Guest Post from BF: Graduate Student Finances

I am so excited to share a guest post today from the one and only BF! I hope you enjoy reading his thoughts. I know I did!

Wouldn't you like to know who is behind that hexagon?! I'll give you a hint, he's super cute :-)

Wouldn’t you like to know who is behind that hexagon?! I’ll give you a hint, he’s super cute 🙂

I am very excited to write this guest post. I have been encouraging Ali to invest time and energy in this blog from the very beginning. She not only has a lot to say about personal finance, but also is able to do so in a very eloquent and “relatable” way. I could not be more proud of the attention that this blog is quickly receiving.

As Ali mentioned, I am currently enrolled in a Ph.D. program in the Boston area. I personally love the student life. The income is not great, but is far from shameful. And the responsibilities are actually slim. You basically get paid to take courses and think and write what comes to your mind. Not a bad life for those with nerdy tendencies.

But continuing to live as a student after college also has its down sides. You are basically postponing going to the job market at the same time that your opportunity costs continue to grow. Not to mention the potential anxiety produced by uncertainties and eventual (unhealthy) comparisons with friends, family and significant others and their new jobs, promotions, raises etc. Existential crises are not uncommon. Let me just say that the life of a graduate student is not for everyone.

In this post, I would like to share my thoughts on two topics regarding a graduate student’s finances; topics that I find myself constantly struggling with. Disclaimer: I know close nothing about personal finance. The little I know I learned from this blog or from talking to Ali. So, what follows are my own lay thoughts. They do not express Ali’s ideas nor should they be taken as recommendations about how other graduate student should think about their own finances.

#1. Managing uncertain cash flow

One of the major difficulties in managing a graduate student’s personal finances is learning to live with an uncertain cash flow. Practically all of my income comes from my university, which pays me either in the form of stipends (free money to cover living expenses) or for teaching or research I do on a regular basis. (I am focusing here on research programs, like a Ph.D. This is very different from professional schools, like business or law schools, where you pay the school, not the other way around.)

The main difference here is that I do not get paid every month or every week as most people do. The university usually transfers money to my account once or twice in the semester. This means that all of the sudden a “large” amount of money shows up in my account. It is totally up to me to make sure that I plan my expenses so that that amount lasts at least until the next deposit or check appears (this can take a few months sometimes, in particular during the summer). This can be particularly challenging since your bank statement immediately after you get paid might give you a false sense that you have more money than you actually do.

#2. Fighting disincentives to invest long-term

I mentioned above that the life of a graduate student comes with a fair dose of uncertainty and anxiety about the future (mostly about the BIG question of whether one will get a job after graduation). This uncertainty can create a disincentive to long-term investment. How do you make a retirement savings plan if you are not sure which type of job (and, consequently, how much income income) you will have or even where you will live? Moreover, you never know whether you might need to have access to your savings in the short term. It is possible that you will have to live from your savings for a short period after graduating in order to keep pursuing you dream job. This gives one a disincentive to invest in common long-term investment options, which have heavy penalties for early withdrawal.

However, from this disincentive to long-term investment it does not follow that a graduate student should only start saving after he or she gets a job. It is true that the job most Ph.D. students dream about (a tenure-track teaching job) would come with a substantial increase in their income (3 or 4 times their student income). But it is never too early to start saving, even if very little. And it is certainly no good reason to spend money left from the last stipend merely because it would be “too little to save.” That said, I do find myself postponing thinking more seriously about “net worth” or “retirements savings plans” until I have a clearer idea of my professional and personal future. Luckily, I have Ali in my life.

How do you approach your finances as a graduate student?


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25 thoughts on “Guest Post from BF: Graduate Student Finances

  1. Thanks for sharing this, it was timely for me. My son is about to graduate college and is trying to decide whether to go to graduate school or get a job for about 5 years then return to graduate school.

    He is a physics major with great grades. He is leaning towards getting an engineering job for 5 years then working on his PHD. He wants to eventually teach physics at a university.

    Your discussion on college finances in helpful.

