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money mindset

How a Boom-and-Bust Money Mindset from Grad School Serves This Start-Up Founder Well

April 12, 2021 by Lourdes Bobbio

In this episode, Emily interviews Dr. Lindy Ledohowski, a PhD in English, former tenure-track professor, and founder of the ed tech start-up EssayJack. Lindy describes the money mindset she developed as a college and graduate student while experiencing boom and bust cycles of income and budgeting for must-haves and investments in herself. Lindy narrates how her money mindset has been in concordance or not with how she’s generated income throughout her career, and how it is serving her well now as a start-up founder. She emphasizes that a safety net enables career risk and how she prefers to bet on herself rather than other financial instruments.

Links Mentioned in this Episode

  • Find Dr. Lindy Ledohowski on Twitter and LinkedIn
  • Find EssayJack on Twitter, LinkedIn, Instagram, and Facebook
  • Quarterly Estimated Tax for Fellowship Recipients
  • Personal Finance for PhDs: Quarterly Estimated Tax
  • Personal Finance for PhDs: Community
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money mindset PhD

Teaser

00:00 Lindy: Even that TA income that was more regular, certainly wasn’t enough to comfortably cover month to month costs. I’ve since read that you’re not supposed to spend something more than one third of your income on fixed housing costs and that was never my case. It was often I was spending anywhere from 60 to 90% of what monthly envelope was on just fixed costs.

Introduction

00:33 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season eight, episode 15 and today my guest is Dr. Lindy Ledohowski, a PhD in English, former tenure track professor, and founder of the ed tech startup EssayJack. Lindy describes the money mindset she developed as a college and graduate student while experiencing boom and bust cycles of income and budgeting for must haves and investments in herself. Lindy narrates how her money mindset has been in concordance or not with how she’s generated income throughout her career, and how it is serving her well now, as a startup founder. She emphasizes that a safety net enables career risk and how she prefers to bet on herself rather than other financial instruments.

01:31 Emily: I’m recording this near the end of March shortly after finishing my 10th webinar for a university client in this month alone. That sets a record for my business in terms of speaking engagement density. I want to send a super sincere and heartfelt thank you to all of the people who have recommended me to their universities and other organizations, particularly in the past year. I shared with you last month that I really wasn’t sure how my business would fare when the pandemic started given that the revenue was so reliant on in-person speaking engagements, but between webinars, individual, and bulk purchases of my tax workshops and the Personal Finance for PhDs Community, my business has actually flourished in the past year, and especially this spring. I know that is in large part due to the recommendations of the graduate students and PhDs who listened to this podcast. I know that because the people who book me tell me so. I really, really appreciate you supporting me in this manner. I’m so happy to be able to provide this podcast to you for free, and it is possible thanks to the products and services I sell to universities and individuals.

Book Giveaway

02:42 Emily: Now it’s time for the book giveaway contest. In April, 2021, I’m giving away, one copy of “Walden on Wheels” by Ken Ilgunas, which is the Personal Finance for PhDs Community book club selection for June, 2021. Everyone who enters the contest during April, we’ll have a chance to win a copy of this book. If you would like to enter the giveaway contest, please rate and review this podcast on Apple podcasts, take a screenshot of your review, and email it to me [email protected]. I’ll choose a winner at the end of April, from all the entries you can find full [email protected]/podcast.

03:22 Emily: The podcast received review this week titled “Customized and Encouraging Info”: “I’ve been interested in personal finance for awhile, but a lot of advice from other sources doesn’t really apply to my unique situation as a graduate student. This podcast, and the online resources on filing taxes as a grad student on a fellowship have been so enlightening and useful/relatable in a way that other sources aren’t. They’ve also helped me to challenge my sometimes limiting mindset about money as a graduate student, and have helped me begin to save and invest more than I thought I’d be able to on my stipend. Definitely recommend for anyone grad school or thinking about entering grad school. This is really important info that we don’t get from our school/programs.”

04:04 Emily: Thank you so much for this review! This reviewer really gets what I’m doing with the podcast and business. Without further ado, here’s my interview with Dr. Lindy Ledohowski.

Will You Please Introduce Yourself Further?

04:22 Emily: I have joining me on the podcast today. Dr. Lindy Ledohowski. She is the founder of EssayJack. She’s also a PhD. She’s a former faculty member — we’re going to find out all about that. When Lindy and I were preparing for this episode, we realized that she has a super interesting parallel story to her career story, which is the story of how her money mindset has served her very well in some of these stages, not so well in other stages. And it’s a little bit of an interesting flip on what we usually hear. A lot of times we talk about how money mindsets we develop in academia are harmful to our finances. Lindy has found the opposite of that. She’s found some concordance with her money mindset nurtured in graduate school with her success with finances later in life. We’re going to hear all about that. Lindy, thank you so much for joining me today. I’m really pleased to have you on. Will you please introduce yourself a little bit further to the audience?

05:15 Lindy: Yeah, absolutely. Thanks so much for that introduction. I am Dr. Lindy Ledohowski. I have an English PhD. Before I was an English professor at the university of Waterloo, I had been a high school English teacher. Then I left full-time teaching and founded, as you say, EssayJack, which is an ed tech software solution in the academic writing space.

Money Mindset in Young Adulthood

05:38 Emily: That’s fantastic. It’s obvious how your business grew out exactly of your career, so fascinating. We’ll get a little bit of that story today, but really I want to focus on this money mindset aspect. What was the money mindset that you were developing in your childhood early experiences with money in your young adulthood?

05:56 Lindy: It’s actually interesting looking back in hindsight, because you don’t know that you’re developing a money mindset when you’re in the middle of it. For me I think it’s best characterized as kind of a boom and bust. All throughout high school and then my undergrad, I certainly taught during the school year. I was a busser on weekends and then I was a waitress and then I would make the majority of my money that had to last throughout the school year in the summer months. When I was a high school student that was all day long babysitting, nine to five, whereas during the school year, it might be a couple of hours after school. And then similarly through undergrad, I relied very heavily on making a lot of tips and making all that money over a full-time summer working gig, and then during the academic year, I would scale back so I could focus on my full-time classes.

06:51 Lindy: That really gave me an approach to finances that was like, make as much as you can in as short a time as possible, and then budget that surplus over a long sort of drought period. That really started to get shaped for me in my teen years and then into my undergrad. I had my first job was as a paper route when I was 11, and then it was, as I say, babysitting, and then into the hospitality industry and customer service.

07:25 Emily: Now I can see how that kind of pattern, which I think is not uncommon for young adults and people who are still in their schooling years, but I can see how that pattern could divorce in your mind work from money in the sense that you’re doing a lot of work all the time, which is the work of being in school — the classes and so forth — but sometimes you’re not doing that kind of work and you’re doing the kind of work that makes money and that’s that period of intensity of earning the money and then spreading it out through the rest of the time. As an entrepreneur, I can see how that separation of what is work for money and what is work that just has to be done to further your general development, how that can help you later on, but you developed that early on while you were still in the cycle of the academic year.

08:11 Lindy: Yeah, absolutely. You put it really well that it made that separation between work and money. And then also I think it gave me a sense of budgeting through scarcity. And also I’m not really counting on financing for things because I very early was training myself to not think about, “Oh, I have a stable monthly salary, which I will then allocate for various purchases.” I always had to make a bunch of money and then buy the thing, whatever that thing is that I wanted.

Money Management and Budgeting Strategies through Scarcity

08:56 Emily: It’s so interesting that you use that term, budgeting through scarcity. And I think when we were prepping for this, you also use the term hoarding — hoarding money during the good times and eking it out during the leaner times to get through that. What kinds of strategies were you using during those early years? How did you budget for when your income was much lower or like zero versus when that income was much higher?

09:19 Lindy: One of the interesting things, and I don’t know if this is just my own personality traits, but as you focus on developing a money mindset unconsciously, in my case, what that meant is that I very quickly began to prioritize the “must haves” and the “nice to haves” for me. I was never, for instance, really into like clothes or fashion. That wasn’t my thing. I also had an older sister whose best friend was really into fashion, so from the two of them, I could inherit hand me downs and that was more than enough for me. I don’t know if I’m particularly stylish, so I didn’t need to color my hair or all that. Those kinds of things became “nice to have” for me and even in a time when my bank account was very flush, I still never ran out and bought a bunch of clothes or did my hair or things like that.

10:15 Lindy: Whereas, books were always my passion and I could justify also spending some of that money on books because I would think of them as a longer-term investment in my intellectual future. Even if I was buying books as a high school or undergrad student, I always knew that I was going to sort of go on and do more. I loved books and that was sort of investing in myself. Similarly for me a must have, would be say traveling. Interestingly, I had a conversation with my then boyfriend as an undergrad because his attitude towards money was to invest it in financial investments. Whereas if I had a little bit extra, I’d budget a backpacking trip and I always thought, well, I’m investing in myself and how my brain is going to be broadened by different perspectives. I think that came into play in terms of creating a hierarchy of, if I have limited funds in that hoarding and scarcity time, what will I spend it on and what won’t I spend it on?

11:22 Emily: I’m so glad you gave us that insight, because first of all, I’m glad to hear that your “must haves” were not literally just like food and shelter. Of course you took care of that, but had added onto that what you considered to be investments. And it’s so interesting that you were thinking about them that way, even that early on, because as I said earlier, obviously your career has evolved in such a way that probably all those experiences, the books, especially, did contribute to ultimately like your founding of your company and everything. I don’t think that many people at that age think about investing in themselves in those ways, but you did.

12:00 Lindy: I think maybe that’s a personality quirk of my own, or maybe my good fortune. And speaking of good fortune, as you mentioned, I did have a place to live. During my undergrad, I lived at home. The deal with my parents was that I could live at home rent free and so I need to flag that because that’s just a tidbit of good fortune on my part that not everybody shares. Again, back when I was doing undergrad, so that was in the nineties, I was able to make enough money waitressing and saving my tips over the summer that I could afford tuition. And again, that’s a very different financial reality than what people are facing today. That kind of make it all and then put it into your tuition, buy books, and then also the fact that I did have that family help, means that I had a bit of a buffer and it’s fair to recognize that little bit of a buffer that I certainly had.

13:00 Emily: Absolutely. It sounds also then that you didn’t take out debt, at least you haven’t mentioned it so far during those undergrad years.

13:07 Lindy: No, no. And that was actually what the conversation was with that then boyfriend, because he and his parents took out student loans and then he and his parents had a plan for investing that money and making money on the student loans and all that. It was very sophisticated in a way that I didn’t have with my family at all. We didn’t really talk about finances in any sort of concrete way, aside from the “we love you and if you need help, we’ll help you” kind of way, which again, I’m lucky that I had people in my corner, but it wasn’t like a sophisticated financial education in those early days.

13:47 Lindy: In my young twenties, then that boyfriend, and he was the first boy I lived with, we then had to talk about those finances in terms of how we split things up financially in a shared housing. I was really sort of dumbfounded to know that he had this whole other financial reality based on the availability of student loan debt at the time, whereas I just had the neither a borrower nor a lender be. And so if I didn’t have the money, I didn’t spend it, was kind of my approach at the time.

14:23 Emily: Yeah. I like your simpler approach. For the record, for anyone who’s listening, please don’t take out student loans just to invest the money. I do not endorse this approach. It is something I’ve been asked about from time to time and it’s very risky, very, very risky. I’ll just put it that way.

14:39 Emily: That was some of the strategies you were using. What about budgeting at that time? Did you have any particular way that you were doing it, or you just found this sort of natural rhythm of your spending?

14:48 Lindy: A couple of ways. One, I definitely found a kind of natural rhythm to the spending, which is you don’t spend very much and then whatever you have leftover is the surplus for travel or for something else. After my undergrad degree where I was living at home, then I did have a proper job that had a salary and the deal with my parents was I could have one more year at home rent free, so I could sort of get on my feet. I used that to again, sort of boom and bust, to hoard that income so that I could then go and do another degree, and that was my education degree. I was more conscious of budgeting at that time, because I had a really specific target. I want to do a bachelor of education degree. I know that I’m going to have to, at that point, move away, pay for housing, pay for tuition, sort of figure out all of that. I did have a spreadsheet and tracked things, and then once I had a couple of months of the spreadsheet, I could then sort of see, okay, well, typically this is how much I spend on a given month. If I go over that, that’s a problem. And then if I can be competitive with myself and get under that, then that’s great.

16:06 Emily: I see. So you actually had a little like gamification element kind of going on.

16:10 Lindy: Yeah, absolutely. Like self gamification. It was like, can I go lower?

Income Changes and Money Mindset During Graduate School

16:16 Emily: Yeah. And so we’re kind of talking about you mentioned a second bachelor’s degree, but then of course, at some point you went into graduate school and got your PhD as well. Can you talk about how this money mindset served you or didn’t serve you during that time?

16:31 Lindy: As I just mentioned, after the undergrad, then I worked and saved money, did the education degree. Then I worked as a teacher and saved money so that I can go to graduate school. I did a master’s, which was unfunded and then the PhD, which was fully funded. I went straight through for that and I did borrow some money from my dad, at the time to do that unfunded masters, but I had a chunk saved from my education degree. That money mindedness meant that as I went through, one of the things for sure, when I was contemplating a PhD after the masters, and I really loved my master’s degree, which is what made me want to continue on and do doctoral work. But one of the absolute deal breakers was it had to be fully funded and it had to be significantly, fully funded. Not all fully funded PhDs are fully funded equally.

17:29 Lindy: I knew that any university would happily take me as a PhD if I was going to be willing to pay them, but it would be a real vote of confidence if they said, yes, we will take you, and here’s the financial commitment we’re making towards you and your success. I think the fact that was a real must have for me in the application process for the PhD came out of that money mindset that had been developing along the way.

17:58 Lindy: And then in the PhD, similarly, there’s these funding cycles. You apply for grants and scholarships and all of that at one time of the year and then it ups your funding for the subsequent years of the PhD. had five years of guaranteed funding from the university, and I immediately then upped that by various kind of scholarships and grants. And again, then was able to sort of dole out the month by month stuff when I would get a big stipend or a big award in September or January, and then make it last for the subsequent term and semester and top up. I did also do some teaching and TA work and again, that was paid more regularly, so I at least had the combination of some TA work that was paid regularly and then grants and scholarships and fellowships that came in these lump sums.

18:48 Emily: Yeah, so a combination of regular income, irregular income, larger sums, and I really liked that you pointed out the grant cycle and the fellowship applications and all of that, because that’s another example of how you work, like on an application, it’s not immediately for money, but some percentage of them presumably will work out and you can have this cash influx based on that later. For you, I think it was just probably grooving in even further, again, this boom and bust cycle and all the things that you’ve mentioned so far and work not being directly for pay, but sort of indirectly for pay later on.

19:26 Emily: Is there anything else you want to say about those grad school years? How did you come out of them financially? It sounds like you maybe were making a decent amount of money with all these sources combined.

19:37 Lindy: Yeah. Interestingly, I made more money as a grad student than I did as a high school teacher, to be quite honest. And part of that again has to do with taxation, so certain grants and fellowships and scholarships, aren’t taxable in the same way that a teaching income is fully taxed as regular income

19:57 Emily: Actually, we’ll note, because we haven’t said so far, but you’re in Canada. Actually, no, you mentioned the university name, so we know you’re in Canada. But yes, different situation in the States.

20:04 Lindy: Yeah, I was going to say, anything I say about taxes will be specific to the Canadian context. My schooling was in Canada and then my work life has also been principally in Canada. There were certain kind of tax benefits to the way that the graduate funding was set up. Everybody sort of jokes about being a starving student and I still was, but I was less starving as a PhD student than I had been as a full-time school teacher. And again, that’s just because you know, it was early days and I hadn’t sort of stuck with teaching long enough to go up the ranks or anything like that.

20:44 Lindy: The only thing that I will certainly say about my PhD experience from a financial perspective is that even that TA income that was more regular, certainly wasn’t enough to comfortably cover month to month costs. I’ve since read that you’re not supposed to spend more than one third of your income on fixed housing costs. That was never my case. It was often I was spending anywhere from 60 to 90% of what a monthly envelope was on just fixed costs. I got very good at going to every single free wine and cheese on campus and getting food. Any holiday party anybody would in invite me to. I ate a lot of canned goods and pasta, and so if I was invited to somebody’s house, it would be the produce that I’d be eating because that you couldn’t sort of buy in bulk at the beginning of the semester and have it last, whereas you can buy cans of tuna and that’ll last. That gives you a bit of a color on that PhD experience.

21:57 Emily: It also does for you and your budgeting method, I guess. Knowing that you have money in the bank, but eating this way, being this frugal and so forth, knowing that you have to make it last until the next influx comes in. I do think that gives us a good picture.

Post PhD Salary: How Having Steady Cashflow Changed the Money Mindset

22:12 Emily: Now, after your PhD, you had regular employment. You had a salary, maybe not for the first time, but maybe in a different way than you had before in your life. Tell us about that period when you were a professor.

22:26 Lindy: After my PhD, I did a post-doctoral fellowship and again, that was much the same as, as the PhD in terms of lump sums of money. Then I became a tenure track professor. That had full benefits, full salary, all of those sorts of wonderful things. But interestingly, at that point I was then married. My husband is an academic and we had jobs in different cities. And so again, the budgeting became sort of weird because we were now using our two regular salaries to spend on the monthly costs of running two homes. We had two apartments in two different cities and traveling back and forth. Then any surplus I had was on driving or flying to be in the same city as my spouse. However, what I did find in that because that was our experience, I was well-suited to continuing a bit of that boom and bust and spend the money that was surplus on travel to see my spouse.

23:26 Lindy: What was interesting for me is at the time banks were only too willing to give us financing. because we were in two different cities, I had an old 15 year old car, we were going to sell that and buy a new car so that I could safely drive on the highway. And the dealership is like “we can give you this kind of financing because you’re both professors” and I was really uncomfortable with that. We were like, “well, we have our savings, let’s just buy the car.” In hindsight, I don’t know that that was the smartest decision given that cars are depreciating assets.

24:02 Lindy: But again, at the time I was very uncomfortable with this idea of taking on something that was a month to month to month debt, because I hadn’t built up my trust in the system that money would be there month to month to month in the way that I think if you start working at a regular job early and have that continuity over time, you start to have faith that, yeah, even though you might run out of money by the 30th of the month, it rolls over and new money comes in. I, temperamentally, didn’t feel that that was the case, even though, obviously as a professor, that is the case.

24:41 Lindy: So as I say, we made the choice to buy the car outright and again, hoard all of our money and live cheaply in the hopes that we could then save up for a down payment. That’s kind of how that money mindedness — the boom and bust, the hoarding — carried over into the academic job when we were both professors and seemingly could have had a much more regular financial life. We still kind of didn’t.

25:06 Emily: I’m so glad you pointed that out because really we’re talking about whatever it was 10, 15, maybe close to 20 years of this boom and bust cycle developed by the type of income you have with maybe some periodic, yes, you had some regular income, but it was never as much compared to that irregular income. I can totally understand why you didn’t immediately have trust that the salary is going to keep coming in and so forth.

Commercial

25:31 Emily: Emily here, for a brief interlude. The federal annual tax filing deadline was extended to May 17th, 2021, but the federal estimated tax due date remains April 15th, 2021. This is the perfect time of year to evaluate the income tax due on your fellowship or training grant stipend. Filling out the estimated tax worksheet and form 1040ES will tell you how much you can expect your tax liability to be this year and whether you are required to pay estimated tax. Whether you’re required to pay throughout the year or not, I suggest that you start saving for your ultimate tax bill from each paycheck in a dedicated savings account. If you need some help with the estimated tax worksheet, or want to ask me a question, please join my workshop, quarterly estimated tax for fellowship recipients. It explains every line of the worksheet and answers common questions that postbaccs, grad students, and postdocs have about estimate tax, such as what to do when you switch on or off a fellowship in the middle of a calendar year. Go to pfforphds.com/QETax to learn more about and join the workshop. Now, back to our interview.

Transitioning to Entrepreneurship

26L49 Emily: So you’re going along, you have your salary job and everything, but at some point you become inspired to start your company. I’d like for you to talk about the financial aspects of that transition — did you prepare financially before jumping into self-employment or were you already prepared based on the way that you were living? Or these kinds of insights?

27:10 Lindy: Before starting the company that I now head up, which is EssatJack, and that’s an ed tech software solution, I did a couple of years of consulting. So between being a professor and starting a tech startup, I was like, “okay, this living in two cities as two professors is untenable. All of the money that we’re making, we’re spending to rent two apartments or to travel back and forth to see each other, and I just don’t see this being a sustainable future for us. Something’s got to give, and the something that’s got to give is I’ll give up this job and figure out what comes next.

27:45 Lindy: I was very lucky. Again, I secured a grant — this is apparently just how I roll. I get the chunk of money and then decide what to do with it. So I secured a grant which gave me the confidence to take a year’s no pay leave from my job as a professor, as a kind of get the first toe in the water of quitting without actually quitting first. I had this grant, I was working on a conference in a symposium and ultimately it then became a book. But what I also did during that time was I started consulting. I started taking consulting projects just to see what can I do and then that gave me a certain confidence in being able to charge for my services.

28:27 Lindy: You made a really good point earlier on in the podcast about how my mindset divorced labor from financial remuneration, which I think is absolutely spot on. The time as a consultant remarried those two things together for me, because it made it very clear that my time was worth money, so I had to a, charge appropriately for it and not do free work on the gamble that it would pay off later in the way that say applying for grants and things like that is that kind of a gamble. Secondly, I also ran into like a scalability problem. There are only so many hours in the day that as a single sole proprietor consultant, you can work. At some point you max out and you can’t charge for 27 hours a day worth of work. That was ultimately how I got to the end of my time as a consultant is that I just sort of was like, there’s more work than hours in the day for me to do it, so I need to now start thinking about what’s the next step? Do I grow out the consultancy or do I think of something else? That’s kind of how that money mindset of the boom and bust carried over into consulting and I really did have to change my approach to labor and finance and more closely see every minute I worked as having to be worth money.

29:56 Emily: Yeah, I see. You had in that narrative that you didn’t officially leave your job, but you took unpaid leave for a year, testing the waters, after securing a grant as well. I’m wondering, obviously I think anyone can see that your life at that time with your husband was untenable, that’s not a long-term solution, but I think a lot of other people still in the face of something like that of there’s this really big thing about my job that’s unsatisfactory, they still stay in it maybe longer than you did. I would like for you to just speak briefly about this transition and how you decided to do that unpaid leave versus just leaving it right away. Did that make it easier taking the half step out? And also, is there anything that you wish you had done differently in that transition from the full-time position to the consulting?

30:48 Lindy: I think the first part of the answer is profoundly gendered. Many female professionals in the Academy and other professional fields find their careers just taking off at the time where they biologically, if they want to have children, they have to. That’s the window, you kind of have to do it. And that was the case for me. I was in my early thirties as a professor and my husband and I, we hadn’t yet decided whether or not we had wanted kids. It had always been like a “maybe one day kind of conversation. But being professors in two different cities and the ages that we were made it very important for us to get some clarity around, well, do we even want to have a family because if we do, that’s something that we’re really going to have to get on sooner rather than later. What came out of that conversation was the recognition that while we still didn’t know if we wanted kids or not, we knew that we didn’t want that decision to be made by circumstance. We didn’t want to fall into not having kids because we lived in two different cities and couldn’t figure out how to do it in that context, in a way that would make us both happy and satisfied as parents or as a family. That I think helped because it was like, well, this is a huge life decision and it could happen to us by circumstance and you can never know what that feeling is going to be like down the road, if you regret it. And I certainly didn’t want to be in that situation.

32:28 Lindy: Taking the leave kind of helped, as I say, sort of give me the confidence that I could actually make money outside of the Academy, which was my big fear. I was like, “Well, this is what I know. This is what I’m good at. This is what I can do. And I like it and all the rest of it.” Being able to sort of throw my hat over the fence, so to speak, as a metaphor for then you got to go in and get your hat, meant that I then began to feel confident that I could pitch for consulting gigs. I could get them. I could do the work. It could be rewarding. I could get paid. And then that also gave us the opportunity to live in the same city, to think about whether or not we wanted a family. In the end we decided we didn’t want kids. We have a cat. She’s amazing. But I’m very happy with that because it was a choice that we made as opposed to one day we woke up and realized that that that window had closed. So that, I think, as I say, the first part of that answer is a profoundly gendered answer.

Money Management Shifts during Self-Employment

33:28 Emily: What I found really interesting in there is that, okay, so you’ve, you stated that this period of consultancy, tied your time and earning back together. Your husband during that time, I think still was salaried. Is that right? So you still had that part of your finances was salaried. How did that change your money management or did it? Were you starting to trust the salary system or were you still like hoarding and then making these investments?

33:58 Lindy: I was definitely still hoarding. As soon as I left my job as a professor and started as a consultant, I definitely got back into the hoarding mindset, partially because as a consultant, it is also very boom and bust. You have periods of intense work and then periods where you don’t necessarily have the work or you’re calling around and trying to get work, so you need to kind of have enough that you’re carrying yourself through the lean times. Particularly at the beginning, you have no confidence that the lean time will end. You do one job and then it’s lean time and you think, Oh my God, I’m never going to make money again. And then you get another job. And then over time, you start to feel a bit more confident that even in a moment when there happens to be a break, that that’s temporary, but it takes a while to sort of get through that. And every time there’s a bit of a break or a lull in projects, at least for me, I was like, “Oh my God, I’ll never work again and I’m a failure and this is terrible and I’m never going to make any money.” I certainly hoarded quite a fair bit.

35:06 Lindy: And then again, because we didn’t know in the early days, did we want to have kids? I wasn’t paying into any benefits package at that point as a consultant, I was just myself. I knew there’d be no maternity leave, so whatever the next step was going to be, I needed to make sure that we had saved and had a buffer. And again, just as I flagged, my early years, I was very lucky to have family support. I had a home where I could live and, and there were financial resources there to support me, as an adult I was very lucky to have a spouse who had a full-time job. Again, I’ve had the ability to take probably some greater risks because of that backstop.

35:56 Lindy: Other people who are in similar situations to me may also think about one person covering the costs and one person taking the risks, because I think that’s a reasonable way for two people in a financial partnership, a marriage, to plan things out. My dad always said, if you can live on 50% of what you make, so one person’s salary and bank the other, you get much farther ahead than if you spend a hundred percent, month to month to month. Again, the finances of dad, the boomer generation are obviously different from us, but I did have that message in the back of my mind for sure.

36:40 Emily: Yeah. That is a really interesting way to put it and quite true that a safety net is maybe not strictly necessary, but can make it easier and more psychologically palatable to take a risk like that.

36:55 Emily: Okay, now you’re in this period of you did this consulting work for a while, but you mentioned earlier that you wanted to scale, ultimately, and so that’s where the business, the software solution comes in. Also, to today, is your husband still in that academic position?

37:09 Lindy: Yeah. He’s still a full-time tenured law professor and he loves it, and will probably continue doing it until one day he’ll be an emeritus professor, I think.

Interplay Between Lindy’s Money Mindset and Entrepreneurship

37:22 Emily: Okay. Another question we have here is after doing the consulting and starting the business, did you start to realize that there were some mismatches between your financial mindset and how the system worked? We talked about the system of being a salaried employee earlier in terms of your employer, but what about the system of, as you mentioned earlier of financing for instance, or you’ve also brought up taxes?

37:46 Lindy: Yeah, so really interestingly, as I say, as a consultant, I was doing that hoarding. Initially because it was like, well, maybe if we want to have a kid, we want to have a buffer. And then there were also things like, well, maybe we want to buy a house, so we need a down payment. And then as I started to think, okay, well, let’s get away from a service-based business and start thinking about a product-based business, we know we’re going to need to have some savings to put into that. All of those considerations required having some kind of chunk of money to allocate towards them.

