Personal Finance for PhDs

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This Grad Student Is Riding the Meme Stocks and Crypto Roller Coasters

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In this episode, Emily interviews Cara Davidson, a graduate student at Western University. Cara has a “tumultuous” income from assistantships, scholarships, and freelance writing, and she built up a considerable nest egg thanks to diligently tracking her spending. She started investing in January 2021 in mutual funds and also meme stocks and crypto. Cara details her investing motivation, philosophy, and sources, shares how much mental bandwidth she devotes to her positions, and gives great advice for anyone already invested in or considering investing in meme stocks and crypto.

Links Mentioned in this Episode

grad student meme stocks and crypto

Teaser

00:00 Cara: Do your research. Just because it’s a meme stock, that doesn’t mean that there shouldn’t be some kind of data behind it. Don’t just do it because the internet says to do it.

Introduction

00:15 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts. This is Season 10, Episode 9, and today my guest is Cara Davidson, a graduate student at Western University. Cara has a “tumultuous” income from assistantships, scholarships, and freelance writing, and she built up a considerable nest egg thanks to diligently tracking her spending. She started investing in January 2021 in mutual funds and also meme stocks and crypto. Cara details her investing motivation, philosophy, and sources, shares how much mental bandwidth she devotes to her positions, and gives great advice for anyone already invested in or considering investing in meme stocks and crypto.

01:06 Emily: I’d like to share with you a personal update now. As I discussed in Season 8 Episode 18, my husband and I purchased our very first home last spring in north San Diego County. It was an area we’d never lived in or near before but we are location independent with respect to work and just got a really good feeling from the city. We’ve been living in our house for about five months now and are settled into a pretty pleasant routine. Our older daughter started kindergarten in August, and our younger daughter is in preschool. After a year and a half of either no childcare or grandparent childcare, it’s amazing to have our children back in a school setting. It’s great for them to be among peers, and it’s great for us to have quiet, uninterrupted work time. We also enrolled the kids in introductory sports classes, which is quite hilarious to watch.

01:58 Emily: We’ve made friends with a few of our neighbors, and I’ve organized a once-per-month social gathering in our neighborhood park. We have a goal to explore one new-to-us point of interest each weekend, so we’ve been to numerous beaches, parks, tourist attractions, etc. It definitely isn’t considered hip, but my husband and I both really wanted this quiet, suburban, family-oriented lifestyle, and I think we’ve made a good start at cultivating it after so many years of putting down only shallow roots. COVID has of course made its mark on this process and has dampened the in-personal socializing that I would otherwise have hoped for. I am really thankful to live in an area where it’s pleasant to be outdoors year-round. That was one of the main reasons we moved away from Seattle in summer 2020. We are here for the long-term, though, so I hope with time and vaccine availability for the younger children, we will eventually develop a robust network of local friends. So I just wanted to let you all know that things are going well following our move, and even though buying a house in a place we’ve never lived before was an odd thing to do, it seems to be working out. Without further ado, here’s my interview with Cara Davidson.

Will You Please Introduce Yourself Further?

03:12 Emily: I’m really excited to have joining me on the podcast today, Cara Davidson. She is just finishing up her master’s now, starting a PhD program in the fall. We are recording this by the way in June, 2021. Cara has been on an investing journey, specifically regarding meme stocks and crypto and other kinds of investing. And I’m so excited to have her because I haven’t had a conversation about this yet. Obviously it’s been in the news and on a lot of people’s minds, and I know there are so many people in my audience who are interested in this kind of investing because it’s garnered so much attention and it’s so exciting. And I’ve been getting questions in my seminars actually about how do I pay capital gains tax on this money that I made from, you know, this kind of investing? So super excited to have Cara on. Cara, would you please tell the audience a little bit more about yourself?

03:58 Cara: Yeah, absolutely. So, as you mentioned, I’m finishing up my master’s and then launching my PhD in the fall. I’m specializing in mixed methods research involving intimate partner violence and looking at how that can affect breast cancer. So I’m really excited for that, but I’ve yet to defend. So that’s kind of the bane of my existence right now. And yeah, in terms of investing, I got into that in January. It’s brand new to me still, I guess that was like the height of the meme stocks. And I got in just in time and I’ve been riding the wave ever since. It’s been a lot of fun for me. And then I’ve also been dabbling in cryptos, which I also find really interesting, especially just because of the volatility of the market, which I know is a huge disincentive for many people. But for me, it’s a lot of fun because you can make a lot of money really quick, but I guess you can also lose it all pretty fast too. So I’m looking forward to discussing all of that.

04:55 Emily: Yeah. We’ll get into that in a moment. And can you tell us what university you attend?

05:01 Cara: Yes. So I attend Western University in London, Ontario but I’m doing so remotely right now. So I’m at home in Ottawa at the moment.

Balance Sheet: Cashflow and Side Hustle Income

05:08 Emily: Okay, great. So first question is, let us know what your balance sheet looks like right now. And actually it’d be helpful to talk about cashflow too. Like what’s your stipend? What basically are, you know, you spending on living expenses, and how much are you able to save, and how much have you accumulated in what?

05:25 Cara: So, I’m a freelance writer, so I’m going to say that first because when I was doing my research on my own finances for this interview, I was a bit surprised at how much it really does fluctuate. So like I’ve made as little as $1,700 in a month and I’ve made as much as over $8,000 in a month. So, I really like month-to-month don’t know what’s going to come my way. It can be really lucrative and it can be tight. And in a year also, like, I wouldn’t say I even have an annual salary because I’m so dependent on grad funding, like scholarships that I’m applying to, GRA positions if I’m fortunate enough to get one, teaching assistantships. So even putting like a dollar amount on my annual income is difficult just because like, I really don’t know what I’m going to earn until it happens.

06:18 Emily: Okay. So you have the freelance writing side hustle, but I assume it brings in more than your main hustle, right? Being a graduate student, but it sounds like even that aspect of it is not, it’s not fixed or steady, right? Your income as a graduate student is fluctuating.

06:33 Cara: No, not at all. So like, as I mentioned before, like that about like one and a half to $8,000 range, that can come in freelance, I’ve made like 200 bucks in a month and I’ve also made $3,000 in a month and that’s just doing it like part-time, as I can, as a grad student. I was fortunate enough to get the Ontario Graduate Scholarship for last year, or I guess technically this year, which was $15,000. And then the Canada Graduate Scholarship for next year which is 17 and a half thousand dollars. But those kind of aren’t ideal because they go to tuition first. So like, you’re like, yay, $15K. And then immediately like $8,000 gets taken from you. So that’s not ideal. And then depending on whether or not I get the research assistantships and I get the TA ships, I’m making, the research assistantship’s like one to $2,000 a month. And then the teaching assistantship is about $5,000 a month, but I mean, it’s so variable. And then I got another scholarship for $1500. I don’t know if that’s coming again in the PhD, like they don’t tell you until it happens. And then one other source of income that I’ve recently gotten into is flipping things on Kijiji. So like buying like old wood furniture and sprucing it up. I really enjoy that. But then again, like that’s $0 some months and like $500 next, so.

07:53 Emily: Wow.

07:54 Cara: My finances are tumultuous, to say the least.

07:58 Emily: Yeah. That’s definitely, that’s a great word to describe it. Is at least the freelance writing, like anti-correlated with your graduate student income? Like, are you able to, if you know, you have slow months coming up for like scholarship-wise you can ramp it up, or is it also just not really under your control? Just like whatever work comes your way.

08:17 Cara: So right now I’m fortunate that I have clients that just show up in my inbox and they’re like, “Hey, I need something from you.” Just because I’ve been working with them for a long time. So that part, I don’t have much control over, but if I do have a slow month, I can go to my platforms and like apply to things and likely get jobs. So I have a lot of peace of mind from that, that like, no matter what happens, like let’s say I don’t get a scholarship next year or whatnot. Like I can still rely on that and I will be able to support myself.

Balance Sheet: Savings and Investments

08:48 Emily: Yeah. I feel like this could be a whole podcast interview in itself just on the freelance writing, which is really exciting. But also on dealing with the irregular income aspect of it. However, this is not the subject that we propose to talk about today. So I am curious though, I asked about your balance sheet. So like are you in debt for example, or how much of your assets are devoted to maybe cash savings to help you buffer these irregular months? And how much do you actually have working for you in terms of investments?

09:17 Cara: Yeah, so right now in my bank I have about $7,000 and I like to keep it normally around like three to 4,000. So I’m looking for something to do with that extra cash, just because I had a busy freelance month. In terms of debt, I am very lucky that I don’t have any. So in my undergrad, I was so lucky that my parents would pay my rent and all I had to do is worry about like tuition, books, and food. So that kept me out of debt for sure. And now getting the scholarships, like I’m able to pay off the tuition right away, because that would be my biggest expense. So, and then my partner and I just paid off his car that I now use. So I helped with like the remaining payments. That’s gone.

09:58 Cara: So I really don’t have any debt. In terms of credit cards, like I use one as a debit card. I heard that’s good for your credit score. So I do that. But I pay that off like every two weeks so that I don’t really consider that a debt. And then in terms of investments, I’m pretty busy in that front. So I have a TFSA that I’m able to use. I forget their official title, they’re a professional investment manager. And I maxed out my TFSA, which was good, which is about, I gave them like $34,000 at the beginning of the year and now it’s become $36,000. So that was exciting for me, that was like my first foray into investing and it worked out. But that’s a long-term hold. Like I’m not going to touch that money like in my mind ever. It’s just going to be there forever until I really need it.

10:46 Cara: I opened an RRSP which was fun. I’m doing that through Wealthsimple. That’s where I do my like traditional investing. And I’ve managed to make a couple hundred dollars on that as well. It’s sitting at about like $5,000, I think. And then I also have a personal account. So before I opened the RRSP, I was dabbling in Wealthsimple. And that’s just like, like I will get taxed on it, which is the sad part for me, but that’s okay. And that’s where I’m holding my meme stocks, which was not smart on my part. So like, let’s say those do really take off, then I’ll be paying the price for that, but that’s okay. I believe in taxes. It’s fine. And then I have a couple of different crypto wallets where I hold things.

11:31 Cara: So I’ve got like $4,000 in cryptos, I’d say. And so I really liked Celsius. So Celsius is a wallet where you can hold your cryptos, but you also earn interest on those cryptos. So like I’m buying tokens that I would hold anyways, but I’m earning like up to 14% interest on those year over year. So that’s been fun for me as well. And then just holding in various wallets, like my long-term things that like, I’m hoping in five years we’ll be up enough that I can cash out and make a profit.

12:02 Emily: Yeah. So, it definitely sounds like you’re not all in on any one thing, right? You have a variety of different strategies and places going on for our American listeners. I think the RRSP and TFSA equivalents would be like our IRAs or other tax-advantaged types of, you know, supposed to be for retirement type accounts. Versus just holding things in like a taxable brokerage account, which you also have. Yes. Wonderful. So yeah, you, you only started in January, but it sounds like you had a fast start because you had savings to devote to it already, right?

12:34 Cara: Yes. Absolutely. So like I worked through high school and I didn’t spend a dime and that’s why I was able to have that cushion. And it was just sitting in my cash account and I kept thinking like, I should do something, even if it’s only 5% interest like that matters for inflation and whatnot. So I was able to have a nice little nest egg to devote.

Strategies and Mindset for Building Savings

12:51 Emily: Yeah. So let’s talk for a moment. Were there any other strategies that you use to build up the savings that you were then able to invest and also your current level of savings? So you’ve already mentioned the freelance writing career, of course, finding funding as a graduate student. Anything else that you practice or related to your mindset that helped you build up the savings?

13:09 Cara: Absolutely. I track everything. I’ve been tracking everything since I was in high school. I have like my own Excel sheet where I put in all of my expenses every month. Like absolutely everything. And that’s helped keep me accountable a lot. So like I was exploring those food kits that will get delivered to your door, but they end up being so expensive. So I was looking at my grocery bill, and as soon as it hit over like $300 a month, I was like, nah, I can’t do that. Like I’d much rather put the money towards something else. So I’ve definitely dialed back on that. But if I wasn’t tracking like that, I wouldn’t see these things that crop up. And like, I find you forget in a month what you’ve actually spent things on. So like, I have a puppy and I would love to spend all my money on her. And like, I’ve noticed that, okay, you’ve already spent this much on her. Like maybe you can pass on that special thing for her this month and then get it the next month just to keep a more consistent level of expenses. So I’d say that’s been the biggest thing for me was keeping myself very much accountable in terms of what I am spending and relative to the income coming in that month.

14:18 Emily: Yeah. It sounds like, I mean, that tracking is not at all passive for you. You’re really looking at the data and then making different decisions based on what you’re seeing. So I absolutely love to hear that.

Progression to Crypto/Meme Stocks

14:29 Emily: Okay. So I think you mentioned earlier that you just started with investing in this past January, so like five months ago. And you started with a bang because you had the cash savings to put towards some different things. Of the different investments that you mentioned, was the more like classic type of investing the first thing that you did, or did you start out on these like crypto/meme stocks more? How did that progress?

14:54 Cara: So I started for sure with the TFSA. I had already put a little bit of money in there, like maybe under $10K, but I didn’t really know how to use it. That’s not very clear. So I wanted to max it out. I may as well while I can. And so that’s when I connected with the investment advisor and they were able to actually invest in different stock portfolios for me. And then I was just watching the number for like a few months and I was like, “Meh, like this isn’t doing what I would like. Like I’m young, I can take on some risks.” And I feel really comfortable with the amount that I have in that right now. So why not? Let’s do something more fun in the future and where there’s more risk, but the reward is higher and I can be more engaged with it. Because with the TFSA like, you don’t really touch it unless you need to move around your portfolio, which my advisor would do, and I wouldn’t. So I wanted something more hands-on because I do find it fun. So that’s where I got into the meme stocks and the cryptos

Getting into Meme Stocks

15:56 Emily: Let’s start with meme stocks because that’s been like the newer story. Crypto has been an exciting ride for a number of years now. So with meme stocks, you said you started in January. And when you volunteered to be on the podcast, that was in March, we’re now getting around to actually recording this interview in June. So I know there’s been some developments over that time as well. So, yeah, just tell me like what your experience was through those through these last few months.

16:19 Cara: It has been a wild ride. So I started in January. I got in on the floor of GME at like 40 bucks based on something I read on Reddit. I’ve been a part of that community ever since, but moving around there were problems in the WallStreetBets community, which I guess that happens when there’s money involved. So I’m in another one that’s like a little more secure and they call them like shills. So less people trying to sway your opinion and more of like, here’s the data look at the data, which is fun.

16:52 Emily: Is that also on Reddit?

16:53 Cara: Yeah. So a lot of how I’m involved in the meme stocks. So, I’m in on GME and AMC. Since January I’ve been holding, like they went like way up. I don’t know if you heard around like it was around my birthday and like the end of January, they just went way up and then Robinhood blocked buying. And that was like a massive thing. I was so upset because that just basically like, like cut off the feet of the short squeeze, and I’ve been holding ever since because I’m like, just because they turned off buying doesn’t mean that the short interest is any less. That doesn’t mean that they don’t have to cover. So I’ve been holding since, and then actually this week there has been like crazy developments once again. So AMC really shot up yesterday, like 99%.

17:40 Cara: They’re struggling today, but I have confidence. There’s big meetings coming up. But that actually reminds me, so like we call them meme stocks, and that’s what everybody knows them as, but AMC and GME, the reason why they’re actually successful is because there’s a lot of data behind what we’re doing. And I probably shouldn’t say we, because that sounds like a lawsuit waiting to happen, but based on the data that’s available in the short interest in knowing that anyone who shorted the stock does need to cover, but if we’re all buying and holding these stocks and so many people, so many retail investors do, there’s nothing to buy up. And so when you have that much demand and that little availability that creates a short squeeze and then boom, off we go to the moon. And then I cash out. But I’ve been waiting five, six months for that and it looks like it’s on the horizon again. So we’ll see. We’ll see, stay tuned.

18:35 Emily: Yeah. Well, I would like to hear about the future. So like for you personally, do you have a plan for when you’re going to exit this position or partially exit it?

18:44 Cara: Certainly. I don’t have a dollar amount, but I do want to see indicators. Like yes, we are indeed in the short squeeze. Like, a short squeeze does not happen in a day, and it doesn’t shoot up a stock by a hundred percent. Like, it’s pretty exponential in terms of how that works. In considering who’s involved in shorting the stock, and like basically when you short a stock, like you’re betting that the company is going to go under, go bankrupt, et cetera. I’m not a huge fan of Wall Street and how they’re playing this. Like, there are a lot of shady things going on. So like, even if it goes to like a thousand dollars a share, I’m not selling. Like that’s not worth it for me. I would really like to stick it to the people who are manipulating the economy and running these like innocent businesses under. So in that regard, I need to see that the short squeeze is happening. I need to see that Wall Street is scrambling to cover everything. And then I’ll probably hold on a little longer and then sell on the way down. Because I don’t want to miss the peak.

Commercial

19:52 Emily: Emily here for a brief interlude. If you are a fan of this podcast, I invite you to check out the Personal Finance for PhDs Community at PFforPhDs.community. The community is for PhDs and people pursuing PhDs who want to take charge of their personal finances by opening and funding an IRA, starting to budget, aggressively paying off debt, financially navigating a life or career transition, maximizing the income from a side hustle, preparing an accurate tax return, and much more. Inside the community, you’ll have access to a library of financial education products, including my recent set of Wealthy PhD Workshops. There is also a discussion forum, monthly live calls with me, and progress journaling for financial goals. Our next live discussion and Q&A call is on Wednesday, October 20th, 2021. Basically, the community exists to help you reach your financial goals, whatever they are. Go to pfforphds.community to find out more. I can’t wait to help propel you to financial success! Now back to the interview.

Initial Amount of Money Invested in Meme Stocks

21:04 Emily: So when we started talking about your portfolio overall, you mentioned, you know, certain dollar amounts, 30 some thousand that you put towards this and that or the other. You can share whatever you want of this, but I’m wondering how much money you initially invested in these two stocks? Because I want to get an idea of like how big this was. It’s probably big in your world now, but how big was it at the beginning?

21:28 Cara: I’ve been like gung-ho since the beginning, but I also did not trust like the information I was getting totally. Because like I found this on Reddit. Like let’s not go too far here. So let’s see. I think I wrote down what I put in. Did I, did I not? Okay. I think I put $750 in AMC and I’ve got like a $2,500 return now. It’s still not worth it for me. The squeeze hasn’t happened. And then I think GME, I did maybe about 1400, $1,500. So, like that is a lot of money, but for me, like relative to like the TFSA I have to fall back on, like it’s not a big deal for me. If I lose that, I can recoup it based on my freelance. And like the risk for me isn’t, I don’t find it that high. I do believe that like these companies will go up, so I’m not worried about that. And I got in while the floor was still low. Like if you’re buying in now and it’s like 250 bucks and you want to buy a lot of shares, it’s going to be a lot more money for you. So I would hesitate then, maybe. But yeah, I’d certainly put about like 2,500 in total, under $3,000. And just to see like where it took me.

22:46 Emily: I feel like that amount of money is a lot of money, like in a grad student world. We’re talking about, you know, one month stipend, maybe a little bit more, a bit less. That’s a lot of money. But for you, because you had these other sources of income, you had, you know, the good savings going on. As part of your overall portfolio, it wasn’t a big percentage. And that’s something that I, so I’m kind of a dyed in the wool, like passive investor. And so, the advice that I hear from other people who promote passive investing is like, okay, sure. Like if you want to, you know, get into these like exciting trends and be part of it. And like you were saying, maybe you want to make a statement with your money about the policies of Wall Street and so forth, do it, but do it with an amount of money that you can afford to lose that’s not going to hurt you, right? It’s not going to make you lose sleep at night or anything like that. So it sounds like that’s actually what you did. And so it’s been an exciting part of your portfolio, but it’s not anywhere near the majority of your portfolio.

23:43 Cara: No, no. And that would give me stress. To lose it all would hurt my pride and that’s fine, but like, I wouldn’t be putting myself in any danger whatsoever. Like I would be perfectly able to like continue living my life and to recoup that. And like, I would never bet my life savings. I know some people do. It’s all or nothing, but I’m too risk adverse for that. Like, I do have a tolerance, so yeah. I wouldn’t recommend that. This has worked out for me just fine so far. And I’m very comfortable with what I’ve invested and where I’m at.

