Personal Finance for PhDs

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How to Eat Well on a Grad Student Budget

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In this episode, Emily interviews Jen from the Budget Epicurean (formerly College-Approved Food) about her experience as a grad student. Jen finished a master’s and spent several years in a PhD program, but decided to leave before completing her dissertation. They discuss her reasons for leaving and the career she built and what role finances played in the decision. In the second half of the interview, Jen gives her best tips for eating well on a grad student budget, including curating go-to meals and ingredients, where to shop, how to track prices, and what kitchen appliances are the best bang for your buck.

Links Mentioned in This Episode

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Teaser

00:00 Jen: I almost tripled my income within two years of leaving the program. It was very exciting to get those paychecks and say, oh wow, this is what real money feels like.

Introduction

00:17 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 9, Episode 4, and today my guest is Jen from Budget Epicurean. Jen finished a master’s and spent several years in a PhD program but decided to leave before completing her dissertation. We discuss her reasons for leaving and the career she built, plus what role finances played in the decision. In the second half of the interview, Jen gives her best tips for eating well on a grad student budget, including curating go-to meals and ingredients, where to shop, how to track prices, and what kitchen appliances are the best bang for your buck. I have found through facilitating my workshop Hack Your Budget that early-career PhDs are highly interested in food spending. I poll the attendees about what budget category they most want to discuss, and food always comes out on top, plus the vast majority of the frugal tips submitted are related to food. I think this is because grocery spending is typically the largest variable expense category in a grad student or postdoc budget. It’s quite gratifying to try out a new frugal strategy and immediately see the effects on your spending. In fact, Season 4 Episode 13 with Dr. Brielle Harbin was devoted to the subject of meal planning, and I almost always interrogate my budget breakdown guests on their cooking and food shopping habits.

01:51 Emily: Keep in mind, though, that your frugal journey should not end or even necessarily start with food spending. I am a firm believer that you should re-evaluate your large, fixed expenses, such as housing and transportation, before any other categories. It may take a long time, a lot of research, and even some money up front to reduce your spending in one of those areas, but once you do make a reduction, that lower spending level is locked in indefinitely and requires no conscious action by you to maintain. That is the big advantage of reducing fixed expenses first. However, I also love the idea of using frugal strategies in the kitchen to start what I call a frugal stack, which is when you use variable expense reductions to leverage yourself into fixed expense reductions. If you would like to learn more about strategic frugality and frugal stacking, check out the Personal Finance for PhDs Community at PFforPhDs.community. I taught these strategies as part of two monthly challenges held near the end of 2020. I also devoted a chapter of my ebook The Wealthy PhD to frugality; it discusses the philosophy of frugality and gets into really nitty-gritty strategies for each one of your budget categories. I hope you will join us this month inside the Personal Finance for PhDs Community PFforPhDs.community.

Book Giveaway Contest

03:30 Emily: Now onto the book giveaway contest! In June 2021 I’m giving away one copy of The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich by David Bach, which is the Personal Finance for PhDs Community Book Club selection for August 2021. Everyone who enters the contest during June will have a chance to win a copy of this book. If you would like to enter the giveaway contest, please rate and review this podcast on Apple Podcasts, take a screenshot of your review, and email it to me at emily at PFforPhDs dot com. I’ll choose a winner at the end of June from all the entries. You can find full instructions at PFforPhDs.com/podcast. The podcast received a review recently titled “Preparation and survival!” The review reads: “Excellent resource to get prepared for graduate education and to navigate it. I think the specifics of your personal situation and institution will always vary. So some things you take with a grain of salt, however, the biggest asset of the pod is the variety of people interviewed. People from different backgrounds and programs and the amount of topics covered. Most of these topics are discussed behind closed doors and in private, but this podcast makes you remember you’re not alone and there are way more people out there navigating difficult situations like you.” Thank you to this reviewer, and I fully agree that the strength of this podcast lies with the guests! I really appreciate my guests being transparent about this taboo topic. Without further ado, here’s my interview with Jen from Budget Epicurean.

Will You Please Introduce Yourself Further?

05:10 Emily: I have joining me on the podcast today Jen from Budget Epicurean. And we kind of ran into each other on Twitter. And I realized that Jen would have a lot to say to us on the podcast. So that’s why I invited her on. And she is both a former grad student and, as you can tell by the name of her blog, Budget Epicurean, has a lot of content to offer us on managing a budget with respect to groceries, with respect to cooking, food spending. So we’re going to learn about both these things. Why did Jen leave her graduate program, and then what are the food tips that she can give us for, you know, eating well on a budget? So I’m really excited for this interview. Jen, will you please introduce yourself to the audience a little bit further?

05:59 Jen: Sure. Thanks Emily. Yeah. I was a graduate student for a very long time. My mom’s a nurse, my dad’s a chemist, so I’ve always been interested in science and knew from a young age that I wanted to go to grad school, get a PhD, run a lab. So that was kind of my path. And I got my undergraduate degree in biology and then I pursued a master’s degree right after, also in biology, and then got into a PhD program in genetics which was wonderful. I loved being in school and learning, but I realized after about a year of talking with the other graduate students, the other postdocs, and even some of my advisors who said funding kept getting tighter and tighter. Tenure-track jobs were almost non-existent anymore. And it just seemed like a big struggle. So it took me about two and a half years to decide, it was a really hard decision, but I did not complete the PhD program. And we can get more into that later. But throughout all this time, I was also blogging because I love food and cooking. So it started out in undergrad as College Approved Food, that most of it you can make in like a dorm room. And it’s just kind of grown from there and morphed over time into the Budget Epicurean as my personal cooking skills and interests expanded.

What Were Your Career Aspirations at the Start of Grad School?

07:24 Emily: One thing I love about blogging, and I used to blog about personal finance, is that you have this wonderful record to look back on, you know, years later. When you can’t quite remember as well, you know, what was going on day-to-day, you have that blog. So it’s so fun that you were focused on food for all those many years and that you have the record of it. So I want to go back to, you know, when you started graduate school, you said you were basically going straight through, undergrad, master’s, into a PhD program. What were your career aspirations? Was it definitely to have a tenure-track job or, you know, was that the only thing you were there for, or what were you thinking when you started the PhD program?

08:00 Jen: So early on, I guess I just had this dream of having my own labs and writing papers and grants and, you know, like I’d cure cancer someday or some kind of fabulous scientific discovery. It just seemed so interesting and just a thing I wanted to do. And then the more I got into it, it’s kind of, they say, you know BS is bull crap, and then MS is more crap and then PhD is just piled higher and deeper. And the longer you go, the more narrow your focus gets on your field. So you know a lot about a little. And so my ideas of big discoveries kind of just became more like fixing this one little problem that we don’t know enough about. And I think that was the further I got, the more I saw people in the end goal as like a professor, as someone running a lab and saw what their lives were. They don’t actually do the science anymore. They’re lab managers and money managers and politicians almost to a point. So I think that’s where the kind of disillusionment started.

09:19 Emily: Yeah. I think, you know, I had a similar trajectory, I would say at the beginning of grad school, like came in wanting to run my own lab, not necessarily in academia, but just to be doing research. And I realized as you did that, once you’re at the top of that, you know, hierarchy of your own lab that you are not doing the day-to-day in the research. And so I then started thinking, oh my God, I actually sort of idealized a postdoc as like the perfect job. And of course there are, you know, staff scientists, those positions can exist, although they’re not super common in academia. So for me, it was never about like academia and like the tenure-track and so forth, but rather about doing research. That was until I got sick of doing research and decided never to do it again later on. But yeah, I’m just thinking about like, I’m sure you considered this because you took a lot of time for this decision, but what were the jobs that you maybe could have had without the PhD? And did you just still have that sense of like, no, I’m going to be overeducated by that point, according to what your interests were? Was that kind of how the decision was made? That even if you didn’t stay in academia, if you finished the PhD, you would still be pigeonholed so much?

10:30 Jen: Yes. I think that ultimately is why, because I did finish a master’s program before going into a PhD program, so not everybody does that. So I had the masters already, so I knew I was that like one level above a college degree, which was, you know, good financially-speaking and did lead to the career path I’m currently in. But not wanting to go the full PhD without wanting one of those “You need a PhD to do it” jobs. I was lucky we had a group that was called careers, alternate careers in science, something like that where once a month they brought in people. So I saw a couple of different options of people who, you know, were clinical scientists in pharma and they advise drug companies or clinical illustrators for textbooks and things like that. But none of those really spoke to me. So I kind of got into that thought process of, okay, well, if I finish the PhD, then there’s nothing really at the end of this tunnel, so I should stop now.

Role of Finances in the Decision to Leave Grad School

11:31 Emily: Yeah. Again, I see myself so much in this path because when I went through the same career exploration process, I did identify a career track that I was like, well, that sounds really cool, and I do need a PhD to do it. Or not need, but you know, it’s helpful. And so I decided to keep going kind of with that in mind. And of course after I finished my PhD, I started my business and it has nothing to do with that career track or anything. So it’s just so interesting, like that can make all the difference is really seeing a career that you’re interested in. Obviously, why would you finish it if you didn’t think there was a career on the other end that needed the degree and that, you know that you were super passionate about? So what role did finances play in this decision?

12:12 Jen: So, there are definitely pros and cons to going straight through. Sometimes I kind of wish I had just taken a few years off after undergrad or after the masters to try and get a career and see if I liked it and then go back. But I think it was also helpful that I had just come out of undergrad where, you know, you’re very used to living on a low income. So going into the master’s program, I think I made $12,500 per year. Which now seems completely absurd, but this was in Ohio and my rent was only $350 a month. So it was doable.

12:47 Emily: What year was that? Or years?

12:50 Jen: 2010 to 2012.

12:53 Emily: Okay.

12:54 Jen: I believe. And it was an attic. So I was literally just living in an uninsulated attic apartment in Ohio. So, you know, my electric bill was probably almost that. But then going into the PhD now I was making 20 something in Colorado. So this is circa 2012 to 2014, something like that. And it just was getting very difficult. I was starting to think about wanting a house someday. I met my future husband there. So we’re thinking about, you know, buying a house, having a family, getting married. And we were both graduate students at the time. So even combined, we were 40 ish. So it was just really difficult to save anything or feel like, you know, you could start doing those adult things as a grad student. So that’s one of the many things we discussed was, okay, if we want to buy a house, we need more income.

High Attrition Rate Amongst Grad School Cohort

13:53 Emily: And you mentioned to me when we were preparing for this interview, that most of your friends left grad school too. Was there a pretty high attrition rate from your cohort?

14:02 Jen: Yes. we had four start and, to my knowledge, only one is still in the program. And the year after us I believe they had the same, they had four people start and only one is still in the program. And now six, seven years later the one person who stayed is still not graduated and had switched labs twice already. So.

14:28 Emily: And do you think that finances are playing a role with those decisions as well? I mean $20K a year, you know, 6, 7, 8 years ago in Colorado, not a low cost of living area, by any means. It sounds quite difficult, even as you said, in a two low-income, two low-income household combined, I still think that would be quite difficult. I’ve just been thinking a lot recently about the strain that we put–“we,” academia–puts on our young, our trainees, of the financial strain that we put on them and the effect it can have on our mental health, our career outlooks. Obviously the financial directly affecting that, even physical health because, you know, food security can be an issue. Housing security. So, yeah. Did you talk about that sort of thing with your cohort mates?

15:21 Jen: We didn’t really, I mean, we weren’t close enough to talk about the numbers and the details, right. But I know I’m the only one who stayed, I think a large part had to do with, he had a lot of family support. Family lived in the area, so he lived with them. So even though he was married and had a kid with another on the way there was, you know, no costs for housing, he had support to help watch the children, to support, to get food and things. So I think that probably helped him a lot, that, that low-income didn’t matter as much. He had that social safety net. One of the other girls who dropped out it was because she got pregnant along the way and got lucky that her husband got a pretty high-paying job about halfway through her first year. So they were comfortable enough that, you know, they said the amount that she was making wasn’t worth the stress it was putting on her. So she left and didn’t come back. So I think that if you don’t have that type of support or other income, it’s really hard to make it as a grad student.

16:22 Emily: Absolutely. It sounds like you, and you know, these other friends, you mentioned like you’re starting to kind of lift your heads up and say, what do I want the rest of my life to look like outside of my career, and what finances are needed to support that? And is grad school currently, or in the future, going to take me to that financial place that I want to get to? And you know, I’ve had a previous interview actually, we’ll link it in the show notes, with Dr. Scott Kennedy, where he talked about, you know, his aspirations initially to become a faculty member, you know, tenure-track, and just realizing as he started his family that a postdoc and, you know, an assistant professor position was not going to cut it for him and his wife and three kids and so forth.

Improved Finances and Current Career Trajectory

17:06 Emily: And so, I mean, so he changed career tracks and he’s very satisfied with that and is paid very well. But yeah, sometimes, you know, the decisions you make when you’re 22, 23, 24 years old, you’re not thinking super far, like you might be thinking decades ahead in your career, but not necessarily about how things might change in your personal life. And they can change very quickly when you’re in your twenties. And a lot of people are, you know, forming families and so forth. So yeah, I just, I find that really interesting. So, you know, what career have you had after leaving your PhD program and how are your finances looking now?

17:39 Jen: Yeah. So once I had made the decision that, yes, I did need to leave. I didn’t want to just jump ship, right. I didn’t want to have zero income. So I started looking at other options and as I said earlier, having the master’s already really helped because that gave me a leg up and a lot more options beyond just, you know, being a research tech, cleaning beakers at a university somewhere. Not that that’s a bad thing. But I think it was actually through one of the people who came to talk to us. It was someone who worked for pharma as the medical monitor for clinical trials at a pharma company. And so I started looking into clinical trials, which prior to then I hadn’t really thought about. Every drug that’s approved, that’s what they have to go through. And so I looked into, you know, how does that happen?

18:27 Jen: What are the different careers you could do on the pharma side, on the site side? And I just had good timing. I found an opportunity with a research group, very close to where I was and interviewed. And even though I had no research experience, clinical research experience, I had the master’s degree. And so I convinced them that I could learn quickly and they decided to go ahead and take a chance and hire me as a research associate. And I loved it. It was the first time I ever had patient interaction with people in a clinical setting. And it was just so much fun and it was a very eye opening moment of like, this is like the thing. This is the thing I want to do.

19:08 Emily: Wow. And it sounds actually like, you know, based on, you mentioned your parents’ careers earlier, that it’s kind of an interesting melding of the two, like still doing research, but having patient interactions, like probably, yeah. They probably both do each side of those things, right?

19:21 Jen: Yes, yes. It was perfect. So I still get to read scientific papers. I still get to browse Google Scholar. It’s just, you know, looking at the background of my drugs and standard of care and being on the cutting edge of research is so much fun. So yeah, it was a very good fit. And having the masters, I think is the thing that really pushed me into it. And then once you’re in clinical research and you have years of experience, then the whole world opens up to you. So I’ve switched companies several times, moved up in the ranks and now I’m in essentially a clinical coordinator management position. And so I think doing that was an excellent choice. I don’t know that I could have done that right out of undergrad. So ultimately I’m glad it all worked out the way it did. But I almost tripled my income within two years of leaving the program. Because I mean working full-time, I think I started at like 40. So just by getting a job, a 40-hour-a-week research assistant job, I had doubled my income there. And then after I had a year of experience, I went to a different company and then I was at like 58 or something like that. So yeah, it was very exciting to get those paychecks and say, oh, wow, this is what real money feels like.

20:43 Emily: Yeah. Incredible. And that’s the thing that, you know, I often talk the income jumps that can come along the PhD process, but guess what, if you’ve been living on a grad student stipend, almost any job is going to pay you quite a bit better than that. So yeah, I’m sure that did feel incredible.

Commercial

21:02 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 4-step Gradboss Method, which is to uncover grad school secrets, transform your mindset, uplevel 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 in 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 the academic society dot com slash e m i l y for my affiliate link for the course. Now back to our interview.

Best Tips for Eating Well on a Budget

22:30 Emily: So let’s switch focuses now and talk about the food side of things, the subject of your blog. And so I’m going to kind of let you like drive this half of the conversation, but like, what are your best tips for us in terms of shopping, cooking, whatever it is, as I said earlier, eating well on a budget?

22:45 Jen: Yeah. So I’m also lucky there. My mom is a fantastic cook, and I grew up in a household that we were just very thrifty and frugal and creative. So I got to use all of those skills to feed myself, you know, better than ramen all throughout college. So my house was always the place to go for dinner parties and game nights. And I love hosting, so I had to find ways to, you know, feed six of my grad student friends without, you know, we can’t afford $60 worth of pizza every Friday. So I think one of my best tips is to just try new things. And eventually you will find some recipes that you like, and put those on repeat. So for your standard meals, I have tons of like cheap ingredient lists and less-than-five-ingredient meals on my blog. Things like stir-fried rice. That is just infinitely possible to mix it up. You can put beans in it, you can put whatever meats are on sale in it, and whatever vegetables. It’s good with canned or frozen seasonal produce. So find those couple of recipes that are very flexible, that you almost always like, it’s easy to cook, and that saves you tons of time and money. If you just say, okay, it’s Tuesday, I’m hungry. What can I make? And you just have these like three, five things that you just know you have on hand in the house.

24:10 Emily: One of the things that you just mentioned that I thought was really key was short ingredients lists. Because I know when I started cooking, and I did not have extensive cooking experience growing up or through college. I was always on like a meal plan, so I didn’t have to really cook outside of that much. So when I started with that, I was looking at whatever, I don’t know, standard recipe at that time books. And they would have like 10, 15 ingredients for like a recipe. And it would be cool and like taste good at the end, but the work that went into handling all those different ingredients, and also just the fact that I did not have a stocked kitchen and it would be like, oh, you know, three different spices for this one, you know, meal. And they’re like several dollars each and I had to pick them up and so forth.

24:55 Emily: I realized that it was the wrong approach, looking back at it, and now I cook much, much more simple meals, usually that have usually, you know, much shorter ingredients lists. And I think that’s really a key when you’re just starting out. And yeah, like I said, your pantry is not already stocked with, you know, the sort of esoteric like spices that some fancy recipe might call for. So I really love looking at yeah, five ingredients or less, like those kinds of recipes. And I also really like the idea of having some kind of generic base kind of meal that you can then tweak and alter with, depending on what you have on hand, or as you mentioned, what’s on sale. Something that’s flexible, like a stir fry. Do you have some other examples of that? I’m thinking like salad, you know, that works too.

25:39 Jen: Yeah, for sure. Salads are a great one. You can, you know, can a corn, can of black beans, suddenly it’s Tex-Mex. If you got, you know, walnuts, cranberries, some kind of cheese, salads are great to mix it up. Whatever proteins on sale. I love chickpeas or, you know, a little flank steak. You can get those for a couple bucks, slice it up. It makes a great salad. Soups are really great. If you’re a person who likes soups that’s always a good kitchen-sink meal. Like I don’t know that I could think of anything that you couldn’t throw in a soup and make it work. Casseroles are also great. Omelets, you would be surprised at the things you can put in an omelet and make it delicious. I’ve had like leftover French fries that normally taste terrible. Chop them up and throw them in an omelet. Now they’re basically hash browns. So yeah, I love meals like that. We still have them all the time.

Time Management Tips for Food Shopping and Cooking

26:30 Emily: And so what’s another kind of suggestion, maybe on the time management side of shopping and cooking, which I know can be a real challenge for graduate students?

26:40 Jen: For sure. So again, I would start with what you like, and then branch out a little bit from there. So a list is very helpful if you’re the type of person who likes lists to keep you focused and not spend eternity at the store. Plus it’ll keep you from, you know, just being confused in front of the spice rack, like there are 7,000 things. What do I get? Like, you look at your list, you know, I need like salt, pepper, cinnamon, that’s it. So having that also keeps you from spending money because grocery stores, you know, want you to spend more money than you intended and having a list can help not do that, although I still do.

Process for Making a Grocery List

27:23 Emily: And what about when you’re making that list? Like, what’s your process for that? Like, are you looking at the circulars that are produced by, you know, I don’t know how many different grocery stores you kind of cycle through, but is that, is that another strategy that you use, like shopping multiple stores? Like, let me know how you’re doing in terms of making a list, how you do that with your budget in mind.

27:42 Jen: Yeah. So I have a number in mind that I’m trying to hit every week, right? So let’s say you only want to spend 50 to $70 a week for one person. So you should definitely look at the circulars because stores have what they call loss leaders. So it’s usually whatever’s in season or they can get a lot of, and they want to use that to get you in the store. So like it’s wintertime and cabbage is on sale and Brussels sprouts are on sale. So they’re super, super cheap per pound. So you start with those things and say, okay, what can I make with those things? I can make soup. I can roast them as a side dish. I can put them in a casserole, and just come up with some ideas for meals. And so I would then make a list of, okay, I want this thing, this thing, this thing, they’re all on sale.

28:33 Jen: Check your pantry as well. So like, you know, I have some pasta noodles still, so I’m going to make pasta one night. So I don’t need to buy that, but, oh, I don’t have any sauce. I’ll put a jar of that on the list. So between what you need that’s not in the house and what’s on sale, you can then kind of build your meal ideas around that. And then when you’re at the store, you can look around because, you know, sometimes I’ll find deals that weren’t advertised in the circular, but they have, you know, there’s like a markdown on pineapple because it didn’t sell well enough or whatever. So I’ll pick up some of that too. So I think the idea of flexible meal plans is what works best for me. I’m not like, okay, Monday I will have oatmeal and then sandwiches. And then a tuna noodle casserole. It’s more like, I’ll probably make tuna noodle casserole this week.

Using a Price Book

29:23 Emily: Another strategy that I use. So, my husband always makes fun of me. I do not know the prices of things. I don’t like look at price when I’m shopping, especially in something like a grocery store. So it’s really important for me to kind of study the prices because it’s not something that I like naturally will just absorb. Like he just naturally absorbs that. He knows the last time we bought this, we paid this. The price I see in front of me is lower or higher. That helps me know when to buy it or not, or to skip it. But I actually have to use a price book. So especially when I am, so we recently moved to a new state. And so we were kind of like, well, we don’t know what the prices here are. So we started using a price book again.

30:02 Emily: It’s not something I do all the time, but just to check out, okay, well, this is what we’re paying over here, studying the receipts, basically. This is what we paid for this food at this store. This is what we paid for this food at this store. Okay, that price is the same every week. Okay, sometimes that price is lower and sometimes it’s higher. We need to like pay attention to when it goes to this level and then we can buy it. So the price book to me is really helpful as someone who does not naturally incline to, you know, notice the prices of food to know when something is a good deal or something is not a good deal. Because for me, if it’s not going to appear on the circular, unless I have that price book, I’m not going to know if it is a good price or not a good price.

