Why and How I Eliminated Eating Out for Convenience in Grad School (and You Can, Too)

Shortly after my husband and I got married and combined our finances, we faced a reckoning in our budget. As we created our first combined spending plans and started our system of targeted savings accounts, we realized that our month-to-month spending was out of sync with our values and short-term goals. Chiefly, we wanted to put aside more money for travel spending, which meant that we had to find other areas in our budget to cut back. On the chopping block: eating out for convenience.

While our restaurant spending was never astronomical, we had each fallen into a pattern of buying convenience food on a regular basis. Among other reasons, I tended to buy a quick dinner on campus when my lab experiments ran into the early evening, my husband bought a fast food dinner every week on his way from campus to an evening activity, and we also occasionally went out to dinner just because we didn’t feel like cooking.

We determined that these convenience meals were not a great use of our money, especially in light of our travel goals. So we made a spending rule: We only ate out with other people on social occasions; we eliminated eating out alone or with each other. We held to that rule almost perfectly for our last few years of grad school, though I admit we started deviating a bit while dissertating!

In this post, I’ll share our strategies for sticking with our no-convenience-eating-out rule. I know this topic is of high interest to grad students (with busy schedules!) who are looking to reduce their spending. Most recently, we discussed it at length in Grad Student Finances’s monthly live money chat. (If you want to join our next money chat, sign up for the mailing list here to receive more information.) Even if you don’t want to eliminate eating out for convenience entirely, implementing these strategies will help you to enjoy eating out more when you choose to because it’s not done out of desperation.

Further reading: Give Yourself a Raise: Prepare Your Own Food Even with a Busy Schedule

Identify Your Patterns

The very first step to eliminate eating out for convenience is to take note of when and why it happens. In all three scenarios I listed for my own life, dinner was the issue. My husband and I never ate out for breakfast and rarely did for lunch, as we were consistent brown-baggers. Since dinner was the problem time for us, that was where we focused our energy for creating solutions.

I realized that I tended to get hangry and need to eat right away; if there’s not ready food available, I would buy something because I couldn’t wait an hour or two to get home/shop/cook. So part of my solution was to keep homemade food available (more on that next).

The pattern you identify in your convenience eating could relate to any meal or snack of the day or more than one of them. Maybe you’re not a morning person so you habitually stop for a coffee and bagel on your way to work. Maybe you like to take a nice break for lunch, and part of that is leaving your office to go to an eatery on campus. Maybe you need a pick-me-up snack in the mid-afternoon to keep from nodding off while reading. Maybe you tell yourself you deserve a night off from cooking after a long day in the lab. Work first to identify the situations in which you habitually buy convenience food or are tempted to, whether those are based around a meal, a time of day, a feeling, a stressor, a regularly scheduled meeting, etc.

Keep Food on Campus

If you are buying convenience food on campus or on your way to on from campus, like my husband and I were, the easiest solution is to keep food on campus in your office, department lounge, or whatever personal space is available to you.

Further reading: Make Your Stipend Go Further: Bring Your Lunch to School

We were consistently bringing our lunches with us every day and keeping them in our shared refrigerators. After identifying dinners as our weak point, we started bringing in dinners as well. On the days of the week that we knew in advance that we would need to eat on campus (like before a regular evening activity), we just brought in our lunch and dinner together. But I also started bringing an extra dinner in with me on Monday to stay in the fridge for the week to be eaten on whatever night I happened to stay late (and if that was early in the week, I’d bring in another the next day). In this way, I planned for the eventuality of needing to eat on campus, even though I didn’t know exactly when it would happen.

You don’t necessarily need to bring in a full extra meal to make this work. If you just need to tide yourself over for an hour or two, a snack will do just fine. If you choose shelf-stable foods or long-lasting refrigerator foods, you don’t even need to change them out every week.

Batch Cook

No kidding, batch cooking changed my life. When I first started eating out of my own kitchen and learning to cook, I prepared one-serving meals, which was very time-consuming and didn’t allow me to use frugal strategies like buying in bulk. I also ate a lot of pre-prepared foods and meals out because that kind of cooking was so exhausting. Our slow cooker changed all that for me.

While batch cooking is not limited to slow cookers, it is a good entry point. I started making 8+ servings at once of hearty chilis and soups in our slow cooker, which were easy to toss into a Tupperware and bring to campus for lunch or dinner. From there I moved on to other styles of cooking, but always making at least 4 servings at once. Batch cooking is perfect for a busy grad student as it is so time-efficient.

Batch cooking was key to eliminating our convenience eating out because 1) it created those meals that we wanted to keep on campus and 2) we always had food ready for reheating at home. Gone were the days of convincing ourselves to eat out because we had no groceries at home or cooking would take too much effort.

Further reading: Eliminate Eating Out for Convenience with Batch Cooking

Eat Before You Cook

Batch cooking also leads easily into this tip: eat, then cook. When I arrive home from work hungry, the last thing I want to do is spend a bunch of time cooking! People are always saying “don’t grocery shop while hungry” because it leads to poor decisions, and I apply the same logic to trying to cook while hungry. I get impatient and am liable to go off-plan.

So my (largely unconscious) strategy became to eat a pre-prepared meal upon arriving home, then do any necessary cooking for the following day(s). I did try to batch cook on the weekends, but usually I also needed to do it once or twice during the week, so I made sure that I had a dinner already available on those nights so that cooking could be put off until the later evening.

Use Your Freezer

Tying in closely with batch cooking and always having a meal available to you is freezer cooking. This is not a strategy I personally employed, but it works amazingly well for many people. Basically, you prep/cook one or more meals that are to be immediately frozen and then reheated/cooked at a later time. If you have a meal available in your freezer, you will never have an excuse to stop for convenience food on your way home.