38:19 Lindy: Then it was as we started to refine those things — okay, now we’re going to buy a house. We thought we were in such a great position because neither of us have student loan debts, we have some savings. Then when we started house hunting, we realized actually what we could afford was kind of not what we thought we wanted, so that was a bit of an eye opener to realize that while we, I think very blithely and naively thought, “Oh, well, we’re sort of trundling towards a middle-class life,” we weren’t, and that was surprising. The houses we saw in the neighborhood we were looking at, which we thought were standard middle-class-y, “this is us”, we’re utterly priced out of that. That again was one of those moments where I was like, well, I need to work a lot harder and save a lot more money so that we can sort of buy a nice house or whatever the case may be.

39:17 Emily: To clarify there, was it that you weren’t making enough money to afford that kind of house or was it that the lending system didn’t recognize your income as contributing towards a mortgage of the size needed?

39:30 Lindy: It was essentially that the mortgage that we needed to secure would be based on my husband’s income, not mine, because I didn’t have…and again, you need say as a consultant, self-employed, you need years of income that you can then show and they still only take a percentage of that, that they count towards your overall income to debt ratio. That meant we were in a much smaller position. The only way to up that was we had to make and save more money, so that even though the overall borrowing amount, the debt amount would remain the same, we’d have a bigger down payment, and so the actual house purchase increased. So we paused that house hunt and I scurried around and tried to make a bunch more money so that we could have more. That’s what got us thinking and that carried over into, we were like, “Hey, I need to move from a service based business to a product based business.”

40:35 Lindy: It got me thinking about income to debt ratios in a way that was entirely new and my money mindset, which is very boom and bust is helpful. Particularly now in sort of tech and startup, you may have to spend a fair bit of money at the beginning to build the thing before the thing that you’re building is actually going to start generating revenue. There’s a chunk of time where you’re spending money, but not making any because you haven’t built the thing yet. But it also got me into dealing with traditional lending institutions. In a tech company, there is no collateral. If I want to start a restaurant, I go to a bank and I have the business plan and I’m like, “okay, I want to borrow some money and either rent this restaurant or buy this restaurant or whatever,” and there’s stuff that the bank can take back if that business fails.

41:31 Lindy: Whereas if I say, okay, here’s my business plan, here’s the product I want to build, it’s this technological product and it’s going to be built in the cloud. There is no hard good. There’s nothing a bank can take, it’s all intellectual property. While there’s a lot of value in that intellectual property, it’s not value that somebody else really can monetize in your absence. I was kind of naive about that. I thought, “Oh, well, you know, we’re building this thing. There’s this need, both educators and students need help with academic writing and there are essay mills out there where people are plagiarizing and cheating, and we are actually providing a real viable, technical solution that’s pedagogically sound, that’s built by a couple of professors, all of that. But it means that you can’t necessarily go to banks and get that funded, unless you’re willing to say, “Oh, and you can take my house if this fails.” It’s really sort of getting comfortable with a fair degree of financial risk.

42:38 Emily: I’m thinking this is where venture capital comes in. Is that something you have pursued or are pursuing?

42:44 Lindy: Yeah. We’re right now in the middle of a financing raid. We held off on venture capital for a very, very long time. We had revenues and savings and bootstraps and friends and family and loans and any grants. As I say, I’m the queen of getting grants. Any kind of, um, funding we could get without external investors in the early days, that’s what we pursued. VCs can be fantastic, but there’s also a risk in the sense that if you get them in too early, they are driving a particular business model for your business, and for us, in the early days, I wasn’t sure exactly what our business model is. Academic writing — is that something that’s going to go viral? Do we want it to go viral? Or is it going to be like a meat and potatoes business where you sign up, you get a subscription, it serves your needs while you’re a student writer, and then you move on to the rest of your life, being able to think and write critically because of the skills that you’ve learned. Or do we need to lock you in like Facebook and keep you forever?

43:52 Lindy: I was very wary of inviting other people into the company early on, lest they derail what is…My passion is to create an ethical business that is viable and that provides a real solution and isn’t a gimmick, and isn’t just out there to steal user’s data and sell it to the highest bidder. But of course, many VCs, that’s what they’re looking for. In the early days, I felt our bargaining power would be quite low, because it’d be like, “here’s my idea” and they’d be like, “well, your idea is unproven.” Whereas now, as we’re going out to investors, like, “okay, we’re selling all over the world. We have schools, colleges, and universities. We have individual subscribers. We’ve won a bunch of awards.” We’re in a much more solid position to then say, “Do you VC want to be part of this journey?” As opposed to “do you want to derail and take over the journey yourself?”

44:58 Emily: So fascinating. I’m so glad you gave us that insight. I’m sure there are probably many people in the audience who are thinking in their futures that maybe, VC or startups could be part of that. I’m really excited that you shared that.

Investing in Yourself as a Way of Financial Growth

45:10 Emily: Is there anything else that you want to add about your money mindset that you’ve been developing all these years and your financial life as a founder that we haven’t covered already?

45:19 Lindy: The only thing that I would add is that I think I have been able to take sort of a fair degree of, and I mean, it’s calculated risk, but my calculated risks are always to invest in myself. At earlier times where it was like, I’ll put the time and energy into this grant or this application, now as a startup founder, it’s “I will put the time into developing this content or this product, or pitch decks or financial business models that I’m going to present to lending institutions.” All of that work, which now again, is sort of decoupled from payment in a very specific way. I’m back in the realm where I do a bunch of stuff, and I’m betting that it will pay off in the end. And so being able to do that has always been I’m betting on myself. I’m assuming that if I put any chunk of money I have in a financial institution savings vehicle, that I’ll make small percentages. Whereas if I invest in myself, what I’m gambling on is that I’ll be able to make multiples on that investment. That has developed over time, as I’ve started to think, well, I have the personality type, I’d rather be the one trying really hard, than just handing my money over to the bank and letting an account manager invest in various funds, and I have no insight or understanding on how those work. I’m not a trained financial analyst. I still don’t understand money markets with that degree of specificity. And if I wanted to invest in that, I’d need to then rely on somebody else. Whereas if I invest in myself, I rely on myself. If I take a day off, then that’s my fault if I screw up. Whereas if I work really hard and produce results, I’m the one who benefits from that. That’s the final that I would say, is that I certainly have had to develop the confidence in myself to then bet on myself.

47:35 Emily: Yeah, this is so fascinating. And it is a very different approach from my financial approach, so I’m so glad to have your perspective on the podcast as well, because again, I think this is going to resonate with a certain slice of the audience who wants to be or is the type of entrepreneur that you are. This is really going to resonate with them. And you know, what some other people might be listening and say, I don’t want the life that Lindy has. It’s not for me. I want that salary.

48:00 Lindy: Exactly. That’s the thing that’s so clear is that if you’re going to leave the Academy or leave a stable job, I think you do need to know. If a must have is financial stability and security, then certainly don’t become an entrepreneur. If say you have the backstop of either you’ve got family money or in my case, a spouse with a job or something like that, and you have the sort of weirdo seemingly risk-taker, roll the dice kind of personality, then I think entrepreneurship is really exciting because the relationship between whether you do a good job or not is absolutely connected. Not in a day to day “did I get paid today for my work,” but in the big macro picture. The market, the world at large will tell you whether you did a good job or not.

48:54 Emily: Yes, absolutely. Well, Lindy this has been such a fascinating conversation. One, can you tell people where they can find you, where they can find EssayJack and so forth?

49:04 Lindy: Yeah, so EssayJack is essayjack.com, and then on Twitter and Instagram, it’s @essayjack. For me, I’m @DoctorLindy on both Twitter and Instagram. On Instagram, you’ll just see pictures of my cat, but you’re more than welcome to find me there. And then both on LinkedIn as well.

Best Financial Advice for an Early Career PhD

49:26 Emily: Yeah. Great. And the question that I ask all my guests at the conclusion of our interviews is what is your best financial advice for another early PhD? It can be an emphasis of something that we’ve already touched on in the interview, or it can be something completely different.

49:39 Lindy: The best bit of advice is honestly to keep your debt load as low as possible, like consumer debt load. Ideally at zero, but as low as you possibly can because ultimately if you’re starting from a level position and then earning onwards, whether it’s with a stable job or entrepreneurship, you’re already in the positives going upwards. If you’re already in debt, it is just so hard to start digging your way out. So as much as you can minimize that, that would be my key advice. Learn how to get hand-me-down clothes from your older sister.

50:20 Emily: Yes. I totally totally agree, especially, gosh, for people who are in graduate school and have that lower income. If you have the option to not obligate that future income, please avoid it whenever possible. I totally agree. Well, Lindy, thank you so much for giving us this interview. It was a real pleasure to talk with you and I’m sure the audience found this absolutely fascinating as I did.

50:39 Lindy: It was really great to chat through all of this with you. You unearth things that I’m not aware that I think until I say it.

Listener Q&A: Investing on a Living Wage

Question

50:51 Emily: Now onto the listener question and answer segment today’s question was asked in advance of a live webinar I gave recently for a university client, so it is anonymous. Here is the question: “How much should I invest if I make a living wage?”

Answer

51:08 Emily: Back in season eight, episode seven, I answered a simpler version of this question, which was” what percent of income should be used for investment? In that answer, I gave my overall ideas about what percentage of your gross income should be used to invest for retirement. Now this question specifies that the person makes a living wage. So does my general answer from the previous question change at all, knowing that this person makes a living wage?

51:37 Emily: Living wage is sort of a general term, but I like to refer to the living wage database from MIT, livingwage.mit.edu. That living wage is calculated by looking at how much money a single person or a family spends on average in a variety of different necessary budgeting categories.

51:58 Emily: Let’s say you’re a single person and you’re earning the living wage for a single person in some given area of the country. What that means is that if you are an average spender across all of these different categories, you would not spend any of your wage on discretionary expenses or saving. All of it would go towards those necessary expenses.

52:21 Emily: The first way I can answer this question is if you’re only making a living wage, it’s okay if you’re not investing, I mean, of course I want you to be investing or saving or working on debt repayment or whatever your goal is, but given how much you’re being paid and how much the cost of living is in your area, that may not be feasible for you. I want you to give yourself some grace, if you are not able to invest right now, or you’re not able to invest as much as I talked about in that previous answer.

52:50 Emily: Now, let’s go a step deeper with this. I just mentioned that the living wage is based on averages. You do not have to spend an average amount of money in these various categories. The big, big one that goes into this is on housing expense, so again, if you’re a single person, the living wage calculator that I referenced assumes that you will live on your own. Just by making the one choice to live with a flatmate, instead of by yourself, you’ve already radically reduced your spending compared to what the living wage thinks you should be spending in probably your biggest expense area, overall. That one choice alone, even if you’re average in every other category might free up enough money for you to be able to spend on some discretionary expenses and start investing.

53:39 Emily: You don’t have to do this just with housing. In every one of these necessary expense categories that go into the living wage, you can strive to spend below that level. And if you did that across all these areas, you would free up quite a bit of cash flow to go towards other financial purposes. So that’s my answer. If you are making a living wage, you “should” be investing anywhere from 0% up to the amounts I talked about in that previous answer of 10% of your gross income, 15 or 20% of your gross income, depending on your age when you start investing.

54:13 Emily: But I want to leave you with one final thought, which is have a plan to make more than the living wage. Whether that is by finish up your graduate program and moving on to a postdoc or another type of job. Whether that’s increasing your income in some other way in the meantime, before you can make that career leap, earning more is the other way to circumvent this problem on investing when you only make a living wage.

54:38 Emily: Thank you so much to anonymous for submitting this question. If you would like to submit a question to be answered in a future episode, please go to pfforphds.com/podcast and follow the instructions you find there. I love answering questions, so please submit yours.

Outtro

54:55 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episodes show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast and instructions for entering the book giveaway contest, and submitting a question for the Q&A segment. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media, with an email list serve, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt, repayment and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe through that list. You’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. Music is Stages of Awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC podcast, editing and show notes creation by Lourdes Bobbio.

A Low-Cost Lifestyle Can Be Both Necessary and Enjoyable During Grad School

April 5, 2021 by Meryem Ok

In this episode, Emily interviews Dr. Trevor Hedberg, who completed his PhD in philosophy at the University of Tennessee at Knoxville in 2017. His academic year stipend was $15,000 throughout graduate school, yet he finished with about $35,000 in savings. Emily and Trevor discuss the money mindset and financial strategies that enabled Trevor to save even on this low stipend, including his willingness to apply for any possible extra funding and conduct frugal experiments.

Links Mentioned in This Episode

  • Dr. Trevor Hedberg’s Website
  • Dr. Trevor Hedberg’s YouTube Channel
  • PF for PhDs: Tax Workshop
  • Walden on Wheels (Book by Ken Ilgunas)
  • Emily’s E-mail (for Book Giveaway Contest)
  • PF for PhDs: Podcast Hub (Instructions for Book Giveaway Contest) 
  • PF for PhDs: Quarterly Estimated Tax
  • PF for PhDs: Subscribe to Mailing List
low cost grad student lifestyle

Teaser

00:00 Trevor: Don’t fall into that self-fulfilling prophecy. Don’t just assume that your destiny, as a humanities PhD, is to live paycheck to paycheck. It doesn’t have to be that way for everybody.

Introduction

00:15 Emily: Welcome to The Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts. This is season eight, episode 14, and today my guest is Dr. Trevor Hedberg, who completed his PhD in Philosophy at the University of Tennessee in Knoxville in 2017. His academic year stipend was $15,000 throughout graduate school. Yet, he finished with about $35,000 in savings. We discussed the money mindset and financial strategies that enabled Trevor to save, even on this low stipend, including his willingness to apply for any possible extra funding and conduct frugal experiments. Have you heard about the IRS pushing back the federal tax filing and payment deadline? By the time you listen to this, it would have happened a couple of weeks back. The new deadline for filing your federal tax return and paying any remaining tax due is now May 17th, 2021. I hope that by now, your state will have made up its mind about whether to extend its deadline as well.

01:21 Emily: So, check on that. Please note, however, that the federal deadline for making the quarter one 2021 estimated tax payment on your fellowship, if you’re required to, remains April 15th. And of course, you need to check with your state as well. In response to this extension, I added live Q&A call times to How to Complete Your Grad Student Tax Return (And Understand It, Too!). If you join the workshop now, you’ll be invited to any and all of the remaining Q&A calls, which will take place on April 10th, May 2nd, and May 15th. You can learn more about and join the workshop at pfforphds.com/taxworkshop. I hope to see you inside.

Book Giveaway Contest

02:08 Emily: Now, it’s time for the book giveaway contest. In April 2021, I’m giving away one copy of Walden on Wheels by Ken Ilgunes, which is the Personal Finance for PhDs Community book club selection for June 2021. Everyone who enters the contest during April will have a chance to win a copy of this book. Walden on Wheels is a memoir about student loan debt, if you can believe it, and the steps the author took to get out and stay out of it. Although I haven’t read it yet, the book has been on my radar since its publication because of the extremes the author went to to avoid taking out student loan debt while he was a graduate student at Duke, which is my Alma mater. I’m really looking forward to this one. If you would like to enter the giveaway contest, please rate and review this podcast on Apple podcasts, take a screenshot of your review, and email it to me at [email protected]. I’ll choose a winner at the end of April from all the entries. You can read full instructions at pfforphds.com/podcast. Without further ado, here’s my interview with Dr. Trevor Hedberg.

Will You Please Introduce Yourself Further?

03:23 Emily: I have joining me on the podcast today, Dr. Trevor Hedberg. I’m really delighted to have him on. He is now out of his PhD, but he’s going to be telling us about how he managed his finances during graduate school, which as a slight departure from many of the other interviews we’ve had, Trevor was in a humanities field, philosophy, and he had a lower stipend. So if you are in the audience and have been tired of listening to interviews with people who have had much higher siphons than you did during graduate school, this is the one for you. So yeah, Trevor, thank you so much for joining me for this episode.

03:55 Trevor: Sure, Emily. Thanks for having me.

03:57 Emily: And would you please tell the audience a little bit more about yourself?

04:00 Trevor: Sure. So, my present position, I’m a postdoc at the Ohio State University situated in Columbus. I’ve got a joint appointment with the Center for Ethics and Human Values in the College of Pharmacy. My two main responsibilities are coordinating Center for Ethics and Human Values events. Right now we’re doing webinars because of the whole COVID thing. And I’m teaching bioethics courses to students in the College of Pharmacy. I also do some of my own research in areas of applied ethics.

Length of Time and Stipend in Grad School

04:26 Emily: Yeah, that sounds fantastic. Great kind of postdoc work to have, I think. Okay, so let’s go back to the grad school years. Tell us what years were you in grad school for?

04:36 Trevor: I was in grad school for a while. I started at the University of Tennessee in fall 2010, and I picked up a master’s degree on my way to the PhD and I got the PhD in spring of 2017.

04:48 Emily: Okay. Actually, that doesn’t sound that long to me.

04:52 Trevor: It is about average for humanities PhDs. So it’s like, I don’t feel bad, but when I think back I’m like, man, that was a seven-year chunk of my life, you know, that’s a while.

05:03 Emily: Yeah, it is. My husband also took seven years to finish his PhD and he’s in a bio kind of field. So, it can take a while. Okay. So, what was your stipend during that time? Or if it ranged, maybe just give us the range.

05:15 Trevor: The base stipend for the time that I was in the program, so if you had a standard teaching assistantship package, didn’t do any summer teaching, just fall assignments, spring assignment, was $15,000.

05:26 Emily: And were you at that the whole time, or did you ever get above that?

05:29 Trevor: My first year I had an introductory like one-year fellowship, which reduced my teaching responsibilities to half, well you’re normally at half-time, it reduced it to quarter-time. And I also got like a lot of extra money, which is kind of weird, right? You get paid a bunch of extra money for doing less work, but that’s, you know, why it’s a fellowship. It’s supposed to give you time to work on research. So for that semester, I made around 20,000, $21,000 something like that.

05:58 Emily: Yeah. This is a note for any prospective rising graduate students in the audience that you can get an offer letter and your first year it can look nice and rosy. Oftentimes fellowships are given to help people, you know, transition into grad school or whatever, but you need to be asking about years two plus, because I hope that you were aware that that was a, you know, a short-term thing, but some people may not be aware just looking at that first year.

06:21 Trevor: Yeah. So actually, my situation’s the opposite. I got admitted without having that fellowship and I applied for it under the supervision of a faculty member after they’d already admitted me to the program and then I got it. So it was a bonus on top of my initial offer. So I did not get, you know, deceived or something.

Finances at the Beginning and End of Grad School

06:40 Emily: Good. Yeah, I’m glad to hear that. Okay. So base stipend $15K, a little bit extra in one year, but that was basically what was going on. And so, over that seven-year period, overall, how did your finances end up going? Like where were you financially when you started? Where were you financially when you finished?

06:57 Trevor: I went to Knoxville with a little bit, somewhere between five and $6,000, just kind of a nest egg that had been given to me by parents and other relatives and so on during undergrad and I just had not spent that much of it. And I was able to, without taking out any additional loans or anything, I had some loans from undergrad. I didn’t add to them at all during grad school, but I was able to leave graduate school and go and move to Tampa, Florida with between 35 and $40,000 in my bank account. I was also able to purchase a new car while I was, I didn’t really want to, but my Mitsubishi Lancer was totaled out in a freak hailstorm. And it happens, I guess, in April of 2011. And so I wound up leasing a car for a while and then buying it at the end of that, I ended up getting a Hyundai Elantra. But that was, I got some money from the insurance company for like the payout from the Lancer. But it was, you know, that was still a sizable expense that I had to cover in the long-term.

08:03 Emily: Yeah. I mean, the numbers that you just threw out, I mean, having 35 or $40,000 in savings, that’s two years of what you were earning during that seven-year period, plus buying the car on top of that. That’s quite surprising to me and obviously probably a motivating reason why you came on the podcast because somehow you were able to do that. And we want to hear about how on that lower stipend, right? So kind of like let’s dig into that. Why did you end grad school with so much savings? Was it an intentional thing that you set out to do? Or was it just a happenstance thing based on, you know, your personality or something?

Ending Grad School with Savings

08:39 Trevor: One of the few pieces of financial advice that I got going into graduate school in philosophy is whatever you do, don’t take out any loans en route to your degree because the employment prospects in the humanities, and philosophy included, are just so uncertain. There’s, you know, every job has hundreds of qualified applicants and you may apply for a hundred jobs, but the odds are still very uncertain as to whether you’ll actually wind up with employment at the end of it. So the idea is don’t take out a ton of money for, you know, for a career that might not pan out. And a lot of what happened just kind of resulted from being very steadfast in doing what I could to minimize my expenses and to try to save where I could and also apply for as much extra money as I could get.

09:28 Trevor: I mentioned the first year of fellowship, I also got a couple of summer dissertation fellowships, which were just basically extra money because people thought your dissertation project was cool. Did some summer teaching, which paid very well Tennessee relative to the amount of extra work. And when I traveled to conferences or did events like that, I always put in my, you know, travel reimbursement requests and things like that. And just over a seven-year period of time, these kinds of small, you know, savings or these extra little bundles of cash that you happen upon, it just adds up over time.

10:03 Emily: So at kind of the root of this is you being really realistic about job prospects. And I assume also the possibility of having a lapse of income, right? Like, while you’re job searching. And so having that kind of, let’s say one to two years of, you know, living expenses in the bank when you finished is a hedge to help you pursue the career that you want. Is that a fair characterization?

10:28 Trevor: Yeah. The other thing I was cognizant of is that once I was out of grad school, I’d have to start repaying student loans. And so I wanted to be in a position where, you know, if I’m in fact unemployed, I can float while making loan payments successfully for a while, you know, long enough to if it requires going a non-academic career route, so be it, whatever. But you don’t want to be stuck in that situation where you’re living paycheck to paycheck, then you’re not getting any more paychecks. Now, student loans are coming due and you’re in a really tough spot.

10:59 Emily: Yeah. So really it’s about like financial flexibility in a sense, and being able to meet your obligations, even if you haven’t landed the ideal job yet.

11:10 Trevor: Yeah, I think that’s fair to say.

Summer Funding Strategies

11:10 Emily: Okay. So you mentioned a few different ways that you increased your income during graduate school, such as by pursuing summer funding and summer jobs. I’m wondering, did you have funding in some way or another every summer? Or were there some summers where you were unfunded?

11:26 Trevor: So the first two summers I was there I did summer teaching, and summer classes paid very well. They were about $4,000 which I was offered to adjunct some classes at community colleges. Like I would be getting paid less than half of that. So I turned down those instances, because that’s too much. I think that’s too much time and energy for not enough pay. But four grand for, you know, five, six weeks to teach a summer course was a pretty good deal. One summer I had a research assistantship that I think paid between $2,500 and $3,000 where I was basically helping a professor edit a book that he was putting together. And then there were two summers where I had a dissertation fellowship, which was around the same amount of money as teaching a summer class, but you’re supposed to just be working on your dissertation during that time. So there were two summers in there where I didn’t have any extra income, but that’s still pretty good. Five, you know, five of those seven summers, I managed to add something to what I was getting.

12:31 Emily: I was just thinking, based on your kind of sort of defensive posture towards financial planning and saving that, were you thinking like every year I need to be prepared financially for an unfunded summer? If money comes in, if I get work, that’s a bonus. But were you confident that you, and, you know, there were two summers where that was the case. So were you using your cash to fund, you know, your living expenses through those periods?

12:54 Trevor: I didn’t have any trouble. The amount of money that it seemed to cost to live in Knoxville, Tennessee, where I was living and with what I was doing, was roughly $12,000 a year. [Note: It was actually closer to $14.4K.] So I didn’t really seem to have, there was no danger of if I didn’t have money in the summer that like it was going to be, you know, I was going to take a loss in the year.

Frugal Living Tips for Grad Students

13:18 Emily: Gotcha. $12,000 per year, not bad. Do you have any you know, sort of frugal living tips for the listeners? And I’d really love to hit, for sure the big three expenses for grad students, which are housing, transportation, and food.

13:34 Trevor: Yeah. So the housing in Knoxville is really good. I was able to live in a pretty comfortable, not quite 600 square-foot, I think it was around 600 square-foot, one bedroom, one bathroom apartment for right at $500 a month. That included some, but not all utilities. Transportation-wise, you know, I got that new car. I didn’t have any car payments for almost the first year of grad school. And then I had around payments for around $300 a month once I did have a car again. So that right there is 800 bucks. I said it was around $1,200. I think groceries came out to a little bit, like $200 to $250 a month, give or take. And there were utility expenses, right? So I got a cell phone. You got to pay for gas.

14:24 Trevor: I had a very unusual like cable internet situation because I eventually just got so tired of Comcast because they just rate-hiked ludicrously. And after they did that enough times, I just said, no, I’m done. And just, and I had a period where I didn’t have any internet or television at my apartment, which was an interesting six months. When you’re basically doing all your, now, now during the remote learning period we’re in right now, that would not be doable, but this was a different time. You know, a simpler time where you could have all your internet access on campus and it was okay. So just on average, this whole situation came out to around $1,200. I will say, I wasn’t living like an extremely miserly existence. I was still, you know, it’s not like my apartment was destitute or that I had no material possessions. I still enjoyed the same amount of video games the average person in his twenties nowadays probably enjoyed. I would say that there were certain things that I didn’t do as much as some grad students might. I certainly wasn’t like going to bars frequently. I was eating out on special occasions, but not very often otherwise. So, there were some sacrifices, but I do want to stress I don’t think that it was unbearable.

15:41 Emily: Yeah. You know, in what you’re saying, I’m reflecting on my own time in graduate school as well and thinking about how we did eventually, my husband and I, did eventually get into a rhythm of just kind of simple living, you know, relatively low costs. We were okay with the fixed expenses we had. Yeah, the going out expenses weren’t too much. By about halfway through grad school. We had found friends, we love to hang out with who also wanted to socialize in a low-cost manner that didn’t require us, you know, going out all the time. We would just hang out at each other’s homes and stuff. And so we just kind of settled into what I felt was a very satisfactory, but also pretty low cost, sort of lifestyle. It sounds like what you were doing was similar. Were there any other, you might say discretionary expenses that you did engage in? You haven’t mentioned travel so far.

16:29 Trevor: Oh, so yeah, I did go back. My hometown is in Topeka, Kansas, so I did go back about twice a year to visit. Usually, my parents were willing to cover the flight back. As far as travel to conferences and things like that. It was very rare for me to pay for hotel rooms and other things because I would always apply for travel reimbursement. So I did go to a fair amount of conferences. I don’t know what the average would be over grad school, but I had, you know, 13, 14 conferences on the CV by the time I was on the job market, like at the end. But I didn’t generally have trouble getting reimbursed, provided you go through the actual administrative channels and you show that you actually did present at that conference, you know, show the receipts and all that stuff.

17:12 Trevor: So, that wasn’t really a huge obstacle for me. I suppose if someone, if you were an international student for example, and you’ve got to go abroad to go back home to visit, that would be a more significant expense. There were also some, you know, not all TA assistantships include like health insurance, which was something that I had through my assistantship. So, that’s an extra expense I didn’t mention that I didn’t have to pay. And when you’re making so little money, your taxes are very low. They’re not nothing, but usually like the income tax that was withheld would usually be much greater than what I actually owed. So if anything, I’d be getting a check from the IRS at some point.

17:52 Emily: And there’s no state tax in Tennessee, right?

17:55 Trevor: That’s true as well. Yeah. No state income tax.

Money Mindset Developed in Grad School

17:58 Emily: Yeah. So, you know, we just talked about sort of having a satisfactory but low cost existence. What was the money mindset that you developed, by the end of graduate school, regarding where happiness comes from?

18:11 Trevor: Well, I saw some graduate students, like some of my peers, who lived even more miserly than I did. And I sort of realized there were certain limits. Like there were apartments I could have gone to in Knoxville that had much lower rent than even the $500 I was paying, for example. But there were certain thresholds below which I wasn’t willing to go to save money. So there was an extent to which I did, you know, it wasn’t just save money at all costs. There was a certain amount of prioritizing my own personal satisfactions. But I also think that there were certain things that just, I was able to live without too much trouble. I mean, cable television was a great example. I grew up with cable television and when I didn’t have it, I just didn’t care. It didn’t really make that much of a difference.

