Financial planning for PhD students
October 12, 2016 1:48 PM Subscribe
I’m a PhD student with a stipend who needs to figure out how to manage their finances. What’s a good system to ensure I’m living within my means and am saving properly?
I’ve never kept track of how much I spent for the last 4 years (when I was in college), and I think I wasted a lot of money because of it. There was just always money in the bank due to the internships I had during summers. Now I want to actually manage my money and start saving. How do I do it?
Here’s what I would say to a financial planner:
Suggestions for good financial planners in the Pittsburgh area, or good books or blog posts to read that deal with the above questions, are quite welcome! Throwaway email (anonymous because there's a lot of personal information in this question): aestheticparty@gmail.com
I’ve never kept track of how much I spent for the last 4 years (when I was in college), and I think I wasted a lot of money because of it. There was just always money in the bank due to the internships I had during summers. Now I want to actually manage my money and start saving. How do I do it?
Here’s what I would say to a financial planner:
- I’m a PhD student in computer science living in Pittsburgh, and I make about $25k a year, with $6k in savings. I have no dependents and am not splitting incomes with anyone.
- I pay $750 in rent per month, plus utilities and Internet.
- I have a credit card, which I use regularly, and a credit score around 750.
- How much will I pay in taxes on my income? Do I pay taxes on the tuition ($40k) that my university pays for me?
- I have two fellowships that support me at a $10k lump sum, and $15k over 3 years, respectively. What’s the tax situation on those?
- What financial instruments am I supposed to be setting up? A 401k, a Roth IRA, depositing in a mutual fund?
- I have no idea how much I spend per month or how it breaks down between food/clothes/books/travel/household items. What’s a good iOS app that will keep track of that, break it down, and tell me how much spending money I have? (I use Mac/iPhone/iPad.)
- What’s a good, lightweight, daily/weekly system to follow so that I will actually keep track of things?
- Should I keep track of purchases at a more granular level, e.g. grocery receipts?
Suggestions for good financial planners in the Pittsburgh area, or good books or blog posts to read that deal with the above questions, are quite welcome! Throwaway email (anonymous because there's a lot of personal information in this question): aestheticparty@gmail.com
I think you don't need specific "phd student" financial planning, I think you need general budgeting 101.
To this effect, I can't advise you on your tax situation, but I can note how do get a handle on what you're spending money on. If you are comfortable with it; Mint is a good option, but you can also kick it old school and download your credit card and debit card statements into .csv files, dump them into excel and start categorizing them yourself.
If your 25k is tax free; and you spend roughly ~1,000 a month on rent, utilities and phone bill, that leaves you with 1,000 a month or an average of about ~$35 a day for all other living expenses (food, treats etc.); at this level you'll definitely be cooking at home regularly to afford books, clothes and public transportation. It's not terribly cheap, but big expenses will set you back rapidly; and you'll find that 6k in savings disappearing faster than you expected.
I wouldn't expect to put more than $100-150 a month into a 401k, but even that amount will be really useful to you down the line.
posted by larthegreat at 2:02 PM on October 12, 2016 [2 favorites]
To this effect, I can't advise you on your tax situation, but I can note how do get a handle on what you're spending money on. If you are comfortable with it; Mint is a good option, but you can also kick it old school and download your credit card and debit card statements into .csv files, dump them into excel and start categorizing them yourself.
If your 25k is tax free; and you spend roughly ~1,000 a month on rent, utilities and phone bill, that leaves you with 1,000 a month or an average of about ~$35 a day for all other living expenses (food, treats etc.); at this level you'll definitely be cooking at home regularly to afford books, clothes and public transportation. It's not terribly cheap, but big expenses will set you back rapidly; and you'll find that 6k in savings disappearing faster than you expected.
I wouldn't expect to put more than $100-150 a month into a 401k, but even that amount will be really useful to you down the line.
posted by larthegreat at 2:02 PM on October 12, 2016 [2 favorites]
Beth Kobliner's book Get a Financial Life is well worth the time spent reading it. Since you're a grad student, check it out from your public library.
posted by brianogilvie at 2:14 PM on October 12, 2016 [1 favorite]
posted by brianogilvie at 2:14 PM on October 12, 2016 [1 favorite]
The stipend is probably not tax-free. I'd just take 25% out of each deposit you get & put it in savings for paying taxes—if you overshoot, you'll have some "savings."