Time and Energy Spent on Meme Stocks

24:19 Emily: So I think what you said was that you took this initial position in January, and you’ve been holding it since then. So I am wondering about the amount of like attention you’re giving to this, given that you haven’t actually changed anything about your position. At some point you will sell, we think but yeah, like how big is this in terms of your time and your energy?

24:41 Cara: I absolutely adore it. Like I’m checking on it every day. I will take a break if it’s like been a slow week or whatever. I’m like, man nothing’s changed. But like this past week now that things have been going up again and looking promising, like there’s a big shareholders meeting coming up, we’re going to hear Q1 earnings, all of that stuff. I’m like, oh, okay. Let me just keep up with this again. So I will say that I do spend a lot of time. I like reading the DD, the due diligence, on all the forums and just keeping up with what everyone else is talking about. And I’m not sure that I would be devoting the same attention or would be this invested if we weren’t in a pandemic where this is like one of my only hobbies that I can still access. So it’s been nice to belong to a community virtually and you kind of explore this together. So I would say I do devote a good chunk of time to it, but like I see it as just like a fun hobby that I’m doing. I don’t see it as an obligation because, “Oh my God, I’m a shareholder now. And I’m worried about my portfolio,” and all that. That’s not the case.

25:50 Emily: Yeah. It sounds like you’re going about this in a really healthy manner. So I’m really happy to hear that. Anything else you want to add about meme stocks before we talk about crypto?

26:02 Cara: I will say if you’re thinking about going into meme stocks, just be careful now on the forums. Now that we’ve had our moment of glory, there’s a lot of people out there with I would say like nefarious intentions. Like as soon as we had that day where GME hit $450 at the end of January, all of a sudden all of the ads, all of the new accounts that were made and they were all shilling silver, and everyone’s like, who’s investing in silver? Like there’s no, no one’s shorting silver. What’s going on? And a lot of people lost a lot of money on that because it was basically a pump and dump to distract attention from what was happening with GME. And that’s still happening now, especially right now as we’re chatting because we’ve had such a wild week. So do your research. Just because it’s a meme stock, that doesn’t mean that there shouldn’t be some kind of data behind it. Like for example, AMC and GME are based on potential for short squeeze and that’s a proven concept. It happened with Volkswagen way back. So still do your research. Don’t just do it because the internet says to do it.

27:10 Emily: Yeah, that’s great. Well, I think you’re speaking to a receptive audience in that respect of PhDs and PhDs to be.

Experience with Cryptos

27:16 Emily: Okay. Let’s turn the attention to crypto, then. You also started investing at that time. Tell us about your position and what your experience has been.

27:23 Cara: Yeah. So in cryptos, it’s also kind of like the meme stocks where I’m not putting a ton of money in it. I’ve got maybe like $4,000 in there. And I like to just like keep sifting through things and changing out my positions and whatnot. My long-term holds are Nano and anything that I have in Celsius, so that would be MATIC, Ripple, and the Celsius token. And that’s just because I believe that they will continue to go up over time. And I don’t feel the need to like work around the increases and decreases that happen and the fluctuations on like a daily, weekly basis. I’m not in Bitcoin or Ethereum. I’m not a fan of the gas fees. I think that’s ridiculous. That’s why I’m such a big fan of Nano because it’s instant, it’s feeless, it’s green. And so that’s why I think like that will certainly be a strong contender in the future of crypto.

28:19 Cara: I am invested into, I guess, meme cryptos. When I heard that Elon Musk was going on SNL, I got into Dogecoin because I’m like, definitely the exposure is going to drive it up. So I got in like maybe 27 cents or something, and I got to exit about 50 or 60 cents. So that was like a tidy little return and I cleansed my hands and that was good. And then I bought in again, actually once it went back down after just because I don’t know what’s going on with Elon Musk, but like he loves it and he won’t stop talking about it and he wants to integrate it into everything. So I’m like, okay, if you’re going to have anyone behind a crypto that’s going to be actually used daily and whatnot and at least grow as an investment, then I might as well just hold like a couple hundred Dogecoin and see what happens.

29:13 Cara: And then I also invested in, I guess, a Dogecoin copy cat called Shiba Inu. It’s like, you know, like the sheep dog meme. Yeah. So it’s that. Definitely my most irresponsible investment, but it’s like fractions and fractions and fractions of a cent. So I’m like, I just put like a hundred dollars and this thing goes to 1 cent. Like that’s a good return. And I’m happy to just, like, I would spend a hundred dollars on like, I don’t know, maybe like a nice weekend with friends doing something. So I’m like, I might as well just tuck that away. I have nothing else to do right now. We’re locked down. And let’s just check on it in like 10 years and let’s see what happens. I’m happy to wait. So that’s where I’m at.

29:56 Emily: I really like to hear these distinctions that you’re making between what you’re holding long-term, what you are buying because of instincts about where a particular different coin is heading, and then also that last point that you just made about, you’re really explicitly calling that entertainment at that point. Like I could spend 100 dollars on going out. Well, okay. That’s not available to me right now. Okay. A hundred dollars in this position. We’ll just like, it’s money spent. It’s gone. It’s not even like, you’re barely even thinking about it as an investment anymore at that point. Just like you sunk some money to something you’re having a good experience with it. And it doesn’t really matter what the outcome is, right? So I like to hear those distinctions. How are you, like, what are your sources when you’re doing research on these different cryptos?

30:43 Cara: I just think about what I would like as a consumer and someone who would like to use crypto in the future just to make transactions and make everything easier. So that’s, again, why Nano appealed to me. I wanted something that’s instant, like waiting 30 minutes for Bitcoin is ridiculous. And to think that you can pay like really ridiculous amounts of fees as well. Like sometimes I buy things on Binance, like coins and then I go to transfer them out to hold them in a secure wallet and it’s like paying 40 to $80 in fees. And I just don’t think that’s right. I don’t think that makes any sense at all. And then also seeing photos of these massive mining rigs that they have all over the world that are just chugging away, killing the planet. I’m like, as a currency of the future, that doesn’t make sense either. So I do believe the ones that have the most potential for adoption are ones that are green, that are as fast as a normal transaction, and that don’t carry those massive fees. Like nobody wants to pay more money just to use money. That doesn’t make any sense to me. So my long-term holds are ones that support that for the most part.

Resources to Learn About Cryptos

31:55 Emily: Yeah. I understand. I like your thought process on that. I’m actually wondering more, like, how do you find out about Nano, for example, like how did you think about yourself as a consumer and then match that with, oh, this point reflects what I would like?

32:09 Cara: Great. Like a couple of my friends are into it, so sometimes they’ll introduce coins to me and I’ll chat about that with them. I’m involved in a lot of crypto Reddit forums where I read up on new stuff coming out or updates and whatnot. I also, I just go on CoinMarketCap and I see like, who are the gainers? Who are the losers? Why’s that happening? Because they have like a really handy, like, you’ll see like the price action and all that. But if you scroll down, they’ll give you like a two-paragraph succinct explanation of what this coin is and what it’s hoping to achieve. And then normally like there’s blog posts about that coin that I’ll look at if I’m interested that list the pros and cons. And as soon as I see something like gas fees, I’m like, Hmm, Nope. Or long transaction times. Nope. I’m out. So that’s how I would say I find my responsible investments. My irresponsible investments are things that you hear other people talking about, like Dogecoin, where it’s just like a public movement where everyone’s like Dogecoin. That’s so funny. Let me buy some and then you go up and then you can sell. So I would hear about those ones from other people in like online, I guess, conversations. So it depends, I would say.

How Much Attention Are You Giving to Your Cryptos?

33:24 Emily: Yeah. So a similar question to when we were talking about the meme stocks, but like, how much attention are you giving to your crypto positions?

33:32 Cara: I check on Nano every day, because that’s my baby and I love Nano. So I will check on that constantly. I get really excited when there is price action and I obviously have the opposite reaction when it goes down. So I check on Nano every day. As for my other ones, like, I’ll take a look at them. I just like take a gander, like my Celsius wallet I’ll check on to make sure that I got my weekly interest as promised. And then I leave that alone. In terms of Dogecoin and Shiba. Like, I don’t want to hear about those for 10 years and then I will cash out. So, I would say really Nano is the only one that like I’m investing considerable time in. Like I’m in all the forums. I’m keeping up. Like we just had a new version update come out. Because there was like a massive spam attack that was clogging up the network. And obviously that needs to be solved to facilitate like massive adoption. So developers were great and they fixed it. And so like, I wanted to know everything that was going on with that, but I do not get that in depth with like any other crypto because I found my one and I’m sticking to it.

34:38 Emily: Okay. Got it. Yeah. We’ve gotten some, you know, great insights and great advice from this conversation so far. Is there anything else that you want to add about what you’ve learned about investing in meme stocks and or crypto? I’d love to especially hear a little bit more about the psychology of it. If you have any advice for someone who’s thinking about getting into this or who’s already in, but is wondering, what do I do now? I’m already in, now what?

To Do Cryptos, Or Not To Do Cryptos

35:01 Cara: If you’re a really impulsive person, I don’t think that you should do cryptos because you can go to bed at night and you’ll be up like 20% that day. And you’ll wake up in the morning and you’re down 25%. And there’s usually no clear reason as to why that happened. So if you’re the kind of person who’s going to panic and say, oh my God, I just lost a quarter of my investment. My life is over blah, blah, blah. Don’t do it to yourself. Like you will be so stressed. But if you’re a person who is more like me and like you’re happy to buy something and then leave it alone, like indefinitely until you want to use that money or just to see where you’re at out of interest, not out of like obligation and stress, then absolutely go for it.

35:42 Cara: That sounds fine for you. But I would worry if you’re an impulsive person that you’re going to buy high and sell low just constantly and just absolutely wreck your finances. And cause yourself a lot of stress that you don’t need. Like this is supposed to be fun. People aren’t taking most cryptos very seriously. You get kind of a mix with meme stocks, but even still, like I bought in at GME at $40, I held up to $450, and we went all the way back down to like 50, 60 bucks. And it’s been five months where I’ve been sitting here checking it every day to be like, what’s going on? What’s causing this price action? And if that doesn’t sound like fun to you, and I know it doesn’t to some people, just don’t do it. Like you don’t have to do it just because everyone else is, it doesn’t make any sense for you and you won’t enjoy it. And that’s the whole point I would say.

Best Financial Advice for Another Early-Career PhD

36:33 Emily: Great advice. Thank you. And I think I would add onto that, the reason YOU can have that attitude about this is because it’s not a significant part of your portfolio. You’re not drawing any income from this. You have other sources of income that are coming in. Your whole life is not riding on, you know, the performance of these particular investments, right? You have this in balance with a lot of other things. So like, you CAN sleep well at night because you’re not depending on this. So a very, very important point to add on there. Well Cara, thank you so much for this interview. I really enjoyed speaking with you and learning about your experience with meme stocks and crypto. As we sign off, I just want to ask you the same question I ask of all my guests, which is what is your best financial advice for another early-career PhD?

37:15 Cara: Advice in terms of meme stocks and crypto?

37:18 Emily: It could be related to that, or it could be completely something else.

37:22 Cara: I would say, just buy pretty much anything and just hold it. Just hold it and like, forget the password and have a reminder on your phone in five years with that password. Like do not touch your investments unless you know how to day trade. And I don’t think anyone really knows how to day trade consistently. Like it’s very, very hard to achieve. And it’s more dependent on the market than you and most times. So if you buy and you hold, you will be okay. But obviously to do that, make sure that you’re putting in money that you don’t need for five years and you won’t feel tempted to touch it all. So whether that’s like 20 bucks or a couple thousand, whatever that means for you do it and just forget about it. And then it’ll be there and ready for you hopefully in several multiples for you in a few years.

38:11 Emily: Sounds wonderful. Thank you so much, Cara. This was a great conversation. Thank you so much for volunteering.

38:16 Cara: No, thanks for having me. I had a lot of fun. It’s nice to discuss these things outside of my Reddit communities. I really appreciate it.

Outtro

38:30 Emily: Listeners, thank you for joining me for this episode! PFforPhDs.com/podcast/ is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episodes’ show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast. I’d love for you to check it out and get more involved! If you’ve been enjoying the podcast, here are 4 ways you can help it grow: 1. Subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. 2. Share an episode you found particularly valuable on social media, with a email list-serv, or as a link from your website. 3. Recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and effective budgeting. I also license pre-recorded workshops on taxes. 4. Subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Lourdes Bobbio and show notes creation by Meryem Ok.

This Grad Student Eliminated Her Housing Expense to Pay Off Her Student Loans

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In this episode, Emily interviews Dr. Erika Moore Taylor, an assistant professor at the University of Florida and the founder of Moore Wealth. When Erika started her PhD at Duke, she had $65,000 of student loan debt, which she committed to paying off before her graduation. One of the strategies she used that made the biggest impact was to serve as a resident advisor, thereby eliminating her housing expense. Erika shares how her money mindset fueled her motivation to achieve her debt repayment goal and how she is now pursuing FIRE.

Links Mentioned in the Episode

Eliminate housing expense to pay off student loans

Teaser

00:00 Erika: I did factor in cost of living. So being the poor broke graduate student is a trope that we’re all familiar with, but I think some areas lend to that trope more strongly than others.

Introduction

00:16 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts. This is season 10, episode eight, and today my guest is Dr. Erika Moore Taylor, an assistant professor at the University of Florida and the founder of Moore Wealth. When Erika started her PhD at Duke, she had $65,000 of student loan debt, which she committed to paying off before her graduation. One of the strategies she used that made the biggest impact was to serve as a resident advisor, thereby eliminating her housing expense. Erika shares how her money mindset fueled her motivation to achieve her debt repayment goal and how she’s now pursuing financial independence and early retirement. If you want to be inspired to set an audacious financial goal and also plot your path to achieve that goal, I highly recommend joining the Personal Finance for PhDs Community at PFforPhds.community.

01:14 Emily: There are numerous courses, webinars, recordings, and eBooks to help you figure out what financial goal to pursue right now, for example, repaying student loans versus investing, and how to go about it. Just to take some examples that relate to today’s subject: I recently recorded a set of four workshops for the Community, two of which are titled, “Whether and How to Pay Off Debt as an Early Career PhD,” and, “How to Uplevel your Cashflow as an Early Career PhD.” These workshops teach frameworks and strategies for pursuing goals, like the ones Erika set during grad school, and actually can guide you for years and decades post-PhD as well. Best of all is the community aspect of the Community. There’s a forum available 24/7 to which you can post your questions and prompts, and I host a monthly live call for discussion and Q&A. We’ve spent a lot of our live call time in recent months, discussing homeownership, investing, and career and life transitions. But of course, any financial topic is welcome. To learn more about the excellent content and other opportunities available inside the Community, go to P F F O R P H D S.Community. I hope to see you in our October live call. Without further ado, here’s my interview with Dr. Erikca Moore Taylor.

Will You Please Introduce Yourself Further?

02:39 Emily: I am absolutely thrilled to have joining me on the podcast today, Dr. Erika Moore Taylor. She is actually an assistant professor at the University of Florida, and she finished her PhD in 2018 from none other than the Department of Biomedical Engineering at Duke University, which is the same department that I graduated from four years earlier. So we did overlap I think a little bit, but Erika is joining us today to tell us an incredible debt repayment story from her time in graduate school, as well as giving us some updates on what she’s been up to since she defended. So Erika, it’s a real pleasure to have you on. Welcome! And will you please tell the audience a little bit more about yourself?

03:17 Erika: Yes, thank you so much for having me Emily, or should I say, Dr. Roberts? It’s nice that we have that connection from Duke. And as you said, after I left Duke, actually before I got to Duke, I started thinking about finances and basically use my time at Duke to understand and learn my own personal finance mindset as well as what I wanted my journey to look like. And since then, I’ve been fortunate enough to start my position at the University of Florida, but also start a company focused on personal finance and financial literacy. So I think that’s all I want the audience to know about me so far.

Financial Mindset at the Start of Grad School

03:56 Emily: That is awesome. We’re going to talk so much more about that. So let’s take it back, rewind to when you were getting out of undergrad and starting graduate school. What was your financial mindset like at the time, and what did your finances look like at that time?

04:09 Erika: Yeah, so taking it all the way back to I think it was 2012, this was the year before I started graduate school and I was fortunate enough to do an internship in Boston. And I was kind of bored during the internship, and so I took up personal finance. I started reading books about personal finance because I realized that if I graduated on time from my undergraduate institution, I’d be graduating with $65,000 worth of debt. So in 2013, when I started my graduate program at Duke, I had the mindset of being shackled and weighed down with debt. I was very concerned about debt because I knew that no matter what I did after graduate school, that debt would follow me. It would be with me like a shadow that I couldn’t shake. And so it scared me because I felt like I had done the right moves in graduating and surviving undergraduate and getting into grad school, but I hadn’t made the right financial moves. So my mindset was scarcity.

05:11 Emily: It’s so interesting to me that that student loans, in particular, provoked that scarcity mindset. By the way, did you have any other debt at that time? Aside from the student loans?

05:20 Erika: I didn’t, but when I first started grad school, I bought a car for about 13 or $14,000. So then that added to my debt. So the fear amplified.

05:31 Emily: I think that some people have, I don’t necessarily want to say, like, they feel casually about their student loan debt, but especially when you’re going straight from undergrad into grad school, like you never entered repayment. So maybe the pain of the student loan repayment was not upon you logistically, although it was still there like psychologically. And so some other people I think are just a little bit more, maybe dismissive. And I’m talking about myself. I was very dismissive about the student loan debt that I had from undergrad. It was less than yours, but I was just like, “Oh, it’s subsidized. I’m going to grad school. It’ll still be deferred. No big deal.” Yes, I did know on the other side of graduate school that I would have to pay it off. But it did not bother me psychologically. So why do you think you had the view that you did instead of just feeling a little bit more comfortable with it?

06:18 Erika: Yeah. I think I had the view that I did because I knew I would have to get a job afterwards. And before I entered grad school, I had a job at a daycare working about $7 or $8 an hour. And I had never seen $65,000 in my bank account. I had never seen $65,000 in a job that I could work. And so the fact that I had that much debt was alarming to me, like you said, psychologically, because I had never secured a job that earned that much. And so I, again, was operating in scarcity saying like, “Well, if I have this much debt, I need to pay it off because, you know, I don’t know if I will be able to pay it off.” I didn’t know, you know, how much money I’d make in a job setting in using my degree. And so I was just motivated by that number by the sticker shock, I think price of my undergraduate degree, that really motivated me to pay it off.

Savings and Stipends

07:18 Emily: So starting in grad school, can you share with us did you have any savings or any kind of assets at that time, and also what was your stipend when you started?

07:26 Erika: Yeah, so starting in graduate school, my net worth was I think about negative $60,000. So I had $65,000 worth of debt. And then I had saved around maybe six or $7,000. I saved that money because I knew I would need to put a down payment on my car that I would need to buy in North Carolina, it’s not really public transportation friendly. So I knew that I needed a car as a vehicle. And then I saved a couple of other thousand dollars for a down payment on securing the place that I was going to rent. So first and last month’s rent as well as, you know, a security deposit. So I had, you know, maybe six or $7,000 in my checking account. I was fortunate enough to secure the National Science Graduate Research Fellowship, [GRFP]. And that set my stipend, I think at the time around $32,000 a year.

08:20 Emily: Yeah. Fantastic. And three years of guaranteed funding. That’s awesome. And so actually I want to rewind for a second because having won the NSF GRFP, you, I would imagine, had your selection of graduate programs. So why Duke instead of a different program?

Factoring in Cost of Living

08:40 Erika: Yeah, that’s an excellent question. And you’re right, securing the NSF GRFP, you’re kind of hot on the market, so to speak. So lots of schools will take you even if you didn’t even apply to the school. Thankfully I had already been encouraged to consider Duke because of my graduate research advisor who had just recently moved there. But specifically when I was making my list and considering what schools or programs I would attend, I did factor in cost of living. So being the poor broke graduate student is a trope that we’re all familiar with, but I think some areas lend to that trope more strongly than others. So I kind of eliminated going to Boston or going to San Francisco, even going to San Diego, where there are very strong biomedical engineering programs, but where the cost of living would make it extremely challenging to live independent of my stipend.