19:01 Trevor: If anything, I was just glad that I wasn’t seeing commercials all the time. Now, the internet was different. That six months without internet access was kind of rough. That was an experiment that was probably worth doing. But, never again, right? Like always going to have internet whatever it goes for. But there were lots of things like that that I just kind of tested and experimented with to see what I could do without and what I needed. If you test enough things, pretty quickly, you hone in on what’s important to you and what’s worth spending money on and what’s not. And I think that process is really important when your money is very tight.

Frugal Experimentation

19:37 Emily: I love that point. Absolutely. I use the same word, experimentation, when I talk about, well, I use the term frugal experimentation. So, sometimes if people are, you know, in my audience, looking for ways to decrease their expenses, I’ll say, you know, conduct a 30 or 60-day frugal experiment where you try out a new tip you found. You’re not sure at the outset if it’s going to be right for you. One, you know, you have to sort of evaluate, like you were just saying, like, what impact does it have on your quality of life? If it’s negative, or maybe it could be positive. And how does that compare to the actual savings that you realize? And you can’t really know until you actually try something out. So I’m really pleased that, you know, you also came to this idea of experimentation and it sounds like you did it in multiple areas. Do you want to give us some other examples, aside from the cable and internet one, of some other experiments you did?

20:27 Trevor: So, some of it had to do with technology upgrades in general. So, I was one of the last people, for example, to buy like a smartphone. Because I actually really liked the model of phones where you had the little slide-out keyboard. So they were really good with texting, but not so great for like the web browsing and other stuff that we do on them now. That was one where I was perfectly content to not technologically upgrade for as long as possible. So, you know, once that phone was paid off, I just had that phone for a really long time. And that bill was lower as a result. I wasn’t able to keep my PC around for all of grad school. When I was working on my dissertation, the motherboard finally died, but I mean, I’d had that PC I was using for seven or eight years. And it had been through heavy, heavy usage. So that was another thing that like, I didn’t need to replace. I think that nowadays, especially, we’re so prone to just want to upgrade, upgrade, upgrade when a lot of times the upgrades are marginal and just cost us more money and don’t actually make our lives much better. Those are the obvious other examples I can think of.

21:31 Emily: I have one that I remember from grad school really calling out as a frugal experiment on the blog that I was keeping at the time, which was no longer using our clothes dryer or rather using only for like towels, like that kind of thing. And we were just hanging, drying you know, shirts and all the rest of the stuff that would dry pretty easily in that manner. And I wasn’t that diligent to like, actually look at the difference that made on our electricity bill, and I’m sure it made some kind of small difference. But yeah, that was just something that we like tried out, weren’t super wedded to whether we would keep it around or not, and ended up doing it for a couple of years. Because it was really no more difficult, and again, you know, we weren’t running the dryer, so that probably helps some.

22:08 Emily: So I remember that as being one of our frugal experiments I’m also really big on, this is just like my personality type, I’m big on like rules. Like I love boundaries, like things being black and white and not gray. So for instance, one rule, you mentioned this earlier, but one rule we made eventually in graduate school was that we would only eat out for social occasions and we would not eat out for convenience. Because we noticed that was a pattern going on for us, that we would be, Oh, I’m staying late on campus. I’m just going to grab dinner from whatever fast food joint. And so just that wasn’t really bringing a lot of satisfaction, just convenience, into our lives. So we decided to cut that out and I made a rule for myself. Okay. No more eating out for convenience, only with other people. I wonder, I don’t know if your personality is the same way, but did you end up having sort of a set of rules, financial-related rules, for yourself by the end of graduate school?

How Low (ºF) Can You Go?

22:56 Trevor: Real quick, before I answer that question, there is one other one that comes to mind because you just mentioned like the clothes-drying thing. One of the other things I experimented with was what temperature I could stand to live at. So just adjusting the AC or the heat. And Knoxville has really good weather for that because there’s about a six-month period of the year where you really don’t even need the AC or the heat on at all. The temperature outside is mild enough that it just kind of self regulates. But that was one thing. So, if you need 70 degree summers, so to speak, inside, that’s going to cost you a lot of money in Knoxville, Tennessee. If you’re willing to satisfice for, you know, 76 or 78, that could be $50 on your utility bill at the end of the month. That’s not an exaggeration. Found that out in the first, like couple of months in the summer that I was there. So.

23:50 Emily: That’s a great example. Thank you.

23:53 Trevor: Now, your question about other rules. I’m not necessarily, I like the idea behind setting, like these kinds of rules and rigid boundaries, but I often find that you always wind up being put in a weird situation where you’re tempted to make an exception.

24:08 Emily: Travel is my exception to the no eating out for convenience rule. Yeah. It’s going to happen when you travel sometimes.

Forming Good Financial Habits

24:14 Trevor: Yeah. So I like to think of it maybe in terms of, instead of rules, like habits. Like things that you kind of just try to motivate yourself to do regularly, but not in a sort of rigid ironclad sort of way. So there were quite a few habits that I developed. A few of them I’ve already mentioned, like I always applied for money that I thought I had a chance to get. I always tried to, one of the big habits I developed was not auto paying very many bills and always taking the time to like manually manage what I was doing. Just so that I was more cognizant of the money that was being spent so that, you know, a $70 bill doesn’t just go by and you know, just the system pays it and then, you know, it’s handled.

25:04 Trevor: Nowadays, I do auto pay a fair amount of stuff because I just have more bills and more expenses. But also it’s because I don’t need to be aware of every tiny little expense here and there. But as a grad student, I felt like I did need to be aware of that stuff. I needed to be aware of exactly where all the items on my credit card statement were coming from. So, that was one big habit. Some of the other ones I think would overlap with things you’ve mentioned, like generally not going out to eat unless it was a department event or a Friday night social gathering with a bunch of the other grad students. Reserving that kind of stuff for special occasions. I also have just never been a big drinker. So for me, not regularly going to the bar was not much of a sacrifice, not something that I really had to think too much about to follow.

Commercial

25:59 Emily: Emily here, for a brief interlude. The federal annual tax filing deadline was extended to May 17th, 2021, but the federal estimated tax due date remains April 15th, 2021. This is the perfect time of year to evaluate the income tax due on your fellowship or training grant stipend. Filling out the estimated tax worksheet and form 1040ES will tell you how much you can expect your tax liability to be this year and whether you are required to pay estimated tax. Whether you’re required to pay throughout the year or not, I suggest that you start saving for your ultimate tax bill from each paycheck in a dedicated savings account. If you need some help with the estimated tax worksheet, or want to ask me a question, please join my workshop, quarterly estimated tax for fellowship recipients. It explains every line of the worksheet and answers common questions that postbaccs, grad students, and postdocs have about estimate tax, such as what to do when you switch on or off a fellowship in the middle of a calendar year. Go to P F F O R P H D s.com/Q E Tax to learn more about and join the workshop. Now, back to our interview.

Financial Values Post-PhD

27:17 Emily: I want to go back and like emphasize again this experimentation that you were doing. And I don’t want anybody to take what I’m about to say the wrong way. Graduate school is a very financially challenging period of life, especially for, like you, living on such a low stipend. So I don’t want to lionize that too much. But one of the benefits, if you want to look at it that way, is that you are, many people are sort of forced to do what you did, which is experiment and really figure out, you know, what is going to add to your happiness and your satisfaction with your life at the end of the day and what is not. Because you really have to be kind of brutal about managing your money and cutting out those things that are not adding that much to your life. And I went through that process as well during graduate school. And I think it’s been really beneficial overall. I mean, now post-graduate school, we have a much nicer income and that’s lovely, but I still go back to the lessons and the identification of my own values that I came to during that period of time. And have you carried some things forward into your post-PhD life like that?

28:25 Trevor: Yeah, definitely. Still don’t have cable television, for example. But thinking about it more generally. I would say that the same habits of like checking where my expenses are coming from on like my statements and things like that that, that’s pretty much just stayed the same. Some things are different. I’m a little more willing to like upgrade, you know, things now that I was in graduate school. For example, like once we started this remote learning thing, I bought a printer for my home office, which is something I would have never even considered in grad school. Like always use the department printer, right? Like it’s free and you’re on campus so often. But, so there are things like that or buying new computer software, or stuff like that, I wouldn’t have considered buying, you know, in grad school. You just use whatever freeware alternative, you know, you can get. So some things are a little different.

29:20 Trevor: I am willing to spend a little bit more. And the place I’m living at now is a little bit bigger, like a little bit larger. A little bit more comfortable, higher rent. I have an add-on garage, which I wouldn’t have paid for in grad school, but now, like I like the extra security. And guess what? If it hails, my car won’t get totaled. So that’s nice. But I would say overall, you know, aside from those kinds of incremental changes over time as my income’s gone up and I’m no longer required to micromanage my finances so much, a lot of the habits are still kind of the same. It’s not that big a difference.

Avoiding Lifestyle Inflation

30:00 Emily: Yeah. So, a common term used in the financial space is lifestyle inflation, right? So like when your income goes up and your lifestyle just, somehow the money goes away and you’re suddenly living a higher lifestyle every time you get a raise. I think of a positive process of lifestyle increase that can happen when you go from grad school to a postdoc, postdoc to a real job. That is to say, that like you were just mentioning, adding in intentionally item by item some things into your lifestyle that you think really add to it that you can now afford on the higher salary, but not just blindly increasing everything across the board, right? So that’s what I kind of meant about like keeping the insights that you gained into your own values from that lower-earning period of life in graduate school.

30:47 Trevor: Yeah, definitely. The mere acquisition of more material possessions does not automatically make your life better or make it more fulfilling. It just gives you more stuff. And if you’re like me and you’ve had to move a couple of times since your PhD, having more stuff is not always a good thing for other reasons. I would say, you know, as you said, you want to be more deliberative about the things you buy and about what you add into your life. You want to make sure that it’s actually going to provide some kind of meaningful benefit.

Beware of Financial Pitfalls

31:17 Emily: Yeah, absolutely. Do you have any bits of advice for current graduate students, some things that you’ve maybe observed like, you know, pitfalls that other graduate students have fallen into that maybe you either used to fall into or, you know, learned how to avoid?

31:33 Trevor: Yeah. There are a couple. So, I think there would be basically three that would come to mind. One is, especially in philosophy and English and some of the other humanity fields I’m familiar with, a lot of graduate students seem to assume that they are going to have to live paycheck to paycheck. That they will never be in a financially stable situation at all while they are a grad student. And of course, if that’s your mentality going in, it kind of creates a self-fulfilling prophecy. You’re very unlikely to get out of that position if you think it’s inevitable and don’t take any steps to avoid it.

32:08 Trevor: Another one is, I was shocked to learn there were lots of grad students in my program, I don’t think our program is anomalous, i’s just a common thing, that just didn’t apply for stuff. That were eligible to get travel reimbursement, or to apply for certain kinds of fellowships, whatever, and just wouldn’t apply for it. And they’d say something like, sometimes it was just forgetfulness maybe, or not knowing the like Byzantine administrative requirements, or something like that. There were also some of them, you know, that thought they weren’t good enough to get a fellowship or something like that. But the thing is like, there’s so much arbitrariness in how these things are evaluated. You have no idea whether you’re good enough or not. Let the committee tell you you’re not good enough, you know. Always apply for whatever it is.

32:53 Trevor: And the last one we’ve already kind of alluded to a couple of times in some of the habits we talked about. But I think there’s a really serious tendency to discount small but frequent expenses. So, you know, one $10 on-campus lunch, not a big deal. But if you’re doing that four days a week for a 15-week semester, suddenly like that’s over a thousand dollars a year that you’re spending, you know, buying lunch on campus, as opposed to what you could be doing, which is just taking a few minutes in the morning, packing a sandwich and whatever else and handling things that way. So, I would say, you know, we’re not great at that kind of arithmetic, like human beings just aren’t wired that way to sort of aggregate those small expenses over really long periods of time. But you’ve got to fight that habit and recognize that that stuff does make a difference.

33:45 Emily: I love all those examples so much. I mean, they really all are about as you were just saying, like mindset and habits. And I think that, you know, they’re especially impactful for someone at the kind of stipend level that you were at, right? Like, I mean, you were able to do quite a bit of savings, but it was still a low stipend overall during that period. And so, it absolutely makes such a difference as you were just saying to go into that situation with believing that there’s something financially possible for you above living paycheck to paycheck. I mean, of course, we all know grad school is very difficult financially, for some people more so than others. But like you said, if you never even think that it’s a possibility to get out of that, you definitely never will. I guess I’ve heard the phrase, like whether you believe you can or believe you can’t, you’re right.

34:35 Emily: This can be applied generally. I don’t think that’s quite true at the graduate student level because many graduate students may believe that they can, but they still can’t just because of circumstances. But the opposite is definitely the case. If you don’t believe that you can get out of the paycheck to paycheck cycle, you absolutely won’t no matter what your circumstances are. So I’m so glad that you brought up those points and I hope that, you know, current and entering graduate students will take note of all three of them.

Navigating Savings and Loan Repayment Post-PhD

34:59 Emily: So, now that you’re on the other side of the PhD and you’re in your postdoc, how does the way that you handled your finances during your PhD affect your life? You know, did you end up having to use the savings during a job search? Or how did it work out?

35:14 Trevor: After it, yeah. So when I was in my last year of graduate school, I wound up getting a postdoc at the University of South Florida, which is where I went and spent two years in Tampa. And now I’m at another postdoc at Ohio State. So I didn’t wind up having to dip into savings to navigate any employment gap, which was very fortunate. I was very happy to have that money on hand though, because I was able to really pay off my loans very quickly as a result. And I was also able to pay off my car. So I think that all my loans and the car were both paid off by the end of like December of 2018 or no, was it 2019? I don’t remember, before I finished up at Florida. The December before I finished up at Florida. And that was obviously very satisfying. Now, like the money that I’m saving is mainly going into like an investment portfolio which is something I wasn’t thinking about at all during graduate school. But, you know, as time goes on, your financial goals and what you’re trying to do have to change with your circumstances,

36:14 Emily: I’m wondering why you chose to pay off the debt during that first postdoc, both the car and your student loans, when you could have worked on those earlier, instead of having such a large cash cushion? What was the calculus there?

36:29 Trevor: One was medical emergency. Wanting to have money on hand in case something like that happened. That never happened to me personally, but there were peers I had to whom that happened. And I wanted to be prepared for that possible contingency. I had no reason to think I was high risk. But some of them didn’t, either. And so, that was part of it. I actually did pay off one of the loans while I was in grad school. I could have theoretically paid off all of them. I don’t know how much of a dent it would have taken in that like 35 grand or whatever I had when I was leaving, but it would have been substantial. The other thing I learned is that I didn’t know how much the moving expenses would be, but because of the delay in getting my first paycheck in Tampa and because of other moving-related expenses, you need around five grand as a minimum to do the kind of move that I did and not be in kind of a tough situation.

37:30 Trevor: You also got to put down security deposits, pay, you know, at least one, I had to pay two months rent without any paychecks in Florida, because I was delayed getting into the system. You know, stuff like that. So, the short answer is, I don’t know if it was necessarily the right call. Like some of those loans though, the interest wasn’t running until I graduated. So for those at least, I’m sure it was fine. But I’m honestly not sure looking back if that was like the financially optimific way to do it, but that was the rationale.

Any Financial Regrets?

38:00 Emily: Yeah. I’m not trying to criticize your decision. Just wondering, like, as someone who held onto the cash for so long, why were you able to let go of it at that point? But having loans actually start accruing interest is a great reason to kick into the repayment mode instead of just save the cash mode. Do you have any financial regrets from graduate school?

38:23 Trevor: I think that any financial regrets I would have would be tied to the choice to get a humanities PhD in the first place, right? Because there’s an opportunity cost with going to grad school, right? Like, I’ve got plenty of friends in non-academic positions who during the time that I was in graduate school, they got a certain degree of career capital, such that when I was getting my PhD, they were like getting promoted or something like that. But insofar as I, you know, don’t regret getting a PhD or having one, I don’t regret the financial circumstances I’m in.

Best Financial Advice for Another Early-Career PhD

38:58 Emily: Yeah. Thank you for pointing that out. We sometimes overlook the most important financial decision, which is whether to go to graduate school or not. So yeah. Thank you for that. Well, Trevor, I’ve enjoyed this conversation so much, and I think that, you know, it’s been really valuable for the listener as well. As we’re wrapping up, the question that I ask all my guests is what is your best financial advice for another early-career PhD? And that can be something that we’ve touched on already in the interview, or it could be something completely else.

39:25 Trevor: I’ll just reiterate one short little low-hanging fruit point, which is don’t take out loans to get a degree in the humanities. But that one I’ve already mentioned. The less obvious one I think might generalize across all PhDs is you have to take initiative with your finances because you’re not going to get any feedback from anyone that you’re interacting with about them. So, think about like if I was in a seminar and I wrote a crappy term paper. I would be told that I wrote a crappy term paper and I would be made aware of that and be given suggestions for improvement. But if I made a bad financial decision, no one would know. There’d be no feedback, no graduate advisor is going to be like looming over you to make that kind of decision, which means that you have to self-police pretty much entirely.

40:13 Trevor: No one’s going to give you, you know, any kind of pushback even if you’re making like poor choices or suboptimal choices, repeatedly. And so the only way to kind of keep to avoid that is you have to take the initiative yourself and you have to make some effort, you know. Whether that means making a spreadsheet of all your expenses and tallying them, or just repeatedly like logging into your accounts and checking where your expenses are going or what deposits are being made. Whatever it is, whatever you have to do, like do it because no one else is going to push you in that direction.

40:55 Emily: Such an interesting point. As you were making that, well, one, I thought of the phrase, no one cares about your money as much as you do, which is kind of a truism, but yeah. And the other one is, you know, generally for Americans, like we’re pretty much on our own like financially in a lot of respects with the, you know, pensions being almost non-existent. Social security, yes, it exists. How reliable is it? We don’t know. It’s not that well-funded anyway. It’s not like you get that much money. So in general, Americans are pretty well on their own financially, but the situation is intensified during graduate school because your employer is not giving you the retirement benefits. They’re not giving you certain kinds of insurance. Like unemployment insurance, for example, if you’re a student, I’m pretty confident is not being paid in for you. So other examples like that of just like sort of social safety net kind of stuff. Also, you’re not paying into social security or Medicare. Social safety net stuff is like, we’re kind of exempted from it as students, which is a little bit odd. Especially when you’re getting into your late twenties and thirties, maybe even forties, and you’re still, you know, in PhD training. It’s such an interesting point. So yeah, while Americans in general have to kind of captain their own ship in this, it’s like even more so during graduate school because yeah, your employer is not doing anything for you.

42:13 Trevor: Yeah. That’s an interesting set of observations. Your situation as a graduate student is just very weird and very financially perilous for so many reasons.

42:22 Emily: Yeah. Gosh, well, Trevor, I’m so glad to have gotten your insight on this interview, and I’m really glad that you, you know, had the experience you did in graduate school and all the things that we’ve talked about today and it was positive overall and you got that nice, healthy, you know, nest egg by the end. And yeah, I wish you all the best and thank you so much for volunteering for this.

42:41 Trevor: Sure, thanks Emily. It was good talking with you. And I hope my story can help some other people in the humanities who are struggling. I mean, there were some advantages that went my way. You know, I don’t care how good you are with your money. You’re not making a 15 grand stipend work in New York or LA. So, Knoxville was really good for that. But as I said, you know, don’t fall into that self-fulfilling prophecy. Don’t just assume that your destiny, as a humanities PhD is to live paycheck to paycheck. It doesn’t have to be that way for everybody.

43:11 Emily: I think that’s a perfect note to end on. Thank you so much.

43:15 Trevor: Thanks, Emily.

Listener Q&A: 1098-T

43:15 Emily: Now, on to the listener question and answer segment. Today’s question was asked in advance of a live webinar I gave recently for a university client. So, it is anonymous. Here is the question. Quote: is the form 1098-T accurate? I am confused by it. End quote. I loved the simplicity of this question. I think my conclusion on this is that the form 1098-T is accurate, but it probably doesn’t mean what you think it means. It’s not really trustworthy. The sums in chiefly box five and box one of the form 1098-T draw from the transactions in your student account. So one of the reasons that you shouldn’t take form 1098-T at face value is that not all of your awarded income and not all of your qualified education expenses might have been processed by your university’s student account.

44:23 Emily: You could have awarded income that completely bypassed your student account and just landed in your bank account thanks to some kind of external funding agency. You also could have incurred some expenses that your university did not process. So in that sense, the form 1098-T includes some awarded income and some qualified education expenses, but not necessarily all of them. You still have to critically evaluate your own actual cashflow situation to see the totality of the picture. The other way that the 1098-T maybe doesn’t mean what you think it means is that box one of the 1098-T reflects payments received for qualified tuition and related expenses. That might sound like the same term as qualified education expenses, which is used elsewhere by the IRS, but they’re not quite the same. The sum reported on your 1098-T in box one might be all of the qualified education expenses you can use to make your awarded income tax-free, or it might not. More likely not.

45:34 Emily: There are several education expenses that are considered qualified education expenses for the purpose of making scholarship and fellowship income tax-free that would not be included that are explicitly not to be included in box one of the 1098-T. So, if you incurred those kinds of transactions, even if they show up in your student account, they’re not going to be in the sum reflected in box one of the 1098-T. Therefore, once again, you can’t take box one of the 1098-T at face value. You have to go into your student account and really look at all the transactions that occurred there and figure out whether or not they’re qualified education expenses for the benefit that you are taking. Bottom line, the 1098-T has some issues. And the IRS knows about these issues.

46:27 Emily: And the IRS knows that you may be using qualified education expenses to make some of your scholarship and fellowship income, or what I call awarded income, tax-free that’s not reflected on the 1098-T, and that’s okay. The IRS is aware that this can happen. So the form 1098-T is not given a whole lot of weight when we’re talking about the particular benefit of making scholarship and fellowship income tax-free. It’s given much more weight for the Lifetime Learning Credit, the Tuition Fees Deduction, and the American Opportunity Tax Credit. But those are less often used by funded graduate students. If you want to learn more about the expenses that could be qualified education expenses that you can use to reduce your taxable income and reduce your tax liability that do not show up on form 1098-T in box one, you can join my tax workshop, How to Complete Your Grad Student Tax Return (And Understand It, Too!). You can find more information about that at pfforphds.com/taxworkshop. Thank you to Anonymous for this beautifully phrased question. If you would like to submit a question to be answered in a future episode, please go to pfforphds.com/podcast and follow the instructions you find there. I love answering questions, so please submit yours.

Outtro

47:50 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for The Personal Finance for PhDs podcast. On that page are links to all the episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast, and instructions for entering the book giveaway contest and submitting a question for the Q&A segment. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

How This Prof Developed Her Career, Family, and Finances (with Dr. Sarah Birken of AcaDames)

March 22, 2021 by Meryem Ok

In this episode, Emily interviews Dr. Sarah Birken, a faculty member in the Wake Forest School of Medicine and co-host of the podcast AcaDames. Sarah tells the story of her financial life from her PhD training to her research faculty position at UNC to her new tenured position at Wake Forest, which paralleled the births of her children. She has recently experienced a financial awakening after years of being unaware of her cash flow. Sarah explains the motivation behind some of the financial decisions she’s made, such as working part-time and accepting her position at Wake Forest. Graduate students and PhDs who aspire to become faculty members and/or parents will find this episode fascinating!

Links Mentioned in This Episode

  • I Will Teach You to Be Rich (Book by Ramit Sethi)
  • [email protected] (E-mail for Book Giveaway)
  • PF for PhDs: Podcast Hub (Book Giveaway Instructions)
  • @birkensarah (Sarah’s Twitter)
  • AcaDames Website
  • AcaDames: Sarah Job Search and Transitions Episodes
    • S101: Sarah
    • S304: Is the Growth of Contingent Faculty a Scam?
    • S315: Bonus: Pre-Covid Job Search & Pandemic Partings
    • S410: Bonus: Sarah Job Transition
  • How This Graduate Student Financially Manages Daycare Costs, Debt Repayment, Saving, and Side Hustling (Budget Breakdown with Aubrey Jones)
  • PF for PhDs: Tax Center
  • Personal Capital
  • PF for PhDs: Tax Workshop
  • PF for PhDs: Subscribe to Mailing List
career family finances PhD

Teaser

00:00 Sarah: I think I probably would have taken out a loan and, you know, if I could have understood that I would be making an amount of money in the future and really taken that into account and would be able to pay off a reasonable loan, I probably would’ve done that.

Introduction

00:22 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts. This is season eight, episode 12, and today my guest is Dr. Sarah Birken, a faculty member in the Wake Forest School of Medicine, and co-host of the podcast AcaDames. Sarah tells the story of her financial life, from her PhD training, to a research faculty position at UNC, to her new tenured position at Wake Forest, which paralleled the births of her children. She has recently experienced a financial awakening after years of being unaware of her cashflow. Sarah explains the motivation behind some of the financial decisions she’s made such as working part-time at UNC and accepting her position at Wake Forest. Graduate students and PhDs who aspire to become faculty members and or parents will find this episode fascinating. On the theme of post-PhD financial life, I thought I would give you another update on my family’s house-hunting process since it’s almost literally all I can think about at the moment. The housing market is wild right now, y’all.

01:29 Emily: My husband and I are trying to buy a single-family home in the San Diego area. We are first-time home buyers, and we are looking for a home we can live in for the next 20 years, at least, which is putting a lot of pressure on the process. We look at every home to see if it can meet not only our immediate needs, such as sufficient indoor and outdoor space for us to weather the rest of the pandemic, but also our anticipated needs when our children are in high school. The cycle that we’ve fallen into just about every week for the last six weeks is to monitor the listings that go up throughout the week and message our real estate agent about any houses we want to see that weekend. On Saturday, we drive from Orange County to San Diego County, leaving our kids with their grandparents.

02:14 Emily: We see between one and four houses and debate the merits of each house for the rest of the weekend. Finally, we submit an offer or not by early in the following week. Then the cycle starts over again, even before we hear back about the offer we submitted. As of the time of this recording, we have submitted three offers on homes, none of which have been accepted. All of the offers were between seven and 12% over the asking price. With the latter two offers, we waived the appraisal contingency, which means that we still intended to buy the home, even if it didn’t appraise for the sale price, and would bring cash to the closing table to make up the difference between the appraisal and sale price. I never knew that was a thing before getting into this process. Our offer was the first runner-up on the latter two homes, which I suppose means we’re offering in the right ballpark.

03:07 Emily: On the second house, we lost out to a buyer who was quote, “willing to beat any other offer,” end quote. And on the third house, we lost out to an all-cash buyer who waived all contingencies. So, on top of California real estate prices always being mindbogglingly high, inventory is very low at the moment. And buyer demand is bidding prices up well over asking. It seems like a very bad time to buy. Yet, here we are trying to, because we are personally and financially more than ready for this step. I’ve been trying to think of advice for future first-time home buyers in my audience, and I might end up doing a whole episode on this process once it’s complete. For now, my advice is to do absolutely the opposite of everything we’re doing.

Emily’s Home-Buying Advice

03:50 Emily: One, don’t buy in a sellers market. Two, don’t buy in a pandemic. Three, don’t buy from a distance. That is, unless it’s the right time to buy, like it is for us. My one actionable piece of advice right now for future buyers is to regularly go to open houses, starting well in advance of when you actually want to buy. In California during the pandemic open houses aren’t allowed. So we missed out on seeing lots of houses casually. We only see a very small number of houses seriously. The problem is that we didn’t really know everything that we were looking for when we started the process and we’ve become more specific in our vision as we’ve seen more homes. We’ve probably doubled our list of must-have and nice-to-have features since including minimum square footages for various areas of the home and lot. It’s the kind of stuff we never paid attention to when simply visiting other people’s homes. We’ve also learned about sort of California-specific things like unpermitted additions and Mello-Roos. So, there is a big learning curve for first-time home buyers. And that open house phase, I think would have been really helpful. Wish us luck to get a house soon so we are put out of our misery.