Also, THINK CAREFULLY before you take out any student loans.
posted by listen, lady at 2:26 PM on October 12, 2016
Also, THINK CAREFULLY before you take out any student loans.
posted by listen, lady at 2:26 PM on October 12, 2016
Making that kind of money and paying that kind of rent, it's doubtful that you'll be able to save anything at all, but the crucial part is DO NOT rack up any credit card debt. If you can't afford it without putting it on the credit card you can't afford it. Make your goal to come out of your program debt free and you'll be way ahead of most students.
posted by MsMolly at 2:31 PM on October 12, 2016 [6 favorites]
posted by MsMolly at 2:31 PM on October 12, 2016 [6 favorites]
No taxes on tuition. There are lots of income tax calculators out there that you can run your stipend through - you pay fed and state income tax, but not FICA (Medicare/Social Security) unless you're on a W2. Would guess you're somewhere around a 10% marginal rate - don't forget to pay your quarterly estimated taxes!
Can't save in a Roth or trad IRA, unless, again, you're on a W2 or receiving earned income somehow - stipends and fellowships often don't count. No 401/403 accounts either. Best bet is to start saving in a taxable account; consider tax-efficient index funds. The Bogleheads books and wiki are really good resources to start learning from.
Wrt savings goals: you already have an emergency fund, which is good. You can save for retirement, but doing a PhD can complicate things - sure, you can be frugal and shop around and cook all your meals in order to save more for retirement, but all that time you'll spend on shopping and meal prep and cooking will add up, and unless you love cooking, you need to consider how to budget your time most efficiently so you can graduate on time. The opportunity cost of taking an extra year to finish is pretty huge, and if you can free up extra time for research or even to destress by spending some money, it'll pay off in the end.
Obviously, don't go into debt or blow your whole stipend in Vegas or anything, and it's better to start saving sooner rather than later for retirement, thanks to the magic of compound interest, but think carefully about your goals, come up with some scenarios where you put X, Y, Z... dollars/mo towards retirement, and run the numbers and find out what you're okay with. Then you've got your bills, plus how much you're saving - anything left over is your walking-around money. I'm a PhD student, and that's what I do, and it's pretty freeing - I made up my mind pretty early on that I just don't have the headspace to track every little thing on top of my other responsibilities, and this approach's working out pretty well for me so far. From a purely financial perspective, you've already incurred a negative opportunity cost by going into a CS PhD - your #1 goal is to get out with the job you want, not to be frugal.
posted by un petit cadeau at 2:51 PM on October 12, 2016 [2 favorites]
Can't save in a Roth or trad IRA, unless, again, you're on a W2 or receiving earned income somehow - stipends and fellowships often don't count. No 401/403 accounts either. Best bet is to start saving in a taxable account; consider tax-efficient index funds. The Bogleheads books and wiki are really good resources to start learning from.
Wrt savings goals: you already have an emergency fund, which is good. You can save for retirement, but doing a PhD can complicate things - sure, you can be frugal and shop around and cook all your meals in order to save more for retirement, but all that time you'll spend on shopping and meal prep and cooking will add up, and unless you love cooking, you need to consider how to budget your time most efficiently so you can graduate on time. The opportunity cost of taking an extra year to finish is pretty huge, and if you can free up extra time for research or even to destress by spending some money, it'll pay off in the end.
Obviously, don't go into debt or blow your whole stipend in Vegas or anything, and it's better to start saving sooner rather than later for retirement, thanks to the magic of compound interest, but think carefully about your goals, come up with some scenarios where you put X, Y, Z... dollars/mo towards retirement, and run the numbers and find out what you're okay with. Then you've got your bills, plus how much you're saving - anything left over is your walking-around money. I'm a PhD student, and that's what I do, and it's pretty freeing - I made up my mind pretty early on that I just don't have the headspace to track every little thing on top of my other responsibilities, and this approach's working out pretty well for me so far. From a purely financial perspective, you've already incurred a negative opportunity cost by going into a CS PhD - your #1 goal is to get out with the job you want, not to be frugal.
posted by un petit cadeau at 2:51 PM on October 12, 2016 [2 favorites]
You may have to pay some taxes on your tuition waiver - I did. It's considered "income" under IRS rules.
I would check with someone at your institution for clarity on this.
posted by pantarei70 at 3:10 PM on October 12, 2016
I would check with someone at your institution for clarity on this.
posted by pantarei70 at 3:10 PM on October 12, 2016
1. Get Mint. Just let it record all your income and expense for a while, then look at the graphs after a month or two and see what you think you can improve. If you're using your debit card, Mint will keep track of things at a fairly granular level; I don't think it's worth trying to track non-food items bought at the supermarket, just let the software label it "groceries", but you might want to go to the effort of relabeling Target receipts into "clothes" or "groceries" or "housewares" depending on what that trip was mostly about. Having the software handle stuff for you is a slight incentive to use your debit card rather than paying cash; if that doesn't work for you, consider the envelope system for cash budgeting.
