to help you resist the convenience food available on campus; there’s really no reason to not keep some snacks around to tide you over. Easy room-temperature or refrigerator snacks to keep in your office are instant oatmeal, nuts or nut butters, yogurt, hardboiled eggs, cheese, raw vegetables, and fruit.

Don’t Allow Yourself to Get Too Hungry

‘Never go to the grocery store hungry’ is great advice; hunger can sap our willpower to stick with our eating plan, causing us to overbuy expensive, unhealthy, or unnecessary food. As a graduate student working sometimes long and late hours, I realized that allowing myself to become quite hungry caused me to make poor eating choices on campus and at home in addition to at the grocery store. It’s pretty difficult to arrive home hungry and take the time needed to prepare a meal, especially for a slow cook.

I started flipping my schedule around; nearly every weekday evening, I ate a pre-prepared dinner (or snack) right when I arrived home, and then cooked subsequent days’ meals later in the evening when my hunger was already satisfied. An alternative is to do as much food preparation as possible in advance (washing, chopping, saucing, etc.) so that finishing your meal when you arrive home takes a minimal amount of time.

Batch Cook

Acquiring a slow cooker halfway through grad school absolutely revolutionized how I prepared food; it was my introduction to batch cooking. Batch cooking is preparing multiple meals at once to freeze or refrigerate until they are consumed. Slow cookers are not the only way to batch cook, but they are an incredible tool for preparing large quantities of food at once with relatively little active work or skill needed. Batch cooking usually doesn’t take any or much more time than preparing a single meal, so it’s perfect for a busy trainee. A single person can prepare a meal of 4 or 8 servings and eat for a week off that one-time effort!

Socialize Economically

The connections you make in graduate school are very important for your career; I would not suggest that you skip chances to engage socially with your peers simply because you are trying to spend less money on food. You can, however, often socialize in a manner that limits the damage to your budget. For example:

Changing your eating habits is certainly not easy. However, by overcoming the challenges to eating out of your own kitchen while you are still a student or postdoc, you can effectively give yourself a raise both during your training and throughout the rest of your life.

How have you kept your food spending low as a graduate student or postdoc?

Stack Frugal Strategies for Long-Term Savings

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Have you ever thought that only rich people can afford to be frugal? Many frugal strategies don’t help you spend less today; in fact, some instruct you to spend more today so that you can spend less long-term. But how do you go from being completely strapped for cash to being able to frugally plan your spending over the course of a year or longer? The answer is to stack frugal strategies.

stack frugal strategies

Stacking frugal strategies (a term that might be original to me!) means cutting your spending radically in the short term to free up money to put toward long-term frugal strategies. The short-term strategies may feel painful and sacrificial, but you won’t have to maintain them once you put in place at least one long-term strategy (unless you want to). The short-term strategies are cuts to your variable expenses, which take willpower and effort to maintain, but the long-term strategies are cuts to your fixed expenses, which take no willpower or effort to maintain.

Further reading:

Frugal Strategies for Today

These frugal strategies form the base layer of your stack. Implementing them slows down or stops your spending in these areas immediately so you end the week/month with some money in your pocket. They aren’t usually sustainable for the long term, at least not in their most extreme form, but if you keep them up for a month or two can leave you with a healthy amount of cash that you normally would have spent. If you try out a lot of them, you might even find a few you’re willing to maintain as new habits.

  1. Eat down your pantry. Eat everything you have in your fridge/pantry before doing much grocery shopping. That might mean a few meals in a row of canned tuna or buttered pasta! Only allow yourself minimal shopping to enable you to eat what you already have.
  2. Don’t drive your car unless absolutely necessary. Walk or bike everywhere you can. Set up a carpool (but contribute gas money – don’t mooch!). If you have access to free public transit such as on your university’s campus or through a university-subsidized pass, use that to the greatest extent possible.
  3. Don’t go out with friends (except for free). Pass on restaurant, bar, and entertainment invitations from friends just for a short period of time. Search out free activities that you can suggest for outings.
  4. Substitute free coffee/alcohol. If buying coffee or alcohol is part of your routine, break it. Source free coffee and alcohol on campus, or make/drink it at home.
  5. Fast from shopping. No new clothes, no new household purchases, no new electronics. Delay every possible purchase.