Book Giveaway Contest

05:06 Emily: Now, it’s time for the book giveaway contest. In March, 2021, I’m giving away one copy of I Will Teach You to Be Rich by Ramit Sethi, which is the Personal Finance for PhDs Community book club selection for May, 2021. Everyone who enters the contest during March will have a chance to win a copy of this book. I’m personally really looking forward to reading I Will Teach You to Be Rich for the first time. I have recommended this book and given it as a gift before, but never read it. I do know, however, from reading Ramit’s website and listening to interviews with him that in some ways he has a very different approach to personal finance than I do, such as putting a big emphasis on earning more. So, I think I’ll really benefit from reading a full book from his viewpoint. If you would like to enter the giveaway contest, please rate and review this podcast on Apple podcasts, take a screenshot of your review, and email it to me at [email protected]. I’ll choose a winner at the end of March from all the entries. You can find full instructions at pfforphds.com/podcast. Without further ado, here’s my interview with Dr. Sarah Birken of AcaDames.

Will You Please Introduce Yourself Further?

06:17 Emily: I have a really special guest joining me on the podcast today. It’s Dr. Sarah Birken, you know her from AcaDames where she’s a co-host. She also recently became a faculty member at the Wake Forest School of Medicine. So congrats to Sarah for that. And we are going to be talking today about finances through career transition points. And it’s a real pleasure for me to get to speak with someone, interview someone on the podcast who has been through a few transitions, you know, post-graduate school. So I think she’s going to have some really great lessons for us who are a little younger on in our career to to take from it. So, Sarah, thank you so much for joining me on the podcast. And will you please introduce yourself a little bit further for the listeners?

07:00 Sarah: Yeah, sure. Thank you so much for having me. It’s a real pleasure. And I’ve been getting some friendly joking from friends and family that I’m on a personal finance, finance podcast. But yeah, so Sarah Birken, I am an Associate Professor in the Department of Implementation Science at the Wake Forest School of Medicine Division of Public Health Sciences. And as you mentioned, AcaDames co-host. I have been in the field of implementation science since the end of my PhD where I found out that that was in fact what I was doing. My post-doctoral fellowship was in cancer prevention and control. And as we’ll talk a little bit more about, I started out in a half-time research faculty position after my post-doc then moved to full-time and just in July 2020 transitioned to a tenure-track position at Wake Forest.

Sarah’s Finances and Money Mindset in Grad School

08:00 Emily: Yeah, it’s fantastic. And I know you covered that very well on your podcast. So, we’ll link to, in the show notes, a few of those episodes. So let’s start, you know, way back during graduate school and tell us what your finances were like at that time and whether you were aware of them working on them at all? Maybe not?

08:18 Sarah: Yeah. I mean, I have the benefit of having been partnered with somebody who was always very on top of finances. And I started graduate school after having made very, very little money as an administrator at a community health center. And when I applied for graduate school, I had like a vague sense that I wanted to make more money than I was making at the community health center. It would’ve been hard to make too much less than that, but I mostly, my objectives were not to be in a ton of debt and to be able to pay for graduate school, period. And when I applied for graduate schools and I did all over the country and got a full ride to UNC, that was so much of a blessing. I didn’t even, I mean, I knew that I was really lucky and I knew how wonderful it was that I wasn’t going to have to pay for graduate school, but I didn’t fully understand it at the time because I was pretty irresponsible with money.

09:31 Emily: Did anything regarding like your money mindset start to change during graduate school? And were you making more money, by the way, than you were from your prior job?

09:40 Sarah: Yeah. I was making not an appreciable amount more once I was in graduate school, right? Because I had, you know, my tuition and health insurance paid for, and I had a stipend through graduate school, but it was peanuts. It was really very little money. And so I just got accustomed to spending very little. I didn’t take out any loans because I didn’t have to, but I didn’t spend very much because I didn’t have very much to spend. So my, you know, modus operandi was just spend as little as possible, which I think in retrospect was not a great idea because instead of thinking of how much do I have to spend, it was just head in the sand. Don’t spend too much.

10:32 Emily: Yeah. So it sounds like you were, yeah, sort of in denial about, or like not wanting to deal with money very much.

10:39 Sarah: Oh yeah. Correct.

10:40 Emily: Thankfully the good part of that is you were erring on the side of not overspending, but underspending, but had you been in a little bit of a different headspace, you would have loosened the purse strings a little bit.

10:50 Sarah: Yep, yep. Exactly.

How Having a Child in Grad School Shifted Finances

10:52 Emily: What else happened in graduate school that affected your finances?

10:55 Sarah: Yeah, so I transitioned from the master’s program into the PhD program. So I completed the master’s and then started the PhD. And the stipend situation was really the same. I again had the tuition remission and the health insurance covered and the stipend, and I was kind of, you know, rocking and rolling doing the graduate school thing. And then I became pregnant with my first child in my second year of graduate school. And kind of, that was a big wake up call. Like I can, I can certainly continue to try to spend as little as possible, but I’m going to have a whole new creature to take care of. And some immediate things that became clear were that I needed to not live next to the drug dealer who I was living next door to anymore. I didn’t feel like I was in imminent danger, but certainly it was not a setting, it was a ton of graduate students and just not the sort of place where you want to raise a child if at all possible. So, I decided to find a single-family home and moved a little bit farther away from the university and found a job that was 30 hours a week, in addition to graduate school, that would pay a little bit more. So I went from making probably around $20,000 to making about $40,000 overnight. Which at the time felt very luxurious.

12:31 Emily: Wow, I don’t know that I’ve interviewed anyone else who’s made that kind of decision. So you took a 30-hour per week job. Does that mean you gave up the job you had, like if it was an assistantship, or how did that work combined with the, you know, the funding of graduate school?

12:46 Sarah: Yeah, that’s an important nuance. So, in the first two years of my PhD program, we were guaranteed some sort of position that would include a stipend. So that was a research assistantship or a teaching assistantship. And then a lot of students find a fellowship that will, you know, a pre-doctoral fellowship that will cover the cost of their schooling, their dissertation writing. And I had applied for maybe one or two, maybe it was even just one fellowship, didn’t get it, and was really worried. Like, what am I going to do next? And so I emailed faculty who were doing research in my area and they didn’t have any funding. And so I emailed the chair of the department and said, here’s my situation. Do you have any suggestions? And she said, actually there is a coordinator position for the reaccreditation of the school of public health. It is 30 hours a week. It is a real 30 hours a week. So it’s not like an assistantship where you might work, you know, 10 hours one week, you know, 25, the next. It was going to be a full 30-hour week position, but it made double what I did before. So that’s how I ended up in that position.

14:00 Emily: Okay. And was your funding still, that is for like the tuition and fees and so forth, was that still provided by your program?

14:08 Sarah: Yes, it was.

Housing Expenses and Saving on Childcare 

14:09 Emily: Okay. Yeah. That’s, that’s really interesting. Of course I know sometimes people who get into the ABD stage have different work arrangements, but I’m really glad to hear how that worked out in particular for you. Okay, so you’re making more money but you have the child, so what’s the next stage in the finances?

14:26 Sarah: Yeah, so we had bought this house and it was very inexpensive and I think it felt comfortable because where I live in North Carolina, really, the market is such that it was as affordable to buy a home as it was to rent a home. And that way, you know, I was building equity and I, you know, I had been for teaching spin classes on the side just to kind of make some extra money and fill in gaps for fees, for example, were not covered by the tuition remission. Which, you know, sometimes they were like $700, nothing to sneeze at. So my partner did start making a little bit more money, but in the meantime there was a gap where he wasn’t making very much money. So we, again, were just really trying to keep things as inexpensive as possible. So one of the decisions I made, it was primarily for kind of personal reasons, but also financial. I had minimal childcare, which was pretty stressful because I was doing, you know, my dissertation, I was working 30 hours a week, and I had an infant. But it was important to me to kind of keep things as limited as possible in terms of expenses and childcare is extremely expensive around here. Probably no more expensive than elsewhere, but it was like a second mortgage to have full-time childcare.

15:56 Emily: Yeah. I was going to ask you about that next because yeah, childcare is, I’ve definitely spoken with other graduate students who have, because the flexible schedule, like tried to make it work and not having at least full-time childcare, maybe just part-time or something. How do you feel about that decision now?

16:14 Sarah: You know, I have reflected on it because I do know of graduate students who have children who have gotten childcare. And in retrospect, I do wish I had given myself the grace of having a little bit more help than I did, because it was just a lot. I remember being extremely sleep deprived. I don’t regret anything because I really savored that time with my daughter, but it was stressful in a way that I don’t think I would want my child to do for themselves if they were in that situation. So I think I probably would have taken out a loan and, you know, if I could have understood that I would be making an amount of money in the future and really taken that into account and would be able to pay off a reasonable loan, I probably would have done that.

17:09 Emily: Yeah. I’ll link in the show notes to another episode where I interviewed a graduate student who is currently taking out student loans for daycare and also side hustling and doing all the things on top of it. Do you feel like you still finished in good form or maybe you took a little bit longer or how do you think that worked out?

17:26 Sarah: You know, I took three years to finish my dissertation. So, it was two years for the master’s program, two years for the predoctoral coursework, and then three years of writing my dissertation. And honestly, I think, you know, a lot of people finish their dissertation in two years in my program. For me, I think it was less about having a child and more about like data issues as, you know, these things go. But yeah, I felt like I was in a pretty good position when I graduated.

Decision to Do a Postdoc After Grad School

17:58 Emily: Okay. And so you did a postdoc after graduate school, is that right?

18:01 Sarah: Yes, I did a postdoc, but I did go on the job market in a very limited way, mostly because I wanted my dissertation chair to read my dissertation. And I knew that if I were on the job market, he would read my dissertation, and it worked. And so I very seriously considered a faculty position that I was offered. And the salary that was offered, it was a nine-month tenure-track faculty position. And I was considering also two different postdocs that I had been offered in North Carolina. The faculty position was outside of North Carolina. And you know, postdocs didn’t make, there was one postdoc that made not terribly far off from the faculty position. And then another post-doc that was just very little money. It was a T32 and it had no research support. And the postdoc that I ended up taking, it was an R25, which at the time you could do a post-doc, they funded them that way. And it was a much more generous salary than the T32. It had research funding. I hadn’t even been counseled about thinking about a startup package for a faculty position. And I don’t know if that was on the table. I’m not sure I remember, I don’t remember talking about it. And so again, in retrospect, it was really smart of me to take the generous post-doc that had research funding that had a little bit more generous salary than the other one. And I did that for three years. And for each of the two years subsequent to the first, I got a $5,000 raise.

19:43 Emily: Yeah, not bad. It’s very curious though, because you don’t hear about people turning down tenure-track positions too often. So what was it that tipped things in favor of doing the postdoc?

19:53 Sarah: Primarily, my partner was not super excited about moving, and I felt like I wanted to make sure that he was comfortable with our next life stage, our next, you know, career decision. And also I did get advice from somebody at the institution where I had gotten the tenure-track offer that I should do a post-doc. And part of that, I think for her, the reason she recommended that was because I would have time off of the tenure-track clock, the tenure clock to publish, to get some preliminary data for a career development award. And so taking those things together, it was a pretty clear decision.

20:40 Emily: So, your idea then at that point was to go on the job market again, after the conclusion of the postdoc and be a stronger position for winning funding and getting a position at that time.

20:51 Sarah: Exactly.

Sarah’s Finances and Money Mindset During the Postdoc

20:52 Emily: Gotcha. Okay. So let’s talk about the finances during the postdoc. How much were you making approximately at that time and you know, what was going on?

21:00 Sarah: So, I started at, I want to say $50,000, which is pretty good for a postdoc back in 2011. And then the next year I made 55 and then the final year I made 60, which was really pretty sweet.

21:16 Emily: Yeah. That raise schedule is, yeah, that’s pretty good.

21:19 Sarah: Yes. I finally felt like I was able to breathe a little bit. I mean, I wasn’t exactly like going on fancy vacations and buying a new car which, you know, I hadn’t done. I think, you know, my husband and I went on our very extravagant honeymoon. We went to New Zealand six months after we got married. But other than that, we really weren’t doing anything extravagant. I was driving the same car I had gotten right after college which was used anyway. And so, I think that I just was able to feel like I didn’t have to scrimp and save at every turn making $60,000 a year, which is pretty good.

22:02 Emily: Yeah. And regarding, you know, your child as well, how were you spending money in that respect?

22:09 Sarah: And at this point, I had two children. So in October of my first year of the postdoc, three years after my first child was born, I had a second child. And so, at this point, my daughter was in preschool about half-time. And then my son, I stayed home with exclusively for quite a while, maybe six months, again, kind of fitting my work around the edges, having a little bit of in-home daycare. Somebody would come into my home and watch him while my daughter was at preschool and I would get some work done. And I was doing a lot of work at night and on the weekends.

22:51 Emily: Yeah. So, you had your full-time job, but it was fit into the margins around the children’s schedule.

22:57 Sarah: Exactly. It’s the double-edged sword of that flexible job situation. And I don’t do bench science, so I really was on my own schedule for the most part.

Retrospective Reflections on the Affordability of Childcare

23:07 Emily: Yeah. And I’ll ask you the same question again. How do you feel about that arrangement now, looking back on it?

23:13 Sarah: I mean, I think I’d probably give you the same answer, that first of all, I probably could have afforded more childcare. Particularly once I was making, you know, above $50,000, I probably could have done it. It would have been a little bit tight, but I could have afforded it. Again, it was kind of my own personal comfort level with how much I wanted to be away from my children, but it also was, I just was so used to living as restrictively as possible. It didn’t even occur to me to get more help because I just operated as stringently as possible, but I didn’t have to. And if I had taken a little bit more time to really understand my finances, my cashflow, I’m very lucky. I didn’t have any debt from college. My parents paid for college. I didn’t have any debt from graduate school, aside from my house. I didn’t have any huge responsibilities, liabilities, so I probably could have afforded it. And if I had really examined my finances, I would have seen that.

24:22 Emily: Yeah. I’m asking these questions because I was in a similar period. So I have two children. They’re four and two right now. And in their very young years I was self-employed. And so I had this wonderful flexibility. And so I also didn’t employ as much childcare as I could have, and we sort of slowly dipped our toe into more and more childcare as they got a little bit older. And then the pandemic took the childcare away, and I really, really miss it. So that’s kind of my perspective on this. It’s like, yeah, I could have done a little bit more with that and been a little bit more focused on my work. And maybe for my business, you know, maybe gotten things ramped up a little bit faster than they had been. But, you know, like you said, also, like not regretting having the time with the children because that’s wonderful, but yeah, I’m just curious now for, I know, obviously there’s, you know, younger listeners maybe still in graduate school, maybe they haven’t had any children yet. Just trying to think through these decisions. I think it’s useful as you do on your podcast to talk through the issues that people face as they’re juggling career plus, you know, caregiving for family members and so forth.

25:24 Sarah: Yeah. And I think the bottom line is, you know, it is an intersection of personal values, finances, aspirations for what you want to do with your money, and just understanding all of those fully is going to position you best to make the right decision.

Commercial

25:47 Emily: Emily here, for a brief interlude. Taxes are weirdly, unexpectedly difficult for funded grad students and fellowship recipients at any level of PhD training. Your university might send you strange tax forms or no tax forms at all. They might not withhold your income tax from your paychecks, even though you owe it. It’s a mess. I’ve created a ton of free resources to assist you with understanding and preparing your 2020 tax return, which are available at pfforphds.com/tax. I hope you’ll check them out to ease much of the stress of tax season. If you want to go deeper with the material or have a question for me, please join one of my tax workshops, which you can find links to from P F F O R P H D S.com/T A X. It would be my pleasure to you save time and potentially money this tax season. So don’t hesitate to reach out. Now, back to our interview.

Retirement Savings, Directed Gift-Giving, and Coaching

26:52 Emily: So, let’s also talk a little bit about what financial practices did you have? Because you were saying you weren’t super aware of your cashflow during that time. You didn’t really examine it. So, were you budgeting? Were you saving? What was going on?

27:05 Sarah: Yeah, so by this time my partner was a personal financial planner, which was extremely convenient. He had always been really interested in personal finance. And so, you know, early on I had been, even when I worked at the community health center, I maxed out my retirement savings or contributions and didn’t have that option as a graduate student, no benefits there, but we certainly were saving as much as we could. Just a little bit here and there. But I was not a participant in that decision by my own, kind of, I guess it was more passivity than it was a conscious decision that I didn’t want to be involved in that. And so, I think for me, I just had so little perspective on any of our cashflow. But we had set up 529 plans for each of our children before their birth. And that was something that we started to ask anybody who wanted to give presents to just contribute to 529 plans. So, these were the kinds of things that we were starting to do that would make things a little bit easier and asking for things like, instead of stuff, like memberships to museums and things like that.

28:18 Emily: Yeah, I like that directed gift-giving, the nudges, that’s a good tip for any future parents. Okay. So, any more that you wanted to say about that postdoc position?

28:28 Sarah: I did work with a professional coach when I was trying to make a decision about kind of what I wanted to do towards the end of the postdoc in terms of my next steps. And one thing she encouraged me to think about was that there are all types of currency, and salary is just one of those. You know, benefits are just another component, but flexibility, anything really that you value as a human, you know, personal happiness, contentment in your relationship, proximity to family, be that far or near, depending on what you want. These are all important forms of currency. And that was kind of my orientation as I sought another position following my postdoc.

29:15 Emily: Yeah, that sounds like a really great exercise to go through when you’re at that point of deciding where you’re going to go next in your career. Is that something, an exercise you would recommend to others?

29:25 Sarah: Oh my gosh. Yes. Literally writing it down. I think just making all of those things as explicit as possible. Again, in the vein of really having clear picture of all of these things. Now, still at this point, I didn’t have a clear picture of my finances, but at least knew that that was a consideration that I had to account for.

Sarah’s Half-Time Research Track Faculty Position

29:50 Emily: Yeah. So, you went on the job market again, and where did you end up?

29:55Sarah: Well, so I didn’t really go on the job market. One of the major values that I pulled out of my experience with the coach was that I did want to stay home part-time with my children. I really liked being home part-time and I liked kind of being able to be with them as much as possible while continuing to do my research. And so, I basically worked with a mentor who was in a powerful position to design a half-time research track faculty position. Again, this was a huge compromise in terms of, you know, just financial benefits because it was half a salary, it was no benefits. So I forewent retirement savings aside from any personal contributions, which I did make, and, you know, was on my partner’s benefits which was stressful because he worked for a very small firm. Health insurance was very limited and expensive, but that was a conscious decision on my part to forego the benefits, you know, real and kind of personal, associated with the kind that I would get in a full-time position.

31:10 Emily: Yeah, I think, so I also work part-time now because I can design my own schedule. I find it to be great. And I think a lot of people wish that they could negotiate for that kind of, like still keep their career going, maybe a little slower speed than before, but still on some kind of track while having a lot more time for their own stuff, for their own families or whatever it is that they’re doing. How long were you in that part-time role?

Transition to Full-Time Contingent Faculty Position

31:37 Sarah: I was in the part-time role, I want to say, for maybe a year and a half or two years. And then I sought a position elsewhere because I was ready to work full-time, and it didn’t seem like that was going to be an option at UNC in my department. And so I did get an offer for a full-time position at another institution. And as you know, the chips fell, I was offered a full-time position at UNC in the same department where I was. It was still research track. So I was completely contingent, which means that I ate what I killed. If I didn’t get a grant to cover my salary, I wasn’t going to get a salary ever or a full salary. So that was stressful. But I was taking into account, frankly, a couple of things. One was the kind of intellectual freedom that I would have being in this, even though it was not a tenure-track faculty position, I had the intellectual freedom to do investigator-initiated research. Another consideration was, I was just scared, basically, to do something new or to think about what else my career might look like. I was kind of already on a path, and it was frightening to me to think about doing something different.

33:08 Emily: I see. So, were you at UNC that entire time, or was your postdoc at a different institution?

33:13 Sarah: No, my postdoc was at UNC and its Cancer Center.

Sarah’s Finances During Full-Time Faculty Position

33:17 Emily: I see. I think you’ve talked about on your podcast about the relative of merits of staying at an institution, right? The same institution where you did your graduate work. So yeah, I’d love it if you could give me an episode and I’ll link to it in the show notes for like further discussion about that. For our purposes, now you have this full-time role. You know, you’re going after your own grants, but you get to set your own salary. What do you want to say about the finances during that stage?

33:45 Sarah: I have to say that it was a kind of delay cognitive shift, because I doubled my salary overnight and I was still functioning as though I made half of my salary. And, you know, I really, because I had never confronted or taken the time or the initiative to closely examine my finances, I couldn’t adjust my thinking around finances or how I spent my money. Again, my M.O. was just make as much as possible and spend as little as possible. And I think that, on the one hand, that continued to work out relatively well, but on the other hand, it meant that I was really deferring to my partner for all things, all financial decisions. And I do not recommend that. I cannot overemphasize, and I remember sitting down with a financial planner who helped my partner and me before we got married.

34:50 Sarah: And she said, you need to focus on this. You need to pay attention. And I, honestly, where my brain was was to say like, I’ll figure it out when I need to. Like, right now, I’m overwhelmed with everything I have on my plate. And I don’t want to think about it. There was nothing anybody could have said to convince me to pay more attention to it until I was ready, which is kind of my personality anyway. But at this stage, it’s much harder to wrap my head around things because things are much more complicated. And I would like to think that if I had started earlier and focused when things were simpler, I would be able to keep up a little bit better now. Now that I really am taking the bull by the horns, I am able to get my head around it. I’m happy to say I was right. You know, I need to figure it out now and I am figuring it out, but it’s much more complicated than it would have been, say, when I was in graduate school.

35:50 Emily: I think that’s a really, really great message for the people listening who are starting their adulthood, right? And I actually have, not about finances generally, but I kind of say the same thing about taxes, actually. Like when you start understanding how your tax return works and how income tax operates when you have a simple income, a small income, you know, no assets, no house, no all this complexity that can come like later on, as your financial life gets more complicated, your taxes also get more complicated. And so I can definitely see how, yeah, if you were deferring this work to your partner for all those years now, suddenly you open your eyes and you have this wonderful paying job, but you’ve got the two kids and you have all the different, you know, aspects of your finances that are going on. I can definitely see how it could be certainly overwhelming, but I’m really glad to hear that you’re finally, you know, deciding to take charge of it. So definitely the advice is pay attention when it’s small and, you know, your knowledge will grow as your finances become more complicated. Yeah.

36:52 Sarah: Absolutely.

36:54 Emily: Is there anything else that you want to say about your finances during that period when you were still at UNC, but at the full-time role?

Negotiating Salary as Research Track Faculty

37:01 Sarah: The only kind of negotiating advantage one has as a research track faculty member is that the institution is not on the hook at all for the money that they’re paying you. Because it’s not them paying you. It is completely grant funding. And as a non-physician research scientist, there is no amount that, you know, if I were a physician and I made over the NIH cap, then sure, the institution would have been on the hook for the remainder, but that wasn’t the case for me. So, that was something where I didn’t feel like it was asking too much. So, I did kind of push that a little bit more than I would have otherwise when I was negotiating that retention package.

37:53 Emily: Because as you said earlier, you’re completely funding your own salary. Plus, the research expenses, the lab, whatever it is, well, you said you weren’t lab-based research, but whatever it is that you’re funding costwise.

38:01 Sarah: Right, exactly.

38:02 Emily: Yeah. So, what I’m taking that to mean is that you can set your own salary, but there’s some input from the institution and you don’t want to shoot too high because then you’re running through the grant money more quickly. Is that right?

38:13 Sarah: I mean, that is a consideration, although you kind of put in for a percent effort, but that will eat up the research budget a little bit. That wasn’t something I thought of too much, just because I think the kind of incremental chunk of the overall budget that my salary would take up, you know, a $5,000 increase in my salary, isn’t going to blow my budget.

Sarah’s New Tenure-Track Position at Wake Forest

38:40 Emily: Gotcha. Let’s talk about your new position now. What prompted you to go for it and be willing to leave UNC?

38:49 Sarah: Oh my gosh, it was such a process, but I had a career development award. That is how I funded 75% of my salary for the time, the three years that I was in a full-time position. The other 25% was made up of teaching and other kind of co-investigator positions. And as I near the end of my career development award, you know, the writing was on the wall. I was going to have to, you go from 75% of your salary being covered to, you know, whatever you can pull in with grants. And after your career development award is over, as a, you know, an academic researcher. You’re never going to have a grant that’s going to cover that percent of your salary again. It’s just, you know, you might, if it’s a really generous project, you might get 25%, but usually it’s more on the order of like 10, 15, 20% of your effort.

39:47 Sarah: And that means that you’re on a lot of projects. And funding being what it is, it did not seem like something that was viable for me in a research track position, being able to pull in enough money to support the lifestyle that I had come, you know, again, I was still not spending a ton of money. But, you know, we moved from a smaller house to a bigger house. We had bought a new car by that time. These are things that do add up and, frankly, I wasn’t excited about making half a salary anymore. And, you know, one of the things that happened when I was on faculty was I just wore, in graduate school and for the postdoc, I really just more whatever clothes I had and I just didn’t really care. And something happened and I was like, I love clothes. And I still only buy used clothes to the extent possible. I really am like a big consignment person, but still, these are kind of the orientations that shifted a little bit. So.

40:58 Emily: I want to actually interject there because I think it’s, again, I’m so pleased to speak with someone who’s a little bit further on in their career, because I think this is a great perspective to have that the lifestyle sacrifices that you are willing to do in your twenties might not be ones that you’re willing to do later on. Now, of course, within personal finance, there’s this FIRE movement and there’s lean FIRE, which is, you know, keeping your lifestyle capped at this really low level. And you expect to live on that in perpetuity, maybe for a subset of the population that is acceptable. But I think most Americans on average kind of want to spend more as they, you know, advance through their lives. They grow accustomed to certain comforts and little luxuries that they want to keep around. So, I think that’s a perfectly reasonable perspective. It’s something I’ve observed in myself as well of, yeah, growing to like a little bit more spending once it’s available and not wanting to backtrack from that.

41:53 Sarah: Yeah, exactly. Yeah. And so, you know, going through a tenure-track position was, in some respects, kind of just a psychological shift. I knew that I could probably find a position that would have some startup, which would cover a part of my salary and kind of the percent coverage that I would have would decrease over time. This is kind of the way things go in my field. But that psychological comfort of knowing that I didn’t have to pull in a hundred percent of my salary based on grants was enough to pull me away. And it was time for me to find a position that felt more secure. So, really it was just psychological. I am in a soft money position now, but I like to call it, you know, semi-firm because it is, you know, my startup package was such that I started out with 90% of my salary funded and then it will decrease over five years to 65% of my salary I need to pull in from outside. And my thinking was, if, you know, I’m five years into a tenure-track faculty position and I can’t pull in 65% of my salary, then I probably shouldn’t be doing the kind of research that I’m doing. There’s a little bit of wiggle room because there are lean years, but I feel like I should be able to do that. So, it felt very fair.

43:27 Emily: Interesting. Yeah, this is, it’s kind of a lesson in like betting on yourself, I guess, that you’ve gone through. That is to say, you’re giving yourself a little bit more time for that transition by getting your salary covered again, but you’ve just sought out the structure within academia that makes you feel comfortable at any given time. I really love this lesson about like negotiating for what you want. Like when you did the half-time position, then, well, you phrased it as if it fell into your lap, but somehow you managed to get that to be a full-time position. So, presumably there was some kind of negotiation going on there, or at least going after a position. Yeah, I really like how you’ve been kind of flexible and gone with what you want and what you feel comfortable with, through these you know, through this arc of your career. Is there anything else that you want to say about negotiating that startup package?

Negotiating a Startup Package

44:13 Sarah: Yeah, I mean, I think it’s important to acknowledge a couple of things. So, one is kind of a small thing, but it was really important. When I was a postdoc, I attended a seminar given by an expert in negotiating. And one of the things I remember from that was, you know, well, two things I remember from that, one was start with a win. And the other thing was, you know, you can be honest about what you’re hoping for in terms of the outcome. And so when I was faced with the opportunity to negotiate, because I had been offered a position, I took those things to heart. So, I knew that I wanted the position. And so I didn’t, you know, make any effort to suggest otherwise. I said, I really want this to work out. I’m looking forward to finding a way that we can make that happen so that we’re both happy. And I think that was true and it was nice and it made for a really comfortable negotiation.