2. Figure out exactly how much money you have left over after paying all your living expenses bills, and then don't spend more than that. Grad school is an amazing time socially, because all of your peers are just as broke as you are, and as stressed, and you will (collectively) find ways to get your work done and enjoy yourselves. Most later social situations will have that couple of guys from a rich family or with the amazing job, who just can't seem to understand why people are only ordering an appetizer and water then being such sticklers about splitting the restaurant bill unequally. Grad school is surprisingly free from that, especially if you don't try to resist the stereotype of the "broke grad student". Start thinking about lifestyle questions related to your budget: how do you use your car, could you save money by selling it and using Uber? Could you share a car with your colleagues/roommates? If you have $60 to spend on eating out, do you want that to be lunches and coffee most days, or a weekend dinner and beer? What are you giving up when you decide to fly home and visit family? Start thinking in things in terms of tradeoffs and engineering optimizations.
3. Ask your graduate department what the rules are for your stipend. We cannot tell you how your stipend works. I suspect that you will have to pay income tax on the "monthly paycheck" portion of it (but not the tuition waiver), and that the department is not deducting anything, therefore you will have to self-deduct taxes using the 1040-ES estimator. I could easily be wrong. The department, or older grad students in the department, will tell you how to do this with much more accuracy.
4. It is absolutely worthwhile to start a retirement account. 401(k) is a type of thing that an employer runs for their employees, you're almost certainly not being offered entry into the university's, but if you are, take it. IRA is a type of thing that you buy for yourself regardless of your employer. A Roth IRA is the thing you want, it's where you pay your taxes and then invest money you have left over. So go to Vanguard, and buy $1000 of their Retirement 2060 mutual fund, it's a blend of stocks and bonds that is designed to be more aggressive when you're young and adjust to be more low-risk bonds by the time you're ready for retirement. The real point is that you can start putting money into it now and get in the habit, it takes a $1000 minimum deposit, but you can then set up a monthly $50 or $150 or whatever you can spare, and it has a very low expense ratio and low fees, so it will just keep growing.
5. BUT, if you run your budget and look at the trade-offs and determine that you don't have money for a retirement account, it's way more important to stay debt-free than it is to open an IRA.
6. Read about money. If you can manage a small amount of money and a small lifestyle (science grad school is great for setting up an environment in which people actually *can* balance their budgets) then you won't have to panic later when you suddenly have a $120k job and can't decide if you should pay a $2400 rent or get a $400k mortgage. Financial skills are important, and it's great to learn them before you're stuck facing a massive budget deficit and debt to pay down. Read Dave Ramsay, Suze Orman, the Simple Dollar, Get Rich Slowly - they're all different but they're all the same, the point is to go in with a question (like how to set up a budget) and see what style and approaches suit you best, such that you won't be in a panic when you have to change apartments and need to figure out what you can afford, or when your fellowship changes, or you suddenly have $10k from your grandmother, or whatever. Read now, learn, apply it as you get the cash enough to make it relevant.
posted by aimedwander at 3:16 PM on October 12, 2016 [1 favorite]
2. Figure out exactly how much money you have left over after paying all your living expenses bills, and then don't spend more than that. Grad school is an amazing time socially, because all of your peers are just as broke as you are, and as stressed, and you will (collectively) find ways to get your work done and enjoy yourselves. Most later social situations will have that couple of guys from a rich family or with the amazing job, who just can't seem to understand why people are only ordering an appetizer and water then being such sticklers about splitting the restaurant bill unequally. Grad school is surprisingly free from that, especially if you don't try to resist the stereotype of the "broke grad student". Start thinking about lifestyle questions related to your budget: how do you use your car, could you save money by selling it and using Uber? Could you share a car with your colleagues/roommates? If you have $60 to spend on eating out, do you want that to be lunches and coffee most days, or a weekend dinner and beer? What are you giving up when you decide to fly home and visit family? Start thinking in things in terms of tradeoffs and engineering optimizations.
3. Ask your graduate department what the rules are for your stipend. We cannot tell you how your stipend works. I suspect that you will have to pay income tax on the "monthly paycheck" portion of it (but not the tuition waiver), and that the department is not deducting anything, therefore you will have to self-deduct taxes using the 1040-ES estimator. I could easily be wrong. The department, or older grad students in the department, will tell you how to do this with much more accuracy.