Overall, the idea is to halt or at least seriously reconsider any spending that requires you to pull out your wallet (or click ‘Purchase’). Make do with what you have already to the greatest extent possible.

Frugal Strategies for Next Month

This set of frugal strategies forms the intermediate layer of your stack. Implementing them will pay off not immediately but in a month or two. However, they are more easily turned into habits for long-term maintenance.

  1. Use less electricity/gas. Turn down the temperature regulation in your home (use less heat/air conditioning). Use less hot water, including showering on campus instead of at home if possible (e.g., at the gym). Keep your lights turned off as much as possible. Track down sources of vampire power and unplug those appliances. Spend less time at home if you don’t mind.
  2. Switch utility providers when possible. For example, switch your internet or cell service, if you’re not under contract, to a less expensive provider, or downgrade the plan you have with your existing provider.
  3. Cancel subscriptions. Re-evaluate every subscription service you currently use (e.g., streaming video, streaming music, Amazon Prime, periodicals). If you don’t use it much, can get the same content elsewhere for less, or don’t mind a fast, cancel.
  4. Meal plan and shop strategically. Meal planning is the foundation of many frugal tips relating to food spending. Your meal plan enables you to buy in bulk, stock up on sale items, and batch cook, all of which save you time and money in the long run.

These frugal strategies usually take slightly more research and planning, but they are more sustainable than the shortest-term strategies.

Frugal Strategies for This Year

This set of frugal strategies forms the top layer of your stack. Implementing them requires an up-front investment of money, time, and/or research. Often, it takes months of concerted effort before you can implement the frugal strategy. However, once implemented, they have the biggest payoff potential for the least ongoing effort.

  1. Pay off debt. In the short-term, you have to accelerate your debt repayment amounts, but then the payment disappears!
  2. Reduce your spending on rent/mortgage. This is my #1 suggestion for a long-term way to reduce spending. It’s challenging to execute a move or adjust to having a roommate, but it’s worthwhile if you can reduce such a large expense by a significant fraction!
  3. Go car-free/downgrade your car. Cars are a huge money suck, and expensive/new/financed cars are the biggest money sucks. If you can live without a car, do so. If you can share a car with your spouse/partner/roommate, do so. If you can sell your expensive car and buy a cheap one, do so. Think of all the money you won’t have to spend on purchasing/paying for the car, insuring the car, fueling the car, maintaining/repairing the car, paying tax on the car, etc.
  4. Shop around for insurance. Re-evaluate both your insurance provider and level of coverage to see if you can get a better deal on all of your existing policies.
  5. Travel hack. When you plan your travel well in advance, you can research possible rewards systems that may defray some of the cost of the trip, such as credit cards that offer sign-up bonuses or rewards for ongoing spending. It may take several months or a year for a lower spender to accumulate the necessary points (if ever).

These are the frugal strategies worth keeping around for the long term – the ones that will help you reach your financial goals!

Always start your frugal stack with at least one long-term strategy in mind. You can go whole hog for one month with the short-term strategies; at the end you’ll have made deep cuts that radically changed your lifestyle over the short term, and you’ll have some extra money in your pocket. But you can’t do that month after month. You need to use that extra money to ladder up to mid- and long-term frugal strategies that pay off every single month in perpetuity.

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An Illustration of a Frugal Stack

Rachel’s starting point is that she is essentially living paycheck-to-paycheck. In occasional months, she accumulates a bit more credit card debt, on which she pays a high interest rate. She lives alone in a 1BR place and is willing to live with a roommate in a 2BR place, but doesn’t have the money for the expenses associated with the move or the security deposit (her current place didn’t require one).

The ultimate goal of Rachel’s frugal stack is to save up enough money to move once her lease is up. She estimates that she’ll spend $250/month less on rent and utilities once she completes the move, but she needs $800 in cash for the moving expenses and fees.