09:33 Erika: Additionally, I eliminated any program that had to add on top of the NSF GRFP to meet the standard of living. So that’s something that I don’t think a lot of people know. The NSF GRFP is already above the average stipend in most cases, but in some schools or programs where the cost of living is so high, they have to add on top of that. And so I was like, that means that even if I’m making above average, that’s still not enough to cover the cost of living in this area. So I eliminated those, which is how I landed at Duke.

10:07 Emily: I’m really glad you brought that up. I was thinking, you know, maybe you’re looking at, you know, $32K everywhere and then, oh, wow. It’s an easy choice to go to Durham over, you know, Boston or San Francisco or something. But even knowing that you were going to get a supplement above that, that’s really great that you consider that as well, because you’re right. Like if you look at the median cost of living in Durham, I’m pretty sure for a single person it’s still below $32K, or even below $30K, maybe at this point, I haven’t looked at the data super recently, but I know that when I was there, I did look at the living wage database from MIT. I think when I started at Duke, my stipend was $24,000, because I was getting the base stipend from the department, but I believe the living wage was something like 18, $19,000.

10:45 Emily: And so it was well above that number for a single person. That is not the situation when you go to these more high cost of living cities, but also just graduate programs that don’t pay super well. Duke pays fine for its base stipend as far as I’m aware. Okay. So I’m glad we, you know, we’re seeing how intentional you are when you are going into the selection of graduate school. Now we’re going to go back to where you are, you know, you’re entering graduate school. You have the student loan debt kind of hanging above you and you’ve talked about, you know, what motivated you. What was the exact goal that you set regarding your student loans? Did you want to pay them off entirely? Did you want to pay them off partially? Did you want to be doing retirement savings? Like what was your financial goal at that time?

Student Loan Goals

11:25 Erika: This is a great question, Emily, and I love this because it does break down where my mind was. So I had two buckets of student loans, the first were my own personal federally secured student loans, the second bucket were parent plus secured federal loans. And my parents made it very clear that I was expected to pay back both of those. So they were not going to pay back the parent plus loans. I was expected to cover both of them. The parent plus loan was in essence, a loan that they gave me through the federal government. And so my strategy initially was just to pay off the parent plus loans because I said, if I can lower the debt that I owe my parents or the federal government through my parents, then I’ll be in a much better shape. Additionally, those were the largest loans that I had. So I think I had one that was $20,000 and one that was about $25,000 in parent plus loans. My own personal federal loans were much smaller, you know, by comparison. So I said, it’d be great if, while I was in grad school, I could just pay those off. That was stage one.

12:31 Emily: Yeah. And so just to gain a little bit more clarity here. So your student loans that were in your name, those were deferred because you were in graduate school. Were they also subsidized? It wasn’t like you only took out the subsidized portion?

12:43 Erika: No, I had subsidized and unsubsidized loans.

12:46 Emily: Okay. So part of it subsidized, part of it’s un-subsidized. And then the parent loans that your parents had, those are not in deferment because they’re not yours, technically. So it’s so interesting. So you sort of considered yourself to be in repayment because your parents were in repayment for that portion of the loans. Do you remember what that minimum, like the minimum payment that they had to make that you were trying to make for them, was when you started?

13:08 Erika: Yeah, so actually, because I am the obsessive person that I am, I made a massive spreadsheet, which is something that I recommend to anyone who’s in debt, right? Making a spreadsheet of every single loan, all of the interest and all of the, you know, what the minimum payment is. So at the time, just for my parent plus loans, not my un-subsidized personalized loans, the payment was around $250 a month. The interest rates were low. So it wasn’t that high of a number.

Reducing Housing Expenses and Increasing Income

13:38 Emily: Okay. So let’s sort of progress in time through graduate school. What did you start doing during graduate school to, because I know you did, how did you increase your income? You’re already on the NSF GRFP, but I know you did even more to increase your income.

13:54 Erika: Yeah. So I was very fortunate to be encouraged to look outside of the box. And so when you look outside of the box, you start thinking about what are the most expensive items in my budget and how can I eliminate or dramatically reduce those? And for most people, the most expensive item is where you live. And so I applied to be a graduate resident at Duke, which is a very awesome program. I highly recommend it if you’re in grad school, look in to see if your university has a graduate resident program, because it allowed me to connect better with the undergraduate community, but most importantly, it allowed me to live for free. And so I applied and was awarded that role. And the first year was very challenging, but I served as a graduate resident for four out of the five years of my PhD. That was one major prong.

14:45 Emily: Yeah. Wow. So you completely eliminated your housing expense. That’s incredible. And I’m actually thinking, did that role play a part in your subsequent faculty applications? Like did that come up at all later on? Was it an asset, I guess, on your CV as it is what I’m asking?

15:00 Erika: Yes. It was an asset on my CV due to my familiarity with the administration and the structure as it relates to undergraduate curriculum and undergraduate engagement. And it also bridged me into serving as the Duke University Graduate and Professional Young Trustee. So it definitely allowed me to keep my hands in many pots at Duke and then it allowed me to leverage those opportunities into a faculty position.

15:32 Emily: Yeah. I love it when I can find something that benefits someone both financially and on the CV, and for future funding applications or, you know, whatever it might be. Did you do anything else on the increasing income side?

15:44 Erika: Yes. So the second prong of my approach was I sort of started serving as a house sitter or pet sitter. So this was a hustle that I was not able to maintain. Just because it took so much bandwidth. I was in lab, you know, a lot of time that I was also serving as a graduate resident, which took when I started out about 20 hours a week. So it was a tremendous time commitment. But I essentially wrote how much of the job was worth. And I wrote it in big letters and I just posted it on my door. And I said, you know, whenever you want to complain, just look at that dollar amount. And then during years two and three, I would house sit for professors for different professionals who were going out of town or who were in transient positions, watching their pets, doing things around their houses. So those are the main ways that I accelerated my debt repayment plan.

16:40 Emily: And you said that you didn’t maintain the house and pet sitting. It was too time intensive. Was that the main reason?

16:45 Erika: Yes. The house and pet sitting, I just found that, you know, in life you’re juggling a few balls and then you throw in the graduate resident ball, and then you throw in the stresses of graduate school and trying to complete your PhD. And then I threw in this other ball of house sitting and pet sitting. So it was just one too many balls and I had to think, what can I let drop? And it honestly wasn’t worth the time commitment always. So I definitely let it drop.

17:08 Emily: Yeah. Very, very strategic.

Commercial

17:13 Emily: Emily here, for a brief interlude. This announcement is for prospective and first-year graduate students. My colleague, Dr. Toyin Alli of The Academic Society, offers a fantastic course just for you called Grad School Prep. The course teaches you Toyin’s four-step grad boss method, which is to uncover grad school secrets, transform your mindset, up-level your productivity, and master time management. I contributed a very comprehensive webinar to the course titled, “Set Yourself Up for Financial Success in Graduate School.” It explores the financial norms of grad school and the financial secrets of grad school. I also give you a plan for what to focus on in your finances each season of the year that you apply to and into your first year of grad school. If this all sounds great to you, please register at theacademicsociety.com/emily for Toyin’s free masterclass on what to expect in your first semester of grad school and the three big mistakes that keep grad students stuck in a cycle of anxiety, overwhelm, and procrastination. You’ll also learn more about how to join Grad School Prep, if you’d like to go a step further. Again, that’s theacademicsociety.com/E M I L Y for my affiliate link for the course. Now, back to our interview.

Anything Else to Control Expenses?

18:40 Emily: Okay. So that’s on the income side. Did you do anything else on the, you know, controlling expenses, decreasing expenses side of the equation?

18:47 Erika: Yes, even though I purchased my car, I paid off my car within the first year that I had the loan. So that was really important to me because at the time that was my highest interest debt. And then I actually didn’t drive that much because I didn’t want to pay for maintenance of the car. So I think I got my oil changed about every 12 to 18 months. And because I drove that infrequently, I would, you know, get a ride with friends or I would just walk to a location or I would take, you know, some of the commuter trains into downtown. Commuter buses, excuse me, into downtown. And so I basically decreased my use of the car. And then also my friends know I’m pretty cheap or frugal as a person. So I ate out a lot, but I strategically ate out. So part of the graduate resident job comes with a food stipend. And so I would have meetings or hang out with friends, but it’d be on campus where I could use my meal points. And then also a part of the role was also facilitating community development. So that meant ordering food. And so I would go to the events because that was part of my job. But if there were leftovers, I would take that food and that would be lunch for the week. So I reduced my food expenses and I reduced my transportation expenses.

Balance Sheet and Loans at the End of Grad School

20:00 Emily: Yeah. I think the taking leftovers home from events is a very classic grad student. I think a lot of people are employing that strategy, but you combined it with the, “Oh no, I have a job that actually pays me to eat on occasion.” Okay. So let’s then jump ahead to the end of graduate school. What was your balance sheet at the time? How did you do against these student loans?

20:21 Erika: Yeah, so by the end of graduate school, I had completely eliminated my student loan debt, my parent plus loans and my personal loans. And I had, I think it was still around six or $7,000 saved.

20:35 Emily: Okay.

20:36 Erika: So positive net worth.

20:38 Emily: Yeah. Complete debt elimination. That’s amazing. Congratulations on achieving that goal. And obviously you, I mean, to pay off $65,000 of debt during graduate school while on a graduate student stipend, it’s just, it’s an amazing, amazing accomplishment. I did, if the listeners are interested and you want motivation for your own debt repayment journey during graduate school, I did actually do an interview back in season one with Dr. Jenni Rinker, who also went to Duke, who also had the NSF GRFP. And she also paid off, I think it was yeah, in the low sixties thousand dollars of student loan debt, while in graduate school. She had a different approach than yours. I think she was like a major, major side hustler, whereas you went this like RA route. They both can work fantastically. So really happy to have that. And actually also from season one, there’s another example of an interview I did with an RA. And he also had amazing benefits associated with his resident advisor position.

Would You Have Done it Again the Same Way?

21:26 Emily: So, okay. I still want to think about you back in 2018 when you defended, you’ve conquered the student loan debt. Would you have done it again the same way?

21:35 Erika: I would do it again the same way, because the skills that I’ve learned through the process of accumulating that debt and then paying it off are now with me today. So I apply them in different ways, but I think showing that I could be disciplined over wh at, at the time, seemed like a massive amount of debt to me has transitioned my discipline in so many different ways. So I’m grateful for the experience. Sometimes you kind of need to be slowed down or you need to learn a lesson. So I look at my student loan debt as the lesson that I needed to learn. And then I just try to apply those skills in many different ways.

22:14 Emily: I feel like, so when I finished my PhD, like literally, like when I passed my defense, like finished my PhD, I had this feeling, a very expansive feeling of, I can do literally anything. I can conquer any mountain, like in front of me. I felt that way a couple of other times in my life. But in the financial arena, I don’t know if I’ve had that. But did you have a moment like that? Like with the last payment that you made, did you feel, you know, you had these insights and so forth. Can you tell us about that?

22:44 Erika: Yeah. When I made the final payment, it was kind of anticlimactic. And maybe this is the scarcity mindset in me, but I have sisters and family members who had been working and contributing to their retirement accounts. I hadn’t done any of that. I was just focused on eliminating debt. And so I was like 27, I think, when I defended. No, 26, when I defended and I was kind of like, okay, now I’m really behind because I don’t have any retirement savings. So it kind of just clicked, you know, gears from debt repayment to retirement savings. And it wasn’t quite as I think, as momentous as I would’ve hoped.

Finances in Marriage

26:07 Emily: Yeah. Is there anything else you want to tell us about like, sort of what your life looks like now, financially?

26:12 Erika: Yes. So I got married, which has been an interesting journey. I think it’s been fun. But I love talking about finances. So I immerse that immediately into my relationship. And my husband actually came into the marriage with student loan debt. So there was a moment of panic where I was like, I don’t want to go back to that. And so we came up with a plan to basically, even though we’re dual income, we only live off of one income, and we attacked his debt. And now we’re just full steam ahead planning for really important things in our lives. And so I’m anti-debt now in a major way. And so we were talking about, oh, maybe in few years, we’ll buy a car. And so I’m like, okay, what’s our savings plan to afford this car? Because I’m not going back into debt.

27:01 Erika: Or we talk about going on trips. So later this summer, we’re going to Hawaii, which we’re really excited about. But we are trying to save and plan for that now. Right? All of the excursions and activities we want to go on, I’m not charging them. I want to have the cash to pay for them. And so that means we have to make sacrifices in other areas, but it’s been really fun, fine tuning. What are our shared, you know, drivers, what do we enjoy spending money on, and what things do we not care about as much? So that’s what we are continually working on now as a couple.

27:34 Emily: Yeah, that sounds amazing. I don’t want to put this in like a light where like, “Oh, it’s a great experience to have a low-income for a long time during graduate school with no hope of increasing it.” It’s not great. It’s not great. The silver lining on that very, very, very dark cloud is that in some situations you can embrace some good habits, maybe develop your mindset and so forth. And it really does sound like what you did. You mentioned the word discipline earlier. So you developed your discipline again over this long debt repayment journey. And again, within, you know, the confined circumstances that you had financially during graduate school. So I think that’s amazing. I certainly also developed really good financial habits during graduate school that have continued. And I’m happy now with a higher income to have them serving me well at this point because it’s really gratifying to have a higher income to work with when you have those good habits in place.

Moore Wealth

28:24 Emily: So you mentioned at the top that you have a company now, Moore Wealth, would you please tell us more about what you do through that?

28:30 Erika: Yeah, so Moore Wealth is kind of my love letter to what I wish I would have done when I was a younger student. And so I think one of the plights of education in the United States is a lack of financial literacy training. Like I made the joke the other day, we learned how to write cursive, but we don’t learn how to budget, which is insane because you don’t need to write cursive in life, but you do need to know how to budget if you’re going to, you know, have command over your finances. And so through Moore Wealth, we have a two-pronged approach to addressing this. Our mission is just empowerment through financial literacy. And so the first prong is our scholarships and fellowships. And so I was really excited because I finally have the income to give my money away to people who I think are deserving.

29:17 Erika: And so we established a nonprofit organization to basically grant scholarships and we had our first cohort that was awarded in February. And so that’s a lifelong dream of mine that we’re doing through Moore Wealth. And then the second prong is financial seminars, mainly targeted to high school students. So before you even get to college, take a step back and figure out what you want your life to look like and how finances are going to play a in that. And that’s what we do. So seminars and scholarships, and that’s the company, that’s the mission of Moore Wealth.

29:49 Emily: That sounds so incredible, amazing that you decided to set that up after having this journey. Tell us more about the scholarships and fellowships. Like who are the kinds of candidates you give them to, and then how does that benefit them? What do they get to do with it?

30:02 Erika: Yeah, great question. So right now we had our inaugural class that was awarded in February. And so we solicit proposals and we solicited proposals from over 50 universities. It was actually a tremendous response. That was kind of unexpected for this first year. And we awarded them to anyone who was entering into or completing a degree granting program. So we are specific in that terminology because we consider certificates and trade school or nontraditional routes of access also really important. And so it’s a very inclusive scholarship at this point. There was a Google form that’s on our webpage where people had to respond to a series of short answer questions. And then we had a blinded review that basically scored the essays based on the rubric that was established by the scholarship committee. Those were the only requirements or prerequisites for entering into the scholarship. We did have a GPA minimum of a 3.00 on a 4.0 scale. But other than that, there were no limits in terms of if the person was in graduate school, if the person was entering high school, if the person was completing their plumbing certificate, or anything else like that, we wanted to be as inclusive as possible.

31:24 Emily: And is it a grant that they then do work with, or is it just completely goes into your pocket? You can do whatever you want with it?

31:32 Erika: Yes. At this stage we awarded each of the recipients, they did have to send a follow up about how they’re going to try to implement financial literacy skills that they learned in their reflection essays into their life. And what we’re hoping to do in the future as this builds out is actually have small courses for them and potentially get them up to date with their financial literacy skills. And yeah, so currently they’ve gotten their money and they’ve reflected on financial literacy concepts. But to date, that’s it for that first cohort. So we’re looking to add additional responses and interactions with them in the future.

Best Advice for An Early-Career PhD

32:11 Emily: Incredible, wonderful. We can easily tell the passion that you have for this material in your voice. I’m so excited that you’re in the space as well. Erika, the question that I ask all of my interviewees at the end of our conversation is what is your best advice for an early-career PhD? And it could be something that we’ve touched on already in the interview, or it could be something completely else.

32:33 Erika: Yes. I love this question and I love the responses that you’ve gotten in the podcast so far to it. So I’ll echo what a few other people have said, which is to say that the advice that I have for you is two-pronged: if you have debt, understand what your debt is. Generate a spreadsheet, get clarity on that debt. It’s so important to do now than just ignoring it. And I know it’s hard because you’re like, “I live in denial. It’s the best thing, you know, it’s the best. Ignorance is bliss.” But getting clarity on your debt really can inform what lifestyle you need to live in the future and what lifestyle you want to live and how your finances interact with that. The second piece of advice, if you don’t have debt: contribute to a retirement savings account. This is something I wish I would have done. I didn’t have a lot of extra money, but I know that there were opportunities that I passed up because of ignorance and because of fear for how to interact with a Roth IRA, for example. And so you can never get back time. And so while you’re in grad school, I really recommend just contributing to a Roth IRA if you have any extra money.

33:41 Emily: Absolutely, absolutely. Totally co-Sign each of those pieces of advice. Wonderful. Erika, thank you so much for this wonderful conversation. And I hope that the listeners will find you after this. What is your website?

33:53 Erika: Yes. My website is Moore Wealth, M O O R E W E A L T H.org. And you can also just email me or find me on Twitter. My handle is @DrErika E R I K A Moore M O O R E. And then you’ll find more information there.

34:15 Emily: Wonderful. Thank you again for joining me.

34:18 Erika: Thank you, Dr. Roberts.

Outtro

34:25 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the Personal Finance for PhDs Podcast. On that page are links to all the episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in like investing, debt repayment, and effective budgeting. I also license prerecorded workshops on taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps! The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing by Lourdes Bobbio and show notes creation by Meryem Ok.

The Financial Upside to Leaving Academia

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In this episode, Emily interviews Dr. Chris Caterine, the author of Leaving Academia: A Practical Guide. Chris holds a PhD in classics and worked as a visiting assistant professor before transitioning into a career in the private sector. Leaving Academia addresses the necessary identity shift and practical steps that accompany this process and grew out of the informational interviews Chris conducted. Emily and Chris discuss the financial pressures that motivated Chris to shift to a non-academic career and how to financially prepare for that change. They also discuss the role side hustles and volunteer experiences can play in helping you land a non-academic job. This episode is a must-listen for anyone currently in PhD training or working in academia!

Links Mentioned in the Episode

financial upside to leaving academia

Teaser

00:00 Chris: And when I really stared down that fact it became very, very hard for me to cling to this idea that it’s okay to accept a certain degree of poverty or lack of wealth in being an academic. And to really say, you know what, like actually, I want to have some nice things and I’m not sure I’m willing to be ashamed of that anymore.

Introduction

00:27 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts. This is Season 10, Episode 7, and today my guest is Dr. Chris Caterine, the author of Leaving Academia: A Practical Guide, which was published one year ago. Chris holds a PhD in classics and worked as a visiting assistant professor before transitioning into a career in the private sector. Leaving Academia addresses the necessary identity shift and practical steps that accompany this process and grew out of the informational interviews Chris conducted. Chris and I discuss the financial pressures that motivated Chris to shift to a non-academic career and how to financially prepare for that challenge. We also discuss the role side hustles and volunteer experiences can play in helping you land a non-academic job. This episode is a must-listen for anyone currently in PhD training or working in academia!