4. It is absolutely worthwhile to start a retirement account. 401(k) is a type of thing that an employer runs for their employees, you're almost certainly not being offered entry into the university's, but if you are, take it. IRA is a type of thing that you buy for yourself regardless of your employer. A Roth IRA is the thing you want, it's where you pay your taxes and then invest money you have left over. So go to Vanguard, and buy $1000 of their Retirement 2060 mutual fund, it's a blend of stocks and bonds that is designed to be more aggressive when you're young and adjust to be more low-risk bonds by the time you're ready for retirement. The real point is that you can start putting money into it now and get in the habit, it takes a $1000 minimum deposit, but you can then set up a monthly $50 or $150 or whatever you can spare, and it has a very low expense ratio and low fees, so it will just keep growing.
5. BUT, if you run your budget and look at the trade-offs and determine that you don't have money for a retirement account, it's way more important to stay debt-free than it is to open an IRA.
6. Read about money. If you can manage a small amount of money and a small lifestyle (science grad school is great for setting up an environment in which people actually *can* balance their budgets) then you won't have to panic later when you suddenly have a $120k job and can't decide if you should pay a $2400 rent or get a $400k mortgage. Financial skills are important, and it's great to learn them before you're stuck facing a massive budget deficit and debt to pay down. Read Dave Ramsay, Suze Orman, the Simple Dollar, Get Rich Slowly - they're all different but they're all the same, the point is to go in with a question (like how to set up a budget) and see what style and approaches suit you best, such that you won't be in a panic when you have to change apartments and need to figure out what you can afford, or when your fellowship changes, or you suddenly have $10k from your grandmother, or whatever. Read now, learn, apply it as you get the cash enough to make it relevant.
posted by aimedwander at 3:16 PM on October 12, 2016 [1 favorite]
You may have to pay some taxes on your tuition waiver - I did. It's considered "income" under IRS rules.
No, it's not, as long as you're a degree candidate and the money goes to tuition and fees or books, supplies, and equipment required for the course. Stipends for room and board and other living expenses are taxable.
posted by praemunire at 3:24 PM on October 12, 2016 [2 favorites]
No, it's not, as long as you're a degree candidate and the money goes to tuition and fees or books, supplies, and equipment required for the course. Stipends for room and board and other living expenses are taxable.
posted by praemunire at 3:24 PM on October 12, 2016 [2 favorites]
Some of those questions are PhD specific, some are not. Broadly, the big thing to be aware of is that as a grad student, you're likely to be in a grey zone between student and employee, and you'll generally get the worst of both worlds in terms of finance. In any case, answers based on personal experience:
I have a credit card, which I use regularly
Hopefully it also gets paid off regularly. I never carry a balance; accumulating debt is not a great idea when your means will be limited for a bunch of years. I have also taken out no loans. If you can do this, I highly recommend it. In general, my rule is that if I can't afford to buy it flat-out, I can't afford it at all.
How much will I pay in taxes on my income? Do I pay taxes on the tuition ($40k) that my university pays for me?
In most situations I have heard of, the tuition is not taxable (but grad student funding can vary so much between departments let alone schools that there may be weird situations where it is taxable). You'll almost certainly need to pay taxes on the $25k stipend (and you should be able to calculate federal and state taxes accordingly.) Taxes may or may not be automatically withheld on non-fellowship portions, depending on the funding source (i.e. money your advisor is paying you, or or money the department is paying you for TAing, or whatever.) Your department or university may have some resources regarding taxes, but most shirk this, unfortunately. Ask some senior students in your program to get an idea for what's normal.
I have two fellowships that support me at a $10k lump sum, and $15k over 3 years, respectively. What’s the tax situation on those?
This varies. In general, most fellowships I have had have been taxable (in my field, this certainly covers fellowships from the government, including NSF and NIH fellowships, as well as most stipend-covering fellowships from large foundations). However, none have involved paying taxes related to Social Security, Medicare (FICA stuff.) Relatedly, none of the fellowships have counted as "earned income" (for the purposes of Roth IRAs) and none have been subject to automatic withholding, the way my non-fellowship-derived stipend has been. I hate paying quarterly taxes, so I just adjust my withholding to account for my total taxable income, fellowship included (you can voluntarily withhold more than the default amount), and it gets withheld automatically every month. I have to re-tweak this every time my funding sources change though. I usually come out pretty close to the correct tax level in April, so it's not too awful. Oh, and be careful: lots of general financial advisors or cheap tax preparers do not know much about fellowship tax issues and can give you incorrect advice.
What financial instruments am I supposed to be setting up? A 401k, a Roth IRA, depositing in a mutual fund?