Rachel goes scorched earth on her short-term spending over the course of one month. It’s not sustainable, but for one month she virtually never pulls out her wallet. She eats down her pantry, drinks the free drip coffee available on campus, declines invitations from friends that would require spending (and plans a couple free activities to see them at other times), walks everywhere possible, and doesn’t do any shopping that could reasonably be put off. It’s a crazy ascetic month, but she ends the month with a few hundred more dollars in her bank account than she usually has. She keeps part of the money around for frugal investment and puts part of it toward her credit card debt, knocking down the balance significantly.

In that first month as well, Rachel implements some of the strategies that will take a month or more to pay off. She turns the temperature control in her home way down, unplugs everything at home that she’s not actively using, and spends a lot more time on campus, even showering at the university gym instead of at home on the days she works out there. She goes through her fixed spending with a fine-toothed comb; she switches one of her utility services to a lower-cost option and finds a couple superfluous subscriptions to cancel.

In the second month, Rachel has to restock her depleted pantry, so her food spending jumps up, but since she’s able to buy some items in bulk and is committed to cooking instead of eating out for convenience, she ends the month with about the same amount of grocery spending as was typical before and less money spent on the go. Her ongoing food spending settles out to about $50/month less than it had been before, even including a few meals/drinks out with friends each month. Rachel also eases off the gas pedal in some other areas like entertainment and using her car, but her spending never returns to where it had been.

Meanwhile, the changes Rachel made to her fixed expenses start paying off, and in total she is spending about $50 less per month on those services, as well as a slightly lower electricity bill.

Her first priority is to pay off her credit card debt completely, which she does in a few months, eliminating the interest she had been paying on it. After that, she saves up for her move, and within about six months she has enough money available to move without accumulating any credit card debt.

Rachel’s new reduced rent pays for the moving expenses she incurred within about a month (as she’ll get the security deposit back when she moves out), and with the $250/month reduction in rent and utilities she feels comfortable increasing her variable spending approximately back to where it had been, though she keeps her new grocery shopping and cooking habits. She pays off her credit cards completely every month and is now able to save money regularly. It took one month of intense sacrifice and a half-dozen or so more months of moderate sacrifice, and now Rachel is able to live a comfortable lifestyle while still saving money every single month.

A Dozen Frugal Tips for Graduate Students

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Today’s post is by Brett Green, a physics PhD student at Penn State. These frugal tips are part of the month of frugal tips going up daily on the Personal Finance for PhDs Facebook page. If you want to receive the tips for the entire month plus bonus tips by other PhD contributors like Brett, sign up here.

Frugality is the complement of earning money – earning increases income and frugality decreases expenditure. Just like how earning money can be anywhere from a necessary bore to pay the bills to a way to make a living by doing what you love, frugality doesn’t have to mean undercutting yourself and in fact can lead you to just the opposite! Sometimes it’s almost like a game to me to find new ways to be resourceful and save money, I love learning new things along the way, and habits that save money also mean reduced waste and saved energy. I hope to share some of these benefits with you and hope they prove to be helpful.

On that note, though the main focus here is on saving money, I’m sure that we all are interested in saving time as well as money. When some time-saving ideas tied naturally into these money-saving ideas, I included them too. Besides, you know what they say – “time is money”!

frugal tips for graduate students

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Buy secondhand and at alternative retailers

Buying secondhand and other places “off the beaten path” can have even more benefits than saving you money! You never know what you’ll find at thrift stores – the like-new camera I bought for $10 would have cost me $160 retail, and I’m much happier with my historic Yugoslavian dining room chairs than I’d be with something from the big box stores. The things you’d find in a thrift store are almost invariably not only less pricey but also more unique and interesting! Check out closeout stores too if you have any around, where even new goods can be found at up to half off their normal prices.

Create Your Own Entertainment

Make your own fun instead of paying for it and you’ll save on entertainment! There are myriad ways to amuse yourself without needing to pay for tickets, cable television, or the like. Going to a park, going out with friends, are solid options, as are hobbies. If you don’t have hobbies, this would be a great reason to take one up. As a bonus, if you take up an art or craft, you can sell your work on top of your entertainment savings!

