Resource on good financial practices for a graduate student?

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GradStudent27
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Resource on good financial practices for a graduate student?

Post by GradStudent27 » Fri Jan 12, 2018 8:08 am

Hello,

I am a 26 year old graduate student trying to improve my financial knowledge and practices (particularly saving money) before I enter the job market in 2019...I live modestly (i.e., no costly hobbies, fancy clothes, eating out often), have no credit card or car loan debt, but have ~57k in student loan debt (it hurt just to type that). I have an online savings account with Ally and a Roth IRA, and do my best to save ~$200/month given my limited stipend, but I'm not sure if I'm making the best of my situation and being as financially sound as possible.

Does anyone have suggestions on books (or other resources) aimed towards graduate students that I could reference? Maybe the Bogelheads Guide to Investing text is sufficient, but I'm curious if there are other reliable resources particularly for graduate students.

Thank you!

barnaclebob
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Re: Resource on good financial practices for a graduate student?

Post by barnaclebob » Fri Jan 12, 2018 12:01 pm

There isn't really anything special about the financial needs of a grad student to be honest aside from student loans or grants if applicable. Good personal finance practices are applicable to anyone. Do you have any specific questions about your situation?

student
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Re: Resource on good financial practices for a graduate student?

Post by student » Fri Jan 12, 2018 12:20 pm

Given that you said you live modestly, I don't think there is anything particular that you need to do now. Reading and posting on this forum is good. Is your student loan from your undergraduate? What is the job opportunity in your field? My suggestion will be to live like a graduate student after getting a job until your student loan is paid off.

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Re: Resource on good financial practices for a graduate student?

Post by Grt2bOutdoors » Fri Jan 12, 2018 12:36 pm

Many people attest to this for budgeting: Total Money Makeover - Dave Ramsey
You can watch his shows on youtube - very practical advice.

For a primer on investing and just staying out of trouble financially, read this ---> https://www.etf.com/docs/IfYouCan.pdf
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

shorvath
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Re: Resource on good financial practices for a graduate student?

Post by shorvath » Fri Jan 12, 2018 12:50 pm

I don't think there is any specific books for graduate students. Mainly because "graduate student" is an incredibly vague description.

Targeted advice for someone graduating with a masters in public health will have little overlap with someone finishing a PhD in Computer Science.

The most basic guideline I have is: the more specialized your degree, the longer it can take to land a permanent job, and the more likely it is that you will have to move. With that in mind, your savings should be focused towards:

1)moving expenses - trivial if you get a job in your current location, or much more if you need to do a cross country move
2)bridging employment gaps - do you have a job currently? Is it tied to your student status (TA, RA, etc)?
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triceratop
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Re: Resource on good financial practices for a graduate student?

Post by triceratop » Fri Jan 12, 2018 1:25 pm

There is not to my knowledge any specific information on good financial practices for a graduate student. As noted, the experiences of graduate students are wildly different. Here are a range of examples and the outcomes (so far) from close friends in my college class:

(1) M.D. student at state medical school, finished degree $200k in debt with starting salary of $53k
(2) STEM Ph.D. student at elite private university, expect to finish degree with 6-figure net worth.
(3) Professional Masters student at elite private university in STEM field, finished degree with $90k debt and starting salary of $75k. (debt was paid off in 2 years)

All three students graduated college with a net worth <$5k.

For a Ph.D. student, from a financial management perspective it is helpful in my opinion to treat one's stipend as a low-wage job. Save at least 15%. Use a Roth IRA if you can.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

adamthesmythe
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Re: Resource on good financial practices for a graduate student?

Post by adamthesmythe » Fri Jan 12, 2018 1:35 pm

Graduate students don't make enough for any significant savings. You are also unlikely to make a significant dent in your student debt. The thing is to avoid taking on any more debt, do well, finish, and get a solid job.

Of what you are able to save, consider making carefully-targeted investments in yourself (i.e., conference attendance) after exploring all the no-cost options (your advisor, your department).

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Re: Resource on good financial practices for a graduate student?

Post by triceratop » Fri Jan 12, 2018 1:42 pm

adamthesmythe wrote:
Fri Jan 12, 2018 1:35 pm
Graduate students don't make enough for any significant savings.
This is incorrect.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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BL
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Re: Resource on good financial practices for a graduate student?

Post by BL » Fri Jan 12, 2018 1:48 pm

It sounds like you have personal finances under control for the time being. Perhaps devote some time to job planning. the book
What Color Is Your Parachute? 2018: A Practical Manual for Job-Hunters and Career-Changers
is still recommended for thinking about jobs and how to get them.

The https://www.whitecoatinvestor.com/
site and book may have some good advice if you expect high income.

Plan on expenses to start a new job in a new town.

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JupiterJones
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Re: Resource on good financial practices for a graduate student?

