Hacking Graduate School Finances

Ray Sin provides a few suggestions for effectively managing your finances in graduate school.


September 13, 2016

Graduate school is tough. We have to master the theories and research in our respective fields, learn how to write for peer-reviewed journals (and increasingly for a nonacademic audience), pass our qualifying exams and finish a dissertation -- hopefully in under six to seven years and, fingers crossed, with minimal debt. And with the exception of a lucky few with generous grants and fellowships, many of us -- even those of us who have some kind of stipend -- struggle with managing our finances.

I know I did.

In fact, the problem is considered so severe that Purdue University put in place a new initiative that aims to increase graduate student stipends by decreasing the number of admitted graduate students. The struggle is real, so to speak.

Throughout my time in graduate school, while some of my colleagues were able to supplement our barely enough stipend through adjuncting, as a foreign student, I wasn’t afforded that luxury. I could only be a teaching or research assistant at the university where I matriculated. With the relatively high cost of living in Chicago, and constrained by whatever I earned through my stipend, I was forced to think long and hard about finances above and beyond “stretching a dollar” or “making ends meet.” I had to take into account meeting both my immediate and future needs. Saving and having savings mattered.

That is the case for almost everyone whom I knew in graduate school, and there are several reasons why.

Buffering. Beyond our immediate financial obligations like food, shelter and entertainment, many of our graduate school expenditures are actually tied to the inefficiency of bureaucracy. I’m sure many of us are familiar with attending academic conferences. In fact, if you are in the humanities, attending conferences is where you present your job talks. Generally, there is a pool of money that helps graduate students offset (and if you are lucky, pay for entirely) the travel costs if you are a participant.

However, we are generally expected to front the money -- and often with a credit card. With conference registration fees, association dues, transportation, lodging, food and drinks, the expenses quickly snowball to sometimes $400 or more. Even if you are diligent in submitting your receipts and evidence of conference participation, it takes time to receive your reimbursement -- at times you can wait for several months.

Having some savings provides a buffer between the time you front your conference expenses and the time you receive the reimbursement. Think of the amount of interest that you avoid paying if you had a pool of money in the interim that could help you cover this expense, even if it is only a portion of it. You save on accruing compounded interest over time if the reimbursement is delayed over an extended period of time.

Unexpected but necessary research costs. Unfortunately, conducting research sometimes costs money. You may have to travel to interview your participants or need to buy specialized software. For example, in the midst of analyzing my dissertation data, I quickly realized the current statistical software available through the university wasn’t equipped to handle the type of analyses I was doing, so I had to purchase specialized statistical software. Although it wasn’t prohibitively expensive, it was not cheap, either (about $350).

I applied twice for small internal grants but wasn’t successful in obtaining them. I could wait one more cycle and reapply and risk delaying my graduation date and, consequently, incurring more costs. Or I could bite the bullet and purchase it using my own money. I chose the latter. I bought the software, conducted my analyses and wrote up my findings. Having savings can become quite handy in such situations. Be that as it may, ironically I might have saved more in the long term (if you think about incurring more cost with each additional year you stay in the program) by spending my savings on software to help push my progress forward.

Preparing for Unexpected Costs

With the increasing awareness of the student loan crisis, quite a few articles have appeared on creative ways to improve your finances as graduate students. (They can be found here and here.) Admittedly, I’ve heeded some of their advice and improved my financial situation, as well. But I think what’s even more important for students is understanding common financial-behavior obstacles that we all face when it comes to actually saving money and how to overcome those obstacles.

My suggestions are by no means exhaustive or prescriptive. Many people have used other ways to manage their finances effectively in graduate school. My intent is to share what worked for me, in hopes that it may benefit someone else.

Bias 1: Short-Term or Present Bias

“My immediate needs come first … I’ll think about savings if I have some money left over.”

This is perhaps the most common explanation that we come up with when we think about savings. It is tough to think about the future when we are confronted with the immediacy of our day-to-day financial obligations, like rent, food, health insurance, books and numerous other expenses. Believe me, I know. That was what I told myself in my first year in my Ph.D. program. Guess what? I never had any money left over to save. I would then come up with a dozen excuses why this month was an exception.

Bias 2: Parkinson’s Law

“I’ll think about savings when I get a ‘real’ paycheck.”

An extension of Parkinson’s law argues that expenses always rise to meet earnings -- that is, regardless of income level, you have a tendency to spend everything you earn. Therefore, it is a fallacy to believe that savings are reserved only for those with a “real” paycheck and is incompatible with a graduate student stipend. Don’t believe me? I saw this happen to my friends who supplemented their income through adjuncting. With extra income, they were willing to spend more on food and entertainment -- and rightfully so -- but they still ended up with little to no savings. As predicted by Parkinson’s law, their expenses increased in correspondence with a bigger paycheck.

Ways to Overcome Biases 1 and 2:

  • Set up an automatic deduction from the account where your paycheck is deposited to a savings account as soon as possible. If your paycheck is deposited on the 15th, schedule the transfer on the 16th. Do not wait until you have money left over. Chances are you won’t have any.
  • Start with a small amount and feel free to revise after one or two months. I initially started with $50 per paycheck, but I found it difficult to balance my budget. I changed it to $20 and was comfortable with it for about a year before revising it upward a little.
  • After a while, you won’t even notice the transfer.

Bias 3: Mental Anchoring.

“Only my regular income is subjected to savings. Any incidental income -- such as birthday money and tax returns -- is fun money.”

Not all sources of income are the same. We assign different meanings to different sources of income and, correspondingly, manage them differently. We tend to view our regular source of money as income and treat it more seriously by saving a portion of it, for example. However, we take a more frivolous attitude to other, supplemental sources of income.

Ways to Overcome Bias 3:

  • Treat all sources of money in the same way. I consider the income from my short summer work as a research assistant the same as my summer teaching position. The same amount -- say, $20 -- is deducted from each paycheck. Although my expenses increased when I had more income (summer is really amazing in Chicago, but it can get expensive), I still managed to put some of it away.

It Is All About Developing Good Habits

After working on my savings for a couple of years, I have come to find parallels between good writing habits and good saving habits in graduate school: start small (I started with $20), start now (there is never a perfect time to begin) and do it consistently (auto deduct from every paycheck). Graduate school is hard enough. Don’t let finances get in the way of your success.


Ray Sin is a Ph.D. candidate in the sociology department at the University of Illinois at Chicago. Since May 2016, he has also been an associate behavioral researcher at Morningstar Inc.


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