30:37 Jen: Mhm, that is an excellent point. Absolutely. And I think I’m like, I must be like your husband. I just know in my brain like, oh, last time I bought Italian dressing, it was about 1.50 and it’s, you know, 10 for 10 while on sale. That’s a dollar. So I’ll just get three of them. Should last for, you know, until the next sale comes around. But if that’s not a thing you notice then a price book is definitely a good idea. And I would suggest a price per unit as well. Because sometimes they do get you there. You assume, you know, the big package, cheaper per ounce, but maybe it’s not, maybe you should get two of the one-pound bags instead of one of the two-pound bags. And that’s one way to know for sure.

Finding Your Go-To Stores

31:17 Emily: And one strategy that I just mentioned with that was shopping multiple stores. And so I’m wondering, you’ve lived in multiple places now, someplace for your undergrad, master’s, PhD, maybe you’ve moved since then. How have you found like your go-to stores in those new areas?

31:34 Jen: So I think it’s a lot of the mental price book thing. So we did move around a lot. We’ve lived in Colorado, Connecticut, and now we’re in North Carolina. And so when I go to a new place, I usually do go to all of the grocery store options at least once just to see, you know, what’s the layout, what do the prices look like? How far is it from home? And then I kind of choose the best one based on prices and now a little convenience, because we have that wiggle room in our budget to sometimes pay a little bit more just because it’s closer. But yeah, so I would definitely recommend going to the stores, just checking things out, write down in your price book the things you commonly buy. So that’s another way that you’ll know your eating habits like, oh, I always buy chicken and spinach and milk and bread.

32:20 Jen: So those are the things you’re buying every week, even if you’re only saving 10 cents, 20 cents every week, that’s going to add up. So I usually go to our Harris Teeter because they have pretty good prices. They have regular rotating sales on things we use all the time. Then I supplement once a month, once every other month with Aldi, which is one of my favorite discount grocers. And they’re expanding, they’re in most of America by now. So they just have great super cheap prices on your common everyday staples, like canned tomatoes, canned beans. So those are my two I use most frequently.

33:01 Emily: I’m glad you mentioned that you were in North Carolina. I did not know that. I did grad school in North Carolina at Duke. And so actually when my husband and I first got married, the closest grocery store to where we lived was a Harris Teeter. So we were doing a hundred percent of our shopping at Harris Teeter, which I do not think was a good idea, especially because we were not, again, paying attention to the sales cycles and so forth. It was just, it was all about the convenience of that being like super, super close. So after we started paying attention, after I started paying attention a little bit more to the grocery prices, we mixed in Kroger in North Carolina and Costco and Aldi. And so we would not definitely hit up, you know, Kroger and Costco and Aldi every week, but it would maybe be kind of on a two-week rotation.

33:45 Emily: And yeah, another kind of vote for Aldi. I recently moved from Seattle to Southern California. There were not any Aldis in Seattle, I don’t think, that I was aware of, but there is one really close to where we live now. And so I’ve been, like, as soon as we got here and we were like, oh my gosh, there’s an Aldi again, like we are so excited to be able to go back to Aldi. So yeah, definitely that’s where we do, like, our kind of primary shopping, I would say. And then sort of supplement it with like a regular, you know, grocery supermarket kind of situation.

Tips for Meal Prepping

34:11 Emily: I asked earlier about time management and I was thinking about like, I don’t know, meal prep or like bulk cooking, batch cooking. Do you have any tips around that for someone who maybe is just cooking for themselves and has a busy schedule? I know when I was in graduate school, a big problem for me was staying on campus till, you know, post-six, post-7:00 PM and coming home hungry. And what do you do in that situation?

34:36 Jen: Yeah, absolutely. So I think as a grad student, if you don’t eat leftovers, you should start now. I think I only met one person who refused to eat leftovers and they spent way too much money on food. But that is the best way to just make sure you always have something ready. So I would say, seek out things that freeze well. Things like pasta bakes and soups and chilies, and even some casseroles, and you can make those things in bulk. And honestly for one person, that’s not very difficult. You make one pan of, you know, like a rotini bake or lasagna, and you can eat some then, have some for tomorrow, and then freeze the other half. And that’s 2, 3, 4 more meals for you. So you can start out with cheap Tupperware or even Ziploc bags. The way I do it now is not necessarily cooking whole meals, but I batch prep when I make ingredients.

35:33 Jen: So say I’m making rice for stir fry and burritos this week, and I need like a cup or two cups of rice. Well, I can cook like six or eight cups all at the same time and freeze it in Ziploc baggies. And then next time I need rice, I don’t have to cook it. It’s already made, I just pull it out of the freezer, stick it in the microwave. And that saves me 40 minutes of not having to boil rice next week. So if you’re making things like that, I would say definitely batch it and freeze it if you can.

Go-To Kitchen Appliances

36:05 Emily: And also with, you know, someone budget-conscious in mind, what are your go-to like kitchen tools or small appliances that you would say are good for facilitating the kind of things we’ve been talking about?

36:19 Jen: Yeah, for sure. It’s a little hard looking back now, now that I have the luxury of so many things in my kitchen. But I would say if you can only get one thing right now, probably a pressure cooker is my absolute favorite accessory right now. And the newer ones that are super fancy and have a million things that can do are great, but you don’t need a super fancy one. Like I have an ancient pressure cooker from my grandma and it gets the job done. But that will definitely save you time. You can cook something like a roast from frozen in 30, 40 minutes. It’s amazing. So that helps you maximize your freezer usage of foods like that, and it’ll save you money because you can make your own dried beans. My biggest problem with dried beans was that they take so long. You’ve got to soak it overnight, put it in a Crock-Pot for hours. You can take dry beans, stick it in the pressure cooker, and 40 minutes later, you’re good to go. So the price per pound of dried beans is way better than canned, and a pressure cooker makes them almost as convenient. So that would be my top one right there.

37:35 Emily: That’s a good tip. I’m like pulling out my Amazon like wishlist, like, oh, I need to add one. Because I don’t have a pressure cooker right now. Oh yeah. That sounds really. Because I have far too many times left, you know, some meat or something frozen until way too late and have to kind of scramble and remake the plan. So I mentioned, I don’t have a pressure cooker, but the appliance that I used most when I was in graduate school, and I think it was something like $40 when I received it, was a slow cooker. And I really liked that too, because it was so easy to cook in bulk, again for one person or two people. Like you can cook one meal in a slow cooker and it’s going to last you all week pretty much in terms of like taking it for lunches or whatever.

“Leftovers” Avoid the Takeout Trap

38:13 Emily: So that was my, like, when I started using that, it like completely changed my like cooking life. It made things so much easier. And I really, like we mentioned about like, you know, freezing meals and having things ready also, you know, leftovers. I don’t even like the word leftovers. I love eating leftovers, but I don’t like calling them leftovers. I feel like it’s really pejorative. Like they’re like an afterthought. No, you intentionally created food than you needed, you know, initially. And you had a plan to eat it like over time. I love that because yeah, I think a big sort of trap is being hungry and not having anything really easy to go to at that moment. Especially as I mentioned, like coming home from lab late, I remember when I was blogging at some point and I mentioned something about cooking.

38:56 Emily: Like, you know, not eating out, basically. Like not eating out for convenience. I remember I got a comment from a grad student like, well, what do you do? Because you know, when you get home from lab, like you have to be, it’s late. Like you’ve got to be hungry. And I was just like, oh, I realize I never cook at that time. I always had something already ready to go in the fridge and the freezer because yeah, I came upon that situation over and over again. And I would be tempted to grab takeout on my way home if I didn’t know that there was something there waiting for me that was appealing.

39:25 Jen: Yeah, absolutely. And, the Crock-Pot would be my second for sure. They probably are a little bit more affordable, but yeah, you can make a lasagna in a Crock-Pot. You can make a huge batch of chili or soup or casserole or cook a whole chicken and shred it up and save it for later. So yeah, just having a bag or a Tupperware you can pull out of the freezer, the refrigerator, whatever, you know, it’s eight 30 at night. You just need something before bed. That is definitely a huge time saver, huge money saver.

Find What’s Cheap Per Pound Near YOU

39:55 Emily: Do you have any other tips around budget, budget, cooking, shopping, eating?

40:00 Jen: I would say just look, I mean, there are so many resources on things that are generally cheap per pound. Take those lists, but compare them to what’s near you. Just because the internet says eggs are cheap, that might not be the case where you live. Just because, you know, carrots are supposed to be cheap, maybe they’re not in Canada, I don’t know. But find the things near you that actually are cheap per pound and just keep trying different ways to make them until you find one you like. Because if you can make your average cost per pound lower, that’s going to make your cost per meal lower. And that’s going to be much friendlier to your budget.

40:38 Emily: I have to say, I’ve been doing this recently with cabbage. I’ve been on the website, like Budget Bytes, a lot recently and noticing a lot of cabbage recipes coming up on there. So I was like, okay, I need to find a way, because I never ate cabbage earlier in my life, but yeah, that’s the one I’ve been experimenting with recently. Haven’t quite found the thing that we love yet that’s made of cabbage, but maybe I’ll try one or two more before I give up.

Best Financial Advice for Another Early-Career PhD

41:01 Emily: Okay. Well Jen, thank you so much for giving this wonderful interview. As I ask all my guests at the close of our interviews, what is your best financial advice for another early-career PhD?

41:13 Jen: I would say, learn all you can about investing, but then do it. I spent far too many years just reading, reading, reading, but never actually opened an IRA or a Roth. I had a savings account, you know, but it wasn’t much. And even if all you can do is $10 a month, you know, at least I would have had something building, because time is your biggest ally and don’t let it slip away. Just do it. Open it. That’s what I told my sister. She’s six years younger than me, and she probably already has more than me in her retirement account. So just do it.

41:51 Emily: Yeah, that is perfect advice. I see the same thing with many, many people who come to me, come to my material that they know kind of what they’re supposed to do. They’ve been reading about it, but that step of getting off the sidelines and doing it is really where they get kind of held up and tripped up. And I guess my message to like that same audience is like, you don’t have to be perfect from the start. You don’t have to have the perfect investing strategy figured out. It’s much better to get started imperfectly and figure it out as you go along than do everything perfect right from the start. However, the start is two, three years later than it could have been if you had just been willing to, you know, take the leap. So I’m really glad you mentioned that, it’s yeah, a very, very common problem.

42:35 Emily: I don’t know. Maybe it’s a PhD thing, like a grad student thing, like wanting to do the research and wanting to be right and wanting to not mess up. And I certainly understand that. I actually did mess up when I first opened my IRA and didn’t catch my mistake for like a year, but you know what, I’m glad I started when I did, even though I didn’t do it right at the start. And I’ll mention actually for anyone who’s, you know, hearing themselves in that situation. I have a challenge inside the Personal Finance for PhDs community that is specifically about opening an IRA. So if you join the Community, PFforPhDs.Community, you can go to that challenge and find a six, I think it might be seven, actually, seven-step process. This is exactly how you open an IRA. This is what you need to do, the decisions you need to make at these different points.

43:17 Emily: This is how you research it. It points to resources I’ve created that are inside the Community. So it just, for exactly that problem, people getting off the sidelines. And so it just provides a little bit of accountability, too. Like you kind of go in there and you call me and say, okay, I’m taking the challenge. I’m going to do it. And then by the end of the month, I’m going to be asking you, did you finish? Did you go through all the steps? So thank you so much. Thank you so much, Jen, for this interview. And it’s been great talking with you and hearing about your journey and hearing these great grocery budgeting tips. Thanks.

43:46 Jen: Yeah. Thanks so much, Emily!

Outro

43:48 Emily: Listeners, thank you for joining me for this episode! pfforphds.com/podcast/ is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episodes’ show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast and instructions for entering the book giveaway contest. 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. If you leave a review, be sure to send it to me! 2. Share an episode you found particularly valuable on social media, with an 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 and show notes creation by Meryem Ok.

Pursuing Your Passion in a Financially Healthy Manner

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This episode is a podcast swap! Emily’s guest is Dr. Stephanie Schuttler of Fancy Scientist. Emily and Stephanie interview one another on the financial challenges of a career in wildlife biology and how to pursue your passion while preserving financial balance and health. They discuss the necessity and prevalence of volunteer and pay-to-play experiences in wildlife biology and how to have realistic expectations about the job availability and compensation at various levels of education. Stephanie is an expert in careers in wildlife biology, but this conversation is applicable to PhDs who are following their passions into many other competitive fields.

Links Mentioned in This Episode

Teaser

00:00 Stephanie: In this field, so much is about those experiences. So if you really want those pay-to-play experiences, because, I mean, some of them are super cool, you could focus more on getting into a school that’s more affordable and do some of those things rather than go to a really expensive school.

Introduction

00:21 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 9, Episode 3, and today Dr. Stephanie Schuttler of Fancy Scientist and I are publishing a dual interview! Stephanie is a wildlife biologist-turned-science communicator and expert in careers in wildlife biology. We have a great topic: How to pursue your passion in a financially healthy manner. Stephanie gives the financial and career lay of the land for wildlife biology, a popular and competitive field that requires volunteer and pay-to-play experiences prior to being admitted to graduate school. Even completing a graduate degree in wildlife biology doesn’t necessarily lead to the type of job young people dream about when they enter the field. Sound familiar? Stephanie and I discuss how to limit the financial risk of pursuing a career in a field that you are passionate about.

I have some exciting personal news, which is that I finally received my full vaccination course against COVID-19! I have to say, it was tough to watch my friends and acquaintances who have university and hospital affiliations receive their vaccinations over the last several months while I was waiting for them to become available to my age bracket in California. But my turn finally came. I am ecstatic that my parents are visiting us this week, whom we have not seen in person since November 2019.

01:51 Emily: Prior to COVID, as you likely know, I gave in-person seminars and workshops at universities. I honestly wasn’t sure how my business would fare without being able to travel and with universities facing the uncertainty that they did early on. As it turned out, in the 2020-2021 academic year, my speaking services in the virtual format were more in demand than ever, particularly this last spring. I feel really, really fortunate about that! My calendar is now open for engagements in the 2021-2022 academic year. I am of course offering virtual events, which I assume will continue to be popular. I’m not sure if professional development events and conferences are switching back to being in person this year to any degree, but if they are and I am asked to present, I will certainly consider it. I am over the moon about how I have adjusted my offerings for early-career PhDs this year, which you can check out at PFforPhDs.com/speaking/.

02:53 Emily: First, I got honest with myself about my most popular seminar, The Graduate Student and Postdoc’s Guide to Personal Finance. The Guide is my comprehensive overview of multiple personal finance topics. I was trying to cram it into 90 minutes, but it really is a two-hour seminar with Q&A. It’s great for the end of a workday, not so much for a lunch hour.

03:15 Emily: Second, I clarified the topics for my in-depth seminars, which are financial goals, investing, debt repayment, saving, and cash flow management. Each of these seminars comes in a one-hour lecture and Q&A version or a two-hour workshop version. The workshop version includes the teaching from the lecture version plus spreadsheet templates, worksheets, and/or small group discussion prompts. These seminars work well as stand-alone events or part of a series.

03:45 Emily: Third, I took my tax seminars off my slate of offerings. This is honestly a big risk for my business because my annual tax return seminar was second to The Guide in popularity and always drew my biggest audiences. The preparation of an annual tax return and calculating estimated tax on fellowships are my audience’s most universal financial pain points.

04:10 Emily: However, I am not leaving you in the lurch with respect to tax education and assistance. Stepping back from giving live seminars on this topic actually enables me to scale the delivery of the help. In place of these live seminars, I am licensing access to my pre-recorded workshops on the same topics. I have been offering these workshops for the past several years, and I know that they are even more effective than live events in guiding graduate students and postdocs to their goal of an accurate tax return and up-to-date income tax payments on their fellowships. Please keep these workshops in mind as we draw closer to tax season for 2021. If you would like to book a virtual or in-person event with me or recommend me to your graduate school, postdoc office, or graduate student association, the best place to go is PFforPhDs.com/speaking/. From there you can learn about all my seminar offerings, read reviews from previous event hosts and attendees, view my speaking fees, and schedule a call with me to discuss your event. I look forward to partnering with you this year to deliver high-quality, high-impact financial education to the early-career PhDs at your university, in your association, or at your conference.

Book Giveaway Contest

05:29 Emily: Now onto the book giveaway contest! In June 2021 I’m giving away one copy of The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich by David Bach, which is the Personal Finance for PhDs Community Book Club selection for August 2021. Everyone who enters the contest during June will have a chance to win a copy of this book. The Automatic Millionaire was one of the first personal finance books I ever read, and it had an enormous impact on my financial mindset and behavior. The path to becoming a millionaire is not necessarily quick or easy, but it can be simple and automatic. I can absolutely credit the key strategy that this book teaches as the reason my net worth is as high as it is today. I hope this book effects a similar result for you. If you would like to enter the giveaway contest, please rate and review this podcast on Apple Podcasts, take a screenshot of your review, and email it to me at emily at PFforPhDs dot com. I’ll choose a winner at the end of June from all the entries. You can find full instructions at PFforPhDs.com/podcast. Without further ado, here’s my interview with Dr. Stephanie Schuttler.

Will You Please Introduce Yourself Further?

06:49 Stephanie: Hi, I am Dr. Stephanie Schuttler, and I am a wildlife biologist, and now I’ve turned a science communication entrepreneur. A brief background of myself is that I kind of stumbled into this career. I didn’t know I wanted to be a wildlife biologist until my last year in college when I decided to study abroad and I randomly chose a wildlife management program in Kenya. So that changed my life. And I knew from there that I had to go to graduate school. So I got some experience doing three different types of internships over the course of three years. And then I went to graduate school to get my PhD at the University of Missouri, where I spent close to seven years there, followed by one short postdoc and one long postdoc, lasting, probably about, honestly, seven years. Yeah, so my short postdoc was at Missouri and my long postdoc was at the North Carolina Museum of Natural Sciences where I got to work on a lot of camera trap stuff that I talk about today. Yeah, and now the last part is I started my own business last year. I’ve been blogging for the past few years and I officially made it a business last year where I spread knowledge about science communication, I educate people, I started kids’ programs, and then of course I help people in their wildlife biology careers.

08:20 Emily: Fantastic. What is the name of your business?

08:23 Stephanie: A Fancy Scientist.

08:25 Emily: Great. I’m really excited to speak with you, Stephanie, today because are subject is kind of, you know, the finances of pursuing a career in wildlife biology, but it’s a little bit more general than that really, because we’re really talking about how to stay sort of financially balanced and healthy while you’re pursuing a passion that is not necessarily, or immediately, lucrative. And in fact might, you know, you might be paying for, in the form of your education, you might be paying for career experiences. So that’s kind of our general topic. So even if those of you who are coming to the podcast are not in wildlife biology, like still stick around because this is going to be generalizable information.

09:03 Stephanie: Yeah, absolutely. I would even add that our field can be more lucrative in terms of going to graduate school than other fields. Like I’ve heard about people who are getting their PhDs in English and their TAships get paid just so poorly. So a lot of the experience and advice here will definitely transfer over.

How People Develop a Passion for Wildlife Biology

09:25 Emily: Yeah. Let’s talk more about specifically how wildlife biology is positioned because it’s a science field, of course, which you might immediately think, oh, like you make money in science, of course. But on the other side of it, it’s a very competitive field and people follow it because of long-held passions. So let’s talk more about that. Like how do people develop their passion for wildlife biology and pursue that?

09:47 Stephanie: I think people develop it usually from a young age. That’s what happened for me. I always loved animals and I love nature. And like I said, I didn’t discover it until a career as later on. Like when you’re young, people always say, like, why don’t you become a vet if you really like animals? So I didn’t know it was a career option. Some people do, but when you track back to like, why people want to do it, it usually has to do with those experiences of being outside in nature when you’re young. And actually a lot of wildlife biologists, a lot of them start off like hunting and they just spend a lot of time outdoors. So I think that a big reason why people are so attracted to the field is that they think they will be spending a lot of time outside.

10:35 Stephanie: And this is definitely true for some careers. It depends on what level of education you have, and of course, what job you have. But in general, the more education you have, the less time you spend outside. It’s like an inverse relationship. And you know, we get really cool experiences. A lot of us get to travel. Of course, some of us get these really close interactions with animals that regular people can’t have, or even just accessing different types of places. Like some of the field sites I’ve been to would have been difficult to visit as a tourist and some of the experiences you have. So yeah, I think that’s what’s really attractive about it. And you’re right. It’s really interesting because there’s so much push for STEM education and especially getting People of Color and girls interested in STEM because our field is not very diversified.

11:33 Stephanie: And a reason to advocate for STEM careers is often actually like finances, that it’s a really financially beneficial career. But again, it totally depends on what you do, and wildlife biology is not very lucrative. And it’s just simply because there’s not a lot of money in wildlife and conservation work. A lot of our employment is nonprofits. The universities and, I mean, universities, you can definitely get paid well. And any of these jobs you can get paid well. But in general, if you think of like disease research, there’s going to be so much more money from the U.S. government and other sources to invest in like medical research than there is in saving wildlife. So, that’s really the big difference. But I think most people go into it because they love it so much. And that’s what I always said. I knew I wasn’t going to make a lot of money, but I loved it so much. So that’s why I went into it.

12:38 Emily: It’s so important to go into these kinds of career choices with your eyes wide open as to what the possibilities are, including the financial possibilities. So it sounds like people, maybe from the time they’re children, have a very like romantic idea of what this career is going to be, but the reality does not necessarily line up with that, especially as you advance further and further.

12:57 Stephanie: It’s interesting though, that you said that about like the romantic version, because I have a book, Getting a Job in Wildlife Biology: What It’s Like and What You Need to Know. And I had a review on there recently, it wasn’t a bad review, it was a four-star review, so it was good, but it was a parent that bought it for her daughter and she read it first, and with the intention of getting it to her daughter. And after she read it, she was kind of like, I’ll leave it up to my daughter to read. And her review was all about how realistic I was. And, and that’s exactly why I wrote it because people have this really romantic view of what wildlife biology is, like myself growing up, I saw Jane Goodall. And I mean, Jane Goodall, isn’t really considered a wildlife biologist. She’s more of a primatologist, but still that’s what you imagine it to look like, or Steve Irwin. And the reality is you’re not doing those types of things. So I pride myself on telling the truth, and I don’t want to dissuade anyone from entering this field. I just want them to know like what it’s like going into it.