Post by JupiterJones » Fri Jan 12, 2018 1:56 pm

Personal Finance for Dummies by Eric Tyson is great, whether or not you're a graduate student.

Beyond that (and this is a bit esoteric), realize that your debt is part of a deal you willingly made. You could have just worked somewhere without a graduate degree, saved up a bunch of money, then paid your way through grad school. Of course, you'd be a lot older at that point and have fewer years to take advantage of the (hopefully!) higher salary your master's degree would get you.

Instead, you decided to make a leveraged investment and borrow the money to get your degree now. Which isn't the worst idea in the world, and it's what most college students do. But in exchange for getting your degree a lot sooner, you have promised a portion of your future income to pay off the debt. That's the trade off.

Obvious stuff, I know. But a lot of people finish school with huge amount of debt and then complain about it. Or--even worse--live as if they had chosen option A and basically don't accept the truth of the trade off they made.

But you have to follow through on what you signed up for, which is to live like you were still as broke as you were when you going to school, for several years still after you graduate. Pay off that debt like it was your second job (because it sort of will be). And you have to keep a mindset that you are doing this willingly because you decided it was better than the "option A" alternative.
Stay on target...

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Re: Resource on good financial practices for a graduate student?

Post by triceratop » Fri Jan 12, 2018 2:01 pm

JupiterJones wrote:
Fri Jan 12, 2018 1:56 pm
Personal Finance for Dummies by Eric Tyson is great, whether or not you're a graduate student.

Beyond that (and this is a bit esoteric), realize that your debt is part of a deal you willingly made. You could have just worked somewhere without a graduate degree, saved up a bunch of money, then paid your way through grad school. Of course, you'd be a lot older at that point and have fewer years to take advantage of the (hopefully!) higher salary your master's degree would get you.

Instead, you decided to make a leveraged investment and borrow the money to get your degree now. Which isn't the worst idea in the world, and it's what most college students do. But in exchange for getting your degree a lot sooner, you have promised a portion of your future income to pay off the debt. That's the trade off.

Obvious stuff, I know. But a lot of people finish school with huge amount of debt and then complain about it. Or--even worse--live as if they had chosen option A and basically don't accept the truth of the trade off they made.

But you have to follow through on what you signed up for, which is to live like you were still as broke as you were when you going to school, for several years still after you graduate. Pay off that debt like it was your second job (because it sort of will be). And you have to keep a mindset that you are doing this willingly because you decided it was better than the "option A" alternative.
That is not the option the OP took. The OP states that he/she has a stipend and has net savings per month. Therefore, no additional debt. That said, there is something to be said still about the opportunity cost of graduate school relative to an entry level position. However, it isn't a leveraged cost, and the same considerations apply to college as well when one could flip burgers instead of studying.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

GradStudent27
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Re: Resource on good financial practices for a graduate student?

Post by GradStudent27 » Fri Jan 12, 2018 2:48 pm

Thanks, all, for the feedback...I am a Developmental Psychology PhD; most of my student debt is from undergrad (I understood the investment going in), but my recent emphasis on savings is in part to reframe from borrowing any more money for school costs (e.g., semester fees of $1,500)...Given my training, publications, etc. thus far I am on track to be competitive for post-doc or faculty positions at an R1 institution in the coming year, and a fair amount of positions should be available...I was not thinking about saving for a (likely) move to another state (I currently only have emergency savings), however, so I appreciate those suggestions and will continue reading/saving/planning.

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Re: Resource on good financial practices for a graduate student?

Post by ICMoney » Fri Jan 12, 2018 4:15 pm

GradStudent27 wrote:
Fri Jan 12, 2018 2:48 pm
Thanks, all, for the feedback...I am a Developmental Psychology PhD; most of my student debt is from undergrad (I understood the investment going in), but my recent emphasis on savings is in part to reframe from borrowing any more money for school costs (e.g., semester fees of $1,500)...Given my training, publications, etc. thus far I am on track to be competitive for post-doc or faculty positions at an R1 institution in the coming year, and a fair amount of positions should be available...I was not thinking about saving for a (likely) move to another state (I currently only have emergency savings), however, so I appreciate those suggestions and will continue reading/saving/planning.
I think it's great you are asking these questions and that you are getting started early with savings.

The following may not apply to your situation, but thought I'd mention them anyway in case they might for you or future readers of this thread. If you have any traditional IRAs now could be a good time to convert them to Roth since you are in a low tax bracket. If you have any taxable assets (i.e. maybe you have some stocks someone in your family bought for you years ago or something?), while you are in a low tax bracket, now could be a time to sell them to help fund your emergency fund and/or Roth contributions. (i.e. moving them into tax-advantaged space and harvesting any capital gains at a 0% rate)

Assuming you start a job (with benefits?) in mid-2019, you would have the opportunity to make the maximum 401k and HSA contributions for the year even though you won't have worked the full year. But due to your student loan debt, that is likely not advisable/possible, especially depending on the interest rates on your student loans. You could always check back when that time comes to get advice on how to prioritize that opportunity vs. paying down loans. The following article on the wiki may be helpful as you approach that point: https://www.bogleheads.org/wiki/Paying_ ... _investing

Best,
ICM

trigger08
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Re: Resource on good financial practices for a graduate student?

