Roth IRA

This Grad Student’s Social Spending in Boston Pays Dividends

July 13, 2026 by Jill Hoffman 1 Comment

In this episode, Emily interviews Richard Coca, a 3rd-year PhD student at Boston University. Richard breaks down his budget, detailing his top five largest expenses: rent, groceries, eating out, hobbies, and social spending. He rents a bedroom and private bathroom in a shared home convenient to public transit in East Cambridge, and the higher rent is offset because he does not own a car. Richard has developed two intensive hobbies since starting grad school: running and stand-up comedy. To participate in those hobbies, he spends on race entry fees, shoes, and drinks and meals at venues. Richard used to overwork and be much more frugal; he now spends more on his hobbies, eating out, and friends, but he’s still reaching his goal of maxing out his Roth IRA every year. He feels mentally and physically healthy and is happy with his work-life balance.

Links mentioned in the Episode

This Grad Student's Social Spending in Boston Pays Dividends

Teaser

Richard (00:00): When you are doing physically well, usually you are also doing mentally well and uh, financially well. And I feel like those three things kind of all are intertwined and if you’re working on one of them, they kind of help support the other two. Um, so I think, yeah, I might not be saving as much as I could be, but I think spending that money pays dividends and sort of my mental wellbeing as well as sort of just being uh, a lot more physically active, being a lot more in community with like the huge running community here in Boston, the standup scene here.

Introduction

Emily (00:43): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (01:13): This is Season 24, Episode 3, and today my guest is Richard Coca, a 3rd-year PhD student at Boston University. Richard breaks down his budget, detailing his top five largest expenses: rent, groceries, eating out, hobbies, and social spending. He rents a bedroom and private bathroom in a shared home convenient to public transit in East Cambridge, and the higher rent is offset because he does not own a car. Richard has developed two intensive hobbies since starting grad school: running and stand-up comedy. To participate in those hobbies, he spends on race entry fees, shoes, and drinks and meals at venues. Richard used to overwork and be much more frugal; he now spends more on his hobbies, eating out, and friends, but he’s still reaching his goal of maxing out his Roth IRA every year. He feels mentally and physically healthy and is happy with his work-life balance.

Emily (02:12): At the start of every academic year, fellowship recipients need to know that if they are not having income tax withheld from their paychecks, they should start self-withholding and possibly make a payment by September 15th. Otherwise, they are in for a nasty surprise when they file their tax returns next spring. If your university has not in the past provided adequate messaging and resources regarding estimated tax, would you please recommend me as a workshop facilitator for the start of the upcoming academic year? I offer both live and asynchronous versions of a workshop that guides US citizens and residents in filling out the Estimated Tax Worksheet in IRS Form 1040-ES and managing their money to seamlessly meet their tax obligations. These workshops are typically considered professional development or personal wellness. I would appreciate you cc’ing me when you recommend me so I can follow up with additional information for the potential host. Thank you very much! You can find the show notes for this episode at PFforPhDs.com/s24e3/. Without further ado, here’s my interview with Richard Coca.

Will You Please Introduce Yourself Further?

Emily (03:41): I am delighted to have joining me on the podcast today, Richard Coca. He is a third year PhD student in neuroscience at Boston University and today we are doing a budget breakdown. So we’re gonna get to know all of Richard’s top expenses and all of the nitty gritty details about his finances. So Richard, thank you so much for volunteering to come on the podcast. Will you please introduce yourself a little bit further for the audience?

Richard (04:03): Yeah, of course. Super excited to be here as a long time listener. Um, as you said, my name’s Richard Coca. I would describe sort of who I am. I’ve always kind of been in the science space and a scientist, but recently my PhD journey has been like, okay, science is obviously very difficult and very hard. There are other things to life. So I’ve been trying to sort of expand more and increase sort of my hobbies and in that sense that’s sort of had a stress on my budget and we’ll sort of break that down further. But I pivot back to you Emily.

Current Funding, a Cross Country Move, and Household Size

Emily (04:36): That’s great. Um, finding some identity outside of the lab. Very highly recommended <laugh> along this PhD journey. Um, wonderful. Okay, so we know you’re at BU. Um, can you tell us a little bit more about like how you’re funded? Do you have an assistantship or a fellowship or just give us some more details about that.

Richard (04:56): Yeah, so my program actually um, will fund you for five year guaranteed. Um, our stipend right now, um, now actually all the stipends at BU now that the union has negotiated a rate are all the same. So it’s around like $48,000 a year. Um, I actually was on our training grant for the first two years of my PhD. Um, so that was nice and they were nice enough to give what I thought at the time was a baller $3,000 relocation, stipend, um, and it was baller but then you kind of realized that living in Cambridge is expensive. I’m now on my PI’s uh, grant. So that’s my current funding source.

Emily (05:35): Well I know from my work around the country that um, Boston is an unusually difficult market to move to, right? Because you have um, the realtor fees if I remember correctly as well as, you know, first month’s rent, maybe last month’s. So that $3,000 probably really helped with that process I would imagine. Do you wanna give us any more details about how it was to actually move to Boston?

Richard (05:56): Yeah, I mean at the time I was actually living with uh, my former partner so it was less hard. So in that we had subsidized housing, which was so lovely. Um, but I think really a lot of the funding or a lot of the relocation went from like shipping all of our items to Cambridge, which I think in retrospect really didn’t need to bring that much from California. But um, I think it’s something you don’t know until you kind of live through it and make that move across the country.

Emily (06:27): And tell us about who is in your household now.

Richard (06:30): Uh, now I live with roommates, um, and that is um, it’s a bigger home in Cambridge, so I’ve always kind of lived in the Cambridge rental market. Um, yeah and uh, I’m very bougie in the sense that I always want my own little bathroom. So I do have kind of essentially a studio but like you know, you’re sharing a common space. Yeah,

Emily (06:55): Let’s find more out about your housing when we get to that in your list of expenses. Um, so you’ve covered your stipend, which sounds great actually. I mean I know Boston has a high cost of living area, but like that’s not bad at all. And like do you wanna give us any more details about were you there when the union was negotiating or like what was the timeline of that relative to you starting grad school?

Richard (07:16): Yeah, so I think the strike actually started probably like within the year of us moving here. Uh, so my first year was really clouded by a lot of strike negotiations and sort of classes not being offered. Um, my, I would say I’m glad that effort went through I think my PhD program even before sort of those efforts already was among one of the more higher paid programs at BU. Um, but there are also pro programs out here that were paid maybe like 20K a year. Um, so really glad sort of that effort went through for them.

Maxing out a Roth IRA and Using High Yield Savings Accounts as a Grad Student

Emily (07:50): Yeah, amazing. Are you currently working toward any financial goals?

Richard (07:55): Yeah, I think my goal every year, um, and I’ve learned, I just saw an article about this actually. It’s like Gen Z is doing a Roth IRA max every year. They’re the generation that’s done it the most and that’s always been something that I’ve done every year. Um, I think this year in particular I have tried to shift a lot more of my funds in high yield savings. I am kind of trying to think less about money and kind of just have it passively grow itself. Um, but really I think my goal is just every year maxing out Roth IRA and I think kind of at the point where I’m almost, I think I could spend a little more than I should, but you know, that’s something that I’m constantly negotiating with myself

Emily (08:36): In 2026 maxing out a Roth IRA is like seven and half thousand dollars I believe. And so I’m just doing some quick math in my mind. But that’s something like 13, 14% of your gross income, is that right?

Richard (08:48): Yeah, I think so.

Emily (08:49): So that’s a pretty ambitious like goal, so that’s amazing that you’ve been able to do that consistently.

Richard (08:55): Yeah, and I think part of it was like I was uh, set up nicely in college. Um, I was lucky enough where, um, due to sort of my parental income, I kind of never had to pay tuition. Um, and I was also an RA and I think that’s kind of the cheat code for undergrad or grad school. Um, you just get like seven K or that was my stipend, um, in undergrad and each year I would just throw that in the Roth IRA. Um, so I kind of have had at least five years of maxing it out or four years of maxing it out, um, which is nice to like look at as a good chunk of change. Yeah,

Emily (09:33): Yeah. Even when you are still, like you said, four or five years in, it really does start adding up like pretty early on. That’s amazing. And then when you mentioned like the high yield savings accounts and just putting money in there, um, do you have any, um, purpose linked to those accounts? Is it just to have some safety money or fallback money or like how do you think about that money?

Richard (09:52): Yeah, I, I just think like at least growing up I wasn’t really raised like my parents in particular up until like two years ago, like they are the type of people who, it like kills me, but like all their money is like in a checking account or like a savings account with very low interest. Um, so like learning about high yield savings account or like even different accounts, um, where you can, you know, the interest rates are a lot more generous I think of my high yield savings account as, oh, this is the interest that will be used for like casual spending money. Um, or at least that’s how I treat it. Um, I think in a way probably not the best financial perspective to look at it, but I, that is how I kind of currently use it. Um, yeah.

Emily (10:34): What types of things would you spend that on?

Richard (10:37): Yeah, I feel like, um, oftentimes, uh, and I, this goes sort of into some of my bigger expenses. Um, so thinking about sort of like social outings is particularly with my cohort or with friends out in the uh, Boston area, like those are very expensive. Especially here it’s like a, if you wanna have a good day in Boston, it’s a minimum of a hundred dollars. Um, so that’s the type of uh, time where the high yield saving kind of does generate. I don’t think it’s a hundred dollars if I’m being honest. Sometimes I do dip into it, but like, um, it covers part of it I would say.

Emily (11:10): And all of this is like you were saying earlier, in an effort to just feeling less stressed and less like tight about money. Is that right? Like you think you can, you should be loosening up a little bit more it sounds like.

Richard (11:21): Yeah, I will say like I kind of, in order to max out the Roth IRA earlier in college, I kind of feel like I um, was definitely a lot tighter and a lot more meticulous about how I was spending. Um, and in a way I kind of gave myself um, this feeling of missing out. ’cause a lot of my friends post-college kind of went into the whole traveling the world bit. Um, and I’ve done some of that, but I do feel like, I don’t know, uh, money is one of those things where like if you spend it, it somewhat comes back to you. I, I don’t know if that’s always necessarily true, but um, I definitely feel like I am not going to, uh, go and destroy my wallet if I accidentally dip a bit too much.

Emily (12:06): Hmm. I I’m getting like a, uh, a Die With Zero vibe from you. Have you read that book or have you heard about that book? Okay. It might, if you read it, it might reinforce some of this, um, mindset. It really helped me because from when I went through graduate school I like learned to be really frugal and really tight and really careful and all of those things. And definitely airing more towards maybe too much saving and not as much lifestyle spending as I should have been doing. And so that book, when I read it a few years ago, really helped me kind of rethink about just kind of what you were saying there is how money can buy you what the author calls memory dividends. Like it literally is an investment that you make in your enjoyment of your life going forward in the decades to always have those memories to look back on.

Emily (12:52): Um, so it just, it’s a book that does very well for people who aren’t have the tendency to over save. It’s definitely not a good book for somebody who’s already in like the overspending, not saving enough, investing enough for the future kind of, um, side of things. So anyway, I’m just, I think you might find, um, some commonalities if you did read that book, but I’m very curious now that we’ve had that point in the conversation to know about what your expenses are, um, to kind of see how you’re balancing things within this stipend. So we’re gonna run through your top five expenses in either last month’s budget or a typical monthly budget. So lead us off, what is your number one expense? It’s the same for everybody. <laugh>.

Budget Breakdown: Housing and Transportation

Richard (13:33): Yep. It’s always, it’s always rent. Um, and I live in east Cambridge, which is relatively nice area, maybe like a half hour to 40 minute commute to work. Um, and that is probably like the big budget, like where most of my income goes and that’s like $1600 a month. Um, just went up this year but it, it always does. Um, but that is sort of, you know, kitchen, uh, bedroom own bathroom, which I really love and it’s a big bathroom. Um, and I think for the area it’s like actually probably on the lower end I would say.

Emily (14:08): So 1600 a month. You said you have your own bedroom, your own bathroom. How many in like the overall unit or home size, how many people are living there?

Richard (14:17): So it’s two other roommates. Um, they share a bathroom. I think the rent is cheaper and kinda at the point where like I love having my own bathroom.

Emily (14:27): How did you find this place and how long have you lived there?

Richard (14:30): Uh, this was now year two. Um, and I kind of just found it via probably Craigslist actually. Um, and it was one of those moments where um, you know, the really lucky in terms of who my roommates are and I think in terms of almost their frugality, like they’re not the type who will run the heater 24/7 or necessarily like drive up utilities or anything else. Um, and it’s, yeah, shout out to them, um, because you know, those things do kind of add up. I think utilities wise, I probably spend less on utilities a month than I do groceries for sure. Um, or even like smaller things. Yeah,

Emily (15:13): That’s great. It’s really wonderful to find people who you have the same kind of attitude with about things like that. Um, tell me about the choice to live in Cambridge and have that length of a commute. Like tell us about your commute. Do you use public transit? Do you drive?

Richard (15:27): Yeah, so that’s a great question. Um, I used to live actually my first year when I was living with my, uh, former partner. We would live literally right above Harvard Square, like the red line station was underneath our house. Um, and back then I would just, it was weird because BU is like, it’s on the green line so you would have to go from the red line to the green line and it was easier to walk 45 minutes than it was to take the T. Uh, which is really like a failure of sort of that transportation system. So when I was moving I was like I need an easier commute public transportation wise. Um, and I want to be somewhat closer to the city ’cause that’s just where things really are. Um, so I knew I was gonna move towards East Cambridge and now my commute is maybe like 20 minute green line and then like a 20 minute walk to lab, which is awesome. Um, same time a lot more, I don’t know, fun, less stressful, I think, of a commute. Um, and I really have always loved living on the other side of Boston. There’s something about being separated by the Charles River where I kind of just like, once I cross it, I am detached from work and lab and, and kind of just relax.

Emily (16:38): That makes sense. And I’ve heard that so many times from people who have commutes of any sort, like it, it provides a reset point in your day and helps you, yeah, maintain that kind of psychological separation from your home life versus like your work life. And obviously that got destroyed <laugh> from you work from home like I do, uh, doesn’t exist. We don’t have that benefit. But anyway a lot of people hate commuting, but there is that one, you know, kind of upside for it. Um, that yeah, it gives you a reset point and a way to relax for part of the day. And I love using public transit, a combination of public transit and walking like that sounds ideal to me.

Richard (17:11): Yeah, and it is ideal. And I’ve also started, um, one of the hobbies I guess going on the next expense that I, um, has slowly crept up on me. It is like running. So I’ve started like run, commuting occasionally to work. Um, and then you also save on transportation, I guess expenses, which aren’t that high in Boston if I’m being quite honest.

Emily (17:31): Yeah. Actually let’s talk for a second about transportation expenses because you gave me a preview of your expenses and they don’t appear in the top five. So just tell me like, do you not own a car? Do you pay for a pass for public transit? Like how do your costs play out? And I know they’re not in the top five, but I’m curious about what they are.

Richard (17:49): Like my station in particular, um, it’s really just like $2.40 to take the T. Uh, and I would say like it, it’s frequent enough where um, if you’re, if you’re lucky and you need to catch a bus like, and you take the T immediately after it’s only 70 cents additional, um, so I would say like $2 a day or like 4 or 3, $4 a day actually. It really doesn’t add that much. And I’m also, because I do ride on the weekends, like I kind of save on that money. Um, so it’s not like a noticeable debt in the budget.

Emily (18:22): And your public transportation expenses are pretty much the sum of your transportation expenses. You don’t have any other regular transportation expenses?

Richard (18:29): Yeah, I don’t, yeah, I don’t use a car. I have a roommate who has a car, which again, this isn’t really coming clutch, uh, for those big Costco runs. Um, and I think yeah, other friends have cars and it’s so often where like if I am traveling to somewhere in state that’s farther out or say making a trip to New York, it really doesn’t like, it doesn’t make a big dent. Um, which like I’m coming from LA where you need a car everywhere to go and gas so expensive. I’m kind of like, that was one of the big selling points for moving across the country for me.

Emily (19:05): Yeah. And it definitely helps to offset the higher rent price if you have very, very low transportation costs and you don’t have to own your own car. Amazing. I love to hear that.

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Emily (19:16): Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, goal-setting, investing, budgeting, or designing your financial life, each tailored specifically for graduate students and postdocs? I offer live workshops, asynchronous online courses, and cohort-based programs on these topics, and I’m now booking for the 2026-2027 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, medical school, postdoc office, or postdoc association? My workshops are usually slated as professional development or personal wellness. The fall semester is an excellent time for any type of personal finance content. Ask the potential host to go to PFforPhDs.com/financial-education/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

Budget Breakdown: Groceries and Dining Out

Emily (20:50): Okay. Your number two expense, what is that?

Richard (20:53): Uh, my number two expense is definitely probably gonna end up being my groceries. Um, as I said, I’ve started running a lot more and with that comes the dreaded food noise, so I’m like constantly, uh, getting more food. Uh, the other thing is like, because I um, was formally lived my partner, now I’m paying like the singles tax in terms of food prep and making more food. So I am not someone who like, actually I make probably make enough where I should have leftovers for lunch and should be saving there, but I’m not necessarily having leftovers after I eat dinner after a run. Um, which is like, I mean it is what it is, but I definitely spend more than I think one would typically expect for groceries. Uh, so it’s like maybe a hundred to 150, um, per week I would say. And I’m someone who loves fresh produce as well. Um, and I very frequently learn that if you buy big batches of like fruits and stuff, they will rot in my fridge. So I’m someone who has to get it like day of. Um, and there used to be a grocery like really close to my lab so I would just kind kind of swing by and eat a fresh plum or anything like that. Um, but yeah, it was like those small things like that were like a nectar, a $4 nectarine kind of like quickly added up, um, over the week.

Emily (22:17): So tell us about your like grocery shopping habits then. Like how many times per week are you grocery shopping? You mentioned Costco a moment ago. How often are you going there?

Richard (22:27): Yeah, I would say a Costco run is maybe like bimonthly like every other month. But, uh, the bigger expenses I would say would be um, like dinner and I think in, in terms of like, uh, shopping habits like that can range anything, anything between like once or twice a week to sort of the European model where I’m kind of going in there for, you know, just the ingredients for dinner for that night or for like fresh produce and stuff like that. Um, so one way I try to actually cut costs ’cause I started realizing it was getting like a bit excessive in particular for lunch. Um, is just like getting, relying more sort of on like food kit or like salad kits and stuff like that. Um, so I started doing more of the, you know, sometimes lunch has to be boring and I kind of had to convince myself of that. So more salads and sandwiches and stuff like that.

Emily (23:19): Yeah, I was just gonna ask about like what types of foods you’re eating and what types of foods you’re cooking for yourself. So you mentioned lunch, salads and sandwiches, like what kinds of things do you eat for dinner? Do you have patterns that you’re in?

Richard (23:30): Yeah, I feel like it’s mostly a lot of chicken. Um, I don’t typically eat pork, but I guess like the bigger expense would be like beef, um, and stuff like that.

Emily (23:41): And do you cook dinner like every night? You said that it’s hard to maintain leftovers, so are you cooking like pretty much every day?

Richard (23:50): Um, not as much as I should be and I think maybe it’s like the current recent spell that I’m in. Um, but I would say I like cook maybe every other day. Recently I’ve kind of, the other hobby that I’ve joined that’s been somewhat expensive is like I do standup now. Um, and sometimes making the open mic means that I’m not going to be able to make dinner or like trying to balance that between the PhD. Also getting my mileage in for my run for the week. Um, it means that I have to like stop by somewhere, uh, in between the commute and that’s sort of where my third expense is. Just like the, the food that I’m not cooking for myself. That adds up so quickly, that’s like $20 each time. Um, and I feel like that is definitely a bigger expense than say transportation per se.

Emily (24:39): So that third expense of like eating out of your own home Yeah. What does that add up to over the month?

Richard (24:48): Ooh, that’s like a good $300 I would say it’s a good chunk of change. It’s the one where I’m like, huh, maybe we should tie it up.

Emily (24:56): It just depends. That’s why we talk about goals first. Like if you’re meeting that Roth IRA goal, hey <laugh>, what else do you need to do? Right.

Richard (25:04): Yeah. Yeah.

Emily (25:06): Okay. So it sounds like you’re eating out, um, you know, when you’re transitioning from place to place. Um, you mentioned, you know, you used to grab things from the grocery, uh, near your work. Um, in what other situations do you find yourself eating out and I guess how do you feel about it? Like are you happy about spending that money or are you like, oh no, I need to find a different way to manage this?

Richard (25:26): Honestly, I’m someone who like, especially when I eat out with friends, like I would definitely not regret that. I feel like that is experi- experiential and going back to sort of the idea of memory dividends, having to pay for that, where I’m less excited to do so is when I’d say have gone for a run or I’ve had like a really long day in lab and I’m like, uh, screw it. Like I don’t wanna make dinner for myself. That’s sort of the time where I, I kind of look back in time. I’m like, no, just, just like quickly make some fajitas. It won’t be that long. Um, but yeah, I think I, the guilt I feel is probably going back to that idea of like, oh, you could be saving some money there. Um, but you’re not, but it is what it is.

Budget Breakdown: Hobbies

Emily (26:08): Okay. What is your fourth highest expense?

Richard (26:12): My fourth highest expense has to be like my hobbies. So like running or like stand up. Um, each definitely have a cost associated with them running in particular, I’ve been signing up for a lot more races and it’s kind of like the one that’s like biting me. Um, I recently did like the twin lobster half marathon with like a week’s notice and that was like a good a hundred dollars, uh, race fee. Um, that’s a huge chunk of change. And the other thing is like shoes, uh, the amount of mileage that I put into my shoes, I’ve needed to like replace ’em and that’s like maybe $150 to $200, uh, per pair. So that’s definitely been eating at me and I think I now have um, like seven or so pairs of shoes. Um, so it’s like a huge, huge part of sort of the disposable income I would say.

Emily (27:06): I am not a runner and I’ve never like paid to enter a race or anything. Can you tell me what like benefits you get from it? Is it being around other people? Do you do it with friends? Is it challenging yourself and your times? Like what’s the reasoning?

Richard (27:19): Yeah, I guess like they close the street so it’s like easier to set like a personal best. Um, but oftentimes races have amenities so they’ll have uh, actual like, um, let’s say water on the course or electrolytes on the course as well as like fueling bananas and sometimes they’ll have a metal or a t-shirt associated with them. And oftentimes it’s just like a sort of a chance to kind of prove to yourself like what you can do, um, which is a bit nice, but I really like the atmosphere of race day. Um, you can just sort of feel in the air like before the actual uh, sort of gun goes off that everyone’s kind of a little anxious and everyone wants to really do their best and there’s something about seeing people try really hard and sort of try to reach their goals. Um, it’s just like worth sort of pain to be around and just being in that community there.

