Finances on a graduate school stipend: how to budget your way through broke
Disclaimer: we are not financial professionals. We’re just three barely functioning adults who graduated with their Ph.D.s and slightly less debt. The following contains affiliate links. Figures and values are accurate as at the time of writing.
Let’s just call it what it is - graduate students are not compensated well, and nobody becomes independently wealthy living on a graduate student stipend. For reference, the current average Ph.D. stipend in the U.S. is ~$20,000-$30,000/year, not including the doctoral tuition waiver (1). Assuming a 40/hour work week, which is the bare minimum spent by the majority of Ph.D. students to obtain their degree with 60-80 hour work weeks not being uncommon, this comes out to $9.60-$14.40/hour. This is discipline-dependent and varies somewhat based on the cost-of-living, but regardless, Ph.D. stipends are not a lot of money.
Even though you shouldn’t expect to get rich in graduate school, there are ways of being responsible and sensible with your paycheck to maximize your budget. To this end, we’ve compiled a list of tips, tricks, and resources we used during our doctoral studies both to stretch our dollars as far as they would go and start/continue down the path of financial literacy. It’s worth noting that personal finances are just that: personal. And fluid. There is no one-size-fits-all to how we handle our money, so consider this list like Captain Barbosa considers the pirate code - they’re more like guidelines than actual rules.
Determine the value you assign different aspects of your life and adjust your budget accordingly
Graduate school is difficult, and depriving yourself of small joys is a quick road to burnout. The first step to establishing a budget for yourself is deciding what you personally value vs what you don’t. So for example, if you place a high value on your personal space, living alone is an option. This is certainly more expensive than sharing a 3-bedroom and splitting rent, and will require you to make sacrifices in other areas of your budget, but it’s up to you to decide what aspects of your life deserve your hard-earned money.
Track your spending and live within your means
Become cognizant of how you spend your money. Start with your fixed expenses like rent, insurance, and certain utilities, and then go from there. The general budgeting guideline of the 50-30-20 rule (where 50% of your income goes towards needs, 30% goes towards wants, and 20% goes into savings) isn’t always possible on a grad student stipend, but being aware of where your money is going is a critical step in being financially sound. For example, the following is an example of a grad student budget breakdown:
Monthly income: $1,940
Rent: $1,080
Utilities: ~$250
Car expenses: $150
Groceries: $120
Savings: $200
Social time, flights back home, additional savings, Roth IRA: whatever’s leftover
Use a premade budgeting sheet (like these ones here), or make your own! The free app Personal Capital is also an option, which helps you track your net worth and your spending across all your accounts in one fell swoop. Just figure out a scheme that works for you in your current living situation, and stay consistent with it.
Utilize student benefits - they’re abundant, and can really benefit your wallet
Like we mentioned in this week’s podcast episode, graduate students can and absolutely should take advantage of student discounts. As long as you have a student ID, you qualify for student discounts. For example, you can use the third party flight booker Student Universe for student discounts on flights. Student discounts are available for Spotify, Amazon Prime, Hulu, and a whole slew of subscription services, products, and services. Luckily for us, College Info Geek has compiled a very thorough list of discounts available for students!
Start building credit
Did you know that the length of time you have credit established accounts for 15% of your credit score? Opening up a credit card, if used responsibly, is an excellent way to work toward building better credit history. Students have the bonus option of opening up student credit cards, which are specifically geared toward students who are new to building credit and have limited credit history. Look for a card with no annual fee, low introductory interest rate, and some kind of rewards program if possible. Some student cards even offer rewards for good grades! If you’re looking for a good option, consider the Discover Student It Cash Back card. Discover offers matched cash back at the end of your first year, 1-5% cash back on all purchases, no annual fee, as well as additional perks. Use Jackie’s referral link and get a $100 statement credit if you make a purchase within 3 months of being approved!
Open a self-directed retirement account
Unfortunately, graduate programs offering retirement benefits are essentially non-existent. Considering the number of years necessary to obtain a doctorate, this puts PhD students at a significant financial disadvantage compared to their peers in the traditional workforce. According to The Stanford Daily, “the amount [of retirement benefits] lost for graduate students throughout their lifetimes would compound to almost $100,000” (2). This absolutely needs to be more widely discussed, but in the meantime, graduate students have options for self-directed retirement accounts. Thanks to the SECURE Act, stipends and non-tuition fellowships now count as earned income, which means that you can use your paycheck for opening up an Individual Retirement Arrangement, or IRA (3). Whether you use Vanguard, Fidelity, Charles Schwab, or another brokerage firm, IRAs are a really fantastic tool that graduate students on stipend/fellowship should absolutely be using to set their future-selves up for financial success.
Utilize a high yield savings account
The national average savings account interest rate is currently 0.06%. Using the rule of 72 (4), it would take your money in your savings 1200 years to double (so, by the time you’re done with your degree! Kidding. But it certainly feels like that sometimes). As an alternative, consider putting your savings in a high yield savings account. These are typically online only banks, rather than brick and mortar, and those savings on overhead are passed to the consumer in the form of a higher APY. For example, the online only Ally Bank’s high yield savings account is currently offering 0.5% APY. This means 8.33x the amount of interest you’ll earn, and in graduate school, any extra little bit can really go a long way.
Take advantage of on-campus resources
This feels like an obvious one, but there may be some less obvious resources available through your university, your department, or even your advisor. Of course students have access to their university gym, library, and various service offices (e.g. career services, etc.) but did you know that universities oftentimes hold subscriptions, resources, and access to databases that students may be interested in that they wouldn’t be able to afford otherwise? The Wall Street Journal and MorningStar are two that come to mind. Your university might even offer a makerspace. In addition to these resources, and so many more, some academic research grants allow for institutional allowances which can be used to purchase a computer, or other equipment, for a student supported on that grant in order to support their research efforts.
Consider what your next move will be after graduate school
The best time to think about what you’ll be doing after grad school for your career is before you apply to grad school. Will this career move take you to a different location with a higher cost of living, or do you see yourself staying put? Will you continue in academia working as a postdoctoral fellow without retirement benefits for an additional 2-4+ years? Understanding where you’ll be financially after graduation may affect how you allocate your funds now (e.g. saving more aggressively for a down payment on a house vs putting that expendable income into your retirement account), and it’s better to be able to proactively plan than rather than retroactively react.
Apply for an NIH student loan repayment plan
The NIH Loan Repayment Programs (LRPs) were recently established by Congress to facilitate “highly qualified health professionals into biomedical or biobehavioral research careers”. This includes extramural and intramural opportunities. To see if you qualify, click here!
Extramural financial resources
In addition to these above resources, you have quite literally the entire world of financial information available at your fingertips. We’ve compiled a list here of some of the podcasts, books, and other resources the three of us used in graduate school to increase our financial literacy. We hope you’ll find some of this useful! Click on each photo for more info.
https://isphdforme.com/range-of-phd-stipends-in-the-us/
https://stanforddaily.com/2021/03/08/graduate-students-may-miss-out-on-100000-in-retirement-benefits-according-to-student-calculations/
http://pfforphds.com/is-fellowship-income-eligible-to-be-contributed-to-an-ira/
https://www.investopedia.com/terms/r/ruleof72.asp
Personal Capital Advisors Corporation (“PCAC”) compensates PhDefined for new leads. PhDefined is not an investment client of PCAC.