This strategy also works very well for people who want to batch cook but don’t want to eat the same thing every single day. You can cook a four-serving meal, for example, eating one and freezing three. Rotating through that a few times will give you a selection of different freezer meals so you can spontaneously choose which to eat for any given meal.

Meal Planning

I’m a big believer in creating habits to avoid decision fatigue. I do not want to have to think about what I’m going to eat 3-4 times per day, 7 days per week. Eating the same meals over and over again makes my life so much easier. Grocery shopping, cooking, and eating all become consistent and decisions are minimized. If I have my meals planned out and food available to me, such as through batch cooking, I don’t have the opportunity to decide to eat out for convenience.

Luckily, my personality allows for eating the same dinner multiple nights in a row without becoming dissatisfied. If you crave more variety, meal planning can help you preserve that while still eliminating on-the-spot decisions. When you meal plan, you decide in advance what you’ll eat throughout the week. Often, weekends are used for shopping and prepping/cooking all of the meals, so all you have to do during the work week is carry out the plan with minimal effort.

To combine decision elimination with batch and freezer cooking, you can create a pattern of eating one type of meal every Monday, a different one on Tuesday, another on Wednesday, etc. An even more advanced level of meal planning coordinates the ingredients in the meals you eat throughout the week. The different meals will all draw from a common set of ingredients, which allows you to buy in bulk. (Combine that coordination with the sales cycle at your local grocery store and you are a super-frugal meal planning genius!)

It’s a tough adjustment going from eating family meals growing up or dining hall meals in college to cooking for one or two as a young adult. There is absolutely a learning curve, and sometimes convenience eating is part of that. But as you gain skills in the kitchen and clarity on how you want to use your money, you can make the decision to eliminate eating out for convenience. Start with identifying when convenience eating crops up in your life, then apply these strategies to combat it.

What strategies do you use to avoid eating out for convenience?

How to Manage Irregular Expenses with Limited Cash Flow

A version of this article was originally published on GradHacker.

Irregular or non-monthly expenses can be difficult to weather for anyone, but even more so when you have a low income or little to no discretionary income. Irregular expenses are a nearly universal pain point among graduate students. Any (relatively) large expenses that crop up once or a few times per year can pose a problem, and common examples include school fees, taxes, car registration, car repairs, travel, conference expenses, entertainment, electronics, clothes, home furnishings, insurance, gifts, and medical expenses.

For grad students without much available non-emergency cash, there are limited options for paying for these types of expenses that don’t involve debt: increasing ‘income’ or decreasing spending. A grad student with a side income may be able to ramp up work when an irregular expense crops up. Another grad student may be able to clean out a closet and generate some quick cash on Craigslist or eBay. Frugality in variable spending areas, such as shopping, groceries (eat down your pantry!) and restaurants/bars, entertainment, gas/parking, and personal care, may be sufficient to pay for the expense. An undesirable idea that grad students may consider is to rely on credit cards to float or spread out the expense. This is a dangerous strategy because it is easy to let a balance accumulate, credit card debt is very expensive, and the cycle is hard to break for people with low incomes.

Instead of being forced to make difficult last-minute decisions or put themselves in financial jeopardy, grad students can get ahead of irregular expenses by generating short-term savings that are earmarked for the specific expenses.

Building up cash to have available for these types of expenses certainly takes planning, self-control, and sacrifice in the short term, but it is well worth the long-term benefits of reduced stress, increased confidence in spending decisions, and the ability to say yes to unexpected opportunities.

My husband and I reached a point of frustration with the irregular expenses in our lives about halfway through our PhDs. We had to decline some wedding invitations that we really wanted to accept due to the cost of traveling. This distress spurred us to try to save ahead for the travel we anticipated in the upcoming year. We soon applied this strategy to other areas of our budget.

If it were easy to build up significant savings with a low amount of available cash flow, everyone would have it in place already. For those people, like my husband and I, who don’t naturally live well below their means and watch their checking account balance grow, certain strategies and psychological tricks may make this process more palatable.

The key strategy we used was to set up a system of targeted saving accounts or sinking funds. With this strategy, you essentially convert irregular expenses to regular expenses by spreading out their impact on your cash flow over several months or a year. Targeted savings accounts are either literally distinct savings accounts or simply notations within a single savings or checking account. (If your bank doesn’t allow you to open multiple savings accounts for free, look into an internet-only bank like Ally or Capital One 360. Nickname each account with the category of spending it represents.) The money in each account is designated only for its individual purpose. To fund the account, you anticipate the expenses in each category over a period of time (e.g., a year) and set up a monthly savings rate to pay for the expenses. When an expense occurs in the category, you draw money from the account to pay for they expense.

Returning to the travel example that inspired my own finances, to implement this strategy my husband and I projected all the traveling we expected to do over the course of the upcoming year. Generally, that included a few trips to see one set of parents or the other, travel to a few weddings, and sometimes travel for a special event like a reunion. We assigned an amount of money that we would need to each event and used the total amount of money we expected to spend to calculate a monthly savings rate. The exact number of out-of-town weddings we attended were difficult to pin down a year in advance, but we took a guess based on the previous year’s spending. As the year progressed and the events came into focus, we adjusted our cost estimates to be more accurate and changed our savings rate.