Emily (28:11): How many races would you say you’re doing per year?

Richard (28:13): I would want to say maybe like two to three per season. Um, so that’s actually adding up to lots maybe like, um, eight to 10, I don’t know if I did my math right. Yeah. Some somewhere around that. Um, marathons are a lot more expensive because you have to kind of fly out there as well, uh, get accommodations, but I limit those to two per year. Um, I’m running Philly in the fall saving, saving on accommodations by staying with a friend actually. Um, and the other sort of local race that I do here are like the Cambridge seasonal 5Ks and that I try to, those are only like $40 a race I would say. Um, so it’s not too much. And then I try to do a couple of halfs as well.

Emily (29:01): Have you found, um, any other, um, PhD students or other like academics who have a similar commitment to running or their own like kind of athletic hobbies? Like is this something you bond with other people about?

Richard (29:13): Oh, oh, absolutely. Uh, same with standup comedy. You would be surprised how many academics are actually in those spaces. Um, and I think it’s like something that I really enjoy seeing. Like there’s been times where I’ve been say like at a comedy club and actually talking like pure science to the point where like, wow, the work that you do in your lab is extremely relevant to like what I’m doing in my dissertation. And that’s like something where I’m like, I wouldn’t say like only in Cambridge, but like it’s honestly like an awesome thing. I think about sort of the Boston ecosphere. Same with like running, there’s been times where I’ve met like the editors of journals of um, sort of like the science family or cell, um, and they’re just be giving like advice to like other grad students. I would say like in particular, something about the mid twenties brings out a lot of runners. Um, so there’s a lot of PhD students, um, that I’ve met who are like training for different things and people often say, you know, the PhD is like a marathon and sort of not a sprint. And I think that’s something that a lot of people actually take to heart. And I would say maybe running a marathon is easier than doing a PhD. Um, but that’s just my opinion.

Emily (30:24): That’s amazing that it also turns into a networking opportunity and and so forth. Um, yeah, I mean you mentioned maybe not only in Boston, but Boston would be a great place. There’s obviously, there’s just so many universities there, such a young population overall, like yeah, I would imagine if you’re just getting out there and doing things, you naturally run into a lot of other people who are in a similar position to you. Tell us more about the standup comedy. I mean, I totally understand, uh, you’re going from, you know, work over to where you’re, I don’t know what the word is, delivering a what do you do? A, an open mic. I, i don’t know what the words are, but you know, you have to grab dinner along the way. Um, what other costs are associated with that hobby?

Richard (31:05): Yeah, so doing an open mic or doing a showcase, a lot of the time these spaces are actually kind of very hard to come by. Um, Boston has a small comedy scene, I think relative to sort of the big three of LA, New York, and Chicago. Um, and recently a couple mics have been closing and one of the big things around that is like, you gotta support the venue. You really gotta support the menu. These guys need to sort of sell drinks, sell food in order for them to know this is profitable to put on these events. So there’s a cost of buying sort of drink or buying food to support the venue. Um, that goes into doing like open mic. The other expense is like if you do showcases or you get booked on for another show, there’s often the traveling that you have to do. Um, oftentimes that’s like another part of Massachusetts. So like, you know, paying for someone or like, you know, I would want to pay for someone’s gas if they’re driving me to like say Foxborough per se. Um, the other cost sort of associated with standup as well, if I’ve been lucky enough to sort of kind of co-produce, um, a show before. And it’s just like fronting the money for, uh, the things that you need for the after production, um, be it like flowers or, um, sort of the ticket writer for the other performers in the show.

Emily (32:23): Well this is so exciting and so unique that, that aspect of, of your hobby of doing standup. Okay. We’re down to your fifth largest expense on a monthly basis. What’s that?

Budget Breakdown: Gifts

Richard (32:34): Um, I would say more the social aspect. I’m someone who really loves spending money on gifts. Um, so when it comes to like friends’ birthdays or stuff like that, one of my friends actually who got me more into running, um, she’s great. Shout out to Viv, I think she’s over at Woods Hole right now. Um, she, uh, for her birthday I really wanted to sort of spoil her ’cause I, she really again got me into running, so I decided to get her like a fresh pair of running shoes as well as kind of like a runner starter pack, so like some gels and electrolytes and other stuff for like stretching. Uh, um, and I guess that was like a more, um, expensive gift. And I, I do like sort of thinking more of like well thought gifts for other people as well, um, whether that’s like surprising them or their graduation and stuff like that. So that’s kind of like on the scale of a hundred dollars, $250 kind of monthly splurges and stuff like that.

Emily (33:37): Amazing, amazing. You’ve identified that about yourself by this point, like that generous spirit like in that way. Um, and great that you have the room in your budget to, um, indulge it to the degree that you want. Kind of one of the themes that I, I think is coming out with this episode and you know, something you’ve, you’ve found along your journey in graduate school is this is finding these pursuits outside of the lab and outside of work, um, that are enhancing your life and satisfactory to you and so forth. Would you say that that is necessary to maintain like your mental health, your physical health and still work like very well and effectively in the lab? Or like how do you think about, I don’t wanna use the word balance, but like how do you think about the, the time and energy you’re spending at work versus these other pursuits and how do they complement one another or how do they, I don’t know, maybe compete with one another?

Richard (34:34): Yeah, I would kind of say that they’re almost intertwined. Like I think about I guess the earlier part of my PhD, um, and even post rotation, uh, like in the first lab that I joined, um, I was spending like a lot of time, a lot of effort on the weekend and I think, um, definitely at the expense of sort of a more balanced life approach and yeah, I’m sure I was saving money, but I definitely was not as happy I would say. Um, so I think like when you are doing physically well usually you are also doing mentally well and uh, financially well. And I feel like those three things kind of all are intertwined and if you’re working on one of them, they kind of help support the other two. Um, so I think, yeah, I might not be saving as much as I could be, but I think spending that money pays dividends and sort of my mental wellbeing as well as sort of just being, uh, a lot more physically active, being a lot more in community with like the huge running community here in Boston, the standup scene here. Um, if they’re doing, you know, I’m happy. Thankfully I’ve met like so many wonderful people and I think that really carries into sort of how I conduct myself at work. My coworkers often be like, you’re always smiling and I’m like, thank you for noticing that. Um, but I think it really helps, I think for, um, I don’t know, just like staying at the top of my game and trying to be who I am.

Emily (36:03): It’s really lovely to hear. Thank you for kind of summing up, you know, your, your approach, um, in this respect and I’m, I’m glad to hear that, you know, over the years in graduate school you’ve found a level of spending and a level of, you know, uh, time commitment that as you said, it’s kind of like a mutually positive reinforcing cycle between like your finances and your mental health and your physical health and your performance at work and so forth. So I’m just really glad to hear that. Um, Richard, thank you so much for, uh, volunteering to share your budget with us and give this interview.

Best Financial Advice for Another Early-Career PhD

Emily (36:31): Um, I’d like to end with the question I ask of all, I ask of all my guests, which is, what is your best financial advice for another early career PhD? And it can be something we’ve touched on already in the interview or it could be something completely new.

Richard (36:44): I would say probably like in all actuality, just try to max out that Roth RA if you can. Um, but also don’t be afraid to spend. ’cause like as I tried to touch upon earlier, like that money that you do spend does come back, whether it be in the form of memories or accidental networking with other people, I think it’s like a great opportunity. Um, like money is not something that just like sits there and collects dust. I think it’s something that can work, um, in your favor, uh, whether it be just like passive saving or sort of gaining an opportunity that you wouldn’t elsewise try.

Emily (37:19): Amazing. So glad to hear from you during this interview. Thank you so much for volunteering.

Richard (37:23): Alright. Well thank you so much for having me.

Outro

Emily (37:35): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by me and show notes creation by Dr. Jill Hoffman.

This Grad Student Fellow’s Frugal Lifestyle Enables a High Savings Rate

June 29, 2026 by Jill Hoffman Leave a Comment

In this episode, Emily interviews Michele Remer, a 4th-year PhD candidate at Michigan State University and repeat podcast guest. Michele breaks down her budget, detailing her top five largest expenses: rent, groceries, utilities, restaurants and social events, and transportation. During grad school, she has found ways to decrease her spending on some necessary expenses, which has allowed her to intentionally increase her spending in other areas of higher value. Due to her frugality and her National Science Foundation graduate research fellowship award, Michele has maintained a very high savings rate, which she puts toward her Roth IRA, taxable brokerage account, and student loans.

Links mentioned in the Episode

This Grad Student Fellow's Frugal Lifestyle Enables a High Savings Rate

Teaser

Michele (00:00): I’m just like, okay, I send my money here to, uh, pay off the debt, or I send to my savings account to save up, to pay off debt, or I’m sending it to my investment accounts. And so it’s not super exciting once you’ve got it set up, but I think that’s a good thing because then you just kind of get to live your life while it’s all happening in the background. So as long as you kind of have your expenses figured out, which is really nice.

Introduction

Emily (00:34): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (01:03): This is Season 24, Episode 2, and today my guest is Michele Remer, a 4th-year PhD candidate at Michigan State University and repeat podcast guest. Michele breaks down her budget, detailing her top five largest expenses: rent, groceries, utilities, restaurants and social events, and transportation. During grad school, she has found ways to decrease her spending on some necessary expenses, which has allowed her to intentionally increase her spending in other areas of higher value. Due to her frugality and her National Science Foundation Graduate Research Fellowship award, Michele has maintained a very high savings rate, which she puts toward her Roth IRA, taxable brokerage account, and student loans.

Emily (01:49): You’re probably listening to this podcast because you’re interested in improving your own practice of personal finance, and you want to learn the best PhD-specific strategies. Well, you don’t have to listen through the entire episode archive to do so. Instead, go to PFforPhDs.com/advice/ and enter your name and email there. You’ll receive a document that contains short summaries of all the answers ever given on the podcast to my final question regarding my guests’ best financial advice. The document is updated with each new episode release. Plus, you’ll be subscribed to my mailing list to receive all the latest updates there. Again, that URL was PFforPhDs.com/advice/. You can find the show notes for this episode at PFforPhDs.com/s24e2/. Without further ado, here’s my interview with Michele Remer.

Will You Please Introduce Yourself Further?

Emily (02:59): I am delighted to have back on the podcast today, Michele Remer. We, she first gave an interview for us in season 13, episode 8, published in 2022. At that time, Michele had just started graduate school at Michigan State University. She’s now finishing up her fourth year. During today’s interview, we’re gonna do a budget breakdown episode. So we’re gonna get to hear about Michele top five expenses, some other things she has going on in her finances, and we’re also gonna talk about how those certain expenses and so forth have changed over the last few years. And so it’ll be really interesting if you wanna go back and listen to that earlier episode to get that time point, to get the time point right now to get the um, how Michele summarizes that things have changed over that period of time. So Michele, thank you so much for volunteering to come back on the podcast. It’s great to have you. And will you please introduce yourself a little bit further for the audience?

Michele (03:47): Yeah, I can. Hi everyone. Um, like Emily said, I am doing my PhD and so I’m doing it at Michigan State University and I’m now a PhD candidate after passing my comps last semester. So officially went from student to candidate. Um, my undergrad degree was in environmental biology and now in my PhD I am in the Fisheries and Wildlife Department. And then, um, before starting my PhD, I worked a few seasonal jobs, one of which was volunteering with AmeriCorps, which I talked about in the previous episode. So that kind of gave me some good experience for learning how to save money and, um, knowing that going into this field I wouldn’t necessarily be making a ton of money.

Current Fellowship Income, Additional Income, and Household Size

Emily (04:31): Well, again, it’s wonderful to have you back. Um, okay, so let’s talk about today. Uh, you’re at Michigan State. Tell us a little bit about yourself, your household, if there are any other people or beings involved with that. Um, and you have an assistantship, do you have a fellowship? What’s going on with your income?

Michele (04:49): Yeah, so I, like I said, I go to school at Michigan State University, so that’s located in East Lansing. I actually live in the Lansing area as that is a bit more affordable, not living like super close to campus, relatively. Um, and then I’m also on fellowship currently and have been throughout my time at Michigan State. And I currently have one roommate in a shared house that I’ve lived in since the beginning of grad school. But this has changed from when I first started since originally we had three grad students in this house, but we’ve gone down to having only two people now.

Emily (05:26): Yes, I remember, I mean, your interview has really stood out for me over these years as you having this like ace in the hole with how much your, how much your rent was at that time <laugh>. So we’re gonna talk about the rent amount when we get there. Actually we’ll talk about the roommate situation too when we get to talking about rent. But good to know you’re living with one other person in a house in Lansing. Um, can you tell us what is your stipend income, your, your fellowship income, and then do you supplement your income in any way?

Michele (05:50): Yeah, so I was very lucky. I was fortunate to receive the GRFP and I was also lucky in the sense that I received it after the stipend increase went up from $34,000 up to $37,000, which in Lansing is very nice income to have. Um, and then, so I’m currently at the last year of the GRFP and that’ll be transitioning back into a university fellowship. So my income will actually go down, um, starting in September, but I will be supplementing that with another job over the summer helping out, uh, one of my committee members with some field work. And so it’s not quite making up the difference, but it’s getting me a little bit closer, which is nice.

Emily (06:32): So you’re anticipating coming off the GRFP, you’ve taken these measures to try to supplement your income currently, but in the past several years, have there been any points when you’ve made additional income?

Michele (06:43): Yeah, so throughout my time in grad school I’ve had what I call several small little side hustles that I’ve had. So that’s included opening, um, bank accounts to get the bonuses. Chase had one, I think last year that you got additi- an additional $900 if you open the checking and the savings account with them. And to, you just have to, to avoid having a fee, you just have to make sure you have direct deposit set up with them. And then I also did that for our local credit union at MSU. They had a similar thing when I first started grad school, so I think I got like an extra $100 from that. And then another thing that I’ve done is I open credit cards when I know that I have a big expense coming up. So in order to get like those travel bonuses, so like for my health insurance for instance, when I, I have to pay that with a credit card and so then that way I’m not spending my own money on trying to get these travel rewards.

Michele (07:36): And so that’s been also really nice. I haven’t done it too many times, probably just, uh, like twice maybe. But it has been nice to get a little bit more like travel points in that sense and then to cover various research projects or other professional development opportunities like conferences. I’ve applied and gotten some smaller fellowships through the university and I’ve also like volunteered at a conference to get lower registration before in the past. So just a few different ways to kind of, even though like with conferences it’s kind of sometimes a gray area between like who’s gonna cover it, it, it’s helpful for making sure that you have that and it looks nice in your CV, so.

Emily (08:14): Yeah, I love that you mentioned those specific avenues. Um, because they’re available to everybody. Like I don’t wanna speak out of return about visa regulations and so forth. So always international students need to be careful about what kinds of, um, avenues they pursue for earning additional income. But go back to my previous episode with um, Frank Alvillar and Sheena Connell about whether or not credit card rewards and those kinds of things, banking bonuses would be okay or not typically. Um, so go check that out. But none of these are gonna violate like the terms of your fellowship. They’re not going to, you know, rub your advisor the wrong way to be, you know, pursuing a credit card or like volunteering at a a conference. Those are absolutely very, very accessible ways for people to supplement your income and not ones that take hardly any time. I would classify those as passive, um, pursuits for increasing your income. So I love those suggestions. I hope that people um, take them to heart if they are looking for a little like marginal ways to either decrease some expenses or increase their income a little bit. When you were last on the podcast, I know we talked about your Roth IRA, so I wanna hear an update on what your current financial goals are, um, and how they’ve changed over the past few years.

Current Financial Goals, a 20% Savings Rate, and Debt Repayment

Michele (09:25): Yeah, so for the investing side of it, the Roth IRA, I’ve continued to focus on maxing it out. Um, even with the increases in the, I guess the floor for the Roth IRA, I think now you can do up to $625 a month, um, which is really nice that I’ve, with the GRFP been able to afford investing that. Um, and so that’s something that I try to prioritize when I can. If there’s like certain months where I’m not able to, then obviously I wouldn’t invest it. But that’s something that I’ve continued to prioritize.

Emily (09:59): Yeah, I think we’re up to $7,500 on an annual basis in 2026. I think that’s correct. And so with your income of $37,000 you’re looking at, that’s just about a 20% investing rate off of your gross income rate. So that’s pretty high for a graduate student. I know you’re about to say you’re working towards other goals as well. So just wanna put that touch point in there of like, okay, already like you have a relatively like very high savings rate for your current position. That’s awesome. Okay. You’ve got the Roth IRA, you’ve maxed it out even with the increases along the way. What else?

Michele (10:32): Yeah, so then with, if I do have like extra money at the end of the month, besides on top of the Roth IRA, I’ve been doing the a taxable brokerage, um, which that’s just obviously not as tax advantaged as a Roth IRA, but it still is helpful, especially for me. I’m not planning on buying a house anytime soon. The market is <laugh> not the best and I don’t know exactly where I’ll be. So I don’t really have a plan of purchasing a house in the next like five years or so and so, and I’m probably gonna continue renting. And so for me, I think it makes more sense for me to put additional money into, uh, investing rather than leaving it in a savings account. And then, um, the other thing that I did wanna mention that I just recently got a Fidelity credit card. This one don’t worry, no annual fee involved, but you, it gives you extra rewards if you, uh, invest in their Fidelity account, which can be your Roth IRA or a taxable brokerage. Um, and it’s also really nice if you charge any of your reimbursements for conferences or like I said was saying health insurance on there, you can get a pretty sizable percentage back or I think it’s like 2%, but when you’re paying that much, it’s a pretty big chunk of money, um, which is nice. So.

Emily (11:49): I love that idea as like, ’cause you mentioned opening credit cards for like, like signup bonuses. Um, I love the idea of having a baseline amazing cash back in a sense card like this Fidelity card is.

Michele (12:01): Yeah, I’ll say amazing is kind of a relative term, but <laugh>, it’s,

Emily (12:05): Yeah, but, but 2% for cashback card

Michele (12:07): Even $100 extra is so nice. So.

Emily (12:08): Yes. It is awesome. And then when you’re not working on a signup bonus, falling back and like always using that 2% cards great plan.

Michele (12:15): Yeah. Uh, which is really nice because I’ve found after doing a few of the annual fee cards, it’s, it gets to be kind of annoying to deal with and like having to remember to cancel it eventually if like you don’t, aren’t getting the enough rewards to kind of cover the cost.

Emily (12:31): Okay. So we talked about your Fidelity relationship and that’s great. Um, what else have you been working towards?

Michele (12:37): Yeah, so besides the investing, I’ve been working towards debt repayment. So I had a sizable chunk of student loan debt from my undergrad university since I went to, um, a private like liberal arts school. And so for that I, I borrowed from the federal government and then I also borrowed from a few family members who luckily had money saved up for me to go to school. And so as of right now, and I think in about three months I’ll have repaid my debt to my family members, which is awesome because I did not want to have to like owe them money anymore.

Emily (13:16): That’s incredible. And actually it’s particularly incredible that you’ve accomplished this during graduate school. So can I ask about, I don’t know, whatever you’d like to share, like either the starting balance or um, how much you’ve been paying on a monthly basis? Has it been regular or irregular? Like how has that relation-, that repayment relationship worked?

Michele (13:35): Yeah, so for this relationship, so it’s my parents, I, um, send them the money through, we have like a shared checking account kind of set up or I guess it’s like a shared bank account set up for this. So I send them like a set amount every month. And then also what I was doing at the beginning of grad school when I, I had extra money too because I just like didn’t want to owe them all this money. I think it probably started out at around like maybe 8 or $9,000. And so I was sending them like extra money as like I saved it up. And then I also, um, was just doing like a base of like a hundred dollars a month, um, just because I didn’t want to have to pay them back this money and I wanted them to have it back as soon as possible. And so that’s been really nice to basically by the end of grad school have, have that debt paid. And then for my other debt that’s through the federal government, I only took out the subsidized loans that I was offered. So that means like I didn’t pay any interest during grad school. And so for that I put it into like a kind of like a CD ladder when I had the, the rates were good, I would put it into a CD. And so then that way I’ve saved up like a large chunk of money to hopefully pay back, if not all of it, by the time the interest payments like come due, then I’m gonna be pretty close to paying off the debt. So I’m excited for that too. <laugh>.

Emily (15:05): Yeah. That’s incredible and I love that you’re introducing this idea of a CD ladder to the audience. It’s not something that, I don’t know that I’ve ever discussed on the podcast before. Um, but basically I love this approach because as you said, when we’re dealing with subsidized loans, not accruing any interest, you do not need to take any action and like your money is gonna be doing better for you literally in a savings account or a CD ladder or you know, money market account. I, I like that you’re not investing it. Right. I like that you’re not taking a lot of risk with it because you know, yes, this is gonna come due. Yes, I do wanna make these payments, um, pay it off quickly once you know it’s back in repayment. So I love that you’re not taking risk with it, but you’re doing as best as you can in terms of the interest rate, um, in the meantime. So wonderful approach. And another point of congratulations of wow, like look at all that you’ve accomplished financially during graduate school, like maxing out the IRA yearly, you know, getting ready or almost completely repay your student loan debt. Like that’s a lot to do as a graduate student.

Michele (16:07): Yeah, I’ve been really fortunate just the way everything lined up with the GRFP and um, also just, I mean we’ll get into my expenses, but I’ve also been able to keep my expenses relatively low as well, which is a good thing to be able to meet all these goals. And I will also say that I became a big fan of Mr. Money Mustache in <laugh>, uh, during grad school. And his approach really helped me be like, okay, how do I lower my expenses as much as possible, um, and kind of make sure my money is going to the right avenues. So.

Emily (16:43): Um, I’m not a big follow of follower of Mr. Money Mustache, obviously I have listened to him plenty of times and quite familiar with him, but, um, what I like about his approach is it’s really about finding satisfaction in a lower spending lifestyle. So it’s not about staying in your mind in a, um, a state of deprivation. It’s really about finding joy in simplicity and a low spending lifestyle. And I do think it’s quite compatible with the situation that graduate students are forced to be in, at least for a period of time. So I’m glad you found something that kind of like helped you with your overall, you know, disposition towards this financial stuff during graduate school. Um, is there anything you’d like to add about these, um, various goals that you’ve had or how they’ve shifted over the course of graduate school?