Volunteer and Pay-to-Play: Are They Really Required?

14:01 Emily: So, one thing that I learned from our prior conversations is that in your field, it’s very common for people to have to do volunteer experiences or even pay-to-play experiences, to get into graduate school, to get a job, to advance. And this is not necessarily as common in other areas. So could you please tell us more about what, you know, what does pay-to-play mean? What are the kinds of volunteer experiences that people may be required to have? And are they really required?

14:30 Stephanie: Yeah, absolutely. This is a really hot topic right now. I personally think that you cannot get into graduate school without having some sort of experience. And in order to get that first paid experience, honestly, you really need experience for that. And you can, I would say you can get it in college if you volunteer with a lab and you get college credit for it. So that’s essentially not totally volunteering. And there are some work-study programs in colleges as well, but really to get your first experience, you need to volunteer. And that’s just the unfortunate reality of it. And this is a big problem because it discourages diversity from our field. So, I’m in no way, like advocating for these experiences. I just feel like that’s the reality of the situation. So there’s lots of experiences. And even our museum, when we had interns in our lab, we did have money for some of them.

15:27 Stephanie: And I constantly applied for grants to get money to pay interns, but they don’t come through. So either like I would have people email me and be like, I’m so interested in your research. Can I help you out? Or I would have a lot of research to do, and I would come across people and offer them experiences to help me with this. And there are exchanges in other ways. Like I write them letters of recommendations and I invite them to be on journal publications and stuff like that. But yeah, we can’t afford to pay for everyone. So it’s hard to deny people experiences who want them. But also, the pay-to-play thing is that some experiences are so desirable that they can afford to charge for them. And I do think there are some sort of scammy experiences out there where they profit off of it, but there are also legit scientists who are working in another country and they have to pay for the field site and the food costs and things like that.

16:35 Stephanie: So I’ve seen job advertisements where you get to maybe go to like South Africa for a summer and you have to pay to stay there. And they mention that it just covers the field costs and they’re not making money off of it, but still, I know a big reason why I got certain opportunities was because of my experience in Kenya. I had a study abroad program and an internship in Kenya. And Kenya was, it really was volunteering because I did get paid, but I got paid a Kenyan salary. And then I did have to pay for half of my airfare. So it ended up being a year where I didn’t make anything. And yeah, if I didn’t have those experiences, then I would have not had like my graduate school experience of studying forest elephants. So if somebody who comes from a financially disadvantaged background really wants to do something like work internationally, honestly, it’s really tough because those experiences are more desirable and people are willing to pay for them.

17:42 Emily: Yeah. You outlined a couple of reasons why these experiences exist. It really sounds like the field is in a bind. There’s not enough funding coming in for all the work that needs to be done, sort of from above, but from below, from the people coming up the ranks, there is an eagerness for people to do the work, even if it’s on a volunteer basis, even if they have to pay out of pocket for it. But it sounds like this just comes back to a funding squeeze, right? And the field being so popular and competitive. Those things combined have set up the conditions for this system to develop. And I agree with you. It sounds nightmarish, actually, for someone who doesn’t come from a financially advantaged background. And it’s a little bit like, you know, in the recent, I don’t know, last decade or two, there’s been so many more conversations about unpaid internships and the elimination of unpaid internships in most fields because they’re not great for anybody. Especially people who, you know, can’t afford to do them. But it sounds like that hasn’t quite touched the field of wildlife biology yet. Because these are essentially unpaid internships like on steroids, because you actually have to, in some cases, pay to access the site or what have you.

18:53 Stephanie: Yeah, absolutely. And that’s, like I said, that’s a huge conversation right now. And I think it’s especially difficult for nonprofit organizations because, you know, they obviously always need more funding. And they have been under attack, like posting unpaid internships. And I understand both sides. Like I understand that people need to get paid for their time, but I also don’t think it solves the diversity problem because if you’re just taking experiences away in general, then anything that is available is going to be so, so, so competitive. So it’s like a lose-lose situation.

Financial Risks in Pursuing a Wildlife Biology Career

19:32 Emily: Yeah. It definitely sounds like that. Okay. So we’ve kind of talked about the downsides to the field of kind of relying on these volunteer and pay-to-play experiences in the pipeline, at the beginning of the pipeline. To get into graduate school, you need to have some kind of experience. To get that first experience that maybe you get paid, well, you have to have an unpaid experience before that point. There are downsides to the field of like losing out on having great scientists, budding scientists who could be part of the field, maybe being turned away for financial reasons. What are the financial risks that are posed to an individual who tries to pursue a career in wildlife biology?

20:06 Stephanie: I think, I mean, just going into debt or living paycheck to paycheck constantly, that’s like super common in our field, but I know many people who have gone into debt for these like pay-to-play experiences or to do a volunteer experience, but they don’t have the means to cover themselves financially while they’re doing that experience. And it affects your entire life. The opportunities, I guess, like they kind of go away, but they manifest in different ways. So like once you get your PhD, well actually after your master’s too, like I talked about my friend, Rebecca, a lot of times you have these temporary opportunities, and it’s really difficult to get things lined up financially. And it’s a very demanding career. There are always things that you could be doing for your career, especially once you get to like the science route of doing more research-based things, then you are going to want to be working on your publications and things like that to get you that next job. So you don’t necessarily have the time to be able to like take on another job. So I mean, it’s really just that you have the potential to go into debt. People do go into debt, and then they don’t have the finances saved to be able to keep going, in the future, if opportunities don’t line up.

21:40 Emily: Yeah. This does remind me of the general like pursuit of the tenure-track in some fields where you need a PhD to get, and your goal is to get, a faculty position, but the employment opportunities, if you don’t end up, you know, landing that faculty position, are non-existent, very rare, not very lucrative. And so it’s like, yeah, if the stars completely align and you get that job that you’re going for, it all works out. But for most people who pursue that, it’s not going to work out. And so you have to realize that going in, it doesn’t mean you can’t like, you know, shoot for the stars and everything, but you need to have some kind of nets and backup plans and safety. Because the stats are that a tenure-track position is not going to work out for the vast majority of people who pursue one. And so it seems like there’s, you know, an analogy here with the field, the career in wildlife biology,

22:33 Stephanie: Do you see any additional downsides or risks?

Debt and Opportunity Cost: Loss of Compound Interest

22:38 Emily: I mean, mentioning, going into debt like you did is absolutely perfect. But to me there’s another layer on top of that, which is the loss of opportunity to get compound interest working for you. So if you go for many years in your twenties and into your thirties, maybe doing temporary work and underpaid work, and maybe you’re accumulating some debt, or even if you’re not, but you’re not doing anything like on the saving, investing front to get ahead with your finances, then that’s lost time. That decade or so is lost time. And it’s possible to make up for lost time, but you just have to save so much more later. But what if you end up, maybe in your thirties, in a job that pays, as you mentioned before, $50,000 a year, when you were hoping for something that paid more or was more stable or something like that? Like that’s where you are, and that’s what you have to live off of and save off of after that point and still try to make up for that lost time. So I think that people can be financially successful at all different kinds of salary levels, but like we were talking about earlier, you just have to be realistic about what the opportunities are, the salary opportunities are in the field that you’re pursuing, and also in your backup plans, if that primary plan doesn’t work out that well. So yeah, the loss of time to get compound interest working for you is the main one that I see there.

23:48 Stephanie: And I think that people in our field don’t think about that stuff at all and even, or I know they don’t think about that stuff at all. And even like talking about the loss of time with your first starting salary. You really don’t have at least a good first starting salary. I had a starting salary in graduate school, but like how most jobs work is you get your first job, and that’s your starting salary. And then that’s like the bar for you to negotiate a higher salary every job that you get. So for myself, when I graduated from my PhD, I was, what, thirties, close to 30. And you know, my husband who is an electrical engineer, he had been in his career for, for several years already. So not only are we getting paid little when we’re starting out, but we’re starting out later in age.

24:45 Stephanie: And another thing is people don’t do retirement investments either. So my dad grew up poor. His dad died when he was younger, and he had his brothers to take care of. So he was always like financially worried, and he always had us read financial books and stuff like that. So I’ve had a retirement account since legally you can have one, I think maybe 16 or 18. But yeah, like we’re not taught that. Like, you’re right. Like nobody’s talking about this stuff. And they, like, my friends would be like, well, I’ll get it through my job, when I get my first job, but some of my friends didn’t get their first jobs until they were close to their forties, and your retirement compounds. And that’s really where the money comes from. So if you are waiting a while to start that, then you’re missing out on a lot of that income compounding.

25:42 Emily: Yeah. And I think, again, to generalize, like this is something that I see with graduate students all the time, postdocs all the time is that there’s an optimism about what the future salaries are going to be post-PhD, post postdoc. And I certainly have the same optimism for them. But the other thing that happens as you age, generally speaking, is that your life gets more expensive in a variety of ways. You know, maybe you buy a house, maybe you have a child, maybe you have to take care of aging parents or other family members, like, so even if you do see a post-PhD, jump in salary in whatever field that you’re in, it might not go as far as you were hoping that it would. And so to me, my attitude is more like, you know, work with what you have now, that is, try as best you can to live a sort of financially balanced lifestyle and do some of that retirement investing or paying off debt or whatever it is that your goal is while you still have a lower salary, while you’re still in graduate school. And yes, like I do hope that that higher salary comes, the permanent job comes and it will all be much easier later, but just in case it’s not, let’s get started now so that you have that time, as we were talking about for, you know, your money to compound, or at least your debt to not compound as much.

26:54 Stephanie: Absolutely.

Commercial

26:57 Emily: Emily here for a brief interlude! Heads up, fellows: The next quarterly estimated tax payment deadline is Tuesday, June 15, 2021! This one always catches me by surprise because quarter two, strangely, is only two months long, while quarter four is four months long. Yet, a full quarter’s payment is due on June 15th. If you aren’t having income tax withheld from your stipend or salary and haven’t yet filled out the Estimated Tax Worksheet in Form 1040-ES, now is the time to do so. The worksheet will tell you how much you can expect your tax liability to be this year and whether you are required to pay estimated tax. 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 the common questions that postbacs, grad students, and postdocs have about estimated tax, such as what to do when you switch on or off of fellowship in the middle of a calendar year. Go to PF for PhDs dot com slash Q E tax to learn more about and join the workshop. Now back to our interview.

Advice for Pursuing a Financially Risky Career

28:13 Stephanie: Okay. So knowing that this is a financially risky career, what do you think, like, what’s your advice to people who want to pursue it in like, they’re absolutely sure they want to do this and maybe they don’t have a financial safety net or they don’t come from a really, really wealthy background? What can they do?

28:33 Emily: I think the first thing to acknowledge is that you, as an individual, are a whole person and that you have needs and desires that are perhaps independent of this career in wildlife biology that you want to pursue, or any kind of competitive and perhaps not lucrative kind of career. And what I mean by that is that I would love for you to pursue like your career kind of passion, but just as you’re doing that, keep in mind that you still have needs as a person. You have financial needs, you have relational needs, you have spiritual needs, health needs, all these things matter as well. And I think there’s a tendency for people, especially when they’re younger and in their twenties and so forth, to drive hard at their career goals at the expense of some of these other areas of life. And it will catch up to you, eventually. You will reach age 30 or age 40 and realize that you have some deficits or dearths in these other areas, because you were trying to sort of suppress your needs and desires in those areas for so long to pursue this career.

29:35 Emily: So I don’t think that’s healthy and don’t do it. So try your best. Right? And so we’re going to talk about the finances, but there’s all these other areas of life as well. So don’t forget that you’re a whole human and you’re more than just your future career or job in wildlife biology. So that’s kind of the first thing to keep in mind. So, as we’re talking about sort of financial health and financial wholeness, as you pursue these careers, I do think you need to create your own safety net and your own financial security and backup plans as you go. And so that may mean that it will take you a little bit longer to get to graduate schoo, for example, if that’s like your next goal. Maybe you might take an extra year instead of, you know, taking a one or two year gap, take a three or four year gap between finishing undergrad and that graduate degree, for example. And that’s to build up more of your own financial security in the meantime.

30:25 Emily: And so one of the things we talked about earlier, these pay-to-play or volunteer experiences, is it possible for example, for you to plan around that and say, I’m going to have a summer job? Maybe it’s not even a job, I’m going to have a summer experience, and it’s going to cost this much money, or I’m going to be paid this much, but my lifestyle needs are this much. And how can you save in advance for that? And what kind of job can you have when you’re not actively engaged with these experiences? How can you pursue a job and a career that will allow you to have the experiences, but still give you some financial stability in the meantime? And one of the things I end up talking a lot about, and that I’ve learned a lot about from people I’ve interviewed on my podcast is regarding money mindset and limiting beliefs.

Navigate Limiting Beliefs

31:06 Emily: And so a limiting belief that someone in the field of wildlife biology might hear, and they might even get this from your work, again, the realism, is I can only ever have a temporary job and I can’t have a job the other seven or eight months of the year, because that’s not in my field, whatever. But maybe there is a way for you to build a job or an income or a career in that part of the year and still have that balance where you want to do, you know, these special experiences in the summer or the spring, or what have you, but still be making money in the other part of the year. And honestly, I think one of the most accessible ways is what you and I are now pursuing, which is entrepreneurship. So maybe there’s a way to have, you know, set up your own stream of income.

31:45 Emily: Maybe you work on it more intensely in one part of the year and less intensely in the other part of the year. And you can create that balance for yourself to still allow you to pursue the experiences in the career that you want to have, but still be making money in the other part of a year or a little bit, you know, while you’re having those experiences still. So that’s one idea. The other one is about this debt, you know, either going to have experiences or on the flip side, maybe not paying down student loan debt that you’ve accumulated in the past. I mean, we’ve had a student loan debt crisis that’s been building and building ahead of steam for a long time, but especially in the last decade. And, you know, in the last decade, I think many people have come to realize, you know, your student loans, your education, especially at the bachelor’s level is not necessarily an investment.

32:30 Emily: It’s not automatically an investment. You can’t pursue any bachelor’s at any price and, you know, be sure that that’s going to pay off. Same thing for graduate degrees. You know, your home is not always an investment. There are things that used to feel safe that used to give you a path to the middle class that are not there, they’re not guaranteed any longer. And so I think you have to be really, like, in thinking about pay-to-play experiences as an extension of student loan debt. So like I’m taking out student loan debt to pursue my education. I’m taking out some kind of personal loan or consumer debt to pursue this experience that I want to have to get into graduate school. You can think about them sort of analogously. And so one rule of thumb that works for student loan debt that maybe you could extend to, if you’re going into debt for these experiences in wildlife biology, is don’t take out more debt than one year, your first-year starting salary.

33:20 Emily: That’s like the rule of thumb for an undergraduate degree. And so if you’re, you know, going into a little bit better or forgoing salary to pursue these volunteer pay-to-play experiences, can you keep the debt level down to one year of your current salary or lower? Is that possible? So like, so yes, pursue these experiences, but make sure you’re not giving yourself carte blanche, right? To spend and go into as much debt as you might want to. You’re sort of putting some checks and balances on yourself along the way to make sure that you’re not getting in too far over your head.

Consider the Cost of Your Education

33:56 Stephanie: Yeah, absolutely. And actually one of my big, I have a lot of advice for people, something I think that people should do is not worry about the school so much. Like a lot of students are super obsessed with like, what’s the best graduate program or what’s the best college to go to. And I honestly think that students should really, especially at the college level, focus on getting in the school that’s going to cost them the least, because like you mentioned your degree doesn’t necessarily pay off. If you’re going to invest, you know, $120,000 for a college degree and you can get the same result with one that’s going to cost you $10,000. I mean, I actually regretted for a long time, my experience because I didn’t know what I was doing. I didn’t know what I wanted to be.

34:49 Stephanie: An, I even applied poorly to schools. I applied to like only Ivy league schools because that’s what I knew. And the only schools I got into were my local state school and other schools that cost like $30,000 a year or a semester. And I was like, okay, I’m just going to start from my state school because I don’t know what I’m doing. And then it also felt weird to dorm at my state school, which is like 20 minutes down the road from me. So I stayed with my parents and I regret not having the college experience, but I also love that I don’t have debt and that it was, I mean, I paid, I think a thousand dollars a semester for school. So in the long run it definitely was worth it.

35:34 Stephanie: And in this field so much is about those experiences. So if you really want those pay-to-play experiences, because I mean, some of them are super cool. You could focus more on getting into a school that’s more affordable and do some of those things rather than go to a really expensive school. And this is true for graduate school, too. And graduate school in science, you do get paid, you get a stipend, but you get paid different amounts according to the different schools and even according to the different programs. So I was actually not in the wildlife biology program for my PhD, or in the department. I was in the biological sciences department, and they had a fellowship. So I was paid a lot more and I didn’t have to TA. And that played a huge role in me deciding to do that as opposed to another program where I would have to TA and get paid less.

36:31 Emily: I think that’s a great point. Both at the graduate and the undergraduate level. It’s more about what is the actual work that you could be doing? Who can you be working with? Rather than maybe the name of the school. And of course the finances come into play as well. Because again, I think my basic point here is like shore up security for yourself as you go as best you can to keep you on this route, as long as you want to be on it in pursuit of a career in wildlife biology. So that if you get to the end, let’s say of your PhD and you realize, okay, I can get the permanent job. I’ve achieved all my goals. Everything is wonderful. Well, you have some good, you know, financial, a nest egg behind you perhaps, or at least not as much debt as you could have been in.

37:15 Emily: That would be great. But if you get to that point and you say, Nope, I’m going to exit this career now. I’m not going to have the type of job that I thought I would have. I’m going to have some other type of job. At least you won’t have the financial regret behind you of, oh my gosh, I pursued this school, that school, they didn’t pay me well enough. I spent too much on this experience. Yeah. I think what you said is perfect is like focus more on the experiences. If you want to go for, you know, a less expensive college education, but save your dollars for some pay-to-play experiences that are really high impact, then that makes a lot of strategic sense to me.

FIRE: Financial Independence, Retire Early

37:45 Stephanie: Yeah. And another route, I think we talked about this in our chat, you talked about an acronym FIRE.

37:51 Emily: Yeah. So FIRE stands for Financial Independence Retire Early, or Early Retirement.

37:57 Stephanie: Yeah. So you could either do that or do a sort of hybrid model. And I interviewed somebody who did something kind of similar to that, inadvertently. He didn’t, I mean, he didn’t retire early, but he had 20 years in a corporation that was a really good job. And he participated, he volunteered in the Citizen Science programs on the weekends and in his spare time. And his corporation actually paid for him to go back to school. So he did get a degree in environmental sciences. But when he was finished and on the job market, he got the second job he applied for. And I could not believe that I was like, oh my gosh. Wow. And it was because of those volunteer experiences, he had so much experience that he was like leading groups and organizing events and stuff like that. So that all translated really well.

38:48 Stephanie: So you could start off in a more lucrative career and volunteer with conservation organizations, with Citizen Science, and make enough money then where you can take a less lucrative career. Or if you’re a real go-getter in today’s world, like, I mean, there’s really not a financial limit to like what you can do online and with entrepreneurship and stuff like that. Like, it is tough to do, but it’s, I mean, there’s so many like millionaires who are six-figure earners from selling courses online, and in practical stuff, too. Like I remember I was listening to this one podcast, this woman, she had a podcast all about goats and she made six figures just from selling a course on how to raise backyard goats. And she had like, she had like different courses, too. So it’s like, you know, you just don’t think like, oh wow, like you can make a lot of money off of information and goats, but you can. So there’s a lot of opportunities out there.

Combining FIRE with Passion Careers

39:52 Emily: Yeah. What I think is really interesting about the FIRE movement and combined with like these sort of passion careers, whether it’s wildlife biology or whether it’s maybe some other things you want to get a PhD in. So if, you know, the most intense people in the FIRE movement, the goal is to retire in about 10 years, not retire necessarily, but become financially independent in about 10 years. That would be like a fast goal. So you get out of college when you’re 22, you know, by 32, if you’re really intense about it and chose the right career, maybe you were an engineer or something like that. You could be retired by that point or, you know, financially independent, optional to retire at that point. Now that is a route to free up the entire rest of your life from age 32, to whatever, to do anything that you want.

40:37 Emily: As long as your lifestyle expenses don’t creep up to the point they exceed your investments’ ability to support you. And so that is where you could spend the next 50, 70, a hundred years of your career working in wildlife biology in any kind of capacity that you can achieve knowing that your finances are already taken care of. And that’s a very unconventional route, right? But I think it’s something that maybe more people should consider if their passion is in a field where it’s so difficult and so competitive to get a full-time position. And, you know, I think it also goes back to the realism discussion we’re having earlier. You know, maybe there’s something about wildlife biology or whatever field that you’re in that you would like that romantic version, but you are not so enamored with the reality of having a career in that field version, and maybe becoming financially independent allows you to experience the romantic versions of the career, you know, of rather the field to a great extent without having to commit to having to earn in the career and doing maybe the work that’s not quite as exciting to you.

41:43 Emily: And so that’s, I don’t know, it’s a very like interesting idea. I actually did meet someone one time at a financial bloggers’ conference who had reached financial independence in his early thirties through, whatever, he’s like a finance guy or something. And he was telling me, oh yeah, I’m considering going back and getting my PhD in some completely unrelated area because I can do whatever I want now, essentially. It doesn’t matter if I get a stipend or not. I can support myself. He can pursue anything he likes. And so I’ve never really like discussed this idea with anyone in terms of PhDs before, but I think it’s, I don’t know. It’s not the most outlandish thing.

Wildlife Bio: Career or Lifestyle?

42:19 Stephanie: Yeah, absolutely. And I actually, I mention this in the last chapter of my book is, like you said, maybe you don’t want it as a career, too. And maybe that’ll actually be more satisfying to you. So I had this talk with this very prominent biologist and he was talking about his friends, how like they’re traveling all over the world and showing him all these cool pictures and all these cool places that they’ve been to. And one of the countries that he said was a country that he does a lot of work in. And I was like, you work there, you’re like always traveling there. And he’s like, yeah, but I am in like conference rooms, I’m in meetings. I’m not going to see like this beautiful waterfall or go to the beaches. So again, it might be that romantic version of like, once you get higher up with your education, you’re going to be doing like more administrative work.