45:15 Emily: Yeah. You’re sort of establishing from the beginning, like we’re going to be working together. So let’s make this a pleasant process and both get something that we want here.

45:24 Sarah: Exactly. And, you know, I think I had very different expectations about what the salary was going to be, not very different, but sufficiently different, that that was one of the things that I wanted to negotiate. And we came to a place that we were both happy with. And the startup package made up for kind of any, you know, difference between what I kind of thought the salary was going to be versus what it was. And I certainly came out of the negotiation feeling really good about where things landed. And I think my chair did too.

45:58 Emily: Yeah. I think that’s the best kind of outcome is that you, it’s actually something that I like to say about discussing finances generally is that you, you learn a lot about another person by sort of exposing your values through discussing how you handle your money and what your aspirations are and so forth. And this the same kind of thing could happen through negotiation. My husband actually was in, it wasn’t a negotiation, but it was a performance review recently. And he was asked by his supervisor, well, what motivates you? Is it more salary? Is it more something else? Like what’s going to really, you know, get you to do great work for us? I thought that was a great question, you know?

46:34 Sarah: Great question.

What Motivated You to Face Up to Your Finances?

46:34 Emily: Yeah. Is there anything else that you want to add about, you know, finances through this arc? Do you want to talk about what motivated you to finally face up to your finances and do that whole process?

46:48 Sarah: You know, I turned 40 this year, last year. And I think with taking on a new position, really, it was, I mean, I should emphasize what a big deal it was for me to leave UNC. I like control. I like being able to anticipate what things are going to be tomorrow. And for me to take the leap to leave an institution that I had been at for five years as a faculty member for three years as a postdoc and for seven years as a graduate student was huge. Huge. Especially since I had had several opportunities prior to that to leave and I hadn’t. So, I think, you know, a combination of turning 40 and having succeeded in shoehorning myself out of my comfort zone and, you know, emphasis on the succeeded. Because I really did succeed.

47:47 Sarah: I got exactly what I wanted. That empowered me to be like, Oh, I can do this. Like I’ve got skills, I can handle this. So, and I, you know, I now work with, and there’s a website called Personal Capital that I use and I’m working with a financial planner through them and just getting a hold of the basics. I think I’ve just come to recognize that I have skills, and I’m smart. And I just need to approach this in a really pretty straightforward way of like, I make money, I spend money. I should be able to know what those things are and have a full picture. And I owe it to myself to have that full picture. And hopefully all of the kind of, you know, considerations I have when I look back at my trajectory, I can think that moving forward, I’m going to have a much clearer picture and I will be able to make decisions that are fully informed.

Best Financial Advice for Another Early-Career PhD

48:52 Emily: I’m so glad that you’ve come to this point. And isn’t it fortuitous that I asked you to come on the podcast right at the same time as you’re going through this personal journey as well? You have a new lease on your financial life now. It’s wonderful to hear. So, Sarah, as we wrap up, the question that I ask all my guests is what is your best financial advice for another early-career PhD? And that could be something that you want to emphasize that we’ve already touched on, or it could be something completely new?

49:17 Sarah: Well, I mean, I guess I’ll just double down on the idea of, I think if I could go back and tell myself it would just be, for me, I like things as simple as possible. I would just break out a spreadsheet and put in my income and start tracking my spending. Like that’s pretty easy. It really is. And it’s really easy now with all the apps. And I think that just doing that is a first step. And then you start to get curious, like, okay, well, what do I do with the gap between what I make and what I spend? Okay, I got to do something about that. Or what do I do if I have a little extra? What can I do with that? And it kind of can be a natural progression.

50:02 Emily: I think that’s exactly right. I’ve heard that from other guests as well. And it’s something I went through myself is just that very first baby step is just to start tracking. Just to write down what’s going on, and then you don’t have to push yourself to start budgeting or do anything complicated right away. Just start observing what’s going on. And then as you said, you’ll become curious, you’ll naturally start to make changes. Yeah, I think that’s wonderful advice. Well, thank you, Sarah so much for this interview. It’s so fascinating to learn about, you know, the arc of your career and how your finances have changed through all of that as well.

50:30 Sarah: This has been lovely. Thank you so much for inviting me.

Listener Q&A: Taxable Fellowship and Scholarship Income

50:38 Emily: Now, onto the listener question and answer segment. Today’s question was asked during a live tax webinar I gave recently for a university client. So, it is anonymous. Here is the question. Quote, “How does the IRS verify the amount of taxable fellowship and scholarship income that we report on our form 1040?” End quote. I love answering questions during live events, and I especially love questions like this one that are completely unique. I’d never been asked this one before. It sort of goes to this fundamental thing about income tax in the U.S. which is that the IRS does not necessarily know in advance what your tax liability is. You are really telling the IRS what it is through generating your tax return. So there’s a lot of individual responsibility there, and there’s also kind of a lot of, you know, trust on the IRS’s that you are doing a good job at reporting, you know, your income and your expenses and so forth accurately. That is, unless they decide to audit you. Anyway, that’s pretty unlikely for a grad student.

51:39 Emily: So, to give you some context for this question in the workshop, I talk a lot about how to track down all of your income sources as a graduate student and also all of your qualified education expenses. Now, if your university issued you a form 1098T, you would think that that 1098T would be a complete record of those two things, but it is not. I emphasize in the workshop that it’s very common for graduate students to have additional qualified education expenses not listed in box one of the 1098T that they can use to reduce their taxable income, and therefore, ultimately, their tax liability. So, the question is basically asking, well, if my taxable scholarship and fellowship income is not simply box five of the 1098T minus box one of the 1098T, how does the IRS know that I actually have those expenses?

52:32 Emily: Or how does it know that I did my math right on the subtraction? And my answer, at least for U.S. citizens and residents, is that the IRS doesn’t really know what went into calculating that taxable scholarship and fellowship income, at least when you first submit your tax return. All you’re reporting is that net number, the taxable fellowship and scholarship income. You’re not putting on your tax return anywhere your total scholarship and fellowship income and your total qualified education expenses, only the net of those two. So, in that tax return, you’re not showing the math, right? You’re only showing the answer. However, my firm suggestion is that you keep your notes on this process. Keep the receipts. Keep the records of all the qualified education expenses and so forth. Because while unlikely, it is possible that the IRS may come back to you and say, Hey, we don’t understand where this number came from of your taxable scholarship or fellowship income.

53:31 Emily: What is it? What went into this calculation? And then you’ll be able to show how you did the math there. It’s not something you have to submit in your initial tax return, but it is very handy to keep around for several years in case the IRS does question your return. By the way, that’s not necessarily a full formal audit. It could just be something that you respond to in a brief letter or over the phone. I’ve actually coached several graduate students through something similar to this process where the IRS didn’t understand how they were reporting their grad student income. And they were able to, you know, write a coherent letter, justifying it, and the issue was put to bed. So I loved answering that question in the live webinar. I’m glad to have been able to replicate that for you here. By the way, there are two ways that you can get more of this kind of tax info in your life.

54:17 Emily: One is that you can join my tax workshop, which is called How to Complete your Grad Student Tax Return (and Understand It, Too!). You can join that as an individual, or actually you can even make a bulk purchase. Like if you want to arrange that through your department or grad student association or something. You can find out more details about the tax workshop at pfforphds.com/taxworkshop. I am also available for live events. Believe it or not in previous tax seasons, I have been booked late in March to give an event actually that was in-person that year in early April. So, if you want to bring this kind of material to graduate students and even postdocs broadly within your university, please just email me, [email protected], to kind of get the ball rolling on that. If you would like to submit a question to be answered in a future episode, please go to pfforphds.com/podcast and follow the instructions you find there. I love answering questions, so please submit yours.

Outtro

55:21 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast and instructions for entering the book, giveaway contest and submitting a question for the Q&A segment. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

How This Grad Student’s Finances Changed During the Pandemic

March 8, 2021 by Meryem Ok

In this episode, Emily interviews Eun Bin Go, a PhD student at the University of California at Los Angeles. Eun Bin reflects on the financial changes she made during 2020, and which ones of them will stick post-pandemic now that she has developed more DIY skills. Emily and Eun Bin discuss Eun Bin’s housing decisions during her time at UCLA and why she moved out of subsidized student housing. Eun Bin shares the tricks she used to max out her Roth IRA for the first time in 2020 and how she discovered she can contribute to UCLA’s 403(b). The strategies Eun Bin uses to keep her finances and time management on track might be unique to her, but are a great example of how powerful it is to know yourself and find the strategies that work well for you.

Links Mentioned in This Episode

  • Eun Bin Go @jjiangeunbin (Twitter)
  • Eun Bin Go (LinkedIn)
  • I Will Teach You to Be Rich by Ramit Sethi (affiliate link—thanks for using!)
  • Emily’s E-mail Address (for Book Giveaway)
  • PF for PhDs: Podcast Hub (Giveaway Instructions)
  • PF for PhDs: Tax Center
  • PF for PhDs: What You Can Save in Grad School Has a 1 Million Dollar Value on Your Net Worth 
  • PF for PhDs: Community (Challenge)
  • Quarterly Estimated Tax for Fellowship Recipients
  • Investopedia
  • Be a Fly on the Wall During a Financial Coaching Session (with Elana Gloger of Dear Grad Student)
  • PF for PhDs: Coaching
  • PF for PhDs: Subscribe to Mailing List

Teaser

00:00 Eun Bin: Honestly, things like IRA, investing, like 403(b), 401(k), all those things. Like if we are new to it, it can feel really overwhelming. Like if I read an article about this topic, like three years ago, I would be Googling like every other word, like, what is this? What is that? And it can be a lot of information. Just taking the time to digest through it slowly, I think, gave me the confidence to go for it. Because if you don’t know what it is, it’s hard to put your money into something you don’t know a lot about, right?

Introduction

00:35 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts. This is season eight, episode 10, and today my guest is Eun Bin Go, a PhD student at the University of California at Los Angeles. Eun Bin reflects on the financial changes she made during 2020, and which ones will stick post-pandemic now that she has developed more DIY skills. We discuss Eun Bin’s housing decisions during her time at UCLA and why she moved out of subsidized student housing. Eun Bin shares the tricks she used to max out her Roth IRA for the first time in 2020 and how she discovered she can contribute to UCLA’s 403(b). The strategies Eun Bin uses to keep her finances and time management on track might be unique to her, but are a great example of how powerful it is to know yourself and find the strategies that work well for you.

01:34 Emily: I was very excited to discuss the effect that 2020 has had on Eun Bin’s finances, as it’s not a topic I’ve covered much on the podcast over the past year. It’s difficult to speak about positive financial changes while so many in the U.S. In the world are grieving, sacrificing, and experiencing hardship. Yet, I think the financial course of Eun Bin’s year is likely relatable to people whose income has not faltered during the pandemic. The American personal savings rate spiked during the pandemic. According to the Federal Reserve Bank of St. Louis, the personal savings rate at the end of 2020 was approximately double what it was at the end of 2019. So what is a grad student whose income has stayed steady do with her extra cashflow, at least for the time being? That’s what Eun Bin shares with us in this episode. I hope you’ll use this listening as an opportunity for a retrospective on your own finances over the last year.

Book Giveaway Contest

02:36 Emily: Now it’s time for the book giveaway contest. In March, 2021, I’m giving away one copy of I Will Teach You to Be Rich by Ramit Sethi, which is the Personal Finance for PhDs Community book club selection for May, 2021. Everyone who enters the contest during March will have a chance to win a copy of this book. If you would like to enter the giveaway contest, please rate and review this podcast on Apple podcasts, take a screenshot of your review, and email it to me at [email protected]. I’ll choose a winner at the end of February from all the entries. You can find full instructions at pfforphds.com/podcast. The podcast received a review this week titled helpful advice to help you take action and optimize your personal finance. The review reads, quote, I share this podcast with all the academics I know. It is exciting to hear frank and relatable advice that can be actionable rather than just theoretical. A lot of the personal finance space doesn’t speak to the nuance of the academic life, but Dr. Roberts covers a wide variety of helpful topics. I found her work when I got a fellowship and was confused as to how to do my taxes, but I use the information across my whole financial life. A must-listen for every grad student. End quote. Thank you so much to AK for leaving this review. My subtle plot to lure grad students in with talk about taxes and then help them improve their finances overall seems to be working. Without further ado, here’s my interview with Eun Bin Go.

Will You Please Introduce Yourself Further?

04:11 Emily: I am delighted to have joining me on the podcast today Eun Bin Go. She is a graduate student at UCLA. We have been long-time Twitter correspondents. This is very exciting to get to talk with her live. And, you know, when she came to me wanting to be on the podcast, we kind of talked it over and decided on a theme of 2020, because Eun Bin decided that 2020 was the year that she was going to get her finances in order. And 2020 turned out to be a crazy year, as we all know. So it’s around this theme of kind of like pandemic life and stay at home order life and all of that, of course, that has extended into 2021. We’re recording this in February, 2021. Still going on. So it’s kind of still 2020, right. So, Eun Bin, I’m so happy to have you on the podcast and, you know, will you please introduce yourself a little bit further to the listeners?

05:05 Eun Bin: All right. Yeah. Thank you, Emily. It’s really exciting to be on your podcast after being an avid listener for about a year and a half. So thanks again. Thank you again. Hi everyone. My name is Eun Bin Go and I am a fourth year PhD candidate in biochemistry at UCLA. And like Emily said, this is a year or 2020 was a year that I really decided to be more intentional about my finances and how I invest, how I spend. And so I’m really excited to discuss that here today.

Housing Decision at the Start of Grad School

05:38 Emily: Yeah. So we’re going to go through kind of a few different financial areas in the course of this conversation. And the first one is starting with housing because as, well, we’re both California residents. I recently moved to California, but we all know that housing is a major, major, major expense in California. So how have you made different decisions around your housing in 2020?

06:00 Eun Bin: Right. So I started at UCLA in summer of 2017, and my first year of grad school, I just decided to go apply for the on-campus graduate housing at UCLA, reasoning being that I didn’t have too many months before I committed to UCLA and was about to start my program. So there wasn’t really much time to do all the research into different housing options. So that was like the simplest option for me, I suppose. And I thought, well, a lot of other first year, my classmates were also going into graduate housing. So I thought it would be a good idea to just go into graduate housing with my cohort members so that I can spend more time with them. And it was pretty close to campus. It’s about a three-quarter mile to my lab and because I don’t have a car, I don’t drive. Like I can’t drive, so I can’t live too far away. And so I thought, well, pretty close to campus. Like price was about like 15, like mid 15 hundreds, but apparently that’s a pretty good price for how close it was to campus. So I was okay with that. Sure, I’ll go with that. So that’s where I lived for about one year, my first year of grad school.

07:14 Emily: And did that housing choice live up to your expectations? Did it help you bond with your peers? And did you like living that close to campus?

07:21 Eun Bin: So living close to campus, I think had its pros and cons and the con is actually something I’ll mention later about why I decided to move a bit far away. I was okay with the price per se, like with grad school, like spending more time with my peers, because it’s not really like a dorm life as in like a college, like you live in your own room. I didn’t have a roommate. I was in like a one-room studio by myself. So that made it a bit harder to, I guess, connect with my fellow, like apartment-mates because I’m in chemistry and not all chemistry students were in the same housing. It’s really hard to connect with students from other departments, as you might know, if you don’t have any other connections outside. So that didn’t really work out, but it was nice that at least so it’s close to campus. And I just wanted time to settle in, focus on my first year of classes and research and not have to worry too much about housing stuff. So I think it worked out overall well. Yeah.

Housing Journey After the First Year of the PhD

08:24 Emily: Yeah. I think when it’s available to first years, it makes a lot of sense to them to move there. But you lived there for one year and then you moved somewhere else. So what was the choice you made after that?

08:35 Eun Bin: Right. So after my first year, so in the summer of my second year of grad school I have just been, not constantly like every day, but once in a while I would browse like the Facebook housing group and other like listings, local listings. I would constantly look to see if I can find something a bit cheaper that’s still in a reasonable distance now that I have settled it. And I like found my rhythm in grad school, if you will. So I did come across in the summer, July of 2018, exactly after one year, a listing for just one room in a house for $700. And that happened to be at a place that was pretty accessible via bus from just outside of my lab to the house. So I thought, Hm, it might not be a bad idea to move there.

09:32 Eun Bin: I mean, it’s about like seven, $800 cheaper. And this is, I guess, now is a good place to bring up one of the cons for me in terms of on-campus housing is that if I live too close to campus, I’m, it’s just me. Like, this is my problem, but I’m terrible at establishing like physical boundaries with lab. And it’s always so tempting to just go check in what’s going on in lab, even if it’s like 11:00 PM or 6:00 AM, like if I’m awake, I’m thinking about lab. I just want to get myself there. And that was not the best for like, just like work-life boundaries. And so that’s what made me, I guess, decisively move to the other place. In addition to the lower housing costs is that I wanted sufficient boundaries so that when I’m at work, I would be a lot more focused. And if I am far away and the bus doesn’t run anymore at midnight, I can’t just go to lab because I want to, for example. And I have to be sure to get my work done by the last bus so that I don’t end up having to like walk or Uber cause that also costs money and takes a long time. If I’m going to walk like four miles, it was a four mile distance if I were to walk that, for example.

10:50 Emily: Yeah. I think that’s an interesting like way to help enforce the boundary. I don’t know that I’ve actually heard of like, you know, distance from campus as a time management tool, but it sounds creative. And did it work out, you know, did it play out according to your expectations?

11:06 Eun Bin: Oh, absolutely. Right. So I was sure because the last bus stops after like close to 11:00 PM. So there were never times I could stay beyond that. And I definitely was more focused with the time that I had in lab in school, knowing that it’s going to take a lot more effort for me to find my way back home and then find my way to lab for example. Yeah.

11:33 Emily: Yeah. And how about the price? Because when you said that you were dropping your rent by about 50%, I’m thinking what is wrong with this place? Was there anything that you encountered like that?

11:44 Eun Bin: Not at all, no. It was just a one room. It’s probably just big enough to have a tiny desk and a tiny bed, nothing. It’s a tiny, tiny room, but that was honestly enough for me. I just needed a desk and a bed. Nothing else super fancy. And then there was a bathroom outside my room, but then there was only one other lady who lives in this house and then she had a master room with a bathroom inside. So that bathroom was pretty much mine. So it felt I had a lot of privacy. Good distance, nice roommate lady who rent me her room. So there were no issues. Yeah.

Additional Housing Moves During the Pandemic

12:23 Emily: But, you said you moved in 2020 as well. And so why did you give up that housing situation?

12:29 Eun Bin: Right, so only because of the pandemic when we got the notice that, Oh yeah, we absolutely cannot go into lab for however long it may be. I figured, well, do I hold my place here and keep paying rent while I can’t go to lab? Because there was no reason for me to like live in LA cause my family, my parents are in Orange County, in Fullerton, not too far away from UCLA. So if I were to move back with them, which I did, it’s like, is it worth holding onto this place? Because as you might know, like housing around UCLA is very, very competitive and I had a really nice deal, but that is a question I had to wrestle with. Do I keep paying rent and then hold this place? Or do I just give it up and then start over when we are allowed to go back to school and when will that be? We had no idea when it was February, March. We have no idea what time that would be. Right.

13:24 Emily: Yeah. I think a lot of graduate students have been in that exact situation this year. You’ve told me I can’t come back to campus. Why am I here? Why am I paying massive rent in this area? Okay. So, so are you still with your parents or have you found another living arrangement?

13:38 Eun Bin: Right. So I moved back to my parents’ place in March and I came back out to LA in June in 2020 when the school said, Oh yeah, we can let grad students work in labs now just under limited time. But, and the students have to come and shift, but still students can come in. So that’s when we got that notice, that’s when I started actively looking for a new housing arrangement because someone else, as I had worried about, moved into that place, so that place was no longer available. So I just had to find something else. And my priorities this time was I wanted something that’s in a walkable, reasonably walkable distance, just in case like I can’t take the bus, for example, it’s too dangerous to take the bus. I had to have a way to get to school and I can’t drive because of a condition that I have. So I had to find a place where I can walk. Yeah.

14:38 Emily: And so, where are you now and what rent are you paying?

14:42 Eun Bin: So right now I’m living in an apartment. My roommate is a lady whose children have all moved out of this house. So they had a room open and I was able to move in here. This is housing that I found from a UCLA housing Facebook group. And I’m paying now 1300, which is about 600 more than what I was paying in my earlier apartment, but it’s reasonably close to campus. I like the location, my roommate. And my roommate is also very generous with like her sharing her supplies in the kitchen and things like that. And sometimes she cooks for me occasionally. So that’s a nice bonus to have. Yeah.

How Did Housing Changes Affect Your Finances?

15:32 Emily: I feel like I’m experiencing like whiplash, like thinking about all these different amounts that you’ve paid for housing. How has this affected your finances over these last few years with these big swings?

15:43 Eun Bin: Mhm. Right. So like my first year of grad school, when I was living on on-campus housing I knew that based on talking to the grad students at UCLA, all I knew was that they, the pay is good enough for you to live in on-campus housing and be able to like eat and do a little fun things occasionally. So after hearing that, I thought, well, then I’ll just pay the rent that I have to pay. And with the rest, like feed myself and maybe go out once in a while. And so that’s the time in my graduate career where I did not think about money at all. I paid what I needed to pay and that was it. And whatever I had left, I did whatever I felt like kind of.

16:31 Emily: Yeah. Kind of a conventional grad student mindset. Right? All I have to do is pay bills. If I do that, I’m good.

16:37 Eun Bin: Exactly. Right. Yeah. And like, like retirement account, like what is that? Investing like, Ooh, do I even have enough money to give that a try? I didn’t really consider that seriously at the time. And so food, rent, and the remaining money, I just kept. Right.

17:01 Emily: And then when you moved to the much cheaper place, did you make any changes how you were managing your money?

17:07 Eun Bin: Ah, yes. The one big change I would say. So, even though I was paying less in rent, I still treated my life as if I were paying the equal rent that I was paying at the more expensive on campus housing. So with the 600 or so that I had left over every month, I put that into a high yield savings account. And that’s money like, that’s a way for me to just like put money away so that I don’t feel tempted to like just spend it all away immediately. So that was like my first real attempt at saving if you will.

17:44 Emily: Yeah. I think that’s a great little psychological trick is if you manage to reduce a bill, I mean, reducing it by multi hundreds, hundreds of dollars a month is very impressive, but whatever you can manage to do, as you just said, don’t think about that as now available spending money. Divert it towards whatever purpose is, you know, your real priority, which, okay. So you’re building up cash savings during that time. And then, and then you have this short period when you were living with your parents. And now that you’re back paying a higher rent price, how are things going? Are you still saving that little different, that smaller differential? Or how are you thinking about it now?

Weekend Side Hustle Toward Roth IRA Contributions

18:18 Eun Bin: Right. So I guess there are some things that have changed. I also, in addition to moving to a more expensive housing in 2020, I also got a weekend job that pays about 700, 800 a month. So I guess that kind of helps offset that a little bit, but again, I still treat my real rent in my brain as being in the mid 15 hundreds. So every like excess of my rents up to 1550, I just put away. Before I had my Roth IRA account, I just would put it in my high yield savings account. But now I just funnel that to my Roth IRA account for a regular contribution throughout the year.

19:07 Emily: Awesome. Yeah. Well, we will come back I think to the Roth IRA in a moment, but now I’m curious about this weekend job that pays so well. Is this something pandemic-related?

19:19 Eun Bin: No. So it’s like a high school tutoring and like mentoring job that I just do on the weekends, every Saturday. So it’s just helping students with various topics. Mostly I do like chemistry and calculus, high school level calculus, and just like providing peer support for high school students.

19:41 Emily: That’s very interesting. And is this a W-2 job or are you a contractor, self-employed?

19:46 Eun Bin: Yeah, it’s a W-2 job. Yeah.

19:49 Emily: Wow. Okay. That sounds fantastic. I also tutored for a little bit after college, it seems like it’s a kind of a natural job for a grad student to have, but it’s very interesting that you have it as a W-2 job. And how do you feel like that is like balancing with your role as a graduate student? Like, are you able to keep up, you know, good time management? Does your advisor know about this?

20:11 Eun Bin: My advisor, I may have mentioned, I mean, he does know that I go home every weekend and sometimes like, he takes me to the train station. Like before the pandemic, he would give me rides to the train station. So he is aware of the fact that I go home and I’m not in the lab during the weekends. And this is another one of my psychological tricks, I guess. I need to physically distance myself from whatever that I’m tempted to do, whether if it’s lab, I need to move myself far away so that I’m not tempted to like, keep thinking about it. Oh, should I go into lab and do this or not? So going home on the weekend is another way of like, enforcing like a work-life balance that works for me. Yeah.

How Else Has COVID Changed Your Spending?

20:50 Emily: Yeah, wow. Okay. So you definitely, weren’t going to be in lab anyway, so it’s not affecting that. That sounds really good. Okay. So what are the other ways that like COVID social distancing has changed your spending? I mean, I know it has for mine, but how has it affected yours?

21:05 Eun Bin: So because when I moved back into my parents’ place I did pay them a little bit, a couple hundred dollars just because they were feeding me and housing me, but not like what I was paying out here. But besides that, I really had no other expenditures really. I can’t travel. I can’t go out to eat in restaurants. And really, I would say besides housing, food, just eating out was a majority of my other non-housing expenses. So I naturally got to save a lot in that regard.

21:42 Emily: So you have been eating out less during the pandemic. Because I know that some people are still eating or, you know, getting takeout or whatever the equivalent is quite a lot.

21:50 Eun Bin: Yeah. Right. So, yeah, I pretty much like never ate out for like, at least the first month where it was like really picking up, like the news is like encouraging, Hey, people stay home. Like don’t do so many things outside. And so like early on, like I barely even left the house, for example. Yeah.

22:11 Emily: Okay. So yeah, you just had a lack of outlets for your spending. Like you know some people have been like shopping more, like shopping more online or like maybe they’re subscribing to a few more things for like streaming entertainment. Did any of that have an uptick for you?

22:24 Eun Bin: Yeah. I know a lot of people like signed up for a new Netflix account and stuff for like watching a movie, but I did not do that either. And I didn’t really notice any differences in spending online shopping necessarily. I mean, I didn’t do too much of that to begin with, and it’s not, it’s just not something that I started doing more necessarily, I would say. Yeah.

22:46 Emily: Okay. So you’ve just been stacking up your cash throughout much of the pandemic because yeah. The spending outlets don’t, don’t interest you. And what do you think, like in the future, at some point when spending opportunities are available again, are you going to go back to your prior level of spending or have you made any changes that you’re really happy with and you want to have stick?

23:08 Eun Bin: Yeah. So something that, some things that I realized as a result of, I guess, like my lack of outlets for spending is that I started cooking more at home and that, that truly led me to like I guess, meal options that are cheaper to prepare and also are healthier because I can actually pick what I decide to put in my food instead of if I were eating out, I can’t necessarily do that. And that’s something that I’ve come to appreciate a lot more, doing more cooking healthier. And I think just because I realize this doesn’t mean I’m never going to go out to eat again. Of course, if like friends come over or there’s a special occasion, of course, I will go out to eat once in a while. But I think I’ll try to be, I guess, more conservative in my spending on restaurant dining, I would say. Definitely. Yeah.

24:08 Emily: Yeah. So it sounds like the pandemic in that respect has given you an opportunity to expand your skillset, expand your repertoire of, you know, menu items and so forth. And so it’s really kind of, you sort of up-skilled yourself in the cooking department so that the eating out differential is not so attractive.

24:24 Eun Bin: Right. Mhm.

24:24 Emily: Yeah. Gotcha.