Michele (17:29): That’s the other thing is that it’s pretty boring when you’re doing like your finances in a, like a healthy way, I guess. Just like, okay, I send my money here to uh, pay off the debt or I send to my savings account to save up to pay off debt or I’m sending it to my investment accounts. And so it’s not super exciting once you’ve got it set up, but I think that’s a good thing because then you just kind of get to live your life while it’s all happening in the background. So as long as you kind of have your expenses figured out, which is really nice,

Emily (18:01): I think that’s very insightful. Healthy finances are boring. Like once you get it sorted out, you put everything on autopilot. Um, they’re boring, but that’s a good thing. Like you said, you can shift your attention away from those financial elements. You don’t have to pay a lot of attention to it once you have your decisions made and your system set up and then you’re free to <laugh> do anything else with your mind and your time. Um, so I think that’s very insightful. It’s not something that has to consume you continually, forever and ever and it shouldn’t, it shouldn’t be exciting, honestly, like you said, I mean I find it nice over time, you know, check the investment balance periodically, especially if things are going well, you know, in the market. Yeah, go ahead and check it. If things are not going well, don’t check it. <laugh> don’t look, you don’t need to know.

Michele (18:41): Yeah, it’s, it’s kind of crazy too just when, when you do get to like a stable place and you’re able to invest regularly, just looking back at my account over the past five years, it’s like, wow, like I didn’t think that this would add up to this much, you know, with the compound interest and this payments that I’m making. So yeah, it’s very satisfying. I will say once, I know not every grad student is able to contribute as much as I am, but even like if you can’t contribute until you graduate, like just starting out now is also, um, still gonna be help people out in the future.

Budget Breakdown: Housing

Emily (19:20): Okay. Let’s dive into those five, those top five expenses. Um, and feel free also to share how they’ve changed over the course of time in graduate school. Um, and I know number one is gonna be housing, it’s always housing for everybody. Um, so share about the rent payment that you’re making and share about how you only have one roommate now instead of two, like before. What’s going on with that?

Michele (19:42): Yeah, so basically when I started, um, the rent was probably, I mean I couldn’t really have gotten cheaper rent somewhere else, but it was $375 a month, which is insane <laugh>. Um, but it was $375 a month because we had three grad students living in a shared house with like one bathroom, one kitchen. And so that’s kind of why we decided. We had one roommate who graduated and moved out and she lived in like the top floor, which she was a trooper for living up there because it, it was like an A frame and so it’s not like a super great spot if you’re tall like me, I have to kind of lean when I go up there. Um, and so we were, my other roommate and I were still living here. We were deciding if we wanted to have someone else on the lease, but our other roommate had graduated and moved out. So we had the summer to our ourselves and during that time we were like, well, it’s really nice like sharing the bathroom with one less person, not having as much, um, to think about like the kitchen space as much. Like we still kind of had to plan around like our meal prepping around each other, but it wasn’t quite as bad as it was with three people since we didn’t do like a, we didn’t like cook together, we all cooked individually. So that was also a challenge. And so based on that and we both, my roommate, uh, who I lived with for the past three years was also on the GRFP, so we decided okay, we could probably swing to having just two of us. So that meant that our rent, it’s gone up slightly more since then, but currently it’s at $600 a month. So it’s still very affordable compared to other places around us as well and like living by ourselves would’ve been.

Emily (21:22): So your, the whole house is $1200 a month and you and your roommate are each playing paying half.

Michele (21:29): Yep. And so that roommate that I mentioned, she graduated in December, so she moved out and then, um, we, I think technically she’s my current roommate is like subletting her portion of the lease, but we’re gonna resign it in for the next year and then that’s gonna go up slightly to 630 a month each. So it’s going up by $60, which my landlord apologized, but I was like, it’s really not that much compared to like other places because he had like his property tax go up in his like rental fee. So.

Emily (22:00): Sure. And I’m also doing some quick mental math, um, that’s around 20%, right? Maybe a little over 20% of your gross income a little bit higher if we’re talking about net income, but really quite again, quite manageable. Like nobody is feeling rent burdened right on 20%.

Michele (22:17): No, no, it’s been, it’s a pretty affordable rent I would say. I know that, um, like some of my friends who live alone, they’re paying around like, um, eight to 900 a month for theirs. And so then there are other grad students though who are in like a shared housing situation. I think that’s pretty common for Michigan State at least.

Emily (22:42): Yeah, well I can see that even though you’ve elected to pay more in rent than you absolutely could have, um, still seems super affordable. Hopefully you’re getting use out of the space and you like only sharing with another person, like you said. Um, anything else you wanna talk about in terms of your rent expense?

Michele (22:57): It helps that, I’ve had great roommates who like, I think living with other grad students is really helpful ’cause you know, they’re all gonna be like respectful and um, kind of respecting your time. And also like that you’re also like both maybe working from home sometimes if you need to. So I think it, it’s really nice when you have like great roommates and I, I, I also prefer that because it helps you save money in other ways too if you’re, if we’re talking about like the financial side of it, but also like, I think the emotional side of it is great too to have someone like living with you. But um, it’s also nice like, you know, you can have your roommates like give you a ride to the airport if needed or pick you up from somewhere or like, just like take care, water your plants. My previous roommate had a cat and she never had to pay for a cat sitter ’cause I would always take care of her cat for her. So yeah, it’s just things like that, it’s just very useful to have a roommate I think. And I, I enjoy living with roommates. So.

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Budget Breakdown: Groceries

Emily (25:28): Let’s talk about your grocery expense. I know that’s number two on your list. Um, so tell us about your grocery spending.

Michele (25:35): Yeah, so I just looked at it for the last month, which it came up to $250. I would say that’s pretty average for me. I did go to a conference in like the beginning or at the end of April. And so like that was all covered by like a travel award. So I think it’s usually ranges between like $250 and $350 a month depending on like how much I’m spending or like if I have to do like a restock or something like that. And I will say I’m vegetarian so that also helps me save a lot of money too ’cause I’m not buying meat. So yeah.

Emily (26:08): Definitely. What do you find are other ways? ’cause I know yes meat is expensive, but so is dairy, so are nuts. So are, you know, other things, there are categories there that are expensive as well. Can you share anything about the way that you eat? Like do you have certain go-to meals or do you uh, batch prepare things? How does that work?

Michele (26:27): Yeah, so I guess I’m trying to think about like my day. So like for breakfast I usually just have the same thing. I have like two eggs with toast, so it’s pretty basic and I kind of know where to get like cheap, the cheap bread now, well I’d say cheap bread. Cheaper bread. I like don’t wanna get the like just tiny squares of white bread. I like to get good stuff. But um, yeah, like Trader Joe’s, we just got one of those in East Lansing, so I usually go there for that. Um, and then for lunch and dinner it’s usually like I will cook like on the weekends and then also like maybe on like Wednesdays or if I have time during the week and then I’ll just have my leftovers for both lunch and dinner. And then I also do what I call my bridge meals. So I’ll get like something like gnocchi at Trader Joe’s or some other frozen meal that if I’m like traveling or coming back and I don’t wanna make sure that I’m not ordering like takeout or something like that, I’ll have that ready to go. Um, and then that helps me too. And then as for the meals that I’m cooking, they’re usually, uh, pretty basic, some variety of having like beans or lentils with veggies and so those are all pretty cheap. Um, I do also do protein shakes, so that’s a little bit more just because I’m getting like protein powder and Greek yogurt and things like that. But, um, another way that I’ve saved some money on groceries too is I, I wish that I’d realized this sooner, but one of the grocery stores near me has a 10% off like discount for students. So you, with your student id, you can get um, 10% off groceries, which is really nice.

Emily (28:06): I hadn’t heard of that before actually. That’s amazing. Is it like a co-op or like locally owned or?

Michele (28:10): It’s actually one of the Meijers, but it’s like oh, the downtown location. And I think that maybe they were having issues like getting people to go there because it’s a little bit of the way for some people maybe, but yeah, I think, I’m not sure why they’re offering it, but I saw the sign and I was like, I have my student ID.

Emily (28:29): I was just gonna ask how you found out about it. So it wasn’t like another student who gave you that tip, you just saw a sign at the store?

Michele (28:34): Yeah, I literally just saw a sign at the store, so now I’ve been telling all my friends like, you guys should go here and get this 10% off with your student Id <laugh>.

Emily (28:41): Yeah, that’s amazing. What a good, I mean it’s a good idea for them, um, because yeah, most people don’t, I mean if you’re really frugal you would shop at multiple different places, but most people don’t shop that way. And so it makes sense to try to capture like people’s, you know, become the primary shopping destination for more people.

Michele (28:58): Yeah. And then the other way I save money on, on groceries, well is kind of getting into transportation, but I like to bike to go to the store <laugh>, so ah, um, that also saves you money because then you’re not buying anything that’s really bulky. So like, I’m not buying like pop or I guess, sorry, soda, um, Midwestern coming out, but um, things like that or, uh, any other like seltzer water, things like that I’m usually not purchasing. So.

Emily (29:27): Um, I would imagine also cuts down on impulse purchases if you’re looking at your, your backpack or your bags or whatever you’re using to carry the groceries. Um, I have a strategy that I now use, which is like, I very rarely physically go into grocery stores. I do all online ordering and then do pickup, um, which keeps like the impulse purchases at a minimum.

Michele (29:46): Yeah, <laugh>. I will say that I, I’m not always going to the store with my bike so I, there is times where the impulse purchases still do come through, but it’s also just like a very enjoyable way to spend like a Saturday morning or afternoon even though the stores are kind of busy at that time, but it’s like a nice little bike ride to get there. So at least for me when I’m going to certain stores it’s like, um, like a nice trail. So

Budget Breakdown: Utilities

Emily (30:14): Yeah, I love to hear about that. Your next expense you told me is utilities. Lots of different utilities under that umbrella. Tell us about those expenses. Um, what they amount to typically and how they’ve changed.

Michele (30:25): Yeah, so those have gone up obviously since we have one less person. That was kind of when we were deciding if we wanted to have only two people live, the utilities, that was our sticking point because those can get quite pricey. So I looked at my past month and it came up to around $200, so that’s with electricity, water heating, cooling, internet, trash. And I also include my phone bill in that. So for like the first, obviously the phone bill I’m paying on my own, but everything else is split between my roommate and I and those are pretty variable just because, well I guess like the electricity and the water usually stays pretty, um, similar but like the heating and cooling, it’s more expensive in the winter here in Michigan to heat the house. And then we usually try not to use the AC unless it’s like super hot outside in the summer. And then the internet and the trash are also like pretty affordable. Um, I’ve actually managed to save money on utilities for the internet by switching from like a different provider. And then I also lowered the internet speed because most of the time, unless you’re like playing a lot of video games or something, you don’t need the speed that they give you as like the baseline. So yeah, that’s my utility bill.

Emily (31:49): Yeah, I love that you were, you know, conscious of that evaluating it because stuff like internet bills, they’re not the biggest things in your budget, but as fixed expenses, if you can just put in the like 30 minutes of effort or whatever it’s gonna take to like research it and, and call the company or chat with them or what have you, um, then you can sometimes get that bill lowered and very little effort, very long payoff like throughout the course of at least the next year. So that’s awesome. Have there been any other ways that you’ve decreased your spending on utilities over time?

Michele (32:23): Yes. So some of these people might not wanna do because they do take a little bit of extra time, but some ways that I’ve been able to lower my utility bills has been um, I line dry my clothes, which is obviously a lot easier when you’re in the house, but the dryer is kind of an energy hog.

Emily (32:41): I did that too during grad school.

Michele (32:42): Yeah, I actually, um, yeah, I have some like hanging up downstairs right now, but yeah, I just gotta, gotta time it if you like, need your like clothes at a certain time, like you gotta do like a day in advance, but it’s pretty easy. And then the other thing, um, my roommate who moved in probably doesn’t know what she’s getting herself into, but uh, I layer up in the winter, so kind of try to reduce heating bills by lowering the thermostat. Um, I think that’s a pretty obvious one. But then also in the summer, like running fans and keeping the blinds closed, um, like I said also the internet, but then my other thing I did was in Lansing at least the trash is you pay dependent on like the size of your trash and so I switch it to like the smallest size possible that only comes every other week. So that’s another way that I save money,

Emily (33:33): Another fixed expense that you managed to lower and as long as you’re confident you can like meet those, you know, those limits then that’s great.

Michele (33:41): Yeah. And then the last thing that just happened recently that I’m super excited about, I don’t actually know it’s gonna affect my energy bills at all, but, uh, I kept kind of pestering my landlord about our dishwasher and we just got a new one. And so even if it’s to save us money, it’s, it’s better because it’s a lot quieter so, and I don’t have to try to clean it as often. So yeah, that’s some ways to that I’ve done that. Well then I guess also the, um, for electricity, I don’t know if this is the case, like if it’s the same hours in other places, but our utility provider has like, uh, off peak and on peak hours, so we try to run like our bigger stuff like the dishwasher and the washing machine during those off peak hours.

Budget Breakdown: Restaurants & Social Activities

Emily (34:27): Definitely. Alright, then let’s move on. What is your fourth largest expense each month?

Michele (34:33): Yeah, so this one, the next two are kind of variable, but for this past month it was, um, $160 for restaurants and other social activities. So like this past semester I was the social chair and so I, I hosted some like department happy hours or I guess co-chair. And so that was, you know, we , would go out to like some bars and get like a drink or two and then also just going out to eat with friends as well.

Emily (35:03): And has that changed over the course of time?

Michele (35:05): Yeah, I would say that I, when I first started grad school I was a lot more frugal with those like kinds of social activities. I tried to limit them a little bit more, like tried to have people over at my house rather than going out as much. But now I’ve been that I feel like I’m in a better financial position. I have been going out to eat more often. Um, and then I guess another thing that I’ve started doing is I’ve been doing some sports leagues, so do like, um, adult volleyball or um, sand volleyball as well. So those have like higher costs to them as well, but they’re pretty affordable I would say, especially spread over the like the weeks that you’re participating in them.

Emily (35:50): I just love this that, you know, getting this picture of you at the beginning of graduate school and now four years in, like you’ve found ways to spend less in certain areas. You’ve also decided that it’s worthwhile to spend more in certain areas and still along the way you’ve done all this investing in debt repayment and it’s absolutely wonderful. So I’m very glad to hear that, you know, you’re putting your dollars where you value them.

Michele (36:10): Yeah, it’s, it is definitely like an adjustment because I feel like for so long, like you, like I said, I, I volunteered for AmeriCorps and then in undergrad I was like just saving money all the time and so it’s been nice to be like, okay, I have a little bit of breathing room now and kind of let loose a little bit more with some of my like, like I can go out to eat more often now. So it’s been nice.

Emily (36:36): I think we should do another follow up interview in another four years when you have a proper salary <laugh>, like, we’ll see, we’ll see where you are then. Are you, like, are you still very low spending or have you managed to, you know, moderate with the newer income or are you going crazy with investing? Like, yeah, we’ll let’s put a pin in that and, and return to it. Um, okay, your fifth, uh, highest expense in your budget? What’s that?

Budget Breakdown: Transportation

Michele (36:57): Yeah, so this one was also higher for this month because I went on a trip but, or kind of a trip I went home to visit family. Um, the transportation was $125 and so this usually is closer to $70 for car insurance and gas. But like I said, I like to bike a lot, so my gas is usually pretty low, which is also good for the current gas prices.

Emily (37:23): So it sounds like you have a paid off car, right? Can you tell us about your car?

Michele (37:28): Yeah. Okay. So for the car, it’s basically the same one that I’ve been driving since high school and like I said, my parents are very generous and so they made sure that me and my siblings each had a car. Um, and yeah, I basically don’t put any miles on it. I just use the car basically for like big trips and then if I do need to, like I’m going to those volleyball leagues that are kind of further away from campus then I’m driving to those things. But I, I try to keep my driving to minimum, which also is, is the money, but also because I’m really cognizant about my carbon footprint being in the Fish & Wildlife department. So I, I try not to drive as much as I can.

Emily (38:07): I see. And another way that you have found a kindred spirit in Mr. Money mustache because he definitely writes a lot about not owning a car or minimizing your car usage. So how do you commute to campus?

Michele (38:19): Yeah, I, I bike to campus so I have, the way I do it, I have like, um, a mountain bike that I put like a rack on the back and then I have two like bike bags that I attach. So it’s plenty of room for like my laptop and any other things I need to bring like books or um, like a change of clothes if I’m going to like work out or something like that. So yeah.

Emily (38:42): Have you thought about getting rid of the car entirely and if so, what, why are you keeping it?

Michele (38:48): I have thought about getting rid of my car, but I don’t want to because it’s very hard to live in the US without a car. Um, just like I said for those times where I am doing like a trip or something. And then also for those times where I’m traveling a bit further on to the outskirts of town, it’s basically if I just like worked and stayed at home, I wouldn’t need it. But since I do value those social activities then I do still need the car.

Emily (39:20): It is great. I feel like for something like this where it’s like, yeah, I get some marginal utility out of it. It’s not like a daily thing. It’s good that it’s falling to number five on your list and it sounds like some months it might be even lower, right? ‘Cause in particular you had a trip that you took this month, so in some months it might even be outside of the top five. Um, and that’s about the right size for something that is like, yes, this enhances my life in some, some way. It’s not totally essential. So it’s good that it, you know, that it is a paid off car and that the insurance doesn’t sound like it’s too expensive and, and you’re not using it that much. So the, the operating costs are not very high.

Michele (39:54): Yeah, I will say I did use it more this past semester than I have in the past just ’cause it was a particularly intense Michigan winter um, so I drove to campus a bit more than I usually do and um, just kind of had it on retainer a bit more than I usually do. But yeah, I’ve been usually like biking through the winter too. So.

Emily (40:17): How do you park on campus when you do drive?

Michele (40:20): My office is kind of on the outskirts so um, it’s kind of far away and so it’s not like, um, as big of a deal for me to park over there than it would be so I kind of just risk it on getting a ticket <laugh>. Um, and usually I, so far I’ve been fortunate but for my office parking, but if I am going on further onto campus, I pay, there’s like a pay by plate option so I’ll pay like five bucks or whatever it is for however long I’ll be on campus.

Emily (40:51): Gotcha. So once again, the car comes into use and these like occasional, okay the weather’s particularly bad occasional scenarios. Um, great. So that’s your backup plan for getting to campus is you have your car and you can <laugh>, um, skirt the parking regulations since there don’t seem to be any consequences <laugh>.

Michele (41:10): Yeah, well there is, um, there’s tickets but I somehow have avoided the parking attendants, um, just because it’s kind of for off the beaten path for them. But yeah, ’cause I think it wouldn’t really be too much, but um, the grad students are always doing that calculation like, how many tickets <laugh> would I need to get before getting a parking pass? So, so far it’s kind of the math that’s worked out for me.

Best Financial Advice for Another Early-Career PhD

Emily (41:35): Gotcha. Well we’ve run through your top five expenses. I mean, I’m just so pleased that like you’ve, you know, honed in what’s, what’s of value to you over time that you’ve obviously had these great financial accomplishments, you know, especially coming up in another year, whatever the timeframe is on your graduation, you can really say, wow, look at all these things I accomplished financially during graduate school. It’s incredible. We will wrap up with the question that I ask all of my guests and I know I asked it of you before, but what is your best financial advice for another early career PhD? And it could be something that we’ve touched on today already or it could be something completely new.

Michele (42:11): Yeah, so I have a few things. When I was thinking about what my best financial advice would be, the first thing is to track your spending as I think it’s really helpful to plug any holes where you don’t realize where you’re spending more money. Like for me, I’ve been spending more recently on going out to eat than I have in the past. And so the way that I’ve done that is I’ve mentioned Fidelity a lot because I use them for basically everything, but um, they have this really nice thing where you can connect all your credit cards to one location and so that way you can kind of automate the tracking. Um, and like if you, you could also probably add in like if you’re Venmo people or using cash for something, then you could track it that way as well. And then another thing that I probably, I think that was my last, last time I was on, I talked about the Roth IRA, but I recommend not only sending money to your Roth IRA but making sure that you’re depositing funds into a, some sort of fund because I, I have talked to people in the past who have only put it into the account and not invested in it. And so just gotta make sure that you realize that it’s not a normal bank account and you need to invest the money. So those are my two big pieces of advice.

Emily (43:24): Yeah, so mistake I literally made with Fidelity with the first IRA that I opened, I don’t know, hopefully their interface has changed <laugh> in the intervening time, but I for sure made that mistake. Also, I’ll say that at the time mutual funds were the thing to invest in and there were higher minimums. Now we have ETFs and it’s a little bit more flexible. So another thing to look out for to make sure that you know, you’re investing appropriately and that your money is not just sitting in a money market account.

Michele (43:50): Yeah, yeah. I’ve helped, um, multiple people like set up their Roth IRAs, so I’m always like, okay, make sure you have to pick one of these funds now. And I try to, I think people get overwhelmed by choosing, so I’m just okay if here pick one of these three <laugh>, they’re all basically the same though. So

Emily (44:07): Yeah, definitely. Um, I list this when I teach about getting started with investing, I list this as like a separate step. Like one send over the money, two, make sure it’s inve- like a few days later. Like make sure that it’s actually invested where you intended for it to go. And it’s not just randomly like you missed a step there. It’s a whole other thing you have to consider. Um, absolutely. Well Michele, it’s been so great to have you back in the podcast. I’m so delighted by this update and thank you again for volunteering. It’s been great to speak with you.

Michele (44:36): Yes. And thank you for having me on again. I appreciate it and thank you for all of the great work that you do with this podcast and helping everyone out with learning how to <laugh> navigate finances as a grad student.

Emily (44:46): Yeah. Thank you for saying that.

Outro

Emily (44:58): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by me and show notes creation by Dr. Jill Hoffman.

Sacrificing for a Lofty Financial Goal on a Grad Student Stipend

May 4, 2026 by Jill Hoffman Leave a Comment

In this episode, Emily interviews Dr. Jed Kim, a recent PhD graduate in chemistry from the University of Wisconsin at Madison. Jed built a $35,000 Roth IRA by the time he finished his PhD due to consistent $500 per month contributions. Jed and Emily discuss what it took financially to maintain that savings rate, from applying for fellowships and bank bonuses to sharing food with multiple roommates to engaging in free and low-cost activities. Jed speaks openly about how spending too little at times hampered his mental health and how a family emergency caused him to rethink his approach. This interview illustrates the trade-offs graduate students have to navigate when striving to make the PhD less of a financial liability.