01:29 Emily: Did you know that I run a couple of database websites for collecting stipend and salary information for PhD trainees? The domains are PhD Stipends dot com and Postdoc Salaries dot com. If you haven’t done it yet, would you please take a minute to: 1. Fill out the survey to report your 2021-2022 stipend or salary to the appropriate website? The databases consist of crowd-sourced information, so they rely on the willingness of PhD trainees like you to self-report their income. 2. Share the site with your peers over a social network, a listserv, or a forum website? These websites are super useful for prospective PhD students and postdocs, but they are also often used for advocacy efforts to bolster the case for raising stipends and salaries. Thank you so much for participating in these efforts! Without further ado, here’s my interview with Dr. Chris Caterine.

Will You Please Introduce Yourself Further?

02:32 Emily: I am delighted to have joining me on the podcast today, Dr. Chris Caterine. He is the author of the new book, Leaving Academia: A Practical Guide, and I’m super delighted to have him on because we’re going to be talking about career changes, graduate students, and PhDs and academics who are leaving academia and how personal finance relates to that process. So I’m super excited. Chris, will you please introduce yourself a little bit further for the audience?

02:56 Chris: Of course. Thank you so much for having me, Emily. Again, I’m Chris Caterine, I’m a communication strategist and proposal writer for a global consulting firm. My academic career was actually in classics, which is Greek and Roman literature history and all that stuff. I got my PhD in 2014 from the University of Virginia. And as Emily said, last year I had a book published called Leaving Academia: A Practical Guide with Princeton University Press.

03:20 Emily: Fabulous. And in the book, it talks a lot about your own journey, as well as what you learned from others. And there were lots and lots of interviews which went into the book, which was fascinating. Can you just tell us like quick synopsis, what’s the book about, what do you want the reader to do with it?

03:34 Chris: The book is really designed to do two things. The first thing is that I’ll go to the practical side, which is to say, if you are in academia and you realize that you don’t have a career, a future in academia, which, you know, 93% of entering social sciences and humanities graduate students don’t, then the book gives you practical steps, just put one foot in front of the other and figure out what you need to do to find a new career. Even if you have no idea what that’s going to be. And that practical side of the book again, is good for everybody, not just humanities and social sciences, but STEM folks as well. The other side of the book is almost more psychological or identity-driven. And that’s really trying to get into the mindset of people who can’t imagine having any career besides a professorship. And what sort of, how do you approach what is ultimately an identity crisis, not just knowing what you will do, but not knowing who you will be if you leave the academy. I think those tend to drive more towards the humanities and social sciences side because there’s always been more industry outs for people in STEM. But really it applies to anybody who views academia as vocation and feels called into that line of work and realized since then, that might not be their future.

04:50 Emily: I love the way you described that. And I also loved, I don’t remember if it’s the introduction or something, but you sort of positioned what your book adds to the field already, because I don’t know if I read some of the exact same books you’re referencing, but I read the kind of book that you’re referencing, which is like a lot of like personal essays or like individual stories around careers that people have after they, you know, get out of graduate school or finish their PhD. And that’s wonderful to see examples of what’s going on, but your book is more about, okay, what is the actual like logistically, like, what is the process here? Like what do I actually do to get to that end point that I see as possible? And I really appreciated that. And of course I love, and I’m sure everybody loves that these six chapters have alliteration for all the titles to them.

Motivation for Leaving Academia

05:32 Emily: So there’s, I’ll just read them out because I have the book here. Dread, discern, discover, decipher, develop, and deploy. And I actually found I thought my favorite parts of it were actually in decipher when you were talking about, I don’t know if you use this term, but the translatable skills that you develop in academia and how they actually relate to other jobs you could do later. And I know I’d always heard that in graduate school, you have translatable skills, you can use them later, but like your explanation was just more detailed than anything I’d read before, which I found really delightful, it made me feel a little bit better about the things that I learned while I was in academia. So thank you for that. So, delightful book, and as I said it’s, it was driven by all these informational interviews that you did. And you did more in-depth interviews for the book. But I wanted to know about sort of your motivation for leaving academia. And it’s apparent from the book that finance has played at least some role in that. So would you please elaborate on that?

06:32 Chris: Yeah, really, for me, I think I began accepting that I was going to be leaving academia around age 30. It sounds a little bit cliché, but it was a big transition point, even if I didn’t want to admit it. And I was getting to that stage of life where you know, my wife and I had been married for a few years. We were thinking that we probably wanted to start a family at some point. I just remember looking at all of these jobs I was applying to, you know, I was making $40,000 a year teaching a 3/3 as a visiting assistant professor. And I was applying for jobs like that, that were apart from my wife and I was saying, well, first of all, how do we have kids if we’re living apart, that’s really work. But also like just doing the math and the salary and trying to think, okay, if we’re trying to live in two places, that’s two households, 40, 50, even $60,000 a year like this, just like the math doesn’t work.

07:22 Chris: And on top of that, even if we lived in the same place somehow, you know, solved the two-body problem, because my wife is also an academic, or still is an academic. Even if we solve that, I looked at it and said, you know, I don’t know that my wife and I would be able to give any child or children in the future, anything resembling the quality of life that our parents gave us. And when I really stared down that fact, it became very, very hard for me to cling to this idea that it’s okay to accept a certain degree of poverty or lack of wealth in being an academic. And to really say, you know what, like brass tacks, actually, I want to have some nice things, and I’m not sure I’m willing to be ashamed of that anymore.

08:07 Emily: So interesting. I mean, really what you’re talking about here is a realization of your own values as you grew, you know, towards age 30 and so forth, and realizing that the career, which is one of your values, I’m sure that aligned in some way with your values was in conflict with these other values of what is the standard of living that I want? What is the kind of family that I want? And you resolved, I assume, this conflict by having a career outside of academia that still, again I’m assuming, fulfills many of your values and so forth, but this book is about the process of finding that and landing that career. I’m just wondering, because we’ve heard the story before, a similar story before on the podcast. I’ll refer listeners to the episode with Dr. Scott Kennedy, who similar to you, came into academia, aspiring to the professoriate.

Financial Framework in Grad School

08:51 Emily: And during graduate school got married and actually had, I think, two or three children during graduate school, and realized that it was just not tenable financially and exited academia and found fulfillment elsewhere. So that was a wonderful example, but I want to know. Okay. You just mentioned, you know, as a visiting assistant professor, the $40K salary. Did you know, like back when you were in graduate school, that that was your financial future, if you stayed in academia? Or did you have like a rosier picture? Like what did you think was going to happen?

09:18 Chris: Well, in grad school, I was living on an $18,000 a year stipend. So I figured anything more than that would make me rich. I mean, I literally just thought it’s double the buying power and of course that isn’t actually the case, you know, taxes increase. If you’re living with a partner, like maybe you have two incomes, but you need more space for the two of you. The costs do not kind of move up in a linear way. And so I sort of expected that as my salary went up, you know, in a linear way that the costs would track and they just don’t actually in a lot of ways. And so, I really worked hard to live on that, that $18K a year. You know, it’s funny, I was looking at my pandemic hair, which is getting all too long in the back and I was like, man it hasn’t been this long since graduate school.

10:03 Chris: And I’m like, oh yeah. Like I got one haircut a fiscal quarter for $12 at a place, you know, a 20-minute drive away because I wanted to not put money into that and save it for drinks out, whatever it was. And so I think I just assumed that like my spending was so low that anything that I brought in would let me do infinitely more. And part of that was I was living in a low cost area. And part of that was, I just didn’t understand how those costs scaled, and part of it was that, you know, at age 22 the prospect of kids was a long way off. And then you start thinking about it, you say, oh, I have 18 years to save, you know, $350,000 for college. That’s that’s not going to work right on $40 a year. The math just doesn’t track. So yeah, I think my thinking definitely changed later on. But in graduate school I just assumed that it would be okay.

Financial Strain as a Common Motivator

11:03 Emily: And I think that, you know, you said earlier, oh, it’s cliché approaching my 30th birthday, I had all these, you know, realizations or whatever. But I think that your story, again, is common that as we age, we realize that we want a higher standard of living than what we were enduring during graduate school. And the other thing, you mention this, I think, somewhere in your book that during graduate school, I don’t believe that you were contributing to your retirement. That was something you were able to do only once you had your full-time job and so forth. And so there’s also this like sort of deferred cost, like you’re pushing off responsibility to the future for yourself. And so, yeah, maybe $40K is not actually double $18 K because you have XYZ taxes and retirement and all these other things. Maybe a house, maybe a family, all these other things you want to do. So I totally understand. And it’s the same, you know, experience that I have as well. Do you find that financial strain in academia is a common motivator for leaving academia for other people?

11:59 Chris: Yeah. A lot of people that I’ve spoken with do raise that issue. And I would say that the stories vary a lot. These are some people who say I have a ton of debt, I have nothing in savings. And you know, I’m done with graduate school in three months. Can you help me. And that’s a big ask. You know, I can give advice. I can tell you maybe how to prioritize that three months that you have, but that’s a challenging situation. For other people they see it a little bit earlier on, and maybe they realize that things won’t work out financially, for other people, especially in the U.S., healthcare becomes an issue as well. I would say that that is a big motivating factor for a lot of people. And I think as you do get closer to completing, and as you start applying for jobs and thinking about you know, incurring the cost to move for a jobs that pays you $30,000 like that’s going to cost you a few thousand anyway, you’re kind of burning negative on that deal.

13:06 Chris: I think when people start actually thinking about that or trying it out a few times and seeing how it works out, yeah, the finances do become a big issue. And especially looking at salaries outside of the academy, it’s just wild. I mean, I felt rich when I went from my $18,000 to $40,000 as a visiting assistant professor. And I didn’t realize just how small a salary that was until I began looking outside.

Personal Finance Strain on Contingent Faculty

13:36 Emily: Yeah, my husband’s also PhD and he and I went through a similar thing going from like graduate student to postdoc salary, but then realizing, oh, wait, we’re paying FICA now. Okay. It doesn’t go that far. So I’m actually wondering, so, you know, you mentioned near the start of the interview that only maybe 7% ish of people who start a PhD program will actually end up in a tenure-track job. And I think one of the issues that maybe is not discussed head-on, but certainly indirectly in your book is the problem of contingent faculty, right? So if you get the tenure-track job, then maybe you are on a decent salary path. I mean, I don’t know about your field necessarily, but I have certainly run across many citations of professors making over $100K a year and even $150K or more, but that’s not at the contingent level, the visiting level, the adjunct level. Can you talk a little bit about sort of the strain on the personal finances of contingent faculty, as they’re maybe holding out hope of this, you know this ultimate dream job?

14:38 Chris: Oh, this one really breaks my heart. And one of the things that actually precipitated my move outside of academia was working on contingent faculty issues for my professional society. So that was the first time I really started to look at what life could be like. And when you start hearing figures that something like, it’s like 54% of adjuncts qualify for food stamps you know, like I can’t remember all the statistics off the top of my head now, but I mean, the numbers are really bleak, and you start realizing like, oh my God, this is severe. And as a society, we’re essentially subsidizing these universities that don’t pay people. Like, what, why do we do this? Why do we put up for it? I think the thing that really crushes me so much now, when I talk to people in contingent roles who say, well, you know, I want to try one or two more times is that, you know, they are missing out on the opportunity cost of the situation as well.

15:42 Chris: And it’s like, well, yeah, okay. You can try to get an academic job one or two more times, and maybe you have a, you know, three to 5% chance of getting one, but all the time that you spend on those applications, all the money you spent flying to the conference interview for the job, whatever it is, all of that time and money could be put into other things that could be preparing you for a career that actually makes you happier than being an academic and gets you out from under the thumb of the system that is fundamentally broken. And convincing people that if they’ve bought into the idea that their identity is tied up in being a professor is very, very hard. And there’s sort of only so much that you can do to get people to move past that. And I hope, you know, the early chapters of my book, “Dread,” I give this dire name, title, because I’m trying to shake that sense into some people who maybe are resistant to it. But really, you know, for some people, it is just a matter of coming up and seeing what that’s like. But I would encourage all your listeners to really go out and read some stories of what contingent life is actually like financially. It’s not a good situation.

Commercial

16:53 Emily: Emily here for a brief interlude. If you are a fan of this podcast, I invite you to check out the Personal Finance for PhDs Community at PFforPhDs.community. The community is for PhDs and people pursuing PhDs who want to take charge of their personal finances by opening and funding an IRA, starting to budget, aggressively paying off debt, financially navigating a life or career transition, maximizing the income from a side hustle, preparing an accurate tax return, and much more. Inside the community, you’ll have access to a library of financial education products, including my recent set of Wealthy PhD Workshops. There is also a discussion forum, monthly live calls with me, and progress journaling for financial goals. Our next live discussion and Q&A call is on Wednesday, September 22nd, 2021. Basically, the community exists to help you reach your financial goals, whatever they are. Go to pfforphds.community to find out more. I can’t wait to help propel you to financial success! Now, back to the interview.

Changing Money Mindsets

18:06 Emily: Chris, I know we could stay on the subject for quite a while, and I wish we could, but let’s talk a little bit more about money mindset, specifically for you. So, you know, what was your attitude towards money, practice of personal finance when you were in graduate school, versus did it change later on as you became a visiting assistant professor, as you moved into your non-academic job?

18:26 Chris: So growing up, both my parents were trained as CPAs. I had like a pretty decent financial literacy growing up in that, you know, I knew how to balance a checkbook. I knew how to make at least a basic budget and make sure that there was more money coming in and going out and use that to sort of set my discretionary spending accordingly. So I’d been doing that sort of all the way through graduate school and had adapted pretty well to a very modest standard of living. And I was proud of doing it, and I still am that I did it, but, you know, as time went on, I think, especially with my move to New Orleans. You know, I grew up in Boston, went to school in Virginia. When I ended up in new Orleans, I saw a very different mode of life and people here definitely embrace the better things in life.

19:14 Chris: There’s good music, good food, good drink. And I started saying, wait a minute, like, why am I deferring all of that like a hundred percent? And so my wife and I had made a choice to live in a smaller apartment so that we could afford to dine out in New Orleans thinking we’d only be here for one year. Well, eight years later, here we are. So you know, geography sort of changed my outlook on what I actually wanted to be doing with my money. Not just squirreling it away in the bank, but using it to enjoy life. And I think I also ended up going from being extremely risk averse in graduate school. Just because there wasn’t that much, so if I lost any of it I felt it more, to over time just becoming a little bit more comfortable with risk.

20:01 Chris: And for me, leaving academia was actually a process of embracing risk and embracing financial risk in a way that I hadn’t before. So I had one year left on my visiting assistant professor contract and my wife and I had decided that we wanted to stay in New Orleans no matter what. And we decided to buy a house. And I was terrified of that decision, because we could afford the monthly payments for the next year, but I had no idea what was coming after. I hadn’t really built a good network. I didn’t have good leads on jobs. It was a big question mark, and I actually used that life event to sort of put my back against a wall and say like, if there’s the prospect of losing this house if I don’t figure something out, then I better figure something out. And that was a huge motivator to me. Again I was in a privileged position to be able to do that, but that was sort of the rationale was using sort of a financial tool to push me into a space where I was uncomfortable.

21:09 Emily: I think I’ve heard this referred to as like a commitment device. Like there’s going to be some real big downside if I do not follow through on my goal of X, Y, Z. I’ve heard it in a lower stakes situation than home ownership, but I think this qualifies as well. And, you know, I think what you said earlier about the opportunity cost of that particular example, the opportunity costs of staying in a contingent faculty position, doing 1, 2, 3 more cycles on the job market. There’s also a major opportunity cost to graduate school. There’s also a major opportunity cost at staying at these lower salary levels. So you said, you know, I had to think about risk in a different way. I had to be willing to take on more risk. There was implicit risk in what you were already doing, but it probably wasn’t forefront in your mind, right? Like the risk of spending years and years and years pursuing this career that was not working out financially, was never going to work out financially. But it’s so hard to see that. It’s hard to see graduate school as opportunity cost.

22:11 Chris: It is. And I think the biggest challenge with the PhD right now is really that if you want to be a professor, it is a credential that you need to get. So if you want to keep the professorship open as a possibility for your future, that is the only path you have to do it. And yet, the vast, vast majority of people who get a PhD, can’t become professors. And I think because of that tension, people do get sucked into this mentality that you just need to forge ahead. And anything that you do that deviates from your scholarship or your teaching is ultimately going to be lessening your odds of that thing that you’re working towards. So it feels like a risk-averse position to be overly narrow, when actually it’s not.

Preparing Finances for Leaving Academia

23:00 Emily: Very well phrased. You mentioned earlier an example of, you know, someone coming to you for advice who has three months until they’re not being paid anymore and they have a lot of debt and so forth. And you’re saying, oh, it’s a short timeframe. We can do something here, but let’s say that, you know, some listeners have a longer timeframe, a year or more before they’re thinking about exiting academia. What can that person do to help prepare their finances for this process of leaving academia?

23:30 Chris: I would say, you know, save every penny that you can because at a certain point, you can actually buy time. And what I mean by that is that if you have, you know, three months of expenses in the bank, then even after your last paycheck hits, you will not necessarily need to take the first job that comes your way. And if you are making a major career change, you know, from a planned academic path to something totally different, it is likely that the first offer that you get is not going to be a job you want. And, you know, I cite these examples in the book, but I was interviewing for jobs to pour samples of beer at the grocery store. I was offered a job to sell life insurance, which seemed like a really good idea going through the interview process until I stopped to think about it and then said, wait a minute, like actually this whole thing, the financial arrangement that they put before me was a scam.

24:32 Chris: And I had, you know, friends and family fortunately say like, yes, we didn’t want to be discouraging, but that would be a bad idea. And because I had some savings in the bank because I had a partner with a stable income, you know, we’d looked at the numbers and said, okay, I can probably wait three to six months after that last paycheck. And then at that point I’ll need to shift my mindset into another, take anything that’s available or, you know, begin looking outside of New Orleans and consider potentially having to uproot. But the more you can save, the more flexibility you will have to make a sort of a positive choice at that end game, instead of being backed into something that you’re not totally happy with.

Benefits of Pursuing a Side Hustle for Skill-Building

25:16 Emily: I am in total agreement. And if someone were to follow this process in your book, it’s very deliberate and it takes a good amount of time, not just like the number of hours, but sort of longitudinally for you to be able to process and understand what’s going on and make the networking connections and so forth. It takes quite a bit of time. So to give yourself that runway, it’s the same thing with entrepreneurship, give yourself a runway before your paycheck ends, or, you know, if you can give yourself runway with savings, the more you can, the less of a desperate situation you will end up in eventually. And hopefully, as you said, you can make a positive career choice. And so I really enjoyed that you talked about in the chapter “Develop” how a side hustle can further this whole process. And I think in that chapter, you were specifically citing side hustles as a way for you to sort of add to your resume, add more experiences, demonstrate your skills, that sort of thing. But I think that side hustles could probably be helpful in multiple stages of this process of leaving academia. Can you talk about the benefits that you’ve seen of pursuing a side hustle?

26:18 Chris: For me, what I will say first of all, is that in graduate school, the only side hustle I had was tutoring, which was great because it got me some extra money, but it was also a really foolish thing to do because it didn’t get me anything besides that money. Like it didn’t actually make me a better teacher. It didn’t develop any new skills. It just sort of deepened my presence in a space that I was already in. So if you’re thinking of doing that and like, you just need a little bit of extra cash. Okay, fine. But again, think about opportunity cost. How could you spend that time? Could you get, you know, more than $15 or $20 an hour tutoring to do something else? You know, in that regard, I got lucky. I had a neighbor and a close friend who had a small business.

26:59 Chris: It was him and one other developer. And he just needed somebody to help with website development and like maintaining his books and like doing all this stuff that I had no idea how to do. And I knew him well enough that he said, well, I can pay you. I think he gave me 15 bucks an hour, and he said, “you know, I know that like me giving you $15 an hour to do it is going to free up time for me to bill my clients. And it’s going to let you learn some skills. And it’s probably, you’re going to figure it out faster than somebody I’d pay $35. So I’m good.” Now I got lucky with that situation, but it was great because I brought in a little bit of extra money, but I also began thinking about, okay, how do you sell a business service to a buyer who is probably resistant to incurring that expense in the first place?

27:50 Chris: Where do you go to advertise to small and mature businesses for kind of a small salesforce.com development group. So I began thinking in all these different ways, and it turned out that all that practice talking about technology services for maybe skeptical business audiences really paved the way for the stuff I’m doing now, where most of the time I’m working on proposals for big technology for the patient. I had no idea that would pan out, but that’s sort of how it did. So I think, you know, to get back the core of the question, how can side hustles really help? You don’t know how they could help. But I think you want to use them as a way to simultaneously build new skills and make some extra money. And if you let them do double duty, then that’s great.