You could project an entire year’s irregular expenses all at once and start saving immediately for everything, but there is an easier and more gradual way to get started with targeted savings accounts. Each time you encounter a difficult irregular expense, figure out the next time it will occur and in what amount. Calculate your required savings rate by dividing the amount of money needed by the number of pay periods you have to prepare for it. Then, set up a recurring automatic transfer from your checking account to the appropriate targeted savings account (create a new one if needed). You will be prepared for that expense the next time it arises.

You can create as few or as many of these accounts/designations as your lifestyle suggests. By the time my husband and I finished grad school, we had proliferated our targeted savings accounts to cover travel, car, medical, community supported agriculture, electronics, entertainment, appearance, and tax expenses.

Converting irregular expenses to regular doesn’t make money magically appear out of thin air, but we did find its structure helpful for motivating us to find ways to cut our spending in certain areas or earn extra money. The main benefit we experienced was reduced stress and a feeling of more control over our money as we moved from being reactive toward our irregular expenses to proactive.

Would you like a one-page worksheet that helps you brainstorm your irregular expenses? It includes the three questions to ask yourself to map out your upcoming year and a list of the most common irregular expense categories. Sign up below to receive your worksheet!

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Further Reading: Weather Irregular Expenses on Your Grad Student Stipend with Targeted Savings Accounts (a Grad Student Finances Guide)

How Much of Your Stipend Should You Spend on Rent?

A version of this article first appeared on GradHacker.

There are a few different versions of the “rule of thumb” regarding how much of your income to spend on housing. No more than 25-30% of your take-home pay seems to be the consensus, with a few outliers. But as a graduate student receiving a stipend, does this guideline apply to you? How should you figure out how much to spend on housing? Clearly, whether your university is in a high cost-of-living or a low cost-of-living area will have an enormous impact on how much you need to spend.

For some graduate students, this rule of thumb is unfortunately useless and discouraging. In certain high cost-of-living areas, rent can be 50% or more of a stipend. But even in pricey markets, it’s worthwhile to take a hard look at yourself and your surroundings to make the best choice you can among your limited options.

But, other graduate students are in an area that offers them a degree of choice in how much of their stipend to spend on rent. They have the opportunity to evaluate the range of reasonable choices and decide what is best for them, given their values and other financial goals.
Whether you are moving to a new city to start grad school or are several years into your program already, you should evaluate your housing costs to make sure you are spending the right amount of money and getting the right amount of value for you. To do so, you have to evaluate both yourself and your environment and, ultimately, balance your budget.

Evaluate Yourself

Since housing is the biggest component of most Americans’ budgets, you should use a mini-financial planning process to help you determine where housing falls on your priorities list. Start by determining your top life values (family, freedom, creativity, health, achievement, etc.). Then, set goals for your finances that help you fulfill those values. Once that high-level picture starts to come into focus, you can figure out where housing falls on your priorities list. What aspects of housing—space, location, safety, privacy, amenities—help you fulfill your values or are otherwise very important to you? What attributes are non-negotiable and what are you willing to let go of in favor of a lower price? This process can bring a lot of clarity because it helps you directly compare differences in the price of housing with your other financial goals.

One of the first and biggest decisions you will make is whether or not to have a roommate/housemate. Some graduate students are so tired of living with other people that they won’t consider it no matter how much cheaper it would be, while others may be excited about how a roommate would benefit their lives as well as bottom lines. If you’re on the fence, price out both options and ask yourself if having $X more per month to put toward other areas of your finances is worth the (reasonable) potential downsides such as noise/distractions, differing standards for common areas, reduced privacy, or personality clash. Living with another grad student in your same year or area of study who understands the demands of your program could be a great option.

Evaluate Your Environment

Your best resource for finding appropriate housing options is other graduate students. I have found that grad students are quite willing to divulge what they pay in rent, and widely polling can give you a great idea of the market. If you haven’t yet moved to your city, start by emailing students you met during your visit weekend, students in your (prospective) lab/group, or students in departmental leadership positions. But you don’t have to keep thinking “inside the box,” either, if it seems that grad students flock to the few most popular options. Where in your city do other young professionals or people with an income similar to yours live?

In addition to asking around, check your university’s website to see 1) if housing is offered to graduate students (and at what price and priority) and 2) if your university makes off-campus housing recommendations or maintains a housing database of its own. Searching on Craigslist is usually a good way to find housing and/or roommates, and you can also check listings on Trulia, PadMapper, apartments.com, etc. Which database is best to use to search for housing will vary somewhat by city.

Be sure to consider various types of housing. In Durham’s housing market, my observation is that the least expensive option is renting (or buying) a single-family home with several other people and the most expensive option is renting a luxury apartment near campus. In some cities, on-campus housing may be the least expensive option, and by talking with your peers you may discover the best practices for getting your foot in the door.

Balance Your Budget

Ultimately, when reconciling your own priorities with the realities of the housing market, your expenses need to be less than your income. If you are simply locked into high housing costs no matter how low a priority it is for you, the rest of your budget is going to be affected. But one additional factor to consider is how housing cost might play against other needs like transportation and utilities costs. Perhaps a higher base housing cost can become more palatable if it means you can live car-free or have low utility bills. For example, are you able to keep your total needs spending to 50% of your net income (recommended in All Your Worth), or at least minimize the whole category?

If you live in a city where you have good housing options across a reasonable range of prices, this is the situation where the rule of thumb might come in handy. Calculate what 25-30% of your household take-home pay is and look at what that will get you. If you are tempted to spend more than 30% of your income on housing and don’t have to, ask yourself if it’s really that important and if you are going to be able to meet your other financial goals. Certainly, you can spend less than 25% if you are so inclined!