Links mentioned in the Episode

Sacrificing for a Lofty Financial Goal on a Grad Student Stipend, Money Story with Dr. Jed Kim

Teaser

Jed (00:00): I have to do this in order to do my dream job of being a, being a researcher and a scientist. So how do I make this so that this PhD is no longer a liability but an asset for me, both financially and like career wise?

Introduction

Emily (00:22): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (00:52): This is Season 23, Episode 9, and today my guest is Dr. Jed Kim, a recent PhD graduate in chemistry from the University of Wisconsin at Madison. Jed built a $35,000 Roth IRA by the time he finished his PhD due to consistent $500 per month contributions. Jed and I discuss what it took financially to maintain that savings rate, from applying for fellowships and bank bonuses to sharing food with multiple roommates to engaging in free and low-cost activities. Jed speaks openly about how spending too little at times hampered his mental health and how a family emergency caused him to rethink his approach. This interview illustrates the trade-offs graduate students have to navigate when striving to make the PhD less of a financial liability.

Emily (01:45): This time of year, mid-April to mid-June, is my reflection and planning season. I consider what types of financial education I want to offer my university clients in the upcoming academic year, and there may be a big shake-up in store for this one. When I pilot new workshops and programs, I typically offer them to my mailing list subscribers for free or at a steep discount so that I can work out the kinks and receive feedback. If you would like to be the first to know about these opportunities, please join my mailing list through PFforPhDs.com/advice/. As a bonus, you’ll receive a document that catalogs all of the financial advice given by my podcast guests at the end of our interviews. You can find the show notes for this episode at PFforPhDs.com/s23e9/. Without further ado, here’s my interview with Dr. Jed Kim.

Will You Please Introduce Yourself Further?

Emily (02:55): I am delighted to have joining me on the podcast today, Dr. Jed Kim. He graduated with a PhD in chemistry from UW Madison, um, in June, 2025. And we’re gonna be hearing today mostly about his financial journey through graduate school and specifically what he did to build up a $35,000 balance in a Roth IRA by the time he finished. So that’s really exciting. So Jed, welcome to the podcast. Will you please introduce yourself a little bit further for the audience?

Jed (03:23): Yeah. Hi. Um, I’m Jed. I got my PhD from UW Madison. As you just said, um, I was an avid, uh, runner. I, um, I liked, we have two cats right now, so a big animal lover and for the most part I like going out in nature, which is why I went to UW Madison as well.

Emily (03:40): I have had the pleasure of visiting in the summer, and I found it quite lovely. Um, I don’t know about the rest of the year.

Jed (03:48): Yeah, summer’s probably one of, personally, I think it’s one of the best and worst times ’cause that’s when all the mosquitoes come out, but also like the lakes are just so beautiful. Um, and if you go like, uh, fishing at the, at either Monona or uh, Mendota, it’s just great. Also, like all the wilderness, all the trees. It’s super nice.

Financial Position at the Beginning of Grad School

Emily (04:09): Well, that’s wonderful. Let’s take it back to the beginning of graduate school. I wanna know kind of what your financial position was and also your mindset was going into graduate school. So can you tell us, like, you know, did you have any assets at that point? Did you have any liabilities and what were you thinking about money when you first started graduate school?

Jed (04:28): Yeah. Um, I guess we could, um, going into going into graduate school, I was very lucky where I got a lot of, uh, I guess it sort of like my financial journey starts in undergrad, right? Where I had a part-time job in undergrad, as well as my second part-time job was like applying to as many scholarships that were even remotely relatable to me as possible. So all throughout all that I was able to come out of, uh, undergrad debt free. So like, I had no assets, but also no debt. So there’s, there was a little toss up. So I pretty much started grad school at zero. I think I maybe had like a thousand dollars. Um, the outlook was, uh, when I first toured UW Madison, they said that it wasn’t really a place to like build wealth. It was just a place to like enough of a stipend to survive. And I was always an overachiever. So I was like, okay, how could I make this stretch as far as possible? Um, I got a, um, I got a minor in entrepreneurship and business, so I was really financially focused at that at that time. So I want to like really say, okay, I have to do this in order to do my dream job of being a, being a researcher and a scientist. So how do I make this so that this PhD is no longer a liability but an asset for me both financially and like career wise.

Emily (05:44): Oh, I love the way you put that and I love how, um, conscious of that fact you were going into it. Like it is, it is for most people, the financial reality is yeah, you’re just gonna be treading water, if that, during a PhD. But, um, I’m so curious now to find out how you went against that narrative. Um, especially that local narrative. ’cause it’s not the same everywhere, um, to start building wealth and as you said, not let the PhD be as much of a financial liability. Love it. Can you tell us what your stipend was at the start of grad school?

Jed (06:15): Um, I think it was, well, like it was high 20k, low 30k, and it stayed that way throughout the entirety. I think, I forget the exact numbers, but I think it started off at 28 and ended around like 32. But if, I could be wrong with a couple of thousand here or there, I don’t, I don’t think, I think it’s relatively reliable. I mean, you know, if you’ve had a lot of interviews, that’s pretty much just standard stipend for most PhDs.

Emily (06:42): Yeah. And I do know that UW Madison, at least from the previous interviews I’ve had, not a generous stipend. Definitely not.

Jed (06:48): Definitely not. Yeah.

Emily (06:50): Yeah. And what year did you start grad school?

Jed (06:52): Um, I started in 2020.

Emily (06:54): Okay. Uh, interesting time to start graduate school. Um, you moved, you were, you know, you were on campus the first year?

Housing Expenses During Grad School

Jed (07:02): Yep. No, no. So actually that’s the first way I, I started saving money. Um, before starting grad school, I, I made sure to message all of my incoming, um, grad school, you know, class. And I tried to get as big of a, um, number of people in one place as possible. So we found a house near near UW Madison. It was like a, still a 10, 15 minute walk. Uh, there was a bus that went straight to UW Madison, but I ended up spending only like six to $700 a month in rent. So that, that was like a, I really wanted to stay under like half a paycheck for, for that first year so that I could like, sort of get my, uh, um, feet under me when I first moved it.

Emily (07:47): Okay. This is an amazing tip already for both prospective and current graduate students. So how many, it sounds like you’re renting a single family home? And how many other people did you share it with?

Jed (07:57): So initially it was four, and then one, one person did end up dropping out it, in total, it was about three people. The rent though, was really, uh, we, it wasn’t the best first place. Obviously, as you stay longer and have it, um, in undergrad, you have no money <laugh>, like, pretty much all my money went into paying back, uh, paying back my, uh, student loans. But in the first year I was trying to stay, uh, as lean as possible. The rent, I think was like 1800 some, somewhere around that, maybe 18, 1900 for the whole house. Um, so it started off as four. When it was four, it was great, but, uh, we, like rent was super cheap, but then afterwards it got a little more expensive. Utilities, we kept it at as, at a minimum, I remember us trying to turn off the lights as much as po-. It was all the, all the things where you could scrounge as much as you can, as well as like splitting the internet bill, which was, which is a set cost. A lot of the set costs ended up being split among three, four ways. So that really reduced like the monthly expenses.

Emily (09:00): And did your roommates have a similar, oh, you also shared food. Oh, okay. Did your roommates have a similar mindset to you about wanting to be pretty frugal?

Jed (09:08): One of them did, the other did not. So there was a big room, a medium room, and a small room. The big room person, we just gave it to them. They paid, they paid like an extra 150 a month. The small room person paid like, like a hundred dollars less and I got the medium room. So I, I was considered like the base rent. I’m not sure how that worked out, but it ended up being pretty good. Uh, in the long run,

Emily (09:35): I’m spending some time on this because the housing decision for graduate students is honestly make or break for a grad student’s budget. And and you were so smart to know that going in, like knowing that as a prospective and rising first year, um, is that, was that the same housing that you kept throughout graduate school or did you end up moving?

Jed (09:53): So, um, in grad school I moved every single year. Um, mostly because every single year for some reason, rents kept going up. So I was trying to find a way to, uh, to minimize that. The first year, first first two years, we stayed in that place. Second year, um, we tr I tried to get another roommate, but that sort of fell through. So I found a, uh, uh, apartment that I rented on my own that was the most expense I spent on rent. And then the last two years I actually moved in with my now wife, then fiance. Um, so that ended up splitting rent as well. Um, but rent usually stayed around that when I lived by myself, it was like a thousand dollars, which was a lot. It was. But luckily at that time the, the stipend ran- randomly increased in UW Madison. So there was like a sort of cost of living adjustment, I guess. But, um, yeah, so it was like around that six to thousand dollars mark throughout the entirety.

Transportation Expenses During Grad School

Emily (10:56): Okay. Yeah. So good to know. And I really hope people are taking this message to heart. Um, I also moved a couple, maybe three times during graduate school. Um, a couple of those times were motivated by rent increases that I was like, I, no, I, we can do better elsewhere. Um, what about your transportation situation? Did you have a car? Did you not?

Jed (11:16): Yeah, so that was actually like a deliberate decision. My parents really were, were badgering me. Like, oh, you’re in America. You had to get a car. You have to get a car. I’m like, a car is a monthly expense. I just cannot, I could afford Right? Like a car payments. The car payments is one thing, but the car insurance was something else, something else. And as well as if you get a car in Madison, you have to have it covered. Otherwise it’s gonna like snow over you and ruin the car. So, um, I just took the bus everywhere. It was definitely a time drain, but it was just something that I had to do in order to like not go into debt while in grad school.

Emily (11:55): And what about your peers? Did a lot of them have cars or a lot of them made the same decision as you

Jed (12:00): Most took the bus. Um, the ci- the bus, luckily the bus system in Madison were, was actually quite robust. So, uh, whether you lived like 30 minutes away or an hour away, there’s usually some sort of bus line that gets you through. Um, for instance, like I lived, I didn’t live in Madison City, I lived in Fitchburg, which really saved a lot of money at in that way. Um, there was a direct bus line that went straight from our apartment to the ma- uh, to Madison. And that really helped.

Emily (12:25): So, uh, I managed to live car free for exactly one year of my life, and it was glorious <laugh> and I have not achieved it since. Um, but I know like the questions for some people who maybe they have a car currently, but it, it is expensive and they’re not using it like that much. Like, talk to me about, okay, let’s say someone has like the daily commute solved around town. They know how to do that. What about those really outlier things where like you would really, it would be very convenient to have a car for X reason, like when you’re traveling or something like that. Like how did you solve those? Like, very rare but acute needs for a car.

Jed (13:01): So it really helps to have friends. First of all, <laugh>, if you have friends, um, um, outside the graduate school program, I found that that really helped me. Um, usually, uh, every grad school has some sort of like big industry, like industry company nearby, and that usually employs some people that aren’t in a PhD program. Um, I remember, uh, in Madison usually we go to Chicago or something like that for a trip, um, for a day trip or weekend trip. And usually the people that work at Epic or or in the U- University it’s entirely would sometimes like schedule like a road trip. And we, and that way I would avoid that flight, uh, that, that trip. The renting a car situation is actually not too terrible, especially if you know that you’re not gonna be in the, uh, in the city. So, and you try to plan as much as you can to not travel in the winter, and that way you don’t have to worry about the over, like the covered parking situation that you really had to worry about.

Investing $35,000 in a Roth IRA During Grad School

Emily (14:05): Gotcha. Thank you so much for those, um, insights. Okay. We’ve gotten a picture into your largest fixed expenses, right? Housing and transportation. And we also got a picture into your mindset, which was don’t let the PhD be as much of a financial liability as usual. And so, you know, I mentioned up top that you managed to build up a Roth IRA of $35,000 by the time you finished graduate school, which is incredible. So I wanna hear kind of some things that went into it that, did you do anything on the income side? Did you do anything on the expenses side aside from in housing or transportation that we’ve already covered? So kind of take this where you will, like how did you manage to, you know, save and invest that much?

Jed (14:43): Yeah, I mean, the lar- the fact that my largest expense, um, monthly was $600 really helped. Right? So, um, I was able to sort of squirrel away around $500 a month every month for my entire PhD. Um, and that comes to around like 6K, $6,000 a year, right? Um, luckily I started in, well, okay, I don’t wanna say luckily, but I started investing around, uh, 2020. And there the, uh, the, uh, s- like I mostly focused on like ETFs like, um, international and local ETFs, and those did pretty well. So that really helped with the growing, but the majority of the Roth IRA is still my own contributions, which I’m hoping won’t happen too for too much longer. But right now that’s kind of where it’ll, it’ll stuck.

Emily (15:33): Yeah. So let’s, um, talk a little bit about on the income side. Now, as you know, you mentioned during your undergrad that you applied for so, so many scholarships. Did that continue during graduate school or how did you apply those lessons in grad school?

Jed (15:45): Yeah. Um, first three years, no. Um, but then af- because the first three years is the first year it was mostly like COVID really hard to like sort of get acclimated to the university. Um, second year, uh, there’s these quals called, uh, TBEs that UW Madison has you take. So I was focusing on that. Third year there’s another qual called the RP research proposal, um, that you have to take as well. So those three years pretty much I was just trying to survive <laugh>. Um, um, but then in my fourth and fifth year I was really looking at like external fellowships. Um, I was lucky enough to get one that was, uh, tangentially related to the research I was doing. So the A-C-S Medi, um, I, if you are in the medicinal chemistry or in the organic chemistry field, I highly recommend that you do apply to that one. Um, it’s a very generous fellowship as well as, uh, a allows you to go, they pay for an entire trip to the Gordon Research Conference, which is a really good networking opportunity. Well, it was for me. Um, and then other fellowships I applied to that were a lot smaller were like, um, some scholarships I previously applied to in, um, in undergrad, but you know, in grad school format, um, there’s a grad school, uh, or post undergrad, uh, program as well.

Emily (17:03): And did these fellowships actually increase your stipend or was Madison just like, thank you very much for the money. Your stipend stays the same

Jed (17:11): That, for the ACS Medi? Yeah, it was pretty much your stipend stays the same. Um, they did give me a little bit, I think like four or $500 extra, but it was pretty much, I mean, if you talk to someone from UW Madison, you kind of know that there’s like a whole internal process where all the fellowship money goes into the university, they take the taxes out and then, um, and then they, uh, get give you the rest. That’s actually how I found you because I was, look, I got my first fellowship and I was like, what is going on? How do I use this money? Like what, how do I, like, do I get extra money for doing this? Because technically the stipend was more than I was making, uh, sorry. The fellowship was more than I was getting from the stipend, so I was like, do I get a bonus or, but it was pretty much they get it, use it to pay for my insurance, and then I could get like maybe two, 300 extra dollars extra. Which was a little bit disappointing. But

Emily (18:02): Yeah, it can be. And that’s something where I definitely want grad students to be aware that that could be the outcome. And so you have to know your motivation when you apply to fellowships, is it purely I want to increase my stipend, or is it also I want the prestige, I want this on my cv, I wanna get to go to a Gordon conference? You know, you have to know your reasons, because if you’re applying purely for the money and then your university just absorbs the money, that will be very, very disappointing. I, but it sounds like some of the smaller ones were able to stack.

Jed (18:27): Yeah, the smaller ones was able to stack a little bit, but again, they were so small that when I asked the university, they were like, yeah, it’s fine. Just it went directly to me. Yeah.

Emily (18:38): So you did have a conversation about it, you like disclosed it and yeah.

Jed (18:42): Um, I talked with our, uh, our advisor and she was like, yeah, it’s fine.

Emily (18:47): Um, and then when you won the larger fellowship from ACS did you ask about receiving more of a bonus than a few hundred dollars? Like did they turn you down? How did that work?

Jed (18:58): I did, and then they sat me down and said, here’s all your expenses that we pay for health insurance. You’re not getting that. I was like, okay, that’s fine. And then, okay, <laugh>, I, I kind of just left at that. It was, it was a, uh, in the end it was like a great experience for me anyway ’cause again, they paid for the Gordon conference as well as, um, it’s a, it was a huge boost to my cv. Um, it was a particularly, um, uh, prestigious fellowship, so it was more, I guess prestige wise, but yeah, in the moment I was like, ah, $38,000 extra will be great. And then didn’t happen.

Emily (19:32): Yeah. Um, okay. So that sounds like that about sums it up on the income side.

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Emily (19:39): Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, goal-setting, investing, frugality, increasing income, or student loans, each tailored specifically for graduate students and postdocs? I offer seminars and workshops on these topics and more in a variety of formats. This is a perfect time to book me for a workshop at the end of the current fiscal year or at the beginning of the upcoming academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Ask the potential host to go to PFforPhDs.com/financial-education/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

Reducing Expenses with Roommates, Costco, Sharing Food, and Low-Cost Experiences

Emily (21:04): Do you wanna talk about how you sort of managed or even maybe, you know, reduced your expenses over time in these non housing, non transportation areas?

Jed (21:12): Yeah, of course. So both. Mostly I if stay with roommates for as long as you can, that’s the best advice I could give because not only does it split the rent, but it really like, I don’t know how, how, how it is for you, but utilities are kind of expensive, especially Madison, where it’s like sometimes the utilities could go up to like 150, $200. Those are severe months. But, um, paying that by yourself, it it beco-, it ends up adding up to becoming an extra rent payment. And, um, if you split it among everyone, it becomes way more manageable. Where, where even the expensive months, like it ranges from like 30 to $60 instead of like 50 to $200 and that makes, that makes life a lot easier.

Emily (21:57): Now you mentioned earlier that you all shared food. Can you tell me about that?

Jed (22:01): Yeah, so we usually go, we, um, so conventional, uh, grocery stores, if you go weekly, ends up being really expensive. So what we did was we, we would go to Costco together and we’d get like those bulk deals, like the bulk beef, the bulk pork, um, giant trays of like eggs. And then we’d all just like split the, split the expenses, uh, which, you know, economically fa favorable, but also those meats could be frozen and we could, we usually like use them for like hot pot or like Korean barbecue nights. And then it was like really financially feasible. Um, Wisconsin also has like weirdly cheap beef and pork, so it was like really helpful there. But if we bought ’em individually from the package, I did the math, I think it would’ve been like two, three times more expensive. So I was like, that’s not gonna happen. We, we literally bought yeah, bags of like meat

Emily (22:52): I distinctly remember like discovering Costco when I was in graduate school and realizing, like you just said, like, you don’t have to go through six pounds of meat in a week, like just freeze it. So like if you have an operating freezer, like you can buy in bulk, even if you’re just, even if it’s just one or two people, you know? And it’s still, it’s still pretty feasible. So I was not, of course you might not buy, you know, 48 ounces of ketchup or whatever, but there are definitely things at Costco that you can buy and manage to consume, um, you know, in a timely manner. Uh, so were you all only shopping together or were you also like cooking, like preparing food together?

Jed (23:28): So one of my roommates were, was in the same lab as me, so we did cook together. Um, someti, uh, I’m like, I love cooking. So usually what I do is I would cook for the entire group, um, and then like everyone could just eat what they want. Um, I would meal prep and then, and then we’d sort of split. I mean, the costs are all split and I actually do enjoy cooking, so it, it would end up working out. Um, sometimes people would, uh, in order to like pay me back for that, sometimes pay me back. Not really money-wise, but like they would make dinners. Um, so we would sort of not eat together per se, but still eat the same food. If that makes sense.

Emily (24:08): I honestly have never tried that cooperative relationship with anyone other than my, like family. It sounds to me it sounds challenging, but like, I guess it, for you, it seemed like it was working out, especially since you were willing to do a lot of that labor upfront as like a service to the household.

Jed (24:22): Yeah, like Sundays it was pretty much like for me cooking, a lot of the dishes I cooked are like Asian, right? And like if you have a giant pot, it doesn’t really matter whether you’re cooking for six people or one person, it’s gonna take the same amount of time, like a stew needs a stew for cer-a certain period of time. So I would just turn it on, it would be ready and then people would just take it as they need.

Emily (24:46): And would you like to share any other kind of areas in your budget where you kept a lid on expenses or managed to reduce expenses? Like what did you try during the course of grad school?

Jed (24:55): Oh, well, in grad school, I mean, you know, this like, there’s not really that much free time. So, but when you do have free time, um, you want to ch- uh, I chose experiences and things that I found like very fulfilling that didn’t cost too much. I mentioned fishing, I loved fishing. It was pretty, I mean, you just need a fishing pool and sometimes you can rent those from a friend. Um, you would go ice fishing at the on the lake, which is free <laugh>. Um, you would, we did a lot of like, uh, if you know, lake Monona and Lake Mendota, it’s actually a beautiful walk. So I would, I would run that. Um, I trained for a bunch of like marathons and, um, half marathons, a 5K. And again, all you need are like really good running shoes for those. Um, there was a new rock climbing gym <laugh> in Madison. So in order to advertise for that, I tried to go to as many free events as possible. So like I would still be experiencing the city, um, and still experiencing what, what, uh, what what can be done in the city, but also not pay too much. I did end up spending some money on some activities, but, um, for the most part, I try to keep costs to a minimum. ‘Cause I knew that after grad school I would have more disposable income.

Emily (26:07): I mean, that makes so much sense to me that, you know, in graduate school for need or for want, like you’re gonna choose activities that are pretty low cost, unless you really are roll rolling in the dough, it doesn’t make sense to pick up like an expensive gym membership when you could just be running outside, you know, that kind of thing. Um, so that absolutely makes sense to me. Like I know one of my big activities in graduate school was like watching basketball games, which it’s not free to attend, but it’s free to watch them. Like if you have a watch party at your friend’s house and I’ll bring a little bit of food, like, it’s very, very low cost. Um, so that was like a really enjoyable thing that I did. And yeah, my activities are different like on the other side of graduate school. Um, okay. So you mentioned to me before we started that you were a fastidious budgeter. Can you tell us a little bit more about that?

Tracking Expenses and Budgeting as a Grad Student

Jed (26:54): Yeah, so, um, I had an Excel sheet that I made in undergrad, sort of budget for how much I spend in everything from rent, health insurance, phone bills, food, fun activities. Um, I used, I, I play, I play, oh, video games is how is a lot, was also an activity I have. So like how much I spend on video games, how much I spend on computer stuff, accessories, things like that. Um, clothes, like every category you could think of, I have, I have it. And basically anytime I do anything, I just, I log it into the Excel sheet and then move on. Um, that, that first, oh, um, that first month where I first started was what I called my baseline pay, baseline spend. And I was eating out a lot more than I thought I was. So I, I went to USC in undergrad and USC if, you know, is very close to K-Town. So we would drive to K-Town a lot and spend a lot on Korean barbecue. I didn’t realize how much I was spending until I, I did this, did this exercise. So the first month was just tracking. The second month was using that tracked data. I would extrapolate what can I really give up and what can I actively see, use that money that I’ve given up into something more what I consider to be more, uh, rewarding. For instance, like instead of going to Korean barbecue, which is very expensive, maybe we go someplace cheaper, but also save that money to go on like a trip. Um, ’cause of that I was able to do a lot of things in undergrad that I normally, but that’s not really normal for an undergrad experience. And also like, was able to sort of carry on that mindset and, and sort of modify it. So instead of going on trips ’cause a PhD, you don’t really have time to go on trips that often. Um, you, I would use, uh, divert all of that excess spend, excess spend from my initial first month into, um, into savings.