43:10 Stephanie: And you’re going to be writing scientific papers and writing grants and stuff like that. And, to be honest, that’s sitting behind a desk writing. So I just want people to like really understand what it’s like and what they’re getting into. And, yeah, like, if you’re really driven because you want to travel or have cool experiences with animals, there are Citizen Science vacations, Earth Watch does this, that you can pay for that give you those opportunities. Like you can pay to work with a sea turtle biologist and help him tag turtles or help them tagged hurdles. And so you can still have these experiences. But you’re not the one leading them, which actually might be nice because then you don’t have to worry about like all the logistics of setting everything up, and yeah. And managing people and things like that.

44:03 Emily: Yeah. I love that idea. And it’s just kind of thinking outside the box, right? Like how can I get to have this lifestyle that I want? Does it have to be my career, or can it be something I do on the side as you’re building a career in another area? Or I’ve retired from my career. And so now I can do it afterwards. I think that’s a really exciting idea that you can be in wildlife biology in more ways than just a full-time professional scientist.

44:32 Stephanie: You’re so right, too, about your, your life choices changing when you get older. I talk to a lot of young people who are like, I don’t need to live in a big house. Or maybe not necessarily live in a big house, but you do want more things as you grow up. Like you want more stability and things like that. You don’t want to be moving around all the time. And like, even myself, I didn’t want to have children, but yeah, like I want to be stable and I want to stay put and not going from here to there all the time.

45:02 Emily: Yeah. What I often repeat on my podcast is money gives you options. And so really what you’re doing when you, for instance, take out a bunch of student loan debt and then go into even more debt for these, like, pay-to-play experiences and eventually go into graduate school. And you’re there for a long time. And then, you know, all the things that you might have to do to get this final career that you are going for, if all that while you’re just accumulating debt and you’re not putting money into retirement, you’re basically hamstringing yourself into this career has to work out, or I am sunk, you know? And instead if you try to pursue it, but in a more balanced manner in terms of finances and other areas of life, you can get to that point, maybe when you’re done with your PhD and say, okay, I have options. I can still pursue this career that I’ve been going for. I can get another type of job because you have built up some financial stability along the way. So it gives you options. You don’t feel like you’re stuck in just the one type of job that you’ve been going for that whole time, which might not even be available to you.

46:06 Stephanie: Absolutely.

Best Financial Advice for Another Early-Career PhD

46:08 Emily: Okay. Well, as we’re wrapping up the interview, Stephanie, one thing that I ask all of my guests is what is your best financial advice for another early-career PhD?

46:18 Stephanie: I think probably the best is, and this is where I always tell people to start out in this career, is to look at the jobs out there now that they ultimately want. And I have a tool on my website for this it’s called the Job Tracker. And you basically just like write down, or you copy and paste, like what jobs you like, how much they pay, what your education is. And then, in my course, I actually, I also have a budget planner too. And like, see if you can afford that career and see if it works out to be the type of lifestyle that you want. So really like copy the salary and the location, and look up houses in that area and how much they cost, and see if this fits into your lifestyle. But again, like really get an idea of like, where you want to end up. So there’s no surprises and you can pivot more easily along the way if you decide, okay, I love this, but I really want to make more money. Which is okay, because, like I said, some of these jobs, they pay very little and it can be difficult to live with those jobs. I knew somebody who had what other students thought was like an absolute dream job, but she was just so sick of not making money.

47:38 Emily: Absolutely. I love that advice. It goes along with the general theme of like being realistic. Okay. So where can listeners find you, Stephanie?

47:49 Stephanie: They can go to fancyscientist.com or just Google, fancy scientist I’ll come up and they can contact me any way. I check all my messages. I’m happy to answer their questions. And I love hearing from people.

48:02 Emily: And what is the title of your book?

48:05 Stephanie: Getting a Job in Wildlife Biology: What It’s Like and What You Need to Know.

48:10 Emily: Great.

48:11 Stephanie: Very blunt. Well, thanks so much for doing this. I had a good time talking to you and I learned a lot.

48:17 Emily: Thank you. It’s exciting to me to learn about a new field and kind of wrap my mind around like particular financial challenges within that field.

Outro

48:26 Emily: Listeners, thank you for joining me for this episode! pfforphds.com/podcast/ is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episodes’ show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast and instructions for entering the book giveaway contest. 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. If you leave a review, be sure to send it to me! 2. Share an episode you found particularly valuable on social media, with an email listserv, 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 and show notes creation by Meryem Ok.

Where PhD Candidates Are Full-Time Employees with Benefits

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In this episode, Emily interviews Dr. Veronika Cheplygina about the differences between how universities in the Netherlands and the US financially support their PhD students. In the Netherlands, PhD candidates (beyond the master’s level) are full-time employees under a 4-year contract that specifies their pay and benefits. It’s a secure position with only slightly lower pay than other types of positions. Veronika explains the financial and psychological benefits of this system and describes her lifestyle while she completed her PhD, which included purchasing a home. Prospective PhD students who are interested in doing their PhDs in the Netherlands should listen through to the end of the episode for application advice.

Links Mentioned in this Episode

phd candidate employees

Teaser

00:00 Veronika: You know, when I was doing my PhD and I saw this PhD Comics for the first time, I didn’t recognize the whole situation of like people hunting for free sandwiches. It’s not a lot compared to industry, but it’s also decent. And you can sort of take care of your basic needs.

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 nine, episode two and today my guest is Dr. Veronika Cheplygina who holds a PhD in computer science from Delft University of Technology in the Netherlands. Veronika and I explore the differences between how universities in the Netherlands and in the US financially support their PhD students. In the Netherlands PhD candidates beyond the master’s level are full-time employees under a four year contract that specifies their pay and benefits. Veronika explains the financial and psychological benefits of the system and describes her lifestyle while she completed her PhD, which included purchasing a home. This is the perfect time of year for prospective PhD students in the US to consider broadening their search to include universities in the Netherlands and other countries with similar funding models.

01:24 Emily: On June 6, 2021 at 4:00 PM Pacific, I’m conducting an interactive workshop on choosing the optimal financial goal for you to work on right now, whether to save up cash, invest or pay down debt. I’m a firm believer that you should work on only one or a minimal number of financial goals at any given time, especially when you have a limited income like while in graduate school or a post-doc. Prior to the workshop, you’ll prepare your balance sheet, which is a record of all of your assets and all of your liabilities.

01:56 Emily: During the workshop, I’ll present my eight step financial framework, which I developed specifically for early career PhDs. I’ll show you how to break down your balance sheet to determine which step in the framework you’re currently on and what financial goal I suggest that you work on next. This workshop is for PhDs at all career stages, from rising graduate students through to PhDs with real jobs who are members of the Personal Finance for PhDs Community. If you’re not yet a member, you can easily join the community at PFforPhDs.community, and find details about the event under the course title, the Wealthy PhD workshops. If I get a good response from this first workshop on my financial framework, I’ll plan more of these live workshops for community members, which will be deep dives into money mindset, investing, debt, repayment, cash savings, and cashflow management. Sign up for the community today pfforphds.community, for access to the workshop on June 6th and much, much more great content.

Book Giveaway

03:05 Emily: Now onto the book giveaway contest. In May, 2021, I’m giving away one copy of “Bad With Money: The Imperfect Art of Getting Your Financial Sh*t Together” by Gaby Dunn, which is the Personal Finance for PhDs Community book club selection for July, 2021. Everyone who enters the contest during may will have a chance to win a copy of this book. Today is the last day to enter. The Bad with Money podcast was first recommended to me by one of the participants in my program, The Wealthy PhD. I think it’s going to generate a lot of great discussion in the book club. So please consider joining us pfforphds.community. If you would like to enter the giveaway contest, please rate and review this podcast on apple podcasts, take a screenshot of your review and email it to me [email protected]. I’ll choose a winner at the end of may, from all the entries you can find full instructions pfforphds.com/podcast. Without further ado, here’s my interview with Dr. Veronika Cheplygina.

Will You Please Introduce Yourself Further?

04:09 Emily: I have joining me on the podcast today, Dr. Veronika Cheplygina. She’s currently an assistant professor in the Netherlands, and she’s actually going to teach us today how the path to the PhD in the Netherlands compares to the path to the PhD in the United States, which of course I can represent that position. I think this will be really interesting to our American listeners, listeners in other countries, to compare these two paths, especially for anyone who has not yet embarked on the PhD. But I also think it’s going to have value for people who are already in graduate school in the United States, because there’s a very different view of graduate students there that we could really benefit from adopting, to a degree. We’ll see where the conversation goes. Veronika, thank you so much for joining me and will you please tell the listeners a little bit more about yourself?

05:01 Veronika: Thank you so much for having me it’s a pleasure to be here. As you said, I’m currently an assistant professor at Eindhoven University of Technology. My background is in computer science. I did all of my degrees in Delft, which is a different university of technology, also in the Netherlands. This was followed by, I got my PhD in 2015, followed by a two year postdoc and then, the tenure track, which I’m currently doing now. I am however, also leaving my tenure track in favor of a tenured associate professorship in Denmark, in Copenhagen, where I’m starting in February, 2021. I think that sums it up.

Overview of the Path to the PhD in the Netherlands

05:49 Emily: Congratulations on the new position and the upcoming move. We’re recording this in December, 2020, so I think you’ll have completed that by the time this is out so wonderful. Let’s get an, a quick overview of the educational path to the PhD in the Netherlands. Let’s start at the bachelor’s level: how much time does it take, how is it funded? Would you please answer that?

06:15 Veronika: Sure. Usually for the university level, there’s a three year bachelor program. It is formally separated from the master’s programs, which can be one or two years, but I think in practice, usually universities offer matching masters for different bachelor programs. I think most students end up doing the matching masters. It’s rather usually that the bachelor’s and the master’s are done together in five years or so, then that the master’s is as part of graduate school as in the US.

06:52 Veronika: And then after master’s, some students may go on to do a PhD, which would be typically a four year full-time trajectory. I think it’s different from the US in that you don’t really have a lot of courses anymore, as you would have had the research component in your master’s. Perhaps you might do some career development courses and such, or like an in depth summer school. From the time you’re, well at PhD researcher, I should say you were actually a university employee, and I think that makes a big difference for the experience.

07:36 Emily: Yes, absolutely and we’ll get into that quite a bit more. Then what about the funding? So you just said at the PhD level for the PhD training, you’re a full-time employee. What’s going on with the bachelor’s and master’s equivalent earlier than that? Is that funded by the student? Is it funded by the state? How’s that?

07:56 Veronika: The bachelors and the masters is a combination of the student and the state. I think the current tuition fees are around, for a domestic, and by domestic, I mean European union plus people with an eligible residents permit, that would be about 2000 euros a year in tuition. And the government contributes to this for the universities. So universities get funded centrally depending on the number of students there. I think the fee for non-EU students is quite a bit higher, but still, probably not at the level of many US schools. Then for the PhD, it’s an employment position which needs to be funded beforehand. As professor, you would need to acquire some kind of grant from a funding agency. And if you have that guarantee that you have this financing, then you can advertise a position. As a starting assistant professor, if you don’t have any kind of startup package from the university or already a grant on your own, you cannot say I’m recruiting grad students. Yu might have a master’s students will, of course need, will need to do a research project, but the PhD students, PhD researchers rather, you would need to finance yourself.

09:37 Emily: So to draw a contrast with the system in the US, it seems like for you all at the bachelor’s and master’s level, that’s where people are really viewed as students, right? You’re a learner you’re there to consume the product of the university and develop yourself, as a scholar. And it’s relatively inexpensive compared to here. There’s a big, big, big distinction between the master’s level and the PhD training level before you’ve actually completed your PhD in that it’s treated as a full-time job for your position and you’re going to finish in that time, it sounds like. Does anybody ever go over that amount of time or is it very firm? You’ve got four years you’re going to finish.

10:21 Veronika: Well, you get your salary for four years, unless there have been some special circumstances. For example, if you would take a 80% full-time working hours, you probably would have a longer time. Your salary will stop after that. It doesn’t mean you will necessarily defend your thesis in that time, but most people do aim to submit within then. Of course, this doesn’t always happen depending on your personal circumstances, et cetera, but I think it is doable in four years, given that you don’t have lots of courses and teaching, you would be required to help out a little bit in the department, but that’s not your main occupation. I do have to of course say that this is based on my model of how I experienced things, and I’m sure there are also departments that try to deviate from this, but this is how it should be and how I’ve seen it work in several places.

11:23 Emily: I see. Yeah, it seems like the contrast here, I guess, is that you have the opportunity to be paid at the master’s level. If you’re already, typically, if you’re already enrolled in a PhD program, you’re going through, what would be your master’s. You have the opportunity to receive a stipend usually during that time, but it’s not much. I’m curious about how much in the Netherlands, the PhD students or trainees, you know, PhD employees, PhD researchers are being paid compared to what’s enough to get by on, because definitely here, it’s a question mark, whether you’re going to be above or below that line as still a graduate student. How is the pay compared to if you had a full-time job that wasn’t PhD training?

12:11 Veronika: I think it’s a little bit less than, so for example, for, for me in computer science, industry jobs would be paid a little bit more. I think, compared to some other jobs, maybe straight after master’s, it’s not that much of a difference. I looked up, there are salary scales for these PhD positions, I looked it up just before, and it’s about 2,400 euros, before tax for the first year of the PhD. And it’ll go up to like 3000 to the last year. Of course the amount of after tax will depend on several other issues, like if you own property, et cetera. I think it should be, definitely if you’re sharing a living space with somebody else, it should definitely be okay. When I was doing my PhD and I saw this, PhD Comics for the first time, I really didn’t recognize myself…I didn’t recognize the whole situation of people hunting for free sandwiches everywhere. It’s not a lot compared to industry, but it’s also decent and you can sort of take care of your basic needs.

13:39 Emily: Yeah, I think that’s maybe the most impactful statement you could make in terms of to the credit of the system that you have there, is that it does not feel like what’s going on in PhD Comics. That’s wonderful.

Psychological Benefits to Being Treated as an Employee during the PhD

13:51 Emily: Okay, so you’ve said that once you get to the PhD candidacy stage, you’re a full-time employee of the university. What do you think is the psychological benefit of being viewed and legally treated as an employee versus as a student, like in the earlier stages? Let’s leave aside the financial for now, but just the psychological,

14:15 Veronika: I think it’s a good thing that you are in the same kind of position as your supervisors. I mean, you have, even though they will, of course be in the higher salary scale, you kind of have the same rights and I think that makes for a more equal playing field. Also several things you would not really necessarily need your supervisor’s permission for. Of course, it’s good if you inform them if you are ill or so, but actually that kind of thing would be arranged centrally by a party outside of the university. It just feels like you’re less dependent on your supervisor in personal matters. There’s just a bit less things to worry about. You can concentrate more on doing your job, your research and your life outside it.

15:16 Emily: Yeah. I’ve actually been reflecting on this recently. I had another podcast interview within the last few weeks and I believe it will be published recently before this one. It was with Laura Frater and she said something in that interview that’s really stuck with me since then, which is to not view yourself as a student while you’re pursuing your PhD. Because, and this is my interpretation of what she was saying, if you view yourself as a student, you sort of have an out for doing normal, like adulting things, like taking care of your finances and maintaining your relationships and keeping your body and mind healthy and so forth. Because we think of this, in the US we think of being a student, like being an undergraduate student as this just like magical period, when all you have to focus on is your education and no time passes and you stay healthy and everything’s wonderful, which is realistically not at all the case, especially when you do this for five, 10, whatever years into your twenties and thirties. I think that merely that switch alone of like, no, I literally am a full-time employee of this university – I’m receiving benefits, I have decent pay, would be a massive sort of, it’s like a graduation out of adolescence, when you’re not being considered a student anymore. That’s how I’m thinking about it. Does that strike a chord with you at all?

16:41 Veronika: That’s very true. I think generally, I tried to limit my hours also during my master’s, but it would definitely be the case I would study in the evenings and weekends, whenever. I think once I started this job, I would just come to the office between 8:30 and 5, which is when my supervisors were there. I just assumed that that was normal. I didn’t have like homework in the weekend and because I was in a small lab and I didn’t really have other PhD students to compare to, I didn’t really realize that people were maybe working on their projects the whole time. For me, there was no expectation to do this. This is definitely something that gets deviated from in some labs. But indeed I think just the realization you’re getting paid to do research for 40 hours a week, it’s also in your contract, that that helps with drawing a boundary there.

17:50 Emily: That actually reminds me of, I did a post-bac fellowship, so a year between when I finished undergrad and when I started graduate school, I did a post-bac fellowship at the National Institutes of Health. And it was a very different feel of an environment than a university feel, at least in my corner of that. People did work, I don’t know if it was 40 hours, but it was daytime office kinds of hours, maybe a little bit longer, that I could see. And I didn’t feel pressure to be staying super late. I would come in for eight or so hours a day, do my work, go home. Really, I was able to have some pretty good work-life balance during that time, which was not at all what I experienced during graduate school, where there was much more pressure to be working longer and just be doing a lot more. It sounds like more of a kind of professional environment rather than an environment that’s focused on the training or the trainee situation. Does that make sense?

18:48 Veronika: Yeah, that sounds that’s consistent with my experience

Commercial

18:54 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 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/Emily for my affiliate link for the course. Now back to our interview.

Labor Contracts for PhDs

20:21 Emily: You mentioned earlier that there there’s a contract, like there’s a labor agreement for people pursuing PhDs. What are some of the elements of that contract?

General Benefits

20:31 Veronika: It’s the same labor agreements basically for all people in academic research. There’s a salary scale that corresponds to the kind of level you’re working at. That’s a different scale for PhDs. In comparison, so I told you that last year a PhD would get 3000 before tax per month, as an assistant professor, who’s just starting and you would get, I think 3,700. So it’s quite a flat ladder. There’s also a pension buildup. I have to confess that I haven’t really looked into how it’s done because I kind of trust that it’s done well, so it’s not something I haven’t had to worry about.

21:23 Veronika: The number of hours that you work and the number of vacation hours, you can take are fixed in there. You can also trade some vacation hours for some other benefits, like for example, extra pension. And then you get sort of like a tax advantage. There’s maternity and paternity leave, 16 weeks for maternity leave. And for paternity, I think it’s five days at full pay and then you can take a number of weeks off at lowered pay. There’s also a sick leave. So I think you can be something like 40 weeks at full pay if you need to, and then also longer at a lower pay. Lots of things like this. Basically life things that can come up, there’s usually a provision for.

22:29 Emily: Yeah. I think that must sound like a dream to a lot of PhD students and maybe even postdoc fellows right now who are in the US who are not treated as employees, or at least not as full-time employees of the university and just to have those benefits spelled out explicitly. It’s very patchwork here. In some places, maybe especially if you’re covered by a contract that’s been negotiated by a union, it can be very clear. I don’t think the benefits would be as high as that because just in the US we don’t get as much leave and so forth, but they would at least be clear.

23:03 Emily: But in many, many, many places, it’s not at all clear what your benefits would be, and it’s not until as an individual you come on to, okay, well, I’m pregnant, so I need to figure out what the maternity leave is going to be, or, okay, I need to take a leave of absence because I’m ill — I have no idea am I going to be paid? Unless you’re covered by probably a union contract, you probably wouldn’t know that until you actually encounter the situation, what the benefits might be. I think that clarity is just so, so helpful. And even on the vacation, like that’s even as a smaller issue, but something everyone encounters every year. That often has to be just negotiated one-on-one with your advisor and sort of oftentimes completely up to that person, whether or not they’re going to grant it or what you have to trade off for it. It sounds wonderful just to have the transparency.

23:56 Veronika: Yeah. I imagine that creates inequalities if you have to do it on a case by case basis, and also depending on how rich the field and the PI is. Here, there’s no difference between social sciences and technology and another thing. The agreement is the same for all academic institutions.

24:20 Emily: Yeah, I just left out something that would be super, super important. It wasn’t part of my personal experience during graduate school, but many, many PhD students here experience funding insecurity. They, they might have funding for a year, but they didn’t know what’s going to happen after that. Maybe they have funding every academic year, but in the summers, they have to scramble to find a certain grant or something. You can feel very precarious when you’re sort of careening from term to term, not really sure where the next paycheck is coming from in the upcoming term.

Funding Guarantee as a PhD Employee

24:48 Emily: You mentioned earlier that a PI couldn’t even advertise a position until the funding has been secured for all four years and so that is a massive difference. Actually in that way, it sounds even better than regular employment, like at-will employment, because I would imagine it’s unusual for a PhD student to be let go from that position, a PhD candidate to be let go, unless something has really gone off the rails with their performance.

25:15 Veronika: Usually you would have an evaluation after a year, and if you show progress in the project, then usually it’s fine and you can continue for the other three. It’s actually more secure, it’s a more secure contract that you won’t get right out of university, because you would maybe have a series of temporary contracts for industry.

25:39 Emily: Anything else you wanted to add on that question?

25:42 Veronika: Oh, yeah. About the financial insecurity. So it is possible here that if you are a student and so often students from China, and there are also some from Brazil, I believe, but they get like a scholarship from the government to come here and their salary is paid through that scholarship. This is possible, but then they, they come to the professor with their scholarship. And then they would be paid, the conditions there would probably be different than for most PhD positions. It’s less common and it wouldn’t be advertised as a PhD position because the person comes with it themselves.

Cost of Living Adjustments

26: 31 Emily: I see. In our prep for this episode, you mentioned to me something about cost of living. So earlier you said that, you know, there’s this agreement that’s been negotiated. I don’t know if it’s between universities and the government or who the parties are, but it’s a set schedule. It’s a set contract that all employees, PhD employees are under. Does the pay vary by city or is it the same everywhere?

26:57 Veronika: It’s the same everywhere.

26:59 Emily: Okay, so there is a consideration for cost of living in terms of how your lifestyle is going to be while you’re pursuing the PhD.

27:07 Veronika: So in the pay that you get there, so consideration for it, but of course, if you live in Amsterdam, it will be much more expensive than if you live in Colonian.

27:19 Emily: Yeah. Gotcha. That’s a little bit interesting, I guess, that there wouldn’t be any adjustments for cost of living.

27:27 Veronika: Yeah. Perhaps I’m not sure if that’s the case. So I know like in the UK, there’s a London allowance because London is just so much more expensive than the rest of the country. I’m not sure we have that here. I also imagine that the differences in the bigger cities are not as big. Like if you would go out more into like a more rural area, then the prices go down very quickly, but then you’d have to commute much more as well.