Revisit the Question

If you are renting, you aren’t locked into the housing decision you made at the start of grad school. In fact, you’re likely to make a better decision about housing after you have gotten to know your city and have seen where other grad students live. Your priorities and income may also change with time. It is valuable to periodically re-run this analysis on yourself and your environment to determine if moving is warranted.

I have personally benefitted from re-evaluating the cost of my housing during graduate school. My husband lived in the same apartment for his first five years of grad school and really loved it. But the city changed during those five years, and the area he was renting in no longer seemed like the only option. When the apartment complex tried to raise our rent 6% year-over-year (the rent increases in the previous 5 years had summed to about 10%), we took it as an opportunity to shop around. We ended up moving to a townhouse with the same square footage closer to our university (reducing our commuting costs) for an 11% decrease in rent. The only downgrade was that our new community didn’t have a clubhouse gym, but that wasn’t much of a sacrifice, as we had access to our university’s gym. I count that move as one of the best financial decisions we made to reduce our spending during grad school.

For your stipend, is housing in your city expensive, reasonable, or inexpensive? Where does housing fall on your priorities list? Have you been able to find a good deal in your city?

Basic and Stretch Financial Goals for Graduate School

A version of this article originally appeared on GradHacker.

It may seem counter-intuitive, but graduate school affords you an excellent opportunity to grow financially, whether that means growing in your money management skills or growing your net worth. There is no need to wait until after you land a “real job” to put in the effort to improve your financial picture.

Basic Financial Goals

All graduate students, whether they are being supported by stipends, loans, family, savings, or some combination, have the ability to set and reach basic financial goals during graduate school. In fact, graduate students have already overcome one of the biggest hurdles that prevents people from succeeding with personal finance: they are future-focused. Graduate students are making an incredible sacrifice in the short term to invest in their future careers. Often, success in personal finances comes down to the same type of decision-making and commitment: to put the good of ‘future you’ at least on par with what is good for ‘present you.’

Here are a few examples of basic financial goals and why you should work on them during graduate school:

  1. Track 100% of your spending: If you have never paid attention to how you use your money, you will be surprised by what tracking reveals. Tracking alone can actually change how you spend because of your higher level of awareness. You can track your spending manually (pen and paper, Excel, Pocket Expense, Every Dollar) or automatically (Mvelopes, You Need a Budget, Mint, GoodBudget).
  2. Budget: Be the boss of your money. Tell it where it’s going to go and what it’s going to do. Exercising this kind of control over the small amount of money under your purview now will help you control larger amounts later. Furthermore, you can use your budget to help you meet other financial goals.
  3. Discern the difference between needs and wants: No one is living high on the hog while in graduate school, and many students flirt with the poverty line. When your income is low, you are forced to figure out your priorities quickly. The upside to this process is that you can carry that knowledge forward into your post-grad school life and use it to avoid wasteful spending and lifestyle inflation.
  4. Monitor your credit: Everyone should practice the basic financial hygiene of monitoring her credit reports at least once per year. The purpose is to ensure that all your accounts are being properly reported to the credit bureaus and to catch identity theft early on. You might also take an occasional peek at your credit score (for free), but that’s not as vital.
  5. Build an emergency fund: Emergency funds are important even for people who are in debt. An emergency fund stands between something bad happening in your life and something bad happening in your life plus serious financial consequences (e.g., credit card debt). A starter emergency fund size might be just $1,000, and you can build up the size of the fund to meet your unique needs.
  6. Learn about personal finance: We all should take the time to learn a bit more about such an important topic, and there are plenty of easy-to-digest resources in the form of books (e.g., Get a Financial Life: Personal Finance in Your Twenties and Thirties), websites (e.g., Get Rich Slowly), podcasts (e.g., Stacking Benjamins), etc. Learning more can both motivate you to set other goals and show you how to reach them.

Two of the basic financial goals I set during graduate school were tracking and budgeting. When I was single, I budgeted and manually tracked my spending using Excel. After I got married, I switched to using my husband’s preferred automatic tracking and budgeting platform, Mint, which really aided our communication and coordination around our finances. These practices helped us to align our spending with our values and gain peace of mind, which maximized the satisfaction we gained from the use of our money during grad school.

Stretch Financial Goals

Some graduate students may desire to go beyond these basic financial goals to set ‘stretch’ goals for themselves during graduate school. If achieved, stretch goals positively impact your net worth. (It is also likely that some of the basic goals will improve your net worth, but that is not their primary intent.) Whether one will set stretch financial goals during graduate school is a personal decision, but a student who understands the power of compound interest is likely to strive to preserve or increase her net worth as much as is reasonable during graduate school (i.e., don’t sacrifice your degree progress!).

  1. A stretch financial goal for a graduate student taking out loans for his education may simply be to minimize the amount of debt he is taking out. This could be achieved by reducing his living expenses, finding an on-campus job that provides tuition benefits, or working part-time.
  2. A stretch financial goal for a student living on a stipend plus loans or familial support may be to forgo taking out debt by living within what her stipend provides or making up the difference between her stipend and living expenses with additional paid work.
  3. A stretch goal for a grad student receiving a livable stipend may be to more aggressively save/invest or pay down debt.

This type of goal lends itself very well to the SMART description of goal setting: Specific, Measurable, Attainable, Relevant, and Time-bound. Money itself is easily measured, and it is straightforward to set specific and time-bound goals, e.g., save $3,000 into an emergency fund by August 2016. The aspects of SMART goal setting that will take more consideration are making the goals relevant and attainable.

The goals you set must be relevant to what you really want out of life. It will bring you no satisfaction to set and achieve a financial goal that you don’t care about and that doesn’t impact your well being in the short- or long-term. Give yourself some time to consider what you want money to do for you during and after graduate school, and then translate those ideals into SMART financial goals.