Start with a Roth IRA; it's the usual advice for someone with a typical grad student age and income, and you most likely do not have access to a university sponsored 401k (or 403b), let alone employer matching. But be aware that if you get additional fellowships that do not count as earned income, you can only put in up to your total earned income amount or $5.5k, whichever is smaller. If you're fully fellowship funded and have no other income, you may not be able to contribute anything, and may need to just keep savings in some sort of taxable account. In years when I have qualifying income, I'm putting money in a Roth IRA in a target-date mutual fund with Vanguard, like dondiego87. But I only started doing that after I had a few thousand dollars in savings accumulated. In your position, I might wait to make sure that my savings situation is stable (i.e. you are slowly accumulating more savings) before dedicating some of that to retirement stuff. Money is apt to be pretty tight with that rent/stipend combo, there may well be either emergencies (a hospital trip, a burglary, a car or bike crash) or school-related expenses with long reimbursement schedules (conference travel) that will cause you to dip into your savings, and you need to make sure your emergency fund is healthy before putting too much towards the longer-term future.
I have no idea how much I spend per month or how it breaks down between food/clothes/books/travel/household items. What’s a good iOS app that will keep track of that, break it down, and tell me how much spending money I have? (I use Mac/iPhone/iPad.)
Several people I know use things along the lines of Mint, which can do a certain level of auto-sorting of expenses into categories (it draws info directly from your accounts). You can set monthly budgets and stuff and it'll send you alerts. Some people prefer fancier stuff like YNAB ("You Need A Budget"), some prefer to track things manually, but Mint's not a bad starting point for seeing where your money is going.
What’s a good, lightweight, daily/weekly system to follow so that I will actually keep track of things?
That's really going to vary. Again, my expenses are pretty predictable, so I probably check my accounts and spending on my bank website or Mint/etc. once a week and just make sure I'm directing money to savings appropriately, accommodating specific planned expenses, and otherwise generally am not setting myself up for any financial surprises. You may need to check more frequently or plan more explicitly until you find your new normal. In general, I have standard monthly expenses (groceries, music lessons, utility bills, renter's insurance, rent, savings), and beyond those, anything about $25 or so is something that I'll think about and check my account status before going ahead with.
Should I keep track of purchases at a more granular level, e.g. grocery receipts?
I don't currently do this, because I'm pretty aware of where my money is going (I have one large weekly grocery trip to fuel a range of pretty boringly predictable recipes, a few usual places to go for lunch, some predictable splurges on cheese and beer, etc.) If dining out and groceries are taking up too large a chunk of your expenses, it may be more worth it (you might see that you're spending a lot of money on prepared food that could be going towards cheaper homemade meals, for example).
posted by ubersturm at 3:29 PM on October 12, 2016
I have a credit card, which I use regularly
Hopefully it also gets paid off regularly. I never carry a balance; accumulating debt is not a great idea when your means will be limited for a bunch of years. I have also taken out no loans. If you can do this, I highly recommend it. In general, my rule is that if I can't afford to buy it flat-out, I can't afford it at all.
How much will I pay in taxes on my income? Do I pay taxes on the tuition ($40k) that my university pays for me?
In most situations I have heard of, the tuition is not taxable (but grad student funding can vary so much between departments let alone schools that there may be weird situations where it is taxable). You'll almost certainly need to pay taxes on the $25k stipend (and you should be able to calculate federal and state taxes accordingly.) Taxes may or may not be automatically withheld on non-fellowship portions, depending on the funding source (i.e. money your advisor is paying you, or or money the department is paying you for TAing, or whatever.) Your department or university may have some resources regarding taxes, but most shirk this, unfortunately. Ask some senior students in your program to get an idea for what's normal.
I have two fellowships that support me at a $10k lump sum, and $15k over 3 years, respectively. What’s the tax situation on those?
This varies. In general, most fellowships I have had have been taxable (in my field, this certainly covers fellowships from the government, including NSF and NIH fellowships, as well as most stipend-covering fellowships from large foundations). However, none have involved paying taxes related to Social Security, Medicare (FICA stuff.) Relatedly, none of the fellowships have counted as "earned income" (for the purposes of Roth IRAs) and none have been subject to automatic withholding, the way my non-fellowship-derived stipend has been. I hate paying quarterly taxes, so I just adjust my withholding to account for my total taxable income, fellowship included (you can voluntarily withhold more than the default amount), and it gets withheld automatically every month. I have to re-tweak this every time my funding sources change though. I usually come out pretty close to the correct tax level in April, so it's not too awful. Oh, and be careful: lots of general financial advisors or cheap tax preparers do not know much about fellowship tax issues and can give you incorrect advice.
What financial instruments am I supposed to be setting up? A 401k, a Roth IRA, depositing in a mutual fund?