Post by trigger08 » Fri Jan 12, 2018 6:06 pm

This may not be beneficial for you given you have just one year left in grad school (congratulations), but for future readers:

Look in to opening a 529 plan for yourself. We were able to contribute to our state's 529 plan for the tax deduction, then withdraw the funds to pay qualified education expenses. That includes more than just tuition/fees, like food and rent (up to a certain limit). But check the rules because some states only let you deduct the year's net contribution (minus withdrawals).

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Re: Resource on good financial practices for a graduate student?

Post by triceratop » Fri Jan 12, 2018 6:20 pm

trigger08 wrote:
Fri Jan 12, 2018 6:06 pm
This may not be beneficial for you given you have just one year left in grad school (congratulations), but for future readers:

Look in to opening a 529 plan for yourself. We were able to contribute to our state's 529 plan for the tax deduction, then withdraw the funds to pay qualified education expenses. That includes more than just tuition/fees, like food and rent (up to a certain limit). But check the rules because some states only let you deduct the year's net contribution (minus withdrawals).
There is a benefit still if the state counts net contributions, because of the nontaxability of gains used for qualified purposes. There isn't much benefit here though, because the gains likely won't be substantial (if they are, you're likely taking substantial short-term risk on money intended for basics expenses and one should therefore take caution, though one can hold low-risk assets in taxable to offset this risk and can also possibly deduct losses. It's a fun game overall if you like tax paperwork like me, but not of substantial financial help to grad students. I looked into this a while ago).
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Resource on good financial practices for a graduate student?

Post by livesoft » Fri Jan 12, 2018 6:34 pm

As I read this I thought about oft-asked topics:

Is my stipend taxable?

And do I have to pay FICA/medicare taxes myself if they are not taken out?

Does my stipend allow me to contribute to an IRA, that is, Is my stipend compensation or earned income?

I've been in a few university bookstores. A few have had books specifically for grad students / post-docs / new faculty on how to do financial things such as how to report honorariums and fees collected for giving lectures, tutoring, and teaching. I don't recall any though that said don't sign away some of your intellectual property without consulting with an attorney.
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Re: Resource on good financial practices for a graduate student?

Post by triceratop » Fri Jan 12, 2018 6:51 pm

livesoft wrote:
Fri Jan 12, 2018 6:34 pm
As I read this I thought about oft-asked topics:

Is my stipend taxable?

And do I have to pay FICA/medicare taxes myself if they are not taken out?

Does my stipend allow me to contribute to an IRA, that is, Is my stipend compensation or earned income?

I've been in a few university bookstores. A few have had books specifically for grad students / post-docs / new faculty on how to do financial things such as how to report honorariums and fees collected for giving lectures, tutoring, and teaching. I don't recall any though that said don't sign away some of your intellectual property without consulting with an attorney.
I for one am shocked to find that a university bookstore would neglect to mention that.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Resource on good financial practices for a graduate student?

Post by ThriftyPhD » Fri Jan 12, 2018 7:21 pm

It's been mentioned a couple times, but just to reinforce, I'll mention again.
barnaclebob wrote:
Fri Jan 12, 2018 12:01 pm
There isn't really anything special about the financial needs of a grad student to be honest aside from student loans or grants if applicable. Good personal finance practices are applicable to anyone. Do you have any specific questions about your situation?
The special component for you as a graduate student is that this isn't a permanent position. You will need to leave this job, and most likely will need to move to a different location (as you know, your University already has a professor who works in the same field you're studying :) ). The end can be incredibly chaotic with you finishing final work, writing your thesis, giving a defense, looking for jobs, looking for housing, etc.

Because you'll soon need to move and start a new job, make sure you have money for that. Don't count on having moving expenses covered by the next job. Some things to consider that might come up:

Moving truck
Vehicle relocation (driven or shipped or sold and repurchased)
Hotel stay
Flying out to look at apartments
Gap in wages between jobs while moving
Security deposit + first month rent + current landlord stiffs you on your current security deposit because you're a student and leaving the state
New clothes (depending on your current wardrobe; those conference t-shirts from 4 years ago might not cut it at the next job, and you will need something nice during the interview)

Being able to save on a grad student stipend is great. Keep it up and focus on advancing your career. When you get the first permanent job, avoid lifestyle creep: put a big portion of your new salary into the 401k/403b continue to live like a student and you'll never feel the sting of increasing a retirement contribution.

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