Emily (28:48): Yeah, it sounds like an incredible approach. Can you tell us a little bit more about how you actually did the budgeting? I think you said you used a spreadsheet. Um, but any details about, like, did you also use software or like how many different accounts were you tracking?

Jed (29:03): Um, so I, if you open a, if you open different bank accounts, they do give you bonuses, right? So, um, I use that spreadsheet to sort of track among the different account that I opened in order to get the bonuses and then close them as, as the times as as as I didn’t need them or if, or if the burden became too high. Um, mostly it was three to four accounts at a time. Anything above that, I was completely overwhelmed. Um, four, I remember I tried to do five accounts at one point and that was just too much ju- money juggling and just ended up, I’ve ended up making some mistakes when I had five accounts, which is how I knew that five accounts is the end, four is my limit. So, um, that’s what, um, I also experimented with like how much money I can spend in each category without becoming too depressed. Like there’s a, when you’re making a budget, you’re like, oh, I could be super, uh, super, uh, militant and I could live this like nomadic lifestyle, but af after living a nomadic li like after living that very like Buddhist monk-like lifestyle for six months on top of doing all the work that’s required of you in grad school and really just like hamper you mentally. So I found like a how much I’m comfortable with spending while also not me-, uh, hinder like, um, hurting my mental too much.

How Investing Beyond Your Means Impacts Well-Being

Emily (30:27): Yeah, that makes total sense. And I think it’s also, again, a good message for like prospective graduate students or early on graduate students that, and I’m saying especially for those who set them up for, set themselves up with high fixed expenses, they might think, oh yeah, I’ll be totally fine spending 80% of my income between my housing and transportation. No problem. I’ll just be really frugal everywhere else that gets old very, very fast. It’s very hard to sustain that. So you were in the fortunate position that you had those low, you know, relatively low fixed expenses. Um, and so, but you have these high savings goals and that was what you were navigating with, like the rest of it. So, um, I’m really glad that you, you know, set those fixed expenses up to be on the moderate side, uh, from the beginning because you had that choice really, like it was okay to increase your discretionary spending once you realized that your budget was unrealistic.

Jed (31:16): Yeah, yeah. Um, there was, there were some times where I was sort of for-, I did, I was not doing well mentally, but I still had to do a on the lower side. Um, for some reason I was really obsessed with that $500 mark, um, in grad school. So if I, like, I did that first and then once it’s really hard to get money out of the Roth, IRA, so it was just like, uh, I paid myself first and then if I was suppo-, if I had to scrimp and save for the rest of the month in order to make sure that I could live, that’s kind of what I just did.

Emily (31:46): I see. Yeah. I don’t necessarily advocate taking it to an extreme that, you know, you’re kind of suffering under it, but, but I do really appreciate that approach of like, this is my savings goal and I’m gonna make the other numbers work so that my savings goal happened. Right. Because you paid yourself first. So like, I did it. I’m not taking the money back out. Like, you know, we gotta go forward with this. So I do appreciate that approach even though it sounds like you were pushing yourself at times.

Jed (32:10): Oh yeah. No, no. I do not recommend what I did. Um, I, if, if, if I were to give myself advice from back then, I’d be like, instead of moving it to the Roth ira, just put into a savings account. That way if you need to use the money, you don’t have to like, uh, pray that next day you have enough like milk, uh, to make cereal. So like, it was, it’s like really, like there were some months where it was like I was playing within like margins of like $10. That was completely, completely reckless of me. It was definitely, I was definitely, um, on the too far end of the, um, contributing.

Emily (32:46): I, I, that kind of takes me back to like my first couple years of graduate school where I really played like chicken with the bottom of my checking account. And, and I also, not as much as you were, but I was also investing into a Roth IRA at that time and like yeah could have just done less of that and had more cash on hand. And I, you know, I learned that lesson over time. So like over time I still kind of found a way to do the investing and also built up savings so that there was something there that I could dip into if it was an unusual month.

Jed (33:11): Yeah, I, that is, I really wish I did that. Um, the first couple years of grad school were really hard because for some I was like so militant on that number and I don’t know why I was so set on that number.

Dealing with Irregular and Unexpected Expenses During Grad School

Emily (33:25): How did you ultimately deal with like, irregular expenses? Because that was the thing that pushed me to have more cash savings was to be a- ready to pay for irregular expenses.

Jed (33:33): There was like a family emergency at one point, um, that I had to go back to California for. Um, and it was like the tickets were like $600 and for me that was like a lot of money, um, that month. I luckily it happened in the beginning of the month before I did my stupid thing and did that. Um, but after that event I realized, oh, shoot, I would’ve missed this if I, um, didn’t have that. So that’s when I started building a three, like building an actual savings account first and then start contributing back into the Roth IRA that year I contributed a little bit less, but I think it, like, I built like a thousand dollars, $2,000 savings account. Um, and that really helped with the money anxiety for sure.

Emily (34:17): Yeah. And like, I mean, what you just said, you saved a little bit less that year. But it bought you so much peace of mind for like every year going forward, right? So like, it’s so worth it. Like I, again, I did not do that myself at the beginning grad school, but that is what I teach now. I do teach at least a small emergency fund first before you do anything else. Um, and it, it just, it honestly makes such a big difference to your stress, even if you never have an emergency that causes you to need to use it. Like, you know that it’s there, you have that peace of mind. You can sleep better at night and so just delaying your investing by like a few months, you know, four months or whatever it was. Yeah. It bought you a lot.

Jed (34:56): Yeah, no, that’s, I, I wish I did that early in my grad school ’cause so that I wouldn’t have to be so stressed for the first three years. But luckily at the third year, I, I, um, some like family emergency happened and I was sorta like able to wake up

Emily (35:10): And hopefully some of the listeners will take this advice to heart and not have to have that experience before they make, you know, their own change. Um, well how did it feel, you know, when you got to your defense or your graduation and you had that Roth IRA balance, like did you feel accomplished?

Jed (35:27): I, um, I mean, I’m not sure how you feel about a Roth ira, but for me it’s just like a number. Um, I, I felt like it was something that I had to do in order to retire. So this is this, um, the way I felt was like it was, oh, I’m paying future Jed this this amount of money so that he doesn’t have to worry about too much. Also, something that really inspired me was, um, like a money, the money money multiplier effect, right? So early investing, um, in your early career ends up like multiplying by 32x, um, 32 to 48x and I was like, okay, I have, I put 35K in. So that means th- uh, that means if I multiply that by 32, I’m close to a million dollars. Okay. Jed has a, future Jed has a million dollars to play with next time. I suffered a lot, but I hope he’s able to use it pretty well.

Emily (36:22): Yeah, I mean, time will tell <laugh>, I certainly can also, like, I’m very glad that I did the investing I did during graduate school and I’m far enough out that I’ve seen, you know, that compound interest growth in a significant way. Um, but there were also things I missed out on. So like, it’s definitely a mixed bag and I don’t know, I, I’m sort of a more like a no regrets kind of person. So I think it was a good decision. But yeah, there were some things we didn’t do that, you know, were one time opportunities and they, they don’t come around again. So it’s all, there’s always trade offs.

Jed (36:52): Yep. Yeah. That’s how, that’s how I felt. But I graduated, I got a job, so I was pretty happy. I guess things were looking up

Best Financial Advice for Another Early-Career PhD

Emily (37:02): Good. Um, well let’s end on, I, you know, we’ve learned, we’ve learned so much from this interview you’ve shared so openly. I really appreciate that, um, to, you know, learn honestly about your financial journey through graduate school. Um, why don’t you leave us with, uh, the answer to the question I ask all of my guests at the end of interviews, which is, what is your best financial advice for another early career PhD? And that could be something that we’ve touched on in the interview already, or it could be something completely new.

Jed (37:28): Yeah. Number one rule number one advice is to get, get roommates for as long as you can. Um, I feel like I felt, I felt that even though I was playing on the riskier side of my finances in the first three years, because I had roommates, I had that check, like that ability to like mess up a little bit. We were able to rely on each other when we had really bad bumps. And if you live by yourself, yes, you still have your friends, they’re still your friends, you’re still gonna talk to them. But it’s really hard to have the same kind of relationship when you’re living with someone and asking someone for help that’s not inside the house.

Emily (38:05): Yeah, it is. I mean, it’s a different level of community that you have when you have roommates versus just friends you don’t live with. So, um, thank you so much for sharing that. Thank you again for volunteering to come on the podcast.

Jed (38:17): Of course. Thank you so much, Emily.

Outro

Emily (38:28): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by me and show notes creation by Dr. Jill Hoffman.

Teaching Personal Finance Illuminates the Opportunity Cost of a PhD

March 23, 2026 by Jill Hoffman Leave a Comment

In this episode, Emily interviews Dr. Trevor Hedberg, an assistant professor of practice at the University of Arizona who teaches a seminar on personal finance to undergrad students based on Morgan Housel’s The Psychology of Money. Trevor is a repeat podcast guest, and he shares how teaching the course has made him think differently about finances during his PhD and postdoc, including the financial opportunity cost of grad school and lifetime wealth killers.

Links mentioned in the Episode

Teaching Personal Finance Illuminates the Opportunity Cost of a PhD

Teaser

Trevor (00:00): Because I think that the actual mechanisms for building wealth over time are really pretty simple to understand, but remarkably difficult to put into practice. And I think also as academics, like we’re primed to think that problems in the world sort of correlate in difficulty with their complexity. But it’s not always the case that problems are difficult because they’re complicated. Sometimes it’s just that there are psychological and behavioral things that kind of sabotage us in, in what we’re trying to do.

Introduction

Emily (00:38): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (01:07): This is Season 23, Episode 6, and today my guest is Dr. Trevor Hedberg, an assistant professor of practice at the University of Arizona who teaches a seminar on personal finance to undergrad students based on Morgan Housel’s The Psychology of Money. Trevor is a repeat podcast guest, and he shares how teaching the course has made him think differently about finances during his PhD and postdoc, including the financial opportunity cost of grad school and lifetime wealth killers.

Emily (01:37): The tax year 2025 version of my tax return preparation workshop, How to Complete Your PhD Trainee Tax Return (and Understand It, Too!), is now available! This pre-recorded educational workshop explains how to identify, calculate, and report your higher education-related income and expenses on your federal tax return. Whether you are a graduate student, postdoc, or postbac, domestic or international, there is a version of this workshop designed just for you. I do license these workshops to universities, but in the case that yours declines your request for sponsorship, you can purchase the appropriate version as an individual. Go to PFforPhDs.com/taxreturnworkshop/ to read more details and purchase the workshop. You can find the show notes for this episode at PFforPhDs.com/s23e6/. Without further ado, here’s my interview with Dr. Trevor Hedberg.

Will You Please Introduce Yourself Further?

Emily (02:50): I am delighted to have a repeat guest on the podcast today, Dr. Trevor Hedberg, who is currently an assistant professor of practice at the University of Arizona. Trevor was first on the podcast in season eight, episode 14, way back in 2021 when he was a postdoc, and we’ve had five years of time pass. Um, and there’s been a lot of changes and Trevor has a lot of new insights for us today. So I’m very excited to dig into that, um, both on the professional and personal front. So Trevor, will you please introduce yourself and tell us what’s been going on professionally in the last five years?

Trevor (03:26): Sure. Thanks Emily, and thanks for having me back on the, uh, podcast after all this time. So, um, I’m, I’m now as, as you said, an assistant professor of practice. Uh, my primary affiliation is with W.A. Franke Honors College. Uh, I also have a partial affiliation with the philosophy department. Um, the last time I was on, I was a postdoc at Ohio State. Um, and in the, a year or so after that, uh, I landed this job here at the University of Arizona and have been, um, continuing to teach undergrads, do my research, and, um, and most recently I’ve started teaching a personal finance, um, seminar here in the Honors college.

Teaching Personal Finance Seminars Using the Psychology of Money

Emily (04:03): And that is what prompted us to revisit and have another interview. And I’m so excited about this. Um, but yeah, tell us how you went from, you know, doing philosophy for your PhD to teaching personal finance at this point.

Trevor (04:16): Yeah, well, if, if anybody remembers five years back, I did, I did talk a bit about, uh, when I was in graduate school, the, the challenges associated with managing to live on such a small stipend. And so I had some personal interest in issues in personal finance because I had been grappling with some of them, uh, in my own, in my own life, just to kind of, you know, make it as a graduate student, uh, without having to take out additional loans. Um, when I got here to the University of Arizona, it was not part of my original, you know, teaching load. Uh, I was mainly hired to teach applied ethics courses, which is what my main research area is. Um, but there was a personal finance seminar that was being offered in the Honors college, but it was being offered by an out of house faculty, a faculty member in a different department that we were paying, um, to teach that seminar once a year.

Trevor (05:03): And these little honors seminars are one credit classes that, um, all honors students have to take one of them in order to graduate with the honors distinction on their transcript. So, and that happened to be one of the most popular classes, but it was only offered once a year. And the course caps on these seminars are pretty small, like, you know, low twenties in terms of the number of students. And so they were interested in, you know, this, that course was always maxing out. It’s, it had tons of people on the wait list and just, there was a lot of student demand, so it just came up in an administrative meeting. Um, you know, is there, is there someone else who might wanna teach like a course in this area? And I said I could take a crack at it. And, um, about a year later, um, we, you know, we piloted the first, and of course that course filled to capacity.

Trevor (05:53): Um, I used a, uh, I used the primary text Morgan Housel’s, the psychology of money, um, because my way of teaching the course is not just the nuts and bolts of personal finance, you know, what’s a credit score? What’s an IRA, how do you save for retirement? How do you design a budget? It’s also about the psychological and behavioral elements of, of money management and trying to familiarize the students with the, the obstacles that get in the way ’cause I think that the actual mechanisms for building wealth over time are really pretty simple to understand, but remarkably difficult to put into practice. And I think also as academics, like we’re primed to think that problems in the world sort of correlate in difficulty with their complexity. Um, because almost all the things, especially in philosophy, like all the stuff I write about, these are super complicated moral issues with all kinds of, you know, things changing empirically.

Trevor (06:44): All kinds of assumptions being made in the background about effects of, you know, emerging technologies and things like that. But it’s not always the case that problems are difficult because they’re complicated. Sometimes it’s just that there are psychological and behavioral things that kind of sabotage us in, in what we’re trying to do. And history is littered with examples of people who came upon or accumulated vast amounts of wealth at some point in time and managed to lose all of it in a very short span of time. Um, and, and my hope is that the students that come outta my class won’t follow that life trajectory.

Emily (07:20): Well, I love that you mentioned Morgan Housel’s book, and actually at this moment I’m on the waiting list for his next book or whatever his most recent book is. I’m, I’m at the library. I’m gonna be getting it soon. I’m really excited about that. Um, I’m wondering, is that the same, uh, core text that the previous, um, professor who was teaching this course was using? Or was that a shift that you made?

Trevor (07:41): So, interestingly, it was the same primary text that he was using, but I did not know that when, um, when I was like, I was essentially just looking at different books that, trade books that were written for, you know, a general audience in this area. And that was the one that kept coming up, uh, as a, a very popular source. I mean, the, the way the book is structured, each chapter essentially has one key lesson or idea, and the chapters are only, you know, eight to 10 pages long and there’s 20 of ’em. And so for a one credit course, um, where, you know, you don’t want to really overburden the students in that kind of class with a ton of a ton of reading, um, or assessments. It was just a good fit. Uh, I didn’t, now I have this semester, um, this is my third time teaching the course. I have cut out a couple of chapters of the book that I had previously assigned and replaced them with other material covering the same stuff. Uh, ’cause you know, some chapters seem to resonate more with students than others. And so I’m, I’m trying to, you know, kind of keep, keep tweaking the, the course content to a, to adapt to what works best, um, for the students, uh, Housel’s like new book is called The Art of Spending Money, and I actually do have a chapter from that book that I’m, that I’m gonna use, um, this semester. There’s a lot of overlap in his ideas in the art of spending money and in the psychology of money. But I did find, uh, I haven’t read the entirety of the art of spending money, but like probably two thirds of it, I have found the prior book, the Psychology of Money, I, I thought it was superior. Um, the, and I think like there’s overlap between the ideas. It’s clear to see that the artist spending money is an extension of some of the things he says. But, um, certainly as a teaching tool, I think the psychology of, of, of money has is, is a very good text and, and works well for, for these purposes.

Final Project: Creating a Long-Term Financial Plan

Emily (09:33): Yeah. And certainly a credit to it that you and your predecessor both independently chose it for this particular course. Um, it is a very easy and entertaining read and almost like filled with anecdotes and yeah, it’s a very, um, it moves along very quickly and it teaches you a lot in a very effective way, I think. Um, is there anything else that you wanna tell us about the course itself?

Trevor (09:55): Probably the, um, the final project that I’ve had the students do in the class the previous two times is I, I have made them actually design and outline a personal financial plan from their current age, which for most of ’em is about 20 all the way up to retirement age at 65, uh, operating at about five year intervals. Now doing that, uh, that is challenging for anybody to do regardless of, of, of your, of your age or your, um, financial situation. But I think that a lot of these students have never, they’ve never imagined like their, their wealth building journey on this long time horizon. And so I got a lot of feedback the first semester I taught the course where like everybody was like, this is a really valuable thing to do. And also, this was really, really hard and I would like some more direct guidance and more resources.

Trevor (10:40): Um, so I spent more of an effort last semester, um, showing them in class how to use retirement calculators and, um, and where to look to get information about like what their expected income is in their anticipated career at different life stages. And, uh, and also pointed some things out about like, you know, what commonly goes wrong over the course of a lifetime in trying to, because I, I required them in their timelines to incorporate some negative life events that, not saying that those things will happen, but basically like, don’t design your plan operating where, oh, I’m never gonna have any health emergencies. I’m never gonna have a, be in a car accident. I’m never gonna, you know, have any period of unemployment or decide to make a career change or go through a divorce. Like these are not realistic. Something bad will happen to you over 45 years of your life. You just don’t know exactly what it is. So plan for some of those things. Imagine that those things alter what your plans are and, and adjust your goals, um, accordingly, or like build in that preparation into how you structure your emergency savings or, or, um, or what you end, you know, what, what career decisions you make earlier in your life.

Emily (11:50): I think that exercise is so valuable. And actually I don’t think I’ve ever done that, like, to that level of detail, like projecting that far out. But I did want for our audience to take it down to a, a smaller timescale. Um, and just emphasize this principle of don’t assume everything is going to go perfectly financially, um, especially as you’re entering into a new position as you’re entering graduate school, as you’re entering a postdoc later on in your career. Um, if you’re pro projecting your budget and trying to figure out, okay, can I make it on this stipend? Can I make it on this postdoc salary in this city? You have to build in some of those shocks and prepare your finances for them because the length of term you’ll be in, you know, your PhD program, the length of time you’ll be in a postdoc way too long to assume that nothing is gonna go wrong. And so if your plan relies on everything going perfectly and you’re living on a razor’s edge, it’s not a good enough plan at that point.

Trevor (12:43): Yeah. The, the one, um, the one change that I am making this semester to that final kind of project is I am giving them an alternative option because a number of students kind of seemingly wanted to do this in previous courses, which is I’m gonna allow them alternatively to spend 12 weeks during the semester tracking their spending. Um, and then essentially the, the personal financial plan has two components, like the timeline that I’ve kind of described, and then a narrative that syncs up the timeline with like the course content and material. Like, why did you pick the strategies you did? How is it influenced by the, um, the stuff that we’ve read? Uh, it’s the same thing, but it’s like the information you’d be using is like, what did you learn about your spending over these 12 weeks of tracking your interactions with money? What do you spend money on? How is that consistent or not consistent with the things that we have, uh, covered in the, in the class? You know, what changes might you make in light of what you’ve learned to how you are, uh, to how you’re spending money or what you’re spending things on. Um, now whether or not students will actually like do this project, ’cause this requires you to get started like week three or week four, I’m gonna outline for them next week like how to use a template that I’m giving them for tracking, you know, your spending over time. So it’s an experiment. We’ll, we’ll see how many people actually do it. Um, but, but the idea behind both of these is just, you gotta have a certain level of intentionality and forethought with respect to how you manage your money. It does not magically happen in, in some way. And, and, and for I think virtually every student who takes this class, they’ll not have done either of these things, either this long-term kind of mapping things out to retirement, at least hypothetically, or just let me see what I’m spending money on for three months and see if I am okay with my behaviors. Uh, and if not, what am I gonna do to make a change?

Emily (14:38): I’m just loving this. I hope the audience is as well. And you know, I’m sure they’re all wishing they had the opportunity to take this course, uh, when they were in undergraduate or in graduate school. Um, it sounds incredible, uh, but I understand that you, you know, this is now your third time through teaching the course. It’s caused some reflections and, um, you know, rethinking in you about, you know, decisions you’ve made in the past and so forth. So I’d love for us to kind of, yeah, with this new information and deeper knowledge that you have in this area. Like, let’s speak to, you know, your time as a graduate student and as a postdoc, and how your thoughts about that have changed.

The Opportunity Cost of Grad School

Trevor (15:12): Yeah, so one of the things when, one of the, the basic pieces of advice you always get if you go to grad school in the humanities is like, don’t take out any loans to pursue because of the career prospects are uncertain and you don’t wanna take on additional debt, so on. That’s a totally fair point. It’s actually very understated, um, how important that is. But there’s also, like, there’s a really high opportunity cost to going to graduate school in, in, in any humanities field in your early twenties because the, you’re, you’re de you’re depriving yourself of, of a financial resource that we don’t talk about that much. Um, so a lot of people will point out like, well, if you, if you got an even just an entry level job where you were making, I don’t know, $50,000 a year to start out, you’d not only be working towards having a higher income, you would also be potentially, you know, paying off your debt sooner or, you know, uh, accumulating, you know, $50,000 a year instead of 15 or $20,000, whatever your graduate student stipend was.