Start with a Roth IRA; it's the usual advice for someone with a typical grad student age and income, and you most likely do not have access to a university sponsored 401k (or 403b), let alone employer matching. But be aware that if you get additional fellowships that do not count as earned income, you can only put in up to your total earned income amount or $5.5k, whichever is smaller. If you're fully fellowship funded and have no other income, you may not be able to contribute anything, and may need to just keep savings in some sort of taxable account. In years when I have qualifying income, I'm putting money in a Roth IRA in a target-date mutual fund with Vanguard, like dondiego87. But I only started doing that after I had a few thousand dollars in savings accumulated. In your position, I might wait to make sure that my savings situation is stable (i.e. you are slowly accumulating more savings) before dedicating some of that to retirement stuff. Money is apt to be pretty tight with that rent/stipend combo, there may well be either emergencies (a hospital trip, a burglary, a car or bike crash) or school-related expenses with long reimbursement schedules (conference travel) that will cause you to dip into your savings, and you need to make sure your emergency fund is healthy before putting too much towards the longer-term future.
I have no idea how much I spend per month or how it breaks down between food/clothes/books/travel/household items. What’s a good iOS app that will keep track of that, break it down, and tell me how much spending money I have? (I use Mac/iPhone/iPad.)
Several people I know use things along the lines of Mint, which can do a certain level of auto-sorting of expenses into categories (it draws info directly from your accounts). You can set monthly budgets and stuff and it'll send you alerts. Some people prefer fancier stuff like YNAB ("You Need A Budget"), some prefer to track things manually, but Mint's not a bad starting point for seeing where your money is going.
What’s a good, lightweight, daily/weekly system to follow so that I will actually keep track of things?
That's really going to vary. Again, my expenses are pretty predictable, so I probably check my accounts and spending on my bank website or Mint/etc. once a week and just make sure I'm directing money to savings appropriately, accommodating specific planned expenses, and otherwise generally am not setting myself up for any financial surprises. You may need to check more frequently or plan more explicitly until you find your new normal. In general, I have standard monthly expenses (groceries, music lessons, utility bills, renter's insurance, rent, savings), and beyond those, anything about $25 or so is something that I'll think about and check my account status before going ahead with.
Should I keep track of purchases at a more granular level, e.g. grocery receipts?
I don't currently do this, because I'm pretty aware of where my money is going (I have one large weekly grocery trip to fuel a range of pretty boringly predictable recipes, a few usual places to go for lunch, some predictable splurges on cheese and beer, etc.) If dining out and groceries are taking up too large a chunk of your expenses, it may be more worth it (you might see that you're spending a lot of money on prepared food that could be going towards cheaper homemade meals, for example).
posted by ubersturm at 3:29 PM on October 12, 2016
Simple is an online bank that is designed for folks who are figuring out budgeting and finances, might be worth a look.
Remember that the end of grad school will probably be expensive: graduation fees, possible period of unemployment / moving, buying interview clothes, attending conferences... And unexpected things happen too - having to float travel expenses until they're reimbursed, fellowship funding delayed, new uni fees, change in funding because your PI didn't read the fine print on the grant, plus the usual surprise life expenses. I would definitely plan on saving a bit of money every month for medium-term expenses. Consider putting money in a lower-risk mutual fund rather than a savings account with a terrible interest rate. Vanguard has low fees, your current bank probably has options, too.
Since you will likely be making a lot more money post-degree and don't have a huge savings cushion, I'd probably defer starting a retirement fund.
posted by momus_window at 4:31 PM on October 12, 2016 [3 favorites]
Remember that the end of grad school will probably be expensive: graduation fees, possible period of unemployment / moving, buying interview clothes, attending conferences... And unexpected things happen too - having to float travel expenses until they're reimbursed, fellowship funding delayed, new uni fees, change in funding because your PI didn't read the fine print on the grant, plus the usual surprise life expenses. I would definitely plan on saving a bit of money every month for medium-term expenses. Consider putting money in a lower-risk mutual fund rather than a savings account with a terrible interest rate. Vanguard has low fees, your current bank probably has options, too.
Since you will likely be making a lot more money post-degree and don't have a huge savings cushion, I'd probably defer starting a retirement fund.
posted by momus_window at 4:31 PM on October 12, 2016 [3 favorites]
I could never get Mint to sync with my accounts properly, but maybe it's improved or maybe I'm just a snowflake. YNAB is often recommended, but it's pretty intense.
I am having really good luck with the app DailyBudget.
I would also recommend the blog Mr Money Mustache.
posted by jrobin276 at 5:41 PM on October 12, 2016
I am having really good luck with the app DailyBudget.