28:47 Chris: My wife has a saying now which is like, she doesn’t do anything that doesn’t count twice. And if she can’t kind of apply it in two places, it’s not worth doing because the time investment is just too high. So I think that’s a really good attitude to take as you’re exploring new careers, as you’re trying to, you know, make extra money in graduate school or even beyond graduate school. You know, tutoring, you know, working in a restaurant, all that stuff can, yes, get you money, but is it going to be advancing those other career objectives that you have? If the answer is no, then you might want to think again about how to balance that equation.

Career-Advancing Side Hustles

29:24 Emily: Yeah, you’re absolutely speaking my language here. I have an interview with Dr. Gaius Augustus, which we’ll link in the show notes, where we talk through this framework that I have thinking about how valuable a side hustle will be to you. My favorite side hustle, I call career-advancing side hustles. Double-duty, as you said, it brings in money and also helps you demonstrate a skill, learn a new skill, have another line for your CV, expand your network, anything like that. And I think what was interesting about your example of, you know, keeping the books for your friend’s business is that you didn’t know how that experience was going to advance your career. And it turned out it did, in retrospect. And I think that just speaks to the benefit of like trying something new. And as you said, instead of staying in the same space that you already know tutoring, you know, it’s in your wheelhouse already, try to stretch yourself a little bit and it’ll spark new thoughts and it’ll spark new perspectives.

30:13 Emily: And so, yeah, just give some new things, a chance. And I noticed from that chapter of your book, it seemed like you were pursuing this side hustle, maybe, you know, some other volunteer experience and so forth over a fairly short period of time. And you got a lot out of it over just like a few months, six-month period or something. And so it doesn’t have to be like, oh, I have to set this up and do it the entire time I’m in graduate school. No, just try something. You know, see if you benefit from it. If it’s good pay and you do, keep doing it. Or if not, try something else. Just experiment with it.

30:40 Chris: Yeah. In software development, they have this concept of failing fast. And the idea is that it’s good to experiment and try little things. And like the sooner you find out something doesn’t work, the sooner you can stop spending time doing that thing. And so, I think that sort of agile and iterative approach to trying new stuff to build career skills is absolutely the right path.

31:01 Emily: I think the other benefit is that, you know, working for your friend’s business for a bit, it gave you some language probably that you didn’t have before. Not just the skills, but just that practice, as you said, of speaking with people you weren’t speaking with already inside academia and just that diversity of experience helped you, ultimately, you know, get the job that you have, because I know you said in the book that it took practice to change the kind of language that you use the kind of speech that you used from what you were used to in academia to what was acceptable in the business world, and that exposure can help a person, you know, along with that process.

31:33 Chris: Yeah. It’s maybe expected that a communications strategists would say that like career changes ultimately come down to communication. But in this case, I really do think that that’s the biggest challenge, is just that academics speak their own language, their own jargon. We have ways of interacting with people that are different from the world outside. And until you go out there and learn how other people speak and behave, the like trying to translate is a fool’s errand. It’d be like me trying to translate Latin into Mandarin. I can’t do it until I know Mandarin.

Best Financial Advice for Another Early-Career PhD

32:06 Emily: Chris, this has been such a wonderful conversation. I’m so glad you came on the podcast. I know we’re leaving the listeners wanting more. So where can they find you and where can they find your book?

32:15 Chris: So I’m available on Twitter @clcaterine, also on LinkedIn, Christopher L. Caterine. My book is available from Princeton University Press on Amazon and also at local independent bookstores.

32:27 Emily: Very good. And by the way, hat tip to Dr. Brandon Renfro who connected us, and you can listen to his episode, we will link that in the show notes as well. So Chris, the question that I ask all my guests at the end of our interviews is what is your financial advice for another early-career PhD? So would you please share that with us?

32:44 Chris: You know, we looped this earlier and I think budgeting is a really valuable tool and you should absolutely do it, but sort of don’t be tricked by thinking that the budget that you set for yourself as a graduate student is going to scale up. And yeah, you know run models, figure out what you might need to have the sort of life you want to live, and use that to figure out what kind of income you would need from a job to live that life. And if you have real data that backs it up, you can be really targeted in the jobs you pursue, both inside and outside of the academy, and find a career that works for your life.

33:21 Emily: Yeah. And I think that’s a wonderful exercise to couple with all the exercises that you lay out in your book. So thank you so much again for joining me on the podcast today!

33:29 Chris: Thanks so much for having me!

Outtro

33:37 Emily: Listeners, thank you for joining me for this episode. PFforPhds.com/Podcast is the hub for the Personal Finance for PhDs Podcast. On that page are links to all the episode show notes, which include full transcripts and videos of the interviews. There is also a form to voluntee to be interviewed on the podcast. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media, with an email list listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in like investing, debt repayment, and effective budgeting. I also license prerecorded workshops on taxes. Four, subscribe to my mailing list at PFforPhds.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps! The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing by Lourdes Bobbio, and show notes creation by Meryem Ok.

How to Establish and Improve Your Credit as a Graduate Student or PhD

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In this episode, Emily explores the topic of credit: what is it, why it matters, how to establish it, how to improve it, and when you can stop thinking about it so much. Near the end, she also reveal the biggest credit killer that she sees among the PhD community and how to overcome it. As ever, the content is tailored to the PhD experience of finances in the US, including that of international students, postdocs, and workers.

Links Mentioned in the Episode

Intro

Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts.

This is Season 10, Episode 6, and I don’t have a guest today, but rather I’m exploring the topic of credit: what is it, why it matters, how to establish it, how to improve it, and when you can stop thinking about it so much. Near the end, I also reveal the biggest credit killer that I see among our community and how to overcome it. As ever, I have tailored the content in this episode to the PhD experience of finances in the US, including that of international students, postdocs, and workers.

I’m eager to devote time to this important topic because many PhDs, especially those who grew up outside the US or are from underprivileged backgrounds, don’t have credit or have poor credit or are concerned about their credit. If you have good credit, it’s not something you have to pay much attention to. But if you have poor credit or no credit, it can really hold you back financially and limit your life choices.

The credit bureaus start tracking our financial actions as soon as we start taking any. For many of us, that starts when we’re minors or college students, long before we may have the financial acuity to safeguard and foster our credit. Very sadly, some children and adults are victims of financial fraud, which can destroy your credit through absolutely no fault of your own, and it can be very difficult and painful to rectify.

I expect listeners of this episode to run the gamut, from PhDs and graduate students with great credit to those with poor credit to those with no credit. You will all find great information in this episode, including what steps you should take to establish or improve your credit, if necessary, and some reassurance as to when you can put your credit out of your mind.

What Is Credit?

Asking the question “What is credit?” seems like a basic place to start this episode, but I actually had to search a little harder for a good definition than I was expecting. In fact, the best definition I found was for the term creditworthiness rather than credit, and it’s from Investopedia.

“Creditworthiness is… how worthy you are to receive new credit. Your creditworthiness is what creditors look at before they approve any new credit to you. Creditworthiness is determined by several factors including your repayment history and credit score.”

Basically, credit is a tool that lenders use to evaluate how risky you are to lend to, which affects whether whether they will work with you at all and what interest rate you’ll be offered. This evaluation is based on your past use of credit.

All of your credit-related activity is tabulated in your credit report. Actually, you have multiple credit reports, each prepared by a different credit bureau. There are three main credit bureaus: Equifax, Experian, and Transunion. In theory, they are all working off of the same information.

The information that is included in each of your credit reports is 1) personally identifiable information, such as your name, social security number, and address; 2) lines of credit and payment history, which is all of the loans and credit that have been extended to you and your repayment history with each, going back approximately seven years; 3) credit inquiries, which is a record of each time your credit is viewed by a potential lender; and 4) public record and collections, which is a record of bankruptcies or bills that have gone to collections because you neglected to pay them.

Your credit reports are used to calculate credit scores. You actually have many credit scores calculated in different ways by different bodies for different purposes. The most popular credit score for mortgages and similar loans is the FICO credit score. A close second is the VantageScore. We’ll return in a few minutes to how those scores are calculated and what they mean.

The main points I want you to take from this section are that your credit scores are based on your credit reports, which are records of all of your credit-related activity.

Why Credit Matters

Why should you or anyone else care about your credit or your credit score in particular? You can see that your credit is based on how you’ve treated your debt and some other financial obligations in the past, and it was developed to help lenders asses whether they should lend to you under the assumption that you will behave in the future as you have in the past. So clearly your credit matters if you are trying to take out a loan, like a mortgage or car loan, or a line of credit, like a credit card.

Rather strangely, your credit score is also often referenced when someone wants to quickly judge how financially responsible you are. Landlords, utility companies, and insurance companies often access credit scores, and some employers and even governments do as well. It is a big leap to assume that how you’ve treated debts in the past is predictive of general financial responsibility in the future, and I think it’s quite unfair.

People who have no credit are often quite financially responsible because they have managed to run their lives without the use of debt, but that’s not reflected in their nonexistent credit score. Also, credit you may have had in your home country does not translate to the US; you have to start over. And for anyone with poor credit, the actions and/or circumstances that created that low credit score are not ones that will necessarily be repeated in the future. You can change your financial behavior on a dime, but it takes a long time for your credit score to catch up.

The Equal Credit Opportunity Act of 1974 ostensibly prohibits discrimination based on race alongside other factors, but in practice there is a credit gap. A recent study by Credit Sesame found that 54% of Black Americans had no credit score or a poor or fair credit score, while only 41% of Hispanic Americans, 37% of white Americans, and 18% of Asian Americans had the same. The credit gap stems from the Black-white wealth gap, homeownership gap, employment gap, and income gap, and perpetuates the wealth gap and homeownership gap.

The credit gap is caused by systemic problems, and systemic solutions are warranted. However, in this episode, I’m going to focus on what you can do as an individual to impact your own credit score.

What is a good credit score and how is it calculated?

The FICO credit score and VantageScore range from 300 to 850. According to a lovely Nerdwallet graphic linked in the show notes, a score of 720 to 850 is considered excellent, 690 to 719 is good, 630 to 689 is fair, and 300 to 629 is poor. For another reference point, a FICO credit score of 760 and above will get you the best interest rates on a mortgage.

https://www.nerdwallet.com/article/finance/what-is-a-good-credit-score

While the exact algorithm for calculating FICO credit scores is proprietary, we know that 35% of the FICO score is based on payment history, 30% on amounts owed, 10% on new credit inquiries, 15% on the length of your credit history, and 10% on the mix of credit. We’ll get into what actions you can take in each of these areas to improve your credit score momentarily.

How do I establish credit?

Before we get there, I want to speak to those of you who do not have any credit history in the US. I do think it’s worthwhile to establish credit history and a credit score if you are not yet financially independent. A good credit score is useful as a renter and a virtual necessary when taking out a mortgage.

As I explained earlier, credit is self-referential. To have credit, you must have had credit. So how do you get your foot in the door?

The simple and free way to do so is to take out a secured credit card. This is a special kind of credit card designed to help people establish credit. You turn over a deposit, which becomes your line of credit. You borrow against that line of credit and then pay it back. After about six months, you should have a credit score and be able to move on to more conventional debt products, if you want to. These credit cards are often marketed as student cards.

Alternatively, if you have a family member who is very responsible with credit, you could ask to be added as an authorized user on one of their credit cards. In this way, their good credit sort of rubs off on you. You don’t actually have to even have or use your authorized user card. Just make sure that the person you ask to do this pays off their credit card balance in full every statement period. As soon as your credit score is established and high enough, take out your own credit card to establish your independent credit history. As I learned from Sam Hogan, a mortgage originator with PrimeLending (Note: Sam now works at Movement Mortgage) and an advertiser with Personal Finance for PhDs, in one of the live Q&A calls we’ve held, your credit score may look good with only an authorized user card in your history, but you won’t qualify for a mortgage on that alone.

There are two other solid ways to establish credit, but they are not usually free, and therefore I suggest you only undertake one of them if it is very financially important to you to establish the highest possible credit score quickly. That’s not usually necessary, so these are sort of extreme steps.

Method #1 is to take out a loan with a bank, sometimes specifically called a credit builder loan. This is an installment loan, so it’s a good complement to the revolving line of credit you likely already have with a credit card. It’s not enough to take out the loan, but rather the point is to make the minimum payments consistently to demonstrate that you are capable of repaying debt responsibly. The cost here is the interest you’ll pay throughout the repayment period, so you should shop around for the best rate available to you. You could also consider doing this with a student loan if you are a student, but since the loan won’t go immediately into repayment, I’m not certain it will have as positive an effect on your score as a credit builder loan would. Plus, student loans are not dischargeable in bankruptcy, if it came to that, so that’s a strike against them in comparison with a bank loan.

Method #2 is to pay a service to report the payments you are already consistently making to the credit bureaus. For example, the service might report your rent payment, which would not normally be included in your credit report. The cost here is the fee for the service, so again, shop around. You won’t have to keep the service up indefinitely, only long enough to qualify for another debt product.

This last tactic of reporting rent payments to credit bureaus and having them be calculated into credit scores is, from what I can tell, the top method being pursued to address the credit gap. A few landlords are starting to report rent payments to the credit bureaus on behalf of their tenants for free. The newest versions of the FICO and VantageScore algorithms do take rent payments into consideration, but most lenders still rely on older versions of the algorithms.

How do I improve my credit?

Now that we’ve covered establishing credit, let’s go deep into how to improve credit. Please take note from the outset here that improving your credit score is a long game. You must practice good credit behavior consistently for years. Since the length of your credit history is taken into account, you really can’t attain a top credit score until you’ve been using credit for at least a handful of years.

I’m going to give you at least one suggestion from each category that goes into the FICO credit score. Don’t be shocked when one or two of the suggestions contradict each other!

35% of the FICO score is based on payment history. This is the key category. Make your payments on time and in full every time. For years.

30% of the FICO score is based on amounts owed. Pay down your debt. Pay off your debt. For a specific hack, keep your credit card utilization rate low. Your utilization ratio is the balance you owe across all your credit cards divided by the sum of your credit limits. You should keep this ratio below 30% or ideally below 10%. Please note that your utilization ratio can be viewed at any point in your statement period. So even if you pay off your credit cards in full every period, as you should, having a high utilization ratio at some point earlier in the period will still ding your score. You can keep your utilization ratio low without changing your spending by 1) requesting credit limit increases across all of your cards, 2) applying for new credit cards to increase your overall credit limit, and 3) paying off your cards multiple times each statement period instead of just at the end.

10% of the FICO score is based on new credit inquiries. Don’t apply for any new loans or lines of credit. I warned you that some suggestions would be contradictory!

15% of the FICO score is based on the length of your credit history. Basically, you just need to let time pass. It helps to keep your oldest credit card open indefinitely and to close newer accounts if you want to close any. If you haven’t opened a credit card yet, choose one without an annual fee to be that first card.

10% of the FICO score is based on the mix of credit. Specifically, this means having both revolving lines of credit, like credit cards and home equity lines of credit, and installment loans, like a mortgage, car loan, student loan, etc. If it was really important to you to improve your credit score and you didn’t have any installment loans, you could take one out, like the credit builder loan I mentioned earlier, but it will cost you.

Another great, general step to take is to check your credit reports for accuracy once per year through annualcreditreport.com, which is the government-sponsored website where you can order one credit report per year from each credit bureau. During the pandemic, that limit was increased to once per week. Keeping tabs on your credit reports is part of your basic good credit behavior.

Credit killers

Now I’d like to explore the main credit killer that I see PhDs and particularly graduate students falling into. And it’s not student loans! Believe it or not, as long as you’re current on your payments and your balance isn’t inordinately high, student loans are kinda good for your credit score. No, the big credit killer, and killer of your finances overall, is credit card debt.

According to the Council of Graduate Schools’ recent report, Financial Education: Developing High Impact Programs for Graduate and Undergraduate Students, 85% of graduate students have a credit card. Forty-five percent of those carry a balance on their cards, with 9% only making the minimum payment.

Everyone listening to this podcast episode knows that finances in graduate school are challenging at best. We can all understand how readily an emergency or unexpected expense could result in a carried balance on a credit card. But, I implore you, instead of accepting that your credit card balance will be with you until and through graduation, get aggressive about ridding your balance sheet of this most toxic kind of debt.

Ideally, you would pay your balance off by increasing your income and/or decreasing your expenses and throwing all available cash—outside of a starter emergency fund—at the debt. Depending on how high that balance is, you may not have to make these sacrifices for long.

If it is absolutely impossible for you to increase your income or decrease your expenses before you finish graduate school, you could at least mitigate the negative effects of your credit card debt. If your credit card debt resulted from the hard reality that your stipend is insufficient to pay for basic living expenses, please consider taking out a student loan to pay off the past debt and supplement your income going forward so you stay out of credit card debt. While it’s not great to be in student loan debt either, at least you can defer the payments until after you graduate. If your credit card debt resulted from an unexpected expense that is unlikely to recur, you might consider paying off your credit card debt with a personal loan from a bank or with a balance transfer credit card. That way, you can at least get a break on the interest you would have paid while you’re paying down the balance.

If you’d like to learn more about increasing your cash flow and paying down debt, please join the Personal Finance for PhDs Community at PFforPhDs.community. Inside the Community, you will find the recordings of two workshops I gave in August, titled How to Up-Level Your Cash Flow as an Early-Career PhD and Whether and How to Pay Off Debt as an Early-Career PhD. After working through the materials, you will have a plan for how to handle your credit card balance in the short and long term.

When your credit doesn’t matter

The final credit topic I’ll address in this episode is when your credit doesn’t matter and when it does. Once you have attained a great credit score of approximately 740 or above and you keep up your good credit habits, you don’t need to pay much attention to your credit. Keep paying your bills on time and in full, use your credit cards as you would debit cards, chip away at your debt, and check your credit reports for accuracy once per year. You don’t have to actively work on increasing your credit at that point—with one exception. If you are planning to take out a loan in about the next year, it would behoove you to get a little more protective about your credit. I’m particularly speaking about taking out a mortgage, but this would also help you with a car loan or similar. For example, you might stop opening credit cards months or a year in advance of applying for your new loan so that you don’t have any recent hard credit inquiries. You might pay off a smaller debt in its entirety. You might pay special attention to your utilization ratio. Above all, when you start working with a mortgage loan officer, listen to that person’s advice about what to do regarding your credit. They might instruct you to make absolutely no changes. I know that Sam Hogan, the mortgage originator I mentioned earlier, advises his clients all the time about their credit in the lead-up to taking out a mortgage. If you are looking to take out a mortgage in the near future and you want to work with someone who understands PhD income, please reach out to Sam over text or a call at 540-478-5803.

Conclusion

I hope this episode was instructive for you and clarified what steps, if any, you should take regarding your credit as a graduate student, postdoc, or PhD with a “Real Job!”

Outro

Listeners, thank you for joining me for this episode!

pfforphds.com/podcast/ is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episodes’ show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast. I’d love for you to check it out and get more involved!

If you’ve been enjoying the podcast, here are 4 ways you can help it grow:

  1. Subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use.
  2. Share an episode you found particularly valuable on social media, with a email list-serv, or as a link from your website.
  3. Recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and effective budgeting. I also license pre-recorded workshops on taxes.
  4. Subscribe to my mailing list at PFforPhDs.com/subscribe/. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs.

 See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps!

The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC.

Podcast editing by Lourdes Bobbio and show notes creation by Meryem Ok.

Entering a PhD Program with Significant Debt and Investments

by

In this episode, Emily interviews Alexandra Savinkina, who is starting a PhD program at Yale University after completing a master’s degree and working for several years. She has spent the last few years pursuing Public Service Loan Forgiveness while contributing to retirement accounts and saving and is therefore entering her PhD with significant student loan debt and significant assets. Alexandra and Emily discuss Alexandra’s financial goals during her PhD, including how much to spend on rent, financing a car vs. purchasing it with cash, whether to defer student loans or stay in an income-driven repayment plan, and how to continue to invest for retirement while in grad school.