  2. Great perspective from a graduate student. It’s definitely tough to invest when there is plenty of unknown regarding future employment, income, etc. One thing that I would recommend is to start with a modest savings/investment plan that fits your current situation. It’s always better to start early even if you have to update your plan in the future.

    • That is a great suggestion. BF has recently decided that he wants to start investing and he is working out what the right strategy is for him now. I completely agree that it is always best to start early, even with small amounts and potential future changes.

  3. I like what you say in the last paragraph, save what you can, even if it is just a little. That little bit will become big someday!

    What are you studying? Do you think you will do more guest posts in the future?

    • Yes, BF has time on his side when it comes to investing! I sure hope I can convince him to do more guest posts in the future. This one is getting some great feedback, which I’m sure will motivate him!

    • I agree about saving what you can, even just a little.

      When I was a grad student, this was about $20 a month (we got paid once a month). Not a lot, obviously, and I found being a grad student highly frustrating because all of my non-grad-student counterparts were already in corporate jobs making money and putting into retirement, etc., while I was just hoping to make ends meet and not get sick (I had no health insurance either).

      What a life.

      But saving a little, even if it’s just that $20/month helped. Because I did have a dinky little hand-me-down car that broke down sometimes. I did suddenly have to start repaying undergrad student loans when I graduated but didn’t yet have a job. And that piddly $20/month helped a lot.

      • Thanks so much for sharing your story! Its a great point that emergencies come up and having just a little bit of money can really help you get through tough times.

  4. Learning how to manage an uncertain cash flow is key. For anyone who has a side hustle or is self-employed, the numbers can be a little misleading. Being mindful about where that money goes and when is key. Thanks for sharing!

  5. As a grad student, I followed 1 very simple rule: never spend more than you earn. Since I earned next to nothing, I had a very frugal life to say the least. But it paid off with next to no student debt afterwards. Totally worth it! 🙂

    • That is great that you were able to graduate without debt! Spending less than you earn is always a smart strategy, and I’m sure your frugal living continued to pay off even as you earned more money after graduation.

  6. My husband is a grad school student, who went back after about 6 years in industry. Although the huge pay cut hasn’t been too nice, I’m proud of him for pursuing a degree in the field that he actually wants to work in.

    My biggest tip for students is to remember why you’re working towards a degree, and to work on your career through networking and not just schoolwork. Your advisor may not be the best person to give you career advice because they probably like you and would prefer to have you stick around instead of being replace by some new 23 year old who doesn’t know the trigger from a bit on a drill.

    • That is a great point to keep the end goal in sight at all times! Networking is so important for everyone, but can really benefit students in particular.

  7. I think there is a huge difference between phd students and other grad students. My wife applied to psychology phd programs and unfortunately didn’t get in (she was applying to incredibly competitive programs, as I’m sure you dealt with as well). There is a big difference between paying tuition & (for most) going in debt to take masters classes and getting paid to get a phd. Then again, my wife is working full-time while getting her masters and I’m also working full-time while getting my MBA. “Kind of” evens out. But yes, difficulties and challenges regardless of which program you area in.

    • Good point that it is a very different situation in a PhD program vs. a masters. BF is getting paid to do his PhD, whereas I paid to do my MBA part-time.

  8. So, we’re not grad students yet (and may never be,) but the husband and I both went back to get our degrees at non-traditional ages. And the parallels are astounding! If I could be a perpetual student, I totally would be, but these financial hurdles are enough to keep me spending my time in my field. 🙂 (Plus not too many financial advantages to going on in my field, unlike yours from what I understand.)

    • Good point – it is really important to make sure that an advanced degree will actually help you reach your goals and/or further your career. The hurdles are high and the payoff isn’t there for everyone.

  9. i think your second point is much more important and challenging. You surely ask yourself many times if the time you are “losing” is in fact going to pay off. Having a plan, or building one will help with that. So when you discover what you want to do later.
    the income part is quite easy, just have two account, one for saving another for current spending (credited monthly by the savings one).

    • Good point, and something I think that many people struggle with, weather or not they are in school. We are all making trade offs each day, and you can never really know if the time spent on something is “worth it.”

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