Trevor (16:09): Um, that’s all fair. But the real resource that you’re depriving yourself of is time, uh, and specifically time for your money to grow via some kind of investment mechanism. So the, the alternative where you’re making 50 or $60,000 a year in your early twenties as opposed to try just trying to get by, not take out any more loans and, but not in a position to really save anything, um, when you’re in graduate school, that time is disproportionately more valuable than time in your thirties and forties and so on. Because if you put that money even in just like a basic index fund, um, it’ll, we have to make some assumptions about like, you know, based on past performance of how like the market does, but it’s reasonable to think that whatever money you put in will double somewhere between seven and 10 years after you put it in.

Trevor (17:00): So if you were to spend your twenties, even if it was just, I don’t know, $10,000, $15,000, put that in. By the time you are in your, you know, mid sixties and looking to retire, that money is going to have, have doubled four to six times. And so you’ll be in a position where if it was say, $10,000 and even if it only doubled four times, 10,000 goes to 20,000, 40,000, 80,000, that’s $160,000 by the time you get all the way down there. This is the, just the basic concept of compound interest, which I spend about two weeks trying to drill into my students in, in this class because all of them are typically 18 to 20 year olds. And so for them, the greatest resource they have is, is their time. So I think, I think this is an element of going to graduate school, uh, and being in graduate school for a long time with a relatively modest salary, uh, that isn’t properly appreciated because you’re, you’re not just depriving yourselves of like income in the short term. You’re also taking away like essentially one doubling cycle on money that you could save. And that, that, that cycle that takes place during the twenties, so and so if you, if you lumped all this money in instead, like when you’re 30 instead of when you’re in your early twenties, you’ll only wind, you’ll only have about half as much at the end of this process as you would’ve had, um, using that same money if you just put it in eight to 10 years earlier.

Emily (18:27): I, I wanna make sure the audience is really picking up on this because, um, as you’re saying, it’s not just the lost wages, it’s the lost time for the investments. You, we can presume in our scenario, you would’ve been doing had you not been in graduate school, and it’s not just a few thousand dollars or 10 or $20,000 that you could have invested, let’s say in your twenties, if we’re talking about a traditional PhD student, what we’re really talking about is the last doubling that occurs on your money. Your career itself is let’s say seven years longer if you start it after your bachelor’s degree instead of starting after your PhD. So to make up for that last lost doubling, which could be worth, it could be worth a million dollars. It could be worth hundreds of thousands of dollars easily. You have to earn more on the backside of the graduate degree and save more on the backside of the graduate degree, invest more, um, to make up for the lost time.

Emily (19:24): And so, as you know, from your perspective as someone in the humanities, um, that’s something that you have to be very, very cognizant of, careful about, like if you, how much is the premium going to be on your salary if you have the PhD versus not? What’s the expected outcome there if you get the tenure track job versus you have to take some other kind of job because it didn’t work out in that respect. So you have to make so much more money to make up for this. Now we can all make lifestyle decisions, like it’s okay if you just want to have a PhD, but to be aware of the financial, you know, implications from that decision. Um, really it should be taught before you make these decisions about where you’re, you know, if you go to graduate school, where you go to graduate school and so forth. So I’m really glad you brought this up. I just wanted to put another like kind of underline under there that’s not just a few thousand dollars, it’s the last doubling that you’re missing out on.

Trevor (20:18): Yeah. Now, as a disclaimer, I should note that like, I don’t think this is in itself like a decisive reason to never go into any graduate program or pursue any professional training. Um, most people who go into graduate school in philosophy or any humanities field like I did, uh, you’re probably making that decision primarily for non-financial reasons. I would hope, I would hope that that is the primary motivation for, for doing that. So it’s not like I look back and I say, oh, it was just a total mistake to go to graduate school in philosophy because I, because, you know, my 65-year-old self could have, I don’t know, $500,000 more than I would’ve had, uh, in, in the, in the timeline that I’m currently in. It’s more like knowing what I know. Um, if I could go back in time, one of the things I would’ve done, I was able to still save a, a significant chunk of money while I was in grad school.

Trevor (21:06): And I used some of that to pay off, um, a couple of stu of, of the student loans that I had from undergrad. Um, but I had enough money at, at a couple of points in time where I could have opened a Roth IRA and it wouldn’t have been a huge sum of money initially if I did it as a lump sum, it would’ve only probably been like a couple thousand dollars. But I think what I would’ve liked to do is open a Roth IRA around the age of maybe 23 or something like that, and put in, you know, a hundred dollars a month or something like that. Uh, just get into the hab- even if it was only $50 a month, right? Just build a habit of just putting money in investing in this vehicle. And I just, it did not occur to me, uh, at that time, uh, to do that. So that’s probably the biggest, the biggest change I can look back on and say I would’ve made, um, in grad school. The-

Emily (21:52): Absolutely. So to take that scenario that I just said, okay, you’re starting a career, let’s say seven years later because you decided to do a PhD and you couldn’t save in that meantime, um, that’s true under that set of assumptions that we were just talking about. But what you just pointed out is if you can start to invest a little bit, then you have started that clock, then you’re not missing out entirely on the last doubling, you’re missing a fraction of it because you’re able to invest much less than you would if you had a different kind of job during that period. But you’re, you’re lessening the damage, right, of that lost time just by getting started a little bit. And as you said, a hundred dollars a month, $50 a month, this is still a significant amount of money once you project it forward, you know, as you said, four to six doublings later.

Emily (22:34): Like, this is a significant and effective amount of money. And so it’s not, um, something that you should disregard just because, oh, I can only save $50, I can only save a hundred dollars. No, go ahead and do it if, if you’re financially ready for it. And as you just mentioned, it not only is the effect of the money itself, but the, it’s the effect of the habit. It’s the effect of you having your identity as I am someone who invests even in difficult life circumstances. I still invest, you know, and so that’s very, very valuable as well.

Commercial

Emily (23:03): Emily here for a brief interlude! Tax season is in full swing, and the best place to go for information tailored to you as a grad student, postdoc, or postbac, is PFforPhDs.com/tax/. From that page I have linked to all of my free tax resources, many of which I have updated for this tax year. On that page you will find podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs and PhDs-to-be. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with. Again, you can find all of these free resources linked from PFforPhDs.com/tax/. Now back to the interview.

Financial Changes After Grad School

Trevor (23:54): Yeah, so once I got out of grad school and, and got into kind of, you know, making like a reasonable, like closer to that $50,000, you know, hypothetical income we were talking about, um, the things I did after that was like, I immediately paid down, you know, my high interest student loan debt. Uh, I had never had any, I’ve never had any credit card debt. I’m one of those, uh, what they call in the industry deadbeats who uses credit cards, but just pays off the balance in full every single month. Uh, so that wasn’t an issue. And then I, um, now I, I didn’t really look into, it took me about two years to pay off that debt and to pay off my car. And then I started my postdoc at Ohio State, and it was really that moment, like early, like I believe I was 31, um, when I was actually like, okay, I have some retirement money from, you know, that was just being pulled from my paycheck at South Florida.

Trevor (24:45): Let me convert that into a Roth IRA and, and let’s, let’s actually now start, start like taking this, you know, seriously, not because it’s like, I didn’t care about it previously, but it’s like I actually have money now. I actually am saving a significant chunk of, of my income because one thing I did manage to avoid and have continued to manage to avoid is I have not really had the lifestyle creep problem that, that some people experience, where as your income goes up, your, your lifestyle and the cost of it proportionally increases so that you, you know, you’re making $10,000 more a year or $20,000 more a year, but you’re not actually saving any more money than you were when you were making less. Um, that has not been a, I I haven’t been tempted, um, to, uh, just start to live lavishly, um, once, once I had like a real income

Emily (25:39): Listeners. I have, I need to be very disciplined still <laugh>.

Trevor (25:43): Yeah, so I, I think, I think once I got into like doing the stuff in the postdoc, like I don’t really think there are a lot of choices I would’ve made differently given that, but I, I do, as I said, wish I had kind of set myself up, um, a little bit better. One thing I have learned in teaching this class and just investigating kind of the trends in among, you know, my, the, these people in their late teens, early twenties, folks who are just starting to manage their money. Um, there are certain kinds of well-known like wealth killers, and it’s amazing how often if you just, if you just, if you read some books on the subject or if you, uh, just browse like YouTube videos or other social media for like, from financial advisors or other people, the same kinds of problems just surface over and over again in this in different ways.

Four Common Financial Wealth Killers

Trevor (26:27): Credit card interest, I think is the most well known like wealth killer because the interest rates are so high, you do not wanna ever be carrying a balance month to month on a credit card. Um, student loan, um, interest if, if the, particularly if you’re taking out like private student loans with real high interest rates and not being very aggressive and paying those off. Um, historically there have been cases of people who spend 10, 20 years paying down a balance, and because they were paying so little on the balance, the amount they owe is actually more than the amount they started with because they’re not, they’re not paying off any of the principal money they borrowed, they’re just paying off the interest. Um, that’s a disastrous situation that I, you know, emphasized to my students, you gotta avoid.

Trevor (27:11): And then the two things that, so I knew about those, but there were a couple other things I did not know about, um, teaching this course, one of which is just dubiously financed auto loans. Um, this is sort of a combination of a couple of things. Buying, buying a car you can’t afford, uh, but also buying it on terms that I didn’t even know existed. Uh, I, you know, I, I’ve heard now that there are apparently 84 month and 96 month car loans, which I didn’t know that was a thing. Um, and the interest rates, um, the car I have right now is a 2.9% interest rate, which is pretty good. I think I’ve seen interest rates of like between 11 and 16%, uh, in, in some, in some instances that get talked about in some of these videos. And that’s, um, that’s sort of nightmarish. Uh, and granted, I know like, you know, having a good credit score is what qualifies you for interest rates. Not every people are in different circumstances, but you gotta be cognizant of what kind of car you can afford given your financial situation.

Trevor (28:07): And you’ve, you’ve, you’ve gotta, you’ve gotta find a better, better situation with that. You cannot take, if you’re, if you’re paying 11% interest on $80,000 car, uh, by the time and it’s 84 months, by the time you pay that off, you’re probably paying double what the car’s value is. And it’s a depreciating asset. So if you, you know, get, if you get caught in a situation where you have to get rid of the vehicle or it’s totaled out or something like that, uh, you may have to roll negative equity into your next, which is another thing that I didn’t even know was like an option for, for vehicle purchases. So I don’t know if, like, I was just naive about how people buy cars or, or what, but seeing like all of the ways you can sabotage yourself in that area has been somewhat enlightening for me teaching, um, teaching the class.

Emily (28:51): I totally agree with you, and this is really great stuff to know when you’re going into like your first car purchase or maybe your first financed car purchase or new car purchase or something along those lines. Um, but zooming back out to that like sort of lifetime timeline that we were talking about earlier, one of those other wealth killers related to cars is just always having a car loan. Like never keeping a car <laugh> much, much long, you know, much, much longer past the time period when you’re done paying off the loan. A lot of people do get in a cycle of, they’re just accustomed to it. They’re just accustomed to always having a car loan when their car is paid off, they get another new or they finance another car. And that, that habit alone makes a massive difference for your wealth over your lifetime.

Emily (29:36): I mean, easily a million dollars if we’re talking about like more expensive like kinds of cars, it’s incredible what that habit is. Now, there are structural reasons why this happens, okay? Like we live most of us in very car dependent cities. Absolutely. And so cars are a necessity for a lot of people. And the other thing, sorry, this is a little bit of soapbox for me, but like the types of cars that are being produced now are much, much, much more expensive than types of cars that have been produced in the past. So people feel like they’re kind of forced into a very expensive car just because they’re very limited options on the lower end of the price range. So that is a structural issue that’s kind of pushing people in this direction that’s also very worth, you know, pointing out. But the more, as you’re doing with your students, you know, the more awareness you have about these, um, influences around you, the more that you can try to work against them when you’re making your own individual decisions.

Trevor (30:28): Yeah, and I, I definitely empathize with the point about, um, not wanting to be in a state where you don’t have a car payment every month. So when I came to Arizona, I was driving, um, a Hyundai Elantra that had been fully paid off for several years, but a few months into being here in Arizona, uh, it was one of those older models of vehicles that, uh, unbeknownst to me did not have what is known as a key immobilizer, which means that if you knew what to do, uh, and unfortunately, yeah, so there was a, a TikTok trend about this that was going around under the hashtag Kia Boys, where it was basically a series of tutorials about how to steal Kias and Hyundais that had been manufactured without key immobilizers. And essentially if you strip off the steering column and know what to look for and have like a large blunt object, uh, like in, in this case, I believe it was a, just a screwdriver, um, a flathead Phillips flathead screwdriver that was used. You can, um, you can get the car to start without having any of the keys, right? And so overnight, uh, my car was stolen outta my apartment parking lot and crashed and totaled out in, uh, in like 25, 30 minutes outside of town. Um, and this is apparently just what these people were doing. Um, so somewhere on TikTok, there may be a video in, in the archives of someone driving my Elantra and just crashing it out in the Catalina Foothills of Arizona. Um, but I had two off-, just two. I was woken up by two police officers knocking on my door at 7:00 AM and be like, sir, do you have the keys to your vehicle? Do you know where it’s located? You know, et cetera, et cetera. So we eventually figured out what had happened. Someone had broken out the back window, uh, of the car climbed in, stripped off the steering column. There was a screwdriver in the vehicle that was not mine. That was a very long, you know, uh, there had been a bunch of stuff that had been, you know, it, the vehicle had been totally trashed. It was totaled. Um, so I had to buy a new car here in Arizona. Like that wasn’t my financial plan. This is one of those things that can go wrong, right? We were talking earlier about you can’t, you can’t, like that was a completely unanticipated event. Um, my insurance gave me a very good like, payout for the vehicle, but I had to get a new vehicle right when it wasn’t, it wasn’t part of the plan. Um, so I’m looking forward to, in about a year where I will have this current car paid off and not, um, and not, not have, hopefully not have that car payment for a lot, for a lot longer. I know my new car does have a key immobilizer, so at least won’t be destroyed in the same way.

Trevor (32:53): So the, the one other thing I learned that that was not, this was definitely not a thing when I was growing up, is, um, there’s, so one of the great advantages we have now compared to the past when it comes to like building wealth, is you can manage your investments and other stuff like online. You don’t have to go through like a broker at a brick and mortar bank. Um, and, and you can, you can get a snapshot of like how things are going, what you’re doing, et cetera, way more easily. But the downside of that is it’s now also possible to engage in dubious investment practices or what we would just describe as outright gambling, um, with your money. Some of that is in investment formats. People who are doing, like, they’re, they’re pretending sort of to be day traders, uh, and, and doing, doing things with their money. That’s, I think just basically indistinguishable from gambling, especially if they’re doing things like investing in these, these crypto meme coins where occasionally something hits it big, but the vast majority of the time these things just crash zero over over time. Um, and, and the other big one is sports betting, which is just everywhere now.

Trevor (33:56): And, uh, used to be a very niche thing, uh, that that very few people did. And if they did, it was really just kind of a novelty, like, oh, I happen to be in Vegas, so whatever I, I, I bet on a horse race or something like that, I, but now it’s everywhere and you can access it on your phone. Lots of, lots of, and, and it disproportionately affects young men. Um, the vast majority of, of sports bets are men, uh, and they’re, they skew really young. Um, that, you know, age range of 18 to 25 seems to be like the, the largest, um, growing demographic of that. So I’ve been trying to caution my students many times about not doing these things, these behaviors where you’re ex the expected value is not that you gain money over time, right? And that’s why FanDuel and DraftKings and these, um, why they give you these promotional benefits, you know, that $5 get $200 in bonus bets or, or these, these profit boost tokens they give out where, oh, if your bet hits you get 1.5 times the payout on this. You know, it’s all designed to just keep you there placing bets because they know the longer you’re in the game, the more likely it is that eventually you’ll lose and they’ll make money off of you.

Emily (35:10): Absolutely. I was just explaining to my daughters a few days ago, the concept of gambling. Like they don’t even know what it is. They’re very young, and I, the first thing I said to them is, the house always wins. Remember that <laugh>, like, do not let go of that lesson. The house always, always wins. As we’re recording this interview, um, in January, 2026, it happens to be that I listened to a podcast episode yesterday of deep questions with Cal Newport where he covered sports betting and gambling and the new technology around that and how prevalent it is, as you were mentioning. And this also came up for me in previous conversations with Dr. Zach Taylor, who’s been a repeat guest on the podcast as well, who works with undergraduate students too. And so the stat that I heard in that episode with Cal Newport was that, um, 70% of young men who live on a college campus have a sports betting account, right?

Emily (35:55): We don’t know how much they’re using it, but they have an account, they have access to it. Um, and so to me, I don’t address gambling much. I think this is maybe the first time it’s come up on the podcast, but to me, I struggle with, um, helping to teach how <laugh> entertainment and spending money on entertainment might be okay, and it can be part of your budget, but how gambling, you know, obviously taken too far, it becomes very addictive and very financially damaging and damaging to relationships. And like, how do you find yourself on that spectrum and sort of for your own personal self, your own personal values, decide what you’re comfortable with and what you’re not. How, how do you address this with your students?

Dr. Hedberg’s Experience with Sports Betting on FanDuel

Trevor (36:37): What I tell the students about gambling, whatever form it takes, is that you need to approach what you’re doing. That money that is not savings money, that’s not money that you’re, you know, putting aside for emergency savings. It’s not money that you’re investing for retirement. This is money that needs to be in the same category as like, I’m going out to a nice restaurant, or I’m, I’m going to the movies with some friends, or I’m, I’m, I’m buying some, you know, decorative item from my home or whatever. Um, it needs to be money that you are okay if there is zero return on investment, if it is all, if it is all lost. Um, and that’s how I approached, um, I did a couple of years ago, um, use FanDuel, uh, which is one of the major sports betting apps, uh, for one year. And I basically took a fixed sum of money, which in my case it was like a thousand dollars.

Trevor (37:23): And I said, this is what I got for the whole year. If I lose all of it, that’s it. If I, whatever I, you know, and, and, and we’ll just see what happens. I mostly bet on NBA games as a sport I’m the most familiar with in that, in that kind of context. I actually wound up making $50 over the course of this whole experiment, but it was incredibly tedious, um, and did not make me enjoy watching basketball more. Um, for me it was very much the opposite. I could have made more money just putting that a thousand dollars into, uh, a brokerage account or even like a high yield savings account probably. Um, and so that, that was not, uh, ’cause the other factor is like the gambling earnings or taxed in kind of a weird way. So like, I’m, I’m not sure I actually made $50.

Trevor (38:09): I don’t know what the positive value was, but it was negligible is the, is the point. I neither made nor lost a meaningful sum of money doing that. Um, but if I had lost all of that money, nothing about my financial future would’ve hinged on that. There was no expected amount, rate of return. It was just an experiment. Wanna see how this app works? Want to see what, what this experience is like because so many people are doing it. Um, I don’t really regret doing the experiment, but I also like have deleted my account. Will never go back. So, um, I encourage, you know, my students to, if they are going to do any kind of gambling, to approach it that way, like set aside a fixed sum of money that is just your, and, and have it budgeted in that way. Don’t put more money into your account and do not anticipate or make projections about your financial future based on anticipated earn earnings or gains. Um, that, that’s a recipe for disaster.

Emily (39:06): And I think that, um, paired with this extra, this optional exercise that they have of tracking their spending over the course of the semester is really valuable because some people may be adding money all the time to these kinds of accounts, and it’s one of those like small transaction things that can kind of get overlooked unless you’re really, really in your numbers and adding them up over the course of the month or what have you. And so that could be really valuable. Oh, I’m actually spending this many hundreds of dollars per month on gambling, and maybe that’s not, that’s more than entertainment budget than I need to be spending at this point. Right?

Trevor (39:38): Yeah, I, we’ll see, I I, since I have done that activity before, um, I don’t know what to expect for what, what, how many students will do it or what I’ll, or what I’ll learn about it. But, um, but I do think that if they, if they really did it for the full 12 weeks, that’s three months, that’s enough of a time slice that they would get some idea of what some of their habits were, and they might get some insight into, um, where they might want to make changes, uh, in, in, in the future. Or maybe they would discover like, oh, I’m, I’m doing better in this than I thought, you know, it’s possible.

Dr. Hedberg’s Future Financial Plans

Emily (40:11): Absolutely. Uh, you mentioned the future, so I wanted to ask you if your own plans for your life, your finances have ch- and you know, forward looking have changed at all from your experience teaching this course?

Trevor (40:25): I think for the most part, I mean, I think some of the habits that I have had, had, had developed, um, I, I, I feel are a little bit more vindicated given, you know, like the avoidance of high interest debt and a and a few of the other things. Uh, as I mentioned earlier, I do kind of wish in the past and maybe I had developed an investing habit a little bit earlier. Um, but the, the one thing that is different now is that when I was a postdoc, I was always operating on basically 18 month time horizons with everything in my life because, you know, what’s the next job? What, what am I doing to make myself competitive for that next cycle? And that included the fi- the financial stuff too, right? I mean, there, there was, you know, there was an expectation that at some point that would stretch out longer term, but it’s really hard to like, feel like you’re prioritizing re- retirement outcomes when you don’t even know whether you’re gonna be employed the next academic year.

Trevor (41:18): And once, once I got here at Arizona and once, like, after a year or so, I kind of got the sense that this could be a fairly stable and permanent, you know, appointment, you know, and I liked living here and liked the people I work with. Um, then it became easier psychologically to say like, okay, we’re gonna, I’m gonna overhaul some of the things I’m doing and we’re gonna really, we’re gonna be maxing out that Roth IRA, the university has a, has an HSA as as well that you can use as a kind of retirement investment vehicle. So I’m maxing that out also. Um, and then, um, I also opted in actually to the university’s pension, uh, options. So they give you two options at the University of Arizona, and you have to decide pretty early in your, when you start your job, what you’re taking.

Trevor (42:00): One of ’em is a 403B, which is structured like a 401k, and the other one is a defined benefit pension plan where if you, there’s a formula where like you get a certain percentage of your highest five income earning years in the state of Arizona based on how many years you worked. And, um, so if you work, like, I don’t have the table in front of me right now, but if you work around 25 to 30 years in, in, in the state of Arizona, uh, while you’re eligible for the pension and are putting in the amount of, you know, it’s mandatory, they just deduct it, you know, pre-tax from your, um, from your paycheck, uh, you will get like something like 70% ish of your, of that salary every month, you know, for the rest of your life until, until you die. Uh, so the hope is that between like my Roth IRA, which is like a, like something that I’m maintaining on my own and which started with funds from Ohio State and University of South Florida, like the retirement stuff I had done in those places before getting here between that and the HSA and then having a pension hopefully between those three things, you know, in tandem. Um, I’ll, I’ll be all right when I, when I get into my sixties. Um, right now the short term goal is I’m, I’m, uh, I’m, I’ve got some m- money that I’m growing to potentially make a down payment on a house or, or maybe buy a condominium or something like that.