Links Mentioned in the Episode

PhD debt and investments

Teaser

00:00 Alexandra: Yeah, I think it will definitely be a lifestyle decrease. A lot of my spending, not in the last year, has gone to things like travel. And I also think that the longer that I’ve had a salary and have, you know, my social circle has been people with salaries.

Introduction

00:20 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts. This is season 10, episode five, and today my guest is Alexandra Savinkina, who is starting a PhD program at Yale University after completing a master’s degree and working for several years. Alexandra spent the last few years pursuing public service loan forgiveness while contributing to retirement accounts and saving, and is therefore entering her PhD with significant student loan debt and significant assets. We discuss Alexandra’s financial goals during her PhD, including how much is spent on rent, financing a car versus purchasing it with cash, whether to defer student loans or stay in an income-driven repayment plan, and how to continue to invest for retirement while in grad school. This episode will be instructive for anyone anticipating or in the midst of a career transition or financial crossroads.

00:34 Emily: At the start of a new academic year, I always like to bring up tax considerations, especially for new graduate students. If you haven’t yet, go back and listen to season 10 episode two of this podcast titled, “What to Do at the Start of the Academic Year to Make Next Tax Season Easier.” If you have already started or switched onto fellowship funding for your stipend or salary, please take note of the upcoming quarterly estimated tax deadline of September 15th, 2021. To determine whether you are required to pay estimated tax, fill out the estimated tax worksheet on page eight of form 1040ES. If you need any help with the worksheet, consider joining my workshop at PFforPhDs.com/QETax. The live Q&A call for this quarter is this coming Sunday, September 12th. This is the best time to join this workshop to definitively answer whether you are required to pay estimated tax and how much income tax you can expect to pay in 2021. Again, if you’d like my help with figuring this out, the best place to go is P F F O R P H D s.com/Q for quarterly, E for estimated, T A X. Without further ado, here’s my interview with Alexandra Savinkina.

Will You Please Introduce Yourself Further?

02:46 Emily: I have joining me on the podcast today, Alexandra Savinkina. Our topic today is starting a PhD at a slightly older age. So Alexandra is 30 and she’s starting her PhD this upcoming fall in epidemiology. So I’m really excited to have her on. And Alexandra, would you please introduce yourself a little bit further to the audience?

03:04 Alexandra: Sure! Hi, I’m Alexandra. As you know, I’ll be starting my PhD this fall. I’m really excited about it. I got my bachelor’s degree back in 2013 in biology, and then during that time was working in an HIV virology lab and thinking about graduate school, but knew I wanted to go into the sciences. I was pretty sure I didn’t want to do bench work forever, and so instead of making that decision right away, I did a year abroad teaching in the South Pacific. And experiences there as well as past experiences kind of brought me to public health. So I did my Masters in Public Health at Emory University, right after getting back from the south Pacific. And then I worked at the Centers for Disease Control and Prevention for three years. And at that point started thinking more seriously about a PhD, but instead pivoted a little bit, moved to Boston, and have been working in academia for the last couple of years before really making that decision to pursue that PhD program now.

Why is Now the Right Time for the PhD?

04:14 Emily: I love that you’ve been out of undergrad, out of your masters for several years now. You have a really solid start to a career, actually. So why is it that you decided that this was the right time for the PhD?

04:25 Alexandra: Yeah, so I actually did apply to PhD programs to be totally transparent. Two years ago, I got into some programs, I didn’t get into other programs. And when I was weighing my options at that point, there wasn’t really any program that was a perfect fit in terms of both something that financially I was comfortable with in terms of stipend and really excited about the program itself. At the same time, my partner matched into a medical residency program in Boston. And when I was kind of weighing my options in that way, I hadn’t been accepted to any programs on the east coast, but I realized all of the programs I was really excited about were in the Northeast. So I started looking at jobs and ended up just accidentally finding something that when I read the job description was like exactly what I wanted to do.

05:22 Alexandra: But while working in this job and being like very solidly in academia, I think I’ve been able to realize that every single piece of the job that I really like is a piece that if I want to continue that as a career, I’m going to need a higher degree for. And so I think that’s really what’s led me to be like, okay, I definitely want to do this. And the upside is that during the last two years, I’ve really been able to grow my network, grow my skillset, and I was able to get into my first choice PhD program both from two years ago and from applying this around.

05:59 Emily: Amazing! What restraint you have, I feel like, for that application cycle from two years ago to get into some places, but then just to say, no, ultimately. Like, I just feel like you feel you’re so committed to that point, right? To the idea of going to graduate school, that I really commend you for holding out for what you really wanted in and you got it and that’s amazing. Congratulations!

06:21 Alexandra: Thank you. Yeah, it was very scary. It was a scary decision to make. So on this side of it, I’m pretty happy, but when I was kind of waiting to hear back from programs this time around, I think there was kind of that anxiety hanging over me of like, what if I don’t get in anywhere? And I did get in places two years ago, so I’m glad it worked out the way it did.

Tell Us About Your Balance Sheet: Assets and Liabilities

06:43 Emily: Yeah. I really can’t imagine that anybody would be a weaker candidate having, you know, another two years of work experience. Plus, you know, I think we could hear the clarity in what you were just saying about, you know, your career plans at this point. Maybe you didn’t have that or had that to a lesser degree, you know, two years before, but that’s amazing. Again, congratulations. So let’s talk about your money. You have money, and not money, at this point in your life. Your balance sheet is a little bit more complex than maybe when you’re coming right out of undergrad. So yeah. Tell us about, just give us a quick overview of your balance sheet, your assets, your liabilities, then we’ll talk a little bit more about each of them.

07:20 Alexandra: Yeah, so right now my one big liability are my graduate school loans from my master’s program. Yeah. That’s kind of the one big thing hanging over my head. I don’t really have any other debt right now. And then on the asset side, my assets are split mostly between my retirement savings, both from the 403(b) that I have from my current position. And then I’ve maxed out my Roth IRA every year that I’ve been able to. So for the last three years. And then the other half is sort of in standard savings as well as a long-term investment account and a little bit in short-term, like swing investment, which is just kind of fun money at the moment. But I’m living in Boston right now. I’m moving to New Haven. So my one new big liability is going to be a car that I’m going to need to purchase.

08:17 Emily: Gotcha. Okay, well, let’s start on the liability side. So it makes sense to me that you have student loan debt from a master’s in public health degree. And that is that just from the graduate degree or also from undergrad?

08:32 Alexandra: I had a tiny bit of loans from undergrad, but I’ve paid all of those off. So at this point, it’s just the graduate degree.

Paying Off Student Loan Debt

08:41 Emily: So let’s take this out of the context of you’re heading into graduate school just for a second and talk about, okay. You’ve been in the workforce for several years post-master’s degree. Have you been aggressively trying to pay down that student loan debt, or are you using public service loan forgiveness? Or what has been your plan for that debt?

08:59 Alexandra: Yeah, not aggressively paying it off. The first couple of years, I wish that I’d put a little bit more thought into it. I didn’t, I think at that point, my thinking was I’ll pay it off, but without any kind of really exact plan. For the last few years, I’ve really focused that more. And I am going for public service loan forgiveness. My job at the CDC did not qualify because it was a fellowship position, but my current job does. And so I’m about two years in, and I’ve gone through the paperwork. I’ve kind of stayed vigilant with that. And so I’m really hoping, I’m almost certain that any job I’ll take post-PhD will qualify. So I’m really trying to go down that path.

09:46 Emily: Yeah. This makes sense to me with your career plans for, ideally, it sounds like staying in academia, or if not, it seems like there’ll be plenty of nonprofit type work for you after that point. Sorry, did you say you were going to stay in academia? Or planning to?

10:01 Alexandra: Great question. I think right now that’s the plan. I want to kind of use this time in PhD to see if that’s really the course I want to be on. But I do love kind of the freedom that academia offers. I need to see if I’m any good at writing grants.

10:18 Emily: Gotcha. Okay. So plan A, academia, otherwise, probably a PSLF qualifying employer. And did you say approximately what that student loan balance was?

10:29 Alexandra: No, it’s right around $80,000.

10:32 Emily: Yeah. Okay. So I did an episode a season or two ago with Meagan Landress who’s a certified student loan professional. And so she shared with us her rule of thumb that she does with her consulting, which is around one and a half times your full income. So post-PhD income, your expected income. If your student loan debt balances one and a half times or higher, then that, again, it’s a rule of thumb, not super precise, but makes you a good candidate for income-driven repayment programs with forgiveness. Even down to about one times your income would be, if you had an opportunity to use PSLF, that could also be a great option versus paying them off aggressively. And since of course, you know, your ultimate career several years away, you probably don’t have necessarily a good handle on what that salary is going to be. And certainly in the intervening time, your salary is not going to be high during the PhD. So that decision makes sense. And obviously PSLF has a really popular program with academics.

Retirement Contributions, Investing, and Savings

11:30 Emily: Okay. So we have the student loan debt balance, but instead of paying that down aggressively, you’ve instead, it sounds like, been focusing on building up the assets side of the balance sheet. So you mentioned, you know, some retirement with your employer, Roth IRA contributions, and also taxable investments and cash savings, which sounds like a great sort of mix to have at this point. Is there anything that you want to share with us about how you’ve built that up or why you focused on that in the meantime?

11:57 Alexandra: Yeah, I think honestly coming straight out of my master’s program, it wasn’t especially difficult because, while I wasn’t making like a huge salary, it was hugely more than I’ve ever made before in my entire life. And so I think I’d been so used to living really frugally that it was easy to kind of save some money. And once I started and I started learning a little bit more about investment and about the value of money, I think I just made it a priority. So one thing I do is I just automatically have money transfer from my checking account to my savings account every single time I’ve a paycheck. And then I have money transferred directly from my savings account to an investment account as well. So it’s not even something that I think about. Like, it just happens automatically. I know that it’s going to happen. It happens when I know I have money in the account, so I don’t have to worry about like overdrafting. And so I think that’s been one of the best ways for me to do it is just kind of consistency.

Financial Predictions for Graduate School

13:05 Emily: Yeah. I love that strategy, obviously, automating as much as you can with your finances. So let’s shift now to talking about graduate school again, what I guess financial predictions have you made? So we’re recording this in June, 2021. So you’re still, it sounds like probably a couple months away from moving and starting your program. Can you share with us like what your stipend is going to be, and have you put together any of those big rock expenses? Like, do you have your housing set already? You mentioned a car that you’re going to purchase. Yeah. Can you give us kind of a picture there?

13:38 Alexandra: Yeah. So my stipend is $38,000. So my housing I do have set. My rent will be $800, and I’ll be living with a couple of other PhD students. I made the decision to live with people to save a little bit of money and also on the personal end, my boyfriend’s still in Boston. So I do plan on kind of going back and forth. So it didn’t make financial sense to necessarily put more money into living by myself. And then the other big thing will be the car. I’m planning on buying a used car, but I want something that will last me a little bit of time, and I’m a little bit anxious on the car side. I haven’t really owned a car in a long time. Haven’t really had to take care of one. So I want something that’s not too old and too unreliable. So I’m looking at about 10 to $15,000 on that. And I’m still sort of going back and forth between just paying it out right from my savings or financing to just have that monthly payment, which should be affordable.

14:41 Emily: Yeah. I mean, it sounds like with the stipend as relatively high, that’s among the higher stipends that I hear right now. Which is awesome. Congratulations. And then yeah, the rent being pretty reasonable for that level of income. Yeah. It sounds like you could afford the debt payment if you wanted to. But it also sounds like you have the option of paying in cash. So yeah. What are your thoughts there? So, in general, I kind of don’t love the idea of graduate students holding debt that they don’t need to. That is to say, debt that like, they need to actually be making payments on like a car payment. But, you know, you could do it. The other thing about that car purchase is I think it’s a lot more painful to part with cash than it is to finance something. And so you might end up with a lower-priced purchase if you told yourself it has to be in cash. So I don’t know. Where do you think you’re going to come down on that?

15:35 Alexandra: I’m really torn on it. I think part of it is almost mental. I think I know that if I have a car payment I need to pay, that money will go towards that car payment. I think I’m a little bit less certain that if I don’t have that car payment, that same amount of money will go into savings. And so I think that’s the one place where, and I don’t think that’s necessarily a good financial decision. But I think mentally that’s one of the reasons why I’m considering financing. But I agree with you. I am a little bit nervous about taking on more debt. And so I’m still sort of on the fence about it. I have been slowly putting away money. So I will have the cash kind of handy outside of investments if I do choose to do it out in cash.

16:27 Emily: And if you end up financing the car, will you keep that money in cash or will you invest it?

16:33 Alexandra: That’s the other thing. I would most likely transfer that into investments. And so there is some question about kind of where that money would be making the best value.

16:42 Emily: Yeah. So it’s more about like maybe leveraging debt, not just yeah, having cash, but also paying debt at the same time.

Commercial

16:52 Emily: Emily here for a brief interlude. These action items are for you if you recently switched or will soon switch onto non-W2 fellowship income as a grad student, postdoc, or post-bacc and are not having income tax withheld from your stipend or salary. Action item number one: Fill out the estimated tax worksheet in form 1040ES. This worksheet will estimate how much income tax you will owe in 2021 and tell you whether you’re required to make manual tax payments on a quarterly basis. The next quarterly estimated tax due date is September 15th, 2021. Action item number two: Whether you are required to make estimated tax payments or pay a lump sum at tax time, open a separate named savings account for your future tax payments, calculate the fraction of each paycheck that will ultimately go toward tax, and set up an automated recurring transfer from your checking account to your tax savings account to prepare for that bill. This is what I call a system of self-withholding, and I suggest putting it in place starting with your very first fellowship paycheck so that you don’t get into a financial bind when the payment deadline arrives. If you need some help with the estimated tax worksheet, or want to ask me a question, please join my workshop, Quarterly Estimated Tax for fellowship recipients. It explains every line of the worksheet and answers common questions that PhD trainees have about estimated tax. Go to PFforPhDs.com/QETax to learn more about and join the workshop. Now, back to our interview.

Expected Expenses and Lifestyle Changes

18:31 Emily: Do you have any idea about the rest of your expenses? It sounds like maybe you’re sort of a more naturally frugal person. So have you made any predictions on that front about like, you know, general spending money or like groceries? Or I guess what I’m asking is, do you think you will be able to keep a similar lifestyle to what you’ve been living the last few years, or will you actually have to take a lifestyle decrease and be a little bit more frugal on the lower salary?

18:57 Alexandra: Yeah, I think it will definitely be a lifestyle decrease. A lot of my spending, not in the last year, has gone to things like travel. And I also think that the longer that I’ve had a salary and, you know, my social circle has been people with salaries, eating out has become more expensive, trips have become more expensive. And that’s one of the things I think I’m going to need to be more careful of because, you know, most of my social circle aren’t grad students, but I will be, which is different than the last time I was a grad student where my entire social circle also made no money. So I think it’ll definitely be a little bit of cutting back on some of, kind of more of the luxury items I’ve gotten more used to. I’ve always been pretty frugal in terms of big expenses. Things like rent, bigger kind of monthly payments. But I have kind of splurged on some things which I’ll need to be a little bit more careful on, I think.

20:03 Emily: So, when you move, you’ll have a whole new cohort of peers. So, they will be making probably exactly the same amount of money as you, right? The people in your program, or more or less. So, you’re really talking about your partner and your friends in Boston and maybe other places around the country. Is that right?

20:19 Alexandra: Yeah. Yeah.

20:20 Emily: Yeah. So I’m thinking that it may be fairly easy for you to keep those day-to-day or month-to-month expenses on the lower side, since that will be, you know, the people you’re interacting with there in New Haven. But yeah, you may have to be pretty intentional about budgeting for travel, for example, or whatever are things you might be doing with these like older friends.

20:40 Alexandra: Yeah, definitely. And I think, you know, I really don’t want to be dipping into my savings for any kind of normal life expenses. So, I think I will just need to be a little bit more strict and careful about that. I do think it’s very doable. It is a very decent stipend comparatively, so that’s really nice.

21:05 Emily: Yeah. In the grad student world, it’s a great stipend. In the working world, it’s a low salary.

21:11 Alexandra: Yeah.

Travel Hacking and Asset Building

21:12 Emily: Yeah. Well, have you gotten into travel hacking at all? Is that something you practiced earlier on?

21:18 Alexandra: I’m not sure what that is.

21:19 Emily: Oh, okay. Yeah, so travel hacking is basically just sort of structuring credit card rewards to figure out how to pay for travel, either get it for free or super inexpensively. So like, it sounds like you haven’t gotten into that game yet.

21:35 Alexandra: I actually do have one really great travel credit card, and it is the card that I use for almost all of my purchases and it does purchase a good amount of my plane tickets, which is nice. So yeah, I guess I just didn’t know there was a term for it, so a little bit. Yeah. And that helps.

21:55 Emily: Yeah. I’m thinking that, as a graduate student, it might be a way to enhance that travel aspect of your life without necessarily spending much more money. Although it is difficult to turn credit cards as a graduate student because your spending is going to be on the lower side. So like meeting signup bonuses. Anyway, if you’re interested, we’ll link in the show notes, I’ve done a couple of different interviews with people who have travel hacked as graduate students through credit card reward accumulation. So anyway, only a strategy good for someone who is really strict about their credit card usage, but very on top of things. So it sounds like you are that way anyway. Okay. So what financial goals do you think you’ll pursue during your PhD? You already stated one which is not dip into savings, so live off of the stipend on an ongoing basis. Yeah. Anything else that you think you might want to do either in terms of building assets or the step that you’ll have maybe during grad school?

22:49 Alexandra: Yeah. So in terms of assets, yeah, my biggest one is not to dip into my savings. I think beyond that, if possible, I would really like to keep funding a Roth. I don’t know if I’ll be able to, I’m not sure what the mechanism of my stipend will be yet. I know I’ll be able to find one for 2021. But if I’m able to, after that, I would like to do that.

Non-W2 Income Eligible for IRA

23:13 Emily: Actually, let me pause there for a second. So, are you referring to having W2 income versus fellowship income?

23:22 Alexandra: Yeah.

23:22 Emily: So the good news, and this may be different from the last time you were in grad school, is that fellowship income, non-W2 income, is eligible to be contributed to an IRA as of 2020. So that’s a new like law change. So we’ll link in the show notes the podcast episode where I discuss that. But yeah it changed with the SECURE Act, which was passed at the end of 2019. So, going forward, whatever type of stipend you in grad school, you would be eligible for the IRA all the way through.

23:49 Alexandra: Oh, that’s excellent. Okay. So I think that would be one of my goals. But it sort of ties to the second part of, I am trying to decide what to do with my loans a little bit. Right now, I’m in income-based repayment, and I could stay in income-based repayment and make very low payments monthly, or I could pause my payments completely during graduate school. And I haven’t made the decision of sort of what’s the right move.

Public Service Loan Forgiveness (PSLF) Eligibility

24:20 Emily: Yeah. So, I’ve looked into this before. So, I want to ask you, I thought that you had to work full-time, or let’s just say like 30 hours a week or more, to be eligible for a PSLF. Is that not the case?

24:34 Alexandra: Yeah, it is. So I would not be eligible for PSLF during that time, unfortunately. I would, I think, if I stay in income-based repayment, be eligible for like the 20-year forgiveness. So it keeps me on track for that, I guess.

24:52 Emily: But I think, what we’re talking about then is you making, however long your PhD is, five years or whatever it is, five years of payments, that you wouldn’t need to make if PSLF ends up working out. Is that right?

25:06 Alexandra: Yeah. I think the only reason I’m sort of considering it is it does make me nervous that, you know, the balance is going to go up and up and up while I’m in grad school. At the same time, you’re right. It doesn’t make a lot of sense because I’m just paying in money that I don’t need to. So most likely, my thinking was, especially now that I know I can fund a Roth IRA, would be to put my money there.

25:33 Emily: Yeah. I mean, unless your payment was zero, which, I mean, I guess that’s possible. I don’t know exactly how that would work on precisely what your stipend is, but if it was a zero payment, it’s like, oh, well, why not? You know, keep it going. But if it’s anything above zero, yeah, because, well, it’s a gamble, right? Because either PSLF is going to end up working out and you’ll make ultimately, whatever it was, eight more years of payments after your PhD, or it’s not and it would have been a good idea, I guess, to make those payments during your low-earning graduate school years. So yeah, it sounds like you would either be doubling down on PSLF being the route for you, or deciding that that’s too risky and that you want some other backup options.