To avoid burnout, the financial goals you set must also be attainable. You will just become frustrated if you set a goal that requires you to have an amount of cash flow available that is impossible or unlikely in your current situation, so you should select challenging but achievable goal numbers for your life.

Stretch financial goals boil down to ones that improve your balance sheet (assets minus liabilities). On the ‘increasing assets’ side, you can set a short-, mid-, or long-term savings goal and choose appropriate investment options for your time horizon and risk tolerance. On the ‘decreasing liabilities’ side, you can set a goal to pay off your debt ahead of schedule, perhaps using the debt snowball or avalanche method. To achieve these goals or to reduce your living expenses overall, you may set a variety of other SMART goals, like reducing your spending within a given category through budgeting, tracking, and frugality.

One of the ‘stretch’ financial goals I set during graduate school was to save for retirement consistently. I started out saving 10% of my gross income into my Roth IRA, but over time wanted to do even more. Eventually, my stretch goal became to max out my Roth IRA every 12 months. I did not achieve this goal during graduate school, but I did end with a 17.5% savings rate, which definitely aligned better with my values than not saving at all or sticking with 10%.

Grad students shouldn’t treat this period as an exception from their overall financial lives. Even if you are taking on debt or have a lower income than you had before or expect to have after grad school, you have the ability to set and achieve basic financial goals that will help you develop positive financial habits and even stretch financial goals that will help you grow your wealth.

What is a basic or stretch financial goal you are currently working on or would like to set for yourself during grad school?

Break the Taboo: Talk with Your Peers about Money

A version of this post originally appeared on GradHacker.

Traditionally, there have been certain topics that were off-limits for dinner table conversation. The prohibitions against discussing sex, politics, and religion have largely fallen away, but in many pockets of our society the money taboo persists. Over the past several years, I have fought against the money taboo among my grad school peers, and in return have experienced financial and relational benefits.

I encourage you to begin or continue discussing money with your peers for the following reasons:

1) Take advantage of your own malleability.

One major upside to discussing finances as a young person is that you don’t yet have deeply ingrained habits around money—or at least not as deep as they will be in a few decades! As you are trying to figure out your own relationship with money, you can learn from the best practices of those willing to share theirs with you. Grad students are by and large not locked in to large financial commitments (such as expensive cars and homes) and have the flexibility to change as they gain new information.

2) The information you get from your peers is the most relevant.

The internet has bountiful resources on how to manage your money well—so bountiful as to be overwhelming at times (Google “frugal tips” and find hundreds on just the first results page). When you talk with people who live in the same city, have the same employer, and have a similar lifestyle as you do, the information they impart is as relevant for your situation as it can get. This could be anything from a benefit you didn’t know you had to a tip on a discount retailer to a new-to-you money management strategy. When you discuss money with your peers, you can find mentors all around you and be a mentor yourself.

3) Expose “the Joneses.”

I hope that none of us are comparing our lifestyles to those of our college classmates who got jobs instead of going to grad school—that’s a game you just can’t win. But it may be the case that your jealousy has been kindled by some of your own peers’ apparent spending habits. When you are open to talking about money with your peers, you can find out the real story behind those shared photos, which is likely to dampen your envy.

4) Grow closer by discussing your values.

The biggest reason I like talking about money with people is that money is really a stand-in for our own individual life values. How you choose to use your money reflects your priorities. When my friends and I are open about our money with one another, we are learning what really matters most to the other person, and that spurs us to grow closer (even when we disagree).

Get the conversation started.

Money can be a difficult subject to broach for the first time with a friend. Two baby steps to take toward breaking the taboo are to share something from your own financial life and to ask for advice. Focus your icebreaker on yourself so your friend doesn’t feel as if she is under the microscope. For example, when communicating a spending decision, share your reasoning as well as the final yea or nay. Instead of just rhetorically complaining about pain points in your finances, ask your friend if she has found a good solution in her own life.

When you bring up money for the first time, be especially attuned to your friend’s facial expressions and body language. If he subtly communicates that he is offended, uncomfortable, or bored, change the topic and steer clear for a while!

We have so many superficial conversations with one another. Why not take a chance on a topic through which you may learn something really practical, improve your balance sheet, and deepen a friendship?

Do you discuss money with your peers, and if so what outcomes have you experienced? What keeps you from discussing money more openly?

Your Most Important Budget Line Item in Graduate School and Why You Need to Re-Evaluate It

The largest line item in nearly every graduate student’s budget is housing. Whether you own your home or rent, whether you live on campus or off, whether you live in an apartment/condo, townhouse, or single family home, unless someone is subsidizing it, you are almost certainly spending the biggest chunk of your income on your abode.

If your rent is $400 per month and you spend five years pursuing your PhD, over the course of your studies you will spend $24,000 on rent. If your rent is $1,000 per month and you spend six years pursuing your PhD, you will spend $72,000. These are staggering numbers, especially when you compare them to your annual stipend. Your decision of where and with whom to live is almost certainly the most financially impactful budget decision you will make during graduate school.

Housing is a very tricky expense category to budget. There is no argument that you need somewhere to lay your head. A certain fraction of your housing spending is simply a baseline that covers a necessity. (That is, unless you can get really creative, such as by living in a van.) But you can’t write off your entire housing expense as a “need,” especially if you then let yourself off the hook from evaluating its cost carefully. A fraction of your housing spending is “want” as well. Perhaps you are paying a bit more for a desirable location, an amenity, extra square footage, updated features, a parking spot, or solitude. There’s nothing wrong with wanting to upgrade from a Spartan home, but you must be honest with yourself about what aspects of your housing you could dispense with if push came to shove.