Research Your Purchases Ahead of Time

Give yourself time to have options by starting your search for something you’ll need before you direly need it. Most of the best deals are found by watching and waiting while patiently keeping a lookout. This is especially helpful if you like thrift stores, as their inventories are constantly changing. Similarly, I like to set up Craigslist searches with e-mail alerts so I can jump on good deals right away. Remember, though, that you need to be looking actively to find your query – watching and waiting alone won’t do the job! Try to think of new places to look or people to ask.

Sell before the Move-Out Rush

Plan ahead for a move-out by starting to sell things before the last minute. Your offerings will be the first others will see and you won’t be forced to accept a low offer because of a time crunch. If you aren’t able to sell something, I encourage you to donate it. Even putting aside the societal benefits of charity and waste reduction, this benefits you directly as a tax deduction.

Buy During the Move-out Rush

Conversely, going move-out hunting when students vacate dorms (usually May) and leases are ending (usually August) is a great way to pick up left-behind freebies often in new or like-new condition! Many students fail to plan ahead and end up abandoning things that are perfectly good. One May I picked up two brand-new 500GB hard drives still boxed and sealed in antistatic bags from beside a dumpster, for example, and about a month ago a friend of mine picked up and made $40 off a leather office chair.

Buy and Cook in Bulk

Buy in bulk, and then cook in bulk, use your freezer! The first saves money, the second saves time, and the third saves your food from spoilage when you go in bulk. Some grocery stores display the price per unit (e.g. per pound) beside the package price, making it easy to see that you can save as much as half by buying in bulk. If not, bring a calculator – it takes only seconds to do it yourself! Cooking in bulk means you’ll only have to preheat, clean, etc. once, which is not only a timesaver but can make it less of a chore for those of us who don’t really like to cook. Finally, the wonderful preservation technology of the freezer means you won’t have to throw it out! For example, I buy about six pounds of chicken breasts for less than $2/lb, about half the regular price, and cook and freeze them all so I can just defrost them and have them ready in less than a minute for the next several weeks.

Bring Your Lunch

Pack your own lunch to campus to save both money and time instead of making a detour midday to find a restaurant. On top of that, you get to design your lunch exactly the way you want it, not constrained by any menu!

Grow Your Own

Start your own garden and grow some of your own groceries and spices! It’s awesome to see what you can grow, and you can bet they’ll taste better just because you know that you grew them yourself. You may not even need to go to a garden store – many such as onions, lettuce, and potatoes can be grown from your leftovers. I was a proud potato papa when I found that the two I had buried had grown into twelve! You can also grow many plants from cuttings by taking a few inches off a stem and putting it in water until it roots. I’ve grown mint, basil, rosemary and lemongrass this way.

Bicycle

Buy a quality bike instead of a parking pass! Getting out and riding in the fresh air is good for you too. Learn to take good care of your bike and it’ll serve you well for many years to come, and you’ll be able to help out and impress your friends with your knowledge of bicycles. You’ll be environmentally friendly this way too.

Buy a Home

Buying a house or condominium, if you can, means you’ll be building equity instead of just paying rent. If you have spare rooms you can rent them out as well! Just to be safe, if you plan to sell it after you graduate, it would be wise to talk to those familiar with the housing market to get a picture of how the home’s value might change. I figure, at least, that if you’re looking for a house now, then by the time you’re ready to move another student will be there in your former role as the buyer.

Put in Sweat Equity

Do your own “dirty work” when applicable instead of hiring someone, and you’ll get a sense of satisfaction and pride in addition to saving money! This can be as simple as washing your car by hand, or it could be more complicated, such as home maintenance. Even many things that are at first intimidating, though, actually aren’t so hard once you start. I’ve fixed my water heater for $12 and my gas fireplace for free with just some courage and the manuals, and the sensation of accomplishment and victory afterward is awesome! On the not-so-intimidating (for a young man, at least) side, I’m about to 3D-print a larger hair clipper attachment to match the length I like.