Commercial

24:26 Emily: Emily here, for a brief interlude. Taxes are weirdly, unexpectedly difficult for funded grad students and fellowship recipients at any level of PhD training. Your university might send you strange tax forms or no tax forms at all. They might not withhold your income tax from your paychecks, even though you owe it. It’s a mess. I’ve created a ton of free resources to assist you with understanding and preparing your 2020 tax return, which are available at pfforphds.com/tax. I hope you’ll check them out to ease much of the stress of tax season. If you want to go deeper with the material or have a question for me, please join one of my tax workshops, which you can find links to from PF F O R P H D s.com/T A X. It would be my pleasure to help you save time and potentially money this tax season. So don’t hesitate to reach out. Now, back to our interview.

Starting a Roth IRA in 2020 (for 2019)

25:34 Emily: So you mentioned earlier that at some point along this way, you started on a Roth IRA. Can you tell us about deciding to start that and what you did and also when that was?

25:45 Eun Bin: Alright. So honestly, so I have to say, I did not know about Roth IRA. I didn’t know what a Roth was, what IRA was, any of that term until I have chanced upon one of your articles describing compound interest, that was very informative and very eye-opening. So I’m very thankful for that.

26:03 Emily: We will link that in the show notes. I think you’re probably referring to…

26:06 Eun Bin: The $5,000 initial investment one, the compound interest.

26:10 Emily: Yeah, like what you can save during grad school has a $1 million impact on your net worth. Yeah. That’ll be linked from the show notes.

26:19 Eun Bin: Right. So when I first saw that I was like, no way that can be like seven-digit figure. Like, but when I actually did the math out, it’s actually true. I was like, wow, that’s amazing. And that was like the first catalyst I would say. And the second was when there was the announcement that the IRS has delayed the tax filing deadline to July of 2020 for the year 2019. And that also gave you more time to contribute to your 2019 Roth IRA if you desire. And honestly, that delay is what made me think, huh? Should I actually start this thing? It actually gave me time to think about, because that was not on my mind at all before that. And so after having done some more research, like seeing more articles that you had on Roth IRA, and I knew that I had W-2 income and that I had money in my savings account that I can just funnel over to a Roth IRA account when I realized that that’s when I decided here, let’s go for it and start contributing. Yeah.

27:26 Emily: Okay. So if I have the timing on this right, in 2020, you started contributing to your 2019 IRA. And for the listener, just anyone who’s not familiar, you can contribute to your prior year IRA contribution limit, which is currently $6,000 per year. You can contribute up through tax filing day. So, normally, April 15th. In 2020, it became July 15th. So you took, you saw that extra three months as an opportunity to reevaluate and have a little bit more time to fill up that 2019 IRA. So did you end up contributing like a lump sum or did you start dollar cost averaging or what was your strategy?

28:01 Eun Bin: Yeah, so I had about, about like two years worth of IRA contributions from just my savings in a savings account. So I actually had more than $12K in my savings account at the time. So I just, it was like a one lump sum deposit for both the year of 2019 and 2020 that I made in mid-2020 to my Roth IRA.

Roth IRA Contribution Strategy in 2021

28:22 Emily: Wow. All right. So you maxed out two years at once. You’re all set through the end of your, you were all set through the end of 2020 now we’re in 2021. And is your strategy the same? Are you saving up cash and doing another lump sum contribution or have you started contributing on a regular basis?

28:38 Eun Bin: Yeah, so I have a direct deposit set up where I put in about 500 every month into my Roth IRA account. And that should come out to exactly 6,000 in one year. Yeah.

28:48 Emily: Yeah. So you’re on track to max out in 2021 as well. Yeah. Incredible. And did you, so you explained how you went about this in terms of saving up cash and so forth. Were there any other like tricks you want to pass onto the listener about yeah, how to start this process of contributing to an IRA or how to contribute more than they have been before?

29:11 Eun Bin: Right. So, honestly, things like IRA, investing, like 403(b), 401(k), all those things. Like if we are new to it, it can feel really overwhelming. Like if I read an article about this topic, like three years ago, I would be Googling like every other word, like, what is this? What is that? And it can be a lot of information. But I think honestly your resources have been very helpful for me. You have a lot of resources regarding Roth IRA. And so going through them one by one, like slowly digesting, Hey, what’s an IRA, what’s Roth? What are the different types of investment, I guess, products available to you? Just taking the time to digest through it slowly, I think gave me the confidence to go for it, because if you don’t know what it is, it’s hard to put your money into something you don’t know a lot about, right? So I think part of the solution was just to spend the time to learn about this whole IRA, retirement savings investing. Yeah.

30:12 Emily: Yeah. I’m really glad to hear that you used some of my resources and that, that like worked well for you of course, in combination with some other things. Yeah, I agree. It can be really daunting. And I do correspond with a lot of people who, I have, if you subscribe to my email list, there’s a certain point in the sequence where I ask you, what’s your biggest challenge right now in your finances. And if I can help you, I’ll try to, and probably, I don’t know, at least 25% of the responses are, I want to open an IRA and I just don’t know what to do. Like I know it’s important, but what do I do to get from here to there? So I want to mention, I do have a resource available for people who are in that position.

30:48 Emily: I think you probably opened your IRA before I created this resource. So you didn’t actually use it. But it’s inside the Personal Finance for PhDs Community. So if you go to pfforphds.community and sign up for the community, there’s a challenge in there in the forum called open an IRA, or like open your first IRA, something like that. And so I wrote out like a seven-step process, like every sort of decision point where you need to, you know, figure out what you’re going to do and we need to learn about, and I have resources inside the community like webinars and things I’ve written that sort of support that. So step one, okay. Here’s what it is. Here’s a support item. If you’re not sure about this yet, go watch this or go read this. So I’ve had great feedback from people who have been through that seven-step process and have opened and funded their IRA at the end of it. So if anyone is still sitting on the sidelines, you have money like Eun Bin did, you know, this could be a resource available for you. So pfforphds.community, if you want to check that out.

31:41 Eun Bin: And if you don’t have, like, I mean, I made a lump sum because I had money saved up, but honestly it takes us a little as a couple tens of dollars to make the initial investment. You don’t have to contribute all at once, just little by little and you don’t necessarily have to max out. So do what you can. And I think like, as Emily writes in that one article, 5,000, that’s not even like a maximum of one year’s contribution, but compound interest can do a lot of great things to that 5,000.

Transitioning from NSF Fellowship to W-2 Income

32:08 Emily: Yeah. Thank you so much for saying that. I love talking about investing and I understand there’s actually been another exciting investment change on for you in 2020.

32:19 Eun Bin: Right. So in 2020 is also when I transitioned from my NSF graduate fellowship to TAships so just regular W-2 income. And after having learned about different like retirement savings options, I started looking into like, what retirement options does UCLA provide for its employees? And I did find that they provide like the 403(b) and so with this, I decided to also contribute like 5% of my pay to this 403(b) account. Honestly, this was, I mean, Roth IRA, I would say is like my primary retirement saving vesicle, but I just wanted to, I guess, try it out. That’s what got me into this. And this is also a way for me to, now that like restaurants are opening back up and there are more opportunities to spend, that’s just another way of me just putting money away so I can’t take it out. That’s how I deal with like managing my savings, I guess, like similar to, I need to physically move myself away from the lab so I don’t think about it. It works the same way for me with money as well. Yeah. So.

33:40 Emily: Absolutely, me too. I love the pay yourself first strategy. I use it myself. I recommend it everywhere. And it’s just because I’m a bit of a spender also. So like, I just want that money, like out. I’m a forced saver, but a natural spender. I think I’ll put it that way. I like saving, but I have to put systems in place to make sure that I do it or else I’m really not going to.

33:58 Eun Bin: I’m exactly the same way.

34:01 Emily: Yeah. That’s so exciting that like you had, you know, you found out that you had the 403(b) access. And this is a good tip for anyone else at UCLA or anyone at any of the UCs, I would imagine. And also just anyone anywhere to check to see if you have access because you know, I don’t think many graduate students can, you know, save the full 6,000 for the IRA and then be looking for their next like savings opportunity. But you have, especially with this like awesome side job, I mean, it seems like you have, you know, plenty of pocket money already, so yeah. So it’s worth looking into, sometimes you’ll be surprised and the answer will be, yes, you do have access to the 403(b). And switching from fellowship to being on W-2 has also come with some tax changes, right?

34:44 Eun Bin: Right. Right. So when I was on the NSF, I know this is a very hot topic that you talk a lot about Emily, like quarterly taxes and filing. So for me, because my parents also run their own businesses, they have to do their own quarterly taxes. Thankfully, like, the CPA who helps with my parents’ finances, they were kind enough to help with mine as well. So that made it a lot less stressful for me. And in terms of like saving, because I know you mentioned in one of your articles, like have a designated savings account for your quarterly taxes. But what helped me in that regard was my actually side job that I had. Because of that excess income I didn’t necessarily, I guess, have to withhold my own taxes, I suppose and whatever I had to pay, I could just pull that from my weekend job money that I had. Yeah. That was enough to cover all my taxes. Yeah.

35:46 Emily: Yeah. So it sounds like you, with that additional income, you had enough sort of flexibility in your cashflow to be able to pay that somewhat larger tax bill in a given month. That’s awesome. It’s definitely not the case for most grad students. And that’s why I think that saving up in advance strategy is so critical for, I mean, for most people, right? All these strategies are, if it works for you, great. If it doesn’t like move on from it. And I think one of the themes that, you know, you’ve identified in this interview is that, you know yourself, you know your psychology, at least in a few of these areas, right? You know, what’s going to work for you and you set up systems that help you stay within the boundaries that you, that your like higher thinking self wants you to be in.

36:27 Emily: Whereas like in the moment you might not make that decision, but that’s why you have the boundary in place. So I think that’s an awesome takeaway for the listener to kind of figure out what those tricks are that, you know, are going to work really well for you. They may not be the same as what other people do. That’s okay.

Best Financial Advice for Another Early-Career PhD

36:41 Emily: So as we wrap up Eun Bin, thank you so much for this interview, it’s really interesting to hear what’s been going on in 2020 for someone else. I feel like I haven’t had that many interviews that sort of acknowledge that we are in the middle still of a global pandemic. So as we’re wrapping up, would you please tell us your best financial advice for another early career PhD? And it could be something that we have already touched on that you want to emphasize, or it could be something completely new.

37:04 Eun Bin: Yeah. So I think based on my experiences, my advice for early career PhD students is number one, do this before you apply. Sign up for Emily’s website, they are very helpful. I wish I had discovered them way earlier in my career. Definitely. And second, like if this is like your first time making like regular income, which it was for me until after I graduated college it can feel very overwhelming to have just a lot of cash than you’re normally used to. So make a budget of like your essential I guess like costs that you need to pay and then like just develop a budget for yourself. And what I did was whatever that was above that beyond the budget, I just put away into a savings account that I can’t touch. But I guess Emily did mention also, but be open to, I guess, experimenting a little bit with your finances and figuring out a strategy that works for you.

38:11 Eun Bin: And do take the time to learn about like saving and investing. I know when you first get into it, for me, it was like, Oh, like investing in like the stock market or like mutual funds. Like what are those things like? How does it work? And like, are you sure that I won’t lose my money this way? I had a lot of these concerns, but I think there’s a lot of really informative articles. I like the one Investopedia, for example, they have a lot of really informative articles that are friendly to beginners and combined with Emily’s various articles. I think it is a steep learning curve but it is something worth putting your time into, I would say. Yeah.

38:53 Emily: Yeah, I totally agree. And the thing about learning about investing, especially learning about passive investing is there is an initial upfront investment of time of a few hours or 10 hours or 20 hours. Maybe if you want to be really like in depth. But after that, it’s very, hands-off like, it is not something that you have to continually be learning about and maintaining for the rest of your life. You make this initial upfront investment of 10 hours. Read one book, you know, read a couple of my articles, whatever you’re probably going to be pretty set for like a very, very long time on just that amount of information. And that’s the nature of passive investing. And so you have to find the time to make that initial push, but once you’re over that, it’s like, it’s like smooth sailing. It’s so easy after that point. Yeah. Great. Well, Eun Bin, thank you so much for joining me on the podcast today. It’s been a pleasure having you.

39:39 Eun Bin: Yeah. It was a really great time talking about these things with you, Emily. After being a listener for a very long time, it was really exciting to be a guest on this podcast. And I hope this would be helpful for the other listeners.

Listener Q&A: Making Smart Financial Decisions

39:56 Emily: Now, on to the listener question and answer segment. Today’s question actually comes from a survey I sent out in advance of one of my university webinars this spring. So it is anonymous. Here is the question: quote, what smart financial decisions should every PhD student be making with their money? End quote. This is an amazing question. So thank you anonymous for contributing it. I have to acknowledge upfront that not every PhD student is going to be able to make the decisions that I’m about to list as smart financial decisions. And that’s okay. I hope in those cases, that being in a PhD program overall is a smart financial decision for your longterm career. Maybe it’s not a short-term smart financial decision because you’re not being paid that well, but I still hope it is a longterm smart financial decision. Okay. First smart financial decision over the course of your graduate degree is backup, before you get into graduate school, choose a PhD program that will support you well financially so that you can do the rest of things that I’m about to list.

41:05 Emily: Okay, one smart financial decision that you should make as a grad student, but it’s certainly not unique to graduate students is to not abuse your credit cards. Use your credit cards, if you use any, exactly as you would use a debit card and never put a charge on it that you could not immediately pay off with cash from your checking account. That certainly means not carrying any credit card debt, but it also means not giving yourself an advance on your next paycheck through floating charges on a credit card. For further explanation of why this kind of use of credit cards is dangerous and how to get out of it, listen to my episode last week, season eight, episode nine with Elana Gloger. Another smart financial decision during grad school is to prioritize your savings rate. You might direct that savings rate toward different purposes throughout the course of graduate school.

42:00 Emily: Maybe it’s going to be cash savings. Maybe it’s going to be investing. Maybe it’s going to be debt repayment. But whatever it is, getting that savings rate higher, maybe even in the 10 or 20% or higher ranges, that’s a really smart financial decision. And you can work that savings rate up to those levels that I just mentioned by attacking both sides of the equation, both the earning more and the spending less sides. Now of course, an individual graduate student might have more opportunity on the earning more side, might have more opportunity on the spending less side. It depends on your personal situation, but you can reevaluate both sides. Start with the easier one for you, but eventually get around to thinking about how you might do the other one. On the earning more side, you know, I think you should be consistently applying for outside fellowships that might increase your stipend or for smaller grants that will add on to your stipend or your funding package.

42:59 Emily: Grad students can also try to generate a side income. In many cases, that’s not to say necessarily a side job or a side hustle, which are not accessible to all graduate students, but some kind of side income. On the spending less side, a lot of people are attracted first to tweaking and cutting back in the small and variable expenses in their lives. But that’s actually not where I recommend that you start. I think you should start with the big three expenses that most Americans have, which are housing, transportation, and food, specifically your grocery spending. But start on the fixed side of that. So start with your housing expense to reevaluate is there a way that I can pay less on a monthly basis for housing? Yeah, it might take months or a year to work into that next housing situation, but it’s very worthwhile if you think there is room for reduction right there. On transportation, any fixed expense you can reduce would be amazing. You know, if you own a car, if you have a car payment, how can you reduce or eliminate that? If you presumably pay for car insurance, how could you reduce that expense?

44:03 Emily: Food is the last one of the big three to address. And I suggest that you make long-term sustainable changes to your habits around shopping and eating rather than trying to use willpower in the short-term to reduce your spending. Okay. There are obviously many other budget categories to address after those, but I think you should start with the big ones. Another smart financial decision would be to work the steps in my financial framework. I have an eight-step financial framework that kind of toggles back and forth between building financial security in the form of cash and working to improve your net worth overall through debt repayments and investing. But these things have to come in a certain order.

44:45 Emily: If you go out of order, you can take on more short-term risk. If you want to read more in a lot of detail about my financial framework, you can join the Personal Finance for PhDs Community, pfforphds.community, or sign up for coaching with me, pfforphds.com/get-coaching. The last smart financial decision that I’ll recommend is to not languish in your graduate program. Get out as soon as you can. Really overall, the best thing you can do for your finances is finish that PhD and move on to a higher post-PhD income, whether that’s in a post-doc or a real job. I know there are good reasons to stay in grad school longer related to publishing, related to applying for tenure track jobs, but it’s not a smart short-term financial decision. So again, if you think that the extra year or whatever it is in your PhD program is worth the long-term investment, that’s great. But if you don’t see that ROI on the horizon, just get out as quick as you can. Thank you so much to anonymous for submitting this question. If you would like to submit a question to be answered in a future episode, please go to pfforphds.com/podcast and follow the instructions you find there. I love answering questions, so please submit yours.

Outtro

46:11 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs Podcast. On that page are links to all the episodes show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast and instructions for entering the book giveaway contest and submitting a question for the Q&A segment. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media with an email listserv or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing debt repayment, and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance, for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

This Grad Student and Her Family Lived on Her Stipend While Banking Her Spouse’s

February 22, 2021 by Emily

In this episode, Emily interviews Dr. Jacqueline Kory-Westlund, who recently completed her PhD in the MIT Media Lab. During their five years in Boston, Jackie and her husband lived on her grad student stipend and saved and invested all of his income. Jackie and Emily discuss the frugal tactics Jackie and her husband used to keep their expenses low, even after having their first child. Saving and investing Jackie’s husband’s income gave them a sizable nest egg by the end of grad school, which they used to purchase a home in cash in a low cost of living area of the country. Jackie and her husband have designed their lifestyle around location-independent work so they can live where they want to while they expand their family, which is now an option for more workers made remote during the pandemic.

Links Mentioned in This Episode 

  • Dr. Jacqueline Kory-Westlund’s Website 
  • This PhD Student Paid Off $62,000 in Undergrad Student Loans Prior to Graduation (Money Story by Dr. Jenni Rinker)
  • This Higher Ed Career Coach Worked Her Way Out of Financial Ruin Caused by the Great Recession (Money Story with Beth Moser)
  • Purchasing a Home as a Graduate Student with Fellowship Income (Money Story with Jonathan Sun)
  • This Grad Student Defrayed His Housing Costs By Renting Rooms to His Peers (Money Story with Dr. Matt Hotze)
  • How a Freelancing Career Can Take You from Academia to Affluence (Expert Interview with Courtney Danyel)
  • This Grad Student Didn’t Let a $1,000 Per Month Stipend Stop Her from Investing (Money Story with Dr. Rachel Blackburn)
  • The Simple Path to Wealth (Book by JL Collins)
  • E-mail Emily (Book Giveaway Contest)
  • PF for PhDs Podcast Hub
  • PF for PhDs Tax Center
  • How to Qualify for a Mortgage as a Graduate Student or PhD, Even with Non-W-2 Fellowship Income (Expert Interview with Sam Hogan) 
  • Turn Your Largest Liability into Your Largest Asset with House Hacking (Expert Interview with Sam Hogan)
  • PF for PhDs Tax Workshop
  • IRS Publication 970
  • PF for PhDs: Subscribe to Mailing List

Teaser

00:00 Jackie: We started out with a generic retirement fund, and then at some point later that year realized we could probably get better returns if we were more selective about what funds we invested in. So then we switched to some market index mutual funds and over the course of the next three years made almost $40K.

Introduction

00:26 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts. This is season eight, episode eight, and today my guest is Dr. Jacqueline Kory-Westlund, who recently completed her PhD in the MIT Media Lab. During their five years in Boston, Jackie and her husband lived on her grad student stipend and saved and invested all of his income. We discussed the frugal tactics Jackie and her husband used to keep their expenses low, even after having their first child. Saving and investing Jackie’s husband’s income gave them a sizeable nest egg by the end of grad school, which they used to purchase a home in cash in a low cost-of-living area of the country. Jackie and her husband have designed their lifestyle around location-independent work, so they can live where they want to while they expand their family.

01:18 Emily: It’s a model that is now an option for many more people whose positions went remote during the pandemic. This interview is a wonderful example of how an early, intense focus on a lofty financial goal can often result in financial freedom within a short time. Financial freedom means something different to everyone, but it could include leaving, or not taking in the first place, jobs that are unsuitable to you, location independence, working part-time, starting a business, staying home with a child, full-time travel, or just living your best life. Even if it is a bit unconventional. Financial freedom means choices. And this freedom can arrive quite a bit earlier than full financial independence, which is when you never have to earn an income again. We’ve had many stories on the podcast of guests working on or accomplishing a financial goal that seems outlandish for their career stage.

02:10 Emily: Some examples, which are linked from the show notes include Dr. Jenni Rinker paying off over $60,000 of student loan debt during grad school, Beth Moser clawing her way out of financial ruin during the great recession, Jonathan Sun and Dr. Matt Hotze house hacking during grad school, Courtney Danyel growing her freelancing writing business to over $100,000 per year, and Dr. Rachel Blackburn investing for retirement, despite her $1,000 per month grad student stipend. There are even more examples than that in the archives. Even my and my husband’s own story of increasing our net worth by over $100,000 during grad school qualifies. I can tell you that I appreciate my past self for being aggressive about frugality and retirement contributions more with every year that goes by. I don’t this to wag my finger at anyone who has not been working on a lofty financial goal. Personal finance is personal, and we all have different things we value. I just say it because I had no idea when I was in grad school and racking my brain for ways to increase our savings rate by another half a percent, how sweet financial freedom would taste just a few years later. If you’re looking for motivation to push yourself with your own finances, dream about what your best unconventional like might look like.

Book Giveaway Contest

03:28 Emily: Now, it’s time for the book giveaway contest. In February, 2021, I’m giving away one copy of The Simple Path to Wealth by JL Collins, which is the Personal Finance for PhDs Community book club selection for April, 2021. Everyone who enters the contest during February will have a chance to win a copy of this book. The Simple Path to Wealth has quickly become the go-to text in the financial independence community to explain passive investing, which is the style of investing that I practice and teach. It sometimes comes as a surprise that the most effective form of investing is both low cost and low maintenance. If you’ve been sitting on the investing sidelines, this book will almost certainly motivate you to get started by showing you how simple successful investing really is. If you would like to enter the giveaway contest, please rate and review this podcast on Apple Podcasts, take a screenshot of your review, and email it to me at [email protected]. I’ll choose a winner at the end of February from all the entries. You can find full instructions at pfforphds.com/podcast. Without further ado, here’s my interview with Dr. Jacqueline Kory-Westlund.

Will You Please Introduce Yourself Further?

04:55 Emily: I am welcoming to the podcast Dr. Jackie Kory-Westlund, and she’s a recent graduate of her PhD program. And we are going to discuss her finances during her PhD and how she accomplished a massive financial goal, right upon completing her PhD, which was purchasing a home in cash. When Jackie emailed me about this prompt, I literally misread it because I could not believe that anybody would possibly do that. So this is going to be really exciting to figure out. But Jackie, why don’t you tell the audience a little bit about yourself first?

05:28 Jackie: Hi. Yeah. I did my PhD at MIT in the MIT Media Lab with Dr. Cynthia Breazeal. So I worked on small, cute fluffy robots that helped kids learn stuff. And I, let’s see, I finished in 2019, so I’m currently an independent scholar, writer, artist. I do not have a full-time job because I’m staying home for the most part, hanging out with my kids. My husband is a software guy so he works from home, has his own startups and all of that going on. And we had our first kid during the PhD. So that’s relevant to our finances and our financial goals.

Jackie and her Husband’s Finances at the Start of PhD

06:08 Emily: All right, let’s dive into it. This is such an exciting story. Okay. So please give me a snapshot of your finances when you started the PhD. If your husband was in the picture at the time, include him, too.

06:20 Jackie: Right. So when I started the PhD, this was back in 2012. I was one year out of undergrad. So I’d spent one year kind of doing a research internship thing. So I hadn’t made a lot of money at that point. My husband and I, we were not married yet at the time, but we both moved to Boston for MIT at the same time. I had a used car that was probably worth $2,000. We had a couple thousand in our bank accounts that we used for our first month of rent in the rental deposit and the realtor fee and a couple of thousand in student loans. And that’s about it.

06:56 Emily: Alright. Yeah. Almost zero, close to zero. It sounds like. And then what was your stipend?

07:04 Jackie: My stipend was about $30K a year. And MIT paid for healthcare for me, not for my husband. We had to add him to the plan later, once he couldn’t be on his parents’ plan anymore, you know, hitting 25 years old there. And that stipend increased slightly year to year because MIT made cost of living adjustments. And it also went up slightly when I switched from the master’s program to the PhD program, but it was never more than like 32K or so.

07:33 Emily: Okay. So from 30K, in 2012, when you started to about 32K, when you finished, you said 2019, right?

07:39 Jackie: Yeah. Though, actually for the PhD. So we actually moved and got the house the year before I finished. I finished up the last bit remotely.

07:49 Emily: Okay. Okay.

07:51 Jackie: Because I was just writing at that point, so we actually moved in the middle of 2018.

07:55 Emily: Okay, great.

07:56 Jackie: And at that point I stopped getting the stipend because I wasn’t on campus.

08:01 Emily: Oh. So you, you left the stipend behind in 2018 and finished self-funded after the last month or up to a year. And how about your husband’s income during that period?

08:11 Jackie: So initially, for the first couple of years in 2012 through about 2015 or so, he was working on a couple of startups and as a contractor, primarily working on his self-funded software startup. So was not making a huge salary, probably around $50K a year in the last couple of years. And throughout the entire time I was in grad school, our combined income never went over about $80K on our tax returns.

Strategies to Decrease Expenses During PhD

08:39 Emily: Okay. So that gives us a range to think about over that period. So pretty low at the start a little bit better by the end, but again, we’re talking about Boston, so yeah, pretty high cost of living area. So $30K is a pretty decent grad student stipend, but in a high cost of living area, it’s still really challenging. Okay. So that’s your finances when you started the PhD. So as you’re going through the PhD, I’d love to talk about, you know, both sort of frugality, like how do you keep a lid on your expenses? And also did you increase your income in any way? You just told us what the total was, but were there any, you know, methods that you used to increase it? So let’s start on the decreasing expenses side. What, you know, what were your strategies? What were the things that worked out best for you in terms of controlling those expenses?

09:21 Jackie: The biggest thing is we both just kind of by default are fairly frugal people. Neither of us like tend to eat out much. You know, we don’t usually buy that much stuff. We ate a lot of rice and beans. Probably were in the range of only about $250 a month on food. Probably the entire time we were there. I’m the one who started the trend in my lab of people packing their own lunches to bring to the lab.

09:46 Emily: Great influence.

09:49 Jackie: So we primarily lived on my stipend of about a $30K a year. And two thirds of that was rent. And our vehicle expenses tended to be pretty low because like we did have the car, but we didn’t use it that much. I took public transit and walked to MIT and that was half subsidized by MIT. And the other big thing was we had an awesome landlady who did not increase our rent.

Housing and Rent

10:13 Emily: Wow. Okay. Well, you just hit kind of the big three expenses right there. You hit housing, which at $20,000 per year is yeah. It’s a bit expensive on that grad student stipend. Really admirable, by the way of structuring your budget so that you would live just off the one income and save, presumably, the higher income. That’s really, really impressive. So you hit housing. Now was it luck that you found someone who was not going to increase rent, or was there any strategy involved in finding that place?

10:42 Jackie: That was entirely luck. When we were moving up to Boston, we spent about a week there prior to moving looking at places. And we talked to a realtor who was like, Hey, I’ve got this landlady who just needs someone. We just got lucky that she just had this policy on her own where she just didn’t like increasing rent too much. And she’s a nice old lady, lives downstairs, you know?

11:04 Emily: Yeah. I mean, actually that’s, you know, it could be luck for you, but it might be strategy for someone else. I wonder if there is something there around being neighbors with your landlord and like cultivating a positive relationship, because I think it’s definitely harder to raise rent on someone whose face you see like multiple times per week, rather than some, you know, unknown number or whatever in some system. So, yeah. So it sounds like you were living in a duplex kind of situation?

11:28 Jackie: Yeah. It was one of those three-story, three-family homes.

11:32 Emily: Triplex.

11:32 Jackie: Yeah. Triplex, that’s the word I’m looking for. Yeah. And my husband and our landlady, they both went to the same church, so that maybe was a relevant factor there, you know.