What makes housing even more special in terms of your budget is that it is a fixed expense. Once you settle on where you’ll live, your housing costs are locked in for the term of your contract. It’s difficult to change your housing costs because that involves moving or adding/subtracting a roommate. That means that you can lock in a high rate – or a low rate. Fixed expenses represent excellent opportunities for cost reduction. If you are looking for a simple, long-lasting way to reduce your spending, target a fixed expense. You have to make the decision to reduce it and put in the effort one time to carry out your decision, but after that you have the lower rate set every single month in perpetuity. And what better fixed expense to target for reduction than your largest one, housing?

The most remarkable aspect of your housing decision is that you typically have to make its first iteration before matriculating into your graduate program. If you are moving to a new city, you have to search for and secure your housing with next to no knowledge of the rental market, possibly sight unseen or after one scouting trip. Therefore, your first dwelling in graduate school may not be the most optimal for you financially. Although you should ask for advice from older graduate students when you make that initial housing decision, nothing is as informative as actually living in your city for a few months or a year.

If you haven’t yet moved once within your grad school city, take the opportunity right now to re-evaluate your current living situation. You likely have a totally new perspective on the decision compared to the last time you made it. Even if you have moved once with an intimate knowledge of the local housing market, your financial goals and budget evolve with time; perhaps you are different now and you require a new housing arrangement. It takes some patience and commitment to decide to move and then wait several months to follow through, but a significant enough reduction in housing expense makes the process worthwhile.

[The decision to purchase a home while in graduate school has an enormous financial impact. There is a great amount of financial risk associated with buying a home (both upside and downside). Buying a home is more expensive in the short term while renting is more expensive in the long term. The problem is that no one can predict whether your time in graduate school is short-term or long-term. The housing market could boom or bust during your tenure at your university. You might end up with a home that needs a lot of costly repairs. You could arrange for renters who essentially pay your mortgage for you, or end up with a landlord’s nightmare. You have to make careful calculations and considerations, but there is always a gamble involved. If you are already a homeowner, there are still a few ways for you to reduce your housing costs, such as selling and moving, taking on a roommate, or refinancing your mortgage.]

Have you re-evaluated your housing costs since you moved to graduate school? If you were able to reduce your spending on housing, what would you do with your extra cash flow? 

The Best Kind of Frugality for a Busy Grad Student

When you live on a stipend, frugality is a way of life. You know you can’t live a freewheeling lifestyle on your grad student income, at least not without racking up massive debt. But the approach you take to frugality has an enormous effect on how restrictive you perceive your lifestyle to be and how much time you spend on spending less. When you have a dissertation to write, you don’t want to be spending hours each week scrimping and saving. Effective frugality for a grad student has to be automatic.

The best kind of frugality minimizes spending on what’s least important to you so that you can divert your money to what’s most important to you – without you compromising the time you’re suppose to devote to your studies. And practicing frugality doesn’t mean that you will feel deprived or be living paycheck-to-paycheck. You can use frugality to give yourself a leg up on wealth creation, even during grad school.

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What is the best kind of frugality?

First, we recognize that the best kind of frugality is unique to each individual. Frugality is not a one-size-fits-all solution. Yes, there are popular approaches and strategies, but you still get to pick and choose which practices you will adopt. If spending money in a certain category enables you to live your values – and cutting back in that area would impede that – keep spending there. Move your search on to another category for potential cuts. Of course, the reality of living on a stipend may force you to revisit your valued category, but it should be last on the list for cutbacks.

Second, the best, most effective frugality preferentially targets your largest expenses. Third, once you do the work to reduce those expenses one time, your frugality keeps the expenses low in perpetuity, either because they are fixed expenses or because the frugal practice has become habit (ideally, an effortless habit).

Think of frugality as an 80/20 problem. You can get 80% of your total reduction in spending from 20% of your expenses, if those expenses are the largest ones in your budget. You can eliminate 10 small expenses that won’t add up to as much as one partial cut to a large expense.

Target your largest expenses first

When you’re searching for places to cut back in your spending, start at the top. Using your budget, any past spending data you have, or your memory, rank your expense categories from largest to smallest. Your largest categories likely include rent/mortgage, transportation, and groceries, and other possibilities are eating out/alcohol, entertainment, travel, utilities, childcare, and shopping.

Once you have your ranked list, process each spending category from largest to smallest, brainstorming ways you could reduce your spending in that area. Use resources like our Frugal Practices or frugality websites to target each spending category. Seriously evaluate if you can implement one of your ideas in each category.

Sometimes the prospect of reducing your spending on a very large expense is quite daunting. You may have contracts in place that limit your ability to change the expense for up to a year. Often, reducing a large expense will take quite a bit of work. People tend to be very psychologically resistant to change as well. But you have to focus on how much your quality of life can be improved in other areas by taking those steps.

There may be quite a delay from the day that you decide to reduce your spending on a large expense to the day that you accomplish it. Deciding to reduce this kind of expense isn’t as immediately rewarding as implementing a frugal strategy that you can benefit from immediately. But don’t let that deter you from planning and following through on your idea. While you wait out the contract or research the decision, keep track every month of how much money will be freed up by the change and imagine what you could be doing with it.

Reduce your fixed expenses

The best kind of frugality happens in the background of your life without you having to pay any attention to it whatsoever. When you reduce a large fixed expense, you practice that frugality without even noticing it. (The corollary is that fixed spending is easy to let inflate, as well, since it’s not an active decision.) If it was difficult to reduce that expense in the first place, like getting out of a contract, it’s pretty difficult to reverse the measure, too.