Maintain Properly

Take care of things and they’ll last longer and work better, saving you (you guessed it!) time and money, not to mention possible frustration, in the long run! Whenever you get something new, it’s good practice to check what you need to do to keep it in great shape. Most things will have instructions or a manual available, and even for secondhand goods which no longer have the original copies you can bank on the information being online. When I get a new tool, even if I only skim the features and capabilities, the two places I’ll be sure to read through are safety and maintenance.

Note how many of these come from planning; certainly the 3rd (searching ahead), 4th (selling ahead) and 5th (move-out hunting) and less explicitly also the 6th (cooking ahead), 7th (packing lunch), 10th (buying a home) and 12th (taking care of things) can be thought of in terms of planning ahead. This wasn’t even intentional on my part – it’s just a fact of the way things work that planning ahead is the best way to get things done.

There’s one more thing I think is apropos to share with you, and that’s to keep your approach to saving balanced and in perspective. Frugality can be a double-edged sword, as I often have trouble spending money on myself even when it would be worth it. This can be, for example, buying a cheaper substitute that isn’t really what I wanted or doesn’t adequately accomplish the purpose I wanted it for, or it could be a foregone opportunity, such as museums I didn’t visit or lunch or movies with my friends that I was reluctant to pay for. To be sure, my ideas wouldn’t necessarily correlate with that sort of excessive frugality, but it’s best to be conscious of it now so you’ll be aware of it later. Just be sure that you keep doing what’s best for you overall and put the right importance on other things that matter to you!

All right, I know I said one more thing, but I suppose really it’s two. After all, I would be missing a golden opportunity were I to end this without a frugal pun! “Dumpster diving is a great way to net free stuff. The best, though, is on the side of the highway – that’s how you really get the pick of the litter!”

Thank you for reading!

Birthing a Baby Before You Birth Your Dissertation

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Financial considerations for graduate students becoming parents.

If your relationship with your graduate advisor can be compared to a marriage, the dissertation you create together is your child. You conceive it together in early days and then spend 5 (or 6 or 7 or…) years raising it up until it can make its way into the world independently. That creative process is time-, energy-, and emotion-intensive, not to mention financially limiting due to the small stipend you receive in those years.

Is it possible to bring a human child into your family in the midst of your graduate degree and still see it to a successful completion? Plenty of newly minted PhDs celebrate their accomplishment alongside their children. But having a baby during graduate school may be even more of a challenge to your time and finances than doing so before or after.

When you are deciding whether to have a child during grad school or preparing for one already on the way, the two key areas in which you need to make space are your time and money. In this article, I outline the largest monetary costs that you will incur in the first year of your child’s life and discuss ways to minimize those expenses. The first things to come to mind when you think of these costs may be clothing, toys, or a crib, but those are actually among the more minor expenses.

Medical Care and Insurance

Prenatal, postpartum, and ongoing medical care are necessary for mother and baby, so check your insurance policies. Research the out-of-pocket costs for an uncomplicated birth with each of the providers and settings you are considering, and ask your insurance company about your deductibles and co-pays. Midwifery care tends to be less expensive than obstetric care, but that may or may not be in line with your birth preferences or affect your bottom line. You have time to save up a fund to pay for your part of the birth expenses. You should also make sure your emergency fund is a healthy size in case mother or baby experiences complications that will add to the expense.

After the birth, you can choose to add the child to either parent’s insurance policy; assuming the care options are comparable, you can choose the one that you expect to be less expensive to you between the premiums and the out-of-pocket costs. An open enrollment period prior to or during pregnancy also provides an opportunity to switch the mother’s insurance provider if that is advantageous.

If you are adding the baby to your graduate student insurance policy, expect to pay a (higher) premium. Also be aware that while a typical health insurance premium would be paid incrementally with each paycheck, your grad student insurance might require a lump sum up front for each term or year.

Parental Leave

Your university or department may have a parental leave policy in place. It should outline the amount of time you are permitted to take off; whether the leave will be unpaid, paid, or at partial pay; and whether benefits such as insurance will continue. If there is no official parental leave policy, there may be one regarding leave for a medical or an unspecified reason that will apply or a vacation policy. Failing that, it will be down to you to negotiate your leave with your advisor and possibly department. This is also a great opportunity to negotiate a different schedule for after the baby arrives.