Veronika’s Personal Finances During Her PhD

28:04 Emily: We’ve talked very generally about the system country-wide and what you observed in your experience during your PhD. Can you tell me how your finances kind of went during your PhD? Were you able to live comfortably? Were you able to save?

28:20 Veronika: Yeah, I think it was quite okay. It was definitely an upgrade from my master’s. Then, I had a part-time job, but I had also the stipend from the government. It was enough to cover my expenses, but with the PhD things went better straight away, especially after the first year, because that’s, when you make the largest jump in your salary. I did also move out from a more student-like apartment to a more adult-like place. So my costs went up then, but I think I was still able to save a little bit.

29:03 Veronika: And actually, in the last year of my PhD, I was able to apply for a mortgage, which was very surprising to me at the time. This is because, after three years in the Netherlands, if you have…Normally for a mortgage, you would need a permanent contract, which you, of course don’t have as a PhD student. But after three years of temporary contracts, you can be seen as a kind of freelancer and the bank averages your salary. At that point in time, my PhD student salary average over three years was sufficient to get a small mortgage for an apartment. In current days this would not be possible because of how the prices have increased recently and I think you also need to have a much larger down payment now then rules used to be. I got very lucky. I definitely don’t want to say everybody in any place anytime can do this, but this was of course a combination of several favorable circumstances after which my living costs actually went down back to like the student apartment level, but for an adult-like place. So that’s been very good.

30:35 Emily: Yeah. That’s a wonderful accomplishment. As you said, circumstances had to come together to make it happen, but it did! Wonderful!

Can a US Citizen Do Their PhD in the Netherlands?

30:43 Emily: If there is a listener, let’s say in the US not in the EU, who’s thinking “This sounds amazing! Why would I deal with the system we have here in the US when I could go there?” Is it possible for an American to complete their PhD in the Netherlands?

30:59 Veronika: I don’t see why not because the vacancies are open to everybody in the world. Sometimes there are some EU specific grants, so if the EU gave you a grant, they want you to employ European citizens, but other vacancies do not have this restriction. I’ve been in groups where there were also people from the US doing PhDs, so I don’t see why that’s a problem. I guess you need to find out first about more specifically about the master’s requirements. It seems to be fairly standard, but I don’t think it’s a hard rule. So I do know of somebody from the US who didn’t have a master’s, but he had some additional research assistant experience, which sort of was sufficient. But this was of course also a couple of years ago.

31:52 Veronika: All the open positions they are listed on academictransfer.com, that’s an aggregator from all of the universities. I guess about the master’s thing, there’s always an administrative contact and the professor, so you could always contact the administrative one to check. Outside of these positions, of course you could always contact a PI if they have any upcoming vacancies, because they might be interested in writing a proposal together with you about something, or they already know something is coming up, but they have not gotten the official documents yet, so they cannot advertise it yet. It’s always worth approaching people want to work with, I think.

32:40 Emily: Yeah, that sounds amazing. And actually just the simple fact of there being a central database of all open positions is incredible. Again, in favor of like transparency and wow, making things so much easier for the applicant, so that sounds great. And I should mention, we’ll link in the show notes, because I’ve done a couple other interviews with Americans who have done their PhDs in the EU. I think they’re both in Sweden actually. But anyway, some similarities, so I’ll link to those from the show notes as well.

33:10 Veronika: For sure Sweden should be similar.

Best Advice for an Early Career PhD

33:13 Emily: Veronika, I like to end all my interviews by asking my guests, what is your best financial advice for another early career PhD?

33:22 Veronika: I would say it’s good to look at examples. Of course you need to get over some kind of hurdle of talking about finances, but it would be great to see what are other people spending on different things and how it works, or what kind of insurances and pension schemes and investment things people have. Yeah, I think you can learn a lot from that and it shouldn’t be such a difficult topic to discuss

33:55 Emily: Yeah. Another vote in favor of openness and transparency around these issues. Veronika, thank you so much for joining me on the podcast. It was so interesting to me to learn more about the system that you went through and congratulations again on your new position.

34:10 Veronika: Thank you very much.

Outtro

34:17 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the Personal Finance for PhDs podcast. On that page are links to all the episodes show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast and instructions for entering the book giveaway contest. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me. Two, share an episode you found particularly valuable on social media, with an email list serve, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in, like investing, debt, repayment and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe through that list. You’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. Music is Stages of Awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC podcast, editing and show notes creation by Lourdes Bobbio.

How to Financially Transition to Grad School as an Underprivileged Student

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In this episode, Emily interviews Rutendo Chabikwa, a first-year PhD student from Zimbabwe at the University of Oxford and the host of the podcast So, You Got A Scholarship? The topic is the financial aspects of transitioning to graduate school. Emily and Rutendo list start-up costs, explore the financial “hidden curriculum” of grad school, and discuss financial habits to establish and how to do so. This episode has a particular focus on underprivileged and/or international students.

Links Mentioned in This Episode

Teaser

00:00 Rutendo: If there’s something that you think somebody might cover, even if you don’t think somebody might go cover it, just ask. That’s definitely something I think underprivileged students can fall behind on simply because some of us have to cover a lot of gaps, not coming from families with people that have done PhDs or some of us who will be first-generation graduates to even begin with.

Book Giveaway Contest

02:19 Emily: Now, onto the book giveaway contest. In May 2021, I’m giving away one copy of Bad with Money: The Imperfect Art of Getting Your Financial Sh*t Together by Gaby Dunn, which is the Personal Finance for PhDs Community book club selection for July 2021. Everyone who enters the contest during May will have a chance to win a copy of this book. I’ve listened to a few episodes of the Bad with Money podcast, and I’m looking forward to reading and discussing this book because Gaby has such a different perspective and approach to personal finance than I do. If you’d like to enter the giveaway contest, please rate and review this podcast on Apple Podcasts, take a screenshot of your review, and email it to me at [email protected]. I’ll choose a winner at the end of May from all the entries. You can find full instructions pfforphds.com/podcast. Without further ado, here’s my interview with Rutendo Chabikwa.

Will You Please Introduce Yourself Further?

03:24 Emily: I’m delighted to have joining me on the podcast today Rutendo Chabikwa. She is a first-year PhD student at the University of Oxford. She’s from Zimbabwe. So we are going to discuss in this episode the transition into graduate school, some of the financial stuff that goes on in that time, especially for underprivileged students. This is going to be really great episode. Rutendo and I have actually spoken before because I was on her podcast. She has a podcast called, So, You Got a Scholarship? and my episode of season three, episode one. So we’re doing a swap here. I’m so glad, Rutendo, to have you on my podcast. Welcome. Will you please tell the listeners a little bit more about yourself?

03:58 Rutendo: Thank you so much, Emily. Glad to be here. Glad we could do this. My name is Rutendo. Yes, I am a first-year PhD student, or DPhil as it is called, at the University of Oxford. I’m from Zimbabwe. But basically I have been an international student for the past about 10 years, starting with my two years of high school. Did that in Canada. My undergrad was at upstate New York at St. Lawrence University. So I have a bit of U.S. experience in there with also a couple of study abroads. And then my master’s was in London at the LSE and then now I’m here for my PhD. So it’s a bit, quite of a long trajectory over there, and I am studying information communication and the social sciences. So basically things to do with the internet, digital media, and political participation.

Costs for Anyone Starting Grad School

04:42 Emily: Wow. Okay. Yeah. Fascinating. Thank you so much. So we’re going to jump right in with talking about the financial startup costs for entering graduate students. And obviously you’ve done this before at minimum for your master’s and now again for your PhD. So you’re quite familiar. Let’s talk about this in three layers. One would be for just anyone who’s starting graduate school that didn’t require a move. Two, someone who did need to move to get to graduate school. And then three, someone who had to move internationally to start graduate school. So we’ll layer those on. So what are some costs in that first layer of just anyone who’s starting graduate school?

05:16 Rutendo: Yeah, absolutely. So anybody that is starting, I mean, there’s the obvious in terms of just generally your life in grad school, household items. I know that sounds very minimal, but it can be actually something that builds up and that we underestimate as well as, you know, your working equipment, your laptop. Right now, we’re in a pandemic, so everybody’s sort of working from home, but even outside of pandemic, generally grad students need to have really well stationed, you know, workspaces for your work. Books, and not just books that are not just textbooks as well, because you might have costs to do with like your research topics. Sometimes you might prepare having your own book to highlight or write in, things like that. And obviously we can talk about ways of minimizing those costs later, but definitely anybody going there, your stationary, books. Definitely.

06:07 Emily: Yeah. Well, I’ll add, you know, in the U.S., and you can tell me if you’ve experienced this at LSE and Oxford, but a lot of graduate programs in the U.S. seem to require some fees to be paid upfront. Like even before you ever get your first paycheck as a graduate student, you owe hundreds, maybe a thousand dollars of some kind of fee, which is just, I wish they set the system up differently. But it is that way in many places.

06:33 Rutendo: Absolutely. This is actually, I mean, even before actually getting accepted, right? So these fees, even for applications alone, so there’s that, and then getting accepted, the deposit fees. Sometimes you might be lucky enough to get a waiver. Sometimes not so lucky. They could, you’re right, go from a few hundred dollars to a large sum of your tuition as well. And then I think there are also, depending on your institution, fees, such as for student association fees as well. Those are definitely something to consider and look up how your institution works on that.

07:09 Emily: Yeah, those are the kinds of fees that I was referring to, like a recreation fee or an activity fee, or even sometimes the health insurance premium here, you know, it needs to be paid upfront. That can happen. So that could add up to a sum. The thing about that is that you can know in advance, right? So as soon as you figure out which school you’re going to go to in April, or whenever you do that, you can start asking what is the amount of money that I need to give you before I get my first paycheck? Now, I don’t want to say that everywhere is that way, because it’s not. But it’s definitely something worth figuring out as early as you can.

07:44 Rutendo: Absolutely. And also to find out from the different sort of stages, right. There’s fees, your department might have some type of fee or, I mean, if you come into something, I guess like the Oxford system, you might also try to talk to your college, see if they have any kind of fees or which is a different sort of department or different area. So to make sure that you’re checking boxes with different offices and different levels of the institution to make sure that you have that. Always definitely ask for that.

Startup Costs Associated with a Move for Grad School

08:09 Emily: Hmm. Yes. Okay. So let’s add a move on top of that. If you are moving, what kinds of, you know, startup costs are associated with that?

08:17 Rutendo: Oh, absolutely. Transport for sure. However way you’re getting there. Moving costs, shipping costs. In order to save money, you might have to use money. So in order to save money on buying all new items, for example, let’s say for your house, your desk, it might be cheaper to move with them, but that’s also a cost. So there’s, you know, you need to juggle that and, you know, do your tallies and do your trackings and write that out and see what’s cheaper and what’s easier for you and most convenient. So those moving costs are definitely a thing. Some people, I mean, I guess if you’re moving, then you’d have to consider things such as deposits on rent, rental fees. There might be costs as well for even finding a place to stay if your institution doesn’t provide that. Some people might work through agents. If that’s easier and safer for you, obviously different cities, different countries have different rules and regulations.

09:10 Rutendo: But I’d say that’s definitely a big thing to consider. So, and then the different taxes. Council tax in some places. I know in the UK, council tax is sort of like a big thing, which is one of the bills to do with, you know, your household that you need to consider and that you need to kind of look up at if you know, what’s easier and cheaper for you. If you’re a student, generally, depending on what household you’re living in, you can get a waiver for that. The process on that also requires research. I think the biggest expense is definitely if anybody moving, let’s say cities right now, would be things to do with, with living, added on to what we talked about before.

Different Scales of Moves

09:47 Emily: Yeah. I’m actually thinking back because there are different like scales of moves, right? So I’m thinking back to when I started graduate school, which I was living within a long drive, it was like a four-hour drive from where I was living before to my new graduate student city. So I was just able to drive with my stuff in the back of my car, did not bring any furniture. You know, it was pretty like low-key in terms of the actual transit costs. And then also I got into an apartment complex where they were doing, they didn’t require like a massive upfront deposit. It was some kind of like student special, you know, kind of thing. Like, so I feel like my move, which I did with no savings. I had like my last paycheck that was going to get me through two months, you know, to my first graduate student paycheck.

10:29 Emily: I did that without, you know, any real strain. I didn’t really buy furniture. I kind of lived without furniture for awhile, but that was a really, really low-key, low-scale kind of move. And like there can be, and we haven’t even talked about moving countries yet, but you can go way, way up on that scale. If you have an entire, you know, household, if you have stuffed move, if you’re flying and you have to ship your car, like plus as you just said, you know, I’m thinking about like Boston, where many people go through brokers and have to pay some kind of fee. Like, I don’t know if it’s a month’s rent like upfront just for that plus like the deposit, which could be large. Like, moves can vary so much from, I would say maybe a couple hundred dollars up to like thousands of dollars easily without even going, again, international. So like, that was my experience. I somehow like skated by with very little like actual outlay of money. What was your experience in this most recent move?

Rutendo’s Recent Move: 3 Suitcases

11:20 Rutendo: The most recent move? I could only fly with three suitcases. Somehow Emirates had a really great deal. So I could fly with three suitcases. In that, I made sure that I had my coffee pot because that’s always an essential, I had my bedding and my clothing, including my winter clothes. I knew winter clothes would be actually quite a big expense. So made sure that I had that over here. And then I didn’t have to buy furniture, thankfully, because I’m living in a student flat. So my apartment is actually furnished, so that’s great. But the biggest expenses now came into trying to, I guess, kind of make it feel like a home. Pots and pans, that that was not provided. The couple of basics. So it was a bit costly, but honestly, I guess not as costly as my master’s move, which is a whole different situation because I was not in student accommodation, which we could talk about later, the advantages and disadvantages of that.

12:13 Rutendo: So, this move was definitely slightly easier. But I did have quite some costs. And I did want to say there’s another cost that I think people, not even just internationals, might have to consider. If you’re changing things like your different insurances that you have, your health insurances. If you’re switching, you might need to do a bit more. So that’s also a cost that you need to consider, I guess, talk to your family about, or if you’re by yourself, figure that out how are you going to deal with those.

International Moves for Grad School

12:39 Emily: Yeah, absolutely. Okay. Let’s add that third layer on of now the move is an international move. Anything else you want to add about that particular cost?

12:47 Rutendo: Absolutely. Visa expenses. Sounds like just this one thing that you have to pay for, but then you need to consider the medical expenses within those. You need to consider health insurance within that. Some visas, like for example, the UK visa you have to pay, I think now it’s up to 500 pounds for every year of your visa. And so if you’re getting a five-year visa, it’s quite expensive. So you need to consider that. And then consider obviously things, things like flights you need to consider expenses to do with opening up a new bank account. You can get free bank accounts thankfully, but navigating that system. So, and if you’re going to a new country that you’ve never been to, I would say always make sure that you are able to have money to move around. So transport, to be able to do a couple of things in the first few weeks that you’re there. Add this to everything else that was mentioned before deposits: first month’s rent, household items, textbooks, and all the good stuff.

Challenges for Underprivileged Students Starting Grad School

13:46 Emily: Yeah. Wow. It can be quite a list here. So let’s now focus in particular on underprivileged students. What are the, you know, particular challenges that they’re going to have when they start up grad school?

Challenge #1: Funding

13:57 Rutendo: I’d like to talk about this in four different groups. So the first one is funding. I think this is the biggest thing to even begin with. Sometimes you can have funding for a year. Make sure you understand what your funding structure is as an underprivileged student. You want to know what is included and what is not included. Make sure that when they say it’s just tuition, you’re aware that it’s just tuition and you need to consider how you’re going to live and where that money is going to come from, what opportunities there are for RA ships, TA ships, how much they pay. And so to navigate that, before even I think I would say accepting and finalizing your offer. The different reasons why underprivileged students, you know, can have more difficulty navigating the funding structure, especially if you’re international, there’s that added layer. One of the things is that if you’re from certain countries, for example, I’ll give you the example of myself as a Zimbabwean. I am from a country that was formerly the Commonwealth and is no longer slash officially in the Commonwealth. So there are a lot of funding things that I could qualify for, but I don’t qualify for anymore. And so I needed to understand what I could get and what I couldn’t get. The offer I got, right now it covers tuition. My tuition is covered by the lab that I’m a part of. I’m a part of the computational propaganda lab here. However, there is no stipend. So for me to get a stipend, I need to work my maximum number of hours as an RA. And so that’s something I had to think about. Do I want to not have 20 hours a week to do my research, but to be an RA?

15:21 Rutendo: And so you need to be able to think about the time factor and how that is affecting or adding onto your work. Fortunately, my RA actually allows me to do the work in my research field. So it’s not like I’m spending 20 hours a week doing something that has nothing to do with my research, just so I can pay bills. However, I do need to do this so that I can pay bills. And so there’s that aspect as well of funding. And then one of the things I am consistently aware of is that my funding is pretty much dependent on grants that the lab has. And so that might be perceived as somewhat of a risk. However, it’s a bit of a new situation, not a new situation. It’s something that the lab has done for years. And so this is just how a lot of students in my lab are funded. But just me understanding that it’s not coming from a specific fund, is very useful for me to know what I can do and what I can’t do. So to ask those questions for funding.

16:14 Emily: Yeah, I totally agree. And I think this is, how funding works. It actually varies quite a lot by where you are the field that you’re in the type of university that you’re at. And so like, I am just thinking, Oh wow, I should really create a resource that’s like all just how funding grad school works. And I’m thinking to myself, do I know the full picture? Because I know things very well for certain fields that I’m close to, but like to know the full picture I think is very difficult. So for anyone, really, you do need to understand how funding works in your field, in that school, in that specific situation, where it’s coming from, what you have to do to get it, like you were just saying, how reliable it is, who it’s depending on? You know, if there’s a downturn in enrollment, are TA positions going to go away?

17:01 Emily: If your lab doesn’t get that next grant is like, that, you know, sector of your funding going to go away? Are there any guarantees? You know, guarantees at least in the U.S., they vary quite a lot. Some people get them. Some people don’t. Depends on the field. Depends on the school. Not getting one is not necessarily a bad sign. Although certainly getting one is a great sign. So there’s just a lot of layers to this. And yeah, I think the less versed you are in it, the more, yeah, you’re kind of flying by the seat of your pants, and it’s worth investigating for sure. Probably at an earlier stage than we’re talking about right now, we’re talking to basically rising or matriculating graduate students. And this is something you should ideally try to figure out kind of before you even apply so that you can, you know, know that you’re applying to the right places that have the right funding structure for you.

Challenge #2: Research

17:45 Rutendo: Then the next piece for me is research. Your actual research, but also I do need to say maybe this is in my field as a social scientist. I do not know how things work for sciences or humanities. But generally funding in terms of money and personal finances, there are things that your department, you know, some people can self-fund for a lot of things. So for example, some software that we use, some people in my department will say, Oh yeah, the software is fairly cheap. And I just subscribe this much a year. For me, that takes quite a bit out of my budget, you know? And it is part of research. It is actually part of a research cost. So things like that. However, I guess the best way to go about it is to talk to your department about it and understand what you need for your research.

18:27 Rutendo: If anything, if you think anything at all is tied to your research, talk to your department about it because they should be able to support you through that. But definitely I think as an underprivileged student, if I hadn’t spoken to other people who have navigated the system before, I would be worried about buying such software, for example, or I would be worried about managing the cap on the research fund that I have to be able to do field work and get those needs met as well. And so I think that’s definitely something that, you know, you kind of learn as you navigate the system. Yeah.

19:02 Emily: Yeah. Absolutely totally agree. Ideally, get someone else to pay for everything. And if not, at least you ask and then, you know, well, this is not something that we cover. And then you get to decide, you have to decide if it’s something that you’re willing to do out of your personal funds. But just apply, apply, apply, I would say, for funding. You know, extra grants. A lot of times travel in U.S. institutions sometimes comes down to the student to fund. Like, you know, summer trips to here or there to do their research. Basically, you’re going to get a grant for it, or you’re not going to go. I don’t think that too many people fund those things by themselves, but the smaller costs, like you were saying, like software or some kinds of equipment. Yeah. You should definitely be asking, at least, that your department will do it.

Challenge #3: Professional Development

19:44 Rutendo: For sure. The third one is professional development, and these are things that are not necessarily tied to your work or your research, but you need to do to begin to build up your CV or your presence in the field. And so some of the things might include, some courses offered through either online courses offered through either organizations or sometimes schools do actually offer these, but you still have to pay for them. So I know my library offers different professional development courses and, you know, each of them cost like about 15 pounds, a course. And so imagine taking about, you know, four or five of those a year. For some people, that could add up quite a bit. There could be things like attending conferences as well, that are not necessarily hosted by your school. It could be things like attending events.

20:37 Rutendo: I mean, I know I’m saying attending now, they’re all on online. Some thankfully are free, some still aren’t, which is still a cost for a lot of people. And so even though these things aren’t necessarily tied to your research, these are expenses that some students have actually footed themselves, but I don’t think it’s necessary for you to always do that. And this is, once again, when we talk about applying for assistance. But when it comes to applying, I do want to point out that the information isn’t always out there explicitly to say, Hey, there’s money. You can apply for this. So if there is something that you think somebody might cover, even if you don’t think somebody might cover it, just ask. The chances are that somebody will know where the answer is. Even if it’s not, you know, on the website that says, Hey, we offer professional development funds. But that’s definitely something I think underprivileged students can fall behind on simply because some of us have to cover a lot of gaps, not coming from families with people that have done PhDs, or some of us will be first-generation graduates to even begin with. And so we might have a lot more things and a lot more sessions or professional development work that we need to do but not enough money to actually pay for those things. And so there are a couple of costs entailed in that.

21:52 Emily: Yeah. And when you say ask, I just wanted to point out, who? Who should the people ask?

21:59 Rutendo: A supervisor, I would say start with your supervisor as the first port of call is your supervisor. Your department might have somebody that’s in charge of your program as well. I don’t know how different institutions work, but generally there’s someone that’s not necessarily your supervisor, but oversees your actual program. Those are the people to talk to you. And then if it’s things that are very just professional development focused, career services. I know a lot of schools have career services departments.

22:24 Rutendo: Those places are actually really great, whether you’re an undergrad or a PhD student. They know a lot about what’s going on. And so definitely those three, start off with those three. One of them will be able to assist.

22:36 Emily: Yeah, I would also add older students, students ahead of you. If they’ve done a conference that you want to go to, just ask them if they had it funded from somewhere. If they say, no, that’s not necessarily the final word, but if they say yes, then you’ve gotten a really good lead. And I would say also, you know, the person in charge of the program at my school that was called the Director of Graduate Studies, DGS. That person has an assistant. That is the person who knows everything going on everywhere. So that is the person to befriend to get on your side to advocate for you. That person is going to be an amazing resource just generally, but specifically with respect to funding and knowing how everything works behind the scenes.