This is unlike any strategy that takes willpower or time to enact. In a tough or busy moment, you could easily forgo that strategy and return to your higher-spending ways. Reducing a fixed expense locks in that lower rate, at least for a period.

Make a habit of reducing your variable expenses

Some of your larger expense that are ripe for reduction are variable expenses, so you lose the benefit of locking in the lower rate like with a fixed expense, but they are still worth pursuing when you’re looking to reduce your spending.

The key to reducing a variable expense is to make your frugal strategy a habit. After establishing the strategy, you should automatically follow it unconsciously and without having to use willpower. Until you reach that point, you should use whatever prompting strategies work for you to remind you to follow the strategy. It won’t feel natural at first, but keep at it.

However, if you continue to chafe against the habit after weeks or months of trying it out, it’s probably not for you. Don’t use your limited time and energy forcing a frugal strategy that refuses to become a habit or takes up too much time or energy.

Experiment

The best traits to cultivate with respect to your frugality are creativity and daring. Especially with respect to your variable expenses, ask yourself what you really have to lose by trying something new. If possible, give each frugal strategy a one-month trial. That should be enough time to get over your resistance to change, evaluate the strategy, and possibly create a new habit. If it doesn’t work out – and if you get really creative, not everything will – you can go back to your old ways. Of course, if a strategy requires becoming locked in or an up-front cost, do you research before leaping.

A PhD is a long haul in grad school. If you adopt the attitude toward frugality outlined above, think how many different frugal strategies you can try out over the years. Even if you only made habits of 20% of them, that could impact your spending enormously. One of the great benefits of living on a stipend is figuring out what is important for you to spend on and what isn’t. If you maintain the comfortable but low lifestyle you fine-tune in grad school after you start earning more from your real jobs – probably with a few judicious upgrades! – you can start making huge strides in increasing your net worth.

What fixed expenses have you reduced during grad school? What frugal strategy did you try out that eventually became a habit?


What Grad Students Can Learn from the FIRE Community

At first blush, graduate students and the FIRE community don’t have much in common. FIRE stands for Financial Independence/Retiring Early; it is a movement to retire or reach financial independence (working becomes optional) very early in life, often by age 30 or 40. FIRE aspirants usually have high-paying jobs that they wish to stay in for only a handful of years, whereas graduate students are taking a large (theoretical) pay cut to acquire training that will set them up for long, productive, not necessarily high-paying careers.

Further Reading: Early Retirement Isn’t for Us

However, I think there is a great deal that graduate students can learn from the FIRE community (and vice versa), financially and otherwise, even if they do not have the same goals.

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1) They have a clear vision of what their future will hold.

FIRE people regularly fantasize about what they will do in retirement/upon reaching financial independence. They do so in detail. They have a plan for where they will live and travel, how they will fill their days, what skills they will use or learn, who they will spend time with, and how they will serve their communities. This detailed picture steels them for the sacrifices they are making in the present and motivates them to reach their goal on schedule.

Unfortunately, it’s fairly common for graduate students to apply because graduate school is the next step in their educational progression or because they haven’t been exposed to careers outside academia. Even those who matriculate with a career in mind (usually research and/or teaching) decide against pursuing it in the course of their training. This lack or loss of career focus usually results in students languishing during their training or wasting effort on projects or skill acquisition that won’t serve them later on – not to mention the time not spent on appropriate networking. The clearer the career goal, both for students pursuing academia and those pursuing alternative careers, the more effective the student’s training can be.

2) They have a roadmap to their goal and obsessively track their progress.

Another lesson along the same lines is that FIRE people have a detailed plan for how and when they will reach financial independence. They know exactly how much more money they need to earn, into what vehicles they will save and invest, and how they are going to maintain their lifestyles in the meantime. They track their financial progress on detailed graphs and spreadsheets.

Grad students do create, from time to time, plans for their research progress, but then the plan always seem to go awry or get delayed. That is the nature of research. But the more closely a grad student can stick to a detailed plan, checking off experiments or sources one by one, the better off she will be in terms of keeping her motivation and productivity high. There should be an increasingly clear picture of what the end point will be as time goes by.

3) They work their tails off.

FIRE people tend to be super hard workers. They often have demanding primary jobs, on top of which they might add one or more side income streams to get to financial independence even faster. FIRE bloggers additionally document their experience online.

There is no doubt that grad students can work hard, but many fall into a pattern of working in fits and starts, such as in advance of deadlines. The uncertainty of the progression through grad school exacerbates this tendency. It’s very difficult to push yourself to work hard when you’re not sure where the hard work is leading (see points above).

4) They are uber frugal.

When I jonined the financial blogging community and started reading about other people trying out frugal strategies and challenging themselves to no-spend weeks and months, I wasn’t very impressed. That version of frugality was just my normal life living on a stipend!

But FIRE people really know what they are doing when it comes to frugality – they are an extreme breed. The bar for frugality was set early on by Jacob from Early Retirement Extreme (a PhD scientist!), who lived in an RV for a time. While not many FIRE people go that far, they have become masters of lifestyle cost minimization in a variety of creative ways. Grad students looking for ways to cut their lifestyles further can take some pointers from other FIRE bloggers like Mr. Money Mustache and the Frugalwoods.

5) They save like mad.