11:43 Emily: Yeah, any kind of connection you can make.

11:45 Jackie: Yeah. Yeah.

11:46 Emily: That’s awesome. Okay. So, you know, housing expense is clearly number one, but managing to get a place, you know, by luck probably that didn’t increase the rent is an incredible advantage because that, you know, the rate that rent often rises at is higher than, you know, what you’re getting in your salary increases for cost of living. So you hit housing, number one. You also mentioned transportation. You know, it’s a city life kind of thing. Like you don’t have as much need for like the car usage. And did you have one car or two?

 Sharing a Car, Reducing Food Costs

12:14 Jackie: Just the one.

12:15 Emily: Just one. Okay. So sharing a car as well, another great strategy. And you mentioned, you know, the food expenses. So not eating out very often and also, I mean, $250 per month in food is like really keeping a lid on things. You mentioned rice and beans. Presumably you’re cooking a lot. Do you have any other like, tips in that area around like managing the grocery? Both the budget and like the time that goes into cooking and meal prep?

12:40 Jackie: Well, I kind of have a hobby of cooking, so we did a lot of the crock pot full of a big dinner on Sunday, and then eat leftovers all week to reduce time cooking. Buying things in bulk, instead of popping out to the store every couple of days. We tended to go for beans over meat, which decreases expenses. You look for what’s on sale, you know. That kind of stuff.

13:05 Emily: Yeah. Do you have any like Boston specific tips, like a grocer that you really liked for good deals or something?

Roberto’s Produce (in Boston)

13:11 Jackie: Ooh, let’s see. Actually, we lived about half a mile from a produce store that had way cheaper produce prices than the main grocery store that we drove to.

13:22 Emily: And what was the name of it?

13:23 Jackie: That was, let’s see, what was it called? It was Roberto’s. Roberto’s produce. Cute little place. Just, just produce.

Financial Goals with Savings

13:30 Emily: Yeah. We actually frequented a little shop like that in Seattle as well and had great prices. You mentioned earlier that you actually bought your home prior to finishing your graduate program and that you had been, I think, saving your husband’s salary during that whole period. What were your financial goals during that time, aside from you said, living on just your income, what were you doing with your husband’s salary?

13:56 Jackie: So, in about, I think 2015 was when we realized that we had some money in the bank, we should probably do something with it, which was about my third year of grad school, I think. So we took all of our extra money and put it, invested it primarily in the stock market using Vanguard. We started out with a generic retirement fund, and then at some point later that year realized we could probably get better returns if we were more selective about what funds we invested in. So then we switched to some market index mutual funds, and over the course of the next three years made almost $40K just from having money invested, which is like free money! It’s just so cool. It was like, when we first started doing that, we were like, wait, we just get money from having our money sitting here? Like it’s pretty cool when you figure out how that works.

14:49 Emily: It doesn’t always work out like that over the short-term.

14:53 Jackie: It’s true, we got lucky with which, which years we were investing there.

14:57 Emily: Yeah. I felt that way too. I started investing basically in 2009, like at the nadir of the market and just the last decade has been incredible with, you know, a few hiccups along the way, but overall, obviously really, really strong. And was that in like retirement type accounts or was it more just taxable accounts that are accessible to you?

15:17 Jackie: We had a little bit in some IRAs and the rest of it was just like a generic account that we could move money around whenever we wanted.

Having a Child Motivated the Goal of Home Ownership

15:27 Emily: Okay. So you’re basically living on your stipend, investing your husband’s salary or whatever income he has during that period. At what point did the goal of home ownership materialize?

15:38 Jackie: About the same time we had a kid. So it was in my fourth year of the PhD. That’s when I started thinking, Hey, you know, we’ve got a baby now, at some point I’m going to finish this PhD and where are we going to go? What are we going to do? So that’s when we started doing a lot more life planning and getting a house with a yard somewhere for kids to play. And that’s when that started being like really on our radar.

16:01 Emily: Yeah. We glossed over the whole having a kid during grad school thing. How did that work out with like, did insurance cover pretty much everything? Like, how did the finances of the having a child work?

Health Insurance and Parental Leave

16:13 Jackie: MIT’s healthcare program like yeah. Insurance covered pretty much everything. We paid probably $200 total to have a baby.

16:19 Emily: Amazing. And did you get any leave?

16:22 Jackie: Yes. MIT was good about that as well. And the Media Lab gave me an extra month. So MIT had a policy of two months paid leave for any parents. And then the Media Lab gave me an additional month and that was all paid leave.

16:35 Emily: Amazing.

16:35 Jackie: So I had three months off and then last thing on that was my advisor was awesome. And my lab was awesome in that they’re all very supportive of this and I could work remotely a lot more and was at a point in the program where I didn’t have to go into class anymore because I was just able to just research stuff. So a lot of, a lot of things went into that being, not that bad, like being like a reasonably doable thing. I know it’s not for a lot of women. It can be difficult.

Did You Also Pay for Childcare?

17:06 Emily: So I think about three big expenses when it comes to having a child. We just covered two of them, health insurance and the leave. And then the third one is childcare. You just mentioned working from home, but did you also pay for childcare?

17:18 Jackie: We did not, actually. My husband and I split that.

17:21 Emily: So interesting.

17:22 Jackie: And just managed to work that into our work schedules. That was part of why he was doing such flexible work at the time. And then my lab was flexible. So we just squished childcare and somehow, you know, did lots of work when the baby was napping kind of thing.

17:36 Emily: Yes. I remember those days very well. I have two kids as well, and I’ve actually done one other interview on the podcast from season one. So if newer listeners haven’t seen this one yet, but you’re interested in having a child during graduate school, check it out because I interviewed another graduate student mother married to another PhD father who also did the same thing. I think for the first six months after their first child was born, they completely split childcare and I did not pay for any outside services in that regard. And yeah, she talks about how she managed to you know, complete her dissertation and get a TT job and have the baby. And it’s kind of a really crazy year for her. But it’s incredible that, you know, you took that on and then were able to accomplish it. Was that motivated by finances? Was it motivated by, we just wanted to spend time with our child a lot of time or, you know, what was the reasoning behind that?

18:29 Jackie: All of the above. So, childcare in Boston is ridiculously expensive. But also a lot of you want to spend time with this baby. Like, why would you have a kid if you don’t want to spend time with it? And there are some philosophical things around how we wanted to approach raising our kids and actually being around a lot of the time. I was homeschooled actually growing up. So that’s probably very influential in how I’m thinking about how to raise my kids.

18:57 Emily: Yeah, so a familiar model for you.

18:58 Jackie: Yeah.

How Did You Choose Where You Wanted to Live?

19:00 Emily: Gotcha. Okay. So got the baby, but we’re not paying for childcare or the other associated expenses. MIT did a good job providing you with the appropriate benefits. Okay. So then you said that home ownership became a goal. Once you had the child and you were like, we want to get out of the city life, how did you choose where you wanted to live?

19:19 Jackie: So we decided based on kind of two factors. One, we were not tied to any particular location first. So we could kind of pick anywhere because of the kind of flexible job situation that we’re setting up for ourselves. And then we wanted to move nearer to some of our family. We were like, we’re having kids. We’d love to have some grandparents around. We’d love to live near some family finally, because it’s been a long time since we’d done that. It was really nice. So my husband’s family is in North Carolina. Mine, a lot of them were in Idaho, North Idaho. So between the two of those, we were looking at the different areas and ended up picking Idaho for a variety of reasons. I mean, both places had a lower cost of living. It’s hard to get a higher cost of living than Boston, New York, or San Francisco. Lots of nice, pretty lakes and mountains up here.

Commercial

20:15 Emily: Emily here, for a brief interlude. Taxes are weirdly unexpectedly difficult for funded grad students and fellowship recipients at any level of PhD training. Your university might send you strange tax forms or no tax forms at all. They might not withhold your income tax from your paychecks, even though you owe it. It’s a mess. I’ve created a ton of free resources to assist you with understanding and preparing your 2020 tax return, which are available at pfforphds.com/tax. I hope you’ll check them out to ease much of the stress of tax season. If you want to go deeper with the material or have a question for me, please join one of my tax workshops, which you can find links to from P F F O R P H D S.com/T A X. It would be my pleasure to help you save time and potentially money this tax season. So don’t hesitate to reach out. Now, back to our interview.

Location Independence

21:21 Emily: Sounds like you know, you have intentionally chosen a route that not many PhDs do. You know, a lot of PhDs feel that they have to be geographically flexible to have the type of job that they want. And you’ve gone another direction and said, my primary goal here is to be in certain locations in the country and the job is going to be, it sounds like the job is going to be secondary to that in that you want to work in a way that is flexible to live wherever you want. You want to be location-independent. Is that right?

21:52 Jackie: Yep.

21:53 Emily: And that’s what you’ve done and your husband has done.

21:55 Jackie: Yes. Yeah. That’s one of the main reasons he was working on his smaller software startup was so that he would be able to work from anywhere and not be tied to someone else’s you have to work in this location. And I was not looking at the end of grad school to get an academic job, necessarily. I mean, there’s a university here, but I’m not looking for an academic job or a full-time job currently because I wanted to be able to spend time with my kids and also work on some part-time things.

22:25 Emily: Yeah. I see actually, a lot of similarities between your story and mine actually. I mentioned to you when we started the call that my husband and I recently became location-independent. He still has a job job, but it’s just remote now. And I would imagine a lot of people are in that situation and going forward, a lot of people are not going to be going back into offices and labs and all of that. So depending on the nature of the work that you do, a lot, I think more people in my audience are going to have location independence in their future.

22:54 Emily: And it’s really, it’s exciting, I was telling you too, but it’s also a little bit intimidating to figure out where exactly do I want to live.

23:01 Jackie: We made spreadsheets, we made spreadsheets.

23:05 Emily: You went the direction of going to a lower cost of living area, which is known as geographic arbitrage in the financial world. We are actually choosing to live in a very high cost of living area because we love it and want to be there, but have to make the finances, you know, work out to have balance in that area too. So, in different ends of that spectrum. Okay, so you chose based on, you know, more personal factors where you wanted to live and then comes this, you know, huge accomplishment of buying this home in cash. And I think we’ve already heard how you saved up for it, right?

23:39 Jackie: Yeah, pretty much.

How Much Money Did You Have for Home Buying?

23:40 Emily: So do you want to share like the numbers around that? Like how much money you had to work with by the time you did buy?

23:46 Jackie: Yeah. So when we decided to move, we had about $150K from our non-retirement accounts. We also emptied our IRAs for the most part which was about $25K. So we had around $200K to work with when we were buying a house up here. And relevantly because I no longer had the stipend from MIT when we were moving and my husband’s startup had, like no long-term proven history of income, we wouldn’t have been able to get a loan. So that was also relevant in us deciding to get a home in cash. So we had about $200K to work with and the market up here was moving very quickly at that time. So we came out to Idaho for about two weeks that summer with the plan of when we leave, we will have a house.

24:39 Emily: That’s an incredible story. You say, now you couldn’t have gotten a loan or it would have been, Oh my gosh. So, so difficult, so much paperwork or something. Did you know that that would be the case, like looking forward when you started that taxable savings, savings and investment, or was it just more about having flexibility at that point?

24:59 Jackie: Well, when we first started saving money, we had no idea what we were going to do with all of it. And then we were like, Hey, we should buy a house when we move out of here. And then when we started looking into, how do you buy a house? How do you get a loan? How, how much money do you have to put down on a house? How expensive are houses in the different areas that we’re looking at? As I said, we, we did spreadsheets for a lot of things and calculations about how much money might we have and how much money would we need for this kind of house in this area. And having provable income for getting a loan from just about any bank seemed to be pretty relevant. And because my husband’s business was not quite off the ground yet, it kind of got off the ground a lot more in the year right after we moved, there was relatively little income that we could prove at that point in time, which was, you know, fine for how we lived, because we didn’t need much income to live off of.

25:51 Jackie: But for the purposes of buying a house would have made getting a very expensive house difficult or getting one with a smaller down payment more difficult. And maybe, maybe there was a bank that if you talked to the guy and explained all your situation in lots of detail, lots of paperwork, maybe, maybe they could work something out. But the other factor, I guess, that I should probably talk about was our goal of being debt-free when we moved as well, because we only had a couple of thousand in student loans and we paid that off before we went for the house. So as soon as I was done with grad school I was like, all right, pay off student loans, get rid of any other debt that we have.

Challenges of Mortgages for Fellowship Recipients

26:31 Emily: Gotcha. I probably know a little bit more than I should about getting a loan at this point because my husband and I are anticipating buying a house soon. My brother is a mortgage loan officer, so he sells mortgages. So I’ve talked with him quite a lot about this process. And thirdly, he’s actually helped me quite a bit. We’ll link in the show notes to some episodes I’ve done before on how people receiving fellowships during grad school or a post-doc can or cannot ultimately get a mortgage because a lot of times they’ll be just flat, turned down right away. There is sometimes a way to get a mortgage, but it’s really tricky. So we’ve done all that in these other episodes, but to your point, self-employment income is another really kind of dodgy form of income. I know because that’s what I have that is going to be looked at a lot more carefully and you have to prove a lot more than, you know, you would for like a W2 type of situation.

27:24 Emily: So, yeah. It sounds like, you know, you, you started the savings investing for whatever, you know, because you were in a position to be living on just the one salary and saving the other, and it turns out that it helped you accomplish this like major goal. So now, you know, sounds like you have little housing expense, it would just be like insurance taxes, this kind of stuff, very minor relative to what a mortgage would be, correct?

27:51 Jackie: Correct. Yeah.

What Are Your Future Financial Goals?

27:52 Emily: Yeah. And so what are you thinking now about your finances? Like your, you know, your living expenses must be quite, quite low. So what are you working on next?

28:03 Jackie: So for what’s next we like the idea of having a bigger house with acreage around it. Because up here, we have, you know, the small neighborhood house on, you know, maybe a quarter acre, you know, enough space for a garden, a lawn. But we really liked the idea of having some more acreage out here because this is a great area for that. And then be able to keep this house and rent it out as side income. We would like to keep increasing our income enough that we can increase charitable giving, investing in the local economy and community, that kind of thing. Relevantly, we got our house for about $210K and it’s now worth over probably over $300K, just in the last two years because of the increased, this area is growing a lot. So we liked the idea of maybe being able to get something else soon and then maybe get into more real estate in this area. It seems to be growing a lot.

29:01 Emily: So what would be the plan for the next house? Would you try to take out a mortgage given the change in your husband’s income or in whatever you have going on or is it saving up more cash?

29:12 Jackie: That’s still up for debate. Kind of depends on what kind of house we want to have. Yeah we still have been talking. So that’s been actually a fairly recent conversation. We’re like, okay, we’ve been here for a couple of years now. Like jobs are working out better, you know, one is increasing, income’s increasing, like what are we doing next? So that’s something we’ve actually just been talking about a lot recently is like, what kind of house would we want next? And would we want to do that in cash again, or not? Because now we could deal with a mortgage payment, you know, we could do that now, but not sure.

Best Financial Advice for Another Early-Career PhD

29:46 Emily: Yeah. So still under development. Well it sounds, I don’t know, really lovely. It sounds like a real, you know, you’ve really done lifestyle design, I guess is the way that, you know, it’s kind of put in like the entrepreneurship community of figuring out how you want to make money, where you want to make money, where you want to live getting your expenses down very, very low, if you want them to be. And then maybe even turning this house into an income producing asset, ultimately. Wow. Like what a story. As we wrap up this interview, is there, what’s your best financial advice for another early-career PhD?

30:21 Jackie: Probably to actually have long-term financial goals. Because having something you’ve got your sights on helps a lot when you’re coming up with like, if you’re, if you’re trying to stop spending money or trying to budget and keep to a budget or whatever it is, having something in mind that you’re going for helps a lot. Because we got a lot more conscious about what we were doing with money when we were like, Oh, we have a baby and we want to move and we want to get a house. We started paying a lot more attention to what we were doing with our money. As the second thing, don’t actually be afraid of investing money in the stock market or mutual funds because in a good year, that can actually make you quite a lot.

31:01 Emily: Yes. We also made some investments in a taxable account that has grown quite a bit in the last decade, I guess. It’s actually part of our house down payment of money. Now it’s been allocated in that direction. I of course like need to say like past performance is no indication of future return. So like this was a great, you know, three or so year period where you got to do this, it’s been a great time for me investing, but you know, this ride is not going to continue forever. And so I think what you were just saying, like if you have a specific goal for your money, like think about the timing and think about how much risk you want to take with it. And if you’re flexible about it, like the house was not necessarily quite, you know, a goal on your horizon yet, it makes sense that you would, you know, invest at that time. But once you have the goal in mind, like really think about, okay, do I need the money, do I need to take it out of the market now, do I need to, you know, go a little bit more conservative in the investments because you can hit a bumpy period and then not have the time you need to write it out. But if you’re flexible, keep the money invested, then you know, you can go for the higher return over time.

32:03 Jackie: Yeah, we actually lost about $10K right before we bought the house because Trump started a trade war with China. We were like yeah so I guess we should pull this out of the stock market.

32:13 Emily: It’s really, really hard to time the market. Yes. Well, great lessons here and thank you so much for sharing, you know, again, the lifestyle design, the frugal living, the goals. I think it’s, you know, a wonderful story and well illustrated for my audience. So it’s really been a pleasure talking with you Jackie.

32:29 Jackie: Thanks. Thanks for having me on.

Listener Q&A: Tax Claims

32:36 Emily: Now, on to the listener question and answer segment. Today’s question actually comes from a survey I sent out in advance of one of my university webinars this spring. So it is anonymous. Here’s the question. Quote, how do I do my taxes? What can I claim on my taxes? Can I claim a laptop that I needed for school as an expense? End quote. So this is a really big question. Obviously not one I can answer in a few minutes on this podcast. So the best place to go for further resources about your taxes, especially as a funded graduate student, is my website pfforphds.com/tax. That’s my tax center from which I’ve linked all of my relevant podcast episodes and articles and videos and so forth. This answer is even too big for a set of articles. So I have created an entire tax workshop to help answer this question. The workshop comprises 11 videos, two worksheets, and one Q&A call per month throughout tax season. So if you’re interested in getting into the workshop and having a full exploration of this question, please go to pfforphds.com/taxworkshop.

33:55 Emily: Okay. The part of the question I do want to tackle on this episode is the last part. Can I claim a laptop that I needed for school as an expense? There are four higher education tax benefits. However, one of them is virtually always used by funded graduate students. This benefit is called tax-free scholarships and fellowships. I’ll tell you whether or not you can use a laptop or a personal computer as a qualified education expense for the purposes of making scholarship and fellowship income tax-free. I won’t comment during this episode on whether or not you could do it through one of the other three benefits. So how tax-free scholarships and fellowships generally works is that you have some income as a graduate student, for example, the scholarship or waiver that pays your tuition. If me mentioning scholarships as income shocks you, please go check out my further resources.

34:59 Emily: On the other side of the ledger, you also have some higher education expenses such as tuition. Now, tuition is always is considered a qualified education expense for the purposes of making scholarship and fellowship income tax-free as long as you are enrolled in a degree program at an eligible educational institution. So in the case of tuition for a fully-funded graduate student, how this usually works is that the tuition charge and the tuition scholarship or waiver exactly equal one another. And so basically use the qualified education expense to make the scholarship tax-free. So they cancel each other out. The income, the scholarship, has no net effect on your taxable income. You’ve made it tax-free. And furthermore, you can’t use that tuition charge to take any of the other higher education tax benefits because you’ve already used it for this one. Okay. So that’s generally how the benefit works.

36:00 Emily: The question that I’m drilling down to is, is a laptop or a personal computer considered a qualified education expense for the purpose of making scholarship and fellowship income tax-free? Now, please note, to get down to the question of whether your laptop or personal computer is a qualified education expense, you have to have some scholarship and fellowship income to cancel against it. If you’ve already canceled all of your scholarship and fellowship income against other qualified education expenses, like tuition and required fees, then you would not have any additional scholarship and fellowship income to try to cancel against a laptop. So this benefit wouldn’t apply in that situation. However, there are lots and lots of funded graduate students who have scholarship and fellowship income that exceed the tuition and required fees and so forth. So this question would apply to them. So is a laptop or a personal computer, a qualified education expense for the purpose of making scholarship and fellowship income tax-free?

37:04 Emily: I’m pulling up IRS publication 970 because I’m going to read the definition of a qualified education expense. Quote, for the purposes of tax-free scholarships and fellowship grants, these are expenses for tuition fees required to enroll at, or attend an eligible educational institution and course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction. End quote. The definition goes on to specify some types of expenses that are not qualified education expenses, laptops and personal computers were not included in that list. So we go back to the second half of this definition of qualified education expenses regarding supplies and equipment that are required for the courses at the eligible educational institution. They must be required of all students in your course of instruction. So the question is, does a laptop or personal computer fall under that definition? Here’s my opinion on the matter, this is not tax advice, by the way. If you can prove, if you can show in writing that a laptop or personal computer is required of every student in your course of instruction, that could be an individual course that you’re taking.

38:27 Emily: That could be the degree program that you’re enrolled in. That could be everybody in the graduate school. At whatever level, if a laptop or computer is required of all the students, then it can be considered a qualified education expense. I know that we both know that pretty much a laptop or a personal computer is required of every PhD student, especially in the time of COVID. However, you and I knowing that it’s a tacit requirement is not the same as it being an official requirement that the IRS would accept. The theory is that you, as a graduate student can go to the computer labs provided on campus and do all your work there, I guess, which obviously is ridiculous. But in my opinion, for this to work as a qualified education expense, it needs to be down in black and white somewhere that having your own computer was required.

39:29 Emily: Now I went searching to see if I could find some of these in-writing requirements. So I did a few different Google searches. Does X university require students to own their own computers? Obviously, you would do the search for just your own university. I found a really clear example at Iowa State University, page titled Computer Requirement, quote, beginning in fall, 2020, all students at Iowa State University will be required to own or obtain a laptop computer or other device appropriate to their discipline. End quote. The page goes on explaining why this requirement is in place, but having this page, you would be able to show to the IRS, Yes, I am required as a student at Iowa State University to have my own laptop or computer. It is a qualified education expenses for the purpose of making scholarship and fellowship income tax-free. Super clear. However, you will not find this kind of requirement or clear language everywhere.

40:25 Emily: For example, on the computing and information technology page on Brown’s website, it says, quote: Brown does not require students to own a computer. End quote. Of course, there’s more text on that page, but there it is, you’re not required to own a computer as a student at Brown. So unless you can find maybe something more specific to your course or your graduate degree that says something else, this would probably apply. So you would not be able to say that your laptop or personal computer is a qualified education expense. Now, as I said earlier, you know, there could be a university-level requirement. It could be a graduate school level requirement that could be, you know, for your individual department or program, even for an individual course, you know, you might find a requirement, any one of these levels. So please do look at all of those levels to see if you can find in black and white, this kind of requirement.

41:13 Emily: So for example, I searched out Georgia Tech, and I found their page titled, Required Computer Ownership, quote, all undergraduate students, entering Georgia Tech are required to own or lease a computer. End quote. So I could find that requirement for the undergraduates, you would have to search and see if they had a similar requirement for the graduate school or, you know, your degree program. I couldn’t find that. So I think that’s what it comes down to. Can you find in black and white that a laptop or a personal computer is required for you at some level by your university? If you can, it’s a qualified education expense, and you can use it to make some of your scholarship and fellowship income tax-free that was not already made tax-free by other qualified education expenses. This question showcases really well why you can’t rely solely on your 1098T to provide you with information about your qualified education expenses.

42:06 Emily: A laptop that you purchase from a retailer that’s not your university would not be reflected on your 1098T, yet, as we’ve seen under certain circumstances, it can be a qualified education expense for the purposes of making scholarship and fellowship income tax-free. There are other examples like this of qualified education expenses that don’t show up on your 1098T. So you cannot trust your 1098T alone. You have to really think holistically about what your higher education expenses were for the year, and then figure out whether they can be considered qualified education expenses. So I know that was a lot to follow, especially if you’re new to my tax material and you’ve never heard me talk about how your fellowship scholarships are part of your potentially taxable income. Again, if you want more resources, pfforphds.com/tax is the best place to go for articles and podcast episodes and so forth. But you’re going to find the really in-depth information in my tax workshop. Again, pfforphds.com/taxworkshop. I answer questions like this one once per month during our Q&A calls. The next Q&A call is coming up on Sunday, March 14th, 2021. Thank you so much to Anonymous for submitting this question. If you would like to submit a question to be answered in a future episode, please go to pfforphds.com/podcast and follow the instructions you find there. I love answering questions. So please submit yours.

Outtro

43:34 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast, and instructions for entering the book giveaway contest and submitting a question for the Q&A segment. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt, repayment, and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

Knowing Your Worth in an Environment that Devalues Your Work

January 18, 2021 by Lourdes Bobbio

In this episode, Emily interviews Sam McDonald, a fifth-year PhD student in informatics at the University of California at Irvine. Sam received the NSF GRFP, completed a lucrative internship at a tech company, has won multiple smaller grants and fellowships, and taught classes for additional income. Upon observing this, some of her peers questioned why she was still applying for awards. Even more light was shone on this issue when her department compiled a list of all the grad students’ income as part of the Cost of Living Adjustment protests in the University of California system; Sam was the highest-paid grad student. In response, Sam became discouraged and even stopped submitting funding applications until her advisor counseled her about knowing her worth. Sam has now come out the other side of this financial shaming experience and has great advice for anyone else questioning their worth and what they should be paid in academia.

Links Mentioned in this Episode

  • Find Sam McDonald on her website and on Twitter
  • PhDStipends.com
  • PostDocSalaries.com
  • Personal Finance for PhDs: Tax Resources
  • Personal Finance for PhDs: Community
  • Personal Finance for PhDs: Podcast Hub
  • Personal Finance for PhDs: Subscribe to the mailing list
grad student know your worth

Teaser

00:00 Sam: Sometimes our expertise and our ability to do stuff is so undervalued. And it’s hard to measure how much you’re personally valued because you have all these different discrepancies in how different grad students are getting paid. And you really, I think just have to sit yourself down and look at comparatively, well, if I were to go into industry right now, how much would I be making? So I’d recommend the students to really go out there and see how much is my value in other places versus in grad school, where I think we have this skewed sense because of this limited budgeting construct of how much you’re actually worth.

Introduction

00:33 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season eight, episode three and my guest today is Sam McDonald, a fifth year PhD student in informatics at the University of California at Irvine. Sam received the NSF GRFP, completed a lucrative internship at a tech company, has won multiple smaller grants and fellowships, and taught classes for additional income. Upon observing this, some of her peers questioned why she was still applying for awards. Even more light was shone on this issue when her department compiled a list of all the grad students income, as part of the cost of living adjustment protests in the University of California system. Sam was the highest paid grad student. In response, Sam became discouraged and even stopped submitting funding applications until her advisor counseled her about knowing her worth. Sam has now come out the other side of this financial shaming experience and has great advice for anyone else questioning their worth and what they should be paid in academia.

01:42 Emily: It wasn’t until Sam brought up this topic to me, that I realized that I had my own story of financial shaming and academia. Additionally, several of my relatively well-paid grad student, friends, acquaintances, and podcast guests have told me their stipends or that they had won a fellowship, but asked me not to repeat that information. I believe this was in fear of the financial shaming they might experience from their peers. I am a big advocate of transparency around stipends and benefits, which is why I started the websites, PhDstipends.com and PostdocSalaries.com. But transparency is hindered by shame. Asking for what you’re worth is hindered by shame. Shaming someone else for their financial success doesn’t put any money in your pocket, it just discourages them and ultimately harms our whole community. I’m so pleased that Sam volunteered to give this interview. I hope her message encourages you to swing for the fences financially and to speak respectfully when discussing sensitive topics like finances. Those are great lessons for me too.

