How to begin financial planning

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Five ways that PhD students and postdocs can prepare for the future

When you have little money to spare, it can be easy to ignore your financial wellbeing. But Vincent Esposito, a fifth-year PhD student in computational chemistry at the University of Pennsylvania in the US, says you must still be savvy about your finances. ‘You never know what’s going to happen. There could be a pandemic, or you could have a medical emergency. So, it’s always good to have some emergency funds,’ says Esposito. ‘Even if it’s not a lot, at least it’s something, and it gets you into good habits of saving.’

When you have little money to spare, it can be easy to ignore your financial well-being. But Vincent Esposito, a fifth-year PhD student in computational chemistry at the University of Pennsylvania in the US, says you must still be savvy about your finances. ‘You never know what’s going to happen. There could be a pandemic, or you could have a medical emergency. So, it’s always good to have some emergency funds,’ says Esposito. ‘Even if it’s not a lot, at least it’s something.’

Here are some suggestions to get your money matters in order as you navigate PhD or postdoc life.

Create a budget

Budgeting is probably the most fundamental pillar of intelligent financial planning. Emily Roberts, a financial educator for graduate students and postdocs and the founder of Personal Finance for PhDs, says you can split budgeting into two components: forecasting and tracking. Forecasting involves predicting your monthly or weekly expenditures across several categories. Tracking is seeing if you stuck to the original predictions. ‘A lot of people do the forecasting part without the tracking part – or the tracking part without the forecasting part. It’s really when you bring them together and do them diligently and consistently that a budget is going to be a very powerful tool in your life,’ Roberts says.

Emily Roberts, a financial educator for graduate students and postdocs and the founder of Personal Finance for PhDs (pfforphds.com), says you can split budgeting into two components: forecasting and tracking. Forecasting involves predicting your monthly or weekly expenditures across several categories. Tracking is seeing if you stuck to the original predictions. ‘A lot of people do the forecasting part without the tracking part – or the tracking part without the forecasting part. It’s really when you bring them together and do them diligently and consistently that a budget is going to be a very powerful tool in your life,’ Roberts says.

If this two-part approach seems overwhelming, start by logging your expenses for a month or so through a budgeting app or a simple spreadsheet. ‘Most likely, you’re not aware of how much money is going out into different categories,’ says Alaina Levine, professional speaker and Stem career coach. ‘Once we have that raw data, then the next step would be to start thinking about “What do I want to spend money on? And what do I need to spend money on?”’

Make spending ground rules

‘One of the most successful ways of managing your budget is acknowledging your limits when it comes to the stipend you have and the area you’re living in,’ says Victoria Butler, a sixth-year PhD student in astrophysics at the Rochester Institute of Technology in the US. Sharing an apartment with another person in her department has helped Butler manage well on a stipend of $26,667 (£21,600) per year.

Roberts says that one frugality mistake many people make is cutting down on minor and flexible expenses, such as recreational outings, which may be necessary for their day-to-day happiness. See if there is room to reduce your expenses in more substantial areas like rent and transportation. ‘It’s very daunting to move, sell your car [and] get a different car. But if you’ve managed to do it, then you’ve locked in that lower spending level in perpetuity,’ says Roberts.

Get an emergency fund

Peter Campbell, a financial advisor at Bull Oak Capital, a US-based financial planning firm, says creating an emergency fund is the first step toward creating a financially secure future. ‘When everybody’s younger, we don’t really think that bad stuff will happen,’ says Campbell. But financial nightmares – losing a job, a health emergency or a car breaking down – can happen to anyone at any time. Roberts suggests saving something every month to your crisis account – even if it’s just 1% of your income. ‘It’s gonna give you a lot of peace of mind,’ she adds.

At the start of graduate school, Esposito started earmarking $100 - automatically deducted from his checking account – towards his emergency fund until he had enough to pay for a few months’ rent and utilities. It took two years for Esposito to reach his savings goal, but it was well worth it. ‘Once I got to that six months of rent I felt comfortable that even if I had to go on leave, or if something happened, I can cover my rent for that time,’ he says. Esposito’s PhD stipend has been $34,000 per year for the last three years.

Start saving for the future

After you’ve hit your emergency fund targets, you can explore more advanced types of saving options. If you have no clue where to start, it might also be helpful to think about your career and life priorities. ‘Spend some time to think through: What’s important to me? What are my values? What do I want out of my career? That really helps determine where our money goes,’ says Campbell.

Once Esposito’s emergency savings were in place, he started to pump 10% savings off his gross income into an Individual Retirement Account because it was vital for him to feel financially independent later in life. ‘I have seen my parents struggle financially through the 2008 recession and other hard times, and so I hope to have a good amount of money saved and invested as I grow older to ensure I have security,’ says Esposito.

Do your research

While it’s essential to choose a research group for your PhD that aligns with your interests and aspirations, you should also consider whether your stipend will be sufficient for you to live comfortably in that region. Expenses such as parking and student activity fees can rapidly build up. Moreover, you want to ensure you’ll have enough funding for the whole term of your PhD. ‘You’re not going to be getting a lot of research done if you’re worrying about where the food’s coming from,’ says Butler. Have a frank discussion with your potential advisers about money and find out about their track record with grants.

Levine says if you’re applying for a postdoc, ask current and past lab members about their packages. If you are offered a lower salary than them, negotiate. ‘Do not be afraid to talk about money; do not feel that it’s impolite,’ she says. ‘You have every right to advocate for yourself to make sure that you get the money that you need and want.’ If your prospective employers refuse to bump your salary, ask for other benefits such as financial support for attending conferences, Levine adds.

The Chemists’ Community Fund exists to support RSC members and their families during challenging times, offering support and guidance to members and also financial assistance in some cases of financial hardship. If you are an RSC member and are studying chemistry, completing vocational training or working as an apprentice in the chemical sciences, and are struggling to meet your everyday living costs or a one-off unexpected cost, then please do get in touch. Find out more at rsc.li/chemists-community-fund or email ccfund@rsc.org