26:20 Alexandra: Exactly, exactly. So that’s kind of where my thinking is, as well. That said, I think the amount of payment I would be able to make or would need to make in income-based repayment wouldn’t be that high enough to make a huge difference, I don’t think.

Keep Within the Rules of the Game

26:36 Emily: So, it sounds like you’d be sort of like purchasing an insurance policy. Like I’m going to make whatever this low payment is, which is manageable for me on my grad student stipend, as a backup plan to have five more years or whatever it is of payments if PSLF doesn’t work out. Yeah, I guess it depends on how risk-averse you are, right? And how much you believe in the program. Yeah, I haven’t heard anyone propose that strategy to me. So, you may be more risk-averse than other people I’ve spoken to about PSLF, potentially. But I encourage you to go and listen to that interview with Meagan Landress, because it may make you feel a little bit more comfortable with that ballooning payoff balance. Because the way that she talks about it, and the way that people who work in this area and are, you know, strategic about it, it’s just, it’s like playing a game.

27:31 Emily: Like you just have to keep within the rules of the game. And you know, as you said, you’ve been really on top of like getting your income, you know, your employment certified and all of that, so like, it sounds like you have the practice of like complying with PSLF already, so that probably wouldn’t end up being an issue. But yeah, it’s just about like playing the game and manipulating the numbers. And like we talked about with the debt, you know, whether to take out a car loan or whether it be cash and maybe you could invest, it’s a little bit of a leverage situation. You know, keep this student loan debt that ideally would be in part forgiven later on so that you can fund the IRA and do all these things on the asset-building side. So yeah, that episode might make you feel a little bit more comfortable with this, I’m just going to compartmentalize this debt, it is what it is, you know, that kind of approach.

28:19 Alexandra: Yeah, definitely. I do always do better when I don’t really look at it. So yeah, I think I will listen to that episode for sure. And I think even this conversation kind of makes me feel a little bit better about just letting that go for now.

Consider Projected Asset Growth

28:35 Emily: Yeah. And you know, we’re, again, I’m recording this in June, 2021. So you’ve had over a year now of having payments paused. So you’ve had over a year of credit toward your PSLF time and you haven’t been making payments, right? Yeah. So good. You’ve been building up the asset side of the balance sheet, which is exactly, you know, the intention of the program to give people some relief there. So when you volunteered for this episode, you said that you were, you know, a bit nervous about this income decrease, and then also correspondingly not being able to invest as much. So you want to keep the IRA going some level or perhaps even maxing it out if you’re able to, but have you looked at all into how much your existing assets are projected to grow over that five-year period?

29:23 Alexandra: No, I’ve not looked at the five-year. I use Wealthfront for my long-term investment, so I can see like projected growth to retirement, but I haven’t really looked into it over five years at all.

29:38 Emily: Yeah. I think that is another just element add into this, as you’re thinking about whether to invest the money you would spend on a car versus, you know, paying for it in cash versus financing, that kind of decision. And also, as you’re thinking through, you know, your ballooning student loan balance, you thought about those liabilities growing, but yeah. I encourage you to look at how much your assets are expected to grow, because yes, it is a disadvantage in some capacity to be having this, you know, salary decrease to be going to the PhD program, but you already have assets in your corner. You already have what I say is sort of a tailwind at your back in terms of your net worth growing throughout graduate school. So, the income for you is not as important because you know, of course we’re assuming that like the stock market, for example, will go up over five years. Maybe it won’t, it’s a short period of time. But you at least have that possibility of that happening, the likelihood of that happening over a five-year period. So it may make you feel a little bit better about the student loans to see how much the assets are potentially going to grow.

30:40 Alexandra: Yeah. That’s a really, really great point.

Have You Thought About Purchasing a Home?

30:42 Emily: So, I’ll just ask you one more question. Have you thought about purchasing a house, or rather to say, a home?

30:49 Alexandra: No, I am also a little bit commitment-phobic and purchasing a house sounds very frightening to me. That said, my partner just purchased a house in Boston.

31:03 Emily: So you are familiar with the process. Well then, I have one other podcast episode to recommend to you which is way back in season two, I think. So I did an interview with Jonathan Sun who was going into his second-year PhD at Yale, and he purchased a house. And so we talk about the process of doing that and some of the difficulties that he ran into with his fellowship income, which has since we’ve done a lot more work in that area. And it’s a little bit less of an issue now, but anyway, I just mentioned it because having a very decent stipend and New Haven real estate being like maybe approachable. We’ll see, I know everything’s been in a big, like run-up recently, so maybe not, but it’s the kind of market where like, sometimes it’s possible for a grad student to buy. Now that may be not be a good fit for you personally, for whatever reason, but in terms of like, you know, upleveling your finances during graduate school, purchasing a home, and then having as you already plan to, roommates in that house would be a very strong financial move, but not the right fit for everyone.

32:06 Alexandra: Yeah. I think I would be thinking about all of this a little bit differently were I not in a relationship. I think right now my plan is actually to move to New Haven for about a year. And then, the way that the PhD program works is you take courses for the first year and then you’re pretty much working on your dissertation. So I’m hoping to be able to pop back over to Boston for kind of the next few years and just commute into Yale when I need to be there. The pros of which is I probably will save on living expenses after that first year.

32:42 Emily: Yeah. That makes sense. Yeah. If it’s a one-year stint in New Haven, then absolutely. I mean, you wouldn’t even be able to like purchase because it takes months and months to set that sort of thing up. Yeah, that makes sense if you’re not actually planning on living there. Yeah, very good. Well, I’m really glad to hear this, like, long-term plan from you.

Best Financial Advice for Another Early-Career PhD

33:01 Emily: Well Alexandra, I end my interviews by asking my guests, what is your best financial advice for another early-career PhD? And it could be something that we’ve touched on in the interview or it could be something completely new.

33:12 Alexandra: Yeah. So I think one thing is that I already kind of touched on, I think it really helps me to have all of my savings and investment money automatically taken out of my account. So that it’s just something that happens that I don’t have to think about. I think another thing that has always helped me, especially when moving from one position to another or from one place to another, is I do a line budget for like a month or a couple months where I’ll write down every single thing that I buy and where that falls into my budget. And that has really, I think, helped me stay within my budget as salaries have shifted or locations have shifted. And I plan to do the same again when I start my PhD to make sure that I’m living within my means and able to make those savings payments.

34:03 Emily: Yeah. That’s an awesome, awesome tip. Well, it was a delight to have you on Alexandra. Thank you so much for sharing like your thoughts about this upcoming period. I think it’s going to be really relatable to other people who have been in the workforce for several years, and definitely other people who have had, you know, debt from previous degrees and heading back into graduate school. So thank you so much for being so open about this and best of luck to you this fall.

34:25 Alexandra: No problem. Thank you so much. This was really great and really helpful.

Outtro

34:35 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the Personal Finance for PhDs Podcast. On that page are links to all the episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and effective budgeting. I also license prerecorded workshops on taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps! The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing by Lourdes Bobbio and show notes creation by Meryem Ok.

How This Non-Budgeting PhD Accomplishes Major Financial Goals

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In this episode, Emily interviews Dr. Alana Rister, a PhD in chemistry and the founder of the Science Grad School Coach. Alana and Emily discuss two major aspects of Alana’s finances from grad school and her postdoc: student loans and a condo purchase. Alana’s main financial goal during grad school was paying down her variable interest rate private student loans, and the strategies she used will be very accessible to grad students who, like her, don’t budget. Alana and her partner took a gamble in purchasing a condo when they moved for her postdoc, and then sold it less than a year later when she left that position. Listen through to the end of the interview to learn the connection between that condo purchase and the Science Grad School Coach!

Links Mentioned in this Episode

accomplish major financial goals

Teaser

00:00 Alana: Let’s preface this with I am not a budgeter. I’m really, it very much stresses me out because I’ve never been at a point where I’m really financially secure. So I’ve never been at a point where I’ve made a reasonable budget and there’s been a positive at the end.

Introduction

00:24 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts. This is season 10, episode four, and today my guest is Dr. Alana Rister, a PhD in chemistry and the founder of the Science Grad School Coach. We discuss two major aspects of Elena’s finances from grad school and her postdoc: student loans and a condo purchase. Alana’s main financial goal during grad school was paying down her variable interest rate private student loans, and the strategies she used will be very accessible to grad students who, like her, don’t budget. Alana and her partner took a gamble in purchasing a condo when they moved for her postdoc, and then sold it less than a year later when she left that position. Listen through to the end of the interview to learn the connection between that condo purchase and the Science Grad School Coach.

01:19 Emily: I have my first two speaking engagements of the 2021-2022 academic year coming up this week. Speaking live to and with graduate students and PhDs is my absolute favorite activity within my business, even in a remote format. I’ve built out a slate of offerings this year that I’m incredibly proud of. My flagship seminar is the graduate student and postdoc’s guide to personal finance. And it’s typically what I recommend to first-time hosts, as it covers a broad array of personal finance topics, which of course I discuss through the lens of the PhD experience. I also have four deep-dive seminars on financial goals, investing, debt repayment, and cashflow. I offer these in three formats, which is new for me this year. I can deliver this material as a one-hour live lecture and Q&A, a two-hour live workshop, or a flipped classroom model in which I give access to the workshop videos and individual exercises in advance, and then hold a live call exclusively for discussion and Q&A. I’m really pleased to be able to work with grad students and PhD is to create actionable steps to improve their finances in each of these areas.

02:31 Emily: These four deep-dive seminars work very well as a series, but can also be booked individually. If any of those seminars sound interesting to you, please recommend me as a speaker to your university, graduate school, graduate student association, postdoc office, or department. It’s super easy and relatively inexpensive to arrange a remote event with me. Ask the potential host to go to PFforPhds.com/speaking, or simply email me at [email protected] to start the process. I really, really appreciate these recommendations. They go very far to support Personal Finance for PhDs so I can continue to provide great content, like this podcast, for free. Without further ado, here’s my interview with Dr. Alana Rister.

Will You Please Introduce Yourself Further?

03:23 Emily: I am delighted to have joining me on the podcast today, Dr. Alana Rister of Science Grad School Coach. And it’s really exciting that she volunteered to be on the podcast. We are going to talk about some of her financial decisions from the past, a decision from grad school, a decision up from her postdoc, and I hope we are all going to learn a lot from her stories. So Alana, thank you so much for joining me. And will you introduce yourself a little bit further to the audience?

03:45 Alana: Yeah. So thank you so much for having me. I’m so excited to be here. As you said, I’m Dr. Alana Rister. I am the founder of the Science Grad School Coach. And I got my PhD in chemistry in 2019 from the University of Nebraska. And since then, went on to a postdoc at East Carolina University, and have since taken a few months off to you found the Science Grad School Coach. And that’s kind of where I am today.

04:16 Emily: Yeah. And, by the time this airs, you will be in a new position. Do you want to tell us more about that?

04:21 Alana: I will. So I’m actually going back to where I got my PhD from, and I’m going to be a metabolomics and proteomics research specialist. So I’m getting to go back into research. I’m basically doing a lot of working on doing metabolomics and proteomics for other professors. So I’m going to be a predominantly lab position getting to do fun research.

04:45 Emily: That sounds awesome. I always thought when I was going through my PhD process that I would love to be, I would call it a staff scientist. Is that a fair term? Yeah, I would like to be a staff scientist somewhere. Of course my career went in a different direction, but I find that kind of position to be really attractive. So congratulations!

05:02 Alana: Thank you!

Student Loan Situation at the Start of Grad School

05:03 Emily: Alright. So the first subject we’re talking about today is student loans. Everyone’s favorite. We’re actually going to focus on your private student loans, and we’ll get into why in a moment, but give us the full kind of picture of what your student loan situation was coming into grad school.

05:20 Alana: Yeah, so I actually went to a private undergraduate university. And I did that because it was actually the same for me to go there as my in-state public university, because I got a bunch of scholarships to the private and no scholarships to the public. So I went there, but I still had to rack up a lot in student loans, unfortunately. So when I entered graduate school, I have the numbers here. So I had $15,539 in subsidized loans, $35,418 in unsubsidized loans, and then a $13,000 private loan. So my freshman year was the only year I took out private loans in undergrad. And that was that $13,000 private loan. So altogether, if I did my math right, it comes out to $63,957 that I had in student loans going into graduate school.

06:22 Emily: Yeah. And how did you feel about that at the time?

06:27 Alana: So I was not great. I was really worried because I knew that I had all this kind of loan built up. And when you get to graduate school, you might not be thinking about your loans because they’re generally deferred. And so it’s something, oh, I don’t need to make this payment. I don’t need to worry about it, but I knew that that bill was going to come due and I knew when it was going to come due, I wasn’t going to really have the financial security to pay it off. So I was constantly looking for ways to figure out, you know, how can I pay these things off quicker? One, just because of trying to not pay as much interest, but then two, so that when I did get out of graduate school, I didn’t have, because I think if I would’ve left graduate school with all of that money, it would have been almost $800 a month that I would have had to pay back using like the government’s extended repayment. It would have been over a thousand if I like tried to pay it all back in 10 years. And I was like, looking at what postdocs got paid and what other things got paid. I was like, there’s no way I’m going to be able to afford this. So I was really worried in graduate school about how I was going to navigate after graduate school, even though it wasn’t a payment I needed to make at that time.

Which Loan Did You Target First?

07:48 Emily: That is so interesting that you were more concerned about your future self when the deferment was over, than you were about maybe how were you going to do it in the meantime, right? I mean, I think it’s really forward thinking, but I think it’s unusual, right? Because many of us, I think within our finances have a very like optimistic view. Like, my income is going to be so much higher later, and that we hope of course that’s true. But also don’t necessarily, when we’re younger, think about, well, yeah, my income might be higher, but also I might have some expenses that are higher when I’m older also. So, so interesting, but you, you noted, there were three different buckets of student loans for you, federal subsidized, federal unsubsidized, and private. And so was there like one of those that you were going to target first or that bothered you the most?

08:39 Alana: Yes. So my private loan definitely bothered me the most. And that is because it had the highest interest rate, is the first reason it bothered me. The second reason is, so COVID-19 has apparently happened. And through that time we’ve had a forbearance on student loans. That doesn’t apply to private student loans. And so I knew that private student loans generally aren’t as nice as well when it comes to, you know, forbearances or deferments for your situation. And so when I got my student loan, my interest rate was at 7%. And by the time I paid off that student loan, because I had a variable interest rate, because someone told me that was smart to do back then. It was at 11% interest rate. Yeah. It was literally going up every month in the interest that I was paying.

09:35 Emily: Wow. What a great note of warning for the listener regarding variable student loans. First of all, to have it at 7%, 7%, it’s like, okay. Yeah, it’s kind of a going rate, like, but to get up to 11? Wow. In an overall low interest rate environment. I actually also had a variable interest rate student loan, a federal one, actually. It might’ve even, yeah, it was subsidized, and then became this variable rate student loan once I came out of deferment. But because of the time period, and I think because it was federal and not private like yours, the interest rate, I think it was like at two-something percent, three-something percent. When it got up to four, I was like, you got to go, and we just paid it off. So I’m just like really balking at 11. So it was really, really good foresight again for you to say, to target that as like, oh, wow, this is variable. I don’t know which direction this is going. Like let’s work on this first. So was that like your main financial goal during graduate school is working on paying down that private student loan?

10:35 Alana: Yeah, so that was definitely the main thing I wanted to do was pay that off and then have that off my chest. Because I mean, I still had, you know, several tens of thousands more student loans that I needed to work on. So that became kind of my main goal and what I was putting money towards. I still did like other things as well. I planned for trips and stuff like that that I could go do. But that was definitely, my goal was I wanted to pay off all $13,000 by the end of my PhD. I didn’t get to that. I did $10,000, mainly because I graduated a year and a half early in my PhD, so I graduated in three and a half years. So I ended up paying it off by what would have been the end of my fourth year.

Strategies to Pay Off the Private Loan

11:23 Emily: Oh, wow. Well, that’s a great financial decision all on its own. Just get out of grad school faster. That’s awesome. I love that you identified paying off the loan in its entirety as like an ambitious goal. It’s the kind of thing that like, you know that phrase like, shoot for the moon, and even if you miss you’ll end up among the stars? Like paying off $10K, like you’re among the stars, like that’s amazing in three and a half years. That’s amazing. So let’s hear more about how you mechanically did that. Like what strategies were you using?

11:50 Alana: So I think there were probably like three, okay, let’s preface this with I am not a budgeter. I’m really, it very much stresses me out because I’ve never been at a point where I’m really financially secure. So I’ve never been at a point where I’ve made a reasonable budget and there’s been a positive at the end. So it like always stresses me out to just make a budget. So I’m just like in general, very conscious of spending money, and every time I’m spending money, I’m kind of like, is this really worth spending or not? So that’s kind of, I don’t know if that’s really a strategy, but that’s just kind of how I am.

12:27 Emily: Yeah. It’s like a predisposition, kind of.

12:30 Alana: Yeah. So probably the biggest thing that helped me to be able to do it was that I went to a graduate program in Lincoln, Nebraska. So location is a big thing when you’re choosing a graduate school, and I really wanted to go to a big city. Fortunately, I think, I didn’t get into programs in big cities. And so I came here and you can get, so my first apartment, I shared it with two other people. It was, you know, fairly new apartments, very modern. It was a $400 rent. So it’s just so much cheaper to live in a place like Lincoln. So I think my monthly stipend was $1,700 after taxes. And so that goes a lot further when your rent is only $400 of that 1700. So I think that’s a major factor is the fact that I was living in a much lower cost-of-living area.

13:29 Alana: And then what I would do is, so whenever my like bank account gets below $1,500, I like start freaking out. So I plan to every month to try and put $500 towards my student loan. So we get paid once a month at the end of the month. So right before my paycheck would hit, I would look at my bank account and I would say, okay, there’s this much. And if, you know, I had $2,000 left, I would pay $500 if I had below that I would pay until I hit that $1,500 mark. And so that was kind of my strategy in paying that loan off.

14:09 Emily: Yeah. I really like the way you articulated that and think it is probably really relatable for people who, as you said, are not budgeters or are not into that, but like you are kind of have a predisposition of, okay, I’m really going to kind of carefully weigh my spending and you have this target of $500 per month in mind. Yeah. Maybe you don’t hit that every month, but you’re going to be, when you’re drawing close to that and you’re starting to eat into that balance, you’re aware of it. So yeah, I think that strategy can be really relatable.

Take Advantage of Research Award Opportunities

14:36 Alana: The third one I did is I actually worked on getting a bunch of research awards. So I got a research fellowship that I think was right around $3,000 that was paid out over two years. And I put all of that money towards that private loan. I got multiple research poster awards. There was actually one poster session that was done every year that I literally just went to it to try and get the award so that I could put it towards my student loans. And I think I won like first or second place every year, which was like a 200 to 250 or $300 award. So it’s a nice, you know, amount of cash coming in. So I would do things like that, looking for fellowships, research awards, poster sessions, talk sessions and trying to do things like that, to be able to get some extra income and probably about $3,000 to $5,000 of what I paid towards my student loans probably came from the research awards and fellowships that I got.

15:42 Emily: That’s incredible. And what a boost for your CV, too, like so nice to have that double benefit if, you know, whatever your motivation is for going, you know, going after these things, going after awards, the outcome is great if you actually get it. And even if you don’t, it’s still worthwhile. So yeah, that’s great to hear. And so those awards, when you mentioned your stipend earlier, that’s all on top of that stipend. So you just kind of had a plan of like any windfall money, like that would go straight towards the student loans.

16:09 Alana: Yep.

16:10 Emily: Alright. Yeah. Anything else you want to share with us about how you made that work?

16:15 Alana: I don’t think so. I mean, those were kind of my biggest things. It wasn’t a very planned thing, but it was a thing that was like always on the front of my mind. Anytime I would look at my finances, I kept thinking, is there a way I can put more money to get this, you know, student loan paid down?