Emily (43:27): It’s amazing. I’m so glad to hear that, um, that you chose the pension. I mean, obviously the numbers are different for different people, but just to have that perspective, um, for the podcast audience of like, yeah, pensions actually do still exist, um, in higher education at certain types of institutions. And so this may be a choice that you are faced with and you, it’s really a combination of a career and a financial decision. And it’s also, I also would be very tempted by the pension just for the aspect of the guaranteed income. And as you said, you can still do some retirement investing on your own. Maybe you consider it optional, maybe you consider it necessary, I don’t know. Um, but you still have those other vehicles that you know, you can use for that purpose as well. So anyway, it’s just very interesting and as I’ve gotten, um, well closer to retirement, I guess you could say time keeps passing. Um, I find that idea of guaranteed income to be very attractive and possibly worth, you know, paying a premium for in some ways. So, super interesting.

Best Financial Advice for Another Early-Career PhD

Emily (44:23): Um, I wanna end with the question that I ask all of my guests, which is, what is your best financial advice for another early career PhD? You answered this the first time you’re on the podcast, so let’s get a, a refresh on that. And it can be something that we’ve touched on already in the interview, or it could be something completely new.

Trevor (44:40): The thing that I’ve learned, like I’ve mentioned here earlier, that the one thing I would go back and change is that I would’ve started, I would’ve opened a Roth IRA and I would’ve started investing, even if it was a tiny sum of money every month, just to build that, just to get that habit. Like this is just the thing I do. Um, I think that is something that is not on a lot of 22, 23-year-old PhD students radar. And that’s something that I would definitely, uh, tell people. Now, if I was, if I was advising, uh, an undergrad student who’s gonna go to grad school, this is, this is something that I would make them, um, privy to because, uh, you know, there are all these, um, calculators you can use on in online space to figure out how much money it’s worth. The most common figure that I’m familiar with, which, uh, originates from a guy named Brian Preston, who, who runs like a, I think it’s like called the the Money Guy Show, or the Money Guy podcast or whatever.

Trevor (45:33): He has a book called Millionaire Mission. He’s got this chart, uh, based on, it’s basically how much is a dollar worth at the age of 65 invested at different ages. And, and it assumes a declining rate of like investment returns as you get closer to retirement because you make your, you make your portfolio a little more conservative to make sure that that money doesn’t fluctuate dramatically right before you retire. And essentially $1 invested at age 20, at least according to his calculations, is worth about $88 at the age of 65. Now, again, there are some assumptions built into how that’s calculated, but on any plausible estimate, in my view, the minimum is it’s gonna be like $64 and it could be higher, it could be over a hundred, depending on, again, what background assumptions you’re making, how aggressive your portfolio is, and what actually happens in the market.

Trevor (46:23): So getting even just a small amount each month when you’re 21, 22, 23 years old into these kinds of accounts is just such an incredibly powerful thing. But you don’t get that money for 40 plus years. So there’s a trade off, you know, and, and I know as a graduate student, I was always weighing like, how much emergency savings do I need in the event that I’m unemployed for six months after I get my PhD? And it’s easy to look back now and to say like, oh, I really wish I’d invested, you know, 10,000, $20,000, uh, of, of that, of that money I had on hand now because I didn’t have that period of unemployment. But that’s very much a hindsight bias because certainly if things had gone a little bit differently, there could have been a gap of some sort where I would’ve been very glad to not have a bunch of money tied up in a retirement account. So this has to be, these things have to be weighed, but a small amount, $20 a month, $50 a month, whatever you can scrounge away, like just building that habit and knowing like this is, when you were in even I think once you get to your thirties and you see how much it’s grown in just that short time, you, you will not regret building that habit early and and making those choices.

Emily (47:31): Very well said. Trevor, thank you so much for giving this interview. Thank you for coming back on the podcast and giving us all an update. It was wonderful to hear from you.

Trevor (47:39): Yeah, thanks for having me back, Emily, it was great to see you again, chat about this stuff. And, uh, I, you know, I’ve, I’ve, I have enjoyed teaching about it and I, I expect I’ll keep doing that here in the Franke Honors College for quite some time.

Outro

Emily (48:02): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by me and show notes creation by Dr. Jill Hoffman.

Financial Questions from an International Graduate Student

January 27, 2025 by Emily

In this episode, Emily interviews Gauri Patel, a first-year grad student in biomedical engineering at the University of Texas at Austin. Gauri is on an F-1 visa, but she has lived in the US for over 10 years. The financial questions Gauri has encountered are different from those typically asked by both US citizens and new international students. Gauri and Emily discuss bank accounts, retirement accounts, tax reporting, and the cost of immigrating to the US.

Links mentioned in the Episode

Teaser

Gauri (00:00): I’m the type of person to gather all the information before doing things, but that can hinder progress if you just keep adding more bits of information rather than like acting on what you already know. I spent a little too long deciding like, oh, which, which company to go with. But yes, I I was able to open up the Roth IRA.

Introduction

Emily (00:28): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (00:59): This is Season 20, Episode 2, and today my guest is Gauri Patel, a first-year grad student in biomedical engineering at the University of Texas at Austin. Gauri is on an F-1 visa, but she has lived in the US for over 10 years. The financial questions Gauri has encountered are different from those typically asked by both US citizens and new international students. Gauri and I discuss bank accounts, retirement accounts, tax reporting, and the cost of immigrating to the US.

Emily (01:30): The tax year 2024 version of my tax return preparation workshop, How to Complete Your PhD Trainee Tax Return (and Understand It, Too!), is now available! This pre-recorded educational workshop explains how to identify, calculate, and report your higher education-related income and expenses on your federal tax return. Whether you are a graduate student, postdoc, or postbac, domestic or international, there is a version of this workshop designed just for you. While I do sell these workshops to individuals, I prefer to license them to universities so that the graduate students, postdocs, and postbacs can access them for free. Would you please reach out to your graduate school, graduate student government, postdoc office, international house, fellowship coordinator, etc. to request that they sponsor this workshop for you and your peers? You can find more information about licensing these workshops at P F f o r P h D s dot com slash tax dash workshops. Please pass that page on to the potential sponsor. Thank you so, so much for doing so! You can find the show notes for this episode at PFforPhDs.com/s20e2/. Without further ado, here’s my interview with Gauri Patel.

Will You Please Introduce Yourself Further?

Emily (03:06): I am delighted to have joining me on the podcast today, Gauri Patel, a first year PhD student in biomedical engineering at UT Austin, and today Gauri and I are going to discuss being an international graduate student, but one who has been in the US for a significant amount of time and how the financial questions that you have at that stage are different than either you know, domestic graduate students or people who are international students and brand new to the US. So I’m really excited to learn from Gauri about this. So Gauri, will you please introduce yourself a little bit further for the audience.

Gauri (03:37): Thank you so much Dr. Roberts. So I, as you mentioned, I am a first year graduate student at the University of Texas at Austin and I’m studying biomedical engineering, uh, specifically in biomedical imaging. So my start in this field was during my master’s thesis where I studied a particular image analysis technique to understand how a tumor microenvironment could influence outcomes to therapy. And so I want to continue studying this and so here I am, uh, doing more research at, uh, in a PhD program.

Emily (04:14): Excellent. Well, let’s kind of rewind the clock and take us back to, uh, maybe when you first, uh, entered the US and tell us about how that happened.

Gauri (04:23): I first moved to the US pretty much exactly 11 years ago. Uh, and it was because my dad had found a job in Michigan and so at at that age you don’t really have much of a say in where you’re going. And so my family moved to the states and I’ve been in Michigan ever since.

Visa Status: H-1B, H-4, F-1

Emily (04:46): So tell me how that works visa wise. ’cause I know, I’m gonna guess your father was on an H-1B, but I don’t know how the family aspect of that works.

Gauri (04:55): He eventually got to an H-1B, so we moved from Canada to the US and so Canada, there’s a different visa category that my dad could also work under. So he first started on a TN visa and I was on whatever dependent version of the TN there is. I’m not sure what the name of that is exactly, it was quite a while ago, but then eventually he did get moved over onto an H-1B, after which I was on an H-4 visa, which is a dependent of the H-1B. And I basically stayed on that, um, from middle school through high school and then my first year of my undergrad.

Emily (05:34): Okay. And then from your second year of undergrad, did you start on F1 visa at that time?

Gauri (05:40): I switched to an F1 during my second year of my undergrad and that was because I wanted an opportunity to do internships or paid research on campus. Uh, so the H-4 visa, you require some type of worth work auth- authorization and that there’s a different timeline about when you’d be able to work. It has to go through a different approval process and it’s kind of like up in the air when that, uh, work authorization would come through. And so if I was on an F1 visa, it would be rather immediate. I would do a year of school and during that time I would be permitted to work in a research capacity on campus. And also it’s pretty immediate you can get authorization for CPT or OPT and so that’s why I switched to the F1.

Emily (06:34): That certainly seems like a reasonable reason to, to, you know, make that switch. I’m wondering were there any downsides, like anything that you were foregoing or giving up by making that switch?

Gauri (06:44): Yeah, for sure. So since my family was on an H-1 was under the H-1B visa category, there’s also the option to apply, have your employer sponsor for a green card. And so that’s like the main perk of the H-1B visa. It can eventually lead to a green card. However children, they age out at 21 and so I was like really getting close to that point of aging out. And so the question remained, do we still hang on to this H4 dependent visa and not be able to work in the hopes that before I turned 21 I would, that green card would, you know, go through or do I switch immediately and you know, cut my losses. And so, uh, we just decided that the green card was probably not gonna happen before I turned 21. And so I might as well switch to the h uh, sorry, excuse me. F1 visa at this time.

Emily (07:53): Well I wanna kind of pick up with the green card process maybe a little bit later in our conversation, but let’s kind of go back with um, your experience, you know, doing research and everything through your undergrad. Um, it totally makes sense to me that you would want to have those potentially paid research experiences where you already thinking at that time that you wanted to pursue, uh, your field or science generally or like did this basically the switch to allow you these experiences. Were you thinking ahead to graduate school, I guess is what I’m asking?

Gauri (08:24): Yeah, for sure. So I first started off, um, my first year I was pretty set on pre-med. I wanted to go to medical school, um, and pre-med the curriculum makes you jump through like a lot of hoops, like oh, do shadowing and do research hours and all that. And so that’s how I got into research in the first place. But I ended up liking it so much that I abandoned the pre-med track and I’m like, I think this is the research is just what I’m interested in general. And so the F1 visa definitely helped. It also would’ve been helpful for pre-med purposes as well to get like clinical hours maybe, you know, work in some, some sort of, um, healthcare setting. So working somewhere was like whether I wanted to go to graduate school in research, in a research capacity or to medical school working somewhere had to have happened.

Family and Personal Finances

Emily (09:21): Yeah, that makes sense. Um, since we’re talking about work then and paid work and so forth, can you tell me a little bit about, doesn’t necessarily have to be your family’s finances, but like what was going on for you financially during that time and especially if there were any tie-ins then with like your visa status or your choices around that.

Gauri (09:39): Finances were never really a struggle for my family, which I’m very grateful for. Um, because I, as an international student, I didn’t get any financial aid or qualified for federal student loans, so everything did have to come out of pocket. So more about having paid work, it was more about, um, finding a sense of autonomy and not having to rely on, you know, my family being my safety net all the time. And so that’s why I was interested in the paid work.

Emily (10:14): And you told me during our, um, pre-interview chat that you started listening to financial podcasts even as an undergrad, including this podcast. And so what led you in that direction of like being interested in finances even at that stage?

Gauri (10:28): Oh yeah, it was pretty much, so I worked in this, um, lab as a volunteer for two semesters and then that summer after I asked them like, Hey, can I stay for the summer and work here full time and also get paid perhaps? And they were like, yeah, sure we can make that happen. Um, in hindsight I didn’t realize how like, oh wow, that actually happened <laugh>. Um, now that I know more about the research space like that, that was kind of incredible that that happened. But anyway, so I, I’m like, oh, I’m about to get money for the first time. Um, and unlike some of my peers that I went to high school with, they all worked like, you know, jobs, um, at like the local ice cream shop or they were, you know, hosts at, you know, some type of diner or they tutored on the side. I couldn’t do that on the H-4 visa. And so up until this point I’d just been volunteering. This was quite literally like my first paycheck. And so I was like, what do I do with this? What could I possibly do with this? And I’m just the type of person to go poking and prodding for answers. And so I went to finance podcasts.

Emily (11:49): Yeah, that’s great to hear. Um, I think when I had a similar like transition, you know, coming out of undergrad and getting like my first stipend paychecks, like after that I was asking the same questions like, oh, uh, never had this control over money before. Like, what exactly do I do with this? I went to books because podcasting was barely a thing back then, but that’s awesome that we have so many different like avenues you can go to now. Um, okay. So anything else you’d like to share with us? Maybe about the transition from, you know, finishing up undergrad and your master’s into graduate school in terms of your finances and then we can kind of dig into the, um, specific questions or concerns that like someone in your position has?

Gauri (12:29): I think the only big difference between my undergrad and master’s and then grad school now is that in undergrad and Master’s, the amount I was making was like, it, it couldn’t sustain all of me. Um, my family was helping out with tuition entirely and then now it’s a, a different ball game. Like I, I can more or less like take care of myself on this stipend. And so that autonomy I was like really searching for. Um, I I feel like it’s like finally coming to fruition like, oh, it’s happened.

Emily (13:06): So when you kind of approached me about doing this episode, you were saying, okay, yes, I’m an international student but I don’t have the same concerns of a brand new to the US international student and I also have different concerns going on than someone who is already a citizen or resident. So just like point by point like let’s talk through like what you’ve encountered and sort of what you’d like to share with other, other listeners who might be in a similar situation.

Choosing a Bank as an International Student in the US

Gauri (13:30): Yeah, for sure. So the first thing, um, you do is when when you get some type of money in your hands, it’s like I have to put this somewhere. And so it’s the first question is like, oh, what bank do I choose? And so I was consuming this financial content and it was like, oh, you should start saving up for an emergency fund and moreover you should put it in a high yield savings account, but for international students there are only a certain number of banks that will offer their services to you. And so the first bank account I had was, um, a Chase bank account. Um, I don’t know if it’s okay to name names.

Emily (14:07): Oh yeah, go ahead.

Gauri (14:07): For banks. Okay. So it was a Chase bank account and it had some like stipulations on the minimum balance that should be in there. It didn’t offer any interest at all. And so in terms of all the different banks you could choose from, you’re limited to a very set few. Um, so I had that bank account first, but then finally after I got the work authorization to work on campus in this uh, lab and then after I got the social security number associated with it, it was after all that that I could open this bank account. And so anytime you hear like, oh, do this, do X, y, and z, like a pretty actionable step, that seems easy enough. Um, I always seem to find like, oh I need to have this before I can do this thing.

Emily (15:05): Yeah, it is, it is really hard at like as a podcaster, someone who does one to many communications, it’s really hard <laugh> to keep all audiences in mind and speak to like all audiences. So you’re absolutely right. Like if you’re listening to a US based, you know, personal finance podcast or like reading a book or something else, like you definitely have to put another filter on that and say like, okay, <laugh>, is this actually going to be possible for me? And the answer is like, just like you said, yeah, there are banks that will work with you, it’s just not necessarily every bank and not everyone’s gonna make it easy and some people need the SSN and some don’t and so forth. So like you just have to be, there’s just another selection criteria on that. Absolutely. Have you, so since like having that Chase bank at first, have you subsequently opened or been able to open any other types of like higher yield savings or something like that?

Gauri (15:51): Yeah, for sure. I primarily use uh, my SoFi bank account now and it was pretty easy to like get the account, but it’s only after you’ve got some type of job lined up and you’re getting paid for it and you’ve got like all the things that come with the job first, like you need to have that SSN which um, is not like a oh I’ll just like apply for it type of thing. They’re finding the job is not like the easiest thing in the world. So you could hear the fi- finance advice but know that there are steps before steps you must take before you can, you know, enact those. Um, yeah, in general it’s like a thing I have to Google, like, oh open up a Roth IRA, can I open up a Roth IRA is something I have to Google.

Commercial

Emily (16:42): Emily here for a brief interlude! Tax season is in full swing, and the best place to go for information tailored to you as a grad student, postdoc, or postbac, is PFforPhDs.com/tax/. From that page I have linked to all of my free tax resources, many of which I have updated for this tax year. On that page you will find podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs and PhDs-to-be. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with. Again, you can find all of these free resources linked from PFforPhDs.com/tax/. Now back to the interview.

Opening a Roth IRA as an International Student in the US

Emily (17:34): Yeah, let’s talk about that question. Um, so you heard about Roth IRAs, I’m sure through all the content that you were consuming and uh, tell me what year that was when you like first learned about a Roth IRA,

Gauri (17:46): I actually learned about a Roth IRA back in high school and so my high school offered a finance class and so they tried to teach us about, um, saving for retirement and 401Ks and Roth IRAs and whatnot, but I don’t think it like fully sunk into our minds yet about how significant those things were. So I heard about a Roth IRA before, um, I didn’t fully grasp its like importance until I started listening to like finance content a few years later.

Emily (18:21): Yeah. So when did you like start googling that question? When did you feel like, okay, as an imminent step I would like to open this kind of account and I really need to figure out if I’m able to? When did that happen?

Gauri (18:31): I think that was two years ago. I was like, I’ve listened to all this advice. Um, so I’m the type of person to gather all the information before doing things, but that can hinder progress if you just keep adding more bits of information rather than like acting on what you already know. So I knew that I needed the Roth IRA and I was like, you know what, fine, let’s, let’s just start googling. Um, can I, can I open this and who’s willing to offer this to me?

Emily (19:01): Yeah. And what did you find?

Gauri (19:04): I think it was from your podcast, like some interview a while back, um, and there was like a snippet. I remember watching like as an international student you can open a Roth IRA and I’m like, oh check. Fabulous. Um, now I spent a little too long deciding like, oh, which, which uh, investment bank or like, which, which company to go with. But yes, I I was able to open up the Roth IRA <laugh>.

Emily (19:31): Yeah, that I think you’re referring to the interview I did with Hui-chin Chen who’s a CFP. And I think that we recorded that back in like maybe 2018 or 2019. And even by then I had been getting regularly questions in my like, live seminars from international students, can I open a Roth ira? Should I open one? You know, is it allowed? Is it a good idea? And so I was really, really glad to get an expert on the podcast who could help us with all those questions. But the, the gen, I mean people who are interested should listen to that full episode. But yeah, the, the general, uh, takeaway was like, yep, <laugh>, if you want to invest like while you’re an international student or postdoc in the US go ahead and do it now with a Roth IRA specifically, you still need to fulfill the, um, taxable compensation requirement to be able to make those contributions. Did you have to like, I don’t know if you were receiving W2, you know, employee type income at that time, maybe it wasn’t so much a question for you or is that, is that taxable compensation question something you also had to investigate?

Gauri (20:30): I don’t think I investigated it that much because at the time I really wasn’t earning all that to put anything into the Roth IRA, so it was just open for a while and it, my income definitely wasn’t a W2, it was actually a 1099, but I think from another series of, not another series, but like another episode or couple of episodes of yours, um, I think you went over the old guidance before 2020 and then after 2020 and it was like, yes, 1099 income can be uh, put into a Roth IRA. And so I was like, oh great. So I I could have done it all along. Um, not that there was anything left <laugh>.

Emily (21:16): Yeah, that definitely did change to have fellowship income not reported on W2 eligible to be contributed starting in um, 2020. But you still had that added wrinkle of like as an international student, as a non-resident in the us um, we’ve settled like the compensation term in, in taxable compensation, but you also had to know that your income was taxable in the US and I don’t know, would you like to share like what is your technical country of residence? It seems so silly to say that ’cause you’ve been here for so long, but like what is your country of residence?

Gauri (21:47): I think right now for tax purposes, it is not the US I think it switches to the US in a year. I think it’s like five years. Mm-hmm <affirmative>. Yeah, that I can say I’m on my tax. I’m like, not from here, but after five years of saying that you are from here now for as far as taxes are concerned.

Emily (22:09): Yes. So I don’t know the Canadian US tax treaty intimately, but I’m pretty confident that your income was then taxable in the US at least to some extent. So you did have that eligibility mm-hmm <affirmative>. Yep. So yeah, that’s great. But like you said, like, you know, US citizens, residents and so forth, they have this one bar of like questions they have to ask about the Roth IRA and then there’s that further bar that, you know, international non-residents have to ask. So I’m really glad that we kind of reviewed that to like, you know, point people back to that other resource and like get that all out there because like it is such an amazing tool. Um, and it’s really a shame to miss out on it if you’re ready to contribute to one just because you might have some outstanding questions that, you know, they can take a little bit of time to resolve those. So hopefully we resolved a few for the listeners. Um, is there anything else that you’d like to add on that? Like Roth IRA question?

Gauri (23:03): I think that’s about all. Just, uh, don’t let the tail wag the dog as, as they say. So I had the account open but I wasn’t like too worried about what could go in there. Um, it all worked out in the end for me, but I think if I got too caught up in the weeds, I I don’t think the account would’ve ever been opened or I would’ve ever put anything in there <laugh>.

Emily (23:25): Yeah, I totally agree. And it’s, and it’s this area of investing where people that in my observation seem to have the most like analysis paralysis. Um, and I, maybe you’ve heard me say this on podcast before, I’ve probably told the story, but like I made like a huge mistake when I first opened my Roth IRA, which is that I didn’t actually invest the money that I was putting in and yet it’s really good that I started it and started contributing even though I made like a huge mistake with it. Like, I mean we have a decades, decades long investing journey ahead of us, so like it’s better to just get started even imperfectly than to just like wait and wait and wait and wait and not do anything. It’s totally okay to make relatively minor mistakes. You can overcome them along, along the journey. What was your third uh, point that you wanted to bring up?

Opening a 403B as an International Student in the US

Gauri (24:08): So I figured out the bank account, I figured out the Roth IRA and then now my question is, hmm, I still have some more left to save. Can I open a 403B? Which the answer is yes, but then all of this additional money that I have, it’s coming from a fellowship which according to my university, it’ll be reported on a 1042s form, which I’ve never encountered before. Um, from my searches on Google, I don’t see that much guidance for graduate students with this form. It’s more about US citizens that have moved abroad that, that received this form and I’m like, I’m, I’m not that <laugh>. I’m very much the opposite. I’m a non-citizen within the US so the jury is still out. I’ve emailed like the tax folk at my university regarding like, Hey, would you happen to know if this can be put in a 403B or a Roth IRA or like any tax advantaged account and they’re like, sorry, we can’t give tax advice.