23:17 Rutendo: That is definitely true. There is always that one person in administration who’s a great person to know. And I agree with that. Finding those people is very useful.

Commercial

23:28 Emily: Emily here for a brief interlude. Taxes are weirdly, unexpectedly difficult for funded grad students and fellowship recipients at any level of PhD training. Your university might send you strange tax forms or no tax forms at all. They might not withhold your income tax from your paychecks, even though you owe it. It’s a mess. I’ve created a ton of free resources to assist you with understanding and preparing your 2020 tax return, which are available at pfforphds.com/tax. I hope you’ll check them out to ease much of the stress of tax season. If you want to go deeper with the material or have a question for me, please join one of my tax workshops, which you can find links to from P F F O R P H D S.com/T A X. It would be my pleasure to help you save time and potentially money this tax season. So don’t hesitate to reach out. Now, back to our interview.

Challenge #4: Emergencies

24:34 Emily: Okay. And we had a fourth one, right?

24:38 Rutendo: Now, the last one has nothing to do with all of these other things, but it’s emergencies. These happen. And sometimes, especially as a student, as an underprivileged student, if you’re moving somewhere new, you might have used most of your money for moving in and getting settled, but emergencies do happen. And this actually recently happened to me whereby I needed to go to an emergency room. Thankfully, it was not COVID-related. So just have to say that in a pandemic, just to make sure. However, you know, I ended up being able to talk to my welfare team here at the college and they covered a lot of the costs for a lot of things that I didn’t even know they could be covered for that are emergencies simply because I wasn’t ready then when that happened.

25:25 Rutendo: And so I think it’s really important that we understand that whatever emergencies we face to be able to be open about them, to the best of our abilities and you know, and obviously balance keeping your privacy and your private information private, but also letting letting the right people know to give you assistance. Because while some people might be able to just write their families and, you know, call up home and say, Hey, look, I need an extra, this amount of money. Some people might not be able to. And so to know that most universities will be, there will be some funds somewhere. I know my university has something called hardship funds for things like that. And different levels of it that you can apply for, but definitely the understand that emergencies for underprivileged students can be something difficult to navigate and challenging as well.

26:13 Emily: Absolutely. Absolutely. Could not agree more. I think in the U.S. it’s becoming more common, but I wouldn’t say it’s totally common, that universities or graduate schools have either emergency grants or emergency loans available. It’s not everywhere, but it’s definitely, definitely worth inquiring about because it’s, yeah, it’s becoming more and more popular to set up those kinds of things. As we understand, not everyone has the means to cover an emergency in cash or has access to debt even to finance an emergency or has family to fall back on or whatever the case may be. Yeah, not everywhere, but definitely worth asking about.

People are Your Best Resource: Talk to Them 

26:53 Emily: Okay. Yeah. Anything else you wanted to add about sort of helping, you know, underprivileged graduate students prepare for starting graduate school or, you know, make it to the end? Because finances are a big reasons that people leave PhD programs.

27:08 Rutendo: I mean, I would say that, you know, the most important thing in terms of getting a hold of your finances is also just, you gave the advice of talking to older students in one of the specific categories for professional development. But in general, talking to as many students as you can, once you accept it, try to connect. If there are any people that you see online, if you’re on Twitter, for example, you know, when somebody says I’m doing this program, try to connect with them. I set up a couple of Zoom calls with third years and second years and even people that had just finished their PhDs in my department, just to talk to them, just to hear about their experiences and, you know, students, you know, not just underprivileged students, but everyone just to know about the experiences outside and inside to know what I need to prepare.

27:51 Rutendo: And so I think that’s part of your research and getting so that you really understand your finances. Especially if you’re going to be doing some form of RAing or TAing, it’s important to talk to somebody that has done it so that you understand such as the salary structures as well. Because, you know, sometimes they tell you, this is how much you get paid pro rata, but you don’t even understand what pro rata is, for example. And so it would be useful to talk to people. So I’d say, that your best resource is people that have been through the very same system as well. And just understand the general lifestyle that helps you understand the costs, you know. So just asking them what they do in general, how much things cost, ask people where they go shopping, what things they had to buy, things like that would be very useful as you are preparing to go, and helps you definitely understand your finances, even before you start.

Establishing Good Financial Habits in Grad School

28:40 Emily: So the last thing we wanted to talk about was establishing good financial habits at the start of graduate school. Both what those habits might be, and how to actually go about establishing them, which is really the key. So let’s talk about what habits are great to establish at the beginning of graduate school, and for each one, how people can do that.

Habit #1: Track Your Expenses

28:57 Rutendo: Okay. I think the first habit is to track your expenses.

29:02 Emily: I always say that number one as well.

29:03 Rutendo: Which is, I must actually say, something I got from your podcast. So I listened to this podcast before doing my PhD and honestly like it’s, I went on a binge and it has been very useful for me. And I learned to track, just track. So what I did was I had the first month of not knowing, you know, what is needed or no projections, not knowing how much I might be able to save, just to track everything I bought. It sounds tedious, but you do need to track. And so the how, I think there are different ways of doing this. The way I did it was I used Notion. So I made a table and this sort of like budget looking thing in Notion, even though it wasn’t a budget, it was what I was spending.

29:50 Rutendo: And I had categories for each thing. So groceries and toiletries. So I knew that week one, this is what I spent. Week two, this is what I spent. So that helped me also see an average about on average per week, what am I spending on this? And then I kept my subscriptions. So knowing what subscriptions, you know, I have, and then during that month also making sure am I actually using them, like I have Spotify premium. Do I actually use it? How important is this feature for me? And then there were miscellaneous as well. Things that I, you know, that I’m spending on this month that I won’t necessarily be spending on next month, but just to understand that how much cushion and move room do I have in my budget for that? So I wasn’t going to be buying pots and pans every month, for example. But I kept that in there. That helped me understand an average. Because there will be some things that I will need to pick up throughout the month that are not in necessary, you know?

30:40 Rutendo: So having all of that. The other way you could do your tracking is to use the budget apps, you know, the ones that you connect your bank accounts to an app. I think in the U.S. it might be mint that most people use. In the UK, I use money dashboard. Personally, I find that to be really good. It has, you know, web interface and app interface, and it’s fairly automatic. And so habit number one is track. Just, you know, just to understand exactly what you’re spending. Don’t try to, and don’t lie about anything. If you spend, if you spend money, I spend money on sparkling water because I love sparkling water and I don’t have a soda stream. I wrote that down just so that I actually understand how much money I’m spending on sparkling water. Things like that.

31:32 Emily: Yeah. Completely could not agree more. And I would say when you’re choosing like this manual method, which as you said, can be tedious. I think there’s a lot of power there in the tedium and staying close to the expenses. But if you know yourself and you know that you’re not going to do it, you know, you’re not going to do this daily or multi times per day or whatever it is, and you decide to use mint or you need a budget or something similar, that’s okay. Know yourself, know what’s sustainable for you. And just choose something that, as you said, can become a habit and it is, you know, less maintenance to use one of these automated systems, yeah. But whatever can become easiest for you to sustain. I know for example, I kind of fall on this manual tracking side of things. My husband will not do that. So for us keeping a joint budget together, it has to be software, or it’s not going to get done. But it is a habit. And when we use software, we do check it. So whatever you think is sustainable for you in the longterm.

Habit #2: Understand Your Expenses

32:22 Rutendo: Right. Absolutely. And then the second habit would be connected to the tracking. So after the tracking comes the budgeting. And that’s something that I have found to be very useful. So I then moved, after understanding my expenses, I then, you know, created like a, okay, so per month here’s how much I want. Here’s, you know, on average how much I think I need for groceries, how much I need, I think, for this and this and that. And then I then moved it into the automated system. The automated system for me was easier simply because there were things that I could grab, let’s say, and sometimes forget to enter. I was afraid I’d forget to enter manually because I was no longer in the tracking phase. I was now in, you know, I’m technically still the tracking phase, but you know what I mean?

33:04 Rutendo: Like in the actual making sure I understand how much I spent of what phase. And so I moved that understanding to money dashboard and had all the different categories. And, you know, it’s been very useful, but like you said, even if you do automate something, it’s a habit. So I do check my money dashboard just to make sure that an expense has gone into the correct category or into the category I want it to go into by the categories I’ve set in my budget. So, and also just to see how far I have, how much do I have left this month for this specific thing?

33:35 Emily: One thing that I think is really valuable about tracking, and also budgeting to an extent, is even if you don’t really think you need to do it right now, you may, six months from now, want to look back at that data and, you know, get some insights from it because of a decision or something you have to make at that point. So, it’s just a good thing to make a habit, you know, make as low maintenance as you possibly can, just so you may want to use that data in the future you’ll have it.

34:03 Rutendo: Absolutely. Yeah, one thing I do understand that because of, I do regret not having had a budget during my master’s degree because it was in the same country, so I really have no excuse. So, I couldn’t actually say how much I spent on groceries on average. You know, now I can say that and now I can. And so I do agree. It is nice to just have that data at some point. You never know what you might do next in a couple of months or a couple of years even.

Habit #3: Save

34:30 Emily: Yeah. What’s the next habit on your list?

34:33 Rutendo: The next habit on my list is to save. This one is a bit, I think people, people go about it different ways. I know that the advice generally is pay yourself first, which I understand is great advice. As somebody who’s not that wealthy, not even, let me not even put a “that.” Who is not wealthy, who is mostly just doing enough to get by, paying myself first is actually quite, quite difficult, even on my budget categories. What I always do know is that I always have some little leftover. So I do this thing that I actually learned again from another guest on this podcast, which is at the end of the month, whatever I have leftover in my checking account, I put into my saving and I start from zero with my new paycheck. That is my saving. And then there’s also the other way that I save, technically kind of like save/invest, is through this app called Moneybox.

35:31 Rutendo: I think the U.S. equivalent might be Acorn. I don’t know if that’s what they do, they round up your expenses and sort of, kind of like quote unquote invest it for you. It’s not like you’re investing in big, very risky, you know, things. You’re not making like $5,000 worth of investments, but it is quite nice to just see that number go up. You know, if I buy something and then there’s 20 pence left, knowing that that 20 pence is going to do something. Because also, at the end of the day, in my head, in my budget, anyway, that was a round figure, right? That was not necessarily 0.8. you know. And so, that sort of save and invest model, I find it to be very useful, to always try and save. And it’s useful to save, even if you’re saving very little, because once again, emergencies do happen.

36:19 Rutendo: And then it also is useful to try and strive towards getting to that three to six months worth of expenses, which is something you don’t always start with. Especially if you’re somebody that’s not coming from a wealthy background. You don’t always start out with being able to have three to six months worth of expenses in your savings account. But that little bit counts. Just that little bit counts, and hoping that emergencies don’t happen. Knock on wood. You will get there through I guess some of the other things we’ll talk about.

36:44 Emily: What I really like about that articulation. Now, of course I am an advocate of pay yourself first. I definitely am. But what I like about how you’ve set things up is that saving is not, even though it’s the last thing you do with your money each month, it’s not the last thing on your mind. You know throughout the month that you have that intention of doing it at the end. And so I’m sure it affects your behavior. Oh, well, I want to be able to save a little bit more this month. So I’m going to really try to come in under budget on this category, because I know that’s going to enable me to save this much more. And so what I like about that is that it’s still an intentional thing that you have throughout the entire month, even though you do the action at the end.

37:20 Emily: And I think that, you know, sometimes that’s just how you need to start. And when you’re living essentially paycheck to paycheck, you know, there’s a possibility you might spend your entire paycheck that month, if something odd came up and you can’t, you really can’t, you know, set anything aside in advance. It’s okay to do that system. As long as it’s working for you most of the time, most of the time that you’re able to save something at the end of the month and increase that savings as you were just talking about. I think, you know, it’s, it’s a way it’s a way to start. It’s a way to start saving,

37:47 Rutendo: Right. Also, just to actually say that that’s what I’m doing now, because I’m just starting out. So my intention right now is, because technically I’m still settling in. So there are still odd expenses that are coming up here and there since I’ve been here for a couple of months, but I don’t think that’s what I’ll be doing, let’s say, next year, this time. By then I will have, you know, very few things that come up and I will now know exactly what I can save, even if I’m still living paycheck to paycheck, which then just becomes something I do first. And so this is definitely something transitionary, but yeah.

38:18 Emily: I think it’s also easier as you learn a new city to become more frugal with time. You know, you mentioned earlier, well, where do you shop? That’s a very key question. Maybe when you first move to a city, you don’t know the least expensive places to shop, or the places that have the sales at this particular day of the week. You don’t have that insight. And so, you know what you’re spending on groceries, for example, in month one, you might be able to spend much less by month 13 because you figured out a few of those tricks. And so don’t think that just because you’re starting out completely paycheck to paycheck, that you’re going to be that way forever, because you will learn over time if you’re, you know, if you’re minded in that way.

38:53 Rutendo: Absolutely.

Habit #4: Learn How to Be Frugal

38:54 Emily: Okay. So do you have another habit on your list?

38:56 Rutendo: Yes. Which you actually kind of got to, which is understanding the best way you can be frugal. I put it in a different category than saving because the saving is something very technical, but the other habit you can do is try to find out how best you can reduce costs. It doesn’t matter how little it sounds. You know, for example, Spotify premium, normal is 9.99 pounds, student is 4.99. You might think, okay, that’s not much, but it is, it sort of adds up. So if you know what, just that extra amount of time it takes for you to sign up to student, if you need that. If you use that. Or knowing exactly where to shop, right? And if you go to the store and we’re like, here, we have reduced shelves where you can get fruits and vegetables that are technically about to go bad, kind of like the shelf date really, saves a bit more, you know, I could buy an avocado for 40 P or I could buy it for two pounds 70.

39:47 Rutendo: So then I get two avocados, instead. You know, something like that, just, just being as frugal as you can. If there are books that you want to buy, trying to get them second hand, instead of getting them new. You know, or if it’s something that you actually don’t need to be writing in and that you just want to browse, consider getting it from your library instead. If you’re fortunate enough to be living in, you know, even in a pandemic, some libraries are doing, you know, click and collects or things like that. So try to do that. So just finding ways to be frugal, no matter how small the amount seems, definitely adds up. And the other technique, and this is cash backs as well. I know that some banks do different cashback things with, you know, different retailers or you could actually sign up for like I think in the UK there’s TopCashback or something I think is also a U.S. thing online.

40:44 Emily: I use Rakuten.

40:46 Rutendo: They do have that. Yes. Yes. So things like that definitely, you know, for things that you’re going to buy anyway, might as well get a percentage of it back it’s really useful. And these things I know they seem very minimal when you think about you’re like, Oh, it’s 5%. It adds up. It adds up, and that 5% could be something that goes into your savings, for example. Fine. If you don’t want to spend it on something new, that’s how you end up getting to your three to six months worth of, you know, expenses of savings. So.

41:16 Emily: I was just going to say, tie any little frugal, you know, tactic that you implement to directly increasing your savings rate. If that’s your top goal at the moment, right? So if you, as you were just saying with Spotify, for example, you know, you reduce it by $5, whatever it is, Hey, why don’t you pay yourself first $5? Because you were spending that anyway. So that’s the way you can kind of transition between these two systems, or save at the end of the month. Hey, my grocery budget was this, but I came in, you know, $10 lower because I’ve learned all these frugal things to do. Okay. Your $10 at the end of the month gets to go into your savings. Yes. I love that idea. Yeah. Did you have another habit?

A Note on Side Hustling

41:52 Rutendo: Well, technically it’s not a habit, I guess, because a habit would have to be things that you do consistently, but then to try and be on, this is the last thing under this question, to try and do like side hustle type of things. I don’t know if I could classify that as a habit or a thing. But also, I mean, obviously you have to consider how much time it takes away from your work, because, you know, first and foremost, you are a student. But if possible, you know, there are different ways. Some people do short-term consulting things. I know for me, the thing that has helped me right now is a short-term consulting gig which I know, you know, at the end of that will help me build up my savings so much faster than, you know, saving the little bits off of my paycheck and things like that.

42:34 Rutendo: And so to find out where your skills lie, if somebody wants help with like a couple of editing, copyrights, things like that, that you could take away just a couple of hours of your time to do. Not necessarily to make that become the focus, but only if possible. And this is something that sometimes is also really a sign of privilege as well, actually, rather than something I’d advise underprivileged students to do, because sometimes you have more things to deal with, honestly, than side hustling. So this is why I’m not saying this is necessarily a habit, but if you feel that you do have that privilege of time and space and mental capacity to do that, then do so. But don’t necessarily, please, if there’s something you can’t do feel obligated to.

43:16 Emily: Yeah, absolutely. I mean, you’re primarily in your degree program to get that degree. So I always say about side hustling, like, don’t do anything that’s going to jeopardize your progress toward that end goal. But if you have the capacity, it can be a really great supplement. And like you were saying, I think that sometimes graduate students you know, they end up devaluing what they’re capable of doing because they’re being paid such a low, you know, rate through their stipend or whatever. If you can do consulting, as you were just saying, or employ your skills in another non-academic capacity, especially, you might be able to command a fairly high pay rate, at least compared to what you’re getting through your primary work as a graduate student. And so don’t think that a side hustle is going to be 20 hours a week or 10 hours a week.

44:03 Emily: It could be, as you said, two hours a week and still make a really big impact on your budget. If you select it very carefully, really employing what makes you unique in the marketplace. Now I will say, because we’ve been talking a lot about international students in this interview, in the U.S., international students are extraordinarily limited in what they’re permitted to do in terms of making money outside of their primary position. That is, they really can’t do anything unless it’s been approved through like CPT, like OPT kind of situation. So I’m not encouraging international students to side hustle to work for money, but there might be ways that you can set up passive income sources that it’s not actually exchanging work for money, but other ways you might be able to make money. You mentioned cash back earlier. Credit card rewards are a thing.

44:51 Emily: They can be fairly lucrative. I’ve had a couple episodes in the past on that. So I’ll link them from the show notes. International students would not be able to do that day one arriving in the U.S. because you have to work on your credit score first. But after a year or two, that might be a possibility as like a passive income source. So you are going to have to be a little bit more creative in your thinking about side generating side income as an international student, but it is still possible. Maybe it’s worth looking into again, if you have the time and the energy to do so.

45:19 Rutendo: Precisely. Yes.

Best Financial Advice for Another Early-Career PhD

45:22 Emily: Okay. Rutendo, thank you so much for this wonderful interview. I think we’ve gotten so many insights out of it. I will ask you for one last one, which is what is your best financial advice for another early-career PhD? And that can be something that we’ve already touched on in the interview, or it can be something completely new.

45:39 Rutendo: I would say, we’ve already talked about this. If there’s a chance that you don’t have to pay for it, don’t. It doesn’t matter what it is. Just ask if there’s a chance that you don’t. Because it doesn’t matter how many times you track something, how many times you budget something, if you can get it from somewhere else, all these other habits, all these other things will be better as a result of you not necessarily having to go out of your way to do this. So that’s the biggest thing for me.

46:04 Emily: Absolutely. I think, you know, maybe a more broad category of term for this is just negotiation. Like you can kind of think about it that way, because you’re just sort of ferreting out, you’re feeling out, is there a possibility that someone else can foot this bill for me? Is there another creative way that I can get this paid for by someone else? I know in the U.S. we don’t have a strong culture of negotiation at all in terms of like sales or anything, but I know that other countries, it’s more of a common thing that you learn in your childhood. And so if that’s your, you know, personality, maybe you can think of it that way as just feeling out what are the possibilities here, financially? What are the parameters of this space? Yeah. And oftentimes that’ll be to your advantage. I mean, you’re not going to get anywhere by not asking. That’s for sure.

46:46 Rutendo: Definitely. And I mean, I do just want to say that, especially for underprivileged students, the one thing I do want to say about the reason I’m giving this advice and I put it, so plainly is because a lot of us it’s about our mindset. A lot of us were, you know, I mean, let me not say a lot of us, but then for me, the problem I had to get over was knowing that I had to work for certain things and then sort of feeling that I am not allowed to have certain things, just the social conditioning, right? That I’ve already come this far as like a Black African woman. Now I have to ask again, if they could pay for this conference. Now I have to ask again, but really just, there are people, you know, once I started talking to people that have been doing this for four years and some people for generations because the families had already navigated the system. This is actually what the system is the afford to support you, to become the best that you can be as a researcher, as a student, as whatever it is that you’re doing.

47:40 Rutendo: And so it’s not necessarily, I hope that a lot of people realize it’s not in sense of entitlement, but really just to understand that there are systems of support that might not be explicitly said, you know or stated that they are there, but they really are there for you. And to help you with your finances. And like you said, Emily, at the beginning of the interview, a lot of people are beginning to understand now that finances really impact underprivileged students’ experiences in these institutions. And they are open to that and open to discussion and negotiation. So.

48:12 Emily: That was so well put. Thank you so much for this interview, Rutendo. It was a pleasure to speak with you again.

48:16 Rutendo: Thank you so much. Thank you for having me. I appreciate it.

Outro

48:23 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs Podcast. On that page are links to all the episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast and instructions for entering the book giveaway contest and submitting a question for the Q&A segment. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. If you leave a review, be sure to send it to me to share an episode you found particularly valuable on social media with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in like investing, debt repayment, and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

Can I Qualify for a Mortgage with a Short-Term Fellowship or on an F-1 Visa?

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In this episode, Emily shares a few clips from the first-time homebuyer Q&A that she hosted with Sam Hogan on May 6, 2021. Sam is a mortgage originator with Prime Lending (Note: Sam now works at Movement Mortgage) specializing in graduate students and PhDs, an advertiser with Personal Finance for PhDs, and Emily’s brother. The first pair of questions is on whether having three years left on your fellowship offer is required to get a mortgage. The second pair of questions is on qualifying for a mortgage if you’re on an F-1 visa. These questions are among the most common that Sam receives.

Previous Episodes with Sam Hogan

Introduction

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

This is Season 8, Bonus Episode 1, and today I’m sharing a few clips from the first-time homebuyer Q&A that I hosted with Sam Hogan on May 6, 2021. Sam is a mortgage originator with Prime Lending (Note: Sam now works at Movement Mortgage) specializing in graduate students and PhDs, an advertiser with Personal Finance for PhDs, and my brother.