The reason leave is included as a major cost is because of the potential loss of income. The length of your leave might be influenced by what you can afford. Similar to your medical expenses, use the time you have leading up to the birth to save a dedicated fund out of which you can pay your expenses during your unpaid or partial-pay leave.

Childcare

Childcare is easily one of the largest costs you will incur in the first year of your baby’s life, and it can be paid in either money or the caregiver’s time (i.e., opportunity cost).

If you are going to pay for childcare, compare all your local options: daycare, a nanny or nanny share, or babysitters. As a graduate student, you may be eligible to receive a subsidy for daycare on- or off-campus. Consider whether you need full-time or part-time care; if you have flexibility in when you work and money is more scarce than time, perhaps you only need part-time care.

Some families may be able to arrange for childcare that does not involve an exchange of money. One parent can cease working or move to a part-time schedule, both parents can work different ‘shifts’ so one is always with the baby, or another family member may donate his or her time. This is highly dependent on your existing resources, the flexibility of your work, and how you want to spend your time.

Be very cautious about assigning your time a value equal to that of your stipend ‘hourly rate.’ This line of thought leads many lower-income workers to the conclusion that it is financially advantageous to quit a job to become a full-time caregiver rather than to pay for childcare. This is short-sighted because it does not consider future career advancement and income increases. While you are in graduate school, your income is suppressed, but you can greatly increase it by finishing graduate school and moving on to a higher-paying job. It can make financial sense to pay a comparable or higher rate for childcare than you earn from your stipend if it speeds your progress toward your post-grad school job.

Space

Just about every year a new ‘cost of raising a child’ calculation is performed. For example, in 2015 the headline cost of raising a child to age 18 was $230,000 (this is an average over all income levels and parenting choices). The largest component of that cost calculation (29%) was for housing. If you decide to move to a larger dwelling to accommodate your new child, you must account for that additional monthly cost. Depending on your parenting decisions, that’s not necessarily a cost you will incur immediately – the American Academy of of Pediatrics recommends sleeping in the same room as your infant for the first year – but eventually more space will become necessary.

Insurance

If you have not yet had reason to purchase life insurance, the birth of your first child will almost certainly motivate you to do so. The purpose of life insurance is to provide for anyone who would be financially impacted by your death. The most cost-effective type of life insurance to buy is term life insurance, not whole life or universal life. You can shop online or through an independent insurance broker to find the best policy and price for you.

Food

While the average American spends less than 10% of their disposable income on food (both at home and out), I consider food to be a major regular budget line item for graduate students (often third-largest after housing and transportation). Therefore, an infant’s food could also have a significant impact on the family’s budget. The choice to breastfeed or formula-feed – to the extent that it is a choice – is a parenting decision that has a monetary cost either way. Expect to spend some money in this category, whether on formula, bottles, breastfeeding supplies, or extra food for the mother. Starting between 4 and 6 months of age, you’ll also start purchasing solid foods for your child.

Further reading: Breastfeeding Ain’t Free

Diapers

Another significant cost in a baby’s first year of life is waste management, i.e., diapers, wipes, diapering supplies, etc. This cost is less avoidable than some of the previously listed ones (except by practicing elimination communication and potty training early), but it can be minimized. If you are using disposable diapers, it’s all about sourcing the least expensive diapers that work for your baby. Cloth diapering requires an up-front investment, but becomes less expensive than disposable diapering within the first year and realizes large savings in subsequent years and for subsequent children.

Further reading: Cloth Diapering in an Apartment

Stuff

Most of the remaining money that you will spend in your child’s first year of life are one-time purchases of various items, such as a car seat, stroller/carrier, furniture, linens, clothing, toys, and books. If you receive gifts or hand-me-downs, they will likely be in this category, so some of the cost might not be borne by your budget. You might even be able to borrow many of these types of items from a family with a child slightly older than yours. A parents’ group at your university could be a great resource in this respect. Whatever you do need to buy can be bought used, though be careful for highly regulated items like car seats and cribs that they are compliant.