Current Status of Loans

16:31 Emily: Yeah. Well, let’s hear current updates. So you said you finished in 2019, we’re now in 2021. We’re recording this in April, 2021. So yeah. Where are your private student loans now? Where do they stand?

16:45 Alana: Yeah, so I paid off, so it was just one private student loan. I paid off all $13,000 March of last year. So three months after I graduated, I had the last $3,000 paid off on that one.

17:01 Emily: Incredible, congratulations!

17:04 Alana: Thank you!

17:05 Emily: Then, regarding the federal loans, we know what happened, just starting in March, 2020, administrative forbearance. What are your kind of plans around your payoff for that? Like, are you going to stick with an income-driven payment plan? Are you going to do it more aggressively?

17:19 Alana: So right now I’m on the standard, but the extended standard. So, because I had, I think it’s $25,000. Because I had over the 25,000, there’s an extended where they give you 25 years to pay it off instead of 10 years. So I’m on that right now. And my plan is that, once I start my new job and I have, you know, a little bit more money coming in, I paid some off as I’ve had, you know, extra cash in, but as I start this one, I’m going to start more heavily putting it on to those student loans. So I’m not going to change the actual plan I’m on because there’s no penalty for paying things off early. I’m just going to, you know, put extra income that I get towards my student loans to be able to pay those off more quickly, if that makes sense.

18:11 Emily: Yeah, it totally does. So you’re keeping that minimum payment low just for flexibility, but you still have that as kind of a primary goal. And you’ll still be doing aggressively and just because we are in April, 2021, what do you think about the possibility of student loan cancellation to any degree? Are you factoring that into your plan?

18:32 Alana: So I am not, I am a plan for the worst, hope for the best kind of person. So I’m not, I would be very thankful and appreciative if there was any form of cancellation because, you know, I have a partner who also comes with their student loans, but I’m not banking on it. I think that’s been in talks for a very long time with not really much coming of it. So the forbearance that happened in 2020 was actually a huge benefit to me and has allowed me to make a lot of decisions that I wouldn’t have been able to make had I not had the COVID forbearance. So I’m thankful for that, but I’m not going to, you know, make a plan that, you know, student loans will get canceled or partially forgiven.

19:23 Emily: Yeah. Well, this is a really exciting time. I’m so glad that we caught you right here at the cusp of your new job in that new phase. But again, congratulations on killing the private student loans, having them be completely gone.

19:34 Alana: Thank you.

Commercial

19:36 Emily: Emily here for a brief interlude. These action items are for you if you recently switched or will soon switch on to non-W2 fellowship income as a grad student, postdoc, or postbac and are not having income tax withheld from your stipend or salary. Action item number one: fill out the estimated tax worksheet in form 1040ES. This worksheet will estimate how much income tax you will owe in 2021 and tell you whether you’re required to make manual tax payments on a quarterly basis. The next quarterly estimated tax due date is September 15th, 2021. Action item number two: whether you are required to make estimated tax payments or pay a lump sum at tax time, open a separate named savings count for your future tax payments, calculate the fraction of each paycheck that will ultimately go toward tax, and set up an automated recurring transfer from your checking account into your tax savings account to prepare for that bill. This is what I call a system of self-withholding, and I suggest putting it in place starting with your very first fellowship paycheck so that you don’t get into a financial bind when the payment deadline arrives. If you need some help with the estimated tax worksheet, or want to ask me a question, please join my workshop, Quarterly Estimated Tax for Fellowship Recipients. It explains every line of the worksheet and answers common questions that PhD trainees have about estimated tax. Go to PFforPhds.com/QETax to learn more about and join the workshop. Now, back to our interview.

Real Estate Purchase During Postdoc

21:15 Emily: Okay, let’s talk about the next topic you wanted to bring up, which is about your real estate purchase during your postdoc. So let’s hear the whole story around that.

21:23 Alana: So I met my partner in graduate school, actually, the day before I started graduate school, I met my partner. And so he had a house. He had bought a house years before we met, and when we moved, he sold the house. So we had some money come in from that. And when I took a postdoc, I took a postdoc in Greenville, North Carolina. And it is kind of interesting because when I was looking for housing options, I had the option of paying around a thousand dollars a month for a one-bedroom, one-bath apartment, or I could buy a condo that I could pay $650 a month for a two-bed, two-bath condo.

22:12 Emily: Those numbers are very surprising.

22:14 Alana: Yeah. So real estate was really, really cheap there. And to get into a decent apartment that, you know, wasn’t bug-infested and had other problems, it was very expensive to do there. So we decided to invest and we bought a $85,000 condo, two-bed, two-bath condo. And you know, my partner comes from a family that has constantly flipped homes. So this condo looked very bad. It kind of looked like it had been run down from the seventies, but was built in the nineties. So it was kind of interesting, it had been a rental for years and we kind of transformed it. I think one of my friends said it looked like a modern New York City apartment by the time we were done with it. So it was kind of interesting because we worked a lot on the condo and made it look a lot nicer, but our main driving factor for buying it was primarily because it was so much cheaper. And it was going save us so much money in the long-run. Both because we were investing in something, and then also just because the monthly payment was so much lower when we bought something versus renting a place.

23:36 Emily: How did you fit such major renovation projects around your research schedule?

Renovations and Research

23:44 Alana: I think there’s like a couple things. So one, I didn’t do most of the work. I’m going to be honest. So my partner, Greenville’s a really small town, so my partner actually had difficulty finding jobs there. So he was unemployed for about half the time we were in Greenville, and he spent a lot of his time working on it. I was more the design person. So I was like, this is what we’re going to do. And then I did some of the renovations and it kind of became like our hobby. So I took a week off at the end of my PhD, went down to Greenville, and we did the initial renovation. So we redid the floors, painted the walls, made it at least livable. And that was kind of the bulk. And then we did one more bulk right before we sold the place.

24:30 Alana: That kind of put us over the edge on getting a higher price back. But I think kind of knowing what you’re doing helped because like some things we really didn’t know what we were doing and Googling a lot of things. But I think having someone that, you know, my partner knew a lot more what they were doing when coming to a construction project and then, you know, it kind of ends up being fun after a while. And so that kind of became where we put our free time when we worked on it together around my research schedule.

25:05 Emily: Yeah. That’s really good to hear. I always kind of wonder about how like sort of logistically that works. Anyway, so my husband and I just closed on our first house. It’s very turnkey, but there are like a few things we wanted to change. So we’re kind of in the midst of like this, how much do we outsource? How much do we DIY? What kind of capacity do we have to actually work on this house? Or, you know, those kinds of questions are kind of circling in my mind right now. So I’m just really glad to hear how you did it. So I have been consuming more real estate investing content recently, a little bit from BiggerPockets, and I know Mindy Jensen, who’s the co-host of the BiggerPockets money podcast calls, what you described, a live-in flip. So that’s what she does, like serially, she does live-in flips, one after the other. But that’s great. So you had that initial experience. Now, I think you said that your postdoc was pretty short term, is that right?

25:58 Alana: Yeah, so it wasn’t supposed to be. So I started January 3rd, I think 2020, and I ended it October 31st, 2020. So it was about a 10-month long postdoc. The initial contract was until March of 2021, and then I was supposed to extend it for like another year, but I ended up kind of cutting it short and actually moving back to Lincoln, Nebraska.

Is a Real Estate Purchase Worthwhile?

26:28 Emily: Yeah. And so I think this is something that’s really on the minds of people when they move for grad school, move for a postdoc, move for a first job is, how long am I actually going to be here, and is a real estate purchase worthwhile? So can you tell us your thoughts on that? Like, did you have that thought you first moved there? I mean, obviously the numbers made a lot of sense, but over what time period did the numbers make sense?

26:49 Alana: Yeah, so I definitely had that thought, especially because when you’re looking at buying or selling, there are a couple of things you have to, so I said, you know, it was $650 per month, you know, versus a thousand. So that’s like what, a $350 difference that I probably would have been paying. But then you look at your down payment. So my down payment on the condo was just under $5,000, which was a lot cheaper than a lot of real estate down payments. But if you spread that out through time, you would realize that that’s a lot more than the thousand dollars a month. And so there were a lot of questions that we had on whether this was going to be a smart purchase or not. We were expecting me to stay for about two years. And generally you want, you know, for, I think the advice usually given is five years to make a real estate purchase. You want to be there for about five years. But I think the biggest thing was just our comfort level. And especially with the lack of really good landlords in Greenville, we felt like we were more suited, we knew the real estate market. We knew how to sell houses. We knew how to do that stuff. So we kind of took a gamble. And we went that direction instead. And we were like, we might come out at a loss in the end, but we think our experience there is going be a lot better. And so it might be worth that loss in the end.

28:21 Emily: Yeah. I was going to ask how did it end up turning out?

28:25 Alana: Yes. So actually it was really good. One, we did flip it, so we bought it for $85,000. We sold it for $99,500. So a pretty nice, we actually got an offer for like $104K, but it didn’t appraise for that. So it was a pretty big, you know, good chunk of change, I think after all the sales commissions and everything, we came out, because we also sold all the furniture with the house. So we came out with about $15,000 in the end. But the biggest thing was, that we didn’t think about, is because we had bought real estate, we weren’t hooked into a lease. So we sold our place, we went under contract in September, which means we could leave, where if we had started a lease in January, by the time, you know, October came around, which is when we left, we left October 1st. So by the time that came around, we would have had three months left on our lease. So we have had to end up paying a lot more to get nothing just to break our lease. So ultimately it was kind of a good decision in that we were able to, you know, leave without having to worry about paying, you know, penalty fees.

29:36 Emily: Yeah. I’m really glad that, you know, you’re here to tell this story because I think, for me anyway, my mind more naturally goes to like the downsides of taking, you know, risky decisions. And I think everyone should of course be aware of the potential downsides, but just know that there are upsides also that you might experience that are just as, or maybe even more likely, than the downside. So like, yeah, clearly it was a risk, it was a risk at two years, it was more of a risk at 10 months or nine months or whatever. But it did work out, and the thing is, you didn’t have to sell. If that was not going to work out financially for you, you were not required to sell, you could have moved and rented it out. You had other options. Right. It’s just that, oh, selling did make sense. And so you went through with it.

30:21 Alana: Yeah. So we actually considered that. We were looking at actually either doing Airbnbs for it or doing a long-term rental. And we actually looked into it, and like right as that was happening, there was kind of a real estate bubble. Because of COVID, nobody was selling real estate. So there was a scarcity on the market, and suddenly condos that were usually priced at the 60 to 80,000 range were starting to go near a hundred thousand. And like, so we were like, okay, this seems like it’s a good decision. And we could have always denied a contract if we were like, okay, we’re not going to get enough out of it. And we kind of just wanted the peace of mind. We didn’t really ever want to go back to Greenville. So we didn’t want to have a place that we knew we would have to take care of, but it was definitely something we looked into. And if we stayed closer to the area, we probably would have done it for short-term rental or something.

Real Estate Flip Funded Science Grad School Coach 

31:16 Emily: Yeah. Well this is so interesting. I’m really glad to like kind of learn that it did work out positively in your case. And so when you volunteered for this, you said you wanted to tell how that real estate flip funded your Science Grad School Coach endeavor. So tell us about that.

31:34 Alana: So that $15,000 that we got from the sale of the condo, which knowing for like me and my partner, if it hadn’t been in the condo, because we, you know, put $5,000 down, it probably wouldn’t have been around by the time we got, because again, we’re not budgeters. So the fact that it was there and we had that money, it allowed me to kind of make the decision. My partner finally got like his dream job back in Lincoln. So we made the decision for me to go unemployed and work on building this business and for him to come here, and his job was not fully going to support us here. So the money that we got from the sale of our house actually made up for at least a year. We would have been fine for at least a year between the savings and then also, you know, his income.

32:30 Alana: And so that kind of started me having the freedom to really pursue starting the Science Grad School Coach and work on it. And then on the side, I kind of looked at applying to jobs and things like that. Because I was kind of sad to leave research. I still wasn’t exactly sure what I wanted to do. And now kind of right as things are starting to come into play with the Science Grad School Coach, I’m also starting a new job. So like in the end, it was a risky decision. And the only reason we could have taken that decision was because we bought a house and sold it and had that extra money leftover to then come here and have that time. And now I am employed, starting Monday, I will be employed. And so that’s going to give me the opportunity to kind of do both. Both the Science Grad School Coach, and then also go back into research.

33:24 Emily: Yeah, this just, you know, is another example of what I like to say is money gives you options, right? The option to pursue fun employment. The option to wait for a great job opportunity to come and not try to force yourself into one that’s not a great fit, et cetera, et cetera, et cetera. And I also had, I guess, somewhat of a similar story when I started Personal Finance for PhDs, which just in the sense that my husband and I focused a lot of our energy and our finances on retirement investing when we were in graduate school. And so by the time we finished, and I talk about this in season one episode one, by the time we finished, we had quite a good nest egg, and that made us feel comfortable to take risks with our careers. So he took a job at a startup, which we were very concerned about.

Where to Learn More About Science Grad School Coach

34:09 Emily: It happens to be that he’s still at that same position six years later, but we did not know at the time that it would be around for six years. So he took a job at a startup and I started my business, which, you know, low revenue, you know, initially. So yeah, it was risky, but we felt confident, not because we had a bolus of cash savings as you did, but just because generally we were doing pretty well on the retirement front and we, you know, felt like it was okay to take a risk. So just so interesting, like I’d just love to hear another example of how your finances, like, we all know that our careers can affect our finances, right? By what job we choose and so forth, but how your finances affect your career as well. And for you, your ability to start your side business. So yeah, I’m just, I’m really glad to hear that. If people are intrigued by Science Grad School Coach, where can they find you and you know, what are you doing there?

34:59 Alana: Yeah. So the Science Grad School Coach is kind of the business I developed to help people with pursuing research. So like I said, one of the ways I was able to pay off, you know, a lot of my student loans was because of getting research awards and research posters. And something I realized is I’m actually good at doing research. But I didn’t start out that way. When I started in graduate school, I was really frustrated because I felt like everyone expected me to know things, but nobody ever taught me those things. So I had to kind of, over time figure all these different things out from how do I create a research idea, to how do I write a paper, to how do I put a poster together? And so what I’ve done is basically I want to share that knowledge with other people.

35:50 Alana: And that’s what the Science Grad School Coach is. So if you’re interested, I do have a YouTube channel which is the Science Grad School Coach. And there’s where I share a lot of, kind of shorter videos on different topics around research and how to get better at research and do things like that. You can also find me on Twitter at @scigradcoach. And then I also have a full resource pages if you’re interested that I have several different resources on there from how to create ideas, how to write a paper, how to do your dissertation. And you can find that at sciencegradschoolcoach.com/resources. And so those are kind of three different places where you can connect with me and hopefully get to learn some of the things that I’m trying to share. And hopefully it’s helpful.

36:43 Emily: Yeah. I love that impulse and I wish that I had run across a few of those resources back when I was in graduate school. Maybe the information was there. I don’t know. I didn’t, I was not plugged into it if it was.

36:54 Alana: Yeah, I definitely wasn’t either. And I think people don’t realize that research can be easy, and then it’s just because we’re not taught how to do it and we’re just expected to, and then we have to deal with the frustration of being like, I don’t know what I’m doing, but I feel like I’m supposed to know. So I did something wrong. And it’s not that you ever did anything wrong. It’s just how the system is set up is not set up for researchers to do well, I guess. It’s set up to make you struggle when you don’t need to. Because like I ended up writing or publishing seven papers in my three years as a graduate student, but it didn’t start out that way, right? Because I like really struggled. And then I started learning where I can write a research paper. Once I have the data, I can write it, you know, in a day or two. And that’s just because now I know how to do it. And so that’s what I’m trying to share with other people.

Best Financial Advice for Another Early-Career PhD

37:47 Emily: Yeah. Excellent. Very worthwhile endeavor. Love it. Okay. I’ll ask you the question that I end all my interviews with, which is what is your best financial advice for another early-career PhD?

37:59 Alana: So this is probably not the best advice, but I think my best advice is to think a lot about the location you’re going to. That’s one of the reasons why I came to the university I came to was because I started looking up rent prices and saw how cheap it was. But something that you may not know is before, so I came back to Lincoln after my postdoc. But I actually got two different job offers before I came back to Lincoln. I got an industry job that was going to pay me $85,000 that was in a middle, kind of a higher than Lincoln, cost-of-living, but it was just not the right job for me. But then I got my dream job, which was a postdoc. It was doing the dream research I wanted to do in Seattle. And I looked at the living cost, and I said, I’m going to have to take on debt to go work a job.

38:56 Alana: And I refuse to do that. And so I actually went for unemployment because it was cheaper for me to come to Lincoln and be unemployed than it was for me to go to Seattle and work a job. And so that was a really hard decision for me to make, because I really wanted to do that research. But I think it’s important to think about the fact that even as an early PhD, like you are worth something, and if you’re not going to be netting positive while working a job, you really may want to reconsider taking those jobs because that really shouldn’t be a thing, especially after you have a PhD.

39:40 Emily: What an indictment, you know, of the salaries that we pay, both graduate students and postdocs. Absolutely. And it’s so unfortunate. I mean, it’s the academic loss, the research engine’s loss that you did that calculus and came on the side of, I can’t take this job because you simply don’t pay me enough. You made a rational decision in the face of that, you know, situation, but it’s just so unfortunate that things are set up that way. In any case, you have another wonderful job coming up now in Lincoln. And yeah, I totally agree with you. You have to be very careful about examining the cost-of-living versus salaries. You know, the salary numbers, if you’re coming from a lower or a middle, you know, cost-of-living city, moving to a high-cost living city, like maybe that initial postdoc salary looked to you like, Hmm, not bad, but then you had to actually look into it and say, oh no, Seattle, quite expensive. It’s not going to work. So I totally agree with you do that at every single, you know, any job you’re trying to take going forward. Is there anything else you wanted to add on that?

40:40 Alana: I think that’s the main thing. Yeah, and like Seattle, like that was my dream city too. Like that is where like I want to go retire. So it was like so tempting to take it. And then just to realize that you’re literally not paying me enough to even afford rent, really. And so this new job I’m taking is just slightly over that same salary, but it’s so much more livable because Lincoln is literally less than half the cost-of-living of Seattle. So making that kind of decision, I think it’s so tempting to think that if I take this dream job, it’s going to propel me to the next dream thing. And kind of after different situations in my life, I realized that that’s not always true, and it’s not worth either going through a toxic situation or a situation where you’re not making enough money to live for a hope of the next thing, because if you don’t get that next thing, you’ve screwed yourself.

41:41 Emily: Yes. Such an important message. I mean, we all know the abysmal hiring rates for of course faculty positions, but even as I said earlier, like we tend to be really optimistic about the whole salary situation in research. And Hey, we all hope it comes about, but you’ve got to look at the downsides, too. So it’s interesting that you’ve sort of illustrated in your story, a couple different gambles that we’ve been talking about and how you’ve made different decisions, you know, in the face of these. So yeah, I love that, you know, you illustrated those points. Thank you so much for joining me today. It was a pleasure to have you and to get to know you.

42:14 Alana: Yeah. Thank you so much for having me. And I hope that my story can be helpful to other people especially about, you know, thinking about student loans while you’re in grad school. Because the other thing is, unless you have subsidized loans, your interest is still building while you’re doing that. So just, you know, thinking about that and then kind of making smart decisions when it comes to, you know, gambles. So I’m actually, I’m not a risk taker. I realize that this sounds like I’m a risk taker. I’m really not. Like I weigh through the pros and cons of everything I do. And you know, there are some risks you have to take in life, but I try to limit those to those that are just absolutely necessary. So I hope that this can help people that sometimes it works well. And sometimes not taking an opportunity also works well in the end.

43:07 Emily: Yeah. Thank you so much for sharing these stories and for joining me.

43:09 Alana: Yeah. Thank you!

Outtro

43:11 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/Podcast is the hub for the Personal Finance for PhDs Podcast. On that page are links to all the episode show notes, which includes full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt repayment, and effective budgeting. I also license prerecorded workshops on taxes. Four, subscribe to my mailing list at PFforPhds.com/Subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember you don’t have to have a PhD to succeed with personal finance, but it helps! The music is Stages of Awakening by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Lourdes Bobbio, and show notes creation by Meryem Ok.