Sam has been on the podcast before in Season 2 Episode 5, Season 5 Episode 17, and Season 8 Episode 4. As Sam has gained experience working with PhD clients over the last few years, he’s been able to get mortgages approved in scenarios that didn’t seem possible a couple of years ago. We’re using this bonus episode to update you all on this evolving situation.

What you will hear next is me reading questions that were submitted over chat during the Q&A call and Sam’s answers. We selected these questions because they are among the most common that Sam receives. The first pair of questions is on whether having three years left on your fellowship offer is required to get a mortgage. The second pair of questions is on qualifying for a mortgage if you’re on an F-1 visa. There were a few dozen people on the call so you will hear some background noise as well.

If you would like to attend a Q&A call of this type, please sign up for the Personal Finance for PhDs mailing list at PFforPhDs.com/mortgage/. I’ll be in touch over email about the next scheduled call. As of now we anticipate holding another one in June 2021 and periodically after that.

If you would like to get in touch with Sam directly regarding your own mortgage, you can call or text him at (540) 478-5803 or email him at [email protected].

Without further ado, here are the clips from the first-time homebuyer Q&A call with Sam Hogan.

Conclusion

Thank you, Sam, for giving your time and expertise to this call and thank you, participants, for your excellent questions! If you, listener, are interested in attending a Q&A call for first-time homebuyers in the near future, please go to PFforPhDs.com/mortgage/ and register for my mailing list. I’ll be in touch over email when we schedule the next call. If you would like to contact Sam directly regarding your own mortgage, you can call or text him at (540) 478-5803 or email him at [email protected].

How Two PhDs Bought Their First Home in a HCOL Area in 2021

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In this episode, Emily recounts her and her husband’s home ownership journey, what she’s learned along the way about buying a home, and what she wishes they had done differently. The episode is structured around the necessary elements in your life and finances to qualify for a mortgage and purchase a home: 1) desire to buy a home, 2) income, 3) debt-to-income ratio, 4) credit score, 5) down payment and closing costs, and 6) someone willing to sell you a home. In each section, Emily speaks about the element generally and takes you through their own history to show you how all these elements finally came together in 2021 to enable the purchase of their first home.

This is post contains affiliate links. Thank you for supporting PF for PhDs!

Links Mentioned

Introduction

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

This is Season 8, Episode 18, and today I’m going to recount for you my and my husband’s home ownership journey, what I’ve learned along the way about buying a home, and what I wish we had done differently. I have structured this episode around what I understand as the necessary elements in your life and finances to qualify for a mortgage and purchase a home: 1) desire to buy a home, 2) income, 3) debt-to-income ratio, 4) credit score, 5) down payment and closing costs, and 6) someone willing to sell you a home. In each section, I’ll tell you about the element generally and take you through our own history to show you how all these elements finally came together in 2021 to enable the purchase of our first home.

Purchasing a home in the San Diego area has been a decade-plus-long dream for us. My biggest long-term motivator for staying on top of my personal finances was not debt freedom, not financial independence or early retirement, not lifestyle spending, but rather being able to buy a home in southern California and live a financially stable life with children.

Whenever I met people who used to live in San Diego, I asked them why they moved away, and if the answer wasn’t being transferred by the military, it was nearly invariably financial pressures. I knew it would take all of my financial skills just to make it in this high cost of living area, so that’s what I’ve been working toward all these years.

My husband and I closed on our very first home purchase in north San Diego County in April 2021. So not only did we accomplish one of our major life goals, we did it in the strongest nationwide seller’s market in recent memory.

As I tell the story of our journey to home ownership, I’m going to get really personal and transparent, which I don’t often do on this podcast. I am going to give some advice and suggestions as we go through, but please keep in mind that this episode is largely descriptive of our path, not prescriptive for yours. You will see that we’ve had privileges and opportunities that are definitely not available to everyone. COVID-19 in particular greatly influenced the end of this process, which of course we all hope will not be repeated.

I know that my story, especially the end when I start giving you numbers, will feel quite unrelatable to those of you who are still in grad school or who live in low- or medium-cost-of-living areas in the US. They certainly were for me when I was a grad student in Durham. Yet, multiple years out from finishing my PhD, here I am living it. If eventually buying a home in a high cost of living area is something you want, I hope you will find our story inspirational. If your goal is to buy a home soon, I hope you will find it educational.

If this episode raises new questions for you about the home-buying process or you’ve had some kicking around for a while, I invite you to join me and Sam Hogan for a free live Q&A call this coming Thursday, May 6, 2021. Sam is a mortgage originator specializing in graduate students and PhDs, particularly those with fellowship income. He is also an advertiser with Personal Finance for PhDs and my brother. You can register for the call at PFforPhDs.com/mortgage/.

In case you are a new listener, here is some brief biographical info so you can follow along with the episode:

My husband Kyle and I met and started dating at Harvey Mudd College, from which we graduated in 2007 at the age of 21; we both turned 22 in July 2007. Kyle started his PhD in computational biology and bioinformatics at Duke University in fall 2007; I did a postbac fellowship at the NIH for a year before starting my PhD in biomedical engineering at Duke in fall 2008. We got married in summer 2010. We defended our PhDs in summer 2014. Kyle stayed on as a postdoc in his PhD advisor’s lab for another year, while I worked a few part-time / temporary jobs while I launched Personal Finance for PhDs, which has been my main endeavor since. In summer 2015, Kyle got a job at a biotech start-up, and we moved to Seattle. We have two children, born in 2016 and 2018. In summer 2020, Kyle negotiated to work remotely permanently for the start-up, and we moved to southern California, specifically the Los Angeles area. We closed on the purchase of our very first home in North San Diego County in April 2021.

The six necessary elements to buy a home are:

  1. Desire to buy a home
  2. Income
  3. Debt-to-income ratio
  4. Credit score
  5. Down payment and closing costs, and
  6. Someone willing to sell you a home

In the rest of the episode, I’ll tell you how we checked off each of these elements and give you some pointers as well. By the way, this episode is for entertainment purposes only, and nothing in it is advice for legal, tax, or financial purposes for any individual. You are entirely responsible for your own financial decisions.

1. Desire to buy a home

Before even dipping your toe into the home-buying process, you have to actually want to buy a home. It’s not something that you can or should just fall into. And if you don’t want to buy a home, none of the rest of the elements matter.

Kyle and I do not find the idea of home ownership to be particularly attractive. We have been very happy to rent for these last 14 years in the sense that we like that our landlords have had the financial and logistical responsibility to take care of the properties we’ve lived in. We’ve never cared about not being able to customize the space we’ve lived in or anything like that. However, we did idly consider home ownership in some earlier stages of our careers.

Neither of us was in a position to buy a home financially at the start of grad school. We did know some other grad students who owned their homes in Durham, so it was perhaps feasible to buy a small home with a grad student stipend. I actually interviewed Dr. Matt Hotze, a house hacking grad student at Duke, in Season 3 Episode 3. However, anecdotally, all the grad student homeowners we knew personally had purchased their homes before the subprime mortgage crisis, no later than 2007. Lending standards were obviously a lot looser before the crisis than during and after.

The subprime mortgage crisis and the Great Recession had a very big effect on my outlook on home ownership, as I believe they have for many Millennials. The first chapter of The Psychology of Money by Morgan Housel (affiliate link—thanks for using!) discusses why individuals view money so differently from one another. The way he puts it is: “People do some crazy things with money. But no one is crazy… People from different generations, raised by different parents who earned different incomes and held different values, in different parts of the world, born into different economies, experiencing different job markets with different incentives and different degrees of luck, learn very different lessons.” His examples in the chapter of common financial experiences of various American generations include the Great Depression, high inflation in the 1970s, low inflation since the 1990s, the stock market’s high returns over the last 50 years, and the Great Recession.

Housel calls your teens and 20s “your young, impressionable years when you’re developing a base of knowledge about how the economy works.” Well, my early to mid 20s money mindset was scarred, as Housel puts it, by the housing crisis. By the time I reached my mid-20s, the mantras “Your home is not an investment” and “Don’t buy a home that you don’t plan to stay in for at least five years” had settled in deep.

Now, that five-year rule, that’s a tough one for early-career PhDs. Most of us expect to be fairly itinerant—moving cities, states, or countries for grad school, a postdoc, a first Real Job, a second, etc. You have to be really intentional as a PhD to stay in the same city for longer than 5 years, often making some kind of career sacrifice or concession to do so.

This is the dilemma that Kyle and I found ourselves in back in 2010. We had just gotten married and combined households and finances. The housing market was not strong by any means but it seemed that the worst was over. Our two grad student stipends were certainly enough to support a mortgage on a small home in Durham. We had a small amount of savings. Yet, Kyle was three years into his program and I was two years into mine. We thought, surely we will be leaving Durham by 2013, more or less. There wasn’t time, according to the 5-year rule, to have the reasonable expectation that we wouldn’t lose a bunch of money on buying and selling a home. So we didn’t buy. We focused our financial energy on retirement investing instead.

In hindsight, I learned the wrong lesson from the subprime mortgage crisis, or at least I applied a good lesson in the wrong way.

Here are a few things I’ve learned since 2010:

1) Personally, we didn’t actually move away from Durham until 2015. So we would have passed the 5-year rule anyway if we had bought shortly after getting married. The lesson there is: You might stay in your current city longer than you initially expect to. PhDs can take a long time. Keep a realistic timeline in mind in addition to an optimistic one.

2) If you own a home and then move away, you don’t have to sell it if your home hasn’t appreciated enough yet. You can rent it and become a long-distance landlord, likely with the help of a property management company. In 2012, we rented a townhouse from a private landlord through a property management company. The owner had earned her PhD at Duke and subsequently moved to Europe for a postdoc. Matt Hotze also employed this strategy when he moved away from Durham after finishing grad school.

As I record this, Scott Trench and Mindy Jensen of Bigger Pockets recently published a book titled First-Time Home Buyer: The Complete Playbook to Avoiding Rookie Mistakes (affiliate link—thanks for using!). I have not read the book yet, but I have listened to them go on the podcast rounds to promote it, and I’ve learned something just from that. One of the concepts in the book is on exit strategies from real estate purchases, namely: 1) live in it forever, 2) sell it, 3) rent it. When you buy a home, you should have more than one exit strategy that is a viable option for you.

What I want you to take from this point is that your home ownership clock does not need to stop when you move away from your current city. If it does take 5 years for your home’s rise in value to justify the transaction costs of real estate, which are very high, you don’t have to actually live in the home for all 5 years. Therefore, when you buy a home that you don’t plan on living in forever, whether that’s because of an anticipated move or growing your family or anything else, make sure that it makes financial sense as a rental as well as a primary residence.

3) Instead of relying on passive appreciation to increase your home’s value over a timeline like five years so that you can break even vs. renting, you can instead approach your primary residence with a real estate investor frame of mind. I’ve learned of two ways to do so through The House Hacking Strategy by Craig Curelop (affiliate link—thanks for using!), though there may be more.

The first method is forced appreciation, which is when you upgrade your home while you’re living in it through renovations or an addition or something similar. I don’t know how accessible that method would be to the average PhD; it’s not something that I would feel competent or confident to undertake in a cost-effective manner.

The second method is house hacking. I’ve already mentioned that term once in this episode. House hacking is when you buy a home that’s bigger than you need and rent out part of it. This could be a single family home where your tenants are your roommates or a multi-family property where your tenants are your neighbors. Assuming the ability to buy a home in the first place, I think this strategy is quite accessible for especially graduate students, who are accustomed to roommate living. I have had multiple house hacker interviewees on the podcast, including Matt Hotze, Jonathan Sun in Season 2 Episode 5, and Dr. Caitlin Kirby in Season 6 Episode 16. House hacking is an incredibly powerful strategy, which if done right can either reduce your housing expense or even eliminate it entirely and give you an additional stream of income. I discuss this strategy in depth with Sam Hogan in Season 8 Episode 4.

The upshot is that I wish I could go back in time and tell my early grad student self that living in Durham for grad school was a wonderful and rare financial opportunity. I would tell myself that buying a home with an eye toward renting it out, whether through house hacking or long-distance landlording, greatly mitigates the risk of buying in a city you don’t plan to live in forever.

That pretty well summarizes my aversion to home ownership and what I wish I had known about home ownership in my grad school years. Since I am unable to communicate with my past self, I hope you find it valuable.
In 2015, Kyle and I moved from Durham to Seattle, and that was quite a shock to our financial system. Kyle’s income jumped, of course, but suddenly our cash savings seemed pretty paltry compared to our new living expenses. Buying a home was no longer on the table. Instead, we rented a cheap apartment that was walking distance to his new job and focused our energy on growing our careers and our family. I’ll tell you more about how those years went for us financially later on in the episode.

By the time we were ready to reconsider the home ownership question in about 2018, we looked around and saw that Seattle was experiencing double-digit growth in its median home price and had been for several years. We had numerous friends buying or trying to buy in a super competitive market, doing things like waiving inspection contingencies. That didn’t sound appealing. Plus, going back to the previous discussion, we didn’t want to be in Seattle forever. I told Kyle when we moved there that I wanted to move to southern California within two to four years, and it had already been three. Instead, we decided to focus on building up a down payment on a home in California.

That brings us to the present, more or less. Home ownership was not super desirable for us in the past based on our location and mindset, but now it is. We have two big reasons for wanting to be homeowners at this stage in our life: 1) As a financially-minded person, I love the idea of, as Ric Edelmen puts it, carrying a big long mortgage. Doubly so with interest rates being as low as they are. 2) We, ideally, want to provide our children with a geographically stable home throughout their school years, which both of our sets of parents did for us. Our older child is entering kindergarten in fall 2021, so we knew we wanted to buy in 2021 if not sooner.

What I want you to take away from this section regarding whether or not you desire to become a homeowner is that you not should go on your feelings only. Your feelings matter, but purchasing a home or not purchasing a home is a big decision that should be well thought through. What are your motivations for home ownership? What are your exit strategies if you decide to buy? How can you use your home to increase your net worth, aside from passive appreciation? What are your other financial goals, and how do they rank against home ownership?

2. Income

Your income as an individual or household is one of the factors that determines the upper limit of the purchase price of your home. Income is the main sticking point keeping graduate students and postdocs from being able to buy in cities that their age-mates with Real Jobs could buy in, and that is due to the relatively low amount of income and sometimes the type of income.

First, I’ll address the type of income.

Employee or W-2 income is the easiest income type for lenders to understand and process. Basically, if you are an employee, the lender presumes that your job will continue indefinitely and that you will be able to pay your mortgage. You could potentially get a mortgage with just a single pay stub or an offer letter. Once the mortgage is close to being issued, they do check with your employer to verify that you’re not about to be let go or something similar.

Kyle has W-2 income through his job, so we knew that would be an easy sell.

Self-employment income is also common for lenders to work with, but they ask for at least two years of tax returns and profit and loss statements to ascertain whether the income is stable. Also, self-employment income will not qualify you for as large of a mortgage as an equivalent amount of W-2 income would.

I’m self-employed, and I was really concerned about how a lender would view my income. I wanted to wait to apply for a mortgage until after we filed our 2020 tax return because my income was higher in 2020 than 2018 so I thought that would help us qualify for a larger mortgage.

Fellowship income is the last income type that is common for grad students and postdocs. I hear frequently from grad students and postdocs who have been denied mortgages because the lender either doesn’t understand or can’t work with fellowship or training grant income. We’ve discussed qualifying for a mortgage with fellowship income in depth on the podcast in Season 2 Episode 5 and Season 5 Episode 17. Lenders view fellowship income as temporary, not indefinite like employee income, so they are concerned that you won’t be able to pay the mortgage after the fellowship ends. I know this sounds backwards to us because fellowship income is guaranteed over its term as long as you remain in good standing, whereas most employees can be fired at any time. However, it is possible to qualify for a mortgage with fellowship income under certain conditions and if you use a lender who is accustomed to working with it. Anyway, if after listening to the aforementioned episodes you still have some questions about whether you could get a mortgage with your particular funding situation, please come to the Q&A call on May 6th with Sam Hogan, who again is a mortgage originator specializing in fellowship income. You can register for the Q&A call at PFforPhDs.com/mortgage/.

Second, I’ll address the amount of income.

You may have heard a rule of thumb that you shouldn’t buy a home for more than three times your annual income. I learned through my own home-buying process that 3x your income is an outdated rule of thumb. Because interest rates are so low right now, people without other debt might be able to qualify for mortgages around 5x or more of their income.

The real metric that lenders go on is your debt-to-income ratio. There are actually two debt-to-income ratios, the front-end and the back-end. I’m going to address the back end debt-to-income ratio as a separate element.

Your front-end debt-to-income ratio is your total monthly housing expense divided by your gross monthly income. Your monthly housing expense includes the principal and interest payment on your mortgage, property tax, homeowner’s insurance, private mortgage insurance, and/or homeowner’s association dues. Lenders usually want your housing expense to be no more than 28% of your gross income, although depending on your loan type and credit history, some lenders might go above that number  .

Basically, this front-end debt-to-income ratio is a major factor in calculating the maximum mortgage amount you will be extended. However, what I’ve learned through my own home-buying process and my conversations with Sam is that the amount you’ll qualify for is a bit of a black box. If you want a definitive number, you’ll need to work with a mortgage broker or originator on getting pre-qualified or pre-approved.

Regarding our own homebuying journey, obviously real estate in the San Diego area is very expensive. We had to decide how much we were comfortable spending on a mortgage, regardless of the amount we qualified for, and match that up against the prices of single-family homes. There are a lot of cities and areas in San Diego County that we absolutely could not and would not buy in, and even in the remaining areas we were only looking at pretty modest homes.

When we started homing in on our target range of home prices, Kyle’s income was borderline enough to qualify for that range on its own without including mine. We were really, really fortunate when, just after we made our first offer on a house, Kyle received an unexpected and substantial raise. His income with that raise was more than enough to cover our target range. Ultimately, we went forward with his name only on our mortgage since we didn’t need to use my more complicated self-employment income.

3. Debt-to-Income Ratio

In this section, we’ll discuss the back-end debt-to-income ratio, which many people refer to as simply the debt-to-income ratio. Your back-end debt-to-income ratio is your total monthly debt payments and certain other obligations divided by your gross monthly income. The numerator is inclusive of your proposed housing expense that we delineated when discussing the front-end debt-to-income ratio.

Aside from your housing expense, the other debts and obligations included in the back-end debt-to-income ratio are the minimum payments you are required to make on credit cards, car loans, medical debt, personal loans, and child support. If your student loans are in repayment, those minimum payments go into the calculation as well. If your student loans are in deferment, your lender may consider 1% of the outstanding student loan balance as a stand-in for the monthly payment.

The maximum back-end debt-to-income ratio permitted by lenders varies widely from about 36% to sometimes over 50%, depending on the type of mortgage and the rest of your financial profile. Again, it’s a bit of a black box, so if you think your back-end debt-to-income ratio is what will limit your ability to get a mortgage of the size that you want, speak with a mortgage originator like Sam Hogan.

Kyle and I have been essentially debt-free for many years, so in our case the front-end debt-to-income ratio equals the back-end debt-to-income ratio. I bought a car at the start of grad school with a personal bank loan, but I paid that off during grad school and have since sold the car. We own one car currently, and it’s Kyle’s college car. It’s a 2003 Chevy so pretty unglamorous, but that is literally how we roll. I had student loans from undergrad that we paid off a couple of years after we finished grad school. We use credit cards, but we pay them off every month. I think we may have financed a cell phone or two at 0% instead of parting with cash, but we’re done with those payments now as well. Kyle has essentially never been in debt aside from the kind that builds your credit without costing you any money, and I haven’t taken out any new debt since I was 23.

4. Credit score

Your FICO credit score and the three major credit reports it is based on are the major ways that your lender will determine how credit-worthy you are. Basically, your credit reports and score communicate how responsible you have been with debt in the past.

If you’ve never had any kind of debt, you don’t have a credit score, and then lenders, if they even want to work with you, have to do a lot more legwork, or what’s referred to as manual underwriting, to figure out if you’re credit-worthy. That’s pretty ironic because if you’ve never taken out any debt and always paid your bills on time, you’re probably very responsible with money.

On the other hand, if you have lots of outstanding debt, that’s going to hurt your credit score.

The middle ground with debt is optimal for cultivating a high credit score, which is taking out small amounts of debt and proving that you can pay it back consistently. As your age of credit grows older, your score improves as well because that track record of on-time, in-full payments gets longer.

Exactly how a FICO credit score is calculated is proprietary, but the broad strokes are that 35% is based on your payment history, 30% is your amounts owed, 15% is the length of your credit history, 10% is your credit mix, and 10% is new credit inquiries.

Lenders use your FICO score and credit reports to determine if they’ll lend to you at all, which type of mortgage to use, and what interest rate to offer you.

If your credit score is 760 or higher, you should qualify for the best interest rates on a mortgage. The minimum credit score to get a mortgage is around 620.

While Kyle and I have never tried to hack our credit scores, you can probably tell from what I told you in the previous section that they are very good by now. I started taking out student loans at age 18 and got my first credit card at 22, so my credit history is quite long in the tooth. Kyle’s parents actually added him to one of their credit cards as an authorized user when he was a teenager, so that gave his credit score a big boost right out of the gate. Of course being debt-free at this stage while still using credit cards raises our scores quite a lot. We also haven’t applied for any new credit cards since the pandemic started, so there were no recent hard pulls on our credit reports when we applied for our mortgage. I don’t actually monitor my credit score, but Kyle keeps tabs on his through Credit Karma, and it’s been consistently over 800 for several years.

5. Down payment and closing costs

Saving up money for a down payment on a house and the closing costs on the purchase was the biggest, longest, and most intentional process we went through in preparing to buy a home. I will tell you all about it in detail after going over what this money is for and how much you should target.

First, the down payment.

The minimum down payment on a home depends on the type of mortgage you’re taking out. A conventional mortgage can require as little as 3% down, though 5% is more common as the minimum. A Federal Housing Administration or FHA loan requires 3.5% down. United States Department of Agriculture or USDA and US Department of Veteran’s Affairs or VA loans don’t have a down payment requirement.

You may be familiar with the recommendation to, if possible, put 20% down on a home. If you put down 20% on a conventional or FHA loan, you’ll avoid paying private mortgage insurance, which is an insurance premium you pay to insure your lender against the possibility of you defaulting on the loan.

The more you put down, of course, the smaller your mortgage will be. A larger down payment amount can also potentially lower the interest rate on your mortgage and make you a more competitive buyer in a seller’s market, as we have in 2021.