Further reading: Outfitting Our Baby with Hand-Me-Down, Borrowed, and Used Stuff

While this list may appear overwhelming, not every cost may apply to your family and there are ways to minimize each one. For the costs that you expect to incur, the best way to decide if you can afford them is to pretend that you are paying them now. Draft a post-baby budget that includes your monthly additional cost for housing, childcare, purchases, etc. and see if you can live on the remainder right now. Funnel all the cash flow you are trying to do without into a dedicated fund for your child that can ultimately pay for your start-up costs.

What was the toughest financial aspect of having a baby while in grad school and how did you work through it?

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

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The largest line item in nearly every graduate student’s budget is housing. Whether you own your home or rent, whether you live on campus or off, whether you live in an apartment/condo, townhouse, or single family home, unless someone is subsidizing it, you are almost certainly spending the biggest chunk of your income on your abode.

If your rent is $400 per month and you spend five years pursuing your PhD, over the course of your studies you will spend $24,000 on rent. If your rent is $1,000 per month and you spend six years pursuing your PhD, you will spend $72,000. These are staggering numbers, especially when you compare them to your annual stipend. Your decision of where and with whom to live is almost certainly the most financially impactful budget decision you will make during graduate school.

Housing is a very tricky expense category to budget. There is no argument that you need somewhere to lay your head. A certain fraction of your housing spending is simply a baseline that covers a necessity. (That is, unless you can get really creative, such as by living in a van.) But you can’t write off your entire housing expense as a “need,” especially if you then let yourself off the hook from evaluating its cost carefully. A fraction of your housing spending is “want” as well. Perhaps you are paying a bit more for a desirable location, an amenity, extra square footage, updated features, a parking spot, or solitude. There’s nothing wrong with wanting to upgrade from a Spartan home, but you must be honest with yourself about what aspects of your housing you could dispense with if push came to shove.

What makes housing even more special in terms of your budget is that it is a fixed expense. Once you settle on where you’ll live, your housing costs are locked in for the term of your contract. It’s difficult to change your housing costs because that involves moving or adding/subtracting a roommate. That means that you can lock in a high rate – or a low rate. Fixed expenses represent excellent opportunities for cost reduction. If you are looking for a simple, long-lasting way to reduce your spending, target a fixed expense. You have to make the decision to reduce it and put in the effort one time to carry out your decision, but after that you have the lower rate set every single month in perpetuity. And what better fixed expense to target for reduction than your largest one, housing?

The most remarkable aspect of your housing decision is that you typically have to make its first iteration before matriculating into your graduate program. If you are moving to a new city, you have to search for and secure your housing with next to no knowledge of the rental market, possibly sight unseen or after one scouting trip. Therefore, your first dwelling in graduate school may not be the most optimal for you financially. Although you should ask for advice from older graduate students when you make that initial housing decision, nothing is as informative as actually living in your city for a few months or a year.

If you haven’t yet moved once within your grad school city, take the opportunity right now to re-evaluate your current living situation. You likely have a totally new perspective on the decision compared to the last time you made it. Even if you have moved once with an intimate knowledge of the local housing market, your financial goals and budget evolve with time; perhaps you are different now and you require a new housing arrangement. It takes some patience and commitment to decide to move and then wait several months to follow through, but a significant enough reduction in housing expense makes the process worthwhile.

[The decision to purchase a home while in graduate school has an enormous financial impact. There is a great amount of financial risk associated with buying a home (both upside and downside). Buying a home is more expensive in the short term while renting is more expensive in the long term. The problem is that no one can predict whether your time in graduate school is short-term or long-term. The housing market could boom or bust during your tenure at your university. You might end up with a home that needs a lot of costly repairs. You could arrange for renters who essentially pay your mortgage for you, or end up with a landlord’s nightmare. You have to make careful calculations and considerations, but there is always a gamble involved. If you are already a homeowner, there are still a few ways for you to reduce your housing costs, such as selling and moving, taking on a roommate, or refinancing your mortgage.]

Have you re-evaluated your housing costs since you moved to graduate school? If you were able to reduce your spending on housing, what would you do with your extra cash flow?