Money

There's no better way to sum up how to guide your personal finance.

By Kyle Crocco
Tuesday, February 16th, 2016 - 11:10am


Emily Roberts​If you missed the amazing seminar by Emily Roberts held on Oct. 22, there's no better way to sum up how to guide your personal finance other than to use Emily's own words.

Note: This content should not be viewed as advice for financial planning or tax purposes for any individual situation.

Values

First determine your top life values; then set goals and choose tactics appropriate to meet those goals that are consistent with your values and your personality.

Questions to help you determine your (financial) values:

  1. What is the purpose of money in your life?
  2. What makes you feel happy, proud, or satisfied?
  3. What do you wish you had more of right now?
  4. What do you want to focus your time, energy, or passion on?
  5. What do you want to characterize your future?
  6. What is the value that your goal promotes?

Questions from "Smart Women Finish Rich" and "Smart Couples Finish Rich" by David Bach. Free online chapter: http://www.finishrich.com/pdf/scfr_chapter.pdf

Budgeting

Four budget templates: Choose the budget style that works best for you and your values.

  • Anti-budget: Meet your goals first; then spend everything else as you like.
  • Template budget: Line items for monthly fixed and variable expenses. (Best when you have regular income and expenses).
  • Targeted savings accounts: Save for irregular expenses (repairs, health) and short-term goals (holiday)/purchases (computer). (Works best with online banking accounts).
  • Zero-based budget: For each month, assign every dollar a purpose. (Best for irregular income).

When your stipend is not sufficient for your already reduced expenses, generate and use your savings, increase your income, or take out student loans (judiciously).

Budget Software: Mint (free), You Need a Budget (free), Mvelopes, Every Dollar, GoodBudget, Pocket Expense (app).

Types of Grad Student Pay and Taxes

Grad student income is either compensatory (you earn it in an assistantship or research position) or non-compensatory (you get "free" money in the form of scholarships/fellowships). You may receive both. Compensatory pay will be reported on a W-2. Non-compensatory pay will be reported on a 1098-T as will your qualified education expenses (useful for deductions and credits).

If you receive pay or a stipend for living expenses, you will likely pay income tax!

Unless you are exempt, you are responsible for paying tax throughout the year through tax withholding or quarterly estimated tax (Read IRS Publication 505).

Both compensatory and non-compensatory pay should be reported in line 7 of form 1040 with "SCH" denoted next to your non-compensatory pay (Read IRS Publication 970 Chapter 1).

Saving and Investing

Remember to simultaneously save for short-term, mid-term, and long-term goals (based on your values) and invest each category with an appropriate risk tolerance. Building an emergency fund that will last you through a few months of expenses should be a high priority.

There are many different investing styles; you should research your options and determine your own investing philosophy. The investing style presented is similar to the one championed by Jack Bogle. More information can be found at http://www.bogleheads.org/.

A good way to get started investing is through mutual funds, which allow you to diversify your assets and reduce your risk. Look into index funds, which track the whole market's performance or particular areas of the market.

Debt

Use better/worse debt metrics when evaluating new debt and considering how to prioritize repayment. Consider the interest rate: is it fixed or variable? Consider the underlying asset purchased? Does it appreciate in value like real estate or depreciate in value like a car? Also consider repayment flexibility, penalty and fee structures, and whether it is about to be discharged in bankruptcy.

Two popular debt repayment methods include the debt snowball and the debt avalanche:

Debt snowball: Pay off the lowest balance debt first, while making minimum payment on other debts. This method has a high success rate and increases your motivation as you see debt obligations disappear.

Debt avalanche: Pay off the highest interest debt first, while making minimum payment on other debts. This is the best method for lowering overall cost, but more difficult to maintain your motivation.

Top 10 Tips for Financial Success in Grad School and Beyond

  1. Recognize that personal finance is personal.
  2. Identify your values, set your goals, and choose your tactics accordingly.
  3. Live intentionally within your means - pay taxes, save, spend, give.
  4. Increase your net worth by increasing assets and decreasing debt.
  5. Pay yourself first - as much as you reasonably can into tax-advantaged long-term accounts (IRA, workplace-based accounts).
  6. Save an emergency fund and general savings account.
  7. Keep your big fixed expenses low (housing, transportation).
  8. Don't allow yourself to be sold any financial products.
  9. Know your benefits, including subsidized entertainment/socializing.
  10. Position yourself to take advantage of unique opportunities.

Take-away actions

  • Complete the values exercise (above) and set financial goals.
  • Determine how you are paid and prepare for taxes.
  • Create a budget that fits your personality and set up a tracking system.
  • Create a balance sheet: list all your assets and what kinds of accounts they are in; list all your debts including minimum payments and interest rates.
  • Automate a savings rates for each of your goals, including an emergency fund.
  • Make a plan for investing and debt repayment.

Contact information for Emily Roberts and websites:

Email: emily@gradstudentfinances.org

Personal Finance for Grad Students Resource Website: gradstudentfinances.org

Facebook: Grad Student Finances

Twitter: @GradFinances

YouTube: Grad Student Finances

Stipends Database: PhDStipends.com

Personal Finance Blog: evolvingPF.com