Post-Interview 403B Contribution Follow-Up

Emily (25:19): Hi y’all, this is Emily breaking in during the editing process. Gauri and I talked for a bit here about her 403(b) and her tax situation, but I wasn’t quite asking the right questions, so we ended up exchanging several emails after the interview to sort it out. Here’s what we figured out: Gauri has two types of income. She’s an employee throughout the year and also receives supplemental fellowship income. Her employee income exceeds $10,000 per year and therefore is not subject to the US-Canada tax treaty, so it is fully taxable and reported on a Form W-2. As a nonresident, her fellowship income is reported on a Form 1042-S with income code 16, and it is also fully taxable. Gauri’s question was whether or not she could contribute her Form 1042-S income to her 403(b), and the answer to that is no because it is fellowship income and only employee income can be contributed to a 403(b). But she does have employee income, and that’s why her university allowed her to open the account and she could contribute to it from her employee, i.e., W-2, income if she chose to. The reason she particularly was asking if she could contribute the fellowship i.e., Form 1042-S, income to her 403(b) is because of the automatic 14% income tax withholding rate, which is rather high compared to her effective tax rate. So our conclusion is that she can contribute to the 403(b), but not from the particular pot of money that she wanted to, and even though she has that annoyingly high income tax withholding rate, it’s all going to come out in the wash at tax time, likely in the form of a tax refund. OK now back to the interview!

Building a Financially Stable Life in the US as an International Student

Emily (26:52): Was there any other, another point that you’d like to bring up in this sort of question about having been in the US for like a very long time yet still being on this F1 status?

Gauri (27:03): The main goal of consuming all the finance content is, so answering the question of like how do I build a financially stable or good life for myself years in the future if I’m in the US but because of my visa I also have to, it’s like vacillating between yes, think long term, but also what if you’re not here long term? What then? Um, so of course that opens a can of worms, like what if this, what if that? But I just have to work with, let’s just assume I’m gonna be here for some indefinite amount of time and then if the day that I have to go back to Canada comes, um, I will deal with extricating myself from all of this money that’s invested in these US-based, um, accounts at that point. Um, I think it would, it would be like a hindrance if I constantly worried about it right now.

Emily (28:09): Yeah. And I I’m really not sure what steps you would that would be practical to take, um, to, you know, think about this possible future where you would be living in Canada, um, I don’t know, open a Canadian bank account. Like I’m not even sure what would be like a reasonable thing to do, um, like you said for an outcome that you’re hoping is not going to come about and has a probably a low chance of actually coming about. I think you’re exactly right. Just to say like, I’m gonna build what I can here and if the day comes when I have to make a change, I’ll make a change then, but you don’t need to anticipate that. Yeah, and I think that was the answer too from that podcast episode with, um, with Hui-chin Chen. She was just saying like, yeah, if you end up leaving the US later whether because you wanted to or because you had to or whatever the reason, you can sort of cross that bridge when you come to it. Like don’t let that be a reason for you to not build wealth and build your financial life in the US. So I think you’re taking exactly the right path.

Gauri (29:08): That’s fabulous to hear.

Current Financial Goals

Emily (29:09): <laugh> Do you have any current financial goals?

Gauri (29:14): Current financial goals? So the immediate thing would be to restore my emergency fund. So my emergency savings, I had to draw out of that for moving to Austin from Michigan. And so the moving costs and then furnishing, you know, the apartment, the first few months of, you know, rent before the, uh, the stipend payments came in. I used my savings to tide me over during that time. And so right now I, I need to work on restoring that amount. Um, so that’s my immediate goal. And then once that’s done, I think that should take up to a year, depending on how aggressive I’d like to be at. After that point, I will have to decide where to redirect those extra funds that were going into my, um, emergency savings, like should I put that into a taxable brokerage account or finally answer that 403B question. And so send that, send those funds over there. Where should those go would be the next question.

Emily (30:25): And are you also thinking about a potential green card in the near future and like what are the, because I know there’s sometimes hefty financial costs associated with that transition.

Gauri (30:34): Oh yeah, for sure. So the past, I think two or three years, uh, my Visa has cost about $500 a year in different work authorization fees or different petition fees. So I already have that in the back of my mind. Like, oh, every time I need to do something with my visa, it’ll be a couple hundred dollars. But for a green card application for someone that is seeking a PhD, there is a employment based visa that I myself could petition for if I demonstrate that I’ve done outstanding research in my field and I’m a person worthy of staying in the us. Um, and so just for that, just for two forms relating to that, I think it’s um, called, it’s called Immigration for Alien Worker or Petition for an Alien Worker, something along those lines. The fee for that is around $700 and then the adjustment of status. So to adjust my status from an F1 to this employment based visa, that would be around $1,400. And so just for those two forms, if I were to go about it without the help of any sort of immigration lawyers, whatnot, that’s already over two grand. So I definitely need to have some sort of bucket larger than a couple hundred dollars ready to go for when that day comes about. And also I have to decide like, do I even wanna pursue that path or would I prefer to just go the more routine route, which is employment based, um, visa. So like pursuing an H-1B track, so up in the air.

Emily (32:31): How will you make that decision? Or I guess I’m also asking like you mentioned earlier about, you know, the number of years you’d been in the US and having to make a decision about F1 versus staying on the previous status. Um, is there an amount of time that you’re looking at where you’ll, that you’ve been in the US where you or been on the F1 visa where you’ll need to make this decision? Or is it really kind of up to you? You can do it at any point?

Gauri (32:53): The sooner it happens, the sooner like a weight would be lifted off my shoulders about like this always, you know, you have to keep in the back of your mind that like you’re not necessarily here forever, whether you choose to be or not to be here forever. So it would be like a mental weight, you know, relieved. Um, the F1, since I’m in a STEM field, I could have my OPT go for I think up to three years with the extension. And so within those like three years, I’d have to make some type of decision about whether my employer can sponsor for an H-1B visa or I’m going to go about it on my own. So it’s within the next eight years I have to come up with an, an exact plan about what would be the fastest, um, most efficient way to go about this process. Mm-hmm <affirmative>

Emily (33:53): And if you decide you wanna do it on your own and you have those fees that you’re looking at, plus maybe you, you might wanna pay a lawyer, um, to help you as well, are the finances going to hold you back or do you think you’ll be able to save up the requisite amount of money by the time you want to go about this process?

Gauri (34:10): I think I am well informed enough about how much this is going to cost me, and so I’d be able to plan for that regardless. It would still be a stretch, but it’s not like this is happening six months from now or you know, this is happening in just in a very short amount of time. Like I have the time to prepare for this type of scenario.

Traveling Back to Your Home Country as an International Student

Emily (34:36): I don’t know if this applies for you at all, but something I’ve seen happen with other international students, um, is that they need to go back to their home country every so often to deal with their visas. Has that ever come up for you and, and if not, is it ’cause you’ve been in the US under all these different statuses for so long? Or is it because of the relationship between US and Canada or like how does that work?

Gauri (34:57): It’s a US and Canada thing, so it’s a special caveat in this regard as well. So most students need to go through a Visa interview and actually receive approval to study in the US however, I’m Canadian and so I simply have to be accepted into a US university and show that I have some method of paying for my stay here and that’s all the evidence I have to give to study. I don’t have to continue to go back to Canada to renew my visa or even have any documentation for the exact visa.

Emily (35:41): I see. I’m just throwing that out. There’s another potential cost that I’ve seen international students bear uniquely these like high fees of international travel every, you know, few years to deal with that like particular issue. Um, yeah, I mean the more that obviously I, I was not an international student, so like, but the more I learned about the financial aspects of having this status in the US like it just, there’s just kind of more that burdens that kind of get thrown on the pile. Like, okay, no access to student loans, can’t side hustle, have to pay fees for visa related items, maybe for travel as well. Like just, it it emphasizes um, very deeply for me the importance of paying a living wage and not just a living wage more than a living wage to graduate students, especially international students because there’s just no, there’s no ways to pivot. Um, if you are financially on your own, if you’re financially independent from your family, then you have to make it work on the stipend like you’ve been talking about and you have all these additional, um, fees that can, that can pile up as well that domestic students don’t have to, don’t have to worry about. So yeah. Yeah. I’m really glad that, you know, you brought this up and that we got to have this conversation. Um, is there anything else that you wanna add about yeah, um, being an international student, having been in the US for so long? Or about your current financial goals or anything else?

OPT Application Tip for International Students in the US

Gauri (36:59): Pro tip for international students, um, when it comes time to send in your OPT application, do it the day you’re allowed to submit that application. So first you need all those signatures or you know, green lights from your advisor about like, yep, you’re ready to graduate and whatnot. That should be done before the 90 days. You have like a 90 day window before your last day of classes to apply for OPT. Have those ready to go. And on that like very first day of the 90 days apply for OPT then ’cause I did it right the first year after I grad, graduated from my undergrad and the second year I waited a few weeks and my OPT was delayed, I think over a month.

Emily (37:55): So it’s just for processing time, like you’re just saying like be the first one, like be first in line mm-hmm <affirmative>. Because if you delay then these applications are like piling up behind it and just pushes like the timeout. Is that right?

Gauri (38:06): Yeah, exactly. So when I was first in line, my OPT, like the EAD card arrived within three weeks. And so I had it well in advance of any start date and the second year round I was like, oh, it arrived in three weeks. I’ve got time.

Emily (38:26): You were complacent. Yeah, <laugh>.

Gauri (38:27): I was, I didn’t think I’d be so off base. Um, but yeah, don’t, don’t, don’t do what I did. <laugh>.

Best Financial Advice for Another Early-Career PhD

Emily (38:37): <laugh> Yeah, don’t do it <laugh>. Um, okay. Well thank you so much for that tip. And I’d like to end by asking you the question that I ask all of my guests, which is, what is your best financial advice for another early career PhD? And it can be something that we’ve touched on in the interview already, or it could be something completely new.

Gauri (38:53): I’ve learned that you need two savings buckets at least. So there’s the emergency when truly it’s an emergency and you have no sources of income whatsoever, and then a second bucket for yearly, like one off expenses, like, oh, there’s that vacation you’ve really been wanting to take or you have to travel for whatever reason. For me it’s like, you know, oh, here’s a couple hundred dollars for some visa related thing or I’m working in a STEM field. But I think all grad students in this day and age need a laptop or some type of technology of some sorts, and that’s pretty costly as well. And so, you know, your phone falls apart or your laptop needs to be replaced or you gotta go to a conference or whatnot. Um, there has to be like a separate bucket <laugh>, aside from the emergency savings. Um, and that, that having that separate bucket really relieves like a lot of stress, at least for me.

Emily (39:55): Yeah, this is like a major component of my teaching. I would say that’s different from like you mentioned listening to like financial feminists, for example, Tori Dunlap’s podcast, Her First 100K. Um, what I see in like the more general personal finance space is people talking to other people who have higher incomes high, you know, moderate to high incomes, which is just not the case for graduate students. And so things like having to pay for a plane ticket, well, you know, if your income’s high enough and you’re doing a great job with your personal finances, you know, keeping your rent low and all that stuff, like that’s not gonna be an issue for you, but it’s an issue for almost all graduate students to pay for those types of expenses. So like that is definitely an area that I have of much greater emphasis than other like personal finance teachers do because I totally agree with you. It takes so much stress off to have planned and prepared for those expenses in advance so that you’re not having to, I don’t know, like go to the food bank and like not, you know, put gas in your car and like all the stuff that you would have to do on the short term basis to sacrifice, to come up with money that you really needed if you, if you didn’t have that savings. So I love that tip. Thank you so much for sharing that. Um, and this was, it was wonderful to talk to you and thank you so much for teaching me and you know, asking the questions and you know, sharing the conclusions that you’ve come to along the way. And I wish you all the best in getting your, you know, status in the US secured in the way that you would like it in the near future.

Gauri (41:15): Thank you so much. It was great talking to you

Outtro

Emily (41:27): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by me and show notes creation by Dr. Jill Hoffman.

Is Fellowship Income Eligible to Be Contributed to an IRA?

February 6, 2022 by Emily 27 Comments

Update 2/22/2022: Great news! The point of this article has been fulfilled because the IRS re-revised Publication 970 for tax year 2021 to reflect the current tax code, which permits taxable graduate student and postdoc income, whether reported on a Form W-2 or not, to be contributed to an IRA.

Publication 970 p. 5 NOW states: “Individual retirement arrangements (IRAs). You can set up and make contributions to an IRA if you receive taxable compensation. A scholarship or fellowship grant is generally taxable compensation only if it is shown in box 1 of your Form W-2, Wage and Tax Statement. However, for tax years beginning after 2019, certain non-tuition fellowship and stipend payments not reported to you on Form W-2 are treated as taxable compensation for IRA purposes. These include amounts paid to you to aid you in the pursuit of graduate or postdoctoral study and included in your gross income under the rules discussed in this chapter. Taxable amounts not reported to you on Form W-2 are generally included in gross income as discussed later under Reporting Scholarships and Fellowship Grants.”

The rest of this article is unchanged from its original publication date on 2/6/2022.

Believe it or not, I look forward to the release of each new version of the IRS’s Publication 970, which covers how fellowship and scholarship income is taxed. I read it thoroughly and make sure that what I teach is in line with it. However, when I opened up the new 2021 version a few days ago, I was disappointed to read on p. 5: “Individual retirement arrangements (IRAs). You can set up and make contributions to an IRA if you receive “taxable compensation” (formerly “earned income”). Under this rule, a taxable scholarship or fellowship grant is compensation only if it is shown in box 1 of your Form W-2, Wage and Tax Statement.” Disappointed doesn’t really touch the depths of my feelings… I was momentarily devastated! I’ve been telling you for over two years now that fellowship income is eligible to be contributed to an IRA regardless of how it is reported or not reported at tax time. Was I wrong? Let’s explore the relevant texts. I have great respect for the IRS publications and find them very useful, but they are not the final word on tax law… the tax code is.

Further reading/listening:

Pre-2020 Status

You must have “taxable compensation” to contribute to an IRA in a given tax year. You can contribute up to the cap for that year ($6,000 in 2019-2022) or your amount of taxable compensation, whichever is lower.

Through tax year 2019, with respect to PhD trainee income, only income reported on a Form W-2 was considered “taxable compensation.”

The text from the 2019 version of Publication 970, Tax Benefits
for Education, reads on p. 5: “Individual retirement arrangements (IRAs). You can set up and make contributions to an IRA if you receive taxable compensation. Under this rule, a taxable scholarship or fellowship grant is compensation only if it is shown in box 1 of your Form W-2, Wage and Tax Statement. For more information about IRAs, see Pub. 590-A and Pub. 590-B.”

Similarly, the text from the 2019 version of Publication 590A, Contributions to Individual Retirement Arrangements (IRAs), reads on p. 6: “Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2.”

This text is very clear and reflects the widely held understanding of eligibility for IRA contributions. It was very disappointing for many members of the PhD community; winning a fellowship often comes with a pay raise and therefore an enhanced ability to save for retirement, yet those recipients were barred from making IRA contributions. Keep in mind, these fellowships were taxable as ordinary income, just not considered taxable compensation for IRA contribution purposes. I didn’t like this rule, but I taught it as part of my personal finance material.

The Graduate Student Savings Act

Somehow, the plight of graduate students and postdocs who received fellowship income was heard! The Graduate Student Savings Act proposed to change the definition of taxable compensation. It was put before Congress as a bill in 2016, 2017, and 2019.

An excerpt of the fact sheet for the Graduate Student Savings Act of 2019 reads: “While fellowship or stipend income is taxed by federal and state governments, it doesn’t qualify as “compensation,” meaning that none of a student’s fellowship funds can be saved in an IRA… Many postdoctoral fellows… also receive taxable fellowship income, yet these fellows are also barred from using their fellowship income to contribute to tax-preferred retirement accounts. The Graduate Students Savings Act of 2019 would ensure that any graduate student or postdoctoral fellow who is
paid for their work or their studies can save a portion of their stipend in an IRA.”

While not using super specific or technical language, this excerpt makes clear the intent of the bill: to allow “any graduate student or postdoctoral fellow who is paid for their work or their studies” to contribute to an IRA, i.e., change the definition of taxable compensation.

Graduate Student Savings Act was not successful in being passed as an independent bill in any of those years. Then, in 2019, it was included in the SECURE Act.

The SECURE Act

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) is described by Investopedia as a “far-reaching bill includes significant provisions aimed at increasing access to tax-advantaged accounts and preventing older Americans from outliving their assets.” It was signed into law on December 20, 2019.

The Graduate Student Savings Act was included in the SECURE Act. Here is the relevant text from the bill:

“SEC. 106. CERTAIN TAXABLE NON-TUITION FELLOWSHIP AND STIPEND PAYMENTS TREATED AS COMPENSATION FOR IRA PURPOSES.

“(a) In General.—Paragraph (1) of section 219(f) of the Internal Revenue Code of 1986 is amended by adding at the end the following: “The term ‘compensation’ shall include any amount which is included in the individual’s gross income and paid to the individual to aid the individual in the pursuit of graduate or postdoctoral study.”.

“(b) Effective Date.—The amendment made by this section shall apply to taxable years beginning after December 31, 2019.”

This expands the definition of taxable compensation for the purposes of contributing to an IRA beyond what is reported on a Form W-2. To me, this definition clearly includes taxable fellowship and training grant income paid as stipends and salaries not reported on a Form W-2.

The Tax Code (2021)

From the current Internal Revenue Code section 219 on Retirement Savings, section (f)(1) reads:

“(1) Compensation For purposes of this section, the term “compensation” includes earned income (as defined in section 401(c)(2)). The term “compensation” does not include any amount received as a pension or annuity and does not include any amount received as deferred compensation. For purposes of this paragraph, section 401(c)(2) shall be applied as if the term trade or business for purposes of section 1402 included service described in subsection (c)(6). The term “compensation” includes any differential wage payment (as defined in section 3401(h)(2)). The term “compensation” shall include any amount which is included in the individual’s gross income and paid to the individual to aid the individual in the pursuit of graduate or postdoctoral study.”

Again, I read this as any type of grad student and postdoc salary or stipend with no clauses about being reported on a Form W-2. The language is very similar to how IRS Publication 970 describes fellowship income on p. 5: “A fellowship grant is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research.”

The Internal Revenue Code does seem, to me, to reflect the intent of the Graduate Student Savings Act of expanding the definition of taxable compensation with respect to graduate student and postdoc income beyond what is reported on a Form W-2.

The 2021 Publications

Publication 970

As I stated at the start of this article, Publication 970 disappointingly has not changed its tune on the definition of taxable compensation. It says the same thing in 2021 that it did in 2019 as if the Graduate Student Savings Act had never passed.

Publication 590-A

Publication 590-A, to its credit, now has some mixed language regarding taxable compensation and fellowship stipends and salaries. I’ll compare the 2018 and 2021 versions of this publication.

The 2018 version of Publication 590-A contains exactly one reference to fellowship income on p. 6 in the section titled What Is Compensation?: “Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2.”

The 2021 version of Publication 590-A contains this language on p. 6 in the section titled What Is Compensation?: “Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2.” So no change there.

However, further down in the same section it says: “Graduate or postdoctoral study. Compensation includes any income paid to you to aid you in the pursuit of graduate or postdoctoral study.”

Are they trying to draw a distinction between “any income paid to you to aid you in the pursuit of graduate or postdoctoral study” and “scholarship and fellowship payments”? What could “any” income mean if not, at least in part, fellowship payments?

To further muddy these waters, Publication 590-A includes Table 1-1, Compensation for Purposes of an IRA. The 2018 version of this table doesn’t mention either fellowship income or graduate or postdoctoral study. The 2021 version lists “taxable non-tuition fellowship and stipend payments” as included in the definition of taxable compensation.

This language in the table is consistent with both employee and non-employee graduate student and postdoc income, again, with no mention of a Form W-2 reporting requirement.

Furthermore, the 2021 version of Publication 590-A says under the Reminders section on p. 2: “Certain taxable non-tuition fellowship and stipend payments. For tax years beginning after 2019, certain taxable non-tuition fellowship and stipend payments are treated as compensation for the purpose of IRA contributions. Compensation will include any amount included in your gross income and paid to aid in your pursuit of graduate or postdoctoral study.”

I am not sure what “certain” means in this paragraph. “Non-tuition fellowship and stipend payments” reads to me as stipend or salary as long as your tuition is being paid by another source of funding. “Any amount included in your gross income and paid to aid in your pursuit of graduate or postdoctoral study” reads to me as both your employee income (reported on a Form W-2) such as from a graduate assistantship position or postdoctoral employee position and taxable non-employee (not reported on a Form W-2), often sourced from a fellowship or training grant.

My Conclusion

My conclusion is that the very clear language in Publication 970 and Publication 590-A excluding taxable fellowship and scholarship income from the definition of taxable compensation unless it is reported on a Form W-2 is not consistent with the spirit of the Graduate Student Savings Act or the current tax code. The changes made by the SECURE Act to the tax code included in the definition of taxable compensation “any amount which is included in the individual’s gross income and paid to the individual to aid the individual in the pursuit of graduate or postdoctoral study.” To me, this means that if you receive a taxable stipend or salary as a graduate student or postdoc, even if it is not reported on a Form W-2, it is taxable compensation for the purpose of contributing to an IRA.

What Do You Think?

I am really struggling with this and I honestly want to know: Do you see a flaw in my reasoning? Is there some difference between “fellowship” and “any income paid… in the pursuit of graduate and postdoctoral study”? Leave a comment here or email me ([email protected]). I am open to the idea that there is something I don’t see or understand. Or let me know if you agree with me.

What Can We Do?

If my argument is valid and the text in IRS Publication 970 and Publication 590A (in part) is incorrect, what can be done? Hit me with your ideas for getting this text updated.

My initial idea is to write to the offices of the Senators (Elizabeth Warren, Mike Lee, Ron Wyden, and Tim Scott) who sponsored the Graduate Student Savings Act to see if they can clarify why the IRS’s language in these publications doesn’t reflect the change the Act brought about. Do you have any other ideas?

The big win for our community was getting the Graduate Student Savings Act passed. The follow-through on that win is making sure that people (and tax software/preparers) know about the change so that graduate students and postdocs can functionally contribute to IRAs.