Book Giveaway

02:35 Emily: Let’s turn our focus to the book giveaway contest in January, 2021. I’m giving away one copy of the House Hacking Strategy by Craig Curelop, which is the Personal Finance for PhDs Community book club selection for March, 2021. Everyone who enters the contest during January will have a chance to win a copy of this book. I’m delighted to bring attention to house hacking, which is when you buy a home live in it and rent out part of it, thereby radically reducing or even eliminating your housing expense. It’s a new name for an old tactic that grad students and PhDs have been using for a very long time, but this book puts a highly strategic spin on it. If you’d like to enter the giveaway contest, please rate and review this podcast on Apple podcasts, take a screenshot of your review and email it to me [email protected]. I’ll choose a winner at the end of January, from all the entries you can find full instructions pfforphds.com/podcast. Without further ado, here’s my interview with Sam MacDonald.

Will You Please Introduce Yourself Further?

03:54 Emily: I have joining me on the podcast, Sam MacDonald, who is a graduate student at the University of California at Irvine and she’s here to talk with us today about kind of a touchy subject. It’s financial shaming, and she’s experienced this and I’m really just excited that she’s decided to come forward because I know that her experience is not unique. After she approached me about this topic, I started thinking and I realized I’ve experienced this. I’ve realized I know other peers who have experienced this, so she’s definitely not alone. And we’re going to treat the subject very carefully today. So Sam, thank you so much for your willingness to talk about this. I know it’s not an easy subject matter at all. Would you please tell the audience a little bit more about yourself?

04:37 Sam: Yeah, absolutely. Thank you so much for having me Emily. Like Emily said, my name is Sam McDonald. I am a fifth year PhD candidate at the University of California, Irvine studying informatics. I actually study the United States Congress and their use of constituent communication. So I’ve been back and forth in DC and in California to figure out how members of Congress use technology to communicate with their constituents and how to make it better. I have an undergrad degree from the University of Maryland Baltimore County, where I did a lot of research before going straight from undergrad to my PhD and I got a master’s along the way that I got from UC Irvine.

Funding During Graduate School

05:11 Emily: Thank you so much that overview. Super interesting subject matter, not what we’re getting into today, but thank you so much for the context. So what’s been the funding situation for you during grad school?

05:21 Sam: My funding has been different for different years. My first year I got the GAANN fellowship, which is from the US Department of Education that my department supplied to me, which was really helpful not to TA at first. Then I TAed for two years, and while I was doing that, I applied for the NSF GRFP and luckily I got it to fund my last three years of my PhD. I’ve also spent two quarters teaching as additional funding and have gotten grants from congressional research funding and travel grants. And then also I’ve worked for Facebook for an internship, so I have internship money as well.

05:54 Emily: Can you give us like an idea of much money you were being paid — and I know it might be different year to year — versus, if you’re aware of it, the baseline stipend in your department?

06:05 Sam: Yeah, absolutely. The TA baseline stipend is around $2,200 for teaching us a little bit more. And my GRFP is about $2,800 per month, just to give you a baseline ballpark for how much that is.

06:21 Emily: Okay. And it sounded like in your second year you were being funded only from TA-ships. Is that right?

06:27 Sam: Yes.

06:27 Emily: Okay. So on that year, you lived on that baseline stipend and is it every other year you’ve been above that for one reason or another?

06:34 Sam: Yeah, it’s really fluctuated for different months, depending on if I’m getting travel grants, going to DC during the summer is quite expensive, so getting additional grants for that to be moving around, but still keep my apartment in California. I think my money has fluctuated every single month, being different because of all these different activities that I’m doing in addition to this baseline salary.

06:57 Emily: That is such an interesting budgetary conundrum. One that I would love to explore, but not our subject for today. And this is maybe not super on this subject, but I’m just curious how much the internship at Facebook paid.

07:09 Sam: Let me remember. I think it was around. I could be wrong, I think it was around seven per month,

07:16 Emily: $7,000 per month?

07:18 Sam: Yeah. I think it might be a little bit higher than that. I’d have to go back and double check, but it’s definitely around that ballpark.

How Sam’s Peers Reacted to These Extra Sources of Income

07:24 Emily: Yeah. Sounds great. Well, I am of course, wanting to congratulate you on winning the NSF, gaining these other travel grants, but I understand that’s not necessarily how some of your peers reacted to you having this wonderful CV full of accolades.

07:40 Sam: Yeah, absolutely. The NSF GRFP — I want to particularly point out, I’ve had three advisors, not through my own fault, one retired, one moved, and then one picked me up like a lost puppy and she’s been great, but none of them have had funding for me, so I’ve always had to go out and get my own funding as well, which is why I was so motivated to get a lot of these grants. But I always haven’t had the best reactions to it. After I got the NSF, which is amazing and it’s given me so much more flexibility, I still had to pursue other grants for travel to DC, and then I just kept applying to more grants because it looks good on your CV. A lot of students were really supportive, but one or two would always sort of give me side comments of like, “Oh, you’re applying for this grant, I thought you already had the GRFP. Why do you need this? Why did you win this grant even though you already have these things?” So I’ve had to deal with a little bit of tension and figuring out my own worth in that process.

08:30 Emily: Yeah. How did you feel when you got those snide comments?

08:35 Sam: I felt a little bit guilty. I will say with a caveat that like I am a more privileged person. I’m white. I came from an upper middle class family. I am working in technology, so I get tech internships. I have a really supportive advisor. I live on subsidized housing and I also live cheaply because I love hiking and I bike more than I drive places. Just for context here at the University of California, Irvine it’s so expensive to live in Orange County that even the professors have their own subsidized housing on campus and there’s an entire professor community. I’ve done a lot to really sort of push myself towards getting these grants, and it kind of made me feel bad that I was getting them because I am in such a privileged position. So for a while I was feeling bad about applying to grants and had to talk to my advisor and other peers about it to figure out if I’m in the wrong here of applying for more money, even though I already have a more stable income.

09:28 Emily: So it seems like even though a lot of your peers were supportive of this and they were helping you edit your applications and so forth, a few, a minority, were making these comments. What do you think their kind of motivation was behind that?

09:43 Sam: I think a lot of students — we’ve had protests in California about this — are struggling financially in some ways, or maybe they don’t get the grants that they want, and then they’re feeling like I’m getting a lot of grants and my research is very attractive for the current context with everything going on in Congress and wanting to improve that. I naturally do have an attractive topic and I think some people feel like maybe their topics aren’t reaching that same attractiveness when it comes to advertising your own research. Also it’s hard being a grad student and I’ve worked really, really hard to have really good grants. When I did the GRFP, I went to the writing center on campus at least 12 times and had dozens of friends review it and professors review it, so I really, really take my time with grants where I know some people also can do them last minute because they’re so overwhelmed with everything else. I think it depends on the person, but it’s just the struggle a lot to get grants in the first place, I think.

10:38 Emily: Yeah, definitely. I understand that at some point, this sort of crystallized and it was not only people by happenstance noticing that you won this grant or that grant, even though you already had the GRFP, but at some point it came down in black and white. Can you tell us about that?

10:54 Sam: Earlier this year, our department got together and decided to make a spreadsheet of everyone’s income from the department, because this was part of our consolidarity with the COLA protests. And for those who don’t know, COLA stands for cost of living adjustment. Here in California there’s been a lot of protest from grad students around, the cost of living adjustment, especially at UC Santa Cruz, where a lot of grad students are spending 50 to 70% of their income on just their housing alone, because it’s so expensive to live and they are demanding to have an adjustment to their rent because they are so rent burdened. So UC Irvine and my department in particular, especially one or two students who are really involved in the unions on campus, wanted to make a spreadsheet to show how much did we all make because we needed the data in order to demonstrate how most of us are rent burdened. Even though we have subsidized housing, even though we are a tech department, we found out that 99% of us are still rent burdened just going through this. But did find out in that instance that I do make more money than everyone else in the department. And that was in black and white and that’s on a spreadsheet that’s available to all students in my department to see.

12:03 Emily: I think this is a great process to go through actually and I am very in favor of more transparency around what people make, especially in grad school, not necessarily with your name tied to it, but just what people are making and the range. I’m kind of curious about why you ended up, I guess it was because it was asked of everyone, but what the motivation was for including people who were on fellowship, especially external fellowships like yours, along with people making the baseline stipend from the department. The argument is going to be about increasing the baseline stipend, right? So is it, we want the bottom sector here, that’s just making the baseline to be brought up closer to where you are, closer to where other people who receive outside fellowships are? I’m kind of wondering what the angle is on that.

12:47 Sam: That’s a great question. When this was sent out to students, it was completely optional. You had the option of doing it anonymously. I think most of us just decided to do it publicly and to be able to share how much, and we did put specific notes for each person of like where your funding was coming from — is this the baseline, or is this with an addition to external income? Is this pre-tax, this is post tax?. So we had all those details as well and it is a good question because I think with our department particular, there is an assumption, especially in the summertime that you’re going to go out and get other sorts of funding. And they know that there are a lot of students in our department who have Google and Facebook and Amazon and other sorts of internships because we are a more attractive group for those big tech companies that overcompensate sometimes for this wealth gap and this discrepancy for teaching.

13:34 Sam: I think that was also sort of demonstrating, even if there was a baseline, how much students were maybe feeling like they have to go for these internships in order to supplement their income. And just seeing these different discrepancies of if you were lucky and privileged enough to even get an internship. There’s actually someone in our department who studies this and how to get a tech internship, and she’s really helpful, but also shows the different discrepancies that can happen for who gets it and who doesn’t. So all those details, I think, were just really interesting to sort of demonstrate how broad the ranges and incomes in our department, just for students.

14:06 Emily: Yeah. It’s a super interesting project. I’ve actually recently heard of another, not related to the California specific protest, but another department where students took this on and used it as a negotiation tactic, as in a sense collective bargaining, although they were not in a union. So it can be a really powerful exercise. And what happened with either your peers or with your own feelings about this after the spreadsheet is out there?

14:28 Sam: The spreadsheet was out there during the pandemic, so I haven’t seen much of my peers in person, so there’s less discussion that I can have with them. Definitely for me personally, it did really two main things for me. First, it really sort of solidified this idea that I do make more money than everyone else in the department, and sort of feeling a little bit shameful and a little bit uncomfortable with that, but also at the same time, recognizing that I have a privilege to have these sort of grants and I’ve worked for it, but I’ve also been very lucky with some of these grants. And because of that, I do feel like I have a responsibility to share that and make that transparent and advocate for the people in my department who don’t. So on the one hand, it does make me uncomfortable to come out and say like, “Oh, I make a lot of grant money and I do a lot of other things to supplement that money in different ways, but also I am privileged enough to share this with you to show these discrepancies and make sure that we’re all coming up to a baseline.” And even before I had my tech internships, despite getting all these grants, I was still technically considered rent burdened. It’s kind of funny to show that you make more, but we’re all still in this sort of struggling standpoint, so it doesn’t really help to have as many tensions, in-fighting, I guess, as much as it is to collectively work together.

Continuing to Apply for Additional Grants

15:38 Emily: How did you feel regarding going after more funding?

15:45 Sam: That was a little bit hard for me. I had to talk to my advisor once about this and really figure out what’s the best path, because I did have to tell her once that I felt uncomfortable applying for more because I’ve gotten some of these comments. I was like, “I have enough, I’d be okay.” And she really sat me down and made sure I remembered what my worth is and that grants are really important for CVs if you’re wanting to go into academia, and that you should not stop applying for things just because you have some money.

16:13 Sam: I have a great example of this where actually one of my funders, the democracy fund in DC helped me fund an entire summer in DC and they asked me, “Okay, how much do you need to do your research? And I was like, “okay, well I need this much for housing and this much for food and this much for a plane ride and some Metro and like, that’s it.” And they came back to me and said, “This is great, but you forgot to mention your actual value in terms of the work that you’re doing for this grant, so we’re going to double what you’re asking for.” That just blew my mind because it was the first time that someone came to me and told me you’re worth way more than you’re asking for and you need to make sure that you’re asking for these things at a higher level. I think even now I am getting these grant fundings, it doesn’t necessarily mean that that is my baseline worth just because I get something. And that took me a while from my advisor really encouraged me to keep applying for grants coming to me and telling me that I’m worth more than what I’m asking for.

Commercial

17:06 Emily: Emily here for a brief interlude taxes are weirdly, unexpectedly difficult for funded grad students and fellowship recipients at any level of PhD training. Your university might send you strange tax forms or no tax forms at all. They might not withhold your income tax from your paychecks, even though you owe it. It’s a mess. I’ve created a ton of free resources to assist you with understanding and preparing your 2020 tax return, which are available pfforphds.com/tax. I hope you’ll check them out to ease much of the stress of tax season. If you want to go deeper with the, or have a question for me. Please join one of my tax workshops, which you can find links to from pfforphds.com/tax. It would be my pleasure to help you save time and potentially money this tax season. So don’t hesitate to reach out. Now back to our interview.

Understanding the Value of Your Work

18:12 Emily: I’m really glad that you can share that with our listeners, because some other people in the audience might be feeling the same way — sort of limiting themselves and saying, “well, I shouldn’t go after more. I shouldn’t do this. I shouldn’t do that.” You had these great mentors in a sense in your life to help you push back against that, but maybe someone in the audience doesn’t have that and they’re hearing this line of thought for the first time, which is really wonderful, so I’m really glad you’re sharing that with us now. Is there anything else that you want to say about like understanding your worth? I mean, that is not just in the context of fellowship and grant applications, but just for graduate students more broadly, this is a very tricky topic to value yourself.

18:53 Sam: Yeah, absolutely. I think sometimes our expertise and our ability to do stuff is so undervalued and it’s hard to measure how much you’re personally valued, right? Because you have all these different discrepancies and how different grad students are getting paid. How much you’re worth versus another grad student. You really, I think just have to sit yourself down and look at comparatively, if I were to go into industry right now, how much would I be making? How much is my value in terms of giving to different nonprofits or companies, which was what I was doing. I was technically partially consulting, but mostly had a grant to do my own research. Having those opportunities and making myself step out there and ask other people, “how much am I worth to you?” I think that makes a big difference, so I’d recommend to students to really go out there and see like how much is my value in other places versus in grad school, where I think we have this skewed sense because of this limited budgeting construct, of how much you’re actually worth.

19:46 Emily: I think that’s a really excellent point and I want to underline it that who is paying you, that context, matters a lot in how much you can command for your value. Your value can be the same in the academic context, in the private sector, or in the nonprofit sector. But what you can get paid is vastly different from those different contexts and if you stay stuck in just the academic context, you’re not really going to realize all those different price points, in a sense, for your work.

20:16 Sam: Yeah, absolutely. I’ve come across different discrepancies, even internally, because in addition to having the GRFP and doing my research, I was extremely lucky and my department gave me a chance to teach twice, the first time being right at the onset of the pandemic. And me never teaching before and then teaching 140 students online wasn’t the funnest, but it really showed me how much they were also paying. And actually apparently we get paid more as grad student lectures than adjunct faculty do, which is kind of crazy think about because we have a better union. Recognizing the transparency that “wait I’m a grad student, but I make more than an adjunct faculty.” That’s just telling me that the value system inside the university is skewed and I really shouldn’t use that as a metric for my worth and that I really need to go outside the university bubble to understand that metric at least for grad school.

Financial Transparency in Academia

21:10 Emily: I understand we’ve been in COVID times, you haven’t seen much of your peers so I don’t know if you’ve actually, now that you have this new mindset around going after things and valuing yourself, maybe you haven’t had a chance really to speak with your peers and receive a comment and be able to respond or push back against it. Certainly tell us, have you had that opportunity at all?

21:33 Sam: No, I really haven’t just because everything’s remote and most of the stuff is just friendly, get togethers and things like that. There was a little bit of work with COLA still going on, but that’s a little bit hard with everything being remote and kind of put off to the wayside, I think, in a lot of people’s minds.

21:48 Emily: Definitely. I guess maybe in preparation for you once again seeing your peers in some months, maybe — we’re recording this in January, 2021 — is there anything that you think that you’ll say to your peers at that time, or maybe something you wished you could go back and tell them, earlier on in this process when these comments started?

22:09 Sam: Yeah, absolutely. I mean, the biggest takeaway that I’ve really found, especially contributing to this data when it comes to COLA is that we’re really all in this together. And it’s really important to be open to this process, to share it with other grad students and to not really react negatively when other people are potentially making more than you are applying for more grants than you are, because everyone’s so different. Especially even in my department — my first advisor was an anthropologist, my second was a computer scientist, and my third had a business degree a PhD. Even in that, the professors in our department have different scales of finances just because they come from different backgrounds, so it’s all a little bit hodgepodge anyways.

22:46 Sam: But most importantly, I think it’s important to be transparent. I had an occasion where we had new grad students come into the department, like accepted grad students, and they had a panel of current grad students answering questions about what it’s like living in Irvine. What is the rent like? What is it like being a student and what type of classes do you take? And one of the accepted students asked “what is your stipend like, and how much is it to live on campus?” And none of the other students on the panel were directly answering the question. They’re like, “Oh, it’s enough. It’s reasonable.” And I was like, why aren’t you giving people a number and I just straight up said, make this much money. This is how much I pay for rent. And this is for this type of housing. And they’re like, “Oh, thank you. That’s really helpful.” And I think there’s a stigma still even just to share for accepted students, this is how much you’re actually going to make, because there’s some uncomfortableness with this transparency that I think really needs to be broken because it really does help us collectively to have those discussion.

23:46 Emily: Yeah, thank you for that. And of course, I also contribute to and promote this process through my website, PhDstipends.com and PostdocSalaries.com. That’s an anonymous way that you can share what you’re making, what the funding sources and so forth, because that is also super, as you were just saying, important in this context. Are you making a baseline stipend? Do you have supplemental money coming in from XYZ, other sources? Are you taking out student loans to supplement the income because the rent is so high? Whatever the situation is I’m definitely in favor of being more transparent about it. But I certainly understand the discomfort because this is not, of course, something that exists only inside academia, only in our context, but in our entire society. Employers, even if they can’t actually disallow it, certainly discourage employees from sharing their salaries with one another. It’s really an entire society wide situation, so it’s really commendable for you and also for your peers that you are doing more to throw back the curtain and say this is what it is and we want more and using it as like a bargaining tool. It’s really awesome.

24:49 Sam: Yeah, absolutely. And especially, I think now that we’re having more conversations about minority students and getting a leg up for a lot of people who are underprivileged, it helps to know where the line is and what they should be meeting equally. I work a lot with Congress and there are so many debates about congressional staffers, because staffers are woefully underpaid, but there’s no transparency as much. There is some in documentation about knowing people’s worth in that context. So I’ve just been around these discussions and I feel like the more that we can pull back the curtain, the more we can level up people, especially people who are underprivileged in the beginning and even that playing field.

Advice for Other Early Career PhDs

25:22 Emily: Yeah. Thank you so much and thank you for your willingness to come on the podcast and talk about this because it’s a bit of an uncomfortable process. As we wrap up the interview, the question that I like to ask all of my guests is what is your best financial advice for another early career PhD? And that could be something that we’ve touched on in this interview, or it could be something completely different.

35:43 Sam: Yeah, absolutely. Going along with the theme here, apply to everything, even if you think you have enough, because you’re often worth way more than you think that you are, things cost more than you think they’re going to be in the beginning. That’s always something that happens too. So I think that’s really, really important and always being smart with your money. I’m personally a big fan of the FIRE method. I barely eat out. My activates that I love are cheap, so I’m just naturally in that mindset of being more financially savvy than I think a lot of people want to be, but that’s okay, and that’s my position. Not everyone needs that. But I think the more that people understand to apply and to really say “I could have more and I can really utilize this to my own advantage.” Take advantage of it. There’s so many grants out there that barely anyone applies to and those micro grants really can add up. Just applying for anything that you possibly can, I think is really important. And I know sometimes you get tired, especially towards the end of your PhD, like I am now, but it definitely makes a huge effect in the long run, especially you want to talk about compound interest and investments and things like that. Absolutely doing those as much as possible in the beginning.

26:49 Emily: Yeah. Thank you so much for that advice. And I totally agree with that. I want to emphasize two components of that. One is, like you were just mentioning, kind of the only way you can get a raise as a graduate student is to win outside funding. And whether that is outside funding that replaces your stipend at a higher level or supplements a stipend that you’re receiving, maybe like you mentioned earlier, taking on extra teaching work could be another way to do that. But the fellowship and grant applications are really the way to do it without actually adding more work to your life, so it’s kind of the equivalent of getting raised rather than just taking on more hours of work. A lot of paths to higher income are barred for graduate students, but this is one that is available.

27:30 Emily: The second thing that I wanted to emphasize is, you mentioned earlier that your advisors don’t have funding for you, so this was completely your responsibility. I think that’s part of this mindset of you know that you have to provide for yourself, but I just want to emphasize for people who do have funding to fall back on as a research assistant or teaching assistant, whatever it is for their advisors or their departments, the word guarantee might be in there, but what does it actually mean? And the word guarantee you might not be in there and what does that mean? I had a friend for example who had the NSF GRFP and that finished and she still needed another year or something. And because of a situation going on with her advisor not providing funding as he had in the past, she was left unfunded for a year. That was not something she ever anticipated. That was not supposed to happen in the way the funding typically went in this department, but it did happen. She had to negotiate and say, “you know what, I brought in the GRFP, you can give me another year. I brought in three years of funding.” But that wasn’t necessarily guaranteed to work.

28:37 Emily: In a sense, in academia you’re a little bit like an entrepreneur. You have to hustle for your own money. Yes, you’re supposed to be paid by someone, but how secure is that really? It feels to me a little bit more secure to be applying for lots of different things, have a lot of irons in the fire. And if those don’t work out, at least you can say to your department or to your advisor, “I have applied for four grants in the last year. Hey, they didn’t work out, can you give me some bridge funding?” There’s a way to argue about that too. I think there’s a lot of merits and a lot of different directions for applying for as much as you possibly can. I’m really glad you came back around to that position after having these conversations with your advisor and so forth.

29:19 Sam: Yeah, absolutely. And I love what you said about thinking about it as a raise. Especially as you’re getting more and more in your PhD, you are more valuable, but your finances stay exactly the same. I love the idea of thinking about applying as a way to show that your worth increases over time. Thanks for sharing that too. Yeah.

29:35 Emily: Well, thank you so much for joining me today for this interview, Sam, this was really enlightening.

29:39 Sam: Yeah, absolutely. Thank you so much!

Listener Q&A: Investing

Question

29:42 Emily: Now onto another one of our new segments, the listener question and answer. Today’s question actually comes from a survey I sent out in advance of one of my university webinars this past fall, so it is anonymous. Please note that nothing I say in the segment or anywhere else on the podcast is investing advice.

Answer

30:00 Emily: Here’s the question: How do I invest? I don’t have time to monitor the stock market constantly, but I would like to have at least a small amount of money invested.

30:10 Emily: What a wonderful question and I am so on board with the sentiment here. I also do not have time to monitor the stock market constantly. Who does? Honestly, I feel like people who do have the time and inclination to constantly monitor the stock market should just make that their full-time job, like go become a fund manager and get paid millions of dollars to do so instead of just doing it for your own paltry assets.

30:33 Emily: The good news is that spending that kind of time on investing is absolutely not necessary. In fact, in 99+% the cases it’s actually counter-productive to do. Let me introduce a term to you: passive investing, also known as index investing. Passive investing is the most effective least expensive and most time efficient manner of investing.

31:00 Emily: The real quick gist of passive investing is that you buy one or a small number of index funds and you hold those funds in your portfolio long-term in a percent-wise allocation that you have determined in advance. Index funds themselves are collections of, we’ll stick with the stock market, collections of stocks that reflect a broad market sector. So in these funds, the fund manager is not trying to pick the winners and dump the losers. They’re just trying to buy either everything or a representative selection of everything available in that market sector. My go-to example is always the S&P 500 index. When you listen to the stock market news of the day, you’re going to hear how the S&P 500 and the NASDAQ and the Dow Jones did. So those are three indices that represent how the market overall is doing. The S&P 500 has a really clear definition. It’s simply the 500 largest companies that are traded on the US stock exchanges. So if you were to purchase an S&P 500 index fund, you would be a part owner, a very small part owner,of all 500 of those companies. So that represents the market sector of large cap companies, the largest companies. So basically the learning and the research that you need to do is to understand what passive investing is, what index funds are and which index funds you want to purchase and in what allocation. This might take you a few hours of upfront investment of your time, but it’s not something that you need to put time into on a continual basis. Once you’ve decided on your strategy, you basically just let it ride. Another really easy set it and forget it way of accomplishing this is to use what’s called a target date retirement fund, which is in itself a collection of index funds in a percent-wise allocation like I described earlier.

32:53 Emily: So where to go next for resources. I actually have a set of webinars inside the Personal Finance for PhDs Community explaining what passive investing is, what index funds and exchange traded funds are, how to choose them, which brokerage firm to use for your investments, whether you use an Roth or a traditional IRA, all these kinds of questions. So if you would like to view that webinars series, simply join the Personal Finance for PhDs community at pfforphds.community. And that webinars series will be immediately visible to you. I also have inside the community, a challenge that I ran a few months back on opening your first IRA. So you might be interested in following the steps of that challenge, which point to certain webinars to watch in a certain sequence and other steps to take. That might be relevant for you. Or you could do something like read a book such as the Simple Path to Wealth by JL Collins.

33:46 Emily: Now, another element to this question is that you mentioned you want to have a small amount of money invested. You might be tempted to use. What’s called a micro investing platform. Those are brokerages that specialize in helping people with zero capital upfront get started with investing. Some names you may have heard are Acorns, Robinhood, M1, these kinds of platforms. I want you to be really careful when you’re choosing the platform to go with. Ideally, you would only pay the fee associated with the ETF itself that you end up buying. You wouldn’t be paying fees on top of that. For example, some of these platforms charge like $1 per month to be invested with them. I want you to avoid a platform that charges, that kind of fee. Because when you are investing only a small amount of money, a fee of $1 per month actually takes a big, big bite out of that money. So if you go with a micro investing platform, make sure it’s one that doesn’t charge any fees on top of the underlying ETF fees.

34:46 Emily: You also should check whether the platform offers IRAs, individual retirement arrangements. It might not seem important when you’re just starting out with investing, but retirement investing should probably be your top investing goal when you’re starting out, because it is such a large need, even though it’s a long time away. For example, Robinhood fit some of the criteria I mentioned earlier — they don’t charge you fees on trades, you can buy ETFs through that platform, but they don’t offer IRAs, at least as of the time of this recording. It’s very worthwhile to check out what are called the online discount brokerage firms, like Vanguard, Fidelity, and Charles Schwab. Those are kind of my go tos for being able to avoid higher fees that might be charged by other companies. However, the issue is that sometimes they have minimum amounts that you need to invest to get started, like maybe a thousand dollars, which of course is not at all a that you would have that much money. So in my mind, those are the places to get to, eventually maybe when you’re starting out or maybe later on. But if you need to start out in a micro investing platform or a robo-advisor at the beginning, that’s perfectly fine.

35:51 Emily: I think once you really understand the concept of passive investing and how simple it is, how easy in a sense it is to build up wealth over the decades, you’re going to want to have more than a small amount of money invested. You’re going to be really motivated to increase that savings rate and a discount brokerage firm is a great place to be when you’re saving a hundred dollars a month or more, or have a thousand dollars in your account already. Personally, when I first opened my IRA and started investing, I went with Fidelity because at that time they allowed me to open an account with no money up front, as long as I set up a recurring savings rate of at least $50 per month. So I did that for a little bit over a year until I had $3,000 in my IRA. And then I transferred my account over to Vanguard. They had a $3,000 minimum at that time, and I’ve been with Vanguard ever since. So I hope that is a start to answer your question and that you have a place to go for our further resources, either with me or other people who talk about this. And I really want to encourage you at the start of this investing journey, so I do hope you’ll take that next step. If you would like to submit a question to be answered in a future episode, please go to pfforphds.com/podcast and follow the instructions you find there. I love answering questions, so please submit yours listeners.

Outtro

37:10 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episodes show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast and instructions for entering the book giveaway contest, and submitting a question for the Q&A segment. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media, with an email list serve, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt, repayment and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe through that list. You’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. Music is Stages of Awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC podcast, editing and show notes creation by Lourdes Bobbio.

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