There is no doubt that FIRE people understand the power of compound interest. They have taken it completely to heart. They are mad for investing and building up a large portfolio quickly so they can utilize the 4% rule to fund their lifestyles in perpetuity. Certainly many graduate students understand the power of compound interest as well. But some grad students I talk with just haven’t gotten around to starting to invest yet. Some think it’s not really worth getting started because they could only invest a small sum or a small stream. But the fantastic thing about compound interest is that, given enough time and a decent rate of return, it can turn even small sums into staggering ones. A FIRE person knows that putting away an extra $10, 50, 200 or whatever amount really does make an impact. Your savings rate is the most important factor in determining your ultimate portfolio balance, not the rate of return that you get on your investments.

Further reading: The 4% Rule and the Search for a Safe Withdrawal RateHow Important Is Your Rate of Return?; Starting Down the Road to Financial Independence? Don’t Obsess Over Investment Returns, but You MUST Obsess Over This.

Graduate students really have stepped off the beaten path when it comes to education and career, even though it doesn’t feel like it inside academia. Sometimes it’s worthwhile to take a look at other unusual but highly successful communities to adopt their best practices. Grad students would certainly benefit from taking a few pages out of the FIRE community’s book, even if their objective is not financial independence and early retirement.

Budgeting Methods

Your budget and budgeting method will be unique to you as an individual. You need to find a method that serves the purposes you set for it without being too onerous for you to follow. Below are a few common ways to budget – you can mix and match as best suits you.

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Line Item Budget

The line item budget is probably what you think of when you hear the term “budget.” You start with your net income each month and create a line item for each goal or expense that includes the category and amount. The expenses included are your fixed and variable expenses that occur every budgeting period. This type of budget will be the same every month, only evolving as your expenses change with time, so it works best for people who have very regular income and expenses.

Your objective is to spend exactly (fixed expenses) or less than (variable expenses) the amount of money allocated in each of your line items. Be sure to keep a line item for miscellaneous/unanticipated expenses as well; expenses always pop up that don’t exactly fall into one of your categories. This budget resets between each budgeting period, so you’ll need a plan for what to do with your excess money when you come in under budget or your deficit when you come in over budget.

If you want to keep a monthly line item budget, Mint is a great tool to help you track your spending and match it against the line items in your budget.

One of the pitfalls to line item budgeting for a graduate student is the periodic occurrence of large irregular expenses that overwhelm your miscellaneous line item. One solution to this issue is to use targeted savings accounts.

Unbudgeting

The unbudgeting method is about as simple as a budget can get. From your net income, you set up a savings rate for one or more of your goals and let the rest of your money be unstructured. The only tricky part is to keep from overspending your remaining money in each pay period. In this method of budgeting, you can be confident that you are meeting your goals, yet you don’t feel restricted. This kind of budgeting is great for people who want to work regularly toward goals but don’t want to feel limited in how they spend their money each month.

You don’t really need budgeting software to unbudget, but it is helpful to track your expenses manually or automatically so you know when to stop spending.

Further Reading: 4 Easy Money Management Solutions for Anti-Budgeters

Unique Budget Every Month

If you want to be more exact and directive about your budgeting, you can create a unique zero-based budget every month (aka the Dave Ramsey Method). Every month (or every pay period), you calculate your unique income and project your unique expenses. You give every single dollar an assignment for the month and make sure that it is carried out. This is on the intensive side for budgeting because it requires scrutiny of the coming month and must be completed fresh every month. This budgeting method is great for people who have irregular income, are intensely repaying debt or saving, or have relatively large discretionary income month to month.

Dave Ramsey’s budgeting software that follows this method is Every Dollar.

Envelope Method

The envelope method is a longer-term spin on the line item budget. You divide up your net income into envelopes (categories) for all your fixed, variable, and irregular expenses, then spend down those envelopes. With this system, the budget doesn’t have to reset after every month, but you can continue to accumulate money in your envelopes until it is needed. You can also smooth your spending in your regular budget categories over a few months. For example, you could stock your freezer and pantry in one month of high grocery spending, then eat it down over a few months of lower grocery spending as you build up cash for the next stockpiling month. This budgeting method works well for people whose expenses are not very regular.

One example of software that uses the envelope method is Mvelopes.

Targeted Savings Accounts for Irregular Expenses

Irregular expenses – expenses that occur only once or a few times per year – are the bane of the grad student budget. As stipends are so limited, it is rare to find a graduate student whose money management system hasn’t been stressed by an irregular expense. Examples of irregular expenses common to grad students are quarterly or yearly tax payments, university fees or research-related expenses, travel, insurance premiums, repair/maintenance costs, shopping (electronics, clothes, home, etc.), entertainment, and gifts.

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The best way to handle irregular expenses is to save for them in advance. First, you’ll have the cash on hand when the irregular expense occurs, eliminating the need to scramble to find additional cash flow that month or to carry a balance on a credit card. Second, anticipating your irregular expenses forces you to budget over the course of a year instead of just a month, which means you can better weigh your spending options against one another instead of making last-second calls on what to purchase and what to forgo.

A system of targeted savings accounts organizes your savings for irregular expenses. From each paycheck, you save a small amount of money into each targeted savings account, which are designated according to their expense category. Then, when an irregular expense occurs, you pay for it using the money that has built up in the targeted savings account.

Would you like a one-page worksheet that helps you brainstorm your irregular expenses? It includes the three questions to ask yourself to map out your upcoming year and a list of the most common irregular expense categories. Sign up below to receive your worksheet!

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Further Reading: Weather Irregular Expenses on Your Grad Student Stipend with Targeted Savings Accounts (a Grad Student Finances Guide); A Simple Trick to Save More Money (It Isn’t Automating); Are These Budget Busters Derailing Your Spending Plan?