I would also recommend the blog Mr Money Mustache.
posted by jrobin276 at 5:41 PM on October 12, 2016
The absolute best investment you can make as a CS PhD student is to complete your degree in 4 years and enter the workforce as quickly as possible. Your first year's compensation after school will dwarf every penny you managed to save from your stipend. So: Just live frugally, work hard, and enjoy it.
posted by qxntpqbbbqxl at 5:44 PM on October 12, 2016 [6 favorites]
posted by qxntpqbbbqxl at 5:44 PM on October 12, 2016 [6 favorites]
Get a roommate. You pay too much for rent.
posted by oceanjesse at 7:37 PM on October 12, 2016 [3 favorites]
posted by oceanjesse at 7:37 PM on October 12, 2016 [3 favorites]
If you're breaking even as a PhD student, you're so far ahead of the game that it's a waste of time to worry about finances.
Ask your peers about your tax situation. The likelihood that you owe tax on tuition is vanishingly small. Fellowships will be treated as usual income, but with more annoying paperwork.
If I were you (and except for specific subject matter, I basically was), I'd take every penny you're tempted to save and spend it on travel & luxury. Your make less today than you will throughout the rest of your life, even including compounded interest on careful investments. But, you have more time and enthusiasm than you ever will again. A dollar in the bank today will be negligible in 10 years. A dollar spent on experience will be invaluable. Relax, and have fun.
posted by eotvos at 9:56 PM on October 12, 2016
Ask your peers about your tax situation. The likelihood that you owe tax on tuition is vanishingly small. Fellowships will be treated as usual income, but with more annoying paperwork.
If I were you (and except for specific subject matter, I basically was), I'd take every penny you're tempted to save and spend it on travel & luxury. Your make less today than you will throughout the rest of your life, even including compounded interest on careful investments. But, you have more time and enthusiasm than you ever will again. A dollar in the bank today will be negligible in 10 years. A dollar spent on experience will be invaluable. Relax, and have fun.
posted by eotvos at 9:56 PM on October 12, 2016
Recent PhD here. Fellowships are generally taxable. Our stipends were such that we couldn't use them to fund an IRA, even though we had to teach. The error if thumb I've heard is that if they're not taking it social security and Medicare taxes, it's opportunely not eligible to be used to fund an IRA.
One quirk about being a grad student is that you often get paid in lump sums. To avoid running out of money at the end of the semester, I first figured out how much I could spend a month given my stipend + other funding and accounting for taxes. Then I transferred all the money to savings and moved three amount I calculated over each month. A little extra work, but it ends up being much easier to check your bank account and see if you have enough for the month than figure out if you have enough for the rest of the semester.
posted by matildatakesovertheworld at 12:03 AM on October 13, 2016 [1 favorite]
One quirk about being a grad student is that you often get paid in lump sums. To avoid running out of money at the end of the semester, I first figured out how much I could spend a month given my stipend + other funding and accounting for taxes. Then I transferred all the money to savings and moved three amount I calculated over each month. A little extra work, but it ends up being much easier to check your bank account and see if you have enough for the month than figure out if you have enough for the rest of the semester.
posted by matildatakesovertheworld at 12:03 AM on October 13, 2016 [1 favorite]
If you can manage to get something showing how much was paid in tuition on your behalf I would look into the lifetime learning credit (form 8863 from the IRS). In it, when I was using that deduction, the tuition paid on your behalf was applied as a tax credit, which greatly reduced your liability.
If you can get that to apply in your case then you would be paying a much lower tax rate and be able to get quite a good return when you file your taxes.
posted by koolkat at 2:08 AM on October 13, 2016
If you can get that to apply in your case then you would be paying a much lower tax rate and be able to get quite a good return when you file your taxes.
posted by koolkat at 2:08 AM on October 13, 2016
My understanding is that there are basically two types of student income: those reported on a 1098-T and those reported on a W2.
When I was a PhD student and was funded through a fellowship I would get form 1098-T every year detailing how much of my funding was spent on qualified (tax-free) expenses like tuition. The total fellowship amount minus those expenses is the amount that was taxable (only for federal and state, no FICA as others have mentioned). The 1098-T will have all the info you need to report the correct amount on your taxes. For the most part the non-qualified expenses listed on that form matched up with how much I was receiving as a stipend, so I basically owed taxes on the stipend amount only. If you fall into this bucket you are supposed to pay estimated taxes, so be mindful of that. I owed about 15% in taxes on my stipend (in CA, including state taxes).
When my fellowship expired I started getting wages that were reported on a W2 (I was still just doing the same old thesis work, but the University technically declared me some kind research assistant and I was now basically an employee of the University instead of a person receiving a fellowship). I no longer had to pay estimated taxes because taxes were deducted from my paycheck. I would still get a 1098-T at tax time reporting the amount of money that was used to pay my tuition, but now since it was mainly reporting tuition, the taxable amount reported there was basically zero (in practice more like a few hundred dollars, I don't remember why it wasn't exactly zero). At tax time I would have to report the W2 amount AND whatever small amount was on the 1098-T. Also for some of my fellowship years I did TA work that resulted in a small amount of additional W2 income.