Second, the closing costs.

Going into the home-buying process, I had heard that sellers typically pay closing costs, but that’s not a hard-and-fast rule and it’s not all closing costs. While in a typical transaction sellers pay roughly 5 to 8% of the purchase price in closing costs, buyers pay roughly 3 to 5%. So if you were targeting a down payment size of 3 to 5%, you may want to double your savings goal to account for closing costs.

I’ll give you a history of our down payment savings over the years. But first, I want to share a memory that I have from 2012. Kyle and I were at our five-year college reunion and chatting with a friend who lived in southern California. This friend shared that she and her husband wanted to buy a home and that they were working on saving up a $100,000 down payment. A ONE HUNDRED THOUSAND DOLLAR DOWN PAYMENT. That to me was a completely unrelatable goal. She may as well have said a trillion dollars. It was totally unattainable in my world. Now, to be fair, my friend and her husband were both engineer types and I’m sure had very good salaries. And of course real estate is very expensive where they live. One hundred thousand dollars may have been a 20% down payment, or maybe not. But since I was a grad student living in Durham at the time, my mind absolutely boggled at that number.

The irony is that, nine years later, Kyle and I put down well over $100,000 on our house purchase. And I will tell you how we got there. Before I do, please recall from the beginning of the episode that I am acutely aware of the privilege that you will soon see at play in this process and that I am simply telling you what happened for us, not suggesting that you will or could take the same path.

Kyle and I opened a savings account that we nicknamed “House Down Payment” in 2014, the year that we defended. Our main financial priority prior to that point was retirement investing. By the end of grad school, we had eked our retirement savings rate up to about 17% of our gross income. We were also quite focused on budgeting and saving for irregular expenses; I shared our system for managing those in Season 7 Episode 15. Just before Kyle defended, our combined net worth had crossed $100,000, which I talk about in depth in Season 1 Episode 1.

That summer, as a defense gift, one of our sets of parents gave us $14,000. That was an incredible amount of money to us—about a quarter of our yearly household income—and completely unexpected. We decided to sequester it in the aforementioned House Down Payment account so that we wouldn’t be tempted to use it for everyday living expenses. Then, in summer 2015, that same set of parents gave us another $14,000 as a graduation gift. That also went straight into the savings account. So by the time we moved to Seattle, we had quite a nice nest egg earmarked for a future house purchase.

Once Kyle started his job at the Seattle biotech company in 2015, we reevaluated our financial goals. We increased our retirement savings rate to 20% of our gross income and have maintained it there since. The house down payment became our secondary saving goal. We figured we could move it to primary savings goal status when we had a firm timeline on buying by decreasing our retirement savings rate to perhaps 10% for a year or two. I’ll also note that we didn’t have a firm target amount of money for the down payment. We thought it would be good to have at least a 10% down payment, though 20% was likely out of reach, but of course we didn’t know yet how expensive of a house we would purchase.

I’ll give you snapshots of how the balance in that account grew or didn’t grow over the next five years.

In 2015, we consolidated some other savings we had into the account, but didn’t actively work on adding any more money to it. We got pregnant with our first child that fall, so we were instead beefing up our emergency fund and saving cash to supplement our income during Kyle’s parental leave. The balance in the account at the end of 2015 was $29k.

In 2016, after the birth of our first child, we committed to contributing a certain percentage of my irregular at that time income to the account, which amounted to tens of or a couple of hundred dollars per month. The balance in the account at the end of 2016 was $31k.

We continued that savings plan into 2017, and I even started paying myself a regular salary from the business. When we got pregnant with our second child that fall, we switched our savings goal as we did for our first pregnancy and temporarily stopped contributing to the account. The balance in the account at the end of 2017 was $40k.

In 2018, our insurance changed halfway through our second pregnancy. We were responsible for more medical bills associated with the birth of our second child than we had with our first, plus we supplemented our income during Kyle’s parental leave again. We returned to our savings plan after the birth of our second child, but then decided to pull money back out of the account for some of the medical bills and other irregular expenses. The balance in the account at the end of 2018 was $39k.

Through 2019, we continued to save a certain percentage of my income into the account, and we layered in an additional fixed $250 per month. Again, around tax time we contributed to the account a portion of a distribution from my business and our self-tax refund, which amounted to approximately $10,000. (Sidebar: We save a generous amount from each of my paychecks into a separate savings account earmarked for income and self-employment tax. We pay quarterly estimated tax and also more along with our tax return. Our self-tax refund is whatever is left over in our savings account after all the taxes are paid, which we then incorporate into the rest of our finances.) The balance in the account at the end of 2019 was $56k.

2020, as you all know, started out normally. We again were saving a couple of hundred dollars each month, plus a bolus around tax time. Then, the pandemic hit. We stopped paying for childcare, which was certainly a strain on our time and stress levels, but did allow us to increase our monthly savings rate to the down payment fund to $1,500. We also put most of the first stimulus check into the account.

I’m sure everyone has struggled during the pandemic in at least one facet of life. Our primary struggle was as the working parents of very small children. Both of our children’s preschools and our babysitting service closed. We had no nearby family, and all our nearby friends were dealing with their own small children. I’m sure you’ve heard that “it takes a village” to raise children. Well, the village was gone—or only on Zoom, at any rate. We definitely had it easier than many because of the flexibility in my schedule, but that only goes so far.

By the summer, when we acknowledged this was not just a flash in the pan, we realized that nothing was actually keeping us in Seattle. Kyle negotiated for permanent remote work with his employer, and we started preparing to move to southern California. Our Plan A was to rent a single family house in one of the cities in San Diego County that we were considering buying in so that we could get to know the area. As our desired move date grew closer, we were having some difficulty arranging for a rental at a distance, and we decided to exercise Plan B, which was to move in with Kyle’s parents in the Los Angeles area. They had extended us an open-ended invitation to stay with them.

That’s how, in August 2020, we moved back in with our parents, kids in tow. And even though it wasn’t what we thought we wanted, it was exactly what we needed. I’ve been calling these last eight months a time of respite. We were so tired and so stressed. Moving in with Kyle’s parents has benefited us in so many dimensions. They have provided part-time childcare throughout this period, which relieved so much of the time pressure we were experiencing. Kyle and I could leave the house together without the kids, which was incredible, especially once we started house hunting in earnest. Our kids had two more people they got to interact with on a daily basis.

On the financial side, Kyle’s parents refused any payment for living expenses, not rent, not utilities. Our only financial contribution to the household was to take over the majority of the grocery spending. Therefore, starting in September 2020, we increased our monthly savings rate into our down payment savings account to $4-5k. The balance in the account at the end of 2020 was $115k.

That saving rate continued at the start of 2021. We also put the second and third rounds of stimulus that we received into the account. When our respective sets of parents saw that we actually started house hunting, they also gave us a combined total of $86k. That a lot lot lot of money. We were not expecting or counting on those gifts at all. We are obviously really grateful to our parents for passing those on to us. The addition of those gifts put us well over the 20% down payment plus closing costs target, and we even have enough left over to do some needed repairs and upgrades to the property we bought. We’ll get into that momentarily.

Before we move on from this section, I want to point out some advice or observations:

1) I think it was psychologically important to us that we had a named savings account open for our down payment. Having a certain place to house money for any particular goal keeps it front of mind and prevents you from mixing money intended for that goal with your other money.

2) It was a good step to have a set savings rate going into that account on a monthly basis, when we did, and also to know that we would put any financial windfalls, like our self-tax refund, into that account.

3) Living rent-free with family members is an very, powerful financial move if it’s agreeable among all parties. We wouldn’t have done it if not for the pandemic, but I’m really grateful that we had the opportunity.

4) If you suspect your family might be planning to gift you money for your down payment, I suggest trying to find a way to get that conversation started earlier rather than later. You can tell from our tally that over half of our down payment fund was sourced from gifts, most of which we didn’t know about until the eleventh hour. We could have done more optimal financial planning if we had known they were going to arrive. Then again, it does feel good that we had some skin in the game.

5) Speaking of optimal financial planning, I’m not thrilled that we had cash sitting around since 2014 waiting for us to buy a house when in hindsight it could have been invested. Throughout this whole period, we sort of continually thought that buying a home was about two years off. For a two-year time horizon, cash makes the most sense. But that two years was actually up to seven years in our case. I am glad that we maintained our 20% retirement savings rate, because at least that money benefitted from the incredible market returns in recent years.

So my suggestion is to not skimp out on your retirement savings unless you have a really firm timeline on when you’ll buy. You might even invest part of your down payment fund if you are confident that you have time to weather any market downturns. We knew that we would be able to remove our contributions to our Roth IRAs and even some of the earnings if we really wanted to use them for a home purchase, so that helped us feel comfortable with a relatively high retirement savings rate.

You can see why I said at the beginning that this is a descriptive rather than prescriptive tale, right? Generating down payment money by receiving gifts from family, putting away thousands of dollars sent by the federal government for aid, moving in with your parents, and forgoing childcare is not exactly replicable.

6) Someone Willing to Sell You a Home

This last section is the story of how we bought a house in 2021, the strongest nationwide seller’s market in recent memory.

Once we moved to CA in August 2020, we saved a few searches on real estate websites that pull from the Multiple Listings Service and started passively figuring out in what areas of North San Diego County we could buy a single family home in our price range. We narrowed down our search to about 5 cities/areas. We also compiled a short list of must-have and nice-to-have features of our future home and property. That fall, we worked on making sure that the financial items I talked about earlier in the episode were all in order.

I read Home Buying for Dummies that fall to put together a game plan for getting a real estate agent and lender and so forth. Because at that time we thought we might need my income to qualify for a mortgage of the size we wanted, we agreed to file our 2020 tax return ASAP in January 2021 so that we could give that to our lender. In December and January, we also started contacting local real estate agents with the plan to interview several before choosing one.

That plan went completely out the window when we saw a property pop up in our search in mid-January. By that time, we were primarily using Redfin because we liked its search functionality best. So we saw this property come up in our search that met everything on our list and was well below the maximum of our price range. During the pandemic in California, there are no open houses, and you need a real estate agent to book a private appointment to see anything. We didn’t have an agent yet. Redfin, however, anticipates this exact situation, and so has a feature where you can request to see any property and you’ll be assigned a Redfin agent to go with you. So we did that. We also got a quick prequalification letter from the mortgage arm of our bank, Ally, for the amount we would need.

I’ll spare you the blow-by-blow, but we did end up putting in an offer on that house. The home’s list price was $675,000. Our offer was for $726,000. It sold for $746,000.

It’s very, very involved to decide whether you want to buy a particular house and put together an offer, especially a first offer, so we were working closely with the Redfin agent through that process. Ultimately, we decided that we liked working with her and she was doing a good job, and that’s how she became our agent. So that aspect of Redfin’s business model totally worked on us.

I want to take a small sidebar here about Redfin and why we liked working with one of their agents. Since we didn’t work with any agents outside of Redfin, these perks may exist elsewhere, too, so I’m not saying they are exclusive. 1) Redfin’s search engine is really nice to work with, definitely our favorite, and their app is good, too. 2) It’s seamless to view a property on the website or app and communicate with either your co-buyer or your agent. 3) Redfin takes a smaller-than-standard commission on the buy side, and the difference is refunded to the buyer at closing. 4) Our Redfin agent was on salary, so she got paid whether we bought a particular house or not. We didn’t like the commission-based compensation model of traditional real estate agents because it misaligns the incentives of the agent and buyer, so we felt much more comfortable with Redfin’s salary model. 5) If our agent was ever unavailable to tour a home with us, Redfin assigned another agent to sub in. So we never missed out on seeing a home because of our agent’s schedule.

So our first offer wasn’t accepted. But what we learned from that offer is the power of the appraisal contingency waiver in this market.

There are several contingencies in place in a standard home purchase offer that are in effect once the offer has been accepted and the house goes under contract. A contingency is a way for the buyer to back out of the deal if the contingency is not fulfilled. If you’ve talked with people going through the home-buying process before, you’ve probably heard about the inspection contingency. Once you go under contract on a house, there will be an inspection that will probably turn up a bunch of things wrong with the house. This is a chance for renegotiation, such as asking the seller to make certain repairs or give the buyer money at closing to make the repairs. If that negotiation does not go the way the buyer wants it to, the buyer can exercise the inspection contingency and get out of the contract without penalty, or even do so without negotiating. There are numerous contingencies that are standard for a contract, including the inspection, financing, and appraisal.

So that’s how contingencies work once you’re under contract. When you make an offer, in a strong seller’s market it’s common to waive as many of the contingencies as the buyer is able to and comfortable with. In our case, we could not waive the financing contingency because we were using a mortgage to buy the home. We would not waive the inspection contingency, and the market wasn’t quite strong enough to make that a common tactic. One of the reasons we lost out on that first offer was that we did not waive the appraisal contingency, whereas the winning offer did.

So what is the appraisal contingency? The buyer and seller agree on a price for the home, and during the contract period the home is appraised, which means that it is assessed by a professional and assigned a value that it could be sold for. In a not super hot market, this value is typically at or above the agreed-upon sales price, and everyone is happy. In a rapidly rising market, like we’ve seen this year, it’s typical for the agreed-upon sales price to be above the appraisal. That becomes a problem if you’re using financing, because the bank will usually not lend you more than its assigned fraction of the appraisal value.

To use round numbers, let’s say that you go under contract on a home for $220,000. You were planning to put down 20%, which is $44,000. But the appraisal comes back at $200,000. Your lender is going to say, nope, we are going to lend you 80% of $200,000, which is $160,000, not 80% of $220,000. Your choices at that point are to 1) get another appraisal that you hope comes back higher, 2) bring to the table $60,000 in cash to make up for the appraisal shortfall, 3) decide to redistribute your cash to fully cover the appraisal shortfall and instead put down less than 20%, or 4) exercise your appraisal contingency to get out of the contract if the seller doesn’t renegotiate the purchase price.

Now, it is apparently possible in some cases for the lender to give the buyer the go-ahead to waive the appraisal contingency with the agreement that the lender will still put up their agreed-upon percentage of the sale price, no matter how high the price goes. Our lender did not agree to that.

In our experience in the San Diego housing market in 2021, appraisal waivers are commonly used, and when multiple offers are in play, it’s likely that the seller will pick one that has this particular waiver. We didn’t use an appraisal waiver in that first offer, but we did in our second and third offers.

Speaking as a layperson and first-time homebuyer, waiving the appraisal contingency really scared me. Not only am I coming to the table with my 20% down payment plus closing costs, but now I have to potentially bring even more cash to the table just to make the deal go through, and that cash is above and beyond what an unbiased professional thinks the home is worth. And there’s no real upper limit to how much cash you could be asked to bring because you won’t know for sure what the house appraises for until you’re under contract. Suddenly the cash that we had saved and been given that far exceeded our projected 20% down payment seemed like it might not be enough.

Our agent and lender reassured me that even if we waived the appraisal contingency, we could still get out of any contract that we go into on the financing contingency. Apparently they are somewhat redundant. If the appraisal comes in lower than we expected and we didn’t want the house any longer, we could ask our lender to say they won’t lend to us the needed amount and use the financing contingency to cancel the deal. Of course, nobody wants a deal to be canceled in this way, so Kyle and I had to decide for each of our subsequent offers where we used an appraisal contingency waiver how much of an appraisal shortfall we were willing to make up with cash and consequently how low the appraisal would have to come in for us to exercise the financing contingency.

The second house we put in an offer on was listed at $769,000. Our offer, assuming the escalation clause was exercised, was for $860,000. That house received 21 offers, and the seller’s agent counted with 7 of the them, including us. He asked for certain changes to everyone’s contracts and to submit our highest and best offer, no more escalation clauses. We stuck with $860,000. The house sold for $861,000. It turns out that the winning buyer agreed to “beat any other offer,” and retained a tacit escalation clause following the counterofferr. That one was a heartbreaker.

The third house we put in an offer on was listed at $675,000. Our offer was for $746,000 with an escalation clause up to $756,000. The winning offer was all cash for $730,000.

At that point, we were totally emotionally exhausted. We had toured 13 homes and made 3 offers. Each one was completely wrenching for us. Quick decision making is not our strong suit, but it is necessary in a fast-moving market. Typically homes would be listed between Tuesday and Friday. We would tour them on Saturday, usually, and then have to submit an offer by Sunday or Monday. Each tour day involved at least 90 minutes of driving each way between LA and SD plus more driving to each of the homes. Every week and weekend were consumed with this process, and we were getting tired.

Remember that list of must-haves and nice-to-haves from before we started the search process? It had about tripled in length by that point. Touring houses and making decisions about whether or not to make offers really helped us clarify what we were looking for. We were able to become much more specific about our search parameters and could better decide based on a listing whether it was worth it to tour a home. We had also increased the top end of our price range by about $150,000.

On our last weekend of touring, we saw six houses on Saturday! Even though we had gotten a lot more specific about what we wanted, those six all made the cut. We noticed while we were out that there were way fewer buyers around than there had been on other weekends. Usually, we would show up for a 15- or 30-minute appointment and there would be someone finishing up their appointment just as ours was starting or would be waiting for ours to finish, often both. Sometimes, houses would be 100% booked for showings. However, that weekend, we had several appointments where no one was seeing the house immediately before or after us. It was a very noticeable aberration.

That was a very long day and very long weekend. After seeing the six homes, we only immediately ruled out one, so we debated putting in an offer on any of the other five. We slowly whittled down the list until we had just one remaining, but we simply didn’t feel strongly enough about it to put in an offer. We were very disappointed that we weren’t seizing our opportunity to make an offer on the low-volume weekend, but we just couldn’t do it by the end of the day on Sunday.

All day on Monday, we wondered if we had made a mistake by not making an offer on that last-to-be-ruled-out house in particular. On Tuesday, when the houses that went under contract over the weekend change their status to ‘pending,’ we saw that house’s status changed to ‘back on the market.’ We immediately contacted our agent, who told us that she had spoken with the listing agent and that the house had not received any offers. We knew this was our second chance and we moved fast. We put in an offer for below list price that day. We didn’t waive any contingencies because we knew we we weren’t competing with any other buyers. The sellers countered for asking price, and we went under contract for $700,000.

Kyle and I have speculated about why we got this house for asking price, which the house also appraised for, when virtually all the other ones we were interested sold for so far above asking and appraisal. I know we got lucky, but maybe our luck could be strategy for someone else. The following are some pieces of maybe advice for a hot market.

1) We stayed in and kept pounding the pavement. Even though we were tired, we didn’t take a break, we just refined our process.

2) Because we were out there just about every weekend, we recognized that weird low-volume weekend as an outlier and our chance to win a bid with less competition than usual.

3) We overlooked our house’s poor showing. I honestly think the listing agent made a major strategic blunder by listing when she did, which we benefitted from. The house was renter-occupied when it was listed, which meant 1) it was only shown for four hours total that weekend and 2) the house was not empty or staged, but rather cluttered with the renters’ possessions. The garage and living room were all but inaccessible due to the volume of stuff crammed into them. The windows were covered with a thick tinting film, so the house appeared very dark. It had a strong smell from the renters’ cooking. Finally, there was a necessary and obvious repair that had been neglected by the owner. The house apparently did not make a good first impression on the limited number of people who were able to see it that weekend, which resulted in there being no offers until we changed our minds. If the agent had waited to list until the renters had moved out, which they did a couple of weeks later, I think the sellers would have had a completely different result. On our end, none of the items that I just listed were the reasons we initially passed on the house. We really were able to overlook those cosmetic issues and focus on the fundamental attributes of the house.

The next month, between going under contract and closing on the house, is not something I hear people talk about as much as the first stage. It’s not as thrilling as house hunting, but a lot more work get done. I definitely developed a new appreciation for our agent. There is a lot of communication, negotiation, and paperwork, and we were really glad to have a professional guiding the process as well as support from numerous other professionals. On our side, we almost pulled out of the deal like three more times as new information came to light, but we ultimately decided to stick with it, and we now officially own that house.

My advice for you on finding someone willing to sell you a house is:

1) Start early figuring out where you want to live. Research your market thoroughly months or years in advance of when you actually want to start house hunting. You can do this through tracking prices, visiting the various target areas, and talking with people who live there. Ideally, you would actually live there for a while before buying. We wish we had been able to do this.

2) In non-pandemic times, I suggest going to a lot of open houses. I think we would have really benefitted from a period of casually seeing houses in person to expand and refine our list of must-haves and nice-to-haves. For example, a big difference for us between simply visiting someone’s home and evaluating whether or not we wanted to buy it is that in the latter case we brought a range finder to measure distances and calculate square footages. We developed opinions on how large a bedroom or a dining area or a backyard should be for our home that we didn’t have prior to starting house hunting.

3) Interview real estate agents. I am happy with the agent we worked with, but I’m not happy about how we sort of defaulted into working with her. And do consider Redfin. We had a great experience with the company.

4) Shop around for a loan, again well in advance of when you make your first offer. On our agent’s suggestion, we worked with a local mortgage broker, which was a great experience. But we also got our own quotes from several lenders and even one other broker to make sure we were getting the best rate. A piece of advice I got from Sam Hogan was to ask each potential lender for the official loan estimate. Quotes can take on any format, so a potential lender might be able to make theirs look more attractive by omitting or shifting around some of their fees. Loan estimates have a consistent formatting across the industry, so it’s actually possible to compare them directly.

5) Once you’re ready to submit offers, as I said earlier, pound the pavement consistently because you never know when conditions will align for you to get an offer accepted, like in our case.

6) Trust your agent, or rather find an agent that you can trust. Our agent was not super directive in telling us how much we should bid on a particular house, but she did provide us with information and market insights and to help us make the decisions. She helped us respond to shifting market conditions, like starting to use the appraisal contingency waiver.

Conclusion

We’ve come to the end of the episode! I hope this gave you some insight into what it takes to buy a home, particularly in a HCOL area in a strong seller’s market. Please know, however, that it is often possible to buy a home without all of the advantages that we had. Our financial profile is quite strong at this point because of our age, post-PhD incomes, and the gifts we received, but if you don’t have those things going for you, you may still be able to buy a home. Of course, that depends a whole lot on where you’re trying to buy. In fact, buying a home at an early age could put you in an even stronger financial position by your mid-30s than we are in, especially if you house hack or force appreciation in your home.

Best of luck to you in your home-buying journey! Sam Hogan and I will be answering any question you have about being a first-time homebuyer as a grad student or PhD this coming Thursday, May 6, 2021. Register for the call at PFforPhDs.com/mortgage/. Please join us!