My budgeting strategy was to be super, super cheap about everything for the first semester, and then gradually relax a bit after I knew I hadn't been going over budget. I did this because I found it really hard to plan my expenses accurately with no real data from my past, since I was coming from college where I was living and eating on campus, paying for almost nothing out of pocket.
For expense tracking I used Mint.
I didn't save anything for retirement. I don't regret this at all--my annual retirement savings have been well over my entire annual stipend every year since graduating. Anything I could have saved just would not have made a difference. The frugality learned in graduate school can make it really easy to save once you graduate and get a real job.
I would also not worry too much about investing your money optimally--just keep it in checking and savings accounts, and possibly extremely conservative and liquid investments. When your savings are under $10k it is really good to have that money somewhere easily accessible for emergencies, and you also do not want to risk losing any of it.
If I had to go back and do it all again, the only thing I would do differently is to try to have a bigger emergency fund. I never had as much as $6k saved, so you are way ahead of me! Also momus_window is totally right about the huge job search expenses at the end of grad school. I didn't have this problem, but I have a friend who had to sell her car to cover her moving expenses after using all of her savings on the interview process.
posted by insoluble uncertainty at 4:01 PM on October 13, 2016
When I was a PhD student and was funded through a fellowship I would get form 1098-T every year detailing how much of my funding was spent on qualified (tax-free) expenses like tuition. The total fellowship amount minus those expenses is the amount that was taxable (only for federal and state, no FICA as others have mentioned). The 1098-T will have all the info you need to report the correct amount on your taxes. For the most part the non-qualified expenses listed on that form matched up with how much I was receiving as a stipend, so I basically owed taxes on the stipend amount only. If you fall into this bucket you are supposed to pay estimated taxes, so be mindful of that. I owed about 15% in taxes on my stipend (in CA, including state taxes).
When my fellowship expired I started getting wages that were reported on a W2 (I was still just doing the same old thesis work, but the University technically declared me some kind research assistant and I was now basically an employee of the University instead of a person receiving a fellowship). I no longer had to pay estimated taxes because taxes were deducted from my paycheck. I would still get a 1098-T at tax time reporting the amount of money that was used to pay my tuition, but now since it was mainly reporting tuition, the taxable amount reported there was basically zero (in practice more like a few hundred dollars, I don't remember why it wasn't exactly zero). At tax time I would have to report the W2 amount AND whatever small amount was on the 1098-T. Also for some of my fellowship years I did TA work that resulted in a small amount of additional W2 income.
My budgeting strategy was to be super, super cheap about everything for the first semester, and then gradually relax a bit after I knew I hadn't been going over budget. I did this because I found it really hard to plan my expenses accurately with no real data from my past, since I was coming from college where I was living and eating on campus, paying for almost nothing out of pocket.
For expense tracking I used Mint.
I didn't save anything for retirement. I don't regret this at all--my annual retirement savings have been well over my entire annual stipend every year since graduating. Anything I could have saved just would not have made a difference. The frugality learned in graduate school can make it really easy to save once you graduate and get a real job.
I would also not worry too much about investing your money optimally--just keep it in checking and savings accounts, and possibly extremely conservative and liquid investments. When your savings are under $10k it is really good to have that money somewhere easily accessible for emergencies, and you also do not want to risk losing any of it.
If I had to go back and do it all again, the only thing I would do differently is to try to have a bigger emergency fund. I never had as much as $6k saved, so you are way ahead of me! Also momus_window is totally right about the huge job search expenses at the end of grad school. I didn't have this problem, but I have a friend who had to sell her car to cover her moving expenses after using all of her savings on the interview process.
posted by insoluble uncertainty at 4:01 PM on October 13, 2016
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For personal finance tracking, Mint is pretty great in that it hooks in to all your bank/credit card accounts, and you can track cash spending with it too. You get the granularity of individual receipts, although you would have to manually separate out sub-categories like "food" and "alcohol" from your trip to the grocery store if you wanted to do that. Most transactions are auto-categorized, and of course you can edit. I suggest using it for a few months to see what your typical spending looks like, then see if there's anything you want to change. Once you're comfortable, you can upgrade to YNAB (You Need A Budget) for better budgetary planning. I never got over the learning curve, but that was on me. I'm sure if I took half a day I could have gotten it.
I have a Roth IRA in a target-date mutual fund with Vanguard.
posted by dondiego87 at 2:02